Delaware | 94-3327828 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) | |
111 W. Pine Street, Lodi, California | 95240 | |
(Address of principal Executive offices) | (Zip Code) |
Page
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5
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6
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7
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17
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35
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37
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38
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38
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38
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38
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38 | ||||
38
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38
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Signatures |
39
|
|||
Index to Exhibits |
39
|
(in thousands)
|
Sept. 30,
|
December 31,
|
Sept. 30,
|
|||||||||
Assets
|
2010
|
2009
|
2009
|
|||||||||
Cash and Cash Equivalents:
|
||||||||||||
Cash and Due From Banks
|
$ | 32,453 | $ | 32,660 | $ | 27,954 | ||||||
Federal Funds Sold
|
30,280 | 1,972 | 1,982 | |||||||||
Total Cash and Cash Equivalents
|
62,733 | 34,632 | 29,936 | |||||||||
Investment Securities:
|
||||||||||||
Available-for-Sale
|
351,029 | 365,549 | 362,350 | |||||||||
Held-to-Maturity
|
67,984 | 69,617 | 69,016 | |||||||||
Total Investment Securities
|
419,013 | 435,166 | 431,366 | |||||||||
Loans
|
1,190,872 | 1,212,718 | 1,215,173 | |||||||||
Less: Allowance for Loan Losses
|
32,006 | 29,813 | 25,818 | |||||||||
Loans, Net
|
1,158,866 | 1,182,905 | 1,189,355 | |||||||||
Premises and Equipment, Net
|
24,545 | 24,887 | 24,469 | |||||||||
Bank Owned Life Insurance
|
45,125 | 43,759 | 43,317 | |||||||||
Interest Receivable and Other Assets
|
66,604 | 59,665 | 46,468 | |||||||||
Total Assets
|
$ | 1,776,886 | $ | 1,781,014 | $ | 1,764,911 | ||||||
Liabilities
|
||||||||||||
Deposits:
|
||||||||||||
Demand
|
$ | 336,108 | $ | 324,073 | $ | 283,169 | ||||||
Interest Bearing Transaction
|
166,450 | 180,570 | 162,454 | |||||||||
Savings and Money Market
|
407,660 | 414,285 | 433,613 | |||||||||
Time
|
590,193 | 579,196 | 617,793 | |||||||||
Total Deposits
|
1,500,411 | 1,498,124 | 1,497,029 | |||||||||
Securities Sold Under Agreement to Repurchase
|
60,000 | 60,000 | 60,000 | |||||||||
Federal Home Loan Bank Advances
|
606 | 20,149 | 663 | |||||||||
Subordinated Debentures
|
10,310 | 10,310 | 10,310 | |||||||||
Interest Payable and Other Liabilities
|
29,241 | 27,704 | 31,175 | |||||||||
Total Liabilities
|
1,600,568 | 1,616,287 | 1,599,177 | |||||||||
Shareholders’ Equity
|
||||||||||||
Common Stock
|
8 | 8 | 8 | |||||||||
Additional Paid-In Capital
|
76,198 | 76,198 | 76,386 | |||||||||
Retained Earnings
|
95,855 | 83,767 | 83,549 | |||||||||
Accumulated Other Comprehensive Gain
|
4,257 | 4,754 | 5,791 | |||||||||
Total Shareholders’ Equity
|
176,318 | 164,727 | 165,734 | |||||||||
Total Liabilities & Shareholders’ Equity
|
$ | 1,776,886 | 1,781,014 | $ | 1,764,911 | |||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
FARMERS & MERCHANTS BANCORP
|
(in thousands except per share data)
|
Three Months
|
Nine Months
|
||||||||||||||
Ended September 30,
|
Ended September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Interest Income
|
||||||||||||||||
Interest and Fees on Loans
|
$ | 18,342 | $ | 18,931 | $ | 54,480 | $ | 56,238 | ||||||||
Interest on Federal Funds Sold and Securities Purchased
Under Agreements to Resell
|
32 | 10 | 68 | 78 | ||||||||||||
Interest on Investment Securities:
|
||||||||||||||||
Taxable
|
1,917 | 3,412 | 6,729 | 10,373 | ||||||||||||
Tax-Exempt
|
677 | 722 | 2,084 | 2,201 | ||||||||||||
Total Interest Income
|
20,968 | 23,075 | 63,361 | 68,890 | ||||||||||||
Interest Expense
|
||||||||||||||||
Deposits
|
1,757 | 3,164 | 5,472 | 11,436 | ||||||||||||
Borrowed Funds
|
550 | 552 | 1,634 | 1,637 | ||||||||||||
Subordinated Debentures
|
88 | 90 | 250 | 315 | ||||||||||||
Total Interest Expense
|
2,395 | 3,806 | 7,356 | 13,388 | ||||||||||||
Net Interest Income
|
18,573 | 19,269 | 56,005 | 55,502 | ||||||||||||
Provision for Loan Losses
|
1,315 | 2,215 | 10,550 | 10,345 | ||||||||||||
Net Interest Income After Provision for Loan Losses
|
17,258 | 17,054 | 45,455 | 45,157 | ||||||||||||
Non-Interest Income
|
||||||||||||||||
Service Charges on Deposit Accounts
|
1,680 | 1,840 | 4,964 | 5,183 | ||||||||||||
Net Gain on Investment Securities
|
4 | 510 | 2,857 | 2,982 | ||||||||||||
Increase in Cash Surrender Value of Life Insurance
|
462 | 444 | 1,366 | 1,352 | ||||||||||||
Debit Card and ATM Fees
|
680 | 585 | 1,930 | 1,662 | ||||||||||||
Net Gain on Non-Qualified Deferred Compensation Plan Investments
|
998 | 790 | 463 | 1,197 | ||||||||||||
Other
|
484 | 360 | 1,513 | 1,400 | ||||||||||||
Total Non-Interest Income
|
4,308 | 4,529 | 13,093 | 13,776 | ||||||||||||
Non-Interest Expense
|
||||||||||||||||
Salaries & Employee Benefits
|
7,067 | 7,237 | 21,403 | 21,637 | ||||||||||||
Net Gain on Non-Qualified Deferred Compensation Plan Investments
|
998 | 790 | 463 | 1,197 | ||||||||||||
Occupancy
|
684 | 719 | 1,984 | 2,098 | ||||||||||||
Equipment
|
689 | 567 | 1,948 | 1,917 | ||||||||||||
ORE Holding Costs
|
268 | 603 | 763 | 1,269 | ||||||||||||
FDIC Insurance
|
496 | 195 | 1,804 | 1,996 | ||||||||||||
Other
|
1,428 | 1,566 | 4,464 | 5,056 | ||||||||||||
Total Non-Interest Expense
|
11,630 | 11,677 | 32,829 | 35,170 | ||||||||||||
Income Before Income Taxes
|
9,936 | 9,906 | 25,719 | 23,763 | ||||||||||||
Provision for Income Taxes
|
3,727 | 3,728 | 9,453 | 8,575 | ||||||||||||
Net Income
|
$ | 6,209 | $ | 6,178 | $ | 16,266 | $ | 15,188 | ||||||||
Earnings Per Share
|
$ | 7.95 | $ | 7.90 | $ | 20.83 | $ | 19.39 | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
FARMERS & MERCHANTS BANCORP
|
(in thousands)
|
Three Months
|
Nine Months
|
||||||||||||||
Ended Sept 30,
|
Ended Sept 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net Income
|
$ | 6,209 | $ | 6,178 | $ | 16,266 | $ | 15,188 | ||||||||
Other Comprehensive Loss -
|
||||||||||||||||
Unrealized Gains on Securities:
|
||||||||||||||||
Unrealized holding (losses) gains arising during the period, net of income tax provision of $(462) and $1,436 for the quarters ended September 30, 2010 and 2009, respectively, and of $840 and $1,349 for the nine months ended September 30, 2010 and 2009, respectively.
|
(636 | ) | 1,979 | 1,159 | 1,859 | |||||||||||
Reclassification adjustment for realized gains included in net income, net of related income tax effects of $(1) and $(215) for the quarters ended September 30, 2010 and 2009, respectively, and of $(1,201) and $(1,254) for the nine months ended September 30, 2010 and 2009, respectively.
|
(3 | ) | (295 | ) | (1,656 | ) | (1,728 | ) | ||||||||
Total Other Comprehensive (Loss) Gain
|
(639 | ) | 1,684 | (497 | ) | 131 | ||||||||||
Comprehensive Income
|
$ | 5,570 | $ | 7,862 | $ | 15,769 | $ | 15,319 | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
FARMERS & MERCHANTS BANCORP
|
(in thousands except share data)
|
Accumulated
|
|||||||||||||||||||||||
Common
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||
Shares
|
Common
|
Paid-In
|
Retained
|
Comprehensive
|
Shareholders’
|
|||||||||||||||||||
Outstanding
|
Stock
|
Capital
|
Earnings
|
Income (Loss)
|
Equity
|
|||||||||||||||||||
Balance, December 31, 2008
|
786,960 | $ | 8 | $ | 78,527 | $ | 72,350 | $ | 5,660 | $ | 156,545 | |||||||||||||
Net Income
|
— | — | 15,188 | — | 15,188 | |||||||||||||||||||
Cash Dividends Declared on
|
— | |||||||||||||||||||||||
Common Stock
|
— | — | (3,989 | ) | — | (3,989 | ) | |||||||||||||||||
Repurchase of Stock
|
(5,555 | ) | — | (2,141 | ) | — | — | (2,141 | ) | |||||||||||||||
Change in Net Unrealized Gain on Securities Available for Sale
|
— | — | — | 131 | 131 | |||||||||||||||||||
Balance, September 30, 2009
|
781,405 | $ | 8 | $ | 76,386 | $ | 83,549 | $ | 5,791 | $ | 165,734 | |||||||||||||
Balance, December 31, 2009
|
780,944 | $ | 8 | $ | 76,198 | $ | 83,767 | $ | 4,754 | $ | 164,727 | |||||||||||||
Net Income
|
— | — | 16,266 | — | 16,266 | |||||||||||||||||||
Cash Dividends Declared on
|
— | |||||||||||||||||||||||
Common Stock
|
— | — | (4,178 | ) | — | (4,178 | ) | |||||||||||||||||
Change in Net Unrealized Gain on Securities Available for Sale
|
— | — | — | (497 | ) | (497 | ) | |||||||||||||||||
Balance, September 30, 2010
|
780,944 | $ | 8 | $ | 76,198 | $ | 95,855 | $ | 4,257 | $ | 176,318 | |||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
FARMERS & MERCHANTS BANCORP
|
(in thousands)
|
Nine Months Ended
|
|||||||
|
Sept 30,
|
Sept 30,
|
||||||
|
2010
|
2009
|
||||||
Operating Activities:
|
||||||||
Net Income
|
$ | 16,266 | $ | 15,188 | ||||
Adjustments to Reconcile Net Income to Net
|
||||||||
Cash Provided by Operating Activities:
|
||||||||
Provision for Loan Losses
|
10,550 | 10,345 | ||||||
Depreciation and Amortization
|
1,414 | 1,418 | ||||||
Net Accretion of Investment Security Discounts & Premium
|
(611 | ) | (2,691 | ) | ||||
Net Gain on Investment Securities
|
(2,857 | ) | (2,982 | ) | ||||
Net Gain on Sale of Property & Equipment
|
(19 | ) | (10 | ) | ||||
Net Change in Operating Assets & Liabilities:
|
||||||||
Net Increase in Interest Receivable and Other Assets
|
(7,943 | ) | (8,929 | ) | ||||
Net Increase in Interest Payable and Other Liabilities
|
1,537 | 6,998 | ||||||
Net Cash Provided by Operating Activities
|
18,337 | 19,337 | ||||||
Investing Activities:
|
||||||||
Securities Available-for-Sale:
|
||||||||
Purchased
|
(209,449 | ) | (217,825 | ) | ||||
Sold, Matured or Called
|
226,582 | 153,224 | ||||||
Securities Held-to-Maturity:
|
||||||||
Purchased
|
— | (50 | ) | |||||
Matured or Called
|
1,629 | 2,913 | ||||||
Net Loans Originated or Acquired
|
13,329 | (42,545 | ) | |||||
Principal Collected on Loans Previously Charged Off
|
160 | 175 | ||||||
Net Additions to Premises and Equipment
|
(1,074 | ) | (4,237 | ) | ||||
Proceeds from Sale of Property and Equipment
|
21 | 13 | ||||||
Net Cash Provided by (Used in) Investing Activities
|
31,198 | (108,332 | ) | |||||
Financing Activities:
|
||||||||
Net (Decrease) Increase in Demand, Interest-Bearing Transaction, and Savings Accounts
|
(8,710 | ) | 59,984 | |||||
Increase in Time Deposits
|
10,997 | 4,343 | ||||||
Net Decrease in Federal Home Loan Bank Advances
|
(19,543 | ) | (40 | ) | ||||
Cash Dividends
|
(4,178 | ) | (3,989 | ) | ||||
Stock Repurchases
|
— | (2,141 | ) | |||||
Net Cash (Used in) Provided by Financing Activities
|
(21,434 | ) | 58,157 | |||||
Increase (Decrease) in Cash and Cash Equivalents
|
28,101 | (30,838 | ) | |||||
Cash and Cash Equivalents at Beginning of Period
|
34,632 | 60,774 | ||||||
Cash and Cash Equivalents at End of Period
|
$ | 62,733 | $ | 29,936 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
|
Amortized
|
Gross Unrealized
|
Fair/Book
|
||||||||||||||
September 30, 2010
(in thousands)
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Securities of U.S. Government Agencies
|
$ | 205,177 | $ | 582 | $ | 36 | $ | 205,723 | ||||||||
Obligations of States and Political Subdivisions
|
6,416 | — | — | 6,416 | ||||||||||||
Mortgage Backed Securities
|
125,567 | 6,800 | — | 132,367 | ||||||||||||
FHLB Stock
|
6,213 | — | — | 6,213 | ||||||||||||
Other
|
310 | — | — | 310 | ||||||||||||
Total
|
$ | 343,683 | $ | 7,382 | $ | 36 | $ | 351,029 |
Amortized
|
Gross Unrealized
|
Fair/Book
|
||||||||||||||
December 31, 2009
(in thousands)
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Securities of U.S. Government Agencies
|
$ | 135,958 | $ | 277 | $ | 67 | $ | 136,168 | ||||||||
Obligations of States and Political Subdivisions
|
8,362 | 3 | — | 8,365 | ||||||||||||
Mortgage Backed Securities
|
207,335 | 8,142 | 150 | 215,327 | ||||||||||||
FHLB Stock
|
5,379 | — | — | 5,379 | ||||||||||||
Other
|
310 | — | — | 310 | ||||||||||||
Total
|
$ | 357,344 | $ | 8,422 | $ | 217 | $ | 365,549 |
Book
|
Gross Unrealized
|
Fair
|
||||||||||||||
September 30, 2010
(in thousands)
|
Value
|
Gains
|
Losses
|
Value
|
||||||||||||
Obligations of States and Political Subdivisions
|
$ | 63,471 | $ | 2,777 | $ | — | $ | 66,248 | ||||||||
Mortgage Backed Securities
|
2,524 | 118 | — | 2,642 | ||||||||||||
Other
|
1,989 | — | — | 1,989 | ||||||||||||
Total
|
$ | 67,984 | $ | 2,895 | $ | — | $ | 70,879 |
Book
|
Gross Unrealized
|
Fair
|
||||||||||||||
December 31, 2009
(in thousands)
|
Value
|
Gains
|
Losses
|
Value
|
||||||||||||
Obligations of States and Political Subdivisions
|
$ | 64,044 | $ | 1,437 | $ | 109 | $ | 65,372 | ||||||||
Mortgage Backed Securities
|
3,583 | 65 | — | 3,648 | ||||||||||||
Other
|
1,990 | — | — | 1,990 | ||||||||||||
Total
|
$ | 69,617 | $ | 1,502 | $ | 109 | $ | 71,010 |
Securities Available-for-Sale
September 30, 2010 (in thousands) |
Within
1 Year
|
After 1
but
|
After 5
but
|
Over
10 years
|
Total
Fair
|
|||||||||||||||
Securities of U.S. Government Agencies
|
— | 197,255 | 8,468 | — | 205,723 | |||||||||||||||
Obligations of States and Political Subdivisions
|
— | — | — | 6,416 | 6,416 | |||||||||||||||
Mortgage Backed Securities
|
— | — | 27,858 | 104,509 | 132,367 | |||||||||||||||
Other
|
6,523 | — | — | — | 6,523 | |||||||||||||||
Total
|
6,523 | 197,255 | 36,326 | 110,925 | 351,029 |
Securities Held-to-Maturity
September 30, 2010 (in thousands) |
Within
1 Year
|
After 1
but
|
After 5
but
|
Over
10 years
|
Total
Book
|
|||||||||||||||
Obligations of States and Political Subdivisions
|
801 | 6,470 | 43,974 | 12,225 | 63,470 | |||||||||||||||
Mortgage Backed Securities
|
— | 2,525 | — | — | 2,525 | |||||||||||||||
Other
|
— | — | 8 | 1,981 | 1,989 | |||||||||||||||
Total
|
801 | 8,995 | 43,982 | 14,206 | 67,984 |
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
September 30, 2010
(in thousands)
|
Value
|
Loss
|
Value
|
Loss
|
Value
|
Lo
ss
|
||||||||||||||||||
Obligations of States and Political Subdivisions
|
18,381 | 36 | — | — | 18,381 | 36 | ||||||||||||||||||
Total
|
18,381 | 36 | — | — | 18,381 | 36 |
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
December 31, 2009
(in thousands)
|
Value
|
Loss
|
Value
|
Loss
|
Value
|
Loss
|
||||||||||||||||||
Securities of U.S. Government Agencies
|
$ | 39,926 | $ | 67 | $ | — | $ | — | $ | 39,926 | $ | 67 | ||||||||||||
Obligations of States and Political Subdivisions
|
4,681 | 109 | — | — | 4,681 | 109 | ||||||||||||||||||
Mortgage Backed Securities
|
16,158 | 150 | — | — | 16,158 | 150 | ||||||||||||||||||
Total
|
$ | 60,765 | $ | 326 | $ | — | $ | — | $ | 60,765 | $ | 326 |
September 30, 2010 | December 31, 2009 | |||||||||||||||
Carrying
|
Estimated
|
Carrying
|
Estimated
|
|||||||||||||
(in thousands)
|
Amount
|
Fair Value
|
Amount
|
Fair Value
|
||||||||||||
ASSETS:
|
||||||||||||||||
Cash and Cash Equivalents
|
$ | 62,733 | $ | 62,733 | $ | 34,632 | $ | 34,632 | ||||||||
Investment Securities Held-to-Maturity
|
67,984 | 70,628 | 69,617 | 71,010 | ||||||||||||
Investment Securities Available-for-Sale
|
351,029 | 351,029 | 365,549 | 365,549 | ||||||||||||
Loans, Net of Deferred Loan Fees & Allowance
|
1,190,872 | 1,222,499 | 1,212,718 | 1,229,849 | ||||||||||||
Bank Owned Life Insurance
|
45,125 | 45,125 | 43,759 | 43,759 | ||||||||||||
Accrued Interest Receivable
|
8,150 | 8,150 | 7,216 | 7,216 | ||||||||||||
LIABILITIES:
|
||||||||||||||||
Deposits:
|
||||||||||||||||
Non-Interest Bearing
|
336,108 | 336,108 | 324,073 | 324,073 | ||||||||||||
Interest-Bearing
|
1,164,303 | 1,166,661 | 1,174,051 | 1,175,619 | ||||||||||||
FHLB Advances & Securities Sold Under Agreement to Repurchase
|
60,606 | 65,403 | 80,149 | 81,931 | ||||||||||||
Subordinated Debentures
|
10,310 | 4,777 | 10,310 | 4,061 | ||||||||||||
Accrued Interest Payable
|
1,434 | 1,434 | 1,555 | 1,555 |
Fair Value Measurements
At
September
30, 2010, Using
|
||||||||||||||||
(in thousands)
|
Fair Value
Total
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Available-for-Sale Securities:
|
||||||||||||||||
Securities of U.S. Government Agencies
|
$ | 205,723 | $ | — | $ | 205,723 | $ | — | ||||||||
Obligations of States and Political Subdivisions
|
6,416 | — | 6,416 | — | ||||||||||||
Mortgage Backed Securities
|
132,367 | — | 132,367 | — | ||||||||||||
FHLB Stock
|
6,213 | — | 6,213 | — | ||||||||||||
Other
|
310 | — | 310 | — | ||||||||||||
Total Assets Measured at Fair Value On a Recurring Basis
|
$ | 351,029 | $ | — | $ | 351,029 | $ | — |
Fair Value Measurements
At December 31, 2009, Using
|
||||||||||||||||
(in thousands)
|
Fair Value
Total
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Available-for-Sale Securities:
|
||||||||||||||||
Securities of U.S. Government Agencies
|
$ | 136,168 | $ | — | $ | 136,168 | $ | — | ||||||||
Obligations of States and Political Subdivisions
|
8,365 | — | 8,365 | — | ||||||||||||
Mortgage Backed Securities
|
215,327 | — | 215,327 | — | ||||||||||||
FHLB Stock
|
5,379 | — | 5,379 | — | ||||||||||||
Other
|
310 | — | 310 | — | ||||||||||||
Total Assets Measured at Fair Value On a Recurring Basis
|
$ | 365,549 | $ | — | $ | 365,549 | $ | — |
Fair Value Measurements
At
September
30, 2009, Using
|
||||||||||||||||
(in thousands)
|
Fair Value
Total
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||
Available-for-Sale Securities:
|
||||||||||||||||
Securities of U.S. Government Agencies
|
$ | 105,640 | $ | — | $ | 105,640 | $ | — | ||||||||
Obligations of States and Political Subdivisions
|
8,407 | — | 8,407 | — | ||||||||||||
Mortgage Backed Securities
|
238,815 | — | 238,815 | — | ||||||||||||
FHLB Stock
|
5,378 | — | 5,378 | — | ||||||||||||
Other
|
4,110 | — | 4,110 | — | ||||||||||||
Total Assets Measured at Fair Value
On a Recurring Basis
|
$ | 362,350 | $ | — | $ | 362,350 | $ | — |
Fair Value Measurements
At
September
30, 2010, Using
|
||||||||||||||||||||
(in thousands)
|
Fair Value
Total
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
Gains
(Losses)
|
|||||||||||||||
Impaired Loans
|
$ | 3,068 | $ | — | $ | 3,068 | $ | — | (2,225 | ) | ||||||||||
Other Real Estate
|
9,510 | — | 9,510 | — | (200 | ) | ||||||||||||||
Total Assets Measured at Fair Value On a Non-Recurring Basis
|
$ | 12,578 | $ | — | $ | 12,578 | $ | — | $ | (2,425 | ) |
Fair Value Measurements
At December 31, 2009, Using
|
||||||||||||||||||||
(in thousands)
|
Fair Value
Total
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
Gains
(Losses)
|
|||||||||||||||
Impaired Loans
|
$ | 1,419 | $ | — | $ | 1,419 | $ | — | $ | (1,368 | ) | |||||||||
Other Real Estate
|
8,418 | — | 8,418 | — | (1,034 | ) | ||||||||||||||
Total Assets Measured at Fair Value On a Non-Recurring Basis
|
$ | 9,837 | $ | — | $ | 9,837 | $ | — | $ | (2,402 | ) |
Fair Value Measurements
At
September
30, 2009, Using
|
||||||||||||||||||||
(in thousands)
|
Fair Value
Total
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
Gains
(Losses)
|
|||||||||||||||
Impaired Loans
|
$ | 6,049 | $ | — | $ | 6,049 | $ | — | $ | (1,276 | ) | |||||||||
Other Real Estate
|
3,784 | — | 3,784 | — | (538 | ) | ||||||||||||||
Total Assets Measured at Fair Value On a Non-Recurring Basis
|
$ | 9,833 | $ | — | $ | 9,833 | $ | — | $ | (1,814 | ) |
Three Months
Ended September 30,
|
Nine Months
Ended September 30,
|
|||||||||||||||
(net income in thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Net Income
|
$ | 6,209 | $ | 6,178 | $ | 16,266 | $ | 15,188 | ||||||||
Average Number of Common Shares Outstanding
|
780,944 | 781,878 | 780,944 | 783,298 | ||||||||||||
Per Share Amount
|
$ | 7.95 | $ | 7.90 | $ | 20.83 | $ | 19.39 |
●
|
Net income increased 7.1% to $16.3 million from $15.2 million.
|
●
|
Earnings per share increased 7.5% to $20.83 from $19.39.
|
●
|
Total assets increased 0.7% to $1.8 billion.
|
●
|
Total loans decreased 2.0% to $1.2 billion.
|
●
|
Allowance for loan losses increased 24.0% to $32.0 million.
|
●
|
Total deposits increased 0.2% to $1.5 billion.
|
Three Months Ended Sept 30,
2010
|
Three Months Ended Sept 30,
2009
|
|||||||||||||||||||||||
Assets
|
Balance
|
Interest
|
Rate
|
Balance
|
Interest
|
Rate
|
||||||||||||||||||
Federal Funds Sold
|
$ | 50,713 | $ | 32 | 0.25 | % | $ | 15,380 | $ | 10 | 0.26 | % | ||||||||||||
Investment Securities Available-for-Sale:
|
||||||||||||||||||||||||
U.S. Agencies
|
182,381 | 557 | 1.22 | % | 102,562 | 461 | 1.80 | % | ||||||||||||||||
Municipals - Non-Taxable
|
6,425 | 123 | 7.63 | % | 8,538 | 163 | 7.63 | % | ||||||||||||||||
Mortgage Backed Securities
|
130,993 | 1,312 | 4.01 | % | 242,640 | 2,872 | 4.73 | % | ||||||||||||||||
Other
|
4,425 | 9 | 0.67 | % | 15,159 | 29 | 2.17 | % | ||||||||||||||||
Total Investment Securities Available-for-Sale
|
324,224 | 2,001 | 2.47 | % | 368,899 | 3,525 | 3.82 | % | ||||||||||||||||
Investment Securities Held-to-Maturity:
|
||||||||||||||||||||||||
Municipals - Non-Taxable
|
63,501 | 904 | 5.69 | % | 63,821 | 918 | 5.75 | % | ||||||||||||||||
Mortgage Backed Securities
|
2,731 | 26 | 3.81 | % | 4,163 | 40 | 3.84 | % | ||||||||||||||||
Other
|
1,989 | 12 | 2.41 | % | 1,990 | 10 | 2.01 | % | ||||||||||||||||
Total Investment Securities Held-to-Maturity
|
68,221 | 942 | 5.52 | % | 69,974 | 968 | 5.53 | % | ||||||||||||||||
Loans:
|
||||||||||||||||||||||||
Real Estate
|
711,403 | 11,314 | 6.31 | % | 704,804 | 12,138 | 6.83 | % | ||||||||||||||||
Home Equity
|
62,578 | 917 | 5.81 | % | 65,562 | 395 | 2.39 | % | ||||||||||||||||
Agricultural
|
229,041 | 3,458 | 5.99 | % | 215,094 | 3,246 | 5.99 | % | ||||||||||||||||
Commercial
|
172,754 | 2,518 | 5.78 | % | 198,207 | 2,947 | 5.90 | % | ||||||||||||||||
Consumer
|
8,856 | 132 | 5.91 | % | 10,586 | 201 | 7.53 | % | ||||||||||||||||
Municipal
|
248 | 3 | 4.80 | % | 1,154 | 4 | 1.38 | % | ||||||||||||||||
Total Loans
|
1,184,880 | 18,342 | 6.14 | % | 1,195,407 | 18,931 | 6.28 | % | ||||||||||||||||
Total Earning Assets
|
1,628,038 | $ | 21,316 | 5.19 | % | 1,649,660 | $ | 23,434 | 5.64 | % | ||||||||||||||
Unrealized Loss on Securities Available-for-Sale
|
8,281 | 7,720 | ||||||||||||||||||||||
Allowance for Loan Losses
|
(31,857 | ) | (25,543 | ) | ||||||||||||||||||||
Cash and Due From Banks
|
31,131 | 30,656 | ||||||||||||||||||||||
All Other Assets
|
136,821 | 111,768 | ||||||||||||||||||||||
Total Assets
|
$ | 1,772,414 | $ | 1,774,261 | ||||||||||||||||||||
Liabilities & Shareholders’ Equity
|
||||||||||||||||||||||||
Interest Bearing Deposits:
|
||||||||||||||||||||||||
Interest Bearing DDA
|
$ | 169,961 | $ | 47 | 0.11 | % | $ | 159,035 | $ | 88 | 0.22 | % | ||||||||||||
Savings and Money Market
|
442,100 | 488 | 0.44 | % | 413,536 | 605 | 0.58 | % | ||||||||||||||||
Time Deposits
|
575,010 | 1,222 | 0.84 | % | 667,891 | 2,471 | 1.47 | % | ||||||||||||||||
Total Interest Bearing Deposits
|
1,187,071 | 1,757 | 0.59 | % | 1,240,462 | 3,164 | 1.01 | % | ||||||||||||||||
Securities Sold Under Agreement to Repurchase
|
60,000 | 541 | 3.58 | % | 60,000 | 541 | 3.58 | % | ||||||||||||||||
Other Borrowed Funds
|
615 | 9 | 5.81 | % | 3,566 | 11 | 1.22 | % | ||||||||||||||||
Subordinated Debentures
|
10,310 | 88 | 3.39 | % | 10,310 | 90 | 3.46 | % | ||||||||||||||||
Total Interest Bearing Liabilities
|
1,257,996 | $ | 2,395 | 0.76 | % | 1,314,338 | $ | 3,806 | 1.15 | % | ||||||||||||||
Interest Rate Spread
|
4.44 | % | 4.49 | % | ||||||||||||||||||||
Demand Deposits (Non-Interest Bearing)
|
303,363 | 272,875 | ||||||||||||||||||||||
All Other Liabilities
|
38,340 | 26,566 | ||||||||||||||||||||||
Total Liabilities
|
1,599,699 | 1,613,779 | ||||||||||||||||||||||
Shareholders’ Equity
|
172,715 | 160,482 | ||||||||||||||||||||||
Total Liabilities & Shareholders’ Equity
|
$ | 1,772,414 | $ | 1,774,261 | ||||||||||||||||||||
Impact of Non-Interest Bearing Deposits and Other Liabilities
|
0.17 | % | 0.23 | % | ||||||||||||||||||||
Net Interest Income and Margin on Total Earning Assets
|
18,921 | 4.61 | % | 19,628 | 4.72 | % | ||||||||||||||||||
Tax Equivalent Adjustment
|
(348 | ) | (359 | ) | ||||||||||||||||||||
Net Interest Income
|
$ | 18,573 | 4.53 | % | $ | 19,269 | 4.63 | % |
Nine Months Ended Sept. 30,
2010
|
Nine Months Ended Sept. 30,
2009
|
|||||||||||||||||||||||
Assets
|
Balance
|
Interest
|
Rate
|
Balance
|
Interest
|
Rate
|
||||||||||||||||||
Federal Funds Sold
|
$ | 38,469 | $ | 68 | 0.24 | % | $ | 41,449 | $ | 78 | 0.25 | % | ||||||||||||
Investment Securities Available-for-Sale:
|
||||||||||||||||||||||||
U.S. Agencies
|
162,551 | 1,762 | 1.45 | % | 42,359 | 557 | 1.75 | % | ||||||||||||||||
Municipals - Non-Taxable
|
6,937 | 395 | 7.59 | % | 9,467 | 536 | 7.55 | % | ||||||||||||||||
Mortgage Backed Securities
|
151,470 | 4,819 | 4.24 | % | 252,026 | 9,609 | 5.08 | % | ||||||||||||||||
Other
|
4,046 | 21 | 0.69 | % | 9,860 | 38 | 0.51 | % | ||||||||||||||||
Total Investment Securities Available-for-Sale
|
325,004 | 6,997 | 2.87 | % | 313,712 | 10,740 | 4.56 | % | ||||||||||||||||
Investment Securities Held-to-Maturity:
|
||||||||||||||||||||||||
Municipals - Non-Taxable
|
63,828 | 2,761 | 5.77 | % | 64,218 | 2,761 | 5.73 | % | ||||||||||||||||
Mortgage Backed Securities
|
3,065 | 88 | 3.83 | % | 4,555 | 131 | 3.83 | % | ||||||||||||||||
Other
|
1,989 | 38 | 2.55 | % | 1,991 | 38 | 2.54 | % | ||||||||||||||||
Total Investment Securities Held-to-Maturity
|
68,882 | 2,887 | 5.59 | % | 70,764 | 2,930 | 5.52 | % | ||||||||||||||||
Loans:
|
||||||||||||||||||||||||
Real Estate
|
717,662 | 33,981 | 6.33 | % | 689,515 | 34,537 | 6.70 | % | ||||||||||||||||
Home Equity
|
64,006 | 2,814 | 5.88 | % | 65,874 | 2,392 | 4.85 | % | ||||||||||||||||
Agricultural
|
213,746 | 9,597 | 6.00 | % | 209,398 | 9,577 | 6.11 | % | ||||||||||||||||
Commercial
|
177,981 | 7,660 | 5.75 | % | 201,356 | 9,124 | 6.06 | % | ||||||||||||||||
Consumer
|
9,478 | 418 | 5.90 | % | 10,878 | 597 | 7.34 | % | ||||||||||||||||
Municipal
|
250 | 10 | 5.35 | % | 1,094 | 11 | 1.34 | % | ||||||||||||||||
Total Loans
|
1,183,123 | 54,480 | 6.16 | % | 1,178,115 | 56,238 | 6.38 | % | ||||||||||||||||
Total Earning Assets
|
1,615,478 | $ | 64,432 | 5.33 | % | 1,604,040 | $ | 69,986 | 5.83 | % | ||||||||||||||
Unrealized Gain (Loss) on Securities Available-for-Sale
|
7,746 | 9,163 | ||||||||||||||||||||||
Allowance for Loan Losses
|
(32,205 | ) | (22,382 | ) | ||||||||||||||||||||
Cash and Due From Banks
|
29,419 | 31,907 | ||||||||||||||||||||||
All Other Assets
|
132,547 | 106,904 | ||||||||||||||||||||||
Total Assets
|
$ | 1,752,985 | $ | 1,729,632 | ||||||||||||||||||||
Liabilities & Shareholders’ Equity
|
||||||||||||||||||||||||
Interest Bearing Deposits:
|
||||||||||||||||||||||||
Interest Bearing DDA
|
$ | 173,174 | $ | 171 | 0.13 | % | $ | 149,747 | $ | 224 | 0.20 | % | ||||||||||||
Savings and Money Market
|
439,899 | 1,518 | 0.46 | % | 382,634 | 2,021 | 0.71 | % | ||||||||||||||||
Time Deposits
|
572,966 | 3,783 | 0.88 | % | 670,271 | 9,191 | 1.83 | % | ||||||||||||||||
Total Interest Bearing Deposits
|
1,186,039 | 5,472 | 0.62 | % | 1,202,652 | 11,436 | 1.27 | % | ||||||||||||||||
Securities Sold Under Agreement to Repurchase
|
60,000 | 1,606 | 3.58 | % | 60,000 | 1,606 | 3.58 | % | ||||||||||||||||
Other Borrowed Funds
|
1,432 | 28 | 2.61 | % | 1,985 | 31 | 2.09 | % | ||||||||||||||||
Subordinated Debentures
|
10,310 | 250 | 3.24 | % | 10,310 | 315 | 4.08 | % | ||||||||||||||||
Total Interest Bearing Liabilities
|
1,257,781 | $ | 7,356 | 0.78 | % | 1,274,947 | $ | 13,388 | 1.40 | % | ||||||||||||||
Interest Rate Spread
|
4.55 | % | 4.43 | % | ||||||||||||||||||||
Demand Deposits (Non-Interest Bearing)
|
293,554 | 269,570 | ||||||||||||||||||||||
All Other Liabilities
|
31,108 | 24,615 | ||||||||||||||||||||||
Total Liabilities
|
1,582,443 | 1,569,132 | ||||||||||||||||||||||
Shareholders’ Equity
|
170,542 | 160,500 | ||||||||||||||||||||||
Total Liabilities & Shareholders’ Equity
|
$ | 1,752,985 | $ | 1,729,632 | ||||||||||||||||||||
Impact of Non-Interest Bearing Deposits and Other Liabilities
|
0.17 | % | 0.29 | % | ||||||||||||||||||||
Net Interest Income and Margin on Total Earning Assets
|
57,076 | 4.72 | % | 56,598 | 4.72 | % | ||||||||||||||||||
Tax Equivalent Adjustment
|
(1,071 | ) | (1,096 | ) | ||||||||||||||||||||
Net Interest Income
|
$ | 56,005 | 4.64 | % | $ | 55,502 | 4.63 | % |
|
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
Sept. 30, 2010 compared to Sept. 30, 2009 | Sept. 30, 2010 compared to Sept. 30, 2009 | |||||||||||||||||||||||
Interest Earning Assets
|
Volume
|
Rate
|
Net Chg.
|
Volume
|
Rate
|
Net Chg.
|
||||||||||||||||||
Federal Funds Sold
|
$ | 22 | $ | — | $ | 22 | $ | (10 | ) | $ | — | $ | (10 | ) | ||||||||||
Investment Securities Available for Sale
|
||||||||||||||||||||||||
U.S. Agencies
|
278 | (182 | ) | 96 | 1,319 | (114 | ) | 1,205 | ||||||||||||||||
Municipals - Non-Taxable
|
(40 | ) | — | (40 | ) | (144 | ) | 3 | (141 | ) | ||||||||||||||
Mortgage Backed Securities
|
(1,169 | ) | (391 | ) | (1,560 | ) | (3,385 | ) | (1,405 | ) | (4,790 | ) | ||||||||||||
Other
|
(10 | ) | (10 | ) | (20 | ) | (27 | ) | 10 | (17 | ) | |||||||||||||
Total Investment Securities Available for Sale
|
(941 | ) | (583 | ) | (1,524 | ) | (2,237 | ) | (1,506 | ) | (3,743 | ) | ||||||||||||
Investment Securities Held to Maturity
|
||||||||||||||||||||||||
Municipals - Non-Taxable
|
(4 | ) | (10 | ) | (14 | ) | (17 | ) | 17 | — | ||||||||||||||
Mortgage Backed Securities
|
(14 | ) | — | (14 | ) | (43 | ) | — | (43 | ) | ||||||||||||||
Other
|
— | 2 | 2 | — | — | — | ||||||||||||||||||
Total Investment Securities Held to Maturity
|
(18 | ) | (8 | ) | (26 | ) | (60 | ) | 17 | (43 | ) | |||||||||||||
Loans:
|
||||||||||||||||||||||||
Real Estate
|
111 | (935 | ) | (824 | ) | 1,381 | (1,937 | ) | (556 | ) | ||||||||||||||
Home Equity
|
(18 | ) | 540 | 522 | (70 | ) | 492 | 422 | ||||||||||||||||
Agricultural
|
211 | 1 | 212 | 198 | (178 | ) | 20 | |||||||||||||||||
Commercial
|
(372 | ) | (57 | ) | (429 | ) | (1,022 | ) | (442 | ) | (1,464 | ) | ||||||||||||
Consumer
|
(30 | ) | (39 | ) | (69 | ) | (70 | ) | (109 | ) | (179 | ) | ||||||||||||
Other
|
(5 | ) | 3 | (2 | ) | (1 | ) | — | (1 | ) | ||||||||||||||
Total Loans
|
(103 | ) | (487 | ) | (590 | ) | 416 | (2,174 | ) | (1,758 | ) | |||||||||||||
Total Earning Assets
|
(1,040 | ) | (1,078 | ) | (2,118 | ) | (1,891 | ) | (3,663 | ) | (5,554 | ) | ||||||||||||
Interest Bearing Liabilities
|
||||||||||||||||||||||||
Interest Bearing Deposits:
|
||||||||||||||||||||||||
Transaction
|
6 | (47 | ) | (41 | ) | 31 | (84 | ) | (53 | ) | ||||||||||||||
Savings and Money Market
|
39 | (156 | ) | (117 | ) | 272 | (775 | ) | (503 | ) | ||||||||||||||
Time Deposits
|
(308 | ) | (941 | ) | (1,249 | ) | (1,183 | ) | (4,225 | ) | (5,408 | ) | ||||||||||||
Total Interest Bearing Deposits
|
(263 | ) | (1,144 | ) | (1,407 | ) | (880 | ) | (5,084 | ) | (5,964 | ) | ||||||||||||
Securities Sold Under Agreement to Repurchase
|
— | — | — | — | — | — | ||||||||||||||||||
Other Borrowed Funds
|
(15 | ) | 13 | (2 | ) | (10 | ) | 7 | (3 | ) | ||||||||||||||
Subordinated Debentures
|
— | (2 | ) | (2 | ) | — | (65 | ) | (65 | ) | ||||||||||||||
Total Interest Bearing Liabilities
|
(278 | ) | (1,133 | ) | (1,411 | ) | (890 | ) | (5,142 | ) | (6,032 | ) | ||||||||||||
Total Change
|
$ | (762 | ) | $ | 55 | $ | (707 | ) | $ | (1,001 | ) | $ | 1,479 | $ | 478 |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
(in thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Balance at Beginning of Period
|
$ | 31,403 | $ | 25,454 | $ | 29,813 | $ | 20,034 | ||||||||
Provision Charged to Expense
|
1,315 | 2,215 | 10,550 | 10,345 | ||||||||||||
Recoveries of Loans Previously Charged Off
|
39 | 56 | 160 | 175 | ||||||||||||
Loans Charged Off
|
(751 | ) | (1,907 | ) | (8,517 | ) | (4,736 | ) | ||||||||
Balance at End of Period
|
$ | 32,006 | $ | 25,818 | $ | 32,006 | $ | 25,818 |
Loan Portfolio
|
September 30, 2010
|
December 31, 2009
|
September 30, 2009
|
|||||||||||||||||||||
(in thousands)
|
$ | % | $ | % | $ | % | ||||||||||||||||||
Commercial Real Estate
|
$ | 317,811 | 26.6 | % | $ | 290,473 | 23.9 | % | $ | 292,096 | 24.0 | % | ||||||||||||
Real Estate Secured by Farmland
|
253,059 | 21.2 | % | 260,000 | 21.4 | % | 252,593 | 20.8 | % | |||||||||||||||
Real Estate Construction
|
40,510 | 3.4 | % | 71,647 | 5.9 | % | 72,170 | 5.9 | % | |||||||||||||||
Residential 1st Mortgages
|
104,874 | 8.8 | % | 105,850 | 8.7 | % | 106,005 | 8.7 | % | |||||||||||||||
Home Equity Lines and Loans
|
61,333 | 5.1 | % | 65,541 | 5.4 | % | 66,250 | 5.4 | % | |||||||||||||||
Agricultural
|
229,330 | 19.2 | % | 217,989 | 17.9 | % | 212,868 | 17.5 | % | |||||||||||||||
Commercial
|
177,382 | 14.9 | % | 191,949 | 15.8 | % | 204,228 | 16.8 | % | |||||||||||||||
Consumer
|
8,631 | 0.7 | % | 11,400 | 0.9 | % | 10,990 | 0.9 | % | |||||||||||||||
Total Loans
|
1,192,930 | 100.0 | % | 1,214,849 | 100.0 | % | 1,217,200 | 100.0 | % | |||||||||||||||
Less:
|
||||||||||||||||||||||||
Unearned Income
|
2,058 | 2,131 | 2,027 | |||||||||||||||||||||
Allowance for Loan Losses
|
32,006 | 29,813 | 25,818 | |||||||||||||||||||||
Net Loans
|
$ | 1,158,866 | $ | 1,182,905 | $ | 1,189,355 |
(in thousands)
|
September 30, 2010
|
Dec. 31,
2009
|
September 30, 2009
|
|||||||||
Non-Performing Loans
|
$ | 7,469 | $ | 9,209 | $ | 12,644 | ||||||
Other Real Estate
|
9,510 | 8,418 | 3,784 | |||||||||
Total
|
$ | 16.979 | $ | 17,627 | $ | 16,428 | ||||||
Non-Performing Loans
as a % of Total Loans
|
0.63 | % | 0.76 | % | 1.04 | % | ||||||
Allowance for Loan Losses as a % of Non-Performing Loans
|
428.5 | % | 323.7 | % | 204.2 | % | ||||||
Non-Performing Assets
as a % of Total Assets
|
0.96 | % | 0.99 | % | 0.93 | % |
|
●
|
Demand and Interest-Bearing transaction accounts increased $56.9 million or 12.8% since September 30, 2009.
|
|
●
|
Savings accounts have increased $2.8 million or 2.3% since September 30, 2009.
|
|
●
|
Money market accounts, primarily the company’s higher cost premium money market accounts, have decreased $28.8 million or 9.2% since September 30, 2009.
|
|
●
|
Time deposit accounts have decreased $27.6 million or 4.5% since September 30, 2009. This decline was the result of an explicit pricing strategy adopted by the Company beginning in the second quarter of 2009 based upon the recognition that market CD rates were greater than the yields that the Company could obtain reinvesting these funds in short-term agency securities or overnight Fed Funds. As a result: (1) the Company could not effectively invest funds at a profit without incurring excessive interest rate risk; and (2) significant growth in our overall balance sheet, without any resulting profit, would only place pressures on the Company’s capital ratios. In the first quarter of 2009, non-public time deposits had increased approximately $77.8 million or 18% from December 2008, as depositors aggressively sought out the safety of banks for their funds. Beginning in April 2009 management carefully reviewed time deposit customers and reduced our deposit rates to customers that did not also have transaction, savings and money market balances with us (i.e., depositors who were not “relationship customers”). Given the Company’s deposit growth in transaction and savings accounts, supplemented by investment portfolio maturities and sales, this time deposit decline did not result in any liquidity
issues and it significantly protected the Company’s net interest margin and earnings.
|
(in thousands)
|
Actual
|
Regulatory Capital
Requirements
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
|||||||||||||||||||||
The Company:
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
As of September 30, 2010
|
||||||||||||||||||||||||
Total Capital to Risk Weighted Assets
|
$ | 200,583 | 13.66 | % | $ | 117,452 | 8.0 | % | N/A | N/A | ||||||||||||||
Tier 1 Capital to Risk Weighted Assets
|
$ | 182,061 | 12.40 | % | $ | 58,726 | 4.0 | % | N/A | N/A | ||||||||||||||
Tier 1 Capital to Average Assets
|
$ | 182,061 | 10.26 | % | $ | 71,013 | 4.0 | % | N/A | N/A |
(in thousands)
|
Actual
|
Regulatory Capital
Requirements
|
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|
|||||||||||||||||||||
The Bank:
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||||||||
As of September 30, 2010
|
||||||||||||||||||||||||
Total Capital to Risk Weighted Assets
|
$ | 200,686 | 13.67 | % | $ | 117,448 | 8.0 | % | $ | 146,810 | 10.0 | % | ||||||||||||
Tier 1 Capital to Risk Weighted Assets
|
$ | 182,165 | 12.41 | % | $ | 58,724 | 4.0 | % | $ | 88,086 | 6.0 | % | ||||||||||||
Tier 1 Capital to Average Assets
|
$ | 182,165 | 10.26 | % | $ | 70,989 | 4.0 | % | $ | 88,736 | 5.0 | % |
■
|
general economic and business conditions affecting the key lending areas of the Company;
|
■
|
credit quality trends (including trends in collateral values, delinquencies and non-performing loans);
|
■
|
loan volumes, growth rates and concentrations;
|
■
|
loan portfolio seasoning;
|
■
|
specific industry and crop conditions;
|
■
|
recent loss experience; and
|
■
|
duration of the current business cycle.
|
FARMERS & MERCHANTS BANCORP | ||
Date: November 5, 2010 | /s/ Kent A. Steinwert | |
Kent A. Steinwert | ||
Chairman, President | ||
& Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: November 5, 2010 | /s/ Stephen W. Haley | |
Stephen W. Haley | ||
Executive Vice President and | ||
Chief Financial Officer | ||
(Principal Accounting Officer) |
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Amended and Restated Employment Agreement dated July 23, 2010, between Farmers & Merchants Bank of Central California and Kent A. Steinwert.
|
|
Executive Retirement Plan – Performance Component, as amended on November 5, 2010.
|
|
Executive Retirement Plan – Retention Component, as amended on November 5, 2010.
|
|
Executive Retirement Plan – Salary Component, as amended on November 5, 2010.
|
|
Deferred Compensation Plan of Farmers & Merchants Bank of Central California, as amended on November 5, 2010.
|
1.
|
Employee shall be entitled to a sum equivalent to Twenty Four (24) times the highest monthly base salary which Employee has earned during Employee’s employment with Employer (hereinafter referred to as the “Section 7.01 Severance Payment”) The Section 7.01 Severance Payment shall be paid in a lump sum. Payment of such amount will be made on the 15th day of the first calendar month following Employee’s Separation Date.
|
2.
|
In addition, Employer shall pay to Employee a performance bonus in an amount equal to the average of the Employee’s annual discretionary incentive bonus for the previous two years, prorated for the number of months between the Separation Date and the end of Employer’s last fiscal year. The performance bonus shall be paid in a lump sum. Payment of such amount will be made on the 15th day of the first calendar month following Employee’s Separation Date.
|
3.
|
In addition, Employee will also be entitled to payment of all vested awards of benefit plans, retirement plans and incentive programs in which Employee is vested in accordance with the terms of those plans. Any such payment or distribution from a nonqualified deferred compensation plan or non-qualified supplemental retirement programs shall be governed by the terms of such plan relating to the timing of distributions.
|
1.
|
Change of Control means a change of control of the Employer that satisfies the requirements for a change in the ownership or effective control of the Employer, or a change in the ownership of a substantial portion of the assets of the Employer, under Section 409A (see Section 9.02 of this Agreement), as determined pursuant to applicable guidance thereunder.
|
2.
|
Gross-Up Payment: Employee shall be entitled to a “Gross-Up Payment “ under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to section 6.04.2.a and any federal and state tax reimbursements due pursuant to section 6.04.2.b.
|
|
a.
|
In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with Employer or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 6.04.2.b.
|
|
b.
|
If Employer is obligated to pay Employee pursuant to Section 6.04.2.a, Employer also shall pay Employee an amount equal to the “total presumed federal and state taxes” that could be imposed on Employee with respect to the Excise Tax reimbursements due to Employee pursuant to Section 6.04.2.a and the federal and state tax reimbursements due to Employee pursuant to this section. For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on Employee shall be conclusively calculated using a combined tax rate equal to the sum of the (a) the highest individual income tax rate in effect under Federal tax law applicable to Employee and (ii) the tax laws of the state in which Employee resides on the date that the payment is computed and (b) the hospital insurance portion of FICA.
|
|
c.
|
No adjustments will be made in this combined rate for the deduction of state taxes on the federal return, the loss of itemized deductions or exemptions, or for any other purpose for paying the actual taxes.
|
3.
|
Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at Employer’s expense by an accounting firm appointed by Employer prior to any change of control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to Employer and Employee prior to submission of the proposed change of control to Employer’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, Employer or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon Employer and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, Employer or the entity acquiring control of Employer shall pay the Excise Tax and any penalties assessed by such taxing authority.
|
4.
|
Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, Employer or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that Employer has actually withheld from the Payment or Payments.
|
1.
|
Within thirty (30) days of the Notice of Termination being given to Employee, Employee returns to the full performance of Employee’s duties and provides medical certification that Employee can perform the essential functions of Employee’s duties with or without reasonable accommodation.
|
2.
|
Within thirty (30) days of the Notice of Termination being given to Employee, Employee requests a reasonable accommodation from Employer which would permit Employee to perform the essential functions of Employee’s duties and such reasonable accommodation can be provided by Employer without an undue hardship to Employer.
|
1.
|
For the purpose of this Part VIII, the terms used herein are defined as follows.
|
|
a.
|
TRADE AND BUSINESS SECRETS means information, including a formula, pattern, compilation, program, device, method, technique or process that derives independent economic value, actual or potential from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
|
|
b.
|
PROPRIETARY AND CONFIDENTIAL INFORMATION means trade secrets, computer programs, designs, technology, ideas, know-how, processes, formulas, compositions, data, techniques, improvements, inventions (whether patentable or not), works of authorship, business and product developments, plans, the identity of actual or prospective customers, terms of existing or proposed business relationships with customers, pricing data and other information concerning Employer’s actual or anticipated business, research or development, marketing plans and strategies, Employer’s plans for new product development, Employer’s technical designs, Employer’s data dictionaries, information relating to Employer’s financial status, and any other information that Employer marks confidential or by separate memorandum or e-mail informs Employee is confidential or that is received in confidence by or for Employer from any other person. Also included in “Confidential Information” is any information of Employer’s customers that Employee has access to in performing Employee’s duties for Employer.
|
|
c.
|
COMPANY MATERIALS means documents or other media or tangible items that contain or embody PROPRIETARY AND CONFIDENTIAL INFORMATION or any other information concerning the business, operations or plans of Employer, whether such documents have been prepared by Employee or by others. COMPANY MATERIALS include, but are not limited to blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, tape or printouts, sound recordings and other printed, typewritten, handwritten or computer generated documents, as well as samples, prototypes, models, products and the like.
|
|
d.
|
Excluded from “Confidential Information” is information that: (a) was in Employee’s possession or known to Employee before Employee received it from Employer; (b) is in the public domain through no fault of Employee; or (c) Employee learned from a third party not related to Employer. Information licensed by Employer to any customer under a confidentiality restriction is not considered to be in the public domain.
|
2.
|
Nondisclosure: Employee agrees that he will not directly nor indirectly reveal, report, publish or disclose to any person, firm, or corporation not expressly authorized in writing by Employer to receive such information any Trade and Business Secret, Proprietary and Confidential Information and Company Materials. Employee further agrees that he will not use any Trade and Business Secret, Proprietary and Confidential Information and/or Company Materials for any purpose except to perform his employment duties for Employer and such Trade and Business Secret, Proprietary and Confidential Information and/or Company Materials may not be used or disclosed by Employee for his own benefit or purpose or for the benefit or purpose of a subsequent employer. These agreements will continue to apply after Employee is no longer employed by the Employer so long as such Trade and Business Secrets, Proprietary and Confidential Information and Company Materials are not nor have become, by legitimate means, generally known to the public, but in no event longer than two years after such separation from Employer.
|
3.
|
Return of Employer’s Property: After termination of his employment with Employer, upon written request of Employer, Employee will promptly deliver to Employer, without copying or summarizing, all Trade and Business Secrets, Proprietary and Confidential Information and Company Materials, that is in Employee’s possession or under Employee’s control, including, without limitation, all physical property, keys, documents, lists, electronic storage media, manuals, letters, notes, reports, including all originals, reproductions, recordings, disks, or other media.
|
4.
|
Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of Employer, including user manuals, training materials, sales materials, process manuals, and other written and visual works, are works made for hire in which Employer owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his employment duties with Employer.
|
|
a.
|
Notwithstanding any provision to the contrary in this Agreement, the Company shall delay the commencement of payments or benefits coverage to which Employee would otherwise become entitled under the Agreement in connection with Employee’s termination of employment until the earlier of (i) the expiration of the six-month period measured from the date of Employee’s “separation from service” with the Company (as such term is defined in Treasury Regulations issued under Section 409A of the Code (defined below)) or (ii) the date of Employee’s death, if the Company in good faith determines that Employee is a “specified employee” within the meaning of that term under Code Section 409A at the time of such separation from service and that such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2) of the Code. Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section10.02 (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to Employee in a lump sum, and any remaining payments and benefits due under the Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
|
|
b.
|
In addition, to the extent the Company is required pursuant to this Agreement to reimburse expenses incurred by Employee, and such reimbursement obligation is subject to Section 409A of the Code, the Company shall reimburse any such eligible expenses by the end of the calendar year next following the calendar year in which the expense was incurred, subject to any earlier required deadline for payment otherwise applicable under this Agreement; provided, however, that the following sentence shall apply to any tax gross-up payment and related expense reimbursement obligation, including any payment obligations described in Section 6.04, to the extent subject to Section 409A. Any such tax gross-up payment will be made by the end of the calendar year next following the calendar year in which Employee remits the related taxes.
|
|
c.
|
For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Company (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.
|
|
d.
|
In each case where this Agreement provides for the payment of an amount that constitutes nonqualified deferred compensation or a non-qualified supplemental retirement plan subject to Section 409A to be made to the Employee within a designated period and such period begins and ends in different calendar years, the exact payment date within such range shall be determined by the Employer, in its sole discretion, and the Employee shall have no right to designate the year in which the payment shall be made.
|
|
e.
|
Any series of payments provided under this Agreement shall for all purposes of Code Section 409A be treated as a series of separate payments and not as single payments.
|
|
f.
|
The provisions of this Section 9.02 are intended to comply with Code Section 409A and shall be interpreted consistent with such section.
|
By: | /s/ Stewart C. Adams, Jr |
Date: July 23, 2010
|
|
Stewart C. Adams, Jr. | |||
Chairman of the Personnel Committee | |||
on behalf of FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP
|
|||
By: | /s/ Ole R. Mettler |
Date: July 23, 2010
|
|
Ole R. Mettler | |||
Chairman of the Board | |||
on behalf of FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP |
Employee: | /s/ Kent A. Steinwert | ||
Kent A. Steinwert, Employee
|
1.
|
Purpose of the Plan
. The purpose of this Plan is to serve as part of a program to attract, retain and reward a select group of the Bank’s executive officers by providing retirement benefits in excess of the limitations on contributions or benefits imposed by the IRC. The provisions of this Plan have been amended and restated effective as of January 1, 2009.
|
2.
|
Definitions.
As used in this Plan, the following terms shall have the meanings indicated below:
|
|
(1)
|
The average per share price of the common stock of the Holding Company over the 90 day period preceding any event triggering a Deferred Bonus calculation, not to exceed 20.0 times the trailing twelve months earnings divided by the average number of shares outstanding over the preceding 90 day period.
|
|
(2)
|
In the event of a Change of Control, the price per share paid by the acquirer.
|
3.
|
Retirement Compensation – Existing Participants
. Participants in the Plan as of January 1, 2005 will be eligible to earn Retirement Compensation comprised of both an Earnings Component and a Market Value Component, calculated as follows:
|
|
(A)
|
The product of the Market Value Per Share of the outstanding common stock of the
Holding Company times the total number of such shares outstanding at the time
|
|
|
minus
|
|
|
the Shareholders’ Equity (exclusive of Accumulated Other Comprehensive Income or Loss) per the Holding Company’s GAAP financial statements,
|
|
|
multiplied by
|
|
|
the Participant’s Bonus Factor.
|
|
(B)
|
$219,329,850 (the Market Value/Book Value differential as of December 31, 2004),
|
|
|
multiplied by
|
|
|
the Participant’s Bonus Factor.
|
|
|
The cumulative net income of the Holding Company after January 1, 2005,
|
|
|
multiplied by
|
|
|
the Participant’s Bonus Factor.
|
4.
|
Retirement Compensation – New Participants.
Participants who join the Plan after January 1, 2005, or Participants as of January 1, 2005 who receive additional Bonus Factors after January 1, 2005, will be eligible to earn Retirement Compensation comprised of both an Earnings Component and a Market Value Component, calculated as follows:
|
|
(A)
|
The product of the Market Value Per Share of the outstanding common stock of the
Holding Company times the total number of such shares outstanding at the time,
|
|
|
minus
|
|
|
the Shareholders’ Equity (exclusive of Accumulated Other Comprehensive Income or Loss) per the Holding Company’s GAAP financial statements,
|
|
|
multiplied by
|
|
|
the Participant’s Bonus Factor.
|
|
(B)
|
The Market Value Per Share at the Beginning of Participant’s Participation Period times the total number of such shares outstanding at the Beginning of Participant’s
Participation Period,
|
|
|
minus
|
|
|
the Shareholders’ Equity (exclusive of Accumulated Other Comprehensive Income or Loss), per the Holding Company’s GAAP financial statements at the Beginning of Participant’s Participation Period
|
|
|
multiplied by
|
|
|
the Participant’s Bonus Factor.
|
|
|
The cumulative net income of the Holding Company after the Beginning of Participant’s Participation Period
|
|
|
multiplied by
|
|
|
the Participant’s Bonus Factor.
|
|
Exhibits 1 and 3 attached to this Plan provide an example of how the preceding formula would be calculated under a hypothetical financial scenario. Such Exhibits are provided for example purposes only and are not a guarantee or a prediction of future results or future economic values.
|
5.
|
Vesting.
A Participant’s entitlement to his or her Retirement Account balance shall vest based on the Participant’s Full Years of Service with the Bank, measured beginning with the quarter in which he or she is selected to become a Participant (Participants receiving Bonus Factors in this Plan as of January 1, 2005 will receive vesting credit with respect to these Bonus Factors for all years of participation in any of the Bank’s previous Plans), as set forth in the vesting schedule below. The receipt of an additional Bonus Factor shall result in a new vesting schedule for such additional Bonus Factor. In the event of (i) a Change of Control or (ii) the termination of the Participant’s employment at the Bank due to his or her death or Disability, his or her Retirement Account balance shall become 100% vested.
|
|
Vesting Schedule – Pre 2011 Awards
|
Percentage of
|
|||||
Post-Award Full Years of Service
|
Bonus Vested
|
||||
Less than 2 years
|
0% | ||||
2 years to less than 3 years
|
25% | ||||
3 years to less than 4 years
|
50% | ||||
4 years to less than 5 years
|
75% | ||||
5 years or more
|
100% |
|
Vesting Schedule – 2011 and Later Awards
|
Percentage of
|
|||||
Post-Award Full Years of Service
|
Bonus Vested
|
||||
Less than 1 year
|
0% | ||||
1 year to less than 2 years
|
50% | ||||
2 years or more
|
100% |
6.
|
Retirement Account
. The Bank shall establish a Retirement Account on its books for the Participant comprised of a separate Market Value Component and Earnings Component. Incremental amounts calculated under Sections 3 and 4 will be credited to this account and transferred to the rabbi trust established under Section 20 (b) upon the earlier of a Change of Control or the end of each calendar month. During the Participation Period, declines in the Holding Company’s stock price could cause a Participant’s Market Value Component account balance to decline or even show a negative balance, however, any negative balance will not represent a liability on the part of the Participant nor an offset to any other amount due under the Earnings Component. At the end of the Participation Period, the Participant’s Market Value Component account balance will no longer be subject to movements in the Holding Company’s stock price, but will continue to be credited with earnings, as defined in Section 7. A Participant shall be entitled to the amount set forth in the Retirement Account applicable to him or her, subject to the terms and conditions of this Agreement, including the vesting rules set forth in Section 5, the forfeiture rules set forth in Section 10 and the payment rules set forth in Section 11.
|
7.
|
Earnings on Retirement Account Balances.
Earnings will be credited to each Participant’s Retirement Account balance, and transferred to the rabbi trust established under Section 20 (b), at the end of each calendar month: (a) from January 1, 2005 until such time as the account balances are transferred to the rabbi trust at Prime-3.0%; and (b) thereafter at a rate equivalent to the pre-tax investment earnings rate for such month achieved in the rabbi trust.
|
8.
|
Notice of Bonus Factor and Statement of Accounts
.
As soon as practicable following a determination by the Committee to grant a Bonus Factor to a Participant, the Committee shall give written notice to the Participant of the amount of the Bonus Factor. Such notice shall enclose a copy of the Plan. The Bank shall also provide to the Participant, within sixty (60) days after each calendar year-end, a statement setting forth the Participant’s account balance.
|
9.
|
Accounting Device Only
.
The Retirement Account is solely a device for measuring amounts to be paid under this Plan. It is not a trust fund of any kind. The Participant is a general unsecured creditor of the Bank for the payment of benefits. The benefits represent the mere Bank promise to pay such benefits. The Participant’s rights are not subject in any manner to anticipation, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Participant’s creditors
.
|
10.
|
Forfeiture
. Except in the event of (i) Change of Control, (ii) death or (iii) Disability, on termination of a Participant’s status as a Participant (whether upon the Participant’s Retirement Date or Termination of Employment without Cause), that portion of the Retirement Account that is not vested upon the occurrence of such event shall be forfeited by the Participant
.
Notwithstanding anything to the contrary, in the event of the Participant’s Termination for Cause, all entitlement and other rights of Participant to any Retirement Account component, whether or not vested, shall be cancelled, terminated and forfeited in their entirety. Amounts forfeited by any individual Participant will, in the sole discretion of the Committee, either (i) remain in the Plan and be used to offset future Plan credits required under Section 6 for the remaining Participants, or (ii) withdrawn from the Plan (and the rabbi trust).
|
|
a)
|
Retirement. Upon the Participant attaining his or her Retirement Date (
i.e
., Termination of Employment at or after Normal Retirement Age), the Bank shall pay the vested portion of Participant’s Retirement Account in accordance with the Participant’s Election on the attached Payment Election.
|
|
b)
|
Disability. If Participant’s Termination of Employment is due to Disability, the Bank shall pay the full amount of the Participant’s Retirement Account in accordance with the Participant’s Election on the attached Payment Election for a Retirement under subsection a) above (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for a Termination without Cause under subsection e) below (if Termination of Employment is before Normal Retirement Age), notwithstanding any contrary election on Appendix B.
|
|
c)
|
Death. Notwithstanding any distribution election, in the event of the Participant’s death (i) while employed by the Bank or the Holding Company, the full amount of Participant’s Retirement Account shall be paid to the Participant’s heirs, devisees or designated beneficiaries in one lump sum payment within sixty (60) days following the Participant’s death, or (ii) while receiving payments of his Retirement Account as a result of his prior Termination of Employment, the remaining portion of Participant’s vested Retirement Account which had not been previously paid out shall be paid to the Participant’s heirs, devisees or designated beneficiaries in one lump sum payment within sixty (60) days following the Participant’s death.
|
|
d)
|
Change of Control. In the event of a Change of Control, the Bank shall pay the full amount of the Participant’s Retirement Account (or the remaining portion of the Participant’s Retirement Account if payments had already commenced as a result of a prior Termination of Employment) in a lump sum immediately prior to the Change of Control.
|
|
e)
|
Termination without Cause. In the event of the Participant’s Termination of Employment with the Bank other than for Cause before Normal Retirement Age, the Bank shall pay the vested portion of Participant’s Retirement Account in accordance with the Participant’s Election on the attached Payment Election.
|
12.
|
Beneficiary Designation
. The Participant shall have the right, at any time to submit a Beneficiary Designation Form designating primary and secondary beneficiaries to whom payment under this Plan shall be made in the event of death prior to complete distribution of the benefits due and payable under the Plan. Each beneficiary designation shall become effective only when receipt thereof is acknowledged in writing by the Bank. The Participant’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Participant or if the Participant names a spouse as beneficiary and the marriage is subsequently dissolved. If the Participant dies without a valid beneficiary designation, all payments shall be made to the Participant’s estate.
|
13.
|
Assignment of Rights.
Neither the Participant nor any designated beneficiary shall have any right to sell, assign, transfer, or otherwise convey the right to receive any payments hereunder without the prior written consent of the Bank.
|
14
|
Domestic Relations Orders
. Notwithstanding any other provision of this Plan regarding the time or form of payment to the contrary, the Committee may in its sole discretion pay, or direct payment of all or any portion of the Participant’s Retirement Account directly to an alternate payee in order to comply with a domestic relations order (“DRO”) as defined in Code Section 414(p)(1)(B). The Committee may, but is not required to, establish regular procedures for reviewing and commenting on draft DROs before issuance by the family court and for advising the Participant and alternate payee regarding the changes which are required in a DRO issued by the court to make it acceptable to the Plan. To facilitate any payment to be made in compliance with a DRO, the Committee shall have the right, but shall not be required, to establish a separate account for the alternate payee and may, but shall not be required, to allow the alternate payee to self-direct the deemed investment thereof subject to such conditions as it deems appropriate. Any payment made under this Section to an alternate payee shall reduce the Retirement Account of the Participant by the amount thereof, and shall fully discharge the Bank’s obligation under this Plan or otherwise with respect to such amount. No payment made by the Bank to an alternate payee with respect to a Participant shall constitute a waiver of the Bank’s right to refuse to accept another DRO concerning any remaining account of the Participant, nor shall the fact of such payment affect in any way the applicability of this Section to any other Participant. Any payments made under a DRO to an alternate payee shall be net of any applicable withholding. This Section (and any DRO) shall be interpreted and applied in a manner that complies with the applicable provisions of Section 409A of the Code and the applicable regulations and other guidance promulgated thereunder.
|
15.
|
Unfunded and Unsecured Obligation of Bank.
The Bank is not required to earmark or otherwise set aside any funds or other assets or in any way secure payment of its obligations under the Plan. Any asset which may be set aside by the Bank for accounting purposes or in a rabbi trust is not to be treated as held in trust for any Participant or for his or her account. Each Participant shall have only the rights of a general, unsecured creditor of the Bank with respect to any of his or her rights under the Plan.
|
16.
|
Claims Procedure.
Any claim pertaining to a Participant’s benefits under the Plan shall be filed with the Chairman of the Committee for the consideration of the Committee. Written notice of the disposition of a claim shall be furnished the Participant within 30 days after the application therefore is filed. In the event the claim is denied, the specific reasons for such denial shall be set forth, pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the Participant can perfect his or her claim will be provided.
|
17.
|
No Contract of Employment.
Nothing contained herein shall be construed to be a contract of employment for any term of years, nor as conferring upon the Participant the right to continue to be employed by the Bank, in any capacity, nor in any way vary the Bank’s policy of at-will employment. It is expressly understood by the parties hereto that this Plan relates exclusively to the compensation as set forth in this agreement.
|
18.
|
Construction of Agreement.
Any payments under this Plan shall be independent of, and in addition to, those under any other retirement plan, program, or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant’s designated beneficiary by the Bank. All legal issues pertaining to the Plan shall be determined in accordance with the laws of the State of California except as preempted by Federal law.
|
19.
|
Amendment and Termination.
The Bank shall have the right at any time to modify, alter or amend this Plan, in whole or in part, provided that the amendment shall not reduce any Participant’s interest in the Plan, calculated as of the date on which the amendment is adopted. Upon Plan termination, the Bank may accelerate the distribution of Retirement Account balances only in accordance with the requirements of Section 409A and the regulations issued thereunder. Bank reserves the right to change this Plan, including reducing any Participant’s interest in this Plan in order to make such Plan compliant with Section 409A.
|
20.
|
The Committee.
|
|
a)
|
The Committee shall, for the purpose of administering the Plan, choose a secretary and an assistant secretary (either of whom is hereafter referred to as “Secretary”) who shall keep minutes of the Committee’s proceedings and all records and documents pertaining to the Committee’s administration of the Plan. The Secretary may execute any certificates or other written direction on behalf of the Committee. A majority of the members of the Committee shall constitute a quorum.
|
|
b)
|
The Committee on behalf of the Participants shall be charged with the general administration of the Plan and shall have all powers necessary to accomplish those purposes including, but not by way of limitation, the following:
|
|
-
|
to construe, interpret, and administer the Plan;
|
|
-
|
to make determinations under the Plan;
|
|
-
|
to establish a rabbi trust for the Plan and to deposit amounts calculated under
Sections 6 and 7 into such trust established by the Committee (provided, however, that notwithstanding anything in the Plan or other agreement to the contrary, in no event shall a contribution be made to a trust for the purpose of restricting assets to the provision of benefits under the Plan in connection with a change in the financial health of the Bank or any affiliated entity in a manner that would result in the inclusion of amounts in the gross income of the Participants pursuant to Section 409A(b) of the Code);
|
|
-
|
to maintain the necessary records for the administration of the Plan; and
|
|
-
|
to make and publish such rules for the regulation of the Plan as are not inconsistent with the terms hereof.
|
|
c)
|
The members of the Committee shall serve without bond and without compensation (except for director fees) for their services hereunder. All expenses of the Committee shall be paid by the Bank. The Bank shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. No
member of the Committee shall be liable for the act or omission of any other
member of the Committee nor for any act or omission on his or her own part, excepting only his or her own willful misconduct or gross negligence. The Bank shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of his or her membership on the Committee, excepting only expenses and liabilities arising out of his or her own willful
misconduct or gross negligence.
|
21.
|
Gross-Up Payment.
Upon a Change of Control, a Participant
shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to subsection a) and any federal and state tax reimbursements due pursuant to subsection b).
|
|
a)
|
In the event that any payment or benefit (as those terms are defined within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)) paid, payable, distributed or distributable to a Participant (hereinafter referred to as “Payments”) pursuant to the terms of this Plan or otherwise in connection with or arising out a Change of Control would be subject to the Excise Tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Participant with respect to such Excise Tax, then the Participant will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on the Participant as a result of the Payment and the Excise Taxes on any federal and state tax reimbursements as set forth in subsection b).
|
|
b)
|
If the Bank is obligated to pay the Participant pursuant to subsection a), the Bank also shall pay the Participant an amount equal to the “total presumed federal and state taxes” that could be imposed on the Participant with respect to the Excise Tax reimbursements due to the Participant pursuant to subsection a) and the federal and state tax reimbursements due to the Participant pursuant to this subsection. For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on the Participant shall be conclusively calculated using a combined tax rate equal to the sum of the (a) the highest individual income tax rate in effect under (i) Federal tax law and (ii) the tax laws of the state in which the Participant resides on the date that the payment is computed and (b) the hospital insurance portion of FICA.
|
|
c)
|
No adjustments will be made in this combined rate for the deduction of state taxes on the federal return, the loss of itemized deductions or exemptions, or for any other purpose for paying the actual taxes.
|
|
d)
|
It is further intended that in the event that any payments would be subject to other “penalty” taxes (in addition to the Excise Tax in subsection a)) imposed by Congress or the Internal Revenue Service that these taxes would also be included in the calculation of the Gross-Up Payment, including any federal and state tax reimbursements pursuant to subsection b).
|
|
e)
|
An initial determination as to whether a Gross-Up Payment is required pursuant to the Plan and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and the Participant prior to submission of the proposed change of control to the Holding Company’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by the Participant with respect to a Payment or Payments, it shall furnish the Participant with an opinion reasonably acceptable to the Participant that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to the Participant, the Participant shall have the right to dispute the determination. The existence of the dispute shall not in any way affect the Participant’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to the Participant any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and the Participant, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to the Participant. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.
|
|
f)
|
Notwithstanding anything contained in this Section to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.
|
22.
|
Section 409A.
This Plan is intended to be consistent with the provisions of Section 409A of the Code and its provisions shall be interpreted consistent with such intent.
|
|
a)
|
Distribution Elections. If otherwise payable under the Plan, a Participant’s Retirement Account balance shall be distributed as elected by Participant on Appendix B for a Retirement under subsection a) of Section 11 (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for a Termination without Cause under subsection e) of Section 11 (if Termination of Employment is before Normal Retirement Age), provided that such election has been made prior to the calendar year in which the Participant performs the services for which the contributions to the Participant’s Retirement Account are made (or otherwise in accordance with the requirements of Section 409A), and in accordance with such procedures as shall be established by the Bank. If no such election has been made for either of such payment events, the Participant shall be deemed to have elected to receive payment upon such payment event in a lump sum on the later of (A) the 15th day of the month following the six-month anniversary of the date of Termination of Employment or (B) January 15th of the year following the date of Termination of Employment. The Bank has the discretion to establish sub-accounts for one or more Participants and to maintain separate payment elections in respect of each such sub-account provided that such elections comply with the payment election requirements of Section 409A. The Bank also has the discretion to permit changes in payment elections provided such changes are made in accordance with the requirements of Section 409A and such procedures as shall be established by the Bank.
|
|
b)
|
Distributions To A Specified Employee. Notwithstanding any provision to the contrary in the Plan, a distribution to which a Participant would otherwise be entitled upon a Termination of Employment will be delayed until one day following the expiration of the six (6)-month period from the date of the Participant’s Termination of Employment if the Bank in good faith determines that the Participant is a “specified employee,” as defined in Section 409A and regulations issued thereunder, at the time of such Termination of Employment, and that the delayed commencement is required in order to avoid a prohibited distribution under Code Section 409A(a)(2). In the event that a delay of any payment is required under this provision, such payment shall be accumulated and paid in a single lump sum on the delayed payment date, and any remaining payments due under the Plan shall be paid in accordance with the normal payment dates specified for them herein.
|
23.
|
Headings
. Headings and subheadings in this Plan are inserted for convenience or reference only and are not to be considered in the construction of the provisions hereof.
|
24.
|
Intent
. To the extent that this Plan may be construed to be a plan maintained to provide deferred compensation, it is intended to be limited to a “select group of management or highly compensated employees” within the meaning of Section 201(2) of ERISA. The Plan is intended to be exempt from the participation, vesting, funding, and fiduciary requirements of Title 1 of ERISA, to the fullest extent permitted under the law. The Plan shall at all times be “unfunded” within the meaning of ERISA.
|
25.
|
Gender and Number
. Where the context permits, words in any gender shall, include any other gender; words in the singular shall include the plural, and the plural shall include the singular.
|
By: | /s/ Kent A. Steinwert | |
Chairman, President and C.E.O. | ||
By: | /s/ Stewart C. Adams, Jr. | |
Chairman of the Personnel Committee of the Board |
1.
|
Purpose of the Plan
. The purpose of this Plan is to serve as part of a program to attract, retain and reward a select group of the Bank’s executive officers by providing retirement benefits in excess of the limitations on contributions or benefits imposed by the IRC. The provisions of this Plan have been amended and restated effective as of January 1, 2009.
|
2.
|
Definitions.
As used in this Plan, the following terms shall have the meanings indicated below:
|
3.
|
Retirement Compensation
. Participants in the Plan will be eligible to earn Retirement Compensation calculated as follows:
|
|
The closing stock price per share at December 31, 2004 ($425.00) times the total number of such shares outstanding at December 31, 2004 (792,722),
|
|
minus
|
|
the Shareholders’ Equity (exclusive of Accumulated Other Comprehensive Income or Loss), per the Holding Company’s GAAP financial statements at December 31, 2004 ($117,577,000)
|
|
multiplied by
|
|
the Participant’s Participation Factor.
|
4.
|
Vesting.
A Participant’s entitlement to his or her Retirement Account balance shall vest based on the Participant’s Full Years of Service with the Bank, measured beginning January 1, 2005, as set forth in the vesting schedule below. However, in the event of a Change of Control, his or her Retirement Account balance shall become 100% vested.
|
Post 2004 Full Years of Service
|
Percent of Retention
Compensation Vested |
||||
Less than 1 year
|
0% | ||||
1 year to less than 2 years
|
10% | ||||
2 years to less than 3 years
|
20% | ||||
3 years to less than 4 years
|
30% | ||||
4 years to less than 5 years
|
40% | ||||
5 years to less than 6 years
|
50% | ||||
6 years to less than 7 years
|
60% | ||||
7 years to less than 8 years
|
70% | ||||
8 years to less than 9 years
|
80% | ||||
9 years to less than 10 years
|
90% | ||||
10 years or more
|
100% |
5.
|
Retirement Account
. The Bank shall establish a Retirement Account on its books for the Participant. Incrementally vested amounts will be credited to this account and transferred to the rabbi trust established under Section 19 (b) upon the earlier of a Change of Control or the end of each calendar month. The Participant’s account balance will not be subject to movements in the Holding Company’s stock price, but will be credited with earnings, as defined in Section 6. A Participant shall be entitled to the amount set forth in the Retirement Account applicable to him or her, subject to the terms and conditions of this Plan, including the vesting rules set forth in Section 4, the forfeiture rules set forth in Section 9 and the payment rules set forth in Section 10.
|
6.
|
Earnings on Retirement Account Balances.
Earnings will be credited to each Participant’s Retirement Account balance, and transferred to the rabbi trust established under Section 19 (b), at the end of each calendar month: (a) from January 1, 2005 until such time as the account balances are transferred to the rabbi trust at Prime-3.0%; and (b) thereafter at a rate equivalent to the pre-tax investment earnings rate for such month achieved in the rabbi trust.
|
7.
|
Notice of Participation Factor and Statement of Accounts
.
As soon as practicable following a determination by the Committee to grant a Participation Factor to a Participant, the Committee shall give written notice to the Participant of the amount of the Participation Factor. Such notice shall enclose a copy of the Plan. The Bank shall also provide to the Participant, within sixty (60) days after each calendar year-end, a statement setting forth the Participant’s account balance.
|
8.
|
Accounting Device Only
.
The Retirement Account is solely a device for measuring amounts to be paid under this Plan. It is not a trust fund of any kind. The Participant is a general unsecured creditor of the Bank for the payment of benefits. The benefits represent the mere Bank promise to pay such benefits. The Participant’s rights are not subject in any manner to anticipation, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Participant’s creditors
.
|
9.
|
Forfeiture
. Except in the event of a Change of Control, on termination of a Participant’s status as a Participant (whether upon the Participant’s Retirement Date, Disability, death or Termination of Employment without Cause), that portion of the Retirement Account that is not vested upon the occurrence of such event shall be forfeited by the Participant
.
Notwithstanding anything to the contrary
,
in the event of the Participant’s Termination for Cause, all entitlement and other rights of Participant to any Retirement Account balance, whether or not vested, shall be cancelled, terminated and forfeited in their entirety. Amounts forfeited by any individual Participant will, in the sole discretion of the Committee, either (i) remain in the Plan and be used to offset future Plan credits required under Section 6 for the remaining Participants, or (ii) withdrawn from the Plan (and the rabbi trust).
|
10.
|
Payment.
|
|
a)
|
Retirement. Upon the Participant attaining his or her Retirement Date (
i.e
., Termination of Employment at or after Normal Retirement Age), the Bank shall pay the vested portion of Participant’s Retirement Account in accordance with the Participant’s Election on the attached Payment Election.
|
|
b)
|
Disability. If Participant’s Termination of Employment is due to Disability, the Bank shall pay the vested portion of the Participant’s Retirement Account in accordance with the Participant’s Election on the attached Payment Election for a Retirement under subsection a) above (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for a Termination without Cause under subsection e) below (if Termination of Employment is before Normal Retirement Age), notwithstanding any contrary election on Appendix B.
|
|
c)
|
Death. Notwithstanding any distribution election, in the event of the Participant’s death (i) while employed by the Bank or the Holding Company, the full amount of Participant’s vested Retirement Account shall be paid to the Participant’s heirs, devisees or designated beneficiaries in one lump sum payment within sixty (60) days following the Participant’s death, or (ii) while receiving payments of his Retirement Account as a result of his prior Termination of Employment, the remaining portion of Participant’s vested Retirement Account which had not been previously paid out shall be paid to the Participant’s heirs, devisees or designated beneficiaries in one lump sum payment within sixty (60) days following the Participant’s death.
|
|
d)
|
Change of Control. In the event of a Change of Control, the Bank shall pay the full amount of the Participant’s Retirement Account (or the remaining portion of the Participant’s Retirement Account if payments had already commenced as a result of a prior Termination of Employment) in a lump sum immediately prior to the Change of Control.
|
|
e)
|
Termination without Cause. In the event of the Participant’s Termination of Employment with the Bank other than for Cause before Normal Retirement Age, the Bank shall pay the vested portion of Participant’s Retirement Account in accordance with the Participant’s Election on the attached Payment Election.
|
11.
|
Beneficiary Designation
. The Participant shall have the right, at any time to submit a Beneficiary Designation Form designating primary and secondary beneficiaries to whom payment under this Plan shall be made in the event of death prior to complete distribution of the benefits due and payable under the Plan. Each beneficiary designation shall become effective only when receipt thereof is acknowledged in writing by the Bank. The Participant’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Participant or if the Participant names a spouse as beneficiary and the marriage is subsequently dissolved. If the Participant dies without a valid beneficiary designation, all payments shall be made to the Participant’s estate.
|
12.
|
Assignment of Rights.
Neither the Participant nor any designated beneficiary shall have any right to sell, assign, transfer, or otherwise convey the right to receive any payments hereunder without the prior written consent of the Bank.
|
13.
|
Domestic Relations Orders
. Notwithstanding any other provision of this Plan regarding the time or form of payment to the contrary, the Committee may in its sole discretion pay, or direct payment of all or any portion of the Participant’s Retirement Account directly to an alternate payee in order to comply with a domestic relations order (“DRO”) as defined in Code Section 414(p)(1)(B). The Committee may, but is not required to, establish regular procedures for reviewing and commenting on draft DROs before issuance by the family court and for advising the Participant and alternate payee regarding the changes which are required in a DRO issued by the court to make it acceptable to the Plan. To facilitate any payment to be made in compliance with a DRO, the Committee shall have the right, but shall not be required, to establish a separate account for the alternate payee and may, but shall not be required, to allow the alternate payee to self-direct the deemed investment thereof subject to such conditions as it deems appropriate. Any payment made under this Section to an alternate payee shall reduce the Retirement Account of the Participant by the amount thereof, and shall fully discharge the Bank’s obligation under this Plan or otherwise with respect to such amount. No payment made by the Bank to an alternate payee with respect to a Participant shall constitute a waiver of the Bank’s right to refuse to accept another DRO concerning any remaining account of the Participant, nor shall the fact of such payment affect in any way the applicability of this Section to any other Participant. Any payments made under a DRO to an alternate payee shall be net of any applicable withholding. This Section (and any DRO) shall be interpreted and applied in a manner that complies with the applicable provisions of Section 409A of the Code and the applicable regulations and other guidance promulgated thereunder.
|
14.
|
Unfunded and Unsecured Obligation of Bank.
The Bank is not required to earmark or otherwise set aside any funds or other assets or in any way secure payment of its obligations under the Plan. Any asset which may be set aside by the Bank for accounting purposes or in a rabbi trust is not to be treated as held in trust for any Participant or for his or her account. Each Participant shall have only the rights of a general, unsecured creditor of the Bank with respect to any of his or her rights under the Plan.
|
15.
|
Claims Procedure.
Any claim pertaining to a Participant’s benefits under the Plan shall be filed with the Chairman of the Committee for the consideration of the Committee. Written notice of the disposition of a claim shall be furnished the Participant within 30 days after the application therefore is filed. In the event the claim is denied, the specific reasons for such denial shall be set forth, pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the Participant can perfect his or her claim will be provided.
|
16.
|
No Contract of Employment.
Nothing contained herein shall be construed to be a contract of employment for any term of years, nor as conferring upon the Participant the right to continue to be employed by the Bank, in any capacity, nor in any way vary the Bank’s policy of at-will employment. It is expressly understood by the parties hereto that this Plan relates exclusively to the compensation as set forth in this agreement.
|
17.
|
Construction of Agreement.
Any payments under this Plan shall be independent of, and in addition to, those under any other retirement plan, program, or agreement which may be in effect between the parties hereto, or any other compensation payable to the Participant or the Participant’s designated beneficiary by the Bank. All legal issues pertaining to the Plan shall be determined in accordance with the laws of the State of California except as preempted by Federal law.
|
18.
|
Amendment and Termination.
The Bank shall have the right at any time to modify, alter or amend this Plan, in whole or in part, provided that the amendment shall not reduce any Participant’s interest in the Plan, calculated as of the date on which the amendment is adopted. Upon Plan termination, the Bank may accelerate the distribution of Retirement Account balances only in accordance with the requirements of Section 409A and the regulations issued thereunder. Bank reserves the right to change this Plan, including reducing any Participant’s interest in this Plan in order to make such Plan compliant with Section 409A.
|
|
a)
|
The Committee shall, for the purpose of administering the Plan, choose a secretary and an assistant secretary (either of whom is hereafter referred to as “Secretary
”
) who shall keep minutes of the Committee’s proceedings and all records and documents pertaining to the Committee’s administration of the Plan. The Secretary may execute any certificates or other written direction on behalf of the Committee. A majority of the members of the Committee shall constitute a quorum.
|
|
b)
|
The Committee on behalf of the Participants shall be charged with the general administration of the Plan and shall have all powers necessary to accomplish those purposes including, but not by way of limitation, the following:
|
|
-
|
to construe, interpret, and administer the Plan;
|
|
-
|
to make determinations under the Plan;
|
|
-
|
to establish a rabbi trust for the Plan and to deposit amounts calculated under Sections 5 and 6 into such trust established by the Committee (provided, however, that notwithstanding anything in the Plan or other agreement to the contrary, in no event shall a contribution be made to a trust for the purpose of restricting assets to the provision of benefits under the Plan in connection with a change in the financial health of the Bank or any affiliated entity in a manner that would result in the inclusion of amounts in the gross income of the Participants pursuant to Section 409A(b) of the Code;
|
|
-
|
to maintain the necessary records for the administration of the Plan; and
|
|
-
|
to make and publish such rules for the regulation of the Plan as are not inconsistent with the terms hereof.
|
|
c)
|
The members of the Committee shall serve without bond and without compensation (except for director fees) for their services hereunder. All expenses of the Committee shall be paid by the Bank. The Bank shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. No
member of the Committee shall be liable for the act or omission of any other
member of the Committee, nor for any act or omission on his or her own part, excepting only his or her own willful misconduct or gross negligence. The Bank shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of his or her membership on the Committee, excepting only expenses and liabilities arising out of his or her own willful
misconduct or gross negligence.
|
20.
|
Gross-Up Payment.
Upon a Change of Control
,
a Participant
shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to subsection a) and any federal and state tax reimbursements due pursuant to subsection b).
|
|
a)
|
In the event that any payment or benefit (as those terms are defined within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)) paid, payable, distributed or distributable to a Participant (hereinafter referred to as “Payments”) pursuant to the terms of this Plan or otherwise in connection with or arising out a Change of Control would be subject to the Excise Tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Participant with respect to such Excise Tax, then the Participant will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on the Participant as a result of the Payment and the Excise Taxes on any federal and state tax reimbursements as set forth in subsection b).
|
|
b)
|
If the Bank is obligated to pay the Participant pursuant to subsection a), the Bank also shall pay the Participant an amount equal to the “total presumed federal and state taxes” that could be imposed on the Participant with respect to the Excise Tax reimbursements due to the Participant pursuant to subsection a) and the federal and state tax reimbursements due to the Participant pursuant to this subsection. For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on the Participant shall be conclusively calculated using a combined tax rate equal to the sum of the (a) the highest individual income tax rate in effect under (i) Federal tax law and (ii) the tax laws of the state in which the Participant resides on the date that the payment is computed and (b) the hospital insurance portion of FICA.
|
|
c)
|
No adjustments will be made in this combined rate for the deduction of state taxes on the federal return, the loss of itemized deductions or exemptions, or for any other purpose for paying the actual taxes.
|
|
d)
|
It is further intended that in the event that any payments would be subject to other “penalty” taxes (in addition to the Excise Tax in subsection a)) imposed by Congress or the Internal Revenue Service that these taxes would also be included in the calculation of the Gross-Up Payment, including any federal and state tax reimbursements pursuant to subsection b).
|
|
e)
|
An initial determination as to whether a Gross-Up Payment is required pursuant to the Plan and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and the Participant prior to submission of the proposed change of control to the Holding Company’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by the Participant with respect to a Payment or Payments, it shall furnish the Participant with an opinion reasonably acceptable to the Participant that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to the Participant, the Participant shall have the right to dispute the determination. The existence of the dispute shall not in any way affect the Participant’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to the Participant any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and the Participant, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to the Participant. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.
|
|
f)
|
Notwithstanding anything contained in this Section to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.
|
21.
|
Section 409A.
This Plan is intended to be consistent with the provisions of Section 409A of the Code and its provisions shall be interpreted consistent with such intent.
|
|
a)
|
Distribution Elections. If otherwise payable under the Plan, a Participant’s Retirement Account balance shall be distributed as elected by Participant on Appendix B for a Retirement under subsection a) of Section 10 (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for a Termination without Cause under subsection e) of Section 10 (if Termination of Employment is before Normal Retirement Age), provided that such election has been made prior to the calendar year in which the Participant performs the services for which the contributions to the Participant’s Retirement Account are made (or otherwise in accordance with the requirements of Section 409A), and in accordance with such procedures as shall be established by the Bank. If no such election has been made for either of such payment events, the Participant shall be deemed to have elected to receive payment upon such payment event in a lump sum on the later of (A) the 15th day of the month following the six-month anniversary of the date of Termination of Employment or (B) January 15th of the year following the date of Termination of Employment. The Bank has the discretion to establish sub-accounts for one or more Participants and to maintain separate payment elections in respect of each such sub-account provided that such elections comply with the payment election requirements of Section 409A. The Bank also has the discretion to permit changes in payment elections provided such changes are made in accordance with the requirements of Section 409A and such procedures as shall be established by the Bank.
|
|
b)
|
Distributions To A Specified Employee. Notwithstanding any provision to the contrary in the Plan, a distribution to which a Participant would otherwise be entitled upon a Termination of Employment will be delayed until one day following the expiration of the six (6)-month period from the date of the Participant’s Termination of Employment if the Bank in good faith determines that the Participant is a “specified employee,” as defined in Section 409A and regulations issued thereunder, at the time of such Termination of Employment, and that the delayed commencement is required in order to avoid a prohibited distribution under Code Section 409A(a)(2). In the event that a delay of any payment is required under this provision, such payment shall be accumulated and paid in a single lump sum on the delayed payment date, and any remaining payments due under the Plan shall be paid in accordance with the normal payment dates specified for them herein.
|
22.
|
Headings
. Headings and subheadings in this Plan are inserted for convenience or reference only and are not to be considered in the construction of the provisions hereof.
|
23
.
|
Intent
. To the extent that this Plan may be construed to be a plan maintained to provide deferred compensation, it is intended to be limited to a “select group of management or highly compensated employees” within the meaning of Section 201(2) of ERISA. The Plan is intended to be exempt from the participation, vesting, funding, and fiduciary requirements of Title 1 of ERISA, to the fullest extent permitted under the law. The Plan shall at all times be “unfunded” within the meaning of ERISA.
|
24.
|
Gender and Number
. Where the context permits, words in any gender shall, include any other gender; words in the singular shall include the plural, and the plural shall include the singular.
|
By: | /s/ Kent A. Steinwert | |
Chairman, President and C.E.O. | ||
By: | /s/ Stewart C. Adams, Jr. | |
Chairman of the Personnel Committee of the Board |
1.
|
Purpose of the Plan.
The purpose of this Plan is to serve as part of a program to attract, retain and reward a select group of the Bank’s executive officers by providing retirement benefits in excess of the limitations on contributions or benefits imposed by the IRC. The provisions of this Plan have been amended and restated effective as of January 1, 2009.
|
2.
|
Definitions.
As used in this Plan, the following terms shall have the meanings indicated below:
|
|
“
Termination of Employment
” or “
Employment is Terminated
” shall mean the Executive has a separation from service with the Bank for any reason, voluntary or involuntary, other than death, as defined under Treasury Regulation Section 1.409A-l(h). Subject to the foregoing, whether a separation from service has occurred is determined based on whether the facts and circumstances indicate that the Bank and the Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (as an employee or independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period in which the Executive provided services to the Bank if the Executive has been providing services for less than 36 months). An Executive will not be deemed to have experienced a separation from service if such Executive is on military leave, sick leave, or other bona fide leave of absence, to the extent such leave does not exceed a period of six months or, if longer, such longer period of time during which a right to re-employment is protected by either statute or contract. If the period of leave exceeds six months and the individual does not retain a right to re-employment under an applicable statute or by contract, the separation from service will be deemed to occur on the first date immediately following such six-month period.
|
3.
|
Retirement Compensation.
|
||
3.1 Simulated Investments. The Bank shall establish for each Executive two Simulated Investments in an initial amount equal to the cash surrender values of each Executive’s specified life insurance policies as described in Appendix A, as follows:
|
|||
3.1.1 Simulated Investment Number One shall track the cash surrender value of each Executive’s specified life insurance policies as described in Appendix A.
|
|||
3.1.2 Simulated Investment Number Two shall track the value of a simulated investment account comprised of both principal and accumulated net after-tax interest earnings. Pre-tax interest earnings equal the current 5-year Treasury Bill rate, which shall initially be set at 4.30%, which shall continue through December 31, 2003. Each January 1 thereafter the rate shall be reset based on the average 5-year Treasury Bill rate for the previous month of December according to Bloomberg or such other nationally recognized reporting service. Simulated Investment Number Two assumes the income tax rate to be the Holding Company’s highest marginal tax rate for the current calendar year (which is 42.046%, using a Federal rate of 35% and a State franchise tax rate of 10.84%), and assumes that interest (net of tax) shall be compounded on an annual basis at the end of each Plan Year.
|
|||
3.2 Retirement Account. The Bank shall establish a Retirement Account on its books for the Executive. The amount to be added to the Retirement Account each year after the date hereof until Termination of Employment, but not beyond Normal Retirement Age, will be the greater of (A) one percent (1%) of Simulated Investment Number One as of December 31
st
of the preceding year or (B) the lesser of:
|
|
(i)
|
the sum of: (1) one hundred percent (100%) of the sum determined by subtracting the current year’s increase in the value of Simulated Investment Number Two from the current year’s increase in the value of Simulated Investment Number One and dividing the difference by the Adjustment Rate, plus (2) the Executive’s Pro-Rata Share of Earnings on Pool Policies for the current year; or
|
|
(ii)
|
the Forecasted Retirement Contribution for the current year as stated in Appendix D.
|
4.
|
Normal Retirement.
Upon the Executive attaining his or her Retirement Date (
i.e
., Termination of Employment at or after Normal Retirement Age), the Bank shall pay, or cause to be paid, the Executive’s Retirement Account balance as elected on Appendix B.
|
5.
|
Early Retirement or Termination.
|
6.
|
Disability Benefit
. Upon the Executive’s Termination of Employment following a Disability, the Bank shall pay, or cause to be paid, the Executive’s Retirement Account balance as elected on Appendix B for a Normal Retirement under Section 4 (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for an Early Retirement or Termination under Section 5 (if Termination of Employment is before Normal Retirement Age), notwithstanding any contrary election on Appendix B.
|
7.
|
Change of Control.
|
||
7.1 Change of Control Benefit. Upon a Change of Control on or prior to the Executive’s Termination of Employment, the Executive shall be entitled to receive a benefit in the amount of:
|
|||
(a)
|
the balance in his/her Retirement Account, including all accrued interest pursuant to Section 3.3, plus
|
||
(b)
|
the sum of the present value of each of the post Change of Control remaining annual Forecasted Retirement Contributions provided for in Appendix D.
|
||
For purposes of calculating the amount under Section 7.1(b), the present value factor(s) shall be the Treasury Bill rates (as of the date that is ninety business days prior to the anticipated date of the Change of Control) for each of the number of years (rounded down to the nearest whole number) remaining on Appendix D for Executive. Immediately prior to a Change of Control, the Bank shall transfer to the rabbi trust established under Section 13.10(d) any additional amounts required so that the Executive’s Retirement Account balance is equal to the amount calculated under this Section. The Bank shall pay the benefit to the Executive in a lump sum immediately prior to the Change of Control.
|
|||
Upon a Change of Control after the Executive’s Termination of Employment, the Executive shall be entitled to receive only the unpaid balance in his/her Retirement Account, including all accrued interest pursuant to Section 3.3. The Bank shall pay such amount to the Executive in a lump sum immediately prior to the Change of Control (even if the Executive had already begun to receive installment payments of the Executive’s Retirement Account pursuant to an election on Appendix B).
|
|||
7.2 Gross-Up Payment. In connection with a Change of Control, the Executive
shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to subsection (a) and any federal and state tax reimbursements due pursuant to subsection (b).
|
|||
(a)
|
In the event that any payment or benefit (as those terms are defined within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the “Code”)) paid, payable, distributed or distributable to a Executive (hereinafter referred to as “Payments”) pursuant to the terms of this Plan or otherwise in connection with or arising out a Change of Control would be subject to the Excise Tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such Excise Tax, then the Executive will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on the Executive as a result of the Payment and the Excise Taxes on any federal and state tax reimbursements as set forth in subsection (b).
|
||
(b)
|
If the Bank is obligated to pay the Executive pursuant to subsection a), the Bank also shall pay the Executive an amount equal to the “total presumed federal and state taxes” that could be imposed on the Executive with respect to the Excise Tax reimbursements due to the Executive pursuant to subsection a) and the federal and state tax reimbursements due to the Executive pursuant to this subsection. For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on the Executive shall be conclusively calculated using a combined tax rate equal to the sum of the (A) the highest individual income tax rate in effect under (i) Federal tax law and (ii) the tax laws of the state in which the Executive resides on the date that the payment is computed and (B) the hospital insurance portion of FICA.
|
(c)
|
No adjustments will be made in this combined rate for the deduction of state taxes on the federal return, the loss of itemized deductions or exemptions, or for any other purpose for paying the actual taxes.
|
||
(d)
|
It is further intended that in the event that any payments would be subject to other “penalty” taxes (in addition to the Excise Tax in subsection (a)) imposed by Congress or the Internal Revenue Service that these taxes would also be included in the calculation of the Gross-Up Payment, including any federal and state tax reimbursements pursuant to subsection (b).
|
||
(e)
|
An initial determination as to whether a Gross-Up Payment is required pursuant to this Plan and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and the Executive prior to submission of the proposed change of control to the Holding Company’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to the Executive, the Executive shall have the right to dispute the determination. The existence of the dispute shall not in any way affect the Executive’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to the Executive any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and the Executive, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to the Executive. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.
|
||
(f)
|
Notwithstanding anything contained in this Section to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.
|
||
Payment of these amounts will be made in a lump sum immediately prior to the Change of Control. In the event that it is determined under subsection e) that additional Excise Tax is due and owing, any reimbursement of taxes required to be made by the entity acquiring control of the Bank or Holding Company shall be made no later than the end of the calendar year next following the calendar year in which the Executive remits the related taxes.
|
8.
|
Death Benefits.
|
9.
|
Beneficiaries.
|
10.
|
General Limitations.
|
11.
|
Claims and Review Procedures.
|
(a)
|
The specific reasons for the denial,
|
(b)
|
A reference to the specific provisions of this Plan on which the denial is based,
|
(c)
|
A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,
|
(d)
|
An explanation of this Plan’s review procedures and the time limits applicable to such procedures, and
|
(e)
|
A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
|
|
(a)
|
The specific reasons for the denial,
|
|
(b)
|
A reference to the specific provisions of this Plan on which the denial is based,
|
|
(c)
|
A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and
|
|
(d)
|
A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).
|
12.
|
Amendments and Termination
.
This Plan may be amended or terminated only by a written agreement signed by the Bank and the Executive.
Upon Plan termination, the Bank may accelerate the distribution of Retirement Account balances only in accordance with the requirements of Section 409A and the regulations issued thereunder. The Bank reserves the right to change this Plan, including reducing any Executive’s interest in this Plan, in order to make such Plan compliant with Section 409A of the Code.
|
13.
|
Miscellaneous.
|
|
(a)
|
Establishing and revising the method of accounting for the Plan;
|
(b)
|
Maintaining a record of benefit payments; and
|
(c)
|
Establishing rules and prescribing any forms necessary or desirable to administer the Plan.
|
(d)
|
Establishing a rabbi trust for the Plan and depositing amounts required under Section 3.2 into such trust. In the event a rabbi trust is established, Bank shall (A) immediately transfer to the rabbi trust an amount equal to Executive’s then Retirement Account and (B) monthly thereafter transfer the applicable increase in the Retirement Account calculated pursuant to Sections 3.2 and 3.3. The Bank shall also transfer to the rabbi trust any amounts required under Sections 7.1 or 7.2 in connection with any Change of Control at the times provided for in such Sections.
Notwithstanding the foregoing or anything in the Plan or other agreement to the contrary, in no event shall a contribution be made to a trust for the purpose of restricting assets to the provision of benefits under the Plan in connection with a change in the financial health of the Bank or any affiliated entity in a manner that would result in the inclusion of amounts in the gross income of the Executives pursuant to Section 409A(b) of the Code).
|
By: | /s/ Kent A. Steinwert | |
Chairman, President and C.E.O.
|
||
By: | /s/ Stewart C. Adams, Jr. | |
Chairman of the Personnel Committee of the Board |
1.
|
Purpose of the Plan
. The purpose of the Farmers & Merchants Bank Deferred Compensation Plan is to recognize the valuable services performed by key employees and directors (collectively “Employees”) and encourage each Employee’s continued employment or participation (in the case of a director) by providing an opportunity to defer a certain portion of compensation payable to him or her.
The provisions of this Plan have been amended and restated effective as of January 1, 2009.
|
2.
|
Definitions
. As used in this Plan, the following terms shall have the meanings indicated below:
|
3.
|
Deferred Compensation
. The Board of Directors shall have the sole discretion to determine whether the Employee is eligible to participate in the Plan. Commencing on the date when an eligible Employee executes his first Election of Deferral, and continuing through the date on which the eligible Employee’s Employment is Terminated because of his or her death, retirement, Disability, or any other cause, the Employee may elect to defer into his or her account the amount set forth in the Election of Deferral, which the Employee would otherwise be entitled to receive from the Bank in each calendar year, subject to any changes made to the Election of Deferral in accordance with this Plan.
|
4.
|
Deferred Compensation Account
. The Bank shall establish a Deferred Compensation Account on its books for the Employee. Incremental Employee deferrals will be credited to this account and, for those Employees participating in the rabbi trust, transferred to the rabbi trust established under Section 18, no less frequently than monthly.
An Employee shall be entitled to the amount set forth in the Deferred Compensation Account applicable to him or her, subject to the terms and conditions of this Plan, including the payment rules set forth in Section 8.
|
5.
|
Earnings on Account Balances
. The Bank and the Employee agree that Deferred Amounts will be self-directed by each individual participating Employee. Accordingly, the Bank shall have no responsibility for the Employee’s investment decisions or results, nor provide any assurances that amounts actually deferred will not incur investment losses up to and including all amounts deferred.
|
6.
|
Statement of Accounts
.
The Bank shall provide to the Employee, within sixty (60) days after each calendar year-end, a statement setting forth the Employee’s Deferred Compensation Account balance.
|
7.
|
Accounting Device Only.
The Deferred Compensation Account is solely a device for measuring amounts to be paid under this Plan. It is not a trust fund of any kind. The Employee is a general unsecured creditor of the Bank for the payment of benefits. The benefits represent the mere promise of the Bank to pay such benefits. The Employee’s rights are not subject in any manner to anticipation, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Employee’s creditors
.
|
8.
|
Payment.
|
|
a.
|
Retirement. Upon the Employee attaining his or her Retirement Date (
i.e
., Termination of Employment at or after Normal Retirement Age), the Bank shall pay the Employee’s Deferred Compensation Account in accordance with the Employee’s Election on the attached Payment Election.
|
|
b.
|
Disability. If Employee’s Termination of Employment is due to Disability, the Bank shall pay the full amount of the Employee’s Deferred Compensation Account in accordance with the Employee’s Election on the attached Payment Election for a Retirement under subsection a. above (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for a Termination under subsection e. below (if Termination of Employment is before Normal Retirement Age), notwithstanding any contrary election on Appendix B.
|
|
c.
|
Death. Notwithstanding any distribution election, in the event of the Employee’s death the Bank shall pay the balance in the Employee’s Deferred Compensation Account in one lump sum to the Employee’s designated beneficiary (the “Beneficiary”), in accordance with the last such designation received pursuant to Section 10 by the Bank from the Employee prior to death. The lump sum payment shall be made within sixty (60) days following the Employee’s death.
|
|
d.
|
Change of Control. In the event of a Change of Control, the Bank shall pay the full amount of the Employee’s Deferred Compensation Account in a lump sum immediately prior to the Change of Control.
|
|
e.
|
Termination. In the event of the Employee’s Termination of Employment with the Bank before Normal Retirement Age, the Bank shall pay the Employee’s Deferred Compensation Account in accordance with the Employee’s Election on the attached Payment Election.
|
|
f.
|
In Service Distribution. The Bank may provide the Employee with the option to elect to receive payments of his or her Deferred Compensation Account balance as an in service distribution, notwithstanding his or her continued employment with the Bank. The Employee’s election to receive an in service distribution must be made in writing on the attached Payment Election and in accordance with the requirements of Section 409A and such procedures as shall be established by the Bank.
Should a payment event occur prior to any scheduled in service distribution date that would trigger a distribution under subsections a, b, c, d or e above, all amounts subject to a scheduled in service distribution election shall be paid in accordance with such other applicable provisions of the Plan and not in accordance with the in service distribution election.
|
9.
|
Hardship Withdrawal
. In the event the Employee suffers an unforeseen financial emergency, as defined hereafter, the Bank may, if it deems advisable in its sole and absolute discretion, distribute to or utilize on behalf of the Employee as a hardship benefit (the “Hardship Benefit”) a portion of the Employee’s account. The Bank shall have exclusive authority to determine whether to make a hardship distribution, and the Bank’s decision shall be final and binding on all parties. Any hardship distribution shall, like all distributions, reduce the amounts available for subsequent distributions and be deducted from the Employee’s Deferred Compensation Account. The Employee shall apply for such a Hardship Benefit in writing and shall provide such additional information as the Bank shall require. For purposes of this Section, “unforeseen financial emergency” means an immediate and heavy financial need caused by an unforeseeable emergency, as described in Treasury Regulations Section 1.409A-3(i)(3), resulting from (a) an illness or accident of the Employee, the Employee’s spouse, the Employee’s Beneficiary or the Employee’s dependent (as defined in Code Section 152 without regard to paragraphs (b)(1), (b)(2) and (d)(1)(B) thereof), (b) a loss of the Employee’s property due to casualty, or (c) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Employee, all as determined by the Bank based on the relevant facts and circumstances:
|
|
(a)
|
the need to pay for medical expenses, including non-refundable deductibles, as well as for the cost of prescription drug medication;
|
|
(b)
|
the need to pay for the funeral expenses of the Employee’s spouse, the Employee’s Beneficiary or the Employee’s dependent (as defined in Code Section 152 without regard to paragraphs (b)(1), (b)(2) and (d)(1)(B) thereof); or
|
|
(c)
|
the imminent foreclosure of or eviction from the Employee’s principal residence.
|
10.
|
Beneficiary Designation
. The Employee shall have the right, at any time to submit a Beneficiary Designation Form designating primary and contingent beneficiaries to whom payment under this Plan shall be made in the event of death prior to complete distribution of the benefits due and payable under the Plan. Each Beneficiary designation shall become effective only when receipt thereof is acknowledged in writing by the Bank.
The Employee’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Employee or if the Employee names a spouse as beneficiary and the marriage is subsequently dissolved. If the Employee dies without a valid beneficiary designation, all payments shall be made to the Employee’s estate.
|
11.
|
Assignment of Rights.
Neither the Employee nor any designated Beneficiary shall have any right to sell, assign, transfer, or otherwise convey the right to receive any payments hereunder without the prior written consent of the Bank.
|
12.
|
Domestic Relations Orders
. Notwithstanding any other provision of this Plan regarding the time or form of payment to the contrary, the Committee may in its sole discretion pay, or direct payment of all or any portion of the Employee’s Deferred Compensation Account directly to an alternate payee in order to comply with a domestic relations order (“DRO”) as defined in Code Section 414(p)(1)(B). The Committee may, but is not required to, establish regular procedures for reviewing and commenting on draft DROs before issuance by the family court and for advising the Employee and alternate payee regarding the changes which are required in a DRO issued by the court to make it acceptable to the Plan. To facilitate any payment to be made in compliance with a DRO, the Committee shall have the right, but shall not be required, to establish a separate account for the alternate payee and may, but shall not be required, to allow the alternate payee to self-direct the deemed investment thereof subject to such conditions as it deems appropriate. Any payment made under this Section to an alternate payee shall reduce the Deferred Compensation Account of the Employee by the amount thereof, and shall fully discharge the Bank’s obligation under this Plan or otherwise with respect to such amount. No payment made by the Bank to an alternate payee with respect to an Employee shall constitute a waiver of the Bank’s right to refuse to accept another DRO concerning any remaining account of the Employee, nor shall the fact of such payment affect in any way the applicability of this Section to any other Employee. Any payments made under a DRO to an alternate payee shall be net of any applicable withholding. This Section (and any DRO) shall be interpreted and applied in a manner that complies with the applicable provisions of Section 409A of the Code and the applicable regulations and other guidance promulgated thereunder.
|
13.
|
Unfunded and Unsecured Obligation of the Bank
. The Bank is not required to earmark or otherwise set aside any funds or other assets or in any way secure payment of its obligations under the Plan. Any asset which may be set aside by the Bank for accounting purposes is not to be treated as held in trust for any Employee or for his or her account. Each Employee shall have only the rights of a general, unsecured creditor of the Bank with respect to any of his or her rights under the Plan.
|
14.
|
Claims Procedure
. Any claim pertaining to an Employee’s benefits under the Plan shall be filed with the Chairman of the Personnel Committee of the Board of Directors for the consideration of the Committee. Written notice of the disposition of a claim shall be furnished the Employee within 30 days after the application therefore is filed. In the event the claim is denied, the specific reasons for such denial shall be set forth, pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the Employee can perfect his or her claim will be provided.
|
15.
|
No Contract of Employment
. Nothing contained herein shall be construed to be a contract of employment for any term of years, nor as conferring upon the Employee the right to continue to be employed by the Bank, in any capacity, nor in any way vary the Bank’s policy of at-will employment. It is expressly understood by the parties hereto that this Plan relates exclusively to deferred compensation as set forth in this Plan.
|
16.
|
Construction of Plan
. Any payments under this Plan shall be independent of, and in addition to, those under any other plan, program, or agreement which may be in effect between the parties hereto, or any other compensation payable to the Employee or the Employee’s designated Beneficiary by the Bank. All legal issues pertaining to the Plan shall be determined in accordance with the laws of the State of California except as preempted by Federal law.
|
17.
|
Amendment and Termination.
The Bank shall have the right at any time to modify, alter or amend this Plan, in whole or in part, provided that the amendment shall not reduce any Employee’s interest in the Plan, calculated as of the date on which the amendment is adopted. Upon Plan termination, the Bank may accelerate the distribution of Deferred Compensation Account balances only in accordance with the requirements of Section 409A and the regulations issued thereunder. The Bank reserves the right to change this Plan, including reducing any Employee’s interest in this Plan in order to make such Plan compliant with Section 409A.
|
18.
|
The Committee
.
|
|
a)
|
The Committee shall, for the purpose of administering the Plan, choose a secretary and an assistant secretary (either of whom is hereafter referred to as “Secretary”) who shall keep minutes of the Committee’s proceedings and all records and documents pertaining to the Committee’s administration of the Plan. The Secretary may execute any certificates or other written direction on behalf of the Committee. A majority of the members of the Committee shall constitute a quorum.
|
|
b)
|
The Committee on behalf of the Employees shall be charged with the general administration of the Plan and shall have all powers necessary to accomplish those purposes including, but not by way of limitation, the following:
|
|
-
|
to construe, interpret, and administer the Plan;
|
|
-
|
to make determinations under the Plan;
|
|
-
|
to establish a rabbi trust for the Plan and to deposit amounts determined under
Sections 4 and 5 into such trust established by the Committee (provided, however, that notwithstanding anything in the Plan or other agreement to the contrary, in no event shall a contribution be made to a trust for the purpose of restricting assets to the provision of benefits under the Plan in connection with a change in the financial health of the Bank or any affiliated entity in a manner that would result in the inclusion of amounts in the gross income of the Employees pursuant to Section 409A(b) of the Code);
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-
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to maintain the necessary records for the administration of the Plan; and
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to make and publish such rules for the regulation of the Plan as are not inconsistent with the terms hereof.
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c)
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The members of the Committee shall serve without bond and without compensation (except for director fees) for their services hereunder. All expenses of the Committee shall be paid by the Bank. The Bank shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. No
member of the Committee shall be liable for the act or omission of any other
member of the Committee, nor for any act or omission on his or her own part, excepting only his or her own willful misconduct or gross negligence. The Bank shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of his or her membership on the Committee, excepting only expenses and liabilities arising out of his or her own willful
misconduct or gross negligence.
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19.
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Section 409A
. This Plan is intended to be consistent with the provisions of Section 409A of the Code and its provisions shall be interpreted consistent with such intent.
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a)
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Distribution Elections. If otherwise payable under the Plan, an Employee’s Deferred Compensation Account balance shall be distributed as elected by Employee on Appendix B for a Retirement under subsection a. of Section 8 (if Termination of Employment is at or after Normal Retirement Age) or as elected on Appendix B for a Termination under subsection e. of Section 8 (if Termination of Employment is before Normal Retirement Age), or in accordance with the in service distribution election, if any, elected by Employee on Appendix B, provided that such elections have been made prior to the calendar year in which the Employee performs the services for which the contributions to the Employee’s Deferred Compensation Account are made (or otherwise in accordance with the requirements of Section 409A), and in accordance with such procedures as shall be established by the Bank. If no such election has been made for the form of distribution upon Termination of Employment, the Employee shall be deemed to have elected to receive payment upon such payment event in a lump sum on the later of (A) the 15th day of the month following the six-month anniversary of the date of Termination of Employment or (B) January 15th of the year following the date of Termination of Employment. The Bank has the discretion to establish sub-accounts for one or more Employees and to maintain separate payment elections in respect of each such sub-account provided that such elections comply with the payment election requirements of Section 409A. The Bank also has the discretion to permit changes in payment elections provided such changes are made in accordance with the requirements of Section 409A and such procedures as shall be established by the Bank.
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b)
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Distributions To A Specified Employee. Notwithstanding any provision to the contrary in the Plan, a distribution to which an Employee would otherwise be entitled upon a Termination of Employment will be delayed until one day following the expiration of the six (6)-month period from the date of the Employee’s Termination of Employment if the Bank in good faith determines that the Employee is a “specified employee,” as defined in Section 409A and regulations issued thereunder, at the time of such Termination of Employment, and that the delayed commencement is required in order to avoid a prohibited distribution under Code Section 409A(a)(2). In the event that a delay of any payment is required under this provision, such payment shall be accumulated and paid in a single lump sum on the delayed payment date, and any remaining payments due under the Plan shall be paid in accordance with the normal payment dates specified for them herein.
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20.
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Headings
. Headings and subheadings in this Plan are inserted for convenience or reference only and are not to be considered in the construction of the provisions hereof.
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21.
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Intent
. To the extent that this Plan may be construed to be a plan maintained to provide deferred compensation, it is intended to be limited to a “select group of management or highly compensated employees” within the meaning of Section 201(2) of ERISA. The Plan is intended to be exempt from the participation, vesting, funding, and fiduciary requirements of Title 1 of ERISA, to the fullest extent permitted under the law. The Plan shall at all times be “unfunded” within the meaning of ERISA.
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22.
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Gender and Number
. Where the context permits, words in any gender shall, include any other gender; words in the singular shall include the plural, and the plural shall include the singular
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By: | /s/ Kent A. Steinwert | |
Chairman, President and C.E.O. | ||
By: | /s/ Stewart C. Adams, Jr. | |
Chairman of the Personnel Committee of the Board |
1.
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I have reviewed this quarterly report on Form 10-Q of Farmers & Merchants Bancorp;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant
’
s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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Date: November 5, 2010
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/s/ Kent A. Steinwert | |
Kent A. Steinwert | |||
Chairman, President | |||
& Chief Executive Officer |
1.
|
I have reviewed this quarterly report on Form 10-Q of Farmers & Merchants Bancorp;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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Date: November 5, 2010
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/s/ Stephen W. Haley | |
Stephen W. Haley | |||
Executive Vice President & Chief Financial Officer |
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1.
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the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. $ 78m or 78o(d)); and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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November 5, 2010 | |
/s/ Kent A. Steinwert | |
Kent A. Steinwert | |
Chairman, President | |
& Chief Executive Officer | |
/s/ Stephen W. Haley | |
Stephen W. Haley | |
Executive Vice President & Chief Financial Officer |