SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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
[X] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
AMERICAN RIVER BANKSHARES
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration State No.:
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(4) Date Filed:
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AMERICAN RIVER BANKSHARES
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 17, 2007
TO THE SHAREHOLDERS OF AMERICAN RIVER BANKSHARES:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of Directors, the
Annual Meeting of Shareholders (the "Meeting") of American River Bankshares (the
"Company") will be held on Thursday, May 17, 2007 at 5:00 p.m., at the North
Ridge Country Club, located at 7600 Madison Avenue, Fair Oaks, California 95628
for the purpose of considering and voting upon the following matters:
1. Election of Directors. To elect nominees, Dorene C. Dominguez, Stephen
H. Waks, and Michael A. Ziegler as Class II Directors to serve until
the 2008 Annual Meeting of Shareholders; to elect nominees, Charles D.
Fite, Robert J. Fox, and Roger J. Taylor, D.D.S. as Class III Directors
to serve until the 2009 Annual Meeting of Shareholders; and to elect
nominees Amador S. Bustos, William A. Robotham, and David T. Taber as
Class I Directors to serve until the 2010 Annual Meeting of
Shareholders and until their successors are duly elected and have
qualified.
2. Ratification of Independent Public Accountants. To ratify the selection
of Perry-Smith LLP as independent registered public accountants for the
2007 fiscal year.
3. Other Business. To transact such other business as may properly come
before the Meeting and any postponements or adjournments thereof.
Article III, Section 3.3 of the bylaws of the Company provides for the
nomination of directors in the following manner:
"Nominations for election of members of the board may be made by the
board or by any holder of any outstanding class of capital stock of the
corporation entitled to vote for the election of directors. Notice of intention
to make any nominations (other than for persons named in the notice of the
meeting called for the election of directors) shall be made in writing and shall
be delivered or mailed to the president of the corporation 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) ten (10) days after the date of
mailing of notice of the meeting to shareholders. Such notification shall
contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the corporation owned by each proposed nominee; (d) the name
and residence address of the notifying shareholder; (e) the number of shares of
capital stock of the corporation owned by the notifying shareholder; (f) the
number of shares of capital stock of any bank, bank holding company, savings and
loan association, or other depository institution owned beneficially by the
nominee or by the notifying shareholder and the identities and locations of any
such institutions; and (g) whether the proposed nominee has ever been convicted
of or pleaded nolo contendere to any criminal offense involving dishonesty or
breach of trust, filed a petition in bankruptcy or been adjudged bankrupt. The
notification 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 these procedures shall be disregarded by the chairperson of the
meeting, and upon his or her instructions, the inspectors of election shall
disregard all votes cast for each such nominee. The foregoing requirements do
not apply to the nomination of a person to replace a proposed nominee who has
become unable to serve as a director between the last day for giving notice in
accordance with this paragraph and the date of election of directors if the
procedure called for in this paragraph was followed with respect to the
nomination of the proposed nominee."
The Board of Directors has fixed the close of business on April 5, 2007 as the
record date for determination of shareholders entitled to notice of, and to vote
at, the Meeting and any postponements or adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ STEPHEN H. WAKS
Stephen H. Waks
Corporate Secretary
Dated: April 19, 2007
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
INDICATE IF YOU WILL ATTEND THE MEETING IN PERSON.
THIS PAGE INTENTIONALLY LEFT BLANK
Mailed to Shareholders
on or about April 19, 2007
AMERICAN RIVER BANKSHARES
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 17, 2007
INTRODUCTION
This proxy statement is furnished in connection with the solicitation
of proxies for use at the 2007 Annual Meeting of Shareholders (the "Meeting") of
American River Bankshares (the "Company") to be held on Thursday, May 17, 2007
at 5:00 p.m., at the North Ridge Country Club, located at 7600 Madison Avenue,
Fair Oaks, California 95628 and at any and all postponements or adjournments
thereof. Only shareholders of record on April 5, 2007 (the "Record Date") will
be entitled to notice of the Meeting and to vote at the Meeting. At the close of
business on the Record Date, the Company had outstanding and entitled to be
voted 5,520,433 of the Company's no par value common stock.
Revocability of Proxies
A proxy for voting your shares at the Meeting is enclosed. Any
shareholder who executes and delivers such proxy has the right to and may revoke
it at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later date.
In addition, a proxy will be revoked if the shareholder executing such proxy is
in attendance at the Meeting and such shareholder votes in person. Subject to
such revocation, all shares represented by a properly executed proxy received in
time for the Meeting will be voted by the proxyholders in accordance with the
instructions specified on the proxy.
Unless otherwise directed in the accompanying proxy, the shares
represented by your executed proxy will be voted "FOR" the nominees for election
of directors named herein and "FOR" the ratification of the selection of
Perry-Smith LLP as independent public accountants for the 2007 fiscal year. If
any other business is properly presented at the Meeting, the proxy will be voted
in accordance with the recommendations of management.
Solicitation of Proxies
This solicitation of proxies is being made by the Board of Directors of
the Company. The expenses of preparing, assembling, printing, and mailing this
proxy statement and the materials used in this solicitation of proxies will be
borne by the Company. It is contemplated that proxies will be solicited
principally through the use of the mail, but directors, officers, and employees
of the Company may solicit proxies personally or by telephone, without receiving
special compensation. The Company will reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding the proxy statement to shareholders whose stock in the Company is
held of record by such entities. In addition, the Company may use the services
of individuals or companies it does not regularly employ in connection with this
solicitation of proxies, if management determines it is advisable.
Voting Securities
On any matter submitted to the vote of the shareholders, each holder of
common stock will be entitled to one vote, in person or by proxy, for each share
of common stock he or she held of record on the books of the Company as of the
Record Date.
A majority of the shares entitled to vote, represented either in person
or by a properly executed proxy, will constitute a quorum at the Meeting. If, by
the time scheduled for the Meeting, a quorum of shareholders of the Company is
not present or if a quorum is present but sufficient votes in favor of any of
the proposals have not been received, the Meeting may be held for purposes of
voting on those proposals for which sufficient votes have been received, and the
persons named as proxyholders may propose one or more adjournments of the
Meeting to permit further solicitation of proxies with respect to any of the
proposals as to which sufficient votes have not been received.
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Votes cast by proxy or in person at the Meeting will be counted by the
Inspectors of Election for the Meeting. The Inspectors will treat abstentions
and "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) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions and "broker non-votes" will not be counted as shares voted
for purposes of determining the outcome of any matter as may properly come
before the Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, April 5, 2007, no individual known to the
Company owned more than five percent (5%) of the outstanding shares of its
common stock.
The following table sets forth information as of April 5, 2007,
concerning the equity ownership of the Company's directors, director-nominees,
American River Bank directors, and the executive officers named in the Summary
Compensation Table, and directors, director-nominees, American River Bank
directors, and executive officers as a group. Unless otherwise indicated in the
notes to the table, each person listed below possesses sole voting and sole
investment power, or shared voting and investment power with a spouse, for the
shares of the Company's common stock listed below. All of the shares shown in
the following table are owned both of record and beneficially except as
indicated in the notes to the table. The Company has only one class of shares
outstanding, common stock. Management is not aware of any arrangements which
may, at a subsequent date, result in a change of control of the Company.
Name and Address (1) of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (2)
------------------------------------------ -------------------- ----------
Kevin B. Bender 21,759 (4) 0.4%
Amador S. Bustos 11,198 (5) 0.2%
Raymond F. Byrne 4,446 (6) 0.1%
Mitchell A. Derenzo 40,395 (7) 0.7%
Dorene C. Dominguez - (8) 0.0%
Charles D. Fite 126,534 (9) 2.3%
Robert J. Fox 13,778 (10) 0.2%
Gregory N. Patton 19,285 (11) 0.3%
William A. Robotham 74,145 (12) 1.3%
Larry D. Standing 30,092 (13) 0.5%
David T. Taber 125,430 (14) 2.3%
Roger J. Taylor, D.D.S. 52,051 (15) 0.9%
Douglas E. Tow 21,384 (16) 0.4%
Stephen H. Waks 62,527 (17) 1.1%
Philip A. Wright (3) 53,530 (18) 1.0%
Richard P. Vinson (3) 14,288 0.3%
Michael A. Ziegler 11,948 (19) 0.2%
All directors, director-nominees, and 682,790 (20) 12.1%
executive officers as a group (17 persons)
(1) The address for all persons listed is c/o American River Bankshares, 3100
Zinfandel Drive, Suite 450, Rancho Cordova, CA 95670.
(2) Includes shares of Common Stock subject to stock options exercisable within
60 days of the Record Date.
(3) Mr. Wright and Mr. Vinson are directors of the Company's subsidiary,
American River Bank.
(4) Includes 11,445 shares which Mr. Bender has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(5) Includes 1,986 shares which Mr. Bustos has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(6) Includes 4,336 shares which Mr. Byrne has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(7) Includes 6,717 shares which Mr. Derenzo has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(8) Ms. Dominguez was appointed as a director on March 22, 2007.
(9) Includes 5,894 shares which Mr. Fite has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
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(10) Includes 2,189 shares which Mr. Fox has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(11) Includes 15,887 shares which Mr. Patton has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(12) Includes 23,687 shares which Mr. Robotham has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(13) Includes 693 shares which Mr. Standing has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(14) Includes 14,064 shares which Mr. Taber has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(15) Includes 7,914 shares which Doctor Taylor has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(16) Includes 11,129 shares which Mr. Tow has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(17) Includes 7,914 shares which Mr. Waks has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(18) Includes 6,681 shares which Mr. Wright has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(19) Includes 5,893 shares which Mr. Ziegler has the right to acquire upon the
exercise of stock options within 60 days of the Record Date.
(20) Includes 126,429 stock options outstanding to purchase common stock
exercisable within 60 days of the Record Date.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's bylaws provide that the number of directors of the
Company shall not be less than eight (8) nor more than fifteen (15) until
changed by an amendment to Article III, Section 3.2 of the bylaws duly adopted
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote. The exact number of directors shall be fixed from time
to time within the authorized range by, among other means, (i) a resolution duly
adopted by the Board of Directors; or (ii) a bylaw or amendment thereof duly
adopted by the vote of a majority of the shares entitled to vote represented at
a duly held meeting at which a quorum is present, or by the written consent of
the holders of a majority of the outstanding shares entitled to vote. The exact
number of directors is currently fixed at nine (9) by resolution of the Board of
Directors. In 2005, a former director retired and the Company fixed the number
at eight within the authorized range to reflect the reduction in the number of
directors and reclassified the Board of Directors into two classes. Article
Seven of the Company's articles of incorporation and Article III, Section 3.4 of
the bylaws specify that if the authorized number of directors is nine (9) or
more, the Board shall be divided into three classes. During 2007, the Board of
Directors fixed the number of directors in the authorized range at nine and
appointed Dorene C. Dominguez as a director and has included Ms. Dominguez in
management's slate of nominees for election as a director. Therefore, it is
necessary to reclassify the Board of Directors from two classes to three classes
with each class consisting of three directors.
The Board of Directors deems it to be appropriate and in the best
interests of shareholders of the Corporation to reclassify the Board into three
classes as follows: Directors Michael A. Ziegler, Stephen H. Waks and Dorene C.
Dominguez shall be nominated for election as Class II Directors to serve for a
one-year term expiring at the 2008 Annual Meeting of Shareholders; Directors
Charles D. Fite, Robert J. Fox and Dr. Roger J. Taylor shall be nominated for
election as Class III Directors to serve for a two-year term expiring at the
2009 Annual Meeting of Shareholders; and Directors Amador S. Bustos, William A.
Robotham and David T. Taber shall be nominated for election as Class I Directors
to serve for a three-year term expiring at the 2010 Annual Meeting of
Shareholders.
If any nominee should become unable or unwilling to serve as a
director, the proxies will be voted for such substitute nominee as shall be
designated by the Board of Directors. The Board of Directors presently has no
knowledge that any of the nominees will be unable or unwilling to serve.
The following persons are the nominees of the Board of Directors for
election as Class II directors to serve for a one-year term until the 2008
Annual Meeting of Shareholders and until their successors are duly elected and
qualified.
Nominees for Election as Class II Directors:
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Name and Title Year First Elected
Other than Director Principal Occupation During the Last Five Years Age Director
------------------------------------------------------------------------------------------------------------------------------
Dorene C. Dominquez Chairman and President, Vanir Group of Companies, Inc. in 44 2007
Sacramento since 2004. Vice President of Vanir Construction
Mgmt., Inc. in Sacramento from 1991 to 2004.
Stephen H. Waks Attorney-at-Law; Owner of Waks Law Corporation in Sacramento. 59 1986
Corporate Secretary
Michael A. Ziegler President and Chief Executive Officer of PRIDE Industries in 62 2002
Sacramento.
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The following persons are the nominees of the Board of Directors for
election as Class III directors to serve for a two-year term until the 2009
Annual Meeting of Shareholders and until their successors are duly elected and
qualified.
Nominees for Election as Class III Directors:
------------------------------------------------------------------------------------------------------------------------------
Name and Title Year First Elected
Other than Director Principal Occupation During the Last Five Years Age Director
------------------------------------------------------------------------------------------------------------------------------
Charles D. Fite President, Fite Development Company in Sacramento. 49 1993
Chairman
Robert J. Fox Partner, S.J. Gallina & Co., LLP, Certified Public Accountants 62 2004
in Sacramento.
Roger J. Taylor, D.D.S. Dentist (Retired) and National Executive Director, Impax 61 1983
Vice Chairman Health Prime and a real estate developer in Sacramento.
The following persons are the nominees of the Board of Directors for
election as Class I directors to serve for a three-year term until the 2010
Annual Meeting of Shareholders and until their successors are duly elected and
qualified.
Nominees for Election as Class I Directors:
------------------------------------------------------------------------------------------------------------------------------
Name and Title Year First Elected
Other than Director Principal Occupation During the Last Five Years Age Director
------------------------------------------------------------------------------------------------------------------------------
Amador S. Bustos Chairman and Chief Executive Officer, Bustos Media LLC in 56 2004
Sacramento since 2004 and Managing Partner, Bustos Asset
Management LLC in Sacramento since 1999.
William A. Robotham Executive Partner, Pisenti & Brinker LLP, Certified Public 65 2004
Accountants in Santa Rosa.
David T. Taber President and CEO, American River Bankshares since 1995.
President and CEO CEO of American River Bank since 2004. 46 1989
None of the Company's, nominees for director listed above, American
River Bank directors, or executive officers listed on page 10, were selected
pursuant to any arrangement or understanding other than with the directors,
American River Bank directors, and executive officers of the Company acting
within their capacities as such. There are no family relationships between any
two or more of the nominees for director, American River Bank directors or
executive officers. No nominee for director, American River Bank director, or
executive officer serves as a director of (i) any company which has a class of
securities registered under Section 12, or which is subject to the periodic
reporting requirements of Section 15(d) of the Securities Exchange Act of 1934,
or (ii) 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 or minor offenses) or had a petition under bankruptcy laws
filed against themselves or an affiliate within the last five years.
Committees of the Board of Directors
The Nominating Committee, whose members are Charles D. Fite, Roger J.
Taylor, D.D.S., Stephen H. Waks and Michael A. Ziegler (Chairman), has the
responsibility to assist the Board of Directors by (a) establishing criteria for
candidates and identifying, evaluating, and recommending candidates, including
candidates proposed by shareholders, for election to the Board of Directors, and
(b) periodically reviewing and making recommendations on the composition of the
Board of Directors. The Nominating Committee met once in 2006. All members of
the Nominating Committee are "independent," as that term is defined under
applicable NASDAQ listing rules. Candidates are selected in accordance with a
Nominating Charter. 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, American River Bankshares,
3100 Zinfandel Drive, Suite 450, Rancho Cordova, CA 95670. Each recommendation
should include biographical information indicating the background and experience
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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 that may enhance
the reputation of the Company. The Company operates in a highly regulated
industry and is 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
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, NASDAQ, 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 Nominating Committee recommended the slate of
Nominees for Election described on page 3 and 4.
The Compensation Committee, whose members include Charles D. Fite ,
Amador S. Bustos (Chairman), Michael A. Ziegler and William A. Robotham,
oversees the performance and reviews the compensation of the executive officers
and the directors of the Company and American River Bank. The Compensation
Committee met nine (9) times during 2006. See the Compensation Discussion and
Analysis on page 11 and the Compensation Committee Charter attached to this
proxy statement as Appendix B for additional information regarding the functions
of the Compensation Committee.
o Compensation Committee Interlocks and Insider Participation
The CEO is an invited guest to the Compensation Committee
meetings and can be present at discussions regarding compensation
matters relative to non-CEO executive officers or directors. The CEO
cannot be present during deliberations or vote on CEO or non-CEO
executive officer compensation matters.
The Board has determined that all members of the Compensation
Committee are "independent," as that term is defined under applicable
NASDAQ listing rules including Director Fite from which the Company has
leased one of its bank premises since 1985. The current lease terms and
the Company's policy are disclosed on page 26 of this proxy statement.
The Audit Committee, whose members are Amador S. Bustos, Robert J. Fox,
and William A. Robotham (Chairman), oversees the Company's independent public
accountants, analyzes the results of internal and regulatory examinations and
monitors the financial and accounting organization and reporting. Director Fox
has been designated by the Board of Directors as an "audit committee financial
expert" as defined under rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002. The Audit Committee met
four (4) times in 2006. See the Audit Committee Report on page 29 and the Audit
Committee Charter attached to this proxy statement as Appendix C for additional
information regarding the functions of the Audit Committee. In addition, the
Company's Audit Committee held two (2) "executive sessions" which only the
non-employee directors attended, each of whom is "independent" as defined under
applicable NASDAQ listing rules. In addition, each other member of the Audit
Committee is "financially literate" as defined under applicable NASDAQ listing
rules.
The Finance and Capital Committee, whose members include Roger J.
Taylor, D.D.S., Stephen H. Waks (Chairman), and Michael A. Ziegler, has the
responsibility to (a) oversee asset liability management and the investment
portfolio including recommending to the full Board of Directors the annual
investment strategy; (b) recommend to the full Board of Directors the annual
operating budget for the Company; and (c) review premises leases for
recommendation to the full Board of Directors. The Finance and Capital Committee
met five (5) times during 2006.
5
The Executive Committee, whose members include Charles D. Fite
(Chairman), David T. Taber, Amador S. Bustos, William A. Robotham and Stephen H.
Waks oversees long range planning, formulates and recommends broad policy
positions for the full Board of Directors to consider and is responsible for
evaluating and recommending to the full Board of Directors matters pertaining to
mergers and acquisitions. The Executive Committee met three (3) times during
2006.
The Loan Committee has the responsibility for establishing loan policy,
approving loans which exceed certain dollar limits and reviewing the outside
loan review firm's examinations of the loan portfolios. American River Bank's
Loan Committee includes Charles D. Fite, Robert J. Fox (Chairman), Roger J.
Taylor, D.D.S., Stephen H. Waks, and Philip A. Wright. American River Bank's
Loan Committee met twenty-nine (29) times during 2006.
During 2006, the Company's Board of Directors held twelve (12) regular
meetings. In addition, the Company's Board of Directors held three (3)
"executive sessions" which only the non-employee directors attended, each of
whom is "independent" as defined under applicable NASDAQ listing rules. All
directors attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors and the number of meetings of the committees on which
they served.
A majority of the members of the Board of Directors, each of whom is
"independent" as defined under applicable NASDAQ listing rules, 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, American River Bankshares, 3100 Zinfandel Drive, Suite 450,
Rancho Cordova, CA 95670.
The Company requires members of its Board of Directors to attend the
Company's annual meeting of shareholders each year. All the directors attended
the Company's annual meeting of shareholders held in 2006.
Director Compensation Program
The Compensation Committee of the Board of Directors (the "Compensation
Committee") oversees the Company's director compensation program. The
compensation program includes elements that are designed specifically for the
directors. Additionally, the Compensation Committee is charged with the review,
and recommendation to the full Board of Directors, of all annual compensation
decisions relating to the directors.
The Compensation Committee's compensation philosophy was developed to
balance and align the interests of the directors and shareholders. The three
primary elements of compensation for our directors are cash compensation,
long-term equity-based incentives, and a Director Emeritus Plan.
The Compensation Committee has retained The Balser Group, a
compensation and benefits consulting firm. The Balser Group serves as an
independent compensation consultant to advise the Compensation Committee on all
matters related to the Board compensation and general compensation programs.
The Balser Group assists the Compensation Committee by providing
comparative market data on compensation practices and programs based on an
analysis of peer organizations. The Balser Group also provides guidance on
industry best practices. The Compensation Committee selected a compensation peer
group of companies consisting of nine publicly-traded, mid-to-high performing
financial institutions within and around our geographic market (the "Peer
Group"). The Peer Group is used to benchmark compensation levels against
companies that are similar in breadth and scope to our Company. The following
nine companies comprise the Peer Group used for 2006: Bank of Marin, Central
Valley Community Bancorp, Community Bancorp, Community Valley Bancorp, First
Northern Community Bancorp, Foothill Independent Bancorp, Harrington West
Financial Group, North Valley Bancorp, and Sierra Bancorp. The Peer Group data
is combined with other published survey information to create the "Survey Data."
The Company targets total compensation to be at or above the Peer Group
average. The goal of the cash compensation is to be close to the Peer Group
average, while long-term incentives and retirement benefits are targeted at or
above the Peer Group averages. The decisions by the Board about its member's
compensation are based on analysis of the Peer Group averages, the directors'
completion of continuing education programs, attendance at Board and committee
meetings and prompt responses to management's requests for information required
to complete and timely file regulatory filings.
6
o Overview of Director Compensation Elements
The Company's Director Compensation Program consists of several
compensation elements, as illustrated in the table below.
------------------------------------------------------------------------------------------------------------------------------
Pay Element What the Pay Element Rewards Purpose of the Pay Element
------------------------------------------------------------------------------------------------------------------------------
Cash Compensation Director contribution to the governance of the o Provide fixed compensation based
Company. on competitive market practice.
------------------------------------------------------------------------------------------------------------------------------
Long-Term Stock Options: o Maximize stock price performance;
Incentives o The Company's stock price performance; and o Increase director ownership in
the Company; and
o Continued role with the Company during a o Promote a long-term Company
five- year vesting period. outlook.
------------------------------------------------------------------------------------------------------------------------------
Retirement o The Deferred Fee Plan is a nonqualified o Provides a tax-deferred
Benefits voluntary deferral program that allows the retirement savings program. The
directors to tax-defer a portion of their cash Deferred Fee Plan is described in
compensation. more detail on page 8 of this proxy
statement.
o The Director Emeritus Plan provides the o The Director Emeritus Plan makes
director with retirement benefits for ongoing available benefits for the directors
consulting. to secure their consulting services
following their retirement from the
Company. The Director Emeritus Plan
is described in more detail on page
9 of this proxy statement.
------------------------------------------------------------------------------------------------------------------------------
The use of these compensation elements enables us to reinforce our pay
for performance philosophy, as well as strengthen our ability to attract and
retain highly qualified directors.
o Detail of Director Compensation Elements
The Compensation Committee believes the total compensation and benefits
program for the directors should consist of the following: cash compensation,
long-term incentives and retirement benefits.
o Cash Compensation
The cash compensation paid to non-employee directors of
American River Bankshares during 2006 included a retainer of $600 per month, a
fee of $300 for attendance at monthly board meetings, and a fee of $200 for
attendance at each committee meeting, other than the Directors Loan Committee of
American River Bank whose outside director members received a fee of $300 for
each meeting attended. In addition to the fees received as non-employee
directors in connection with the attendance at Board and committee meetings, the
Chairman of the Board of Directors received an additional retainer fee of $400
per month, and the Chairman of the Audit Committee, the Chairman of the Finance
and Capital Committee and the Chairman of American River Bank's Directors Loan
Committee each received an additional retainer fee of $200 per month. The fees
paid in 2006 by American River Bankshares and American River Bank to all
directors are disclosed in the Directors Compensation Table on page 9 of this
proxy statement.
The director fee schedule changed effective January 1, 2007,
to pay non-employee directors a retainer of $800 per month, a fee of $400 for
attendance at each Board meeting, a fee of $350 for attendance at each
subsidiary board meeting, and a fee of $300 for attendance at each committee
meeting, other than the Directors Loan Committee of American River Bank whose
outside director members received a fee of $400 for each meeting attended. In
addition to the fees received as non-employee directors in connection with
attending Board and committee meetings, the Chairman of the Board of Directors
receives an additional retainer fee of $700 per month, and the Chairman of the
Audit Committee, the Chairman of the Finance and Capital Committee, the Chairman
of the Compensation Committee and the Chairman of American River Bank's
Directors Loan Committee each receives an additional retainer fee of $300 per
month.
7
o Long-Term Incentive
The long-term incentive compensation element has historically
been provided in the form of stock options that vest and become exercisable
ratably over five years. The Compensation Committee has used stock options,
rather than other forms of long-term incentives, because they create value for
the director only if the shareholder value is increased through an increased
stock price. The Compensation Committee believes that this creates strong
alignment between the interests of the directors and shareholders.
In 2000, the Board of Directors approved the American River Bankshares
2000 Stock Option Plan (the "Stock Option Plan") for performance-related awards
for directors, executive officers and other key employees. Our shareholders
approved the Stock Option Plan in September 2000. The compensation expense
related to stock option grants to directors is shown in the Directors
Compensation Table on page 9 of this proxy statement.
Options granted to the directors and executive officers are generally
granted annually, at the same time as grants to the general eligible officer
population. Option grant recommendations are made at Compensation Committee
meetings scheduled in advance to meet appropriate deadlines for compensation
related decisions. The Compensation Committee then recommends the grants to the
full Board of Directors for their approval. Our practice is that the full Board
of Directors approves all stock option grants at regularly scheduled meetings.
The meetings are held after the close of the U.S. stock markets and the Board
sets the exercise price for each stock option using the closing price of the
Company's stock price on the date of grant.
There is a limited term in which the director can exercise stock
options, known as the option term. The option term is generally ten years from
the date of grant. At the end of the option term, the right to purchase any
unexercised options expires. Option holders generally forfeit any unvested
options upon separation with the Company. In certain instances, stock options
may vest on an accelerated schedule. A change of control may trigger accelerated
vesting. In this instance, all unvested options will vest as of the date of the
change in control.
The director options are granted after review of their performance for
the preceding calendar year. The targeted options are granted based on factors
including: a) attendance at Board and committee meetings (30% of option grant
target), b) completion of a specified number of continuing education hours (40%
of option grant target), and c) prompt responses to management's requests for
information required to complete and timely file regulatory filings (30% of
option grant target). On March 17, 2006, Directors Fite, Fox, Robotham, Taylor,
Waks and Ziegler were granted a nonstatutory stock option under the 2000 Plan to
purchase 3,208 shares of American River Bankshares common stock at $27.80 per
share (converted to 3,368 shares at $26.48 as adjusted for the 5% stock dividend
declared in November 2006). On the same date Director Bustos was granted a
nonstatutory stock option to purchase 2,245 shares at the same price (converted
to 2,357 shares based on the same stock dividend). See the Grants of Plan-Based
Awards Table for Directors on page 10 of this proxy statement. On February 16,
2005, Directors Bustos, Fite, Fox, Robotham, Taylor, Waks and Ziegler were
granted a nonstatutory stock option under the 2000 Plan to purchase 3,437 shares
of American River Bankshares common stock at $22.00 per share (converted to
3,788 shares at $19.96 as adjusted for the 5% stock dividends declared in
November 2005 and 2006). On April 21, 2004, Directors Fite, Taylor, Waks, and
Ziegler were granted a nonstatutory stock option under the 2000 Plan to purchase
4,365 shares of American River Bankshares common stock at $21.42 per share
(converted to 5,052 shares at $18.51 as adjusted for the 5% stock dividends
declared in December 2004 and November 2005 and 2006). On March 19, 2003,
Directors Fite, Taylor, and Waks were granted a nonstatutory stock option to
purchase 1,940 shares of American River Bankshares common stock at $22.34 per
share (converted to 3,637 shares at $12.87 as adjusted for a 3-for-2 stock split
declared in October 2003 and 5% stock dividends declared in December 2004 and
November 2005 and 2006). On May 21, 2003, Director Ziegler was granted a
nonstatutory stock option to purchase 485 shares of American River Bankshares
common stock at $24.22 per share (converted to 841 shares at $13.96 as adjusted
for a 3-for-2 stock split declared in October 2003 and 5% stock dividends
declared in December 2004 and November 2005 and 2006)
o Retirement Benefits
Effective December 20, 2001, a Deferred Fee Plan was established for
the purpose of providing the directors an opportunity to defer tax on director
fees. Participating directors may elect to defer a portion, up to 100%, of their
monthly cash compensation. American River Bankshares bears the administration
costs and pays interest on the deferred balances at a rate equal to the
five-year U.S. Treasury Bond plus 4.0%, but does not make contributions to the
deferred account balances. The amounts deferred and the earnings thereon are
unfunded. During 2006, Directors Bustos and Ziegler participated in the Deferred
Fee Plan and deferred $12,000 and $13,600, respectively.
8
In January 2003, the Board of Directors approved a Directors Retirement
Plan and in June 2004, this Directors Retirement Plan was replaced with a
Director Emeritus Program, whereby each director, upon full retirement from the
Company's or an affiliate's Board of Directors, is entitled to receive
installment payments over a 24 month period following retirement which are equal
to the total Board of Director and committee fees received by a director for
such service during the two full calendar years prior to retirement. To qualify
for the payments, a director participating in the Director Emeritus Program must
continue to support the Company by making himself/herself available for
consultation with management and/or the Board, continue to be a referral source
for business to the Company and attend Company functions such as annual meetings
for a period of two years after retirement. The Director Emeritus Program
contains a ten-year vesting component. A director vests 10% for each year of
service on the Board of Directors of the Company or an affiliate Board of
Directors. During 2006, four former directors participated in the Director
Emeritus Program and received payments totaling $28,045.
Director Compensation Table
The following table shows the compensation of the Company's Board of
Directors during the fiscal year 2006.
--------------------------------------------------------------------------------------------------------------------
Change in Pension
Value and
Nonqualified
Deferred
Fees Earned or Compensation
Paid in Cash Option Awards Earnings Total
Name ($) ($) (1) (2) ($) (3) ($)
--------------------------------------------------------------------------------------------------------------------
Charles D. Fite $ 27,200 $ 12,448 - $ 39,648
--------------------------------------------------------------------------------------------------------------------
Roger J. Taylor, D.D.S. $ 19,350 $ 12,448 - $ 31,798
--------------------------------------------------------------------------------------------------------------------
Amador S. Bustos (4) $ 12,000 $ 5,864 $ 480 $ 18,344
--------------------------------------------------------------------------------------------------------------------
Dorene C. Dominguez (5) - - - -
--------------------------------------------------------------------------------------------------------------------
Robert J. Fox $ 24,200 $ 6,936 - $ 31,136
--------------------------------------------------------------------------------------------------------------------
William A. Robotham (6) $ 18,150 $ 6,936 - $ 25,086
--------------------------------------------------------------------------------------------------------------------
Stephen H. Waks $ 21,550 $ 12,448 - $ 33,998
--------------------------------------------------------------------------------------------------------------------
Philip A. Wright (7) $ 10,400 - - $ 10,400
--------------------------------------------------------------------------------------------------------------------
Richard P. Vinson $ 2,750 - - $ 2,750
--------------------------------------------------------------------------------------------------------------------
Michael A. Ziegler (8) $ 16,600 $ 11,807 $ 707 $ 29,117
--------------------------------------------------------------------------------------------------------------------
(1) The amount reported in this column is the dollar amount recognized for
financial statement reporting purposes for 2006 in accordance with FAS
123(R). Options awarded on March 17, 2006 were valued at $8.73/share in
accordance with FAS 123(R). The assumptions used to calculate FAS 123(R)
fair value are described in footnote 2 to our consolidated financial
statements included in our Annual Report on Form 10-K.
(2) As of December 31, 2006, the aggregate number of unexercised stock options
(vested and unvested) held by each director is as follows: Mr. Fite,
13,555; Dr. Taylor, 15,575; Mr. Bustos, 6,145; Ms. Dominquez, 0; Mr. Fox,
7,156; Mr. Robotham, 28,654; Mr. Waks, 15,575; Mr. Wright, 6,681; Mr.
Vinson, 0; and Mr. Ziegler, 8,499.
(3) Amount represents the preferential rate paid on amounts deferred under the
Deferred Fee Plan. See page 8 of this proxy statement for discussion of
Deferred Fee Plan.
(4) Mr. Bustos deferred the entire $12,000 earned in 2006 under the Deferred
Fee Plan. See page 8 of this proxy statement for discussion of Deferred Fee
Plan.
(5) Ms. Dominguez was appointed to the Board in March 2007.
(6) Includes $250 for fees earned in connection with Mr. Robotham's role on the
advisory Board for North Coast Bank, a division of American River Bank.
(7) Includes $750 for fees earned in connection with Mr. Wright's role on the
advisory Board for North Coast Bank, a division of American River Bank.
(8) Mr. Ziegler deferred $13,600 of the total earned in 2006 under the Deferred
Fee Plan. See page 8 of this proxy statement for discussion of Deferred Fee
Plan.
Grants of Plan-Based Awards Table for Directors
The following table summarizes the stock options that were granted
pursuant to the Company's 2000 Stock Option Plan (the "2000 Stock Option Plan")
to the Company's directors in the fiscal year ended December 31, 2006.
Shareholders approved the 2000 Stock Option Plan on September 21, 2000. All of
the grants were made on March 17. All options vest ratably over a five-year
period commencing one year after the grant date. Options may become exercisable
in full in the event of a change of control as defined in the 2000 Stock Option
Plan. The Company does not have any other equity based plans.
9
-------------------------------------------------------------------------------------------------------------------------------
All Other
Option Awards: Exercise
Number of or Grant Date
Securities Base Price Fair Value
Underlying of Option of Stock and Option
Grant Options Awards Awards
Name Date (#) ($/Sh) (1) ($) (2)
-------------------------------------------------------------------------------------------------------------------------------
Charles D. Fite 3/17/2006 3,208 $ 27.80 $ 28,006
-------------------------------------------------------------------------------------------------------------------------------
Roger J. Taylor, D.D.S. 3/17/2006 3,208 $ 27.80 $ 28,006
-------------------------------------------------------------------------------------------------------------------------------
Amador S. Bustos 3/17/2006 2,245 $ 27.80 $ 19,599
-------------------------------------------------------------------------------------------------------------------------------
Dorene C. Dominguez (3) - - - -
-------------------------------------------------------------------------------------------------------------------------------
Robert J. Fox 3/17/2006 3,208 $ 27.80 $ 28,006
-------------------------------------------------------------------------------------------------------------------------------
William A. Robotham 3/17/2006 3,208 $ 27.80 $ 28,006
-------------------------------------------------------------------------------------------------------------------------------
Stephen H. Waks 3/17/2006 3,208 - -
-------------------------------------------------------------------------------------------------------------------------------
Philip A. Wright - - $ 27.80 $ 28,006
-------------------------------------------------------------------------------------------------------------------------------
Richard P. Vinson - - - -
-------------------------------------------------------------------------------------------------------------------------------
Michael A. Ziegler 3/17/2006 3,208 $ 27.80 $ 28,006
-------------------------------------------------------------------------------------------------------------------------------
(1) It is the Company's policy that the exercise price for each stock option is
the market value as of the close of the market on the date of grant.
(2) The Black-Scholes option-pricing model was used to estimate the grant date
fair value of the options in this column. Use of this model should not be
construed as an endorsement of its accuracy. All stock option pricing
models require predictions about the future movement of the stock price.
The assumptions used to develop the grant date valuations were: risk-free
rate of return of 4.6%, dividend rate of 2.2%, volatility rate of 29.6%,
quarterly reinvestment of dividends and an average term of 7 years. The
real value of the options in this table will depend on the actual
performance of the Company's common stock during the applicable period and
the fair market value of the Company's common stock on the date the options
are exercised.
(3) Ms. Dominguez was appointed to the Board in March 2007.
EXECUTIVE OFFICERS
The executive officers of the Company during 2006 were the following
persons:
------------------------------------------------------------------------------------------------------------------------------
OFFICER
NAME AGE SINCE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
------------------------------------------------------------------------------------------------------------------------------
David T. Taber 46 1985 President and Chief Executive Officer, American River Bankshares
since 1995. Chief Executive Officer of American River Bank since
2004.
------------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo 45 1992 Executive Vice President and Chief Financial Officer of American
River Bankshares since 1995. Chief Financial Officer of American
River Bank since 1992.
------------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne 59 2000 President of North Coast Bank, a division of American River Bank,
since 2003. Senior Vice President and Senior Lender of North Coast
Bank from 2001 to 2003.
------------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton 48 1995 President of American River Bank since 2004. Senior Vice President
and Senior Commercial Loan Officer of American River Bank from 2000
to 2004.
------------------------------------------------------------------------------------------------------------------------------
Larry D. Standing 64 2004 President of Bank of Amador, a division of American River Bank,
since 2004. President of Bank of Amador from 1983 to 2004.
------------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender 43 1999 Executive Vice President and Chief Information Officer of American
River Bankshares since 1999.
------------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow 53 1994 Executive Vice President and Chief Credit Officer of American River
Bankshares since 2003. Chief Credit Officer of American River Bank
since 1994.
------------------------------------------------------------------------------------------------------------------------------
10
COMPENSATION DISCUSSION AND ANALYSIS
Oversight of Executive Compensation Program
The Compensation Committee of the Board of Directors (the "Compensation
Committee") oversees the Company's compensation programs. The compensation
programs include elements that are designed specifically for the executive
officers (the "Executives" or an "Executive"), which include the Chief Executive
Officer ("CEO"), Chief Financial Officer ("CFO") and the other Executives named
in the Summary Compensation Table. Additionally, the Compensation Committee is
charged with the review and recommendation to the full Board of Directors of all
annual compensation decisions relating to the Executives.
The Compensation Committee is composed entirely of non-management
members of the Board of Directors. The Board of Directors has determined that
each member of the Compensation Committee is independent under applicable NASDAQ
listing rules. No Compensation Committee member participates in any of the
Company's employee compensation programs. Each year the Company's Audit
Committee reviews any and all relationships that each director may have with the
Company and the Board of Directors subsequently reviews the findings of the
Audit Committee. The CEO of the Company was not present during the Compensation
Committee voting or deliberations regarding his compensation.
The Compensation Committee has taken the following actions to improve
the links between Executive pay and performance:
o Including performance-based awards in the Company's incentive programs;
o Hiring an independent compensation consultant to advise on executive
compensation issues;
o Realigning compensation structures based on a more clearly defined
competitive pay strategy; and
o Reviewing and approving the industry specific Peer Group (as defined
below) for more precise performance comparisons.
The responsibilities of the Compensation Committee, as stated in its
charter, include the following:
o Provide oversight to the Company's overall compensation strategy and
objectives pursuant to the goals of the Company.
o Review and recommend to the Board of Directors, changes to the
structure and design of the compensation elements for the Executives
including: annual base salary, annual cash incentives, long-term equity
incentives, retirement plans (401(k), deferred compensation, and salary
continuation plans), and change in control benefits and severance.
o Review and recommend to the Board of Directors, changes in the
structure and design of the compensation elements for the Board of
Directors of the Company and subsidiary(ies) and any committees
thereof, including cash (meeting fees, retainers), long-term equity
incentive plans and the Director Emeritus Program.
o Review and recommend to the Board of Directors, the appropriate peer
group to be used in benchmarking executive and board compensation.
o Recommend annually to the Board of Directors, the compensation of the
CEO, including base salary, annual cash incentive opportunity and
changes to other compensation elements.
o Recommend annually to the Board of Directors, the compensation of other
executive officers based on the recommendation of the CEO including
base salary, annual cash incentive opportunity and changes to other
compensation elements.
o Recommend to the Board of Directors the performance metrics and weights
of each as required by the Company's Executive Annual Incentive Plan.
o Recommend to the Board of Directors, changes to Company Board member
and/or subsidiary Board member compensation.
o Recommend to the Board of Directors, annual equity grants to the
Executives, board members and other key employees, pursuant to Board of
Directors approved option granting methodology.
11
o Recommend to the Board of Directors, additions to personnel covered by
the Company's Deferred Compensation Plan.
o Recommend to the Board of Directors, employment and/or severance
agreements for the Executives.
o Periodically review and recommend to the Board of Directors, changes to
Executive retirement benefits, employment agreements, and change in
control benefits and severance plans.
o Periodically review the Company succession plans relating to positions
held by the Executives and make recommendations to the Board of
Directors regarding the process for selecting the individuals to fill
these positions.
o Evaluate the CEO's performance relative to the goals and objectives of
the Company and discuss evaluations of other executive officers with
the CEO.
o Annually review and recommend changes deemed necessary to the
Compensation Committee Charter.
o Prepare and submit an appropriate "Compensation Committee Report"
pursuant to applicable regulations of the Securities and Exchange
Commission for inclusion in the management proxy statement for each
annual meeting of shareholders, stating, among other matters, whether
(i) the Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management, and (ii) the
Compensation Committee has recommended to the Board that the
Compensation Discussion and Analysis be included in such proxy
statement and the Company's Annual Report on Form 10-K.
o Perform such other duties and responsibilities as it may be required by
the rules and regulations that govern the Company that are consistent
with the purpose of the Compensation Committee, or as the Board of
Directors may deem appropriate.
Overview of Compensation Philosophy
The Compensation Committee's compensation philosophy was developed to
balance and align the interests of the Executives and shareholders. The
philosophy is intended to attract, motivate, reward and retain the most
qualified management talent required to achieve corporate objectives and
increase shareholder value, while at the same time the compensation philosophy
seeks to make the most efficient use of shareholder resources. To this end, the
compensation philosophy emphasizes rewards for performance.
The three primary components of compensation for the Executives are
base salary, annual cash incentive opportunity and long-term, equity-based
incentive compensation. The Company also provides the Executives with retirement
benefits that are earned over time.
To be effective, the compensation philosophy must reflect the corporate
mission, culture, and long-term goals of the Company. In order to recruit and
retain the most qualified and competent individuals as Executives, the Company
strives to maintain a compensation program that is competitive in its peer
industry labor market. The purpose of the compensation program is to reward
individual performance tied to the achievement of Company objectives. The
following objectives are considered in setting the compensation programs for the
Executives:
o reward performance which supports the Company's core values of
performance, integrity, teamwork, and advancement
opportunities;
o provide a significant percentage of total compensation that is
at-risk, or variable, based on predetermined performance
criteria;
o design competitive total compensation and rewards programs to
enhance the Company's ability to attract and retain
knowledgeable and experienced Executives; and
o set compensation and incentive levels that reflect competitive
market practices.
12
Compensation Consultant
In 2006, the Compensation Committee retained The Balser Group, a
compensation and benefits consulting firm. The Balser Group serves as an
independent compensation consultant to advise the Compensation Committee on all
matters related to the Executives' compensation and general compensation
programs. The Balser Group participates in Compensation Committee meetings on an
as needed basis.
The Balser Group assists the Compensation Committee by providing
comparative market data on compensation practices and programs for the
Executives based on an analysis of peer competitors. The Balser Group also
provides guidance on industry best practices. The Balser Group advised the
Compensation Committee in (1) determining base salaries, (2) setting performance
goals and award levels for the Company's Executive Incentive Plan (the
"Incentive Plan"), (3) determining the appropriateness of individual grant
levels for stock option grants, (4) evaluating the retirements plans and benefit
amounts, (5) evaluating the perquisite program and allowances provided, and (6)
determining the appropriateness of the change in control and termination
benefits.
In 2006, The Balser Group engaged RSM McGladrey's Retirement Resource
group to review the retirement benefit program for the Executives.
Peer Group and Benchmark Targets
With the assistance of The Balser Group, the Compensation Committee
selected a compensation peer group of companies consisting of nine
publicly-traded, mid-to-high performing financial institutions within and around
the Company's geographic market (the "Peer Group"). The Peer Group is used to
benchmark executive compensation levels against companies that have executive
positions with responsibilities similar in breadth and scope to the Company and
that compete with the Company for executive talent.
The following nine companies comprise the Peer Group used for 2006:
Bank of Marin, Central Valley Community Bancorp, Community Bancorp, Community
Valley Bancorp, First Northern Community Bancorp, Foothill Independent Bancorp,
Harrington West Financial Group, North Valley Bancorp, and Sierra Bancorp. An
analysis based on recent financial data shows that amongst the Company's Peer
Group we ranked 2nd in Return on Average Assets as of December 31, 2006 and 2nd
in Return on Tangible Equity as of December 31, 2006.
The Compensation Committee reviews data prepared by The Balser Group
(the "Survey Data") to ensure that the total Executive compensation program is
competitive. The Survey Data is a compilation of compensation and other data
prepared by The Balser Group based upon the review of the Peer Group's published
data as well as other surveys, including the Watson Wyatt Financial Institutions
Compensation Planning Report, the Mercer Long Term Incentives and Equity Survey
Report, and the California Bankers Association Compensation and Benefits
Benchmark Survey.
Compensation Benchmarking Relative to Market
Using the Survey Data, we consider "market" at the median of this data.
The Company targets total compensation above-market, tied to excellent Company
and individual performance. Base compensation, long-term incentives, retirement
and other benefits are targeted at close to market, while annual incentives are
targeted at above market levels.
Decisions by the Board of Directors about the compensation elements are
based on Survey Data as well as Company performance and the Executive's level of
responsibility, skill level, experience and contributions to the Company.
Review of Executive Performance
The Compensation Committee reviews, on an annual basis, each
compensation element of each Executive. In each case, the Compensation Committee
takes into account the scope of responsibilities and years of experience and
balances these against competitive salary levels. The Compensation Committee has
the opportunity to interact with the Executives at various times during the
year, which allows the Compensation Committee to form its own assessment of each
individual's performance.
In addition, each year, the CEO presents to the Compensation Committee
an evaluation of each Executive, which includes a review of individual
contribution, performance against specific targets, strengths and weaknesses, as
well as a development plan. Following this presentation and a review of the
13
Survey Data, the Compensation Committee makes its own assessments and approves
compensation for each Executive.
Overview of Executive Compensation Elements
The Company's compensation program for Executives consists of several
compensation elements, as illustrated in the table below.
-------------------------------------------------------------------------------------------------------------------------------
Pay Element What the Pay Element Rewards Purpose of the Pay Element
-------------------------------------------------------------------------------------------------------------------------------
Base Salary Core competence in the Executive's role relative to o Provide fixed compensation based on
skills, years of experience and contributions to the competitive market practice.
Company.
-------------------------------------------------------------------------------------------------------------------------------
Annual Cash Contributions toward the Company's achievement of o Provides focus on meeting annual goals
Incentives specified profitability, growth, and credit quality. that lead to the long-term success of the
Company;
o Stresses annual performance-based cash
incentive compensation; and
o Motivates achievement of critical
annual performance metrics.
-------------------------------------------------------------------------------------------------------------------------------
Long-Term Stock Options: o Maximize stock price performance;
Incentives o The Company's stock price performance; and o Increase Executive ownership in the
o Continued employment with the Company during Company; and
a five-year vesting period. o Retention in a challenging business
environment and competitive labor market.
-------------------------------------------------------------------------------------------------------------------------------
Retirement The Company's employee benefit plans are available to o Encourages retention of Executives for
Benefits eligible employees, including the Executives; to the balance of his/her career.
reward long-term service to the Company, and include
both tax-qualified and nonqualified retirement plans.
o Provides a tax-deferred retirement
o The Company offers a qualified 401(k) savings plan subject to IRS limitations on
program that the Executives are eligible to qualified plans. The 401(k) Plan is
participate in. described in more detail on page 18 of this
proxy statement.
o Provides a tax-deferred retirement
savings alternative for amounts exceeding
o The Deferred Compensation Plan is a IRS limitations on qualified programs. The
nonqualified voluntary deferral program that tax deferred compensation plan is described
allows the Executives to defer a portion of their in more detail on page 18 of this proxy
base salary and annual cash incentive. Deferred statement.
amounts and earnings are unfunded. o The Salary Continuation Plans make
available retirement benefits for the
o The Salary Continuation Plans are Executives commensurate with those
nonqualified, noncontributory plans that provide available to comparable peer executive
the Executives with retirement benefits. officers. The Salary Continuation Plans are
described in more detail on page 18 of this
proxy statement.
-------------------------------------------------------------------------------------------------------------------------------
Health and Welfare Executives participate in employee benefit plans o These benefits are part of a
Benefits generally available to all employees, including broad-based, competitive total compensation
medical, health, life insurance, disability plans, program.
and vacation and personal absence time.
-------------------------------------------------------------------------------------------------------------------------------
Additional Certain Executives drive Company owned vehicles or o Company autos and club memberships
Benefits and have club memberships available to them. facilitate the Executive's role as a
Perquisites Company representative in the community.
-------------------------------------------------------------------------------------------------------------------------------
Change in Control We have change in control agreements with certain o Change in control arrangements are
and Termination officers, including the Executives. The agreements designed to retain the Executives and
Benefits provide severance benefits if an Executive's provide continuity of management in the
employment is terminated within two years after a event of an actual or threatened change in
change in control. control. The change in control agreements
are described in more detail on page 20 of
this proxy statement.
-------------------------------------------------------------------------------------------------------------------------------
The use of these compensation elements enables the Company to reinforce
its pay for performance philosophy, as well as strengthen the ability to attract
and retain highly qualified executive officers. The Compensation committee
believes that this combination of elements provides an appropriate mix of fixed
and variable pay, balances short-term operational performance with long-term
shareholder value, and encourages recruitment and retention of executive
officers.
14
Detail of Executive Compensation Elements
The Compensation Committee believes the total compensation and benefits
program for Executives should consist of the following: base salary, annual cash
incentives, long-term incentives, retirement plans, health and welfare benefits,
perquisite allowance payments and change in control benefits, as more fully
described below.
Base Salary
Increases to base salaries, if any, are driven primarily by individual
performance and comparative information from the Survey Data. Individual
performance is evaluated by reviewing the Executive's success in achieving
business results, promoting core values, focusing on the keys to success and
demonstrating leadership abilities.
In setting the base salary of the Executives for fiscal year 2006, the
Compensation Committee reviewed the compensation Survey Data. The Compensation
Committee also considered the Company's continuing achievement of its short- and
long-term goals to:
o achieve specific profitability, growth and asset quality
goals;
o communicate strategy and financial results effectively; and
o increase emphasis on employee satisfaction.
The Compensation Committee based its compensation decisions on the
Company's performance related to the objectives listed above. The Compensation
Committee does not rely solely on predetermined formulas or a limited set of
criteria when it evaluates the performance of the Executives. The Compensation
Committee reviews the Survey Data, general economic conditions and marketplace
compensation trends with the assistance of its compensation consultant. The
Compensation Committee usually adjusts base salaries for Executives when:
o the current compensation demonstrates a significant deviation
from the market data;
o recognizing outstanding individual performance; or
o recognizing an increase in responsibility.
In line with the compensation philosophy outlined above, the
Compensation Committee strives to reward the successful Company Executives with
a total package above the median of its peer group with much of the incentive
portion coming from the variable portion of the compensation elements.
The base salaries paid to the CEO, the CFO and the five other
Executives during fiscal year 2006 are shown in the Summary Compensation Table
on page 21.
Annual Cash Incentives
The annual cash incentives are administered under the Incentive Plan
and provide Executives with the opportunity to earn cash incentives based on the
achievement of specific Company-wide, division, and individual performance
goals. The Compensation Committee designs the annual incentive component to
align Executive compensation with annual (short-term) performance. Incentive
payments are generally paid in cash in March of each year for the prior fiscal
year's performance.
The Compensation Committee approves a target incentive payout as a
percentage of the base salary earned during the incentive period for each
Executive. These targets are based on competitive practices for each comparable
position in the Survey Data. The incentive target percentage represents the
Executive's annual incentive opportunity if the annual performance goals are
achieved.
-------------------------------------------------------------------------------------------------------------------------
Mr. Taber Mr. Derenzo Mr. Tow Mr. Bender Mr. Patton Mr. Standing Mr. Byrne
-------------------------------------------------------------------------------------------------------------------------
Target Incentive Compensation 60% 35% 35% 35% 30% 30% 30%
(% of Base Salary)
-------------------------------------------------------------------------------------------------------------------------
The Incentive Plan establishes a set of financial metrics. These
metrics are selected to drive annual performance. Each metric has a weight
within the Incentive Plan, and the sum of the weights is 100%. In 2006,
financial metrics comprised 90% to 91% and the leadership metrics comprised 9%
to 10% of the target incentive.
Several financial metrics are commonly referenced in defining Company
performance for Executive compensation. These metrics are defined below and
their use in the Incentive Plan is further described below.
15
o Profitability Measures
o Return on Average Assets and Return on Average Tangible Equity
Overall profitability is a key measure of the Company's performance.
The use of Return on Average Assets ("ROA") and Return on Average Tangible
Equity ("ROTE") as metrics in the Incentive Plan allows the Company to reward
Executives for meeting targets related to actual net income earned each year.
Both the ROA and ROTE are based on how well the Company performs based on net
income as compared to assets (the ROA) and tangible equity (the ROTE). The ROA
measures how well the Company deploys its assets and the ROTE measures how well
the Company utilizes its capital.
o Earnings Per Share
To ensure compensation is proportional to the return on investment
earned by shareholders, we use earnings per share ("EPS") as a metric in the
Incentive Plan. EPS is defined as net income divided by the average number of
shares outstanding during the Incentive Plan year.
o Growth Measures
o Core Deposit and Net Loan Growth
To ensure long-term growth of the Company, growth in both core deposits
and net loans is essential. The Incentive Plan metrics for growth are based upon
how well the Company grows in both core deposits and net loans on an annual
basis. The Company defines core deposits as total deposits excluding time
deposits, also known as certificates of deposit.
o Credit Quality Measures
o Classified Loans to Equity
The Company believes that the quality of its loans is a key to the
overall success of its future. Poor loan quality will deteriorate the Company's
future earning capacity. The classified to equity metric of the Incentive Plan
measures the amount of classified or problem loans as a percentage of the
Company's equity capital.
o Leadership Measures
o Leadership/Teamwork
The Compensation Committee recognizes that one of the important
responsibilities of each Executive is to produce a strong and positive working
culture throughout the entire organization. The Executives must design and
implement practices that encourage employees to perform at their best. A
committed employee base is a key to the long-term success of the Company.
Effective leadership from the Executives will lead to a higher performing
Company. The leadership/teamwork metric is part of the Incentive Plan. The
metric is subjective and is based on the visible accomplishment of the
individual's actions. The Compensation Committee rates the leadership and
teamwork success of the CEO, while the remaining Executives are rated by the CEO
and recommended to the Compensation Committee.
Incentive Plan Weightings for 2006
The following chart indicates the weight of each metric as a percent of the
total incentive opportunity.
--------------------------------------------------------------------------------------------------------------------------
Mr. Taber Mr. Derenzo Mr. Tow Mr. Bender Mr. Patton Mr. Standing Mr. Byrne
--------------------------------------------------------------------------------------------------------------------------
Metric
--------------------------------------------------------------------------------------------------------------------------
ROA, ROTE and EPS 66% 66% 66% 66% 60% 60% 60%
--------------------------------------------------------------------------------------------------------------------------
Core Deposit and Net Loan Growth 20% 20% 20% 20% 25% 25% 25%
--------------------------------------------------------------------------------------------------------------------------
Loan Quality 5% 5% 5% 5% 5% 5% 5%
--------------------------------------------------------------------------------------------------------------------------
Leadership 9% 9% 9% 9% 10% 10% 10%
--------------------------------------------------------------------------------------------------------------------------
16
The amount of incentive compensation paid to each Executive under the
Incentive Plan is adjusted based on how well the Company performs against the
stated performance goal of each metric, as reflected in the following table.
---------------------------------------------------
Results Against Incentive Multiplied
Performance Goal: By:
-------------------------- ------------------------
120% 110.0%
-------------------------- ------------------------
115% 107.5%
-------------------------- ------------------------
110% 105.0%
-------------------------- ------------------------
105% 102.5%
-------------------------- ------------------------
100% 100.0%
-------------------------- ------------------------
95% 90.0%
-------------------------- ------------------------
90% 80.0%
-------------------------- ------------------------
85% 70.0%
-------------------------- ------------------------
Less than 85% 0%
---------------------------------------------------
For example, if the Company achieves 105% of the growth performance
goal, Mr. Taber would be entitled to 102.5% of the available incentive for the
growth metric. If the Company achieves 90% of the growth goal Mr. Taber would be
entitled to 80% of the available incentive for the growth metric. The Incentive
Plan establishes minimum funding thresholds. If performance on any metric falls
below 85%, no incentive will be paid for that metric.
In March 2007, the Board of Directors approved the weight of each
metric as a percent of the total incentive opportunity for the 2007 fiscal plan
year as follows:
--------------------------------------------------------------------------------------------------------------------------
Mr. Taber Mr. Derenzo Mr. Tow Mr. Bender Mr. Patton Mr. Standing Mr. Byrne
--------------------------------------------------------------------------------------------------------------------------
Metric
--------------------------------------------------------------------------------------------------------------------------
ROA, ROTE and EPS 62% 62% 62% 62% 58% 58% 58%
--------------------------------------------------------------------------------------------------------------------------
Core Deposit and Net Loan Growth 24% 24% 24% 24% 27% 27% 27%
--------------------------------------------------------------------------------------------------------------------------
Loan Quality 5% 5% 5% 5% 5% 5% 5%
--------------------------------------------------------------------------------------------------------------------------
Leadership 9% 9% 9% 9% 10% 10% 10%
--------------------------------------------------------------------------------------------------------------------------
Long-Term Incentives
An important objective of the long-term incentive program is to
strengthen the relationship between the long-term value of the Company's stock
performance and the potential financial gain for employees. The long-term
incentive component has historically been provided in the form of stock options
that vest and become exercisable ratably over five years. The Compensation
Committee has used stock options, rather than other forms of long-term
incentives, because they create value for the Executives only if the shareholder
value is increased through an increased stock price. The Compensation Committee
believes that this creates strong alignment between the interests of the
Executives and shareholders. The stock options help the Company attract and
retain talented Executives.
Stock options provide the Executives with the opportunity to purchase
the Company's common stock at a price fixed on the grant date regardless of
future market price. The Compensation Committee's objective is to provide
Executives with awards that are consistent with the Survey Data and based on the
Executive's individual performance. A stock option becomes valuable only if the
Company's common stock price increases above the option exercise price and the
holder of the option remains employed during the period required for the option
to vest, which provides an incentive for the Executive to remain employed by the
Company. In addition, stock options link a portion of the Executive compensation
to shareholders' interests by providing an incentive to make decisions designed
to increase the market price of the Company's common stock.
In 2000, the Board of Directors approved the American River Bankshares
2000 Stock Option Plan (the "Stock Option Plan") for performance-related awards
for directors, Executives and other key employees. The Company's shareholders
approved the Stock Option Plan in September 2000.
The exercise prices of the stock options granted to the CEO, the CFO
and the five other Executives during fiscal year 2006 are shown in the Grants of
Plan-Based Awards Table on page 22. Additional information on these grants,
including the number of shares subject to each grant, also is shown in the
Grants of Plan-Based Awards Table.
17
Options granted to the Executives and directors generally are granted
annually, at the same time as grants to eligible key employees. Option grant
recommendations are made at Compensation Committee meetings scheduled in advance
to meet appropriate deadlines for compensation related decisions. The
Compensation Committee then recommends the grants to the full Board of Directors
for their approval. The Company's practice is that the full Board of Directors
approves all stock option grants at regularly scheduled meetings. The meetings
are held after the close of the U.S. stock markets and the Board of Directors
sets the exercise price for each stock option using the closing price of the
Company's stock price on the date of grant.
There is a limited term in which the Executive can exercise stock
options, known as the option term. The option term is generally ten years from
the date of grant. At the end of the option term, the right to purchase any
unexercised options expires. Option holders generally forfeit any unvested
options if their employment with the Company terminates.
In certain instances, stock options may vest on an accelerated
schedule. A change of control may trigger accelerated vesting. In this instance,
all unvested options will vest as of the date of the change in control.
Retirement Benefits
The Company offers retirement programs that are intended to supplement
the employee's personal savings and social security. The programs include the
American River Bankshares 401(k) Plan ("401(k) Plan"), the American River
Bankshares Deferred Compensation Plan ("Deferred Compensation Plan") and the
Executives are covered under Salary Continuation Plans ("SCP"). All employees
working at least twenty (20) hours per week, including the Executives, are
generally eligible to participate in the 401(k) Plan. Only the Executives and a
limited number of selected senior managers are eligible for the Deferred
Compensation Plan. Only the Executives and one senior manager have entered into
SCP's with the Company.
o American River Bankshares 401(k) Plan
The Company adopted the 401(k) Plan to enable employees to
save for retirement through a tax-advantaged combination of employee and Company
contributions and to provide employees the opportunity to directly manage their
retirement plan assets through a variety of investment options. The 401(k) Plan
allows eligible employees, including the Executives, to elect to contribute from
1% to 100% of their eligible compensation to an investment trust. Eligible
compensation generally means all wages, salaries and fees for services from the
Company. Employee contributions are matched in cash by the Company at the rate
of $1.00 per $1.00 employee contribution for the first 3% and $0.50 per $1.00
employee contribution for the next 2% of the employee's salary. Such
contributions vest immediately. The 401(k) Plan provides for twenty-two (22)
different investment options, for which the participant has sole discretion in
determining how both the employer and employee contributions are invested. The
401(k) Plan does not provide the employees the option to invest directly in the
Company's common stock. The 401(k) Plan offers in-service withdrawals in the
form of loans, hardship distributions, after-tax account distributions and age
59.5 distributions. The 401(k) Plan benefits are payable pursuant to the
participant's election in the form of a single lump sum.
o American River Bankshares Deferred Compensation Plan
Effective May 1, 1998, the American River Bank Deferred
Compensation Plan was established for the purpose of providing the Executives
and selected senior managers, an opportunity to defer compensation.
Participants, who are selected by a committee designated by the Board of
Directors, may elect to defer annually a minimum of $5,000 or a maximum of
eighty percent of their base salary and all of their annual cash incentive. The
Company bears all administration costs, but does not make contributions to the
Deferred Compensation Plan. Effective December 20, 2000, the Deferred
Compensation Plan was renamed the American River Bankshares Deferred
Compensation Plan. The Deferred Compensation Plan requires the Company to pay
interest on the deferred balances at a rate equal to the five-year U.S. Treasury
Bond plus 4.0%. For 2006 the rate paid was 8.35%.
o Salary Continuation Plans
In 2003, Salary Continuation Agreements were entered into to
provide retirement benefits to Messrs. Taber, Derenzo, and Tow. The terms of the
agreements include the amounts each employee will receive upon the occurrence of
18
certain specified events, including formal retirement on or after a specified
age. The agreements generally provide for annual retirement benefit payments of
One Hundred Thousand Dollars ($100,000) to Mr. Taber and Fifty Thousand Dollars
($50,000) each to Messrs. Derenzo and Tow. The annual retirement benefit amount
is payable in equal monthly installments over a fifteen (15) year period. In the
event of an Executive's death, all remaining amounts due are anticipated to be
paid to the Executive's designated beneficiary over the remaining payout period.
Other events which may alter when payment of the annual retirement benefit is to
begin, or the amount which is to be paid, include: (a) disability prior to
retirement in which case the employee shall be entitled to a lesser benefit
payment amount based upon the length of employment; and (b) termination
following a "change of control," in which case the employee is entitled to
receive the annual benefit payment in equal monthly installments for fifteen
(15) years beginning with the seventh (7th) month following the termination in
connection with the "change of control" equal to Sixty-Four Thousand Nine
Hundred and Seventy Dollars ($64,970) for Mr. Taber and Thirty-Two Thousand Four
Hundred and Eighty-Five Dollars ($32,485) each for Messrs. Derenzo and Tow. In
2007, the Company modified these agreements to include an annual vesting
provision whereby the annual benefit described above vests at a rate of 8% for
Mr. Taber and 5% for Mr. Derenzo and Mr. Tow, effective January 1, 2007.
In 2003, Bank of Amador and Larry Standing entered into a
Director Retirement Agreement. This agreement was assumed by the Company in
conjunction with the Company's acquisition of Bank of Amador in December 2004,
at which time Mr. Standing agreed to waive the acceleration provisions due him
at the time of the merger. The agreement provides annual retirement benefits or
service compensation in the amount of $18,000 per year after Mr. Standing's
retirement from the Company. Under the agreement, such benefits will also be
accelerated and be paid upon a "change of control" of the Company. The annual
retirement benefit amount is payable in equal monthly installments over a ten
(10) year period. In the event Mr. Standing dies or is disabled, the agreement
provides for the payment of benefits corresponding to specified amounts accrued
for the retirement benefits described above.
In 2004, Bank of Amador and Larry Standing entered into a Salary
Continuation Agreement. This agreement was assumed by the Company in conjunction
with the Company's acquisition of Bank of Amador in December 2004, at which time
Mr. Standing agreed to waive the acceleration provisions due him at the time of
the merger. The agreement provides annual retirement benefits or service
compensation in the amount of $32,000 per year after Mr. Standing's retirement
from the Company. Under the agreement, such benefits will also be accelerated
and be paid upon a "change of control" of the Company. The annual retirement
benefit amount is payable in equal monthly installments over a ten (10) year
period. In the event of Mr. Standing's death, amounts due are anticipated to be
paid to the employee's designated beneficiary in a lump sum based on a split
dollar agreement. Other events which may alter when payment of the annual
retirement benefit is to begin, or the amount which is to be paid, include: (a)
disability prior to retirement in which case the employee shall be entitled to a
lesser benefit payment amount based upon the length of employment; and (b)
termination following a "change of control," in which case the employee is
entitled to receive a lump sum benefit payment amount based upon the length of
employment.
In 2007, the Company and/or its banking subsidiary, American River
Bank, entered Salary Continuation Agreements to provide retirement benefits to
Messrs. Bender, Patton, and Byrne. The terms of the agreements include the
amounts each employee will receive upon the occurrence of certain specified
events, including formal retirement on or after a specified age. The agreements
generally provide for annual retirement benefit payments of Fifty Thousand
Dollars ($50,000) each to Messrs. Bender and Patton and Thirty Thousand Dollars
($30,000) to Mr. Byrne. The annual retirement benefit amount is payable in equal
monthly installments over a ten (10) year period. The annual benefit described
above vests at a rate of 5% per year. In the event of an employee's death, all
remaining amounts due are anticipated to be paid to the employee's designated
beneficiary over the remaining payout period. Other events which may alter when
payment of the annual retirement benefit is to begin, or the amount which is to
be paid, include: (a) disability prior to retirement in which case the employee
shall be entitled to a lesser benefit payment amount based upon the length of
employment; and (b) termination following a "change of control," in which case
the employee is entitled to receive the annual benefit payment in equal monthly
installments for ten (10) years beginning with the seventh (7th) month following
the termination in connection with the "change of control" equal to Thirty-Two
Thousand Four Hundred and Eighty-Five Dollars ($32,485) each for Messrs. Bender
and Patton and Nineteen Thousand Four Hundred and Ninety-One Dollars ($19,491)
for Mr. Byrne.
Health and Welfare Benefits
The Company offers a variety of health and welfare programs to all
eligible employees. The Executives generally are eligible for the same benefit
programs on the same basis as the rest of the broad-based employees. The health
19
and welfare programs are intended to protect employees against catastrophic loss
and encourage a healthy lifestyle. The health and welfare programs include
medical, pharmacy, dental, vision, life insurance, accidental death and
disability, paid vacation and personal absence time. Coverage under the life and
accidental death and disability programs offer benefit amounts specific to each
Executive. The Company pays the premium for the health and welfare programs and
the Executive reimburses the Company 30% of the cost through payroll deduction.
The Company offers a long-term disability program that provides income
replacement to Executives and senior managers after a 180-day disability period
at a rate of 66.67% of basic monthly earnings up to a maximum of $10,000 until
age 65 or recovery per the terms and conditions of the program. All other
employees are eligible to receive 60% of basic monthly earnings to a maximum of
$6,000. The program is contributory and all employees, including Executives,
reimburse the Company. The Executives reimburse 30% of the Long-term Disability
premium cost.
Perquisites and Perquisite Allowance Payments
The Compensation Committee annually reviews the perquisite program and
allowances provided to each Executive to determine if adjustments are
appropriate. Messrs. Taber, Patton, Standing and Byrne are provided Company
owned vehicles for their use to attend various events in the community and
business development purposes on behalf of the Company. These vehicles are for
business use only with the exception of commuting to and from their homes. Mr.
Patton has a membership in a golf club and a social club. The Company reimburses
Mr. Patton for the monthly dues and for business development purposes on behalf
of the Company. None of the perquisites exceed $10,000 per year.
Change in Control and Termination Benefits
In June 2006, the Company entered into an employment agreement with
David T. Taber. The agreement provides for an original term of two years subject
to automatic one-year extensions thereafter unless terminated in accordance with
the terms of the agreement. The agreement provides for a base salary which is
disclosed in the Summary Compensation Table on page 21. The agreement may be
terminated with or without cause, but if the agreement is terminated without
cause due to the occurrence of circumstances that make it impossible or
impractical for the Company to conduct or continue its business, the loss by the
Company of its legal capacity to contract or the Company's breach of the terms
of the agreement, the employee is entitled to receive severance compensation
equal to six (6) months of the existing base salary plus any incentive payment
due. The agreement further provides that in the event of a "change in control"
as defined therein and within a period of two years following consummation of
such change in control (i) the employee's employment is terminated; or (ii) any
adverse change occurs in the nature and scope of the employee's salary or
benefits; or (iii) any event occurs which reasonably constitutes a constructive
termination of employment, by resignation or otherwise, then the employee will
be entitled to receive severance compensation in an amount equal to eighteen
(18) months of the employee's annual base salary, less applicable withholding
deductions (in addition to salary, incentive compensation, or other payments, if
any, due the employee).
In June 2006, the Company's subsidiary, American River Bank, entered
into an employment agreement with Larry D. Standing. The agreement provides for
an original term of two years subject to automatic one-year extensions
thereafter unless terminated in accordance with the terms of the agreement. The
agreement provides for a base salary which is disclosed in the Summary
Compensation Table on page 21. The agreement may be terminated with or without
cause, but if the agreement is terminated without cause due to the occurrence of
circumstances that make it impossible or impractical for the Company to conduct
or continue its business, the loss by the Company of its legal capacity to
contract or the Company's breach of the terms of the agreement, the employee is
entitled to receive severance compensation equal to six months of the existing
base salary plus any incentive payment due. The agreement further provides that
in the event of a "change in control" as defined therein and within a period of
two years following consummation of such change in control (i) the employee's
employment is terminated; or (ii) any adverse change occurs in the nature and
scope of the employee's salary or benefits; or (iii) any event occurs which
reasonably constitutes a constructive termination of employment, by resignation
or otherwise, then the employee will be entitled to receive severance
compensation in an amount equal to eighteen (18) months of the employee's annual
base salary, less applicable withholding deductions (in addition to salary,
incentive compensation, or other payments, if any, due the employee).
In September 2006, the Company entered into employment agreements with
Mitchell A. Derenzo, Douglas E. Tow and Kevin B. Bender and the Company's
subsidiary, American River Bank entered into employment agreements with Gregory
N. Patton and Raymond F. Byrne. The agreements have no stated term and can be
canceled at any time by the employer or the employee, with or without cause. The
agreements provides for a base salary which is disclosed in the Summary
20
Compensation Table on page 21. The agreements may be terminated with or without
cause, but if an agreement is terminated without cause due to the occurrence of
circumstances that make it impossible or impractical for the Company to conduct
or continue its business, the loss by the Company of its legal capacity to
contract or the Company's breach of the terms of an agreement, the employee is
entitled to receive severance compensation equal to six (6) months of the
existing base salary. The agreements further provide that in the event of a
"change in control" as defined therein and within a period of two years
following consummation of such change in control (i) the employee's employment
is terminated; or (ii) any adverse change occurs in the nature and scope of the
employee's salary or benefits; or (iii) any event occurs which reasonably
constitutes a constructive termination of employment, by resignation or
otherwise, then the employee will be entitled to receive severance compensation
in an amount equal to twelve (12) months of the employee's annual base salary,
less applicable withholding deductions (in addition to salary, incentive
compensation, or other payments, if any, due the employee), in the case of
Messrs. Derenzo, Tow and Bender and nine (9) months of the employee's annual
base salary, less applicable withholding deductions (in addition to salary,
incentive compensation, or other payments, if any, due the employee) in the case
of Messrs. Patton and Byrne.
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviewed and discussed the Compensation
Discussion and Analysis included in this proxy statement with management. Based
on such review and discussion, the Compensation Committee recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this proxy statement for filing with the Securities and Exchange Commission.
Submitted by the Compensation Committee of American River Bankshares Board of
Directors:
/s/ Amador S. Bustos /s/ Charles D. Fite /s/ Michael A. Ziegler /s/ William A. Robotham
Amador S. Bustos Charles D. Fite Michael A. Ziegler William A. Robotham
Chairman
EXECUTIVE COMPENSATION
The following table shows the cash and non-cash compensation for the
last fiscal year awarded to or earned by individuals who served as our chief
executive officer or chief financial officer and each of our five other most
highly compensated executive officers during fiscal year 2006.
Summary Compensation Table
---------------------------------------------------------------------------------------------------------------------------------
Change in
Pension
Value and
Nonqualified
Non-Equity Deferred
Stock Option Incentive Plan Compensation All Other
Salary Bonus Awards Awards Compensation Earnings Compensation Total
Name and Principal Position ($) (1) ($) ($) ($) (2) ($) (3) ($) (4) ($) (5) ($)
---------------------------------------------------------------------------------------------------------------------------------
David T. Taber $ 257,500 - - $ 24,411 $ 99,807 $39,057 $13,403 $ 434,178
---------------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo $ 145,000 - - $ 11,787 $ 32,785 $ 8,307 $ 7,467 $ 205,346
---------------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow $ 145,000 - - $ 11,787 $ 32,785 $17,789 $ 7,458 $ 214,819
---------------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton $ 140,000 - - $ 11,605 $ 26,460 $ 451 $ 6,378 $ 184,894
---------------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender $ 120,000 - - $ 11,422 $ 27,132 - $ 6,047 $ 164,601
---------------------------------------------------------------------------------------------------------------------------------
Larry D. Standing $ 150,000 - - $ 3,909 $ 28,350 $87,919 $ 7,186 $ 277,364
---------------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne $ 130,000 - - $ 10,381 $ 32,273 - $ 7,863 $ 180,517
---------------------------------------------------------------------------------------------------------------------------------
(1) Includes amounts deferred at the discretion of the Executive pursuant to
the American River Bankshares 401(k) Plan and the American River Bankshares
Deferred Compensation Plan, as applicable.
(2) The amount reported in this column is the dollar amount recognized for
financial statement reporting purposes for 2006 in accordance with FAS
123(R). Options awarded on March 15, 2006 were valued at $8.77/share in
accordance with FAS 123(R). The assumptions used to calculate FAS 123(R)
fair value are described in footnote 2 to our consolidated financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2006.
21
(3) Incentive compensation is listed in the year earned, although actually paid
in following year.
(4) The amounts in this column represent the increase in the actuarial net
present value of all future retirement benefits under the individual's
salary continuation plan and the above market or preferential earnings on
any nonqualified compensation. The above market rate is determined by using
the amount above 120% of the federal long-term rate. For 2006, the interest
rate paid was 8.35% and the market rate was determined to be 5.84%. The
Executives may not be entitled to the benefit amounts included as the
salary continuation plan is not vested and the deferred compensation plan
is not funded.
(5) Amounts include 401(k) matching contributions and the use of a
Company-owned vehicle.
GRANTS OF PLAN-BASED AWARDS
The following table summarizes the stock options that were granted
pursuant to the Company's 2000 Stock Option Plan (the "2000 Stock Option Plan")
to the Company's executive officers in the fiscal year ended December 31, 2006.
Shareholders approved the 2000 Stock Option Plan on September 21, 2000. All of
the grants were made on March 15, 2006 based on achievement of 2005 corporate
and personal performance objectives. All options vest ratably over a five-year
period commencing one year after the grant date. Options may become exercisable
in full in the event of a change of control as defined in the 2000 Stock Option
Plan. The Company does not have any other equity based plans.
Grants of Plan-Based Awards Table
-----------------------------------------------------------------------------------------------------------------------------------
All All
Other Other Exercise Grant
Stock Option or Date
Awards: Awards: Base Fair
Number of Number of Price Value
Shares of Securities of of Stock
Estimated Future Payouts Estimated Future Payouts Stock or Underlying Option and Option
Under Non-Equity Under Equity Units Options Awards Awards
Incentive Plan Awards Incentive Plan Awards (#) (#) ($/Sh)(1) ($)(2)
--------------------------- -------------------------- --------------------------------------------
Grant Threshold Target Maximum Threshold Target Maximum
Name Date ($) ($) ($) (#) (#) (#)
-----------------------------------------------------------------------------------------------------------------------------------
David T. Taber 3/15/2006 - - - - - - - 7,441 $ 27.80 $ 65,290
-----------------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo 3/15/2006 - - - - - - - 3,555 $ 27.80 $ 31,193
-----------------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow 3/15/2006 - - - - - - - 3,555 $ 27.80 $ 31,193
-----------------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton 3/15/2006 - - - - - - - 3,500 $ 27.80 $ 30,710
-----------------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender 3/15/2006 - - - - - - - 3,555 $ 27.80 $ 31,193
-----------------------------------------------------------------------------------------------------------------------------------
Larry D. Standing 3/15/2006 - - - - - - - 3,300 $ 27.80 $ 28,955
-----------------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne 3/15/2006 - - - - - - - 3,300 $ 27.80 $ 28,955
-----------------------------------------------------------------------------------------------------------------------------------
(1) It is the Company's policy that the exercise price for each stock option is
the market value as of the close of the market on the date of grant.
(2) The Black-Scholes option-pricing model was used to estimate the grant date
fair value of the options in this column. Use of this model should not be
construed as an endorsement of its accuracy. All stock option pricing
models require predictions about the future movement of the stock price.
The assumptions used to develop the grant date valuations were: risk-free
rate of return of 4.7%, dividend rate of 2.2%, volatility rate of 29.6%,
quarterly reinvestment of dividends and an average term of 7 years. The
real value of the options in this table will depend on the actual
performance of the Company's common stock during the applicable period and
the fair market value of the Company's common stock on the date the options
are exercised.
22
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows the outstanding exercised stock options,
unvested restricted stock and other equity incentive plan awards held at the end
of fiscal year 2006 by the executive officers named in the Summary Compensation
Table.
Outstanding Equity Awards at Fiscal Year-End Table
-----------------------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
------------------------------------------------------------- -------------------------------------------------
Equity
Incentive
Equity Plan Awards:
Equity Incentive Market or
Incentive Plan Awards: Payout Value
Number of Number of Plan Awards: Market Number of of Unearned
Securities Securities Number of Number of Value of Unearned Shares,
Underlying Underlying Securities Shares or Shares or Shares, Units Units
Unexercised Unexercised Underlying Units of Units of or Other or Other
Options Options Unexercised Option Stock That Stock That Rights That Rights That
(#) (#) Unearned Exercise Option Have Not Have Not Have Not Have Not
----------- -------------- Options Price Expiration Vested Vested Vested Vested
Name Exercisable Unexercisable (#) ($) Date (#) ($) (#) ($)
-----------------------------------------------------------------------------------------------------------------------------------
David T. Taber 4,688 (1) 3,125 (1) - $ 12.87 3/19/2013 - - - -
3,125 (2) 4,688 (2) - $ 18.51 4/21/2014 - - - -
1,563 (3) 6,250 (3) - $ 20.10 9/21/2015 - - - -
- 7,813 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo 9,270 (5) - - $ 5.30 5/22/2007 - - - -
2,239 (1) 1,493 (1) - $ 12.87 3/19/2013 - - - -
1,493 (2) 2,239 (2) - $ 18.51 4/21/2014 - - - -
746 (3) 2,986 (3) - $ 20.10 9/21/2015 - - - -
- 3,732 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow 9,212 (6) - - $ 7.82 12/16/2008 - - - -
2,239 (1) 1,493 (1) - $ 12.87 3/19/2013 - - - -
1,493 (2) 2,239 (2) - $ 18.51 4/21/2014 - - - -
746 (3) 2,986 (3) - $ 20.10 9/21/2015 - - - -
- 3,732 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton 10,014 (7) - - $ 8.42 9/16/2008 - - - -
1,562 (1) 1,042 (1) - $ 12.87 3/19/2013 - - - -
1,528 (2) 2,291 (2) - $ 18.51 4/21/2014 - - - -
764 (3) 3,055 (3) - $ 20.10 9/21/2015 - - - -
- 3,675 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender 10,440 (8) - - $ 7.65 11/17/2009 - - - -
1,822 (1) 1,215 (1) - $ 12.87 3/19/2013 - - - -
1,389 (2) 2,083 (2) - $ 18.51 4/21/2014 - - - -
746 (3) 2,986 (3) - $ 20.10 9/21/2015 - - - -
- 3,732 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Larry D. Standing - 3,465 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne 650 (1) 433 (1) - $ 12.87 3/19/2013 - - - -
1,389 (2) 2,083 (2) - $ 18.51 4/21/2014 - - - -
694 (3) 2,778 (3) - $ 20.10 9/21/2015 - - - -
- 3,465 (4) - $ 26.48 3/15/2016 - - - -
-----------------------------------------------------------------------------------------------------------------------------------
(1) These stock options vest at a rate of 20% per year; 60% were vested as of
March 19, 2006 with the remaining vesting to occur on March 19, 2007 and
2008.
(2) These stock options vest at a rate of 20% per year; 40% were vested as of
April 21, 2006 with the remaining vesting to occur on April 21, 2007, 2008
and 2009.
(3) These stock options vest at a rate of 20% per year; 20% were vested as of
September 21, 2006 with the remaining vesting to occur on September 21,
2007, 2008, 2009 and 2010.
(4) These stock options vest at a rate of 20% per year; with vesting dates of
March 15, 2007, 2008, 2009, 2010 and 2011.
(5) These stock options vest at a rate of 20% per year; 100% were vested as of
May 22, 2002.
(6) These stock options vest at a rate of 20% per year; 100% were vested as of
December 16, 2003.
(7) These stock options vest at a rate of 20% per year; 100% were vested as of
September 16, 2003.
(8) These stock options vest at a rate of 20% per year; 100% were vested as of
November 17, 2004.
23
OPTION EXERCISES AND STOCK VESTED
The following table summarizes information with respect to stock option awards
exercised and restricted stock and restricted stock unit awards vested during
fiscal year 2006 for each of the executive officers named in the Summary
Compensation Table.
Option Exercises and Stock Vested Table
------------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
------------------------------------------- --------------------------------------
Number of Shares Value Realized Number of Shares Value Realized
Acquired on Exercise on Exercise Acquired on Vesting on Vesting
Name (#) ($) (#) ($)
------------------------------------------------------------------------------------------------------------------------
David T. Taber - - - -
------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo 10,000 $ 206,814 - -
------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow 6,300 $ 100,560 - -
------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton 5,000 $ 81,030 - -
------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender 5,000 $ 77,041 - -
------------------------------------------------------------------------------------------------------------------------
Larry D. Standing - - - -
------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne - - - -
------------------------------------------------------------------------------------------------------------------------
PENSION BENEFITS
The following table summarizes information with respect to each plan
that provides for payments or other benefits at, following, or in connection
with the retirement of any of the executive officers named in the Summary
Compensation Table.
Pension Benefits Table
------------------------------------------------------------------------------------------------------------------------
Name Present Value Payments
Number of Years of Accumulated During Last
Credited Service Benefit Fiscal Year
Name Plan Name (1) (#) (2) ($) (3) ($)
------------------------------------------------------------------------------------------------------------------------
David T. Taber Salary Continuation Plan 2.416 $ 43,279 -
------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo Salary Continuation Plan 2.416 $ 17,325 -
------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow Salary Continuation Plan 2.416 $ 43,979 -
------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton - - - -
------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender - - - -
------------------------------------------------------------------------------------------------------------------------
Larry D. Standing Director Retirement Plan 3.416 $ 88,344 -
Salary Continuation Plan 2.75 $152,665 -
------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne - - - -
------------------------------------------------------------------------------------------------------------------------
(1) The salary continuation and director retirement plans are more fully
described on Page 19 of this proxy statement.
(2) Years of credited service represents the number of years the Executive has
participated in the pension benefit plan. Normal retirement age is 65.
(3) Includes amounts which the Executive may not be currently entitled to
receive because those amounts are not vested.
NONQUALIFIED DEFERRED COMPENSATION
The Deferred Compensation Plan was established for the purpose of
providing the Executives and selected senior managers, an opportunity to defer
compensation. Participants, who are selected by a committee designated by the
Board of Directors, may elect to defer annually, a minimum of $5,000 or a
maximum of eighty percent of their base salary and all of their annual cash
incentives.
The following table summarizes information with respect to
participation of the Executives named in the Summary Compensation Table in the
Deferred Compensation Plan, the Company's only nonqualified deferred
compensation plan.
24
Nonqualified Deferred Compensation Table
---------------------------------------------------------------------------------------------------------------------------
Registrant Aggregate Aggregate
Executive Contributions Earnings Aggregate Balance at
Contributions in in Last in Last Withdrawals/ Last Fiscal
Last Fiscal Year Fiscal Year Fiscal Year Distributions Year-End
Name ($) ($) ($) (1) ($) ($) (2)
---------------------------------------------------------------------------------------------------------------------------
David T. Taber $ 124,000 - $ 79,246 - $1,025,737
---------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo $ 19,500 - $ 7,967 - $ 107,598
---------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow $ 41,453 - $ 9,058 - $ 123,912
---------------------------------------------------------------------------------------------------------------------------
Gregory N. Patton $ 7,000 - $ 1,463 - $ 21,351
---------------------------------------------------------------------------------------------------------------------------
Kevin B. Bender - - - - -
---------------------------------------------------------------------------------------------------------------------------
Larry D. Standing - - - - -
---------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne - - - - -
---------------------------------------------------------------------------------------------------------------------------
(1) Earnings credited to the accounts are based upon the terms of Deferred
Compensation Plan, which is equal to the five-year U.S. Treasury Note plus
4.0%. The rate credited for 2006 was 8.35%
(2) The Deferred Compensation Plan is an unfunded plan. For more information on
the Deferred Compensation Plan, please see page 18.
EQUITY COMPENSATION PLAN INFORMATION
The chart below summarizes information under which shares of the
Company's common stock are authorized for the issuance through equity
compensation plans including the 1995 Stock Option Plan and the 2000 Stock
Option Plan as of December 31, 2006. Both of these plans have been approved by
the Company's shareholders. The Company has no other equity compensation plan
and there are no warrants or other rights outstanding that would result in the
issuance of shares of the Company's common stock.
---------------------------------------------------------------------------------------------------------------------------
Plan Category Number of securities to be Weighted-average Number of securities remaining
issued upon exercise of exercise price of available for future issuance
outstanding options, outstanding options, under equity compensation plans
warrants and rights warrants and rights (excluding securities reflected in
column (a))
(a) (b) (c)
---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 326,282 (1) $16.32 310,758
---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security - - -
holders
---------------------------------------------------------------------------------------------------------------------------
Total 326,282 $16.32 310,758
---------------------------------------------------------------------------------------------------------------------------
(1) Shares reserved but unissued shall remain available for grant during any
subsequent calendar year. Awards that expire or are cancelled, forfeited or
terminated before being exercised shall again become available for future
awards under the Plan.
TRANSACTIONS WITH RELATED PERSONS
The Company has a policy that it does not enter into any transactions
covered under Item 404 of Regulation S-K with the exceptions of loans made by
the Company's subsidiary, American River Bank, (see "Indebtedness of Management"
immediately following this section) and a lease transaction that was entered
into in 1985, and subsequently renewed, with Bradshaw Plaza, Associates, Inc., a
California corporation doing business as Bradshaw Plaza, which is owned in part
by Charles D. Fite, a director of the Company, in addition to ownership by other
family members. American River Bank leases the premises at 9750 Business Park
Drive, Sacramento, California and uses the premises for one of its branch
locations. The lease term is 10 years and expires on November 30, 2016, subject
to extension for one five-year option term. The premises consist of 3,711 square
feet on the ground floor. The current monthly rent is $6,865. The approximate
aggregate rental payments for the period from January 1, 2007 through the lease
term expiring on November 30, 2016 will be $910,308. The Board of Directors has
evaluated this transaction and determined that is does not impair the
independence of Mr. Fite, as defined under applicable NASDAQ listing rules. The
Board of Directors also determined that they would not expand the existing lease
relationship nor would they enter into any new leases for any location other
than the current location with Mr. Fite or any of his related companies.
25
Other than the lease transaction with Director Fite, there have been no
transactions, or series of similar transactions, during 2006, or any currently
proposed transaction, or series of similar transactions, to which American River
Bankshares or American River Bank was or is to be a party, in which the amount
involved exceeded or will exceed $120,000 and in which any director,
director-nominee or executive officer of American River Bankshares or American
River Bank, any shareholder owning of record or beneficially 5% or more of
American River Bankshares 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.
Indebtedness of Management
American River Bankshares, through American River Bank, has had, and
expects in the future to have banking transactions in the ordinary course of its
business with many of American River Bankshares' directors and officers and
their associates, including transactions with corporations of which such persons
are directors, officers or controlling shareholders, on substantially the same
terms (including interest rates and collateral) as those prevailing for
comparable transactions with unrelated persons. Management believes that in 2006
such transactions comprising loans did not involve more than the normal risk of
collectability or present other unfavorable features. Loans to executive
officers of American River Bankshares and American River Bank are subject to
limitations as to amount and purposes prescribed in part by the Federal Reserve
Act, as amended, and the regulations of the Federal Deposit Insurance
Corporation.
CORPORATE GOVERNANCE
Our Board of Directors and management are dedicated to exemplary
corporate governance. Good corporate governance is vital to the continued
success of the Company. The Board annually reviews and updates the charters of
the Board committees in response to evolving "best practices" and the results of
changes in the regulatory environment.
Director Independence
Our Board of Directors has determined that each of our directors other
than CEO David T. Taber has no material relationship with the Company and is
independent. Each of our Audit, Nominating and Compensation Committees is
composed only of independent directors.
Our Board has adopted certain standards to assist it in assessing the
independence of each of our directors. Absent other material relationships with
the Company, a director who otherwise meets the definition of independence under
applicable NASDAQ listing standards may be deemed "independent" by the Board of
Directors after consideration of all of the relationships between the Company
and the director, or any of his or her immediate family members (as defined in
the NASDAQ listing rules), or any entity with which the director or any of his
or her immediate family members is affiliated by reason of being a partner,
officer or a significant shareholder thereof. However, ordinary banking
relationships (such as depository, lending, and other services readily available
from other financial institutions) are not considered by the Board of Directors
in determining a director's independence, as the Board of Directors considers
these relationships to be categorically immaterial. A banking relationship is
considered "ordinary" if:
o the relationship is on substantially the same terms as those
prevailing at the time for comparable transactions with
non-affiliated persons;
o with respect to an extension of credit, it has been made in
compliance with applicable law, including Regulation O of the
Board of Governors of the Federal Reserve and Section 13(k) of
the Securities Exchange Act of 1934;
o no event of default has occurred and is continuing beyond any
period of cure; and
o the relationship has no other extraordinary characteristics.
In assessing the independence of our directors, our full Board of
Directors carefully considered all of the business relationships between the
Company and our directors or their affiliated companies, other than ordinary
banking relationships. This review was based primarily on responses of the
directors to questions in a directors' and officers' questionnaire regarding
employment, business, familial, compensation and other relationships with the
Company and our management. Where business relationships other than ordinary
banking relationships existed, the Board of Directors determined that, except in
the case of Mr. Taber, none of the relationships between the Company and the
directors or the directors' affiliated companies impair the directors'
independence because the amounts involved are immaterial to the directors or to
26
those companies when compared to their annual income or gross revenues. The
Board of Directors also determined for all of the relationships between the
Company and our directors or the directors' affiliated companies, that none of
the relationships had unique characteristics that could influence the director's
impartial judgment as a director of the Company.
Code of Ethics
The Company has adopted a Code of Ethics that complies with the rules
promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002 and applicable NASDAQ listing rules. 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 2003
Annual Report on Form 10-K 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" or is available, free of charge, upon written request to Mitchell A.
Derenzo, American River Bankshares, 3100 Zinfandel Drive, Suite 450, Rancho
Cordova, CA 95670.
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 any persons
beneficially owning ten percent or more of the Company's common stock to timely
file initial reports of ownership and reports of changes in that ownership with
the Securities and Exchange Commission. Such persons are required by Securities
and Exchange Commission regulation to send copies of such reports to the
Company. To the Company's knowledge, based solely on a 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, 2006, the
Company believes all such filing requirements applicable to its directors,
executive officers and ten percent shareholders were met.
27
PROPOSAL NO. 2
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Perry-Smith LLP, certified public accountants,
served the Company as its independent registered public accountant and auditor
for the 2006 fiscal year at the direction of the Audit Committee and the Board
of Directors of the Company. Perry-Smith LLP has no interests, financial or
otherwise, in the Company. The services rendered by Perry-Smith LLP during the
2006 fiscal year were audit services, consultation in connection with various
accounting matters, and preparation of the Company's income tax returns.
The table below summarizes the services rendered to the Company by
Perry-Smith LLP during and for the 2006 and 2005 fiscal years.
2006 2005
---------- ----------
Audit Fees (1) $ 165,400 $ 162,480
Audit-Related Fees (2) $ 11,700 $ 4,500
Tax Fees (3) $ 21,600 $ 20,825
All Other Fees $ -- $ --
Total Accounting Fees $ 198,700 $ 187,805
(1) Audit fees consisted of services rendered by Perry-Smith LLP for the audit
of the Company's consolidated financial statements included in the Annual
Report on Form 10-K and for reviews of the financial statements included in
the Company's quarterly reports on Form 10-Q for fiscal years 2006 and
2005.
(2) Audit-related fees represent fees for professional services such as
technical accounting, consulting, and research for 2005 and audit of the
Company's 401(k) plan for 2006.
(3) Tax fees consisted principally of services rendered by Perry-Smith LLP for
assistance relating to tax compliance and reporting for fiscal years 2006
and 2005.
The Audit Committee approved each professional service rendered by
Perry-Smith LLP during the 2006 and 2005 fiscal years and considered whether the
provision of such services is compatible with Perry-Smith LLP maintaining its
independence. The approval of such professional services included pre-approval
of all audit and permissible non-audit services provided by Perry-Smith LLP.
These services included audit, tax and other services described above. The Audit
Committee Charter attached as Appendix C 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 Perry-Smith LLP during the 2006 and 2005 fiscal years. It is
anticipated that one or more representatives of Perry-Smith LLP will be present
at the Meeting and will be able to make a statement if they so desire and answer
appropriate questions.
The Board of Directors has selected Perry-Smith LLP to serve as the
Company's independent registered public accountants for the year 2007 and
recommends that shareholders vote "FOR" the ratification of the selection of
Perry-Smith LLP. The ratification of the selection of Perry-Smith LLP as the
Company's independent public registered accountants requires approval of a
majority of the total number of shares voting at the Meeting. In the event such
selection is not ratified, the adverse vote will be deemed to be an indication
to the Board of Directors that it should consider selecting other independent
registered public accountants for 2007. Because of the difficulty and expense of
making any substitution of accounting firms after the beginning of the current
year, it is the intention of the Board of Directors that the selection of
Perry-Smith LLP for the year 2007 will remain in effect; however, the Board of
Directors also retains the power to select another independent registered public
accounting firm to replace the accountants ratified by the shareholders in the
event the Board of Directors determines that the interests of the Company and
its shareholders require such a change.
28
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: Amador A. Bustos, Robert J. Fox (Audit Committee Financial
Expert), and William A. Robotham (Chairman). Each such member of the Audit
Committee is "independent" as defined under applicable NASDAQ listing rules.
The Audit Committee operates under a written charter adopted by the
Board of Directors, which among other matters, delineates the responsibilities
of the Audit Committee. The Audit Committee's responsibilities include
responsibility for the appointment, compensation, retention and oversight of the
work of the Company's independent registered public accountants engaged
(including resolution of disagreements between management and the independent
registered 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 registered public
accountants report directly to the Audit Committee. The written Audit Committee
charter adopted by the Board of Directors is attached to this proxy statement as
Appendix C.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2006 with
management and Perry-Smith LLP, the Company's independent registered public
accountants. The Audit Committee has also discussed with Perry-Smith 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 Audit Committee has also received the letter from Perry-Smith
LLP required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) as may be modified or supplemented, and the
Audit Committee has discussed the independence of Perry-Smith LLP with that
firm.
Based on the Audit Committee's review and discussions noted above, the
Audit 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-K for
the fiscal year ended December 31, 2006 for filing with the Securities and
Exchange Commission.
/s/ Amador S. Bustos /s/ Robert J. Fox /s/ William A. Robotham
------------------------ -------------------- -------------------------
Amador S. Bustos Robert J. Fox William A. Robotham
29
ANNUAL REPORT
The Annual Report of the Company containing audited financial
statements for the fiscal year ended December 31, 2006 accompanies this proxy
statement.
FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS
AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO STEPHEN H.
WAKS, SECRETARY, AMERICAN RIVER BANKSHARES, 3100 ZINFANDEL DRIVE, SUITE 450,
RANCHO CORDOVA, CA 95670.
WEBSITE
Information regarding the Company may be obtained from the Company's
website at www.amrb.com. Copies of the Company's Annual Report on Form 10-K,
quarterly reports on Form 10-Q, 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 "SEC Filings" menu item on the Company website, then select
either "SEC Filings" to view or download copies of reports including Form 10-K,
10-Q or 8-K, or "Section 16 Reports" to view or download reports on Forms 3, 4
or 5 of insider transactions in Company securities.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders will be held on May 22,
2008. The deadline for shareholders to submit proposals for inclusion in the
proxy statement and form of proxy for the 2008 Annual Meeting of Shareholders is
December 23, 2007. 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 the December 23, 2007 deadline. All proposals should be
submitted by Certified Mail - Return Receipt Requested, to Stephen H. Waks,
Secretary, American River Bankshares, 3100 Zinfandel Drive, Suite 450, Rancho
Cordova, CA 95670.
OTHER MATTERS
The Board of Directors knows of no other matters, which will be brought
before the Meeting, but if such matters are properly presented to the Meeting,
proxies solicited hereby will be voted in accordance with the judgment of the
persons holding such proxies. All shares represented by duly executed proxies
will be voted at the Meeting in accordance with the terms of such proxies.
Dated: April 19, 2007 AMERICAN RIVER BANKSHARES
By: /s/ Stephen H. Waks
----------------------------------
Stephen H. Waks
Corporate Secretary
30
APPENDIX A
AMERICAN RIVER BANKSHARES
BOARD OF DIRECTORS
NOMINATING COMMITTEE CHARTER
I. Membership
The Nominating Committee shall be comprised of at least three
independent directors appointed annually 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 the NASDAQ Marketplace Rules.
II. Purpose
The purpose of the Nominating Committee is to assist the Board of
Directors by (a) establishing criteria for candidates and identifying,
evaluating and recommending candidates, including candidates proposed
by shareholders, for election to the Board of Directors, and (b)
periodically reviewing and making recommendations on the composition of
the Board of Directors.
III. Nomination Process
1. Candidates shall be evaluated based on the criteria
established by the Nominating Committee which may include (a)
satisfactory results of any background investigation, (b)
experience and expertise, (c) financial resources, (d) time
availability, (e) community involvement, and (f) such other
criteria as the Nominating Committee may determine to be
relevant. Candidates selected for consideration as nominees
must meet with the Nominating Committee and thereafter with
the Board of Directors.
2. Any candidate nominated for election to the Board of Directors
must (a) be recommended to the Board of Directors by the
unanimous vote of approval of the members of the Nominating
Committee and (b) 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.
3. Each candidate recommended by the Nominating Committee shall
be required to complete one or more questionnaires and provide
such additional information as the Nominating Committee shall
deem necessary or appropriate. Such information shall include
a personal financial statement and a background investigation
using an outside firm which shall, among other matters, (a)
verify the accuracy of information provided by the candidate
including that the name and social security number is
consistent with other information provided, (b) conduct a
review of criminal history records, and (c) verify addresses
associated with the applicant and identification of persons
with whom the applicant has shared addresses.
4. Each existing member of the Board of Directors whose term is
ending must be reviewed for recommendation for re-election by
the Nominating Committee. 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 Nominating Committee 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 Nominating Committee may deem appropriate.
5. Nominations for existing members of the Board of Directors
must receive a majority of votes in favor of nomination from
the other independent directors.
A-1
IV. Frequency of Meetings
The Nominating Committee shall meet at such times as it may deem
appropriate, but not less frequently than annually.
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-2
APPENDIX B
AMERICAN RIVER BANKSHARES
COMPENSATION COMMITTEE CHARTER
1. Membership. The Board of Directors of American River Bankshares (the
"Company"), upon recommendation of the Chair of the Company, shall appoint a
Compensation Committee of at least three (3) members, consisting entirely of
independent directors, and shall designate one member as chairperson. The
members of the Compensation Committee shall serve at the discretion of the Board
of Directors. For purposes hereof, an "independent" director is a director who
qualifies as independent under the definition of "independence" contained in
applicable rules promulgated by the Securities and Exchange Commission pursuant
to the Sarbanes-Oxley Act of 2002 and the NASDAQ listing rules.
2. Purposes, Duties and Responsibilities. The purpose of the Compensation
Committee is to discharge the responsibilities of the Board of Directors
relating to compensation of the Company's executive officers (the "Executives")
and directors, and in the case of stock options, this would include other key
employees. It is also its responsibility to review and approve the annual report
on compensation for inclusion in the Company's proxy statement for the annual
meeting of shareholders under the caption, "Compensation Committee Report." The
duties and responsibilities of the Compensation Committee are to:
A. Provide oversight to the Company's overall compensation
strategy and objectives pursuant to the goals of the Company.
B. Review and recommend to the Board of Directors, changes to the
structure and design of the compensation elements for the
Executives including: annual base salary, annual cash
incentives, long-term equity incentives, retirement plans
(401(k), deferred compensation, and salary continuation
plans), and change in control benefits and severance.
C. Review and recommend to the Board of Directors, changes in the
structure and design of the compensation elements for the
Board of Directors of the Company and subsidiary(ies) and any
committees thereof, including cash (meeting fees, retainers),
long-term equity incentive plans and the Director Emeritus
Program.
D. Review and recommend to the Board of Directors, the
appropriate peer group to be used in benchmarking executive
and board compensation.
E. Recommend annually to the Board of Directors, the compensation
of the Chief Executive Officer ("CEO"), including base salary,
annual cash incentive opportunity and changes to other
compensation elements.
F. Recommend annually to the Board of Directors, the compensation
of other executive officers based on the recommendation of the
CEO including base salary, annual cash incentive opportunity
and changes to other compensation elements.
G. Recommend to the Board of Directors the performance metrics
and weights of each as required by the Company's Executive
Annual Incentive Plan.
H. Recommend to the Board of Directors, changes to Company Board
member and/or subsidiary Board member compensation.
I. Recommend to the Board of Directors, annual equity grants to
the Executives, board members and other key employees,
pursuant to Board of Directors approved option granting
methodology.
J. Recommend to the Board of Directors, additions to personnel
covered by the Company's Deferred Compensation Plan.
B-1
K. Recommend to the Board of Directors, employment and/or
severance agreements for the Executives.
L. Periodically review and recommend to the Board of Directors,
changes to Executive retirement benefits, employment
agreements, and change in control benefits and severance
plans.
M. Periodically review the Company succession plans relating to
positions held by the Executives and make recommendations to
the Board of Directors regarding the process for selecting the
individuals to fill these positions.
N. Evaluate the CEO's performance relative to the goals and
objectives of the Company and discuss evaluations of other
executive officers with the CEO.
O. Annually review and recommend changes deemed necessary to the
Compensation Committee Charter.
P. Prepare and submit an appropriate "Compensation Committee
Report" pursuant to applicable regulations of the Securities
and Exchange Commission for inclusion in the management proxy
statement for each annual meeting of shareholders, stating,
among other matters, whether (i) the Compensation Committee
has reviewed and discussed the Compensation Discussion and
Analysis with management, and (ii) the Compensation Committee
has recommended to the Board that the Compensation Discussion
and Analysis be included in such proxy statement and the
Company's Annual Report on Form 10-K.
Q. Perform such other duties and responsibilities as it may be
required by the rules and regulations that govern the Company
that are consistent with the purpose of the Compensation
Committee, or as the Board of Directors may deem appropriate.
3. Subcommittees. The Compensation Committee may delegate any of the
foregoing duties and responsibilities to a subcommittee of the Compensation
Committee consisting of not less than two (2) members of the Compensation
Committee.
4. Advisors and Consultants. The Compensation Committee, subject to prior
approval of the Board, will have the authority to retain, at the expense of the
Company, such outside legal, accounting, consultants, and other experts and
advisors, as it determines would be appropriate, to assist the Compensation
Committee in the full performance of its functions. The Compensation Committee
shall have full delegated authority to retain and terminate any compensation
consultant used to assist the Committee in the evaluation of the directors,
Chief Executive Officer or other executives, and to approve the consultant's
fees and the terms and conditions applicable to the services of the consultant.
5. Meetings. The Compensation Committee will meet as often as may be
deemed necessary or appropriate, in the judgment of its Chairperson, either in
person or telephonically, and at such times and places as the Compensation
Committee determines, but in no event less frequently than three times per year.
A majority of the members of the Compensation Committee shall constitute a
quorum for all purposes. The CEO is an invited guest to the Compensation
Committee meetings and can be present at discussions regarding compensation
matters relative to non-CEO executive officers or directors. The CEO cannot be
present during deliberations or vote on CEO or non-CEO executive officer
compensation matters. The Compensation Committee Chairperson may also invite
consultants or other members of management to attend any meeting and provide
pertinent information as necessary. The Compensation Committee will report
regularly to the full Board with respect to the meetings and activities of the
Compensation Committee described in this Charter.
B-2
APPENDIX C
AMERICAN RIVER BANKSHARES
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 Registered Public Accounting Firm ("independent public
accountants");
3. The performance of the Company's independent internal control
auditors;
4. Communications among the independent public accountants,
management, independent internal control 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 applicable 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 applicable 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.
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 and
independent internal control auditor.
The Committee may request any officer or employee of the Company, or
the Company's counsel, or independent public accountants, or independent
internal control auditors, to attend a meeting of the Committee or to meet with
any members of, or advisors to, the Committee.
C-1
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 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 NASDAQ, or as the
Committee deems necessary or appropriate, shall perform the following:
1. Financial Statement and Disclosure Matters
(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-K.
(b) Review with management, the independent public accountants,
the independent internal control 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 independent
internal control auditors management's assertion regarding the design
effectiveness and operation efficiency of the Company's internal controls 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.
C-2
(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
(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 independent internal control 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 independent internal control 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.
C-3
(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) 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 independent internal
control auditors and the independent public accountants.
C-4
^ DETACH PROXY CARD HERE ^
--------------------------------------------------------------------------------
| PROXY
|
| PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
| AMERICAN RIVER BANKSHARES
| for the Annual Meeting of Shareholders May 17, 2007
PLEASE DETACH HERE |
---------------------| The undersigned shareholder(s) of American River
You Must Detach | Bankshares (the "Company") hereby appoint(s) David T.
This Portion | Taber and Mitchell A. Derenzo as proxyholders, each with
of the Proxy Card | full powers of substitution, to represent and to vote all
Before Returning | stock of the Company which the undersigned is (are)
it in the | entitled to vote at the Annual Meeting of Shareholders of
Enclosed Envelope | the Company to be held on Thursday, May 17, 2007 at the
| North Ridge Country Club, located at 7600 Madison Avenue,
| Fair Oaks, California 95628, and at any and all
| postponements or adjournments thereof, as fully and with
| the same force and effect as the undersigned might or
| could do if personally present at the Meeting and at any
| and all postponements or adjournments thereof, upon the
| following items on the reverse side of the proxy.
|
| The Board of Directors recommends a vote "FOR" Proposal
| No. 1 and Proposal No. 2 set forth on the reverse side.
| This proxy, when properly executed, will be voted as
| directed herein by the undersigned shareholder(s). If no
| direction is indicated, this proxy will be voted "FOR"
| ALL nominees listed in Proposal No. 1, "FOR" Proposal No.
| 2 and in the proxyholders' discretion as to any other
| business, which may come before the Meeting.
|
|
| PLEASE SIGN AND DATE ON REVERSE SIDE
|
^ DETACH PROXY CARD HERE ^
----------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors. To elect the following three (3) 2. Ratification of Independent Public Accountants. |<
nominees as Class II directors to serve until the 2008 To ratify the selection of Perry-Smith LLP as |PLEASE DETACH
Annual Meeting of Shareholders and until their successors independent registered public accountants | HERE
are duly elected and qualified: Dorene C. Dominguez, for the 2007 fiscal year. |--------------
Stephen H. Waks and Michael A. Ziegler | You Must
[ ] FOR [ ] AGAINST [ ] ABSTAIN | Detach This
| Portion of
To elect the following three (3) nominees as | the Proxy
Class III directors to serve until the 2009 Annual 3. Other Business. To transact such other business | Card Before
Meeting of Shareholders and until their successors as may properly come before the Meeting and any | Returning
are duly elected and qualified: Charles D. Fite, . postponements or adjournments thereof. | it in the
Robert J. Fox and Roger J. Taylor, D.D.S | Enclosed
| Envelope
To elect the following three (3) nominees as Please date this Proxy and sign your name(s) |
Class I directors to serve until the 2010 Annual exactly as set forth on your stock certificate(s). |
Meeting of Shareholders and until their successors When signing as attorney, executor, conservator, |<
are duly elected and qualified: Amador S. Bustos, administrator, trustee, guardian, officer or in a |
William A. Robotham and David T. Taber similar representative capacity, please give full |
title. If a corporation, please sign the full |
[ ] FOR ALL [ ] WITHHOLD ALL corporate name by the president or other |
[ ] FOR ALL EXCEPT Nominee(s) Written Below: authorized officer. If a partnership, please sign |
the full partnership name by an authorized |
___________________________________________________ partner. If more than one trustee, all should |
Number of Shares: _________________________________ sing. All joint owners should sign. |
Date: _______________________, 2007 |
I/we do [ ] do not [ ] expect to attend the Meeting |
Signature of Shareholder(s) |
|
_____________________________ |
|
_____________________________ |
Please print name(s) |
|
THIS PROXY IS SOLICITED ON BEHALF OF |
THE BOARD OF DIRECTORS, AND MAY BE |
REVOKED BY THE SHAREHOLDER(S) PRIOR TO |
ITS EXERCISE BY FILING WITH THE |
CORPORATE SECRETARY OF THE COMPANY AN |
INSTRUMENT REVOKING THIS PROXY OR A |
DULY EXECUTED PROXY BEARING A LATER |
DATE OR BY APPEARING IN PERSON AND |
VOTING AT THE MEETING |
|