SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[X] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by Rule
[ ] Soliciting Material Pursuant to Rule 14a-12. 14a-6(e)(2))
FNB BANCORP
..............................................................................
(Name of Registrant as Specified in Its Charter)
..............................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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FNB BANCORP
975 El Camino Real
South San Francisco, California 94080
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held Wednesday, May 15, 2002
7:30 P.M.
--------------------
TO THE SHAREHOLDERS OF FNB BANCORP:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of FNB BANCORP, a California corporation (the "Company") will
be held at the Basque Cultural Center, 599 Railroad Avenue, South San Francisco,
California, on Wednesday, May 15, 2002, at 7:30 p.m., for the following
purposes:
1. To elect the eight incumbent directors identified in the
accompanying proxy statement; and
2. To transact such other business as may properly come before
the Annual Meeting and any adjournment or adjournments
thereof.
Section 7 of the Bylaws of the Company provides for the nomination of
directors as follows:
"Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder entitled to vote for the election of
directors. Nominations, other than those made by the Board of Directors, shall
be made in writing and shall be delivered or mailed, with first-class United
States mail postage prepaid, to the Secretary not less than 20 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors; provided, however, that if less than 25 days notice of the meeting is
given to the shareholders, such nomination shall be mailed or delivered to the
Secretary not later than the close of business on the seventh day following the
day on which the notice of the meeting was mailed. Shareholder nominations shall
contain the following information: (a) the name, age, business address and, if
known, residence address of each proposed nominee; (b) the principal occupation
or employment of each proposed nominee; (c) the total number of shares of
capital stock of the corporation that are beneficially owned by each proposed
nominee and by the nominating shareholder; (d) the name and residence address of
the notifying shareholder; and (e) any other information the corporation must
disclose regarding director nominees in the corporation's proxy solicitation.
Nominations not made in accordance with this Section may be disregarded by the
Chairman of the meeting, and if the Chairman so instructs, the inspectors of
election may disregard all votes cast for each such nominee."
Only those shareholders of record at the close of business on April 1,
2002, will be entitled to notice of and to vote at the Annual Meeting.
This will be the first meeting of the shareholders of FNB Bancorp since
it became the holding company for First National Bank of Northern California.
You are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ THOMAS C. MCGRAW
--------------------
Thomas C. McGraw
Secretary
South San Francisco, California
April 19, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Mailed to shareholders
on about April 19, 2002
FNB BANCORP
975 El Camino Real
South San Francisco, California 94080
Telephone (650) 588-6800
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is being furnished to the shareholders of FNB
Bancorp, a California corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held at Basque Cultural Center, 599
Railroad Avenue, South San Francisco, California, at 7:30 P.M. on Wednesday, May
15, 2002. Only shareholders of record on April 1, 2002 (the "Record Date"), will
be entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had outstanding and entitled to be
voted 2,318,849 shares of its no par value Common Stock (the "Common Stock").
The presence in person or by proxy of a majority of the shares entitled
to vote is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence or
absence of a quorum. "Broker non-votes" are shares held by brokers or nominees
who are present in person or represented by proxy, but which are not voted on a
particular matter because under applicable rules the broker cannot vote on the
matter in the absence of instructions from the beneficial owner. The effect of
abstentions and broker non-votes on the calculation of the required vote on
specific proposals to be brought before the Annual Meeting is discussed under
each proposal, where applicable.
Shareholders of Common Stock are entitled to one vote for each share
held, except that for the election of directors each shareholder has cumulative
voting rights and is entitled to as many votes as shall equal the number of
shares held by such shareholder multiplied by the number of directors to be
elected. Each shareholder may cast all of his or her votes for a single
candidate or distribute such votes among any or all of the candidates as he or
she chooses. However, no shareholder shall be entitled to cumulate votes (in
other words, cast for any candidate a number of votes greater than the number of
shares of stock held by such shareholder) unless such candidate's name has been
placed in nomination prior to the voting and the shareholder has given notice at
the Annual Meeting prior to the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such notice, all shareholders may
cumulate their votes for candidates in nomination. Prior to voting, an
opportunity will be given for shareholders or their proxies at the Annual
Meeting to announce their intention to cumulate their votes. The proxy holders
are given, under the terms of the proxy, discretionary authority to cumulate
votes on shares for which they hold a proxy.
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke that proxy prior to its exercise. The proxy may be
revoked prior to the Annual Meeting by delivering to the Secretary of the
Company either a written instrument revoking the proxy or a duly executed proxy
bearing a later date. The proxy may also be revoked by the shareholder by
attending and voting at the Annual Meeting. The proxy will be voted as directed
by the shareholder giving the proxy and if no directions are given on the proxy,
the proxy will be voted "FOR" the nominees of the Board of Directors and as
described in this Proxy Statement and, at the proxy holders' discretion, on such
other matters, if any, which may come before the Annual Meeting (including any
proposal to adjourn the meeting).
The Company will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. In addition to the solicitation of proxies by use of the mail,
some of the officers, directors and regular employees of the Company may
(without additional compensation) solicit proxies by telephone or personal
interview, the costs of which will be borne by the Company.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 2001, including audited financial statements of First National Bank
of Northern California (the "Annual Report") is enclosed with this Proxy
Statement. Additional copies of the Annual Report are available upon request to
the Secretary of the Company, Thomas C. McGraw, at FNB Bancorp, 975 El Camino
Real, South San Francisco, California 94080.
THE ANNUAL REPORT INCLUDES A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
2
PRINCIPAL SHAREHOLDERS
As of April 1, 2002, no person known to the Company owned beneficially
or of record more than five percent (5%) of the outstanding shares of its Common
Stock, except as indicated in the chart below:
===============================================================================
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Ownership(1)
-------------------------------------------------------------------------------
The Ricco Lagomarsino Trust 220,616 9.51
26 Hillcrest Drive
Daly City, CA 94014
-------------------------------------------------------------------------------
Thomas G. Atwood 224,947(2) 9.70
c/o Cypress Abbey Company
P.O. Box 516
Colma, CA 94014
-------------------------------------------------------------------------------
Cede & Co.(3) 826,049 35.62
Box 20, Bowling Green Station
New York, NY 10004
===============================================================================
(1) Based upon 2,318,849 shares outstanding.
(2) Includes 182,328 shares owned by Cypress Abbey Company, a corporation
in which Mr. Atwood is the principal shareholder.
(3) Cede & Co. is the nominee of The Depository Trust Company of New York,
New York, and acts as the record owner of securities held in "street
name" for a number of brokerage firms and other financial institutions.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
The Bylaws of the Company provide a procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full in the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Nominations not made in accordance therewith may be disregarded by
the Chairman of the Meeting, and upon his instructions the tellers of votes may
disregard all votes cast for such nominee(s).
The Bylaws of the Company provide that the Board of Directors shall
consist of not less than five nor more than nine shareholders, the exact number
to be fixed and determined from time to time by resolution of a majority of the
full Board of Directors or by resolution of a majority of the shareholders at
any annual or special meeting thereof. The current number of directors has been
fixed by resolution of the Board of Directors at eight (8). The directors to be
elected at the Annual Meeting shall hold office for one year and until their
successors are elected and have qualified. The eight (8) nominees receiving the
highest number of affirmative votes of the shares present in person or
represented by proxy and entitled to vote for them shall be elected as
directors. Only votes cast "FOR" a nominee will be counted in determining
whether that nominee has been elected as a director.
All proxies will be voted for the election of the following eight (8)
nominees recommended by the Board of Directors, unless authority to vote for the
election of any director or directors is withheld by the shareholder on the
proxy. All of the nominees are incumbent Directors. If any nominee should
unexpectedly decline or be unable to act as a director, the proxies may be voted
for a substitute nominee to be designated by the Board of Directors. The Board
of Directors has no reason to believe that any nominee will become unavailable
and has no present intention to nominate persons in addition to or in lieu of
those named below.
The following table sets forth information with respect to beneficial
ownership of the Common Stock of the Company by those persons nominated by the
Board of Directors for election as directors, as well as all directors and
executive officers of FNB Bancorp and its subsidiary, First National Bank of
Northern California, a national banking association (herein called the "Bank" or
"First National Bank"), as a group. There is no family relationship between any
of the directors and/or executive officers, except that Edward J. Watson is
related by marriage to Anthony J. Clifford. The Company has only one class of
shares outstanding, Common Stock.
4
=====================================================================================
Shares Beneficially Owned
Nominee Age Positions Held Director as of April 1, 2002 (1)
With the Bank Since Sole Shared % of
and Company (2) (3) Total
-------------------------------------------------------------------------------------
Michael R. Wyman 65 Chairman of the 1978 for 3,660 22,090 1.11(4)
Board, Director Bank;
2001 for
Company
-------------------------------------------------------------------------------------
Thomas C. McGraw 50 Chief Executive 1989 1,103 110,759 4.82(5)
Officer, for
Secretary, Bank;
Director 2001 for
Company
-------------------------------------------------------------------------------------
Neil J. Vannucci 65 Director 1989 for 849 45,838 2.01(6)
Bank;
2001 for
Company
-------------------------------------------------------------------------------------
Edward J. Watson 54 Director 1996 for 1,860 3,159 .22(7)
Bank;
2001 for
Company
-------------------------------------------------------------------------------------
Daniel J. Modena 67 Director 1996 for 849 1,059 .08(8)
Bank;
2001 for
Company
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Lisa Angelot 44 Director 1999 for 10,208 -- .44(9)
Bank;
2001 for
Company
-------------------------------------------------------------------------------------
Jim D. Black 46 President, 2002 for 3,993 891 .21(10)
Director Bank and
Company
-------------------------------------------------------------------------------------
Anthony J. Clifford 38 Executive Vice 2002 for 2,323 -- .10(11)
President and Bank and
Chief Operating Company
Officer, Director
-------------------------------------------------------------------------------------
All directors and executive officers (10 persons) 30,155 183,796 9.16(12)
as a group
-------------------------------------------------------------------------------------
(1) This table is based upon information supplied by directors, executive
officers and principal shareholders. Percentages are based upon
2,318,849 shares outstanding.
(2) The named persons exercise sole voting and investment power with
respect to shares listed in this column.
(3) The named persons share voting and investment power with respect to
shares listed in this column.
5
(4) Includes 22,090 shares held by the Wyman Family Trust for which Mr.
Wyman serves as co-trustee. Includes 2,835 shares of presently
exercisable stock options under the Bank's 1997 Stock Option Plan.
Excludes 5,671 shares held by the Deferred Compensation Trust.
(5) Includes 110,759 shares held by the Thomas C. and Virginia K. McGraw
Family Trust for which Mr. McGraw serves as co-trustee. Includes 849
shares of presently exercisable stock options under the Bank's 1997
Stock Option Plan.
(6) Includes 45,838 shares held by the Vannucci Family Trust for which Mr.
Vanucci serves as co-trustee and 849 shares of presently exercisable
stock options under the Bank's 1997 Stock Option Plan.
(7) Includes 3,159 shares held in the Dreher, Garfinkle & Watson Money
Purchase Pension Plan, under which Edward J. Watson and Eugene
Garfinkle serve as Trustees and 849 shares of presently exercisable
stock options under the Bank's 1997 Stock Option Plan.
(8) Includes 849 shares of presently exercisable stock options under the
Bank's 1997 Stock Option Plan.
(9) Includes 1,157 shares held by Ms. Angelot as Custodian for Eric Angelot
and 277 shares held by Ms. Angelot as Custodian for Katherine
Brandenberger. A total of 220,616 shares are held by The Ricco
Lagomarsino Trust for which Ms. Angelot serves as one of the
co-trustees. Ms. Angelot disclaims beneficial ownership of such shares.
Includes 667 shares of presently exercisable stock options under the
Bank's 1997 Stock Option Plan.
(10) Includes 2,423 presently exercisable stock options under the Bank's
1997 Stock Option Plan. Excludes 1,266 shares held in the Bank's
Deferred Compensation Plan. Includes 189 shares held in trust for Greg
Black and includes 189 shares held in trust for Janelle Black.
(11) Includes 2,256 presently exercisable stock options under the Bank's
1997 Stock Option Plan. Excludes 757 shares held in trust in the Bank's
Deferred Compensation Plan.
(12) Includes a total of 16,257 shares of presently exercisable stock
options under the Bank's 1997 Stock Option Plan. Excludes 10,904 shares
held by the Deferred Compensation Trust for the accounts of Messrs.
Wyman, Black, Clifford and Ramsey. See "Deferred Compensation Plan"
herein.
---------------------
The following table sets forth certain information as of the Record
Date with respect to each Director of the Company and the Bank, each person
nominated for election as a Director, and each executive officer named in the
Executive Compensation table elsewhere herein, as well as for all other
executive officers of the Company and the Bank.
6
Michael R. Wyman Chairman of the Board of Directors of the Company
since 2001. Chairman of the Board of Directors of
First National Bank since 1999 and Director of First
National Bank since 1983. Retired as Chief Executive
Officer of the Company and First National Bank
effective March 31, 2002. Previously, Chief Executive
Officer of First National Bank since 1983 and
President of First National Bank from 1983 to 1996.
Thomas C. McGraw Director and Secretary of the Company since 2001.
Chief Executive Officer of the Company and First
National Bank since April 1, 2002. Director and
Secretary of First National Bank since 1989, and
President and Chief Operating Officer of First
National Bank from October 2001 until April 1, 2002.
Formerly, self-employed communications consultant in
San Mateo and Marin Counties, since 1987.
Neil J. Vannucci Director of the Company since 2001. Director of First
National Bank since 1989. Director of U.S. Concrete
since 1999. President of Bay Cities Building
Materials from 1995 to 1999.
Edward J. Watson Director of the Company since 2001. Director of First
National Bank since 1996. Certified Public
Accountant. Attorney and partner in the law firm of
Watson & Lanctot LLP, formerly known as Dreher,
Garfinkle & Watson.
Daniel J. Modena Director of the Company since 2001. Director of First
National Bank since 1996. Attorney and partner in the
law firm of Modena & Royce in South San Francisco
since 1961.
Lisa Angelot Director of the Company since 2001. Director of First
National Bank since 1999. Property manager for the
Lagomarsino Properties in Daly City since 1992. Her
grandfather was Ricco Lagomarsino, Founding Director
and Chairman of First National Bank.
Jim D. Black Director of the Company and First National Bank since
March 2002. President of the Company and First
National Bank since April 1, 2002. Formerly, Senior
Vice President and Senior Lending Officer of First
National Bank and an employee since 1981.
Anthony J. Clifford Director of the Company and First National Bank since
March 2002. Executive Vice President and Chief
Operating Officer of the Company and First National
Bank since April 1, 2002. Formerly, Vice President
7
and Branch Administrator of First National Bank since
1995; Vice President and Branch Manager of First
National Bank since 1990; and Assistant Vice
President and Branch Manager of First National Bank
since 1983.
James B. Ramsey Senior Vice President and Chief Financial Officer of
the Company since 2001. Senior Vice President, Chief
Financial Officer and Cashier of First National Bank
since 1997. Formerly, Vice President/Controller of
Mid-Peninsula Bank in Palo Alto since 1994, Senior
Vice President and Chief Financial Officer of Codding
Bank in Rohnert Park, California since 1989, and
Executive Vice-President and Chief Financial Officer
of Pajaro Valley Bank since 1982.
Charles R. Key Senior Vice President and Director of Information
Systems of First National Bank and an employee since
1970.
None of the directors of the Company is a director of any other company
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940, whose common stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
Committees of the Board of Directors
The Company has an Audit Committee and a Compensation Committee. In
addition, the entire Board of Directors of the Company functions as the
nominating committee. The current members of the Company's Audit Committee are
Edward J. Watson, Neil J. Vannucci and Daniel J. Modena. The current members of
the Company's Compensation Committee are Thomas C. McGraw, Neil J. Vannucci and
Edward J. Watson. The Company was formed in 2001 to become the holding company
for First National Bank. Upon consummation of a plan of reorganization approved
by the shareholders of the Bank, effective March 15, 2002, the Bank became a
wholly owned subsidiary of the Company. As a result, the members of the
Company's Audit Committee and Compensation Committee did not meet during 2001.
First National Bank has an Audit Committee, a Loan and Discount
Committee (which functions as an executive committee of the Board of Directors)
and a Compensation Committee.
8
First National Bank does not have a nominating committee, but the Loan
and Discount Committee functions as the Bank's nominating committee, as
necessary. Since March 15, 2002, the Company has been the sole shareholder of
the Bank.
The current members of the Bank's Audit Committee are Edward J. Watson,
Neil J. Vannucci and Daniel J. Modena. The principal functions of the Audit
Committee are (1) to examine and review both internal audit controls and
regulatory audit reports and to meet with the First National Bank auditors
concerning audit procedures and controls and (2) to monitor the First National
Bank investments.
The current members of the Bank's Loan and Discount committee are
Michael R. Wyman, Thomas C. McGraw, Daniel J. Modena and Lisa Angelot. The
principal functions of the Loan and Discount Committee are to oversee loans and
investments and the routine operations of First National Bank by delegation from
the board of directors and to advise and report to the full board regarding such
matters.
The members of the Bank's Compensation Committee are Thomas C. McGraw,
Neil J. Vannucci and Edward J. Watson. The Compensation Committee investigates
and advises the board of directors as to employee benefit arrangements and
conducts executive searches whenever First National Bank proposes to hire
executive personnel. The Compensation Committee also reports to the board of
directors with regard to executive compensation, including bonus compensation.
The board of directors of First National Bank met a total of 25 times
during 2001. During this same period, the Loan and Discount Committee met 27
times, the Audit Committee met twice and the Compensation Committee met once.
All incumbent directors of the Bank attended at least seventy-five percent (75%)
of the meetings of the board of directors and the committees of which they were
members during 2001.
Compensation of Directors
No fees or other compensation has been paid to the non-officer
directors of the Company since incorporation of the Company on February 28,
2001. The Company became the holding company for First National Bank, effective
March 15, 2002. No separate fees will be paid to the directors of the Company
during 2002 for their attendance at meetings of the board of directors or for
their attendance at meetings of the committees of the board of directors.
Each non-officer director of First National Bank was paid $30,000 in
fees for attending meetings of the board of directors during 2001. The aggregate
amount of such fees paid by First National Bank in 2001 was $150,000. No fees
were paid to the directors during 2001 for their attendance at meetings of the
committees of the board of directors of the Bank. During 2001, each non-officer
director of First National Bank was granted a non-statutory option for 246
shares of common stock pursuant to the First National Bank 1997 Stock Option
Plan.
9
Board Compensation Committee Report
Set forth below is the Report of the members of the Compensation
Committee of the Board of Directors of the Company and the Bank:
No separate compensation was paid to the executive officers of the
Company during 2001, as the Company was formed in 2001 to become the holding
company of First National Bank. After approval by the shareholders of the Bank,
the holding company reorganization became effective March 15, 2002. It is
expected that the compensation to be paid by First National Bank to executive
officers during 2002 will include payment for all services rendered or to be
rendered by such officers to the Company during 2002, including their attendance
at meetings of the board of directors and their attendance at meetings of
committees of the board of directors of the Company.
The compensation of the executive officers of First National Bank is
reviewed and approved annually by the board of directors based on the
recommendations by the Compensation Committee. During 2001, Thomas C. McGraw
(Chairman), Neil J. Vanucci and Edward J. Watson served as members of the Bank's
Compensation Committee. Executive officers of First National Bank during 2001
were Michael R. Wyman, Chairman and Chief Executive Officer, Paul B. Hogan,
(former) President and Chief Operating Officer, James B. Ramsey, Senior Vice
President and Chief Financial Officer, Jim D. Black, Senior Vice President and
Senior Lending Officer, Charles R. Key, Senior Vice President and Director,
Information Systems, and Anthony J. Clifford, Vice President, Branch
Administrator.
The Compensation Committee's philosophy is that compensation should be
designed to reflect the value created for shareholders while supporting First
National Bank's strategic goals. The Compensation Committee reviews the
compensation of the executive officers annually to insure that First National
Bank's compensation programs are related to financial performance and consistent
generally with employers of comparable size in the industry. Other than as
described in this report, there are no other employment contracts between First
National Bank and any officer of First National Bank. Annual compensation for
First National Bank's executive officers includes the components described
below.
Base salary is related to the individual executive officer's level of
responsibility and comparison with comparable employers in the industry. The
board of directors reviews and sets base salaries annually, taking into
consideration the recommendations of the Chief Executive Officer (for executive
officers other than the Chief Executive Officer). In conducting its review of
salaries, the board of directors takes into consideration the overall
performance of First National Bank.
The board of directors determines the base salary for the Chief
Executive Officer by (a) examining the financial performance of First National
Bank against its present goals; (b) examining the financial performance of First
National Bank as compared to the banking industry generally; (c) evaluating the
overall performance of the Chief Executive Officer; and (d) comparing the base
salary of the Chief Executive Officer to that of other chief executive officers
in the banking industry in the market area of First National Bank.
10
On December 13, 2000, effective as of January 1, 2001, the board of
directors approved the following base salary increases: Mr. Wyman's annual
salary was increased to $245,000; Mr. Hogan's annual salary was increased to
$210,000; Mr. Ramsey's annual salary was increased to $140,004; Mr. Black's
annual salary was increased to $140,004; Mr. Key's annual salary was increased
to $125,004; and Mr. Clifford's annual salary was increased to $120,000. Mr.
Hogan resigned as a director and as President and Chief Operating Officer of
First National Bank, effective October 31, 2001. The board of directors then
appointed Thomas C. McGraw, a Director and the Secretary of First National Bank,
as the interim President and Chief Operating Officer, and established his base
salary at the annual level of $195,744.
First National Bank does not have a formal bonus plan. The board of
directors, at its discretion, awarded bonuses to its executive officers during
2001, including bonuses to Messrs. Wyman, Ramsey, Black, Key and Clifford (which
are set forth in the table of Executive Compensation below). Bonus compensation
is based on the return on beginning shareholder equity for each year and
individual performance criteria are established by the Compensation Committee
for each executive officer.
The entire board of directors can, at its discretion, grant stock
options to key officers of First National Bank who are primarily responsible for
the growth and management of its business. As of December 31, 2001, a total of
99,841 shares were reserved for options previously granted and currently
outstanding under the First National Bank of Northern California 1997 Stock
Option Plan, including options for an aggregate of 35,867 shares of common stock
(as adjusted for stock dividends paid in 1998, 1999, 2000 and 2001) which have
been granted to Messrs. Wyman, Hogan, Ramsey, Black, Key and Clifford. Each
option granted to such officers during 1998 is exercisable at a price of $32.00
per share; each option granted during 1999 is exercisable at a price of $28.00
per share; each option granted during 2000 is exercisable at a price of $25.13
per share; and each option granted during 2001 is exercisable at a price of
$25.05 per share. The exercise price of an incentive stock option is set at the
fair market value of the shares on the date of grant. All options granted and
currently outstanding are incentive stock options, vesting at the rate of 20
percent per year over the period of 5 years from date of grant and are
exercisable for a period of 10 years from the grant date. During 2001, Mr. Wyman
was granted options for 2,446 shares; Mr. Hogan was granted options for 2,446
shares; and Messrs. Ramsey, Black, Key and Clifford were each granted options
for 2,153 shares. In accordance with the stock option agreements between Mr.
Hogan and First National Bank, the term of Mr. Hogan's options expired three
months after termination of his status as an employee, which was effective on
October 31, 2001.
First National Bank has established a Deferred Compensation Plan.
Participation in the Plan is open to all officers of First National Bank with
the title Vice President or higher. As of April 1, 2002, the Deferred
Compensation Trust held an aggregate of 13,680 shares of First National Bank
common stock for the accounts of Messrs. Wyman, Hogan, Ramsey, Black, Key and
Clifford, representing approximately 0.5% of the total shares outstanding on
such date (consisting of 5,671 shares for Michael R. Wyman; 2,776 shares for
Paul B. Hogan; 3,210 shares for James B. Ramsey; 1,266 shares for Jim D. Black;
no shares for Charles R. Key; and 757 shares for Anthony J. Clifford).
11
Each year, the Board of Directors of First National Bank decides
whether to make a profit sharing contribution to the First National Bank Profit
Sharing and 401(k) Plan, and the amount of that contribution. The profit sharing
contribution to the Plan for 2001 was $524,250. Each participant in the Plan who
is employed on the last day of the Plan year receives a share of that
contribution based on the amount of his or her compensation relative to the
compensation of all other participants. The accounts of the participants vest
according to a schedule of years of service with First National Bank.
Submitted by the Compensation Committee:
Thomas C. McGraw, Chairman
Neil J. Vannucci
Edward J. Watson
12
Executive Compensation
Set forth below is the compensation of the Chief Executive Officer of
the Company and the Bank and the other most highly compensated officers (whose
total annual salary and bonus exceeds $100,000) for services in all capacities
to the Company and the Bank during the three years ended December 31, 2001.
================================================================================
Annual Compensation
--------------------------------------------------------------------------------
Name and Position Year Salary Bonus (1) All Other
Compensation(2)(3)
--------------------------------------------------------------------------------
Michael R. Wyman, Chairman of 1999 $ 200,004 $ 70,000 $ 21,240
the Board, Chief Executive 2000 215,004 100,000 26,756
Officer 2001 212,022 100,000 16,603
--------------------------------------------------------------------------------
Paul B. Hogan, President, 1999 $ 160,008 $ 70,000 $ 21,240
Chief Operating Officer (4) 2000 180,000 100.000 26,756
2001 227,675 -- --
--------------------------------------------------------------------------------
James B. Ramsey, Senior Vice 1999 $ 118,548 $ 40,000 $ 15,731
President, Chief Financial 2000 123,288 50,000 19,404
Officer 2001 147,003 40,000 13,674
--------------------------------------------------------------------------------
Jim D. Black, Senior Vice 1999 $ 111,384 $ 40,000 $ 14,786
President, Senior Lending 2000 115,848 55,000 18,233
Officer 2001 149,695 44,000 13,674
--------------------------------------------------------------------------------
Charles R. Key, Senior Vice 1999 $ 93,948 $ 27,500 $ 12,471
President, Director, 2000 100,000 37,500 15,739
Information Systems 2001 125,004 30,000 12,209
--------------------------------------------------------------------------------
Anthony J. Clifford, Vice 1999 $ 93,300 $ 32,500 $ 12,385
President, Branch 2000 97,032 42,500 15,271
Administrator 2001 120,000 34,000 11,720
================================================================================
(1) Bonuses are indicated for the years upon which they are based, and are
payable in the same year.
(2) Each of Messrs. Hogan, Wyman, Black and Clifford is provided with the
use of a Bank-owned automobile. No executive officer received
perquisites or other personal benefits in excess of the lesser of
$50,000 or 10 percent of each such officer's total annual salary and
bonus during 1999, 2000 or 2001.
(3) Amounts shown represent contributions to The First National Bank Profit
Sharing and 401(k) Plan for the accounts of the named officers.
(4) Paul B. Hogan resigned as a director and officer of First National
Bank, effective October 31, 2001. Previously, Mr. Hogan was President
and Chief Operating Officer of First National Bank. Mr. Hogan entered
into a Separation Agreement with First National Bank, in order to
confirm the financial terms of his resignation. The Separation
13
Agreement provides for the payment to Mr. Hogan of severance salary for
a period of 18 months at Mr. Hogan's existing annual rate of pay plus
the continuation of his existing health insurance coverage for the same
period, both commencing from November 1, 2001. In addition, the
Separation Agreement confirms the early termination benefits payable to
Mr. Hogan over 20 years upon his reaching age 66, under the terms of
Mr. Hogan's Salary Continuation Agreement with First National Bank,
dated December 20, 1996, which benefits will be calculated based on a
stipulated accrual of $360,167 for six years of service with First
National Bank.
The following table sets forth certain information concerning the
granting of options under the First National Bank 1997 Stock Option Plan during
the year ended December 31, 2001.
Option/SAR Grants In Last Fiscal Year
------------------------------------------------------------------------------------------------
Potential
Realizable Value
at Assumed
Annual Rates of
Individual Grants Stock Price
Appreciation for
Option Term (3)
------------------------------------------------------------------------------------------------
Number of Percentage of
Securities Total
Underlying Options/SARs
Option/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($Sh) (2) Date 5% 10%
------------------------------------------------------------------------------------------------
Michael R. Wyman 2,446 6.8% $ 23.93 6-29-11 $36,812 $93,290
------------------------------------------------------------------------------------------------
Paul B. Hogan (4) 2,446 6.8% $ 23.93 6-29-11 $36,812 $93,290
------------------------------------------------------------------------------------------------
James B. Ramsey 2,153 6.0% $ 23.93 6-29-11 $32,403 $82,115
------------------------------------------------------------------------------------------------
Jim D. Black 2,153 6.0% $ 23.93 6-29-11 $32,403 $82,115
------------------------------------------------------------------------------------------------
Charles R. Key 2,153 6.0% $ 23.93 6-29-11 $32,403 $82,115
------------------------------------------------------------------------------------------------
Anthony J. Clifford 2,153 6.0% $ 23.93 6-29-11 $32,403 $82,115
------------------------------------------------------------------------------------------------
(1) Options granted under the Stock Option 1997 Plan were either incentive
options or nonstatutory options. Options granted under the 1997 Stock
Option Plan became exercisable in accordance with a vesting schedule
established at the time of grant. Vesting cannot extend beyond ten
14
years from the date of grant. Upon a change in control of First
National Bank, all outstanding options under the 1997 Plan will become
fully vested and exercisable. Options granted under the 1997 Stock
Option Plan are adjusted to protect against dilution in the event of
certain changes in First National Bank's capitalization, including
stock splits and stock dividends. All options granted to the named
executive officers are incentive stock options and have an exercise
price equal to the fair market value of First National Bank common
stock on the date of grant.
(2) The exercise price was determined based upon the average of the bid and
asked price of First National Bank common stock on the grant date.
(3) In accordance with Securities and Exchange Commission rules, these
columns show gains that might exist for the respective options,
assuming that the market price of the stock appreciates from the date
of grant over the 10 year option term at the annualized rates of 5% and
10%, respectively.
(4) Mr. Hogan resigned as a director and officer of First National Bank,
effective October 31, 2001.
The following table sets forth the number of shares of First National
Bank common stock acquired by each of the named executive officers upon the
exercise of stock options during fiscal 2001, if any, the net value realized
upon exercise, the number of shares of First National Bank common stock
represented by outstanding stock options held by each of the named executive
officers as of December 31, 2001, the value of such options based on the average
of the bid and asked price of First National Bank common stock, and certain
information concerning unexercised options under the 1997 Stock Option Plan.
Aggregated Option/SAR Exercises In Last Fiscal Year And
FY-End Option/SAR Values
-----------------------------------------------------------------------------------------
Number of Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs at Options/SARs
on Value Fiscal Year-End (#) at Fiscal Year-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
-----------------------------------------------------------------------------------------
Michael R. Wyman ------ ------ 2,161 / 5,971 3,894 / 17,074
-----------------------------------------------------------------------------------------
Paul B. Hogan (2) ------ ------ 2,012 / 5,833 3,733 / 16,869
-----------------------------------------------------------------------------------------
James B. Ramsey ------ ------ 1,834 / 5,194 3,358 / 14,931
-----------------------------------------------------------------------------------------
Jim D. Black ------ ------ 1,849 / 5,203 3,364 / 14,934
-----------------------------------------------------------------------------------------
Charles R. Key ------ ------ 1,745 / 5,095 3,224 / 14,741
-----------------------------------------------------------------------------------------
Anthony J. Clifford ------ ------ 1,730 / 5,085 3,218 / 14,737
-----------------------------------------------------------------------------------------
15
(1) The aggregate value has been determined based upon the average of the
bid and asked price for First National Bank common stock at year-end,
minus the exercise price.
(2) Mr. Hogan resigned as a director and officer of First National Bank,
effective October 31, 2001.
Employment Contracts and Termination of Employment and Change in
Control Arrangements
Employment Contracts. There are no employment contracts between the
Company or First National Bank and the executive officers named in the tables
above, other than the Salary Continuation Agreements, the Management Continuity
Agreements, the Deferred Compensation Plan and the 1997 Stock Option Plan, as
described below. Effective March 15, 2002, the Company assumed all of the Bank's
rights and obligations under the 1997 Stock Option Plan, and all of the other
employee benefit plans of the Bank, existing on that date, are to be continued,
modified or assumed by the Company as determined by mutual agreement of the Bank
and the Company, in accordance with applicable laws, regulations and tax rules.
Salary Continuation Agreements. First National Bank purchased life
insurance policies on the lives of Michael R. Wyman and Paul B. Hogan on
December 21, 1996, and on the life of James B. Ramsey on December 30, 1998.
First National Bank also entered into Salary Continuation Agreements with
Messrs. Wyman, Hogan and Ramsey in the form proposed by Clark/Bardes Consulting
(the "Agreements"). First National Bank is the sole owner and beneficiary under
such life insurance policies, which policies indirectly offset the anticipated
costs for certain death, disability and post-employment/retirement benefits for
Messrs. Wyman, Hogan and Ramsey. The cash surrender value of each insurance
policy, which is expected to increase over the term of the policy, is included
among the "other assets" on the balance sheet of First National Bank. The
Agreements provide for annual benefits to be paid to Mr. Wyman or his designated
beneficiary of up to $60,000 per year over a period of 15 years; annual benefits
to be paid to Mr. Hogan or his designated beneficiary of approximately $57,000
per year over a period of 20 years (fixed as of October 31, 2001, the effective
date of his resignation, based on six years of service); and annual benefits to
be paid to Mr. Ramsey or his designated beneficiary of up to $50,000 per year
over a period of 20 years. Such benefits are effective in each case upon: (i)
attainment of 66 years of age (65 in the case of Mr. Ramsey) or his death or
disability prior to such time if he is actively employed by First National Bank
at the time; (ii) termination of his employment by First National Bank without
"cause" (as defined in the Agreements); and (iii) termination or constructive
termination of his employment by First National Bank after the occurrence of a
"change in control" of First National Bank (as defined in the Agreements).
Management Continuity Agreements. On July 20, 2000, First National Bank
entered into Management Continuity Agreements with Jim D. Black, Charles R. Key
and Anthony J. Clifford. Each Agreement provides for the payment of a severance
benefit to the officer upon termination of employment after a "change in
control" of First National Bank (as defined in the Agreements). The purpose of
the Agreements is to maintain sound and vital management of First National Bank,
16
thereby protecting its best interests, in the event of a proposed change in
control of First National Bank. The amount of the benefit payable under each
Agreement is two times the "base annual salary" of the relevant officer for the
twelve month period immediately preceding a "change in control." In addition, if
any payment of the benefit constitutes an "excess parachute payment" that is
subject to an excise tax imposed by the Internal Revenue Code of 1986, as
amended, First National Bank will increase the amounts payable to the extent
necessary to place the officer in the same after-tax position that would have
existed had no excise tax been imposed. First National Bank can elect to pay
benefits in a lump sum payment or in monthly installments over a period not
exceeding two years following the date of termination of employment. Each
Management Continuity Agreement continues for two years from July 20, 2000, and
is subject to automatic one year renewals thereafter, unless First National Bank
gives written notice of non-renewal.
Deferred Compensation Plan. First National Bank has established a
Deferred Compensation Plan. Participation in the Plan is open to all officers of
First National Bank with the title Vice President or higher. The Deferred
Compensation Plan consists of a Deferred Compensation Trust, dated November 1,
1997, with The Mechanics Bank serving as Trustee, and individual Deferred
Compensation Agreements between First National Bank and each of the
participating officers. The funds contributed to the Plan are those of the
individual participant, and represent income earned and/or bonuses granted as an
employee of First National Bank. No funds of First National Bank may be
contributed to the Plan. Under the Plan, a participant may elect to defer the
receipt of a portion of his or her cash salary and/or bonus. First National Bank
maintains a record of the deferred compensation for each participant, and at the
time of distribution, is obligated to effect the distribution as well as
collection of any and all taxes due at such time. Each participant may elect
whether he or she will receive distribution of his or her entire account,
subject to applicable tax withholding requirements, upon reaching a specified
age, or upon passage of at least five years or upon termination of employment.
In order to discharge its obligations in respect of such deferred compensation,
First National Bank makes contributions of the deferred compensation specified
by the participants to the Deferred Compensation Trust, which are then invested
in accordance with the instructions of the participants. The principal and any
earnings in the Trust are held separate and apart from other funds of First
National Bank and are used for the discharge of First National Bank's
obligations to the participants. See "Board Compensation Committee Report"
above.
1997 Stock Option Plan. On September 30, 1997, the board of directors
adopted the First National Bank of Northern California 1997 Stock Option Plan
(the "Option Plan"), which provides for the grant of incentive stock options and
nonstatutory stock options to eligible officers and directors of First National
Bank. The Option Plan was approved by the shareholders of First National Bank at
the 1997 Annual Meeting, held on October 15, 1997. The Option Plan was adopted
in order to attract and retain the best available personnel for First National
Bank and to provide additional incentive to the officers and directors of First
National Bank. The aggregate number of shares available for issuance pursuant to
the exercise of options granted under the Option Plan may not exceed 200,000
shares of Common Stock. As of April 1, 2002, a total of 99,841 shares were
reserved for options previously granted and currently outstanding under the
17
Option Plan, including options for an aggregate of 35,857 shares of Common Stock
(as adjusted for the Bank's 1998, 1999, 2000 and 2001 stock dividends) which
have been granted to the six officers of the Bank identified in the table of
Executive Compensation above. Also, see "Board Compensation Committee Report"
above. All such options granted and currently outstanding are incentive stock
options, vesting at the rate of 20 percent per year over the period of 5 years
from date of grant and are exercisable for a period of 10 years from the grant
date. Directors Angelot, McGraw, Vannucci, Watson and Modina have been granted
non-statutory stock options for an aggregate of 4,063 shares of Common Stock (as
adjusted for the Bank's 1998, 1999, 2000 and 2001 stock dividends) which were
fully vested on the dates of grant and are exercisable (at a price of $32.00 per
share for options granted in 1998; at a price of $28.00 per share for options
granted in 1999; at a price of $25.13 per share for options granted in 2000; and
at a price of $25.05 per share for options granted in 2001) over a period of 10
years from the grant dates. Upon consummation of any plan of reorganization,
merger or consolidation of the Bank with one or more other banks or corporations
as a result of which the Bank is not the surviving entity, or upon the sale of
all or substantially all the assets of the Bank to another bank or corporation,
then all outstanding unexercised options shall become immediately exercisable in
accordance with the terms of the Option Plan and the Option Plan shall
terminate.
Profit Sharing Plan
On August 26, 1969, the Bank established The First National Bank Profit
Sharing and 401(k) Plan (the "Plan") under provisions which allow the Bank to
make a contribution on behalf of each eligible employee. Each year, the Board of
Directors of the Bank decides whether to make a profit sharing contribution to
the Plan, and the amount of that contribution. The profit sharing contribution
to the Plan for 2001 was $524,250. Each participant in the Plan who is employed
on the last day of the Plan year receives a share of that contribution based on
the amount of his or her compensation relative to the compensation of all other
participants. The accounts of the participants vest according to a schedule of
years of service with the Bank. The Mechanics Bank acts as Trustee for the
Profit Sharing Plan Trust, and the Trustee invests all the assets of the Plan in
four common trust funds maintained by the Trustee. On January 1, 1998, the Plan
was amended to allow any eligible employee to make voluntary contributions to
the Plan, and to direct the investment of such voluntary contributions from a
menu of available options. Both the profit sharing provisions and the employee
contribution provisions are elements of the 401(k) Plan. The profit sharing
element of the Plan is funded by the Bank. The employee contribution element of
the Plan is funded by the employee.
Comparison of First National Bank Shareholder Return
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on First National Bank common stock with the
cumulative total return of the SNL Securities Index of Pink Banks (asset size of
$100 million to $500 million) and the Russell 2000 Index as of the end of each
of First National Bank's last five fiscal years.
The graph assumes that $100.00 was invested on December 31, 1996 in
First National Bank common stock and each index, and that all dividends were
reinvested. Returns have been adjusted for any stock dividends and stock splits
18
declared by First National Bank. Shareholder returns over the indicated period
should not be considered indicative of future shareholder returns. Effective
March 15, 2002, First National Bank became the wholly owned subsidiary of FNB
Bancorp and the common stock of FNB Bancorp is currently quoted on the OTC
Bulletin Board under the symbol "FNBG.OB."
--------------------------------------------------------------------------------
First National Bank of Northern California
--------------------------------------------------------------------------------
Total Return Performance
[CHART GRAPHIC OMITTED]
Period Ending
---------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
----------------------------------------------------------------------------------------------------
First National Bank of Northern CA 100.00 141.74 170.68 149.59 160.84 169.29
Russell 2000 100.00 122.36 119.25 144.60 140.23 143.71
SNL $100M-$500M Pink Bank Index* 100.00 139.11 163.94 149.30 126.20 145.38
*SNL $100M-$500M Pink Bank Index consists of Pink Sheet- and OTC Bulletin
Board-traded banks with between $100M and $500M in total assets.
SNL Financial LC
(C) 2002
Note: The foregoing graph was prepared by SNL Financial L.C. ("SNL") at the
request of the Company for purposes of this Proxy Statement. All information
provided by SNL in the graph has been gathered by SNL from sources believed by
SNL to be reliable and true and accurate in both form and substance.
19
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and any
persons who own more than 10% of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, Directors and any greater
than 10% shareholders are required by the SEC to furnish the Company with copies
of all Section 16(a) forms they file.
On March 15, 2002, the Company registered its common stock under
Section 12(g) of the Exchange Act, at which time the Company's directors,
officers and any person who owns more than 10% of such common stock became
subject to Section 16(a) of the Exchange Act. Neither the Company nor the Bank
had equity securities registered under Section 12 of the Exchange Act during the
fiscal year ended December 31, 2001.
Certain Relationships and Related Transactions
Through its banking subsidiary, First National Bank, the Company has
had, and expects in the future to have banking transactions, including loans and
other extensions of credit, in the ordinary course of its business with many of
the Company's directors and officers and their associates, including
transactions with corporations of which such persons are directors, officers or
controlling shareholders, on substantially the same terms (including interest
rates and collateral) as those prevailing for comparable transactions with
others. Management believes that in 2001 such transactions comprising loans did
not involve more than the normal risk of collectibility or present other
unfavorable features. Loans to executive officers of First National Bank are
subject to limitations as to amount and purposes prescribed in part by the
Federal Reserve Act, as amended, and the regulations of the Office of the
Comptroller of the Currency.
AUDIT COMMITTEE REPORT
The Audit Committee consists of the following members of the Company's
Board of Directors: Edward J. Watson (Chairman), Neil J. Vannucci and Daniel J.
Modena. Each of the members of the Committee is independent as defined under the
National Association of Securities Dealers' listing standards. The Committee
operates under a written charter adopted by the Board of Directors which is
included in this Proxy Statement as Appendix A.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted accounting principles and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes.
20
The Committee's responsibilities include assisting the Board of
Directors in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing, internal control and financial reporting
practices of the Company. The Committee's primary responsibilities are to: (1)
serve as an independent and objective party to monitor the Company's financial
reporting process and internal control system; (2) review and evaluate the audit
efforts of the Company's independent accountants and the outsource internal
audit firm; (3) evaluate the Company's quarterly financial performance as well
as its compliance with laws and regulations; (4) oversee management's
establishment and enforcement of financial policies and business practices; and
(5) facilitate communication among the independent accountants, financial and
senior management, counsel, the outsource internal audit firm and the Board of
Directors.
The Committee has reviewed and discussed the audited financial
statements of First National Bank for the fiscal year ended December 31, 2001,
with the Company's management. The Committee has discussed with Grant Thornton
LLP, the Company's independent public accountants, the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Committee has also received the written disclosures and the
letter from Grant Thornton LLP required by Independence Standards Board Standard
No. 1 (Independence Discussion with Audit Committees) and the Committee has
discussed the independence of Grant Thornton LLP with that firm.
Based on the Committee's review and discussions noted above, the
Committee recommended to the Board of Directors that the Bank's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, for the filing with the Securities and
Exchange Commission.
Submitted by the Audit Committee:
Edward J. Watson, Chairman
Neil J. Vannucci
Daniel J. Modena
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Grant Thornton, LLP ("Grant Thornton"),
certified public accountants, served First National Bank as its independent
public accountants for the fiscal year 2001. The Audit Committee of the Bank's
Board of Directors approved each professional service rendered by Grant Thornton
during the fiscal year 2001 and considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.
21
First National Bank became a wholly owned subsidiary of the Company,
effective March 15, 2002, and due to the shortness of time, the Board of
Directors of the Company has not, as of the date of this Proxy Statement,
selected a firm to serve as the independent public accountants for the Company
for the fiscal year 2002. After such selection, the Board of Directors of the
Company may appoint other, new independent public accountants at any time during
the fiscal year if the Board of Directors believes that such action would be in
the best interests of the Company and its shareholders. Grant Thornton has
served as the Bank's independent public accountants since 1985. It is
anticipated that a representative of Grant Thornton will be present at the
Annual Meeting with the opportunity to make a statement if the representative
desires to do so and will be available to answer appropriate questions.
Audit Fees
----------
The aggregate fees billed by Grant Thornton to the Company and the Bank
for professional services rendered for the Bank's annual financial statements
for the fiscal year ended December 31, 2001, were $100,294.
All Other Fees
--------------
The aggregate fees billed by Grant Thornton to the Company and the Bank
for services rendered to the Bank, other than the services described above under
"Audit Fees," for the fiscal year ended December 31, 2001, were $50,654.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders will be held on May 21,
2003. The deadline for shareholders to submit proposals for inclusion in the
Proxy Statement and form of proxy for the 2003 Annual Meeting of Shareholders is
January 31, 2003. All proposals should be submitted by Certified Mail, Return
Receipt Requested, to the Secretary, FNB Bancorp, 975 El Camino Real, South San
Francisco, California 94080.
South San Francisco, California
April 19, 2002
22
APPENDIX A
----------
AUDIT COMMITTEE CHARTER
-----------------------
This Audit Committee Charter has been adopted by the Board of Directors
of FNB Bancorp (the "Company"). The Audit Committee of the Board shall review
and reassess this charter annually and recommend any proposed changes to the
Board for approval.
Membership
The audit committee will be composed of not less than three (3) members
of the board of directors. They will be selected by the board of directors,
taking into account prior experience in matters to be considered by the
committee, probable availability at times required for consideration of such
matters, and their individual independence and objectivity.
The committee's membership will meet the requirements of the audit
committee policy of Nasdaq. Accordingly, all of the members will be directors
independent of management and free from relationships that, in the opinion of
the board of directors, would interfere with the exercise of independent
judgment as a committee member.
No officers or employees of the Company or its subsidiaries will serve
on the committee. A former officer of the Company or any of its subsidiaries may
serve on the committee (even though the former officer may by receiving pension
or deferred compensation payments from the Company) if, in the opinion of the
board of directors, the former officer will exercise independent judgment and
will significantly assist the committee to function. However, a majority of the
committee will be directors who were not formerly officers of the Company or any
of its subsidiaries.
When considering relationships that might affect independence,
including possible affiliate status, the board of directors will give
appropriate consideration, in addition to its audit committee policy, to
guidelines issued by Nasdaq, which are provided to assist boards of directors in
observing the spirit of Nasdaq policy.
The board of directors shall appoint one member of the committee as
chairman. The chairman shall be responsible for leadership of the committee,
including scheduling and presiding over meetings, preparing agendas and making
regular reports to the board of directors. The chairman will also maintain
regular liaison with the Chief Executive Officer, the Chief Financial Officer,
the lead independent audit partner and the outsource internal audit firm.
23
Actions of the Committee
The committee's activities will include the following actions:
o Oversight of the financial statements and relations with the
independent auditors.
o Instruct the independent auditors that the board of directors is the
client in its capacity as the shareholders' representative.
o Expect the independent auditors to meet with the board of directors at
least annually so the board has a basis on which to recommend the
independent auditors' appointment to the shareholders or to ratify its
selection of the independent auditors.
o Expect financial management and the independent auditors to analyze
significant financial report issues and practices on a timely basis.
o Expect financial management and the independent auditors to discuss
with the audit committee:
o Qualitative judgments about whether current or proposed accounting
principles and disclosures are appropriate, not just acceptable;
and
o Aggressiveness or conservatism of accounting principles and
financial estimates.
o Expect the independent auditors to provide the audit committee with:
o Independent judgments about the appropriateness of the Company's
current or proposed accounting principles and whether current or
proposed financial disclosures are clear;
o Views on whether the accounting principles chosen by management are
conservative, moderate, or aggressive as they relate to income,
asset, and liability recognition, and whether these accounting
principles are commonly used;
o Reasons why accounting principles and disclosure practices used for
new transactions or events are appropriate;
o Reasons for accepting or questioning significant estimates made by
management; and
o Views on how selected accounting principles and disclosure
practices affect shareholder and public attitudes about the
Company.
Actions taken on the board's behalf that require board notification but not
board approval:
o Review and approve the scope of the Company's audit and that of its
subsidiaries as recommended by the independent auditors and the
President;
o Review and approve the scope of the Company's annual profit and pension
trust audits;
o Answer questions raised by shareholders during an annual shareholders'
meeting on matters relating to the committee's activities if asked to
do so by the board of directors' chairperson; and
o Ask the President to have the outsource internal audit firm study a
particular area of interest or concern to the audit committee.
24
Matters requiring the committee's review and study before making a
recommendation for the board of directors' action:
o Appointment of the independent auditors;
o Implementation of major accounting policy changes;
o SEC registration statements to be signed by the board of directors; and
o The auditors' reports and financial statements prior to publication in
the annual report.
Matters requiring the committee's review and study before providing summary
information to the board of directors:
o Accounting policy changes proposed or adopted by organizations such as
the Financial Accounting Standards Board (FASB), the Securities and
Exchange Commission (SEC), and the American Institute of Certified
Public Accountants (AICPA), or by comparable bodies outside the United
States;
o The independent auditors' assessment of the strengths and weaknesses of
the Company's financial staff, systems, controls, and other factors
that might be relevant to the integrity of the financial statements;
o Quarterly financial statement review before publication;
o Administration of the Company's "conflict of interest" policies as may
be set by the board of directors from time to time;
o The performance of management and operating personnel under the
Company's code of ethics as may be adopted by the board of directors
from time to time;
o Gaps and exposures in insurance programs;
o Reports about the Company or its subsidiaries submitted by agencies of
governments in countries in which the Company or it subsidiaries may
operate; and
o Periodic SEC filings and the adequacy of programs and procedures to
assure compliance with SEC rules and regulations and the rules and
regulations of Nasdaq.
25
PROXY
-----
FNB BANCORP
Solicited by the Board of Directors
for the Annual Meeting of Shareholders
on May 15, 2002
The undersigned holder of Common Stock acknowledges receipt of a copy
of the Notice of Annual Meeting of Shareholders of FNB BANCORP and the
accompanying Proxy Statement dated April 19, 2002, and revoking any Proxy
heretofore given, hereby constitutes and appoints Thomas C. McGraw, Neil J.
Vannucci and Edward J. Watson, and each of them, with full power of
substitution, as attorneys and proxies to appear and vote all of the shares of
Common Stock of FNB BANCORP, a California corporation, outstanding in the name
of the undersigned which the undersigned could vote if personally present and
acting at the Annual Meeting of Shareholders of FNB BANCORP, to be held at the
Basque Cultural Center, 599 Railroad Avenue, South San Francisco, California, on
Wednesday, May 15, 2002, at 7:30 p.m. or at any adjournments thereof, upon the
following items as set forth in the Notice of Meeting and Proxy Statement and to
vote according to their discretion on all matters which may be properly
presented for action at the meeting or any adjournments thereof. The above-named
proxy holders are hereby granted discretionary authority to cumulate votes
represented by the shares covered by this Proxy in the election of directors.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE
FOLLOWING ITEMS:
1. To elect as directors the eight (8) nominees set forth below:
[ ] FOR all nominees listed below (except as marked to the
contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:
Michael R. Wyman Daniel J. Modena
Thomas C. McGraw Lisa Angelot
Neil J. Vannucci Jim D. Black
Edward J. Watson Anthony J. Clifford
2. In their discretion, to transact such other business as may
properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS. THE PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED
"FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS.
SHAREHOLDER(S) No. of Common Shares
______________________
______________________
Date: _______________, 2002
Please date and sign exactly as your
name(s) appears. When signing as
attorney, executor, administrator,
trustee, or guardian, please give full
title. If more than one trustee, all
should sign. All joint owners should
sign. WHETHER OR NOT YOU PLAN TO ATTEND
THIS MEETING, PLEASE SIGN AND RETURN THIS
PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
I/we do [ ] or do not [ ] expect to
attend this meeting.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.