SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material
[_] Confidential, For Use of the Commission Only Pursuant to SS.240.14a-12
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
SIERRA BANCORP
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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[NAME AND LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 22, 2002
TO THE SHAREHOLDERS OF SIERRA BANCORP:
NOTICE IS HEREBY GIVEN that pursuant to its Bylaws and the call of its
Board of Directors, the Annual Meeting of Shareholders (the "Meeting") of Sierra
Bancorp (the "Company") will be held at the Main Office of Bank of the Sierra,
90 North Main Street, Porterville, California 93257 on Wednesday, May 22, 2002
at 7:30 p.m., for the purpose of considering and voting upon the following
matters.
1. Election of Directors. To elect the following Class I
directors to serve until the 2004 annual meeting of shareholders and until their
successors are elected and qualified:
Morris A. Tharp Robert L. Fields
Gregory A. Childress James C. Holly
Howard H. Smith
2. Transacting such other business as may properly come before
the Meeting and at any and all adjournments thereof.
The Bylaws of the Company provide for the nomination of
directors in the following manner:
"Nominations for election of members of the Board of
Directors may be made by the Board of Directors or by any
shareholder of any outstanding class of voting stock of the
Corporation entitled to vote for the election of directors.
Notice of intention to make any nominations, other than by the
Board of Directors, shall be made in writing and shall be
received by the President of the Corporation no more than 60
days prior to any meeting of shareholders called for the
election of directors, and no more than 10 days after the date
the notice of such meeting is sent to shareholders pursuant to
Section 2.2(d) of these bylaws; provided, however, that if
only 10 days' notice of the meeting is given to shareholders,
such notice of intention to nominate shall be received by the
President of the Corporation not later than the time fixed in
the notice of the meeting for the opening of the meeting. Such
notification shall contain the following information to the
extent known to the notifying shareholder: (A) the name and
address of each proposed nominee; (B) the principal occupation
of each proposed nominee; (C) the number of shares of voting
stock of the Corporation owned by each proposed nominee; (D)
the name and residence address of the notifying shareholder;
and (E) the number of shares of voting stock of the
Corporation owned by the notifying shareholder. Nominations
not made in accordance herewith may be disregarded by the
chairman of the meeting, and the inspectors of election shall
then disregard all votes cast for each such nominee."
Only those shareholders of record at the close of business on March 26,
2002 will be entitled to notice of and to vote at the Meeting.
DATED: April 26, 2002 By Order of the Board of Directors
Robert H. Tienken
Secretary
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
IN ORDER TO FACILITATE THE PROVIDING OF ADEQUATE ACCOMMODATIONS, PLEASE INDICATE
ON THE PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
2
SIERRA BANCORP
86 NORTH MAIN STREET
PORTERVILLE, CALIFORNIA 93257
(559) 782-4900
________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 22, 2002
________________
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders (the "Meeting") of Sierra
Bancorp (the "Company") to be held at the Main Office of Bank of the Sierra (the
"Bank"), 90 North Main Street, Porterville, California 93257, at 7:30 p.m., on
Wednesday, May 22, 2002, and at any and all adjournments thereof. The
solicitation of the Proxy accompanying this Proxy Statement is made by the Board
of Directors of the Company and the costs of such solicitation will be borne by
the Company.
It is expected that this Proxy Statement and accompanying Notice will be
mailed to shareholders on approximately April 26, 2002.
The matters to be considered and voted upon at the Meeting will be:
1. Election of Directors. To elect five Class I directors to serve until
the 2004 Annual Meeting of Shareholders and until their successors are
elected and have qualified.
2. To transact such other business as may properly come before the
Meeting and at any and all adjournments thereof.
Revocability of Proxies
A Proxy for use at the Meeting is enclosed. Any shareholder who executes
and delivers such Proxy has the right to revoke it at any time before it is
exercised by filing with the Secretary of the Company an instrument revoking it
or a duly executed proxy bearing a later date, or by attending the Meeting and
voting in person. Subject to such revocation, all shares represented by a
properly executed Proxy received in time for the Meeting will be voted by the
proxy holders whose names are set forth in the accompanying Proxy (the "Proxy
Holders") in accordance with the instructions on the Proxy. If no instruction is
specified with respect to a matter to be acted upon, the shares represented by
the Proxy will be voted in favor of the election of the nominees for directors
set forth herein and, if any other business is properly presented at the
Meeting, in accordance with the recommendations of the Board of Directors.
Solicitation of Proxies
The Company will bear the cost of this solicitation, including the expense
of preparing, assembling, printing and mailing this Proxy Statement and the
material used in this solicitation of proxies. The proxies will be solicited
principally through the mails, but directors, officers and regular employees of
the Company may solicit proxies personally or by telephone. Arrangements will be
made with brokerage firms and other custodians, nominees and fiduciaries to
forward these proxy solicitation materials to shareholders whose stock in the
Company is held of record by such entities, and the Company will reimburse such
brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith. In
addition, the Company may pay for and utilize the services of individuals or
companies it does not regularly employ in connection with this solicitation of
proxies, if management determines it advisable.
VOTING SECURITIES
There were issued and outstanding 9,230,280 shares of the Company's common
stock on March 26, 2002, which has been set as the Record Date for the purpose
of determining the shareholders entitled to notice of and to vote at the
Meeting. The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares of the common stock is necessary to
constitute a quorum at the Meeting for the transaction of business. Abstentions
and broker non-votes are each included in the determination of the number of
shares present for determining a quorum but are not counted on any matters
brought before the Meeting.
Each holder of common stock will be entitled to one vote, in person or by
proxy, for each share of common stock standing in his or her name on the books
of the Company as of March 26, 2002 for the annual meeting on any matter
submitted to the vote of the shareholders. An abstention or broker non-vote will
have the same effect as a vote against a director nominee and against any other
matters submitted for shareholder approval. Shareholders of the Company do not
have cumulative voting rights in connection with the election of directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Management knows of no person who owns beneficially more than 5% of the
outstanding Common Stock of the Company, except for Morris A. Tharp, Gregory A.
Childress, Robert L. Fields, James C. Holly and Howard H. Smith, each of whom is
a nominee for election to the Board of Directors (see "ELECTION OF DIRECTORS").
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors shall be not
fewer than six (6) nor more than eleven (11) until changed by a bylaw amendment
duly adopted by the vote or written consent of the Company's shareholders. The
Bylaws further provide that the exact number of directors shall be fixed from
time to time, within the foregoing range, by a bylaw or amendment thereof or by
a resolution duly adopted by the vote or written consent of the Company's
shareholders or by the Company's Board of Directors. The exact number of
directors is presently fixed at nine (9).
Pursuant to the terms of the Company's Articles of Incorporation, the Board
of Directors is divided into two classes, designated Classes I and II. The
directors serve staggered two-year terms, so that directors of only one class
are elected at each Annual Meeting of Shareholders. At the Meeting, shareholders
will be asked to elect the following five (5) Class I directors whose terms
expire this year, for an additional term of two (2) years:
Morris A. Tharp Robert L. Fields
Gregory A. Childress James C. Holly
Howard H. Smith
Since shareholders do not have cumulative voting rights in the election of
directors, the affirmative vote of a majority of the votes cast is required for
the election of directors. In the event that any of the nominees should be
unable to serve as a director, it is intended that the Proxy will be voted for
the election of such substitute nominee, if any, as shall be designated by the
Board of Directors. Management has no reason to believe that any nominee will
become unavailable.
2
The following table sets forth certain information as of March 26,
2002, with respect to (i) each of the persons to be nominated by the Board
of Directors for election as directors, (ii) each of the Company's
executive officers, and (iii) the directors and executive officers of the
Company as a group:
Common Stock
Beneficially Owned on
March 26, 2002/1/
--------------------------------------------------
Director Percentage
Names and Offices Principal Occupation Since/Term Number Vested Option of Shares
Held with Company for Past Five Years Age to Expire of Shares/1/ Shares/2/ Outstanding/3/
------------------------ ----------------------- --- ---------- ------------ ------------- --------------
Morris A. Tharp/4/ President and Owner, 62 2000/ 414,480 100,000 5.51%
Chairman of the Board E.M. Tharp, Inc. (Truck 2004
Sales and Repair) (1977)/5/
Albert L. Berra Orthodontist/Rancher 61 2000/ 267,884 100,000 3.94%
Director 2003
(1977)/5/
Gregory A. Childress/4/ Rancher 45 2000/ 1,595,548/6/ 100,000 18.17%
Director 2004
(1994)/5/
Robert L. Fields/4/ Investor 74 2000/ 620,357 100,000 7.72%
Director (formerly Owner, 2004
Bob Fields Jewelers) (1982)/5/
James C. Holly/4/ President and Chief 61 2000/ 448,776 100,000 5.88%
President, Chief Executive Officer, 2004
Executive Officer Bank of the Sierra (1977)/5/
and Director
Vincent L. Jurkovich President, Porterville 74 2000/ 136,950 100,000 2.54%
Director Concrete Pipe, Inc. 2003
(1977)/5/
____________________________
/1/ Except as otherwise noted, may include shares held by such person's
spouse (except where legally separated) and minor children, and by any
other relative of such person who has the same home; shares held in "street
name" for the benefit of such person; shares held by a family or retirement
trust as to which such person is a trustee and primary beneficiary with
sole voting and investment power (or shared power with a spouse); or shares
held in an Individual Retirement Account or pension plan as to which such
person (and/or his spouse) is the sole beneficiary and has pass-through
voting rights and investment power.
/2/ Consists of shares which the applicable individual or group has the
right to acquire upon the exercise of stock options which are vested or
will vest within 60 days of March 26, 2002 pursuant to the Company's Stock
Option Plan. (See "Compensation of Directors" and "Stock Options.")
/3/ The percentages are based on the total number of shares of the
Company's Common Stock outstanding, plus the number of option shares which
the applicable individual or group has the right to acquire upon the
exercise of stock options which are vested or will vest within 60 days of
March 26, 2002 pursuant to the Company's Stock Option Plan. (See
"Compensation of Directors" and "Stock Options.")
/4/ Mr. Tharp's address is 15243 Road 192, Porterville, California 93257;
Mr. Childress' address is 12012 Road 200, Porterville, California 93257;
Mr. Fields' address is 200 North Main Street, Porterville, California
93257; Mr. Holly's address is 86 North Main Street, Porterville, California
93257; and Mr. Smith's address is 421 East Martin Avenue, Porterville,
California 93257.
/5/ Year first elected or appointed a director of the Bank.
/6/ Includes 5,280 shares owned by Childress, Bates, Childress, Inc.
("CBC"), a corporation of which Mr. Childress is President and a 331/3%
shareholder; 41,000 shares owned by the CBC Defined Benefit Pension Plan,
of which Mr. Childress is a trustee and a beneficiary; and 684,992 shares
owned by CPG Ranch, a partnership of which Mr. Chrildress is a partner; as
to all of which shares Mr. Childress has shared voting and investment
power.
(Table and footnotes continued on following page.)
3
Common Stock
Beneficially Owned on
March 26, 2002/1/
---------------------------------------------
Director Percentage
Names and Offices Principal Operation Since/Term Number Vested Option of Shares
Held with Company for Past Five Years Age to expire of Shares/1/ Shares/2/ Outstanding/3/
----------------- -------------------- --- ---------- ------------ ------------ -----------
Howard H. Smith/4/ Retired/Investor 90 2000/ 400,000 100,000 5.36%
Director (formerly Owner and 2004
Chief Executive (1977)/5/
Officer, Smith's
Complete Market)
Robert H. Tienken Retired (formerly 82 2000/ 187,628 100,000 3.08%
Corporate Secretary Realtor/Farmer) 2003
and Director (1977)/5/
Gordon T. Woods Owner, Gordon T. Woods 65 2000/ 1,386/7/ 100,000 1.09%
Director Construction 2003
(1977)/5/
Kenneth E. Goodwin Executive Vice 59 n/a 152,004 60,000 2.28%
Executive Vice President President and Chief
and Chief Operating Officer Operating Officer,
Bank of the Sierra
Kenneth R. Taylor Senior Vice President 42 n/a 0 0 0.00%
Senior Vice President and and Chief Financial
Chief Financial Officer Officer,
Bank of the Sierra/8/
Charlie C. Glenn Senior Vice President 63 n/a 1,922 15,000 0.18%
Senior Vice President and and Chief Credit
Chief Credit Officer Officer,
Bank of the Sierra/8/
Directors and Executive 4,226,935 975,000 50.97%
Officers as a Group (12
persons)
Committees of the Board of Directors
The Company has, among others, a standing Audit/CRA Committee, of which
directors Berra (Chairman), Childress, Fields, Jurkovich and Tienken are
members. During the fiscal year ended December 31, 2001, the Audit/CRA Committee
held a total of twelve (12) meetings. The purpose of the Audit/CRA Committee,
with respect to its audit duties, is to meet with the outside auditors of the
Company in order to fulfill the legal and technical requirements necessary to
adequately protect the directors, shareholders, employees and depositors of the
Company.
________________________
(Certain footnotes appear on previous page.)
/7/ Does not include 134,598 shares held by Filinco, Ltd., as to which Mr.
Woods' spouse and daughters have sole voting and investment power and as to
which Mr. Woods disclaims beneficial ownership.
/8/ Mr. Taylor was appointed Senior Vice President/Chief Financial Officer on
October 9, 2001. Previously, he served as Senior Vice President/Chief Financial
Officer for Tokai Bank of California in Los Angeles ("Tokai") from June, 2000 to
July, 2001; and in various other capacities at Tokai from 1986 through June,
2000.
4
It is also the responsibility of the Audit/CRA Committee to recommend
to the Board of Directors the selection of independent accountants and to make
certain that the independent accountants have the necessary freedom and
independence to freely examine all bank records. Each February the committee
reviews the risk management assessment of the Company's branches, credit centers
and operating units and assigns priorities for the year to have independent
reviews conducted by loan, operational, information systems and compliance teams
hired by the committee. The committee meets with such independent review
consultants on an annual basis and approves the contractual basis of each
engagement letter and arrangement under consideration. Further, as part of its
regular monthly meeting schedule, the committee meets on a quarterly basis to
review the Company's Form 10-Q with the independent accountants prior to such
Form being filed with the SEC. Also, the committee meets with the accounting
audit partner in charge of the engagement who presents the audited consolidated
financial reports to the committee upon completion of the annual engagement. The
committee receives and reviews management letters and all reports of external
independent firms which have been contracted to perform agreed upon procedures
for the benefit of the Company and the Committee. Additionally, the committee
receives and reviews all Reports of Examination prepared by regulators regarding
safety and soundness, compliance, or other examinations performed by such
agencies. As part of its responsibilities, the committee also receives, reviews
and approves, any and all management initiated responses to engagements
conducted by independent consultant firms or regulatory agencies, prior to their
dispersal to the appropriate reviewing agent. The Audit Committee Charter
(attached as Appendix "A") requires that the Audit Committee be comprised of at
least three directors, each of whom must be independent.
While the Board has no standing "compensation" committee, it has a
Human Resources Committee of which directors Berra (Chairman), Fields, Holly,
Smith and Woods are members. The primary function of the Human Resources
Committee, which met two (2) times during 2001, is to approve the employment of
executive officers and recommend the compensation for all executive officers.
Additionally, the Human Resources Committee recommends salary ranges for graded
personnel and approves personnel policies recommended by senior officers of the
Company.
The Company has no standing nominating committee; however, the
procedures for nominating directors, other than by the Board of Directors
itself, are set forth in the Company's Bylaws and in the Notice of Annual
Meeting of Shareholders.
During the fiscal year ended December 31, 2001, the Board of Directors
of the Company held a total of thirteen (13) meetings. Each director attended at
least 75% of the aggregate of (a) the total number of such meetings and (b) the
total number of meetings held by all committees of the Board on which such
director served during 2001.
Report of the Audit Committee
The Audit/CRA Committee has reviewed and discussed with management the
Company's audited consolidated financial statements as of and for the year ended
December 31, 2001. The committee has discussed with the Company's independent
auditors, which are responsible for expressing an opinion on the conformity of
the Company's audited consolidated financial statements with generally accepted
accounting principles, the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, including their judgments as to the
quality of the Company's financial reporting. The committee has received from
the independent auditors written disclosures and a letter as required by the
Independence Standards Board, Standard No. 1, as amended, and discussed with the
independent auditors the firm's independence from management and the Company. In
considering the independence of the Company's independent auditors, the
committee took into consideration the amount and nature of the fees paid the
firm for non-audit services, as described on the following page.
In reliance on the review and discussions described above, the
committee recommends to the Board of Directors that the year-end audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001 for filing with the SEC.
5
Submitted by:
Albert L. Berra, Chairman
Gregory A. Childress Vincent L. Jurkovich
Robert L. Fields Robert H. Tienken
Change in Company's Principal Accountant
At its Board of Directors meeting on June 14, 2001, the Board of
Directors of the Company/1/ terminated the services of McGladrey & Pullen, LLP
("M&P"). At the same meeting, the Board of Directors selected the accounting
firm of Perry-Smith & Co. LLP ("Perry-Smith") as independent auditors for the
remainder of the Company's 2001 fiscal year. The determination to replace M&P
was recommended by the audit committee and approved by the full Board of
Directors of the Company.
M&P audited the consolidated financial statements for the Company1 for
the years ended December 31, 2000 and 1999. M&P's report on the financial
statements for those two fiscal years of the Company did not contain an adverse
opinion or disclaimer of opinion, nor were such reports qualified or modified as
to uncertainty, audit scope or accounting principles.
During the two fiscal years ended December 31, 2000 and 1999 and the
subsequent interim period January 1, 2001 through June 14, 2001, there were no
disagreements between M&P and the Bank or the Company on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
M&P, would have caused it to make reference to the subject matter of the
disagreements in connection with its reports.
The Company and the Bank each filed a Report on Form 8-K concerning the
change in accountants on June 19, 2001. The Company requested that M&P review
the disclosure in the Reports on Form 8-K, and M&P was given the opportunity to
furnish the Company with a letter addressed to the Securities and Exchange
Commission (or the FDIC, in the case of the Bank) containing any new
information, clarification of the Company's expression of its views, or the
respects in which it did not agree with the statements made by the Company or
the Bank in the Reports on Form 8-K. Such letters were filed as exhibits to the
Reports on Form 8-K.
Audit-related Fees
Audit Fees. Aggregate fees billed by Perry-Smith for professional
services rendered in connection with the audit of the Company's annual
consolidated financial statements for the fiscal year ended December 31, 2001
and for the required review of the Company's consolidated financial statements
included in its Form 10-Q's and Form 10-K for that same year totaled
approximately $85,000. In addition, the Company paid $12,900 to its former
accountants, M&P, for their review of the financial statements included in the
Company's Form 10-Q's during 2001.
Financial Information System Design and Implementation Fees. No fees
were paid to Perry-Smith for financial information system design and
implementation services rendered for the 2001 fiscal year.
All Other Fees. Approximately $40,400 was paid to Perry-Smith for all
other services rendered for the 2001 fiscal year. These services consisted of
$8,500 for an audit of the Company's employee retirement plan; $14,400 for tax
related services; $6,900 for facilitation of the directors' strategic planning
meeting; and $10,600 for miscellaneous services including assistance with the
Bank's Report of Management on internal controls over financial reporting.
_____________________
/1/ As used throughout this Proxy Statement, the term "Company" includes, where
appropriate, the Company and/or the Bank. Inasmuch as the Company did not
acquire the outstanding shares of the Bank until August, 2001, the consolidated
financial statements for 1999 and 2000 were for the Bank rather than the
Company.
6
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during and with respect to the period from August 10,
2001 (effective date of the holding company reorganization) to December 31,
2001, and a review of Forms F-7 and F-8 and amendments thereto furnished to the
Bank during and with respect to the period from January 1 to August 10, 2001, no
director, executive officer or beneficial owner of 10% or more of the Bank or
the Company's common stock failed to file, on a timely basis, reports required
during or with respect to 2001 by Section 16(a) of the Securities Exchange Act
of 1934, as amended, except that all of the Company's executive officers and
directors who were granted stock options in 2001 inadvertently failed to file a
Form 5 with respect to such options on a timely basis; and Kenneth Taylor, Chief
Financial Officer, inadvertently failed to file his initial Form 3 ownership
report on a timely basis.
Executive Compensation
The following table sets forth certain summary compensation information
with respect to the Chief Executive Officer and the only other executive
officers of the Company as of December 31, 2001 whose total salary and bonus for
the fiscal year ended December 31, 2001, exceeded $100,000 on an annualized
basis (the "Named Executive Officers"):
Summary Compensation Table
Long Term
Compensation
------------
Stock Options
Annual Compensation Granted
---------------------------------------- (Number of All Other
Name and Principal Position Year Salary/1/ Bonus Other Shares) Compensation
--------------------------- ---- -------- ----- ----- ------------ ------------
James C. Holly 2001 $175,000 $175,000 $18,100/2/ 50,000 $14,364/3/
President and 2000 130,000 116,675 15,100/2/ 0 8,203/3/
Chief Executive Officer 1999 130,000 130,000 15,075/2/ 0 6,756/3/
Kenneth E. Goodwin 2001 $145,000 $ 58,000 0 30,000 $ 6,053/4/
Executive Vice President 2000 105,000 33,172 0 0 7,813/4/
and Chief Operating Officer 1999 105,000 42,000 0 0 7,139/4/
Kenneth R. Taylor 2001 $125,000/5/ $ 37,500/5/ 0 25,000 0
Senior Vice President
and Chief Financial Officer
Charlie C. Glenn 2001 $125,000 $ 37,500 0 25,000 $ 5,541/6/
Senior Vice President 2000 82,000 19,429 0 0 5,388/6/
and Chief Credit Officer 1999 82,000 22,500 0 0 4,702/6/
/1/Salary figures include amounts deferred pursuant to the Company's 401(k)
Plan. The 401(k) Plan permits all participants to contribute up to 15% of
their annual salary on a pre-tax basis (subject to a statutory maximum),
which contributions vest immediately when made. Employer contributions are
made in varying amounts at the discretion of the Board of Directors, and
become vested over a period of five (5) years at the rate of 20% per year.
/2/Consists entirely of directors' fees.
/3/Includes employer contributions to Mr. Holly's account pursuant to the
401(k) Plan in the amounts of $7,140, $7,605 and $6,158 for 2001, 2000 and
1999, respectively; term life insurance premiums in the amount of $598 per
year; and $6,626 in cash in lieu of vacation paid in 2001.
/4/Represents employer contributions to Mr. Goodwin's account pursuant to
the 401(k) Plan in the amounts of $5,565, $7,325 and $6,651 for 2001, 2000
and 1999, respectively; and term life insurance premiums in the amount of
$488 per year.
/5/Represents annualized salary and bonus compensation. Actual salary and
bonus amounts paid from October 9, 2001 (commencement of employment)
through December 31, 2001 were $28,305 and $9,375, respectively.
/6/Consists entirely of employer contributions to Mr. Glenn's account
pursuant to the 401(k) Plan.
7
Stock Options
The Company's Stock Option Plan, intended to advance the interests of
the Company and the Bank by encouraging stock ownership on the part of key
employees, was adopted by the written consent of the Bank's shareholders
effective July 21, 1998. As part of the holding company reorganization effective
in August, 2001, the Company assumed the Plan from the Bank, so that the Plan
now covers authorized but unissued shares of the Company's common stock. The
stock option plan provides for the issuance of both "incentive" and
"non-qualified" stock options to full-time salaried officers and employees, and
of "non-qualified" stock options to non-employee directors. All options are
granted at an exercise price of not less than 100% of the fair market value of
the stock on the date of grant.16 Each option expires not later than ten (10)
years from the date the option was granted. Options are exercisable in
installments as provided in individual stock option agreements; provided,
however, that if an optionee fails to exercise his or her rights under the
options within the year such rights arise, the optionee may accumulate them and
exercise the same at any time thereafter during the term of the option. In
addition, in the event of a "Terminating Event," i.e., a merger or consolidation
of the Company as a result of which the Company will not be the surviving
corporation, a sale of substantially all of the Company's assets, or a change in
ownership of at least 25% of the Company's stock, all outstanding options under
the stock option plan shall become exercisable in full (subject to certain
notification requirements), and shall terminate if not exercised within a
specified period of time, unless provision is made in connection with the
Terminating Event for assumption of such options, or substitution of new options
covering stock of a successor corporation. As of December 31, 2001, the Company
had options outstanding to purchase a total of 1,991,220 shares of its Common
Stock under the stock option plan, with an average exercise price of $7.66 per
share with respect to all such options. As of that same date, the fair market
value of the Company's Common Stock was $7.00 per share.
The following table furnishes information regarding stock options
granted to the Named Executive Officers during 2001:
Percent of Total Options
Number of Granted to Employees Exercise or Expiration Fair
Name Options Granted During Period Base Price Date Value/2/
---- ---------------- ------------------------ ----------- ---------- --------
James C. Holly 50,000/3/ 7.17% $6.43 10/11/11 $101,685
Kenneth E. Goodwin 30,000/4/ 4.30% 6.43 10/11/11 61,011
Kenneth R. Taylor 25,000/5/ 3.59% 6.43 10/11/11 50,842
Charlie C. Glenn 25,000/5/ 3.59% 6.43 10/11/11 50,842
________________________
/1/ Exercise price per share is equivalent to market price per share on the
date of grant, as determined by the Board of Directors of the Company,
based upon trades in the Company's Common Stock known to the Company and
opening and closing prices quoted on the Nasdaq National Market concerning
the Company's Common Stock.
/2/ The fair value of options was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: dividend yield of 2.57%, expected volatility of 26.45%,
risk-free interest rate of 4.96% and expected life of six years.
/3/ These options were exercisable in full on the date of grant.
/4/ These options were exercisable as to 15,500 shares on the date of
grant; and as to the remaining 14,500 shares on January 15, 2002.
/5/ These options will become exercisable at the rate of 20% per year
commencing one (1) year from the date of grant.
8
No stock options were exercised by the Named Executive Officers during
2001. The following information is furnished with respect to stock options held
by the Named Executive Officers at December 31, 2001:
Number of Unexercised Options at Value of Unexercised in-the-Money
December 31, 2001 Options at December 31, 2001/1/
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
James C. Holly 94,000 6,000 $28,500 $ 0
Kenneth E. Goodwin 45,000 15,000 8,550 8,550
Kenneth R. Taylor 0 25,000 0 14,250
Charlie C. Glenn 15,000 35,000 0 14,250
Compensation of Directors
The directors are not paid any directors fees by the Company, but the
directors receive directors fees from the Bank for services they provide as
directors of the Bank. Non-employee directors of the Bank received $600 per
meeting for their attendance at Board meetings in 2001and $400 per meeting for
committee meetings attended. The President received $600 per meeting for
attendance at Board of Directors meetings, but did not receive any fees for
attending committee meetings. In addition, all directors received an annual
retainer of $10,900.
During 2001 all of the non-employee directors were granted stock
options to purchase 50,000 shares each of common stock, at exercise prices of
$6.43 per share, all expiring in October, 2011. All of such options were
exercisable in full on the date of grant. None of the Company's non-employee
directors exercised any stock options during 2001. As of December 31, 2001, each
non-employee director held the outstanding stock options to purchase 50,000
shares of Common Stock described above, plus previously granted options, also
exercisable in full, to purchase an additional 50,000 shares, with expiration
dates in 2008, at exercise prices of $9.00 per share. As of December 31, 2001,
the fair market value of the Company's Common Stock was $7.00 per share.
Information concerning stock options held by Mr. Holly, who is also a Named
Executive Officer, is set forth above under "Stock Options."
Performance Graph/2/
The graph on the following page compares the yearly percentage change
in the cumulative total shareholders' return on the Company's stock with the
cumulative total return of (i) the Nasdaq market index; (ii) all banks and bank
holding companies listed on Nasdaq; and (iii) an index comprised of banks and
bank holding companies located throughout the United States with total assets of
between $500 million and $1 billion. The latter two indexes were compiled by SNL
Securities LP of Charlottesville, Virginia. The Company reasonably believes that
the members of the third group listed above constitute peer issuers for the
period from January 1, 1997 through December 31, 2001. The graph assumes an
initial investment of $100 and reinvestment of dividends. The graph is not
necessarily indicative of future price performance.
___________________________
/1/ Represents the excess of the aggregate fair market value over the aggregate
exercise price of the shares at December 31, 2001.
/2/ Inasmuch as the Company did not acquire the outstanding shares of the Bank
until August, 2001, the information contained in the Performance Graph for part
of 2001 and for prior years is for the Bank's stock. As of the effective date of
the holding company reorganization (August 10, 2001), each outstanding share of
common stock of the Bank was converted into one outstanding share of common
stock of the Company.
9
[GRAPH]
Period Ending
--------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
---------------------------------------------------------------------------------------------
Sierra Bancorp 100.00 159.24 93.22 110.35 85.37 88.32
NASDAQ - Total US* 100.00 122.48 172.68 320.89 193.01 153.15
NASDAQ Bank Index* 100.00 167.41 166.33 159.89 182.38 197.44
SNL $500M-$1B Bank Index 100.00 162.56 159.83 147.95 141.62 183.73
Board of Directors' Compensation Committee Report
The Human Resources Committee of the Board is responsible for
overseeing the various compensation programs of the Company. It approves
compensation objectives and policy for all employees and sets compensation
levels for the Company's Executive Officers. During 2001, the Human Resources
Committee was comprised of four independent outside directors, namely, directors
Berra (Chairman), Fields, Smith and Woods, plus director Holly (President and
Chief Executive Officer).
The objectives of the Committee are three-fold; (i) to ensure that
compensation and benefits are at levels that enable the Company to attract and
retain the high quality employees it needs; (ii) to align the interests of the
Company's officer corps with those of its shareholders through at risk
compensation programs; and (iii) to provide rewards that are closely linked to
Company-wide team and individual performance goals which are measured in terms
of the Company's profitability, growth and asset quality.
10
Executive officer base salaries are evaluated annually by the Human
Resources Committee and are adjusted pursuant to such evaluation when
appropriate. Executive Officer bonuses are awarded annually and are determined
with reference to Company-wide team and individual performance. Base salaries
are determined on a wide range of measures which require comparisons with
salaries and compensation programs at banks or bank holding companies comparable
in terms of asset size, capitalization and performance. In order to evaluate the
Company's competitive position in the industry, the Human Resources Committee
reviews and analyzes the compensation packages, including base salary levels
offered by community banks, specifically reviewing the annual survey prepared by
the California Department of Financial Institutions, and that prepared for the
California Bankers Association by Deloitte and Touche, C.P.A.'s. The Company's
practice, however, is not to provide employment contracts to any executive
officers as all employees of the Company are employed at will.
Salaries are fixed for the year for Executive Officers; however,
bonuses are dependent on the achievement by the Company of annual profitability
goals and specific performance goals. In 2001, the Board implemented a
three-year incentive plan for Company officers. The President is specifically
excluded from this plan to enable him to objectively administer the plan; his
bonus is determined by a separate plan related solely to Company profitability
and base salary. All other officers are eligible for incentive bonuses based
upon the attainment of certain corporate performance goals related to both
pre-tax earnings and after-tax return on equity, thereby reflecting favorably
upon enhanced shareholder return. Under this plan, a formula was developed which
created a pool from which incentive bonuses would be allocated to eligible
officers. The earnings targets, as well as the corporate performance goals, are
based on confidential information and are competitively sensitive to the Company
as they are derived from the Company's internal projections and business plan.
The distribution of the pool is based on the level of the participant, with the
eligible Executive Officers receiving up to a maximum of 40% of base salary and
less senior officers receiving lesser percentages. The amounts paid to the Named
Executive Officers pursuant to these incentive plans are listed in the Summary
Compensation Table above (see "Executive Compensation").
In order to (i) provide an additional incentive for the Company's
officers and employees to contribute to the Company's success, (ii) encourage
their increased stock ownership in the Company, and (iii) enable the Company to
be competitive in the industry with respect to compensation packages, the Board
of Directors adopted a Stock Option Plan (the "Option Plan") in 1998. Details
concerning the Option Plan and options granted thereunder to the Named Executive
Officers are set forth above under "Stock Options."
Human Resources Committee:
Albert L. Berra, Chairman
Robert L. Fields Howard H. Smith
James C. Holly Gordon T. Woods
Compensation Committee Interlocks
The Human Resources Committee, which serves the functions of a
compensation committee, is composed of four of the Company's outside directors,
plus Mr. Holly, President and Chief Executive Officer. While Mr. Holly serves on
this committee, he does not vote with respect to his own compensation.
Transactions with Directors and Executive Officers
Certain of the executive officers, directors and principal shareholders
of the Company and the companies with which they are associated have been
customers of, and have had banking transactions with, the Company in the
ordinary course of the Company business since January 1, 2001, and the Company
expects to continue to have such banking transactions in the future. All loans
and commitments to lend included in such transactions have been made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons of similar
creditworthiness, and in the opinion of Management, have not involved more than
the normal risk of repayment or presented any other unfavorable features.
11
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Perry-Smith & Co., LLP
("Perry-Smith") as independent public accountants for the Company for the fiscal
year ending December 31, 2002. Perry-Smith audited the Company's financial
statements for the year ended December 31, 2001, and replaced McGladrey &
Pullen, LLP as independent accountants in June 2001. (See "Change in Company's
Principal Accountant" above.) It is anticipated that a representative or
representatives of Perry-Smith will be present at the Meeting and will be
available to respond to appropriate questions. All professional services
rendered by Perry-Smith concerning the fiscal year ended December 31, 2001 were
furnished at customary rates and terms.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present
proposals at shareholder meetings. Any such proposal concerning the Company's
2003 Annual Meeting of Shareholders must be submitted by a shareholder prior to
December 27, 2002 in order to qualify for inclusion in the proxy statement
relating to such meeting. The submission by a shareholder of a proposal does not
guarantee that it will be included in the proxy statement. Shareholder proposals
are subject to certain regulations and requirements under the federal securities
laws.
The persons named as proxies for the 2003 Annual Meeting of
Shareholders will have discretionary authority to vote on any shareholder
proposal which is not included in the Company's proxy materials for the meeting,
unless the Company receives notice of the proposal by March 13, 2003. If proper
notice is received by that date, the proxy holders will not have discretionary
voting authority except as provided in federal regulations governing shareholder
proposals.
OTHER MATTERS
Management does not know of any matters to be presented to the Meeting
other than those set forth above. However, if other matters properly come before
the Meeting, it is the intention of the Proxy Holders to vote said Proxy in
accordance with the recommendations of the Board of Directors, and authority to
do so is included in the Proxy.
DATED: April 26, 2002 SIERRA BANCORP
James C. Holly
President
A COPY OF THE COMPANY'S 2001 ANNUAL REPORT ON FORM 10-K INCLUDING FINANCIAL
STATEMENTS (BUT WITHOUT EXHIBITS) FILED WITH THE SEC IS INCLUDED AS PART OF THE
COMPANY'S ANNUAL REPORT TO SHAREHOLDERS WHICH IS BEING SENT TO SHAREHOLDERS
TOGETHER WITH THIS PROXY STATEMENT. IF A SHAREHOLDER DESIRES COPIES OF THE
EXHIBITS TO THE REPORT, THEY WILL BE PROVIDED UPON PAYMENT BY THE SHAREHOLDER OF
THE COST OF FURNISHING THE EXHIBITS TOGETHER WITH A WRITTEN REQUEST TO KENNETH
R. TAYLOR, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF THE COMPANY, AT
86 NORTH MAIN STREET, PORTERVILLE, CALIFORNIA 93257.
12
SIERRA BANCORP and BANK OF THE SIERRA
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE PURPOSE
The Audit Committee of Sierra Bancorp and Bank of the Sierra (jointly, the
"Company") is appointed by the Board of Directors to assist the Board in
fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:
. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
. Monitor the independence and performance of the Company's independent
auditors, the external audit function and the loan review function.
. Provide an avenue of communication among the independent auditors,
management, the external audit function, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense, special
legal, accounting or other consultants or experts it deems necessary in the
performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the National
Association of Securities Dealers ("NASD"). The Audit Committee shall be
comprised of three or more independent directors as determined by the
Board, each of whom shall be independent non-executive directors, free from
any relationship that would interfere with the exercise of his or her
independent judgement. All members of the Audit Committee shall have a
basic understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one member of the
Audit Committee shall have accounting or related financial management
expertise.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Audit
Committee may designate a Chair by majority vote of the Audit Committee
membership.
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee should meet
privately in executive session at least annually with management, the
independent auditors, and as a committee to discuss any matters that the
Audit Committee or each of these groups believe should be discussed. In
addition, the Audit Committee, or at least its Chair, should communicate
with management and the independent auditors quarterly to review the
Company's financial statements and significant findings based upon the
auditors' limited review procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
A. Review Procedures
1. Review and reassess the adequacy of this charter at least
annually. Submit the charter to the Board of Directors for
approval annually and have the document published at least every
three years in accordance with SEC regulations.
APPENDIX "A"
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and the independent auditors of significant issues
regarding accounting principles, practices, and judgements.
3. In consultation with management and the independent auditors,
consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control,
and report such exposures. Review significant findings prepared
by the independent auditors together with management's responses,
if any.
4. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of
earnings and/or the Company's quarterly financial reports prior
to filing or distribution. Discuss any significant changes to the
Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with AICPA
SAS 61 (see item B.5). The Chair may represent the entire Audit
Committee for purposes of this review.
5. Review the budget, plan, changes in plan, activities and
organizational structure, as needed.
6. On at least an annual basis, review with the Company's counsel,
any legal matters that could have a significant impact on the
Company's financial statements, compliance with applicable laws
and regulations, and inquiries received from regulators or
governmental agencies, if any.
B. Independent Auditors
1. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall
review the independence and performance of the auditors and
annually recommend to the Board of Directors the appointment of
the independent auditors or approve any discharge of auditors
when circumstances warrant.
2. Approve the fees and other significant compensation to be paid to
the independent auditors.
3. On an annual basis, the Committee should review and discuss with
the independent auditors all significant relationships they may
have with the Company that could impair the auditors'
independence, and the Audit Committee shall receive the written
disclosures and the letters from independent auditors required by
Independence Standards Board Standard No. 1 (Independence
Discussion with Audit Committee), as such may be modified or
supplemented.
4. Review the independent auditors' plan and discuss scope,
staffing, locations, reliance upon management, and external audit
and general audit approach.
5. Prior to releasing the year-end earnings, discuss the results of
the audit with the independent auditors. Discuss certain matters
required to be communicated to audit committees in accordance
with AICPA SAS 61.
6. Consider the independent auditors' judgements about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
A-2
C. Other Audit Committee Responsibilities
1. Annually prepare a report to shareholders as required by the SEC.
This report should be sent to shareholders together with the
Company's annual proxy statement.
2. Review significant reports prepared by the Company's internal
and/or external loan review personnel together with management's
response and follow-up to these reports.
3. Perform any other activities consistent with this Charter, the
Company's bylaws, and governing law, as the Committee or the
Board deems necessary or appropriate.
4. Maintain minutes of meetings and periodically report to the Board
of Directors on significant results of the forgoing activities
A-3
REVOCABLE PROXY
SIERRA BANCORP
ANNUAL MEETING OF SHAREHOLDERS - May 22, 2002
The undersigned shareholder(s) of Sierra Bancorp (the "Company") hereby
nominates, constitutes and appoints James C. Holly, Morris A. Tharp, and Robert
H. Tienken, and each of them, the attorney, agent and proxy of the undersigned,
with full power of substitution, to vote all stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at the Main Office of Bank of the Sierra, 90 North Main
Street, Porterville, California 93257 on Wednesday, May 22, 2002 at 7:30 p.m.,
and at any adjournment or adjournments thereof, as fully and with the same force
and effect as the undersigned might or could do if personally present thereat,
as follows:
1. Election of Directors. Authority to elect the following five (5) Class I
directors to serve until the 2004 annual meeting of shareholders and until their
successors are elected and qualified: Morris A. Tharp, Robert L. Fields, Gregory
A. Childress, James C. Holly and Howard H. Smith.
[_] AUTHORITY GIVEN [_] WITHHOLD AUTHORITY
To vote for all nominees To vote for all nominees.
(except as indicated to the
contrary below).
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S),
PLEASE WRITE THE INDIVIDUAL'S OR INDIVIDUALS' NAME(S) IN THE SPACE BELOW)
_____________________________
2. To transact such other business as may properly come before the Meeting
and at any adjournment or adjournments thereof. Management at present knows of
no other business to be presented by or on behalf of the Company or its
Management at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" FOR
PROPOSAL 1. THE PROXY SHALL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
GIVEN. IF NO INSTRUCTIONS ARE GIVEN, THE PROXY CONFERS AUTHORITY TO AND
SHALL BE VOTED "AUTHORITY GIVEN" FOR PROPOSAL 1.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE ON REVERSE SIDE.
PLEASE SIGN AND DATE BELOW.
____________________________ Dated: ___________________________
(Number of Shares)
__________________________________ __________________________________
(Please Print Name) (Signature of Shareholder)
__________________________________ __________________________________
(Please Print Name) (Signature of Shareholder)
(Please date this Proxy and sign
your name as it appears on your
stock certificates. Executors,
administrators, trustees, etc.,
should give their full titles. All
joint owners should sign.)
I (We) do ___ do not ___ expect to
attend the Meeting.
Number of Persons ________________
1