AMERICAN RIVER HOLDINGS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 20, 2004
TO THE SHAREHOLDERS OF AMERICAN RIVER HOLDINGS:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of Directors, the
Annual Meeting of Shareholders (the "Meeting") of American River Holdings (the
"Company") will be held on Thursday, May 20, 2004 at 5:30 p.m., at the Capitol
Mall Branch Office, located at 520 Capitol Mall, Suite 100, Sacramento,
California 95814 for the purpose of considering and voting upon the following
matters:
1. Election of Directors. To elect the following nominees of the Board of
Directors as Class I Directors to serve until the 2007 Annual Meeting
of Shareholders and until their successors are elected and qualified:
Amador S. Bustos Robert J. Fox William A. Robotham
2. Amendment of Articles of Incorporation. To approve the amendment of
the Company's Articles of Incorporation to change the name of the
Company to American River Bankshares.
3. Ratification of Independent Public Accountants. To ratify the
appointment of Perry-Smith LLP as independent public accountants for
the 2004 fiscal year.
4. Other Business. To transact such other business as may properly come
before the Meeting and any postponements or adjournments thereof.
Article III, Section 3.3 of the bylaws of the Company provides for the
nomination of directors in the following manner:
"Nominations for election of members of the board may be made by the
board or by any holder of any outstanding class of capital stock of the
corporation entitled to vote for the election of directors. Notice of intention
to make any nominations (other than for persons named in the notice of the
meeting called for the election of directors) shall be made in writing and shall
be delivered or mailed to the president of the corporation by the later of: (i)
the close of business twenty-one (21) days prior to any meeting of shareholders
called for the election of directors; or (ii) ten (10) days after the date of
mailing of notice of the meeting to shareholders. Such notification shall
contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the corporation owned by each proposed nominee; (d) the name
and residence address of the notifying shareholder; (e) the number of shares of
capital stock of the corporation owned by the notifying shareholder; (f) the
number of shares of capital stock of any bank, bank holding company, savings and
loan association, or other depository institution owned beneficially by the
nominee or by the notifying shareholder and the identities and locations of any
such institutions; and (g) whether the proposed nominee has ever been convicted
of or pleaded nolo contendere to any criminal offense involving dishonesty or
breach of trust, filed a petition in bankruptcy or been adjudged bankrupt. The
notification shall be signed by the nominating shareholder and by each nominee,
and shall be accompanied by a written consent to be named as a nominee for
election as a director from each proposed nominee. Nominations not made in
accordance with these procedures shall be disregarded by the chairperson of the
meeting, and upon his or her instructions, the inspectors of election shall
disregard all votes cast for each such nominee. The foregoing requirements do
not apply to the nomination of a person to replace a proposed nominee who has
become unable to serve as a director between the last day for giving notice in
accordance with this paragraph and the date of election of directors if the
procedure called for in this paragraph was followed with respect to the
nomination of the proposed nominee."
The Board of Directors has fixed the close of business on April 8, 2004 as the
record date for determination of shareholders entitled to notice of, and to vote
at, the Meeting and any postponements or adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ STEPHEN H. WAKS, ESQ.
----------------------------------
Stephen H. Waks, Esq.
Corporate Secretary
Dated: April 27, 2004
Please sign and return the enclosed Proxy Card as promptly as possible and
indicate if you will attend the meeting in person.
AMERICAN RIVER HOLDINGS
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 20, 2004
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
Proxies for use at the 2004 Annual Meeting of Shareholders (the "Meeting") of
American River Holdings (the "Company") to be held on Thursday, May 20, 2004 at
5:30 p.m., at the Capitol Mall Branch Office, located at 520 Capitol Mall, Suite
100, Sacramento, California 95814 and at any and all postponements or
adjournments thereof. Only shareholders of record on April 8, 2004 (the "Record
Date") will be entitled to notice of the Meeting and to vote at the Meeting. At
the close of business on the Record Date, the Company had outstanding and
entitled to be voted 4,212,981 shares of the Company's no par value common
stock.
It is expected that this Proxy Statement and the accompanying Notice, Proxy
Card, and Annual Report to Shareholders will be mailed on or about April 27,
2004 to shareholders eligible to receive notice of, and to vote at, the Meeting.
Revocability of Proxies
A Proxy Card for voting your shares at the Meeting is enclosed. Any
shareholder who executes and delivers such Proxy has the right to and may revoke
it at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking it or a duly executed Proxy bearing a later date.
In addition, a Proxy will be revoked if the shareholder executing such Proxy is
in attendance at the Meeting and such shareholder votes in person. Subject to
such revocation, all shares represented by a properly executed Proxy received in
time for the Meeting will be voted by the Proxyholders in accordance with the
instructions specified on the Proxy Card.
Unless otherwise directed in the accompanying Proxy Card, the shares
represented by your executed Proxy will be voted "FOR" the nominees for election
of directors named herein, "FOR" the ratification of Perry-Smith LLP as
independent public accountants, and "FOR" the amendment to the Articles of
Incorporation. If any other business is properly presented at the Meeting, the
Proxy will be voted in accordance with the recommendations of management.
Solicitation of Proxies
This solicitation of Proxies is being made by the Board of Directors of the
Company. The expenses of preparing, assembling, printing, and mailing this Proxy
Statement and the materials used in this solicitation of Proxies will be borne
by the Company. It is contemplated that Proxies will be solicited principally
through the use of the mail, but directors, officers, and employees of the
Company may solicit Proxies personally or by telephone, without receiving
special compensation. The Company will reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding these Proxy materials to shareholders whose stock in the Company is
held of record by such entities. In addition, the Company may use the services
of individuals or companies it does not regularly employ in connection with this
solicitation of Proxies, if management determines it is advisable.
Voting Securities
On any matter submitted to the vote of the shareholders, each holder of
common stock will be entitled to one vote, in person or by Proxy, for each share
of common stock he or she held of record on the books of the Company as of the
Record Date.
A majority of the shares entitled to vote, represented either in person or
by a properly executed Proxy, will constitute a quorum at the Meeting. If, by
the time scheduled for the Meeting, a quorum of shareholders of the Company is
not present or if a quorum is present but sufficient votes in favor of any of
the proposals have not been received, the Meeting may be held for purposes of
voting on those proposals for which sufficient votes have been received, and the
persons named as proxyholders may propose one or more adjournments of the
1
Meeting to permit further solicitation of Proxies with respect to any of the
proposals as to which sufficient votes have not been received.
Votes cast by Proxy or in person at the Meeting will be counted by the
Inspectors of Election for the Meeting. The Inspectors will treat abstentions
and "broker non-votes" (shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power under applicable rules of the stock exchange or other self-regulatory
organization of which the broker or nominee is a member) as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions and "broker non-votes" will not be counted as shares voted
for purposes of determining the outcome of any matter as may properly come
before the Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, April 8, 2004, no individual known to the Company
owned more than five percent (5%) of the outstanding shares of its common stock,
except as described below.
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Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class (1)
-------------------------------------------------------------------------------------------------------------
Common Stock Keefe Managers, LLC 262,418 6.2%
375 Park Avenue, 23rd Floor
New York, New York 10152
-------------------------------------------------------------------------------------------------------------
(1) Percentage calculated based on 4,212,981 shares outstanding as of the
Record Date.
The following table sets forth information as of April 8, 2004, concerning
the equity ownership of the Company's directors, Class I Director nominees and
the executive officers named in the Summary Compensation Table, and directors,
Class I Director nominees and executive officers as a group. Unless otherwise
indicated in the notes to the table, each director and executive officer listed
below possesses sole voting power and sole investment power for the shares of
the Company's common stock listed below. All of the shares shown in the
following table are owned both of record and beneficially except as indicated in
the notes to the table. The table does not include former Directors, M. Edgar
Deas, who resigned on December 31, 2003; Marjorie G. Taylor, who resigned
(including her position as Corporate Secretary) on December 31, 2003; Larry L.
Wasem, who resigned on December 31, 2003; and William L. Young, who resigned
(including his position as President and Chief Executive Officer of American
River Bank) on January 2, 2004. The Company has only one class of shares
outstanding, common stock. Management is not aware of any arrangements which
may, at a subsequent date, result in a change of control of the Company.
Name and Address (1) of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (2)
----------------------- -------------------- ----------
Amador S. Bustos 4,150 0.1%
Raymond F. Byrne 277 (5) 0.0%
Mitchell A. Derenzo 43,482 (6) 1.0%
Charles D. Fite 102,959 (7) 2.4%
Robert J. Fox (3) 10,000 0.2%
Sam J. Gallina 118,612 (8) 2.8%
Wayne C. Matthews, M.D. (4) 102,107 (9) 2.4%
William A. Robotham 58,930 (10) 1.4%
David T. Taber 114,911 (11) 2.7%
Roger J. Taylor, D.D.S. 97,894 (12) 2.3%
Douglas E. Tow 26,254 (13) 0.6%
Stephen H. Waks 48,761 (14) 1.2%
Michael A. Ziegler 2,474 (15) 0.1%
All directors, director nominees, and 730,811 (16) 16.5%
executive officers as a group (13 persons)
(1) The address for all persons listed is c/o American River Holdings, 1545
River Park Drive, Suite 107, California, 95815.
(2) Includes shares of Common Stock subject to stock options exercisable within
60 days of the record date.
(3) Mr. Fox is a director nominee selected by the Nominating Committee to
replace retiring Director, Doctor Matthews.
(4) Doctor Matthews will resign his position upon expiration of his term
effective May 20, 2004.
(5) Includes 187 shares which Mr. Byrne has the right to acquire upon the
exercise of stock options within 60 days of the record date.
2
(6) Includes 26,296 shares which Mr. Derenzo has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(7) Includes 30,732 shares which Mr. Fite has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(8) Includes 582 shares which Mr. Gallina has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(9) Includes 582 shares which Doctor Matthews has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(10) Includes 25,899 shares which Mr. Robotham has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(11) Includes 56,732 shares which Mr. Taber has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(12) Includes 30,732 shares which Doctor Taylor has the right to acquire upon
the exercise of stock options within 60 days of the record date.
(13) Includes 19,248 shares which Mr. Tow has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(14) Includes 18,673 shares which Mr. Waks has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(15) Includes 145 shares which Mr. Ziegler has the right to acquire upon the
exercise of stock options within 60 days of the record date.
(16) Includes 209,808 stock options outstanding to purchase common stock
exercisable within 60 days of the record date.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors of the Company
shall not be less than eight (8) nor more than fifteen (15) until changed by an
amendment to the Articles of Incorporation or by a Bylaw amending Section 3.2
duly adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote. The exact number of directors shall be
fixed from time to time, within the range specified in the Articles of
Incorporation (i) by a resolution duly adopted by the Board; (ii) by a Bylaw or
amendment thereof duly adopted by the vote of a majority of the shares entitled
to vote represented at a duly held meeting at which a quorum is present, or by
the written consent of the holders of a majority of the outstanding shares
entitled to vote; or (iii) by approval of the shareholders. The exact number of
directors was fixed at nine (9) at a regular meeting of the Board of Directors
held January 21, 2004.
The Company has three groups of directors, each of whom is elected for a
three-year term. Class I directors are nominated for election this year. Class
II directors and Class III directors were elected to serve until 2005 and 2006,
respectively, at the Annual Meetings of Shareholders on May 23, 2002, and May
22, 2003, respectively. If any nominee should become unable or unwilling to
serve as a director, the proxies will be voted for such substitute nominee as
shall be designated by the Board of Directors. The Board of Directors presently
has no knowledge that any of the nominees will be unable or unwilling to serve.
The following persons are the nominees of the Board of Directors for
election as Class I directors to serve for a three-year term until the 2007
Annual Meeting of Shareholders and until their successors are duly elected and
qualified.
Nominees for Election as Class I Directors:
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Name and Title Year First Elected
Other than Director Principal Occupation During the Last Five Years Age Director
-----------------------------------------------------------------------------------------------------------------------------
Amador S. Bustos Chairman and Chief Executive Officer, Bustos Media 53 2004
Corporation (BMC) in Sacramento.
Robert J. Fox Partner, S.J. Gallina & Co., LLP, Certified Public Accountants 59 --
in Sacramento.
William A. Robotham Executive Partner, Pisenti & Brinker LLP, Certified Public 62 2004
Accountants in Santa Rosa.
3
Class II Directors, Continuing in Office:
-----------------------------------------------------------------------------------------------------------------------------
Name and Title Year First Elected
Other than Director Principal Occupation During the Last Five Years Age Director
-----------------------------------------------------------------------------------------------------------------------------
Sam J. Gallina Retired Partner, S.J. Gallina & Co., Certified Public 71 1986
Accountants in Sacramento.
Roger J. Taylor, D.D.S. Dentist (Retired) and National Executive Director Impax Health 58 1983
Vice-Chairman Prime and a real estate developer in Sacramento.
Michael A. Ziegler President and Chief Executive Officer of PRIDE Industries in 59 2002
Sacramento.
Class III Directors, Continuing in Office:
-----------------------------------------------------------------------------------------------------------------------------
Name and Title Year First Elected
Other than Director Principal Occupation During the Last Five Years Age Director
-----------------------------------------------------------------------------------------------------------------------------
Charles D. Fite President, Fite Development Company in Sacramento. 46 1993
Chairman
David T. Taber President and CEO, American River Holdings. 43 1989
President and CEO
Stephen H. Waks Attorney-at-Law; owner of Stephen H. Waks, Inc. in Sacramento. 56 1986
Corporate Secretary
None of the directors, nominees for Class I director listed above or
executive officers(1) listed on page 7, were selected pursuant to any
arrangement or understanding other than with the directors and executive
officers of the Company acting within their capacities as such. There are no
family relationships between any two or more of the directors, nominees for
Class I director or executive officers. No director, nominee for Class I
director or executive officer serves as a director of (i) any company which has
a class of securities registered under Section 12, or which is subject to the
periodic reporting requirements of Section 15(d) of the Securities Exchange Act
of 1934, or (ii) any company registered as an investment company under the
Investment Company Act of 1940.
None of the nominees were subject to any legal proceedings involving
violations of securities laws, convictions in a criminal proceeding (excluding
traffic violations or minor offenses) or had a petition under bankruptcy laws
filed against themselves or an affiliate within the last five years.
Committees of the Board of Directors
The Audit Committee, whose members are Amador S. Bustos, Sam J. Gallina
(Chairman), Wayne C. Matthews, M.D., and William A. Robotham, oversees the
Company's and its subsidiaries' independent public accountants, analyzes the
results of internal and regulatory examinations and monitors the financial and
accounting organization and reporting. Director Gallina has been designated by
the Board of Directors as an "audit committee financial expert" as defined under
rules promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002. The Audit Committee met four (4) times in 2003. See
the Audit Committee Report on page 18 for additional information regarding the
functions of the Audit Committee. As reported on page 2 of this Proxy Statement,
Doctor Matthews is retiring on May 20, 2004. It is anticipated that Director
Nominee Fox will replace Doctor Matthews on the Audit Committee. Each member of
the Audit Committee is "independent," as that term is defined under rules
promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002, and by applicable Nasdaq Stock Market Rules. In
addition, each other member of the Audit Committee is "financially literate" as
defined under applicable Nasdaq Stock Market Rules.
--------------------------------------------------------------------------------
(1) As used in this Proxy Statement, the term "executive officer" of the
Company includes the President and CEO of American River Holdings, the
Executive Vice President and Chief Financial Officer of American River
Holdings, the President of American River Bank, the Senior Vice President
and Credit Administrator of American River Holdings, and the President of
North Coast Bank.
4
During 2003, the full Board of Directors performed the functions of the
Nominating Committee including considering appropriate candidates for election
as directors. In January 2004, the Board of Directors delegated this function to
a new committee named the Nominating Committee. The Nominating Committee, whose
members are Charles D. Fite, Sam J. Gallina, Roger J. Taylor, D.D.S., and
Stephen H. Waks, has the responsibility to assist the Board of Directors by (a)
establishing criteria for candidates and identifying, evaluating, and
recommending candidates, including candidates proposed by shareholders, for
election to the Board of Directors, and (b) periodically reviewing and making
recommendations on the composition of the Board of Directors. All members of the
Nominating Committee are "independent," as that term is defined under rules
promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002, and applicable Nasdaq Stock Market Rules. Candidates
are selected in accordance with a Nominating Charter. The Nominating Charter
includes a policy for consideration of candidates proposed by shareholders. Any
recommendations by shareholders will be evaluated by the Board of Directors in
the same manner as any other recommendation and in each case in accordance with
the Nominating Charter. Shareholders that desire to recommend candidates for
consideration by the Company's Board of Directors should mail or deliver written
recommendations to the Company addressed as follows: Board of Directors,
American River Holdings, 1545 River Park Drive, Suite 107 Sacramento, California
95815. Each recommendation should include biographical information indicating
the background and experience of the candidate that qualifies the candidate for
consideration as a director for evaluation by the Board of Directors. In
addition to minimum standards of independence for non-employee directors and
financial literacy, the Board of Directors considers various other criteria
including the candidate's experience and expertise, financial resources, ability
to devote the time and effort necessary to fulfill the responsibilities of a
director and involvement in community activities in the market areas served by
the Company and its subsidiaries that may enhance the reputation of the Company
and its subsidiaries. The Company and its subsidiaries operate in a highly
regulated industry and are subject to the supervision, regulation and periodic
examination by state and federal banking regulatory authorities including the
Board of Governors of the Federal Reserve System, California Commissioner of
Financial Institutions and Federal Deposit Insurance Corporation. Directors of
the Company and its subsidiaries are subject to certain rules and regulations
and potential liabilities not otherwise applicable to directors of non-banking
organizations. Consequently, evaluation of candidates by the Company's Board of
Directors may include more extensive inquiries into personal background
information including confirmation of the accuracy and completeness of
background information by (a) requiring candidates to complete questionnaires to
elicit information of the type required to be disclosed by the Company in
reports filed with the Securities and Exchange Commission, Nasdaq, or such state
and federal banking regulatory authorities, (b) conducting background
investigations by qualified independent organizations experienced in conducting
criminal and civil investigatory reviews, and (c) such other personal and
financial reviews and analyses as the Board of Directors may deem appropriate in
connection with the consideration of candidates. Shareholders who wish to
nominate a candidate for election to the Company's Board of Directors, as
opposed to recommending a potential nominee for consideration by the Board of
Directors, are required to comply with the advance notice and any other
requirements of the Company's bylaws, applicable laws and regulations. The Board
of Directors may elect to use third parties in the future to identify or
evaluate candidates for consideration by the Board of Directors. The Nominating
Charter adopted by the Board of Directors is attached to this Proxy Statement as
Appendix A. The Nominating Committee recommended the slate of Nominees for
Election as Class I Directors.
The Compensation Committee, whose members include Charles D. Fite
(Chairman), Sam J. Gallina, and Roger J. Taylor, D.D.S., oversees the
performance and reviews the compensation of the executive officers of the
Company and its subsidiaries. The Compensation Committee met seven (7) times
during 2003. See the Compensation Committee Report on page 12 for additional
information regarding the functions of the Compensation Committee. The Board has
determined that all members of the Compensation Committee are "independent," as
that term is defined by applicable Nasdaq Stock Market Rules. Stephen H. Waks
joined the Compensation Committee effective March 17, 2004.
The Finance and Capital Committee, whose members include Wayne C. Matthews,
M.D., William A. Robotham, Stephen H. Waks (Chairman), and Michael A. Ziegler,
has the responsibility to oversee asset liability management and the investment
portfolio including recommending to the full Board of Directors the annual
investment strategy; and recommending to the full Board of Directors the annual
operating budget for the Company and its subsidiaries; and reviewing premises
leases for recommendation to the full Board of Directors. The Finance and
Capital Committee met five (5) times during 2003. As reported on page 2 of this
Proxy Statement, Doctor Matthews is retiring on May 20, 2004.
5
The Executive Committee, whose members include Charles D. Fite (Chairman),
Sam J. Gallina, David T. Taber, and Roger J. Taylor, D.D.S., oversees long range
planning, formulates and recommends broad policy positions for the full Board of
Directors to consider; and is responsible for evaluating and recommending to the
full Board of Directors matters pertaining to mergers and acquisitions. The
Executive Committee met eleven (11) times during 2003. Stephen H. Waks joined
the Executive Committee effective March 17, 2004.
Each of the subsidiary banks have Loan Committees that have the
responsibility for establishing loan policy, approving loans which exceed
certain dollar limits and reviewing the outside loan review firm's examinations
of the loan portfolios. American River Bank's Loan Committee includes Charles D.
Fite, Sam J. Gallina, Roger J. Taylor, D.D.S. (Chairman) and Stephen H. Waks.
American River Bank's Loan Committee met thirty-eight (38) times during 2003.
North Coast Bank's Loan Committee includes Leo J. Becnel, O.D., M. Edgar Deas,
Larry L. Wasem (Chairman), and Philip A. Wright. North Coast Bank's Loan
Committee met thirty-three (33) times during 2003. Effective January 1, 2004,
North Coast Bank became a division of American River Bank and at that time the
role of the Loan Committee transferred to American River Bank; Mr. Wright also
joined the American River Bank Loan Committee.
During 2003, the Company's Board of Directors held twelve (12) regular
meetings and two (2) special meetings. In addition, the Company's Board of
Directors two (2) "executive sessions" which only the non-employee directors
attended, each of whom is "independent" as defined under rules promulgated by
the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of
2002, and applicable Nasdaq Stock Market Rules. All directors attended at least
75% of the aggregate of the total number of meetings of the Board of Directors
and the number of meetings of the committees on which they served.
A majority of the members of the Board of Directors, each of whom is
"independent" as defined under applicable rules promulgated by the Securities
and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002, and
applicable Nasdaq Stock Market Rules, has established procedures for receipt and
delivery of shareholder communications addressed to the Board of Directors. Any
such shareholder communications, including communications by employees of the
Company solely in their capacity as shareholders, should be mailed or delivered
to the Company addressed as follows: Board of Directors, American River
Holdings, 1545 River Park Drive, Suite 107 Sacramento, California 95815.
The Company encourages members of its Board of Directors to attend the
Company's annual meeting of shareholders each year. All of the directors
attended the Company's annual meeting of shareholders held in 2003, except for
Directors Deas and Wasem.
Compensation of Directors
The fees paid to non-employee directors of American River Holdings during
2003 included a retainer of $250 per month, a base fee of $250 per month for
attendance at board meetings, and a fee of $150 per month for attendance at
committee meetings, other than the Directors Loan Committee of American River
Bank whose outside director members received a fee of $250 for each meeting
attended and the Directors Loan Committee of North Coast Bank whose outside
director members received a fee of $100 for each meeting attended. Outside
director members of the Executive Committee received an additional retainer fee
of $150 per month. In addition to the fees received as non-employee directors in
connection with the meetings and matters described above, the Chairman of the
Board of Directors also received a retainer fee of $250 per month, and the
Chairman of the Audit Committee and the Chairman of American River Bank's
Directors Loan Committee also received a retainer fee of $150 per month. The
Chairman of North Coast Bank's Directors Loan Committee also received a retainer
fee of $100 per month and the Chairman of the Finance and Capital Committee also
received a retainer fee of $50 per month. In 2003, the total amount of fees paid
by American River Holdings to all directors as a group was $77,900. In addition,
certain directors of American River Holdings also serve as directors and/or
committee members for the subsidiaries. In 2003, the total amount of fees paid
by the subsidiaries to directors of American River Holdings (in their capacities
as directors and/or committee members for the subsidiaries) as a group was
$60,200.
On August 25, 1995, the Board of Directors authorized the grant to each
outside director of a nonstatutory stock option to purchase 10,000 shares of
American River Holdings common stock at $10.50 per share (converted to 30,150
shares at $3.483 as adjusted for stock splits and stock dividends). On March 19,
2003, Directors Deas, Fite, Gallina, Dr. Matthews, M. Taylor, Dr. R. Taylor,
6
Waks, and Wasem were granted a nonstatutory stock option to purchase 1,940
shares of American River Holdings common stock at $22.34 per share (converted to
2,910 shares at $14.893 as adjusted for a stock split). On May 21, 2003,
Director Ziegler was granted a nonstatutory stock option to purchase 485 shares
of American River Holdings common stock at $24.22 per share (converted to 727
shares at $16.144 as adjusted for a stock split). The options for Directors
Deas, M. Taylor, and Wasem expired upon their resignations as directors. See
resignation discussion on page 2.
On June 18, 1997, the Board of Directors approved a Gross-Up Plan (the
"Plan") to compensate for the tax effects of the exercise of nonstatutory stock
options. The Plan named Directors Fite, Gallina, Dr. Matthews, M. Taylor, Dr. R.
Taylor, and Waks as participants and applies only to those options granted on
August 25, 1995. The Plan also named as a participant, James O. Burpo, who was a
director at the time. Mr. Burpo retired from the Company's Board of Directors on
September 18, 2002; however, he remained on American River Bank's Board of
Directors until May 21, 2003. The Plan encourages participating optionees to
retain shares acquired through the exercise of nonstatutory stock options by
American River Holdings paying to the participating optionee an amount equal to
the taxable income resulting from an exercise of a nonstatutory stock option
multiplied by American River Holdings' effective tax rate, subject to the
optionee's agreement to hold the shares acquired for a minimum of one (1) year.
In the event that the shares acquired upon exercise are not held for at least
one year from the date of acquisition, the optionee is required to reimburse the
amount paid to the optionee under the Plan. During 2003, former Director Burpo
executed an agreement in return for payment of $56,278.80.
Effective December 20, 2001, a Deferred Fee Plan was established for the
purpose of providing the directors an opportunity to defer director fees.
Participating directors may elect to defer a portion, up to 100%, of their
monthly director fees. American River Holdings bears the administration costs
and pays interest on the deferred balances at a rate equal to the five-year U.S
Treasury Bond plus 4.0%, but does not, otherwise, make contributions to the
Plan. During 2003, two directors participated in the Plan and deferred $15,000.
In January 2003, the Board of Directors approved a Directors Retirement
Plan (the "Retirement Plan") whereby each director, upon full retirement from
the Company's or an affiliate's Board of Directors, is entitled to receive
installment payments over a 24 month period following retirement which are equal
to the total Board of Director and Committee fees received by a director for
such service during the two full calendar years prior to retirement. The
Retirement Plan contains a ten-year vesting component. A director vests 10% for
each year of service on the Board of Directors of the Company or an affiliate
Board of Directors. During 2003, former Director Burpo participated in this
Retirement Plan and received payments totaling $5,040.
EXECUTIVE OFFICERS
The executive officers of the Company during 2003 included David T. Taber,
President and Chief Executive Officer of American River Holdings, about whom
information is provided on page 4, William L. Young, President and Chief
Executive Officer of American River Bank, who resigned effective January 2,
2004, and the following persons:
--------------------------------------------------------------------------------
Officer Principal Occupation
Name Age Since During the Past Five Years
--------------------------------------------------------------------------------
Mitchell A. Derenzo 42 1992 Executive Vice President and Chief
Financial Officer of American River
Holdings since 1995. Chief Financial
Officer of American River Bank since
1992.
--------------------------------------------------------------------------------
Raymond F. Byrne 56 2000 President of North Coast Bank, a
division of American River Bank,
since 2002. Senior Vice President and
Senior Lender of North Coast Bank
2000 to 2003. Vice President and
Manager of Bank of the West 2000 to
2001. Vice President and General
Manager of Discovery Office Systems
1991 to 1999.
--------------------------------------------------------------------------------
Douglas E. Tow 50 1994 Senior Vice President and Credit
Administrator of American River
Holdings since 2003. Senior Vice
President and Credit Administrator of
American River Bank since 1994.
--------------------------------------------------------------------------------
7
Executive Compensation
Set forth below is the summary compensation paid during the three years
ended December 31, 2003 to David T. Taber, Mitchell A. Derenzo, William L.
Young, Raymond F. Byrne, and Douglas E. Tow, the only executive officers of the
Company and its subsidiaries.
Summary Compensation Table
--------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Year Salary Bonus Other Annual Restricted Securities LTIP All Other
Principal Position ($) (1) ($) (2) Compensation Stock Underlying Payouts Compensation
($) (3) Award(s) Options/SARs ($) ($) (5)
($) (#) (4)
--------------------------------------------------------------------------------------------------------------------------------
David T. Taber, President and 5 2003 $200,000 $ 137,617 -- -- 6,750 -- $ 38,287
Chief Executive Officer 2002 175,000 44,688 -- -- -- -- 31,472
2001 175,000 194,026 -- -- -- -- 27,551
--------------------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo, 2003 125,000 41,568 -- -- 3,225 -- 9,269
Executive Vice President and 2002 105,124 18,387 -- -- -- -- 5,586
Chief Financial Officer 2001 102,833 22,617 -- -- -- -- 4,918
--------------------------------------------------------------------------------------------------------------------------------
William L. Young, President and 2003 150,000 102,082 -- -- 3,300 -- 37,674
Chief Executive Officer, 2002 150,000 28,239 -- -- -- -- 7,213
American River Bank (6) 2001 150,000 160,345 -- -- -- -- 6,093
--------------------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne, President and 2003 107,525 2,000 -- -- 937 -- 3,677
Chief Executive Officer, North 2002 105,892 2,286 -- -- -- -- 3,346
Coast Bank 2001 105,949 20,611 -- -- -- -- 3,576
--------------------------------------------------------------------------------------------------------------------------------
Douglas E. Tow, Senior Vice 2003 113,000 44,389 -- -- 3,225 -- 10,247
President and Credit 2002 100,650 15,982 -- -- -- -- 5,459
Administrator 2001 98,457 21,656 -- -- -- -- 4,921
--------------------------------------------------------------------------------------------------------------------------------
(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers under the 401(k) Plan and the Deferred Compensation Plan.
(2) Amounts indicated as bonus payments are listed in the year paid. The
amounts listed as paid in 2003 were all earned in 2002. Additional amounts
accrued in 2003 and paid in 2004 were $133,333 to Mr. Taber; $41,417 to Mr.
Derenzo; $100,000 to Mr. Young, $17,148 to Mr. Byrne, and $35,880 to Mr.
Tow.
(3) No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000 or 10% of each such officer's total annual
salary and bonus during 2003, 2002, and 2001.
(4) Represents the number of shares granted in the year indicated, as adjusted
for stock splits and stock dividends. The Company had a 1995 Stock Option
Plan (the "1995 Plan") pursuant to which options could be granted to
directors and key, full-time salaried officers and employees of the Company
and its subsidiaries. The 1995 Plan was replaced with the Company's 2000
Stock Option Plan (the "2000 Plan"). Options granted under the 1995 Plan
were either incentive options or nonstatutory options. Options granted
under the 1995 Plan became exercisable in accordance with a vesting
schedule established at the time of grant. Vesting could not extend beyond
ten years from the date of grant. Upon a change in control of the Company,
all outstanding options under the 1995 Plan will become fully vested and
exercisable. Options granted under the 1995 Plan are adjusted to protect
against dilution in the event of certain changes in the Company's
capitalization, including stock splits and stock dividends. The 2000 Plan
is substantially similar to the 1995 Plan regarding provisions related to
option grants, vesting, and dilution. All options granted to the named
executive officers have an exercise price equal to the fair market value of
the common stock on the date of grant.
(5) Amounts shown for each named executive officer include 401(k) matching
contributions, the use of an automobile owned by the Company, earned but
unpaid interest on amounts deferred under the Company's Deferred
Compensation Plan, excess life insurance premiums paid by the Company, and
amounts accrued pursuant to post-retirement agreements as described below.
(6) Mr. Young retired effective January 2, 2004.
8
Stock Options
The following table describes stock options that were granted pursuant to
the Company's 2000 Stock Option Plan (the "2000 Stock Option Plan") to the
Company's executive officers in the fiscal year ended December 31, 2003. The
2000 Stock Option Plan was approved by shareholders on September 21, 2000. All
of the grants were made on March 19, 2003, based on achievement of 2002
corporate and personal performance objectives.
Option/SAR Grants in Last Fiscal Year
-------------------------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs Grant Date
Underlying Granted to Present
Options/SARs Employees in Fiscal Exercise Price Expiration Values ($)
Name Granted (#) (1) Year ($/Sh) Date (2)
-------------------------------------------------------------------------------------------------------------------
David T. Taber 6,750 18% $14.89333 3/19/2013 $23,625
-------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo 3,225 8% 14.89333 3/19/2013 11,288
-------------------------------------------------------------------------------------------------------------------
William L. Young (3) 3,300 9% 14.89333 3/19/2013 11,550
-------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne 937 2% 14.89333 3/19/2013 3,280
-------------------------------------------------------------------------------------------------------------------
Douglas E. Tow 3,225 8% 14.89333 3/19/2013 11,288
-------------------------------------------------------------------------------------------------------------------
(1) All options are incentive stock options, which vest ratably over a
five-year period commencing one year after the grant date. All options
have an exercise price equal to the market value on the date of grant. The
number of shares granted and the option price have been adjusted to
reflect the 3 for 2 stock split distributed on October 31, 2003. The terms
of all of the Company's stock option plans provide that options may become
exercisable in full in the event of a change of control as defined in the
2000 Stock Option Plan.
(2) The Black-Scholes option-pricing model is used to determine grant date
present value. To derive the per share option value of $3.50, the
assumptions used include a risk-free rate equal to the seven-year
interpolated treasury yield of 3.52%, volatility of 19.6%, and a
seven-year maturity.
(3) Mr. Young retired effective January 2, 2004, thereby terminating the
options granted to him listed in the table above.
The following table sets forth the number of shares of common stock
acquired by each of the named executive officers upon the exercise of stock
options during fiscal year 2003, the net value realized upon exercise, the
number of shares of common stock represented by outstanding stock options held
by each of the named executive officers as of December 31, 2003, the value of
such options based on the closing price of the Company's common stock, and
certain information concerning unexercised options under the 1995 and 2000 Stock
Option Plans.
Aggregated Option/SAR Exercises In Last Fiscal Year And
FY-End Option/SAR Values
-------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
Shares Value at Fiscal Year- End (#) at Fiscal Year-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e) (1)
-------------------------------------------------------------------------------------------------------------------
David T. Taber -- $ -- 75,382 / 6,750 $ 1,267,755 / $ 36,495
-------------------------------------------------------------------------------------------------------------------
Mitchell A. Derenzo 4,500 $ 57,889 25,651 / 3,225 $ 363,366 / $ 17,437
-------------------------------------------------------------------------------------------------------------------
William L. Young 43,270 $ 715,155 32,122 / 3,300 $ 540,219 / $ 17,842
-------------------------------------------------------------------------------------------------------------------
Raymond F. Byrne -- $ -- -- / 937 $ -- / $ 5,066
-------------------------------------------------------------------------------------------------------------------
Douglas E. Tow 2,524 $ 50,886 19,803 / 3,225 $ 250,267 / $ 17,437
-------------------------------------------------------------------------------------------------------------------
(1) The aggregate value has been determined based upon the closing price for
the Company's common stock at year-end, minus the exercise price.
9
Employment Contracts and Termination of Employment and Change in Control
Arrangements
In August 2003, the Company entered into an employment agreement with David
T. Taber and its subsidiary, American River Bank, entered into an employment
agreement with William L. Young. The agreements provide for an original term of
two years subject to automatic extensions of two years following expiration of
the original term and one-year extensions thereafter unless terminated in
accordance with the terms of the agreements. The agreements provide for a base
salary which is disclosed in the Summary Compensation Table on page 8. The base
salary under each agreement is reviewed annually and is subject to adjustment at
the discretion of the Board of Directors. Additionally, the agreements provide
for, among other things (i) an annual incentive bonus based upon the Company's
achievement of certain profitability, growth and asset quality standards as set
forth in the agreements; (ii) in the event of disability, payment of base salary
reduced by the amounts received from state disability insurance or workers'
compensation or other similar insurance benefits through policies provided by
the Company and/or American River Bank; (iii) stock option grants in the
discretion of the Board of Directors under the Company's stock option plan; (iv)
four weeks annual paid vacation leave; (v) use of an automobile; and (vi)
reimbursement for ordinary and necessary expenses incurred in connection with
employment.
The agreements may be terminated with or without cause, but if the
agreements are terminated without cause due to the occurrence of circumstances
that make it impossible or impractical for the Company and/or American River
Bank to conduct or continue its business, the loss by the Company and/or
American River Bank of its legal capacity to contract or the Company and/or
American River Bank's breach of the terms of the agreement, the employee is
entitled to receive severance compensation equal to six months of the existing
base salary plus any incentive bonus due. The agreements further provide that in
the event of a "change in control" as defined therein and within a period of two
years following consummation of such change in control (i) the employee's
employment is terminated; or (ii) any adverse change occurs in the nature and
scope of the employee's salary or benefits; or (iii) any event occurs which
reasonably constitutes a constructive termination of employment, by resignation
or otherwise, then the employee will be entitled to receive severance
compensation in an amount equal to eighteen (18) months of the employee's annual
base salary, less applicable withholding deductions (in addition to salary,
incentive compensation, or other payments, if any, due the employee). Mr.
Young's employment agreement terminated upon his retirement on January 2, 2004.
On March 18, 1998, American River Bank adopted the American River Bank
Employee Severance Policy. The Policy allows for certain named employees to
receive severance payments equal to six times their monthly base pay should
these named employees be terminated within one year of a "change in control."
The Board of Directors has designated executive officers, Mitchell A. Derenzo
and Douglas E. Tow, to be covered under the Policy.
Recognizing the importance of building and retaining a competent management
team, additional agreements were entered into to provide post-retirement
benefits to Messrs. Taber, Derenzo, Young and Tow. The terms of the agreements
include the amounts each employee will receive upon the occurrence of certain
specified events, including formal retirement on or after a specified age. The
agreements generally provide for annual retirement benefit payments of One
Hundred Thousand Dollars ($100,000) to Mr. Taber and Fifty Thousand Dollars
($50,000) each to Mr. Derenzo, Mr. Young and Mr. Tow. The annual retirement
benefit amount is payable in equal monthly installments over a fifteen (15) year
period. In the event of an employee's death, all remaining amounts due are
anticipated to be paid to the employee's designated beneficiary over the
remaining payout period. Other events which may alter when payment of the annual
retirement benefit is to begin, or the amount which is to be paid, include: (a)
disability prior to retirement in which case the employee shall be entitled to a
lesser benefit payment amount based upon the length of employment; and (b)
termination following a "change of control," in which case the employee is
entitled to receive the annual benefit payment in equal monthly installments for
fifteen (15) years beginning in the month following the termination or "change
of control" equal to Sixty-Four Thousand Nine Hundred and Seventy Dollars
($64,970) for Mr. Taber and Thirty-Two Thousand Four Hundred and Eighty-Five
Dollars ($32,485) each for Mr. Derenzo, Mr. Young and Mr. Tow.
The Company purchased insurance policies on the lives of Messrs. Taber,
Derenzo, Young and Tow, paying the premiums for these insurance policies with a
lump-sum premium payment of approximately $1,614,000.
10
Other Compensation Arrangements
Effective May 1, 1998, the American River Bank Deferred Compensation Plan
was established for the purpose of providing certain highly compensated
individuals, which includes the executive officers, an opportunity to defer
compensation. Participants, who are selected by a committee designated by the
Board of Directors, may elect to defer annually a minimum of $5,000 or a maximum
of eighty percent of their base salary and all of their cash bonus. American
River Bank bears all administration costs, but does not make contributions to
the plan. Effective December 20, 2000, the Deferred Compensation Plan was
renamed the American River Holdings Deferred Compensation Plan and beginning
January 1, 2001, the Company now bears the administration costs for participants
that are employed by the Company and each subsidiary bears the costs for
participants that are employed by the subsidiary.
EQUITY COMPENSATION PLAN INFORMATION
The chart below summarizes share information about American River Holdings'
equity compensation plans including the 1995 Stock Option Plan and the 2000
Stock Option Plan as of December 31, 2003. Both of these plans have been
approved by the Company's shareholders. The Company has no other equity
compensation plan and there are no warrants or other rights outstanding that
would result in the issuance of shares of the Company's common stock.
------------------------------------------------------------------------------------------------------------------
Plan Category Number of securities to be Weighted-average Number of securities remaining
issued upon exercise of exercise price of available for future issuance
outstanding options, outstanding options, under equity compensation
warrants and rights warrants and rights plans (excluding securities
reflected in column (a))
(a) (b) (c)
------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 549,349 (1) $6.39 411,243
------------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security -0- -0- -0-
holders
------------------------------------------------------------------------------------------------------------------
Total 549,349 $6.39 411,243
------------------------------------------------------------------------------------------------------------------
(1) Shares reserved but unissued shall remain available for grant during any
subsequent calendar year. Awards that expire or are cancelled, forfeited or
terminated before being exercised shall again become available for future
awards under the Plan.
11
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the executive officers of American River Holdings and
its subsidiaries is reviewed and approved annually by the Board of Directors on
recommendation by the Compensation Committee. During 2003, Charles D. Fite
(Chairman), Sam J. Gallina and Roger J. Taylor, D.D.S., served as members of the
Compensation Committee. Each such member of the Committee is "independent" as
defined under applicable rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002, and applicable Nasdaq
Stock Market Rules. Mr. Taber was not present during the Compensation Committee
voting or deliberations regarding his compensation as required by applicable
Nasdaq Stock Market Rules. David T. Taber, Mitchell A. Derenzo, William L.
Young, Raymond F. Byrne, and Douglas E. Tow, served as executive officers of
American River Holdings and/or its subsidiaries during 2003 in the capacities
reflected in the Summary Compensation Table.
The Compensation Committee's philosophy is that compensation should be
designed to reflect the value created for shareholders while supporting American
River Holdings' strategic goals. The Compensation Committee reviews annually the
compensation of the executive officers to insure that American River Holdings'
compensation programs are related to financial performance and consistent
generally with employers of comparable size in the industry. Annual compensation
for American River Holdings' executive officers includes the following
components:
1) Base salary is related to the individual executive officer's level of
responsibility and comparison with comparable employers in the industry.
2) Executive officers are eligible to participate in the American River
Holdings Incentive Compensation Plan (the "Incentive Plan"). The Incentive Plan
outlines minimum financial performance standards which include performance,
growth, efficiency and asset quality minimums which must be achieved prior to
any payout. If the performance standards are met, the pool amount available for
payment to all employees of the Company is set at a predetermined rate by the
Compensation Committee. The incentive pool for 2003 was set at 18% of net income
prior to incentive accruals and adjusted for taxes. The actual amounts accrued
in 2003 to be paid in 2004 represented 18% of net income prior to incentive
accruals and adjusted for taxes. The incentive pool also includes 401(k)
matching funds.
3) Stock option grants are intended to increase the executive officers'
interest in American River Holdings' long-term success and link interests of the
executive officer with those of shareholders as measured by American River
Holdings' share price. Stock options are granted at the discretion of the Board
of Directors and at the prevailing market value of American River Holdings
common stock. Consequently, the value of the options is directly connected to
the increase in value of American River Holdings' stock price. See the Summary
Compensation Table and Option/SAR Exercise Table, and notes thereto for a
further description of stocks options.
4) American River Holdings matches salary deferred by employees
participating in its 401(k) Plan at a rate equal to 50% of the participant's
contribution up to a maximum of 6% of such participant's annual compensation.
Executive officers are eligible to participate in the 401(k) plan. See the
Summary Compensation Table for further 401(k) plan information.
/s/ CHARLES D. FITE /s/ SAM J. GALLINA /s/ ROGER J. TAYLOR, D.D.S.
------------------------ ----------------------- ----------------------------
Charles D. Fite Sam J. Gallina Roger J. Taylor, D.D.S.
12
COMPARISON OF AMERICAN RIVER HOLDINGS SHAREHOLDERS RETURN
Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on American River Holdings common stock with the
cumulative total return of the SNL Securities Index of National Peer Banks
(asset size of less than $500 million), NASDAQ--Total U.S., and the S&P 500
Index as of the end of each of American River Holdings' last five fiscal years.
The following table assumes that $100.00 was invested on December 31, 1998 in
American River Holdings common stock and each index, and that all dividends were
reinvested. Returns have been adjusted for any stock dividends and stock splits
declared by American River Holdings. Shareholder returns over the indicated
period should not be considered indicative of future shareholder returns.
--------------------------------------------------------------------------------
AMERICAN RIVER HOLDINGS
--------------------------------------------------------------------------------
Total Return Performance
[GRAPHIC OMITTED]
Period Ending
---------------------------------------------------------------
Index 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
---------------------------------------------------------------------------------------------
American River Holdings 100.00 90.67 91.95 112.23 180.05 236.00
S&P 500 100.00 121.11 110.34 97.32 75.75 97.51
NASDAQ--Total US 100.00 185.95 113.19 89.65 61.67 92.90
SNL <$500M Bank Index 100.00 92.57 89.30 123.53 158.20 230.92
13
TRANSACTIONS WITH MANAGEMENT AND OTHERS
There have been no transactions, or series of similar transactions, during
2003, or any currently proposed transaction, or series of similar transactions,
to which American River Holdings and its subsidiaries was or is to be a party,
in which the amount involved exceeded or will exceed $60,000 and in which any
director or executive officer of American River Holdings or its subsidiaries,
any shareholder owning of record or beneficially 5% or more of American River
Holdings common stock, or any member of the immediate family of any of the
foregoing persons, had, or will have, a direct or indirect material interest,
except as follows:
American River Bank leases premises at 9750 Business Park Drive,
Sacramento, California, from Bradshaw Plaza Group, which is owned in part by
Charles D. Fite, a director of American River Holdings, in addition to ownership
by other family members. The lease term is 7 years and expires on November 30,
2006, subject to extension for one five-year option term. The premises consist
of 4,590 square feet on the ground floor. The current monthly rent is $7,500.
The approximate aggregate rental payments for the period from January 1, 2004
through the lease term expiring on November 30, 2006 will be $269,702. If the
five-year option is exercised, the approximate aggregate rental payments for the
option term will be $474,000.
American River Bank leases premises at 10123 Fair Oaks Boulevard, Fair
Oaks, California, from Marjorie Taylor, a former director of American River
Holdings. The lease term is 12 years and expires on March 1, 2009. The premises
consist of 2,380 square feet on the ground floor and the current monthly rent is
$1,825. The approximate aggregate rental payments for the period from January 1,
2004 through the lease term expiring on March 1, 2009 will be $119,352.
Certain Business Relationships
There were no business relationships during 2003 of the type requiring
disclosure under Item 404(b) of Regulation S-K.
Indebtedness of Management
American River Holdings, through its subsidiaries, has had, and expects in
the future to have banking transactions in the ordinary course of its business
with many of American River Holdings' 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 2003 such transactions
comprising loans did not involve more than the normal risk of collectability or
present other unfavorable features. Loans to executive officers of American
River Holdings and its subsidiaries are subject to limitations as to amount and
purposes prescribed in part by the Federal Reserve Act, as amended, and the
regulations of the Federal Deposit Insurance Corporation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and any persons beneficially owning
ten percent or more of the Company's common stock to timely file initial reports
of ownership and reports of changes in that ownership with the Securities and
Exchange Commission. Such persons are required by Securities and Exchange
Commission regulation to send copies of such reports to the Company. To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2003, the Company believes
all such filing requirements applicable to its directors, executive officers and
ten percent shareholders were met.
CODE OF ETHICS
The Company has adopted a Code of Ethics that complies with the rules
promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002 and applicable Nasdaq Stock Market Rules. The Code of
Ethics requires that the Company's directors, officers (including the principal
executive, financial and accounting officers, or controller and persons
performing similar functions) and employees conduct business in accordance with
14
the highest ethical standards and in compliance with all laws, rules and
regulations applicable to the Company. The Code of Ethics is intended to
supplement the provisions of any other personnel policies of the Company or
codes of conduct which may establish additional standards of ethical behavior
applicable to the Company's directors, officers and employees.
The Company's Code of Ethics is attached to this Proxy Statement as
Appendix B. In addition, the Code of Ethics was filed as Exhibit 14.1 to the
Company's 2003 Annual Report on Form 10-K and may be accessed through the
Company's website by following the instructions for accessing reports filed with
the Securities and Exchange Commission hereafter in this Proxy Statement under
the heading "Website" or is available, free of charge, upon written request to
Mitchell A. Derenzo, American River Holdings, 1545 River Park Drive, Suite 107,
Sacramento, California, 95815.
15
PROPOSAL NO. 2
AMENDMENT TO ARTICLES OF INCORPORATION
The Company proposes to amend its Articles of Incorporation to change its
name from American River Holdings to "American River Bankshares." The purpose of
the name change is to align the Company's name more closely with its business
focus on financial services. Management and the Board of Directors believe that
the name American River Bankshares more accurately identifies the Company as
being engaged in the financial services business through its subsidiary, the
Bank.
The Company has a regional business focus in Northern California and
national recognition through its listing on the Nasdaq Stock Market. The new
name more closely parallels the Company's existing trading symbol, "AMRB," which
the Board of Directors believes will enhance name recognition and brand identity
as a financial services provider in the public marketplace and in numerous
publications in which the Company is listed. The non-recurring costs associated
with the amendment of the Company's Articles of Incorporation to effect the name
change including filing fees, regulatory fees to change the Nasdaq listing and
changes to Company stationery, stock certificates, business cards, and other
incidental expenses, are anticipated to be less than $25,000, primarily due to
the fact that the proposed change will substantially coincide with the normal
re-order purchase cycle for Company stationery, stock certificates, business
cards and other supplies.
If the shareholders approve the proposal to change the Company's name to
American River Bankshares, a Certificate of Amendment substantially in the form
attached as Appendix C will be filed with the California Secretary of State
along with such other certifications as may be required to effect the change of
name. Approval of Proposal No. 2 requires the affirmative vote of a majority of
the total number of shares voting at the Meeting.
The Board of Directors has determined that it is in the best interests of
the Company to change the Company's name from American River Holdings to
American River Bankshares and recommends that shareholders vote "FOR" approval
of the amendment to the Company's Articles of Incorporation to effect the name
change.
16
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Perry-Smith LLP, certified public accountants,
served the Company as its independent public accountant and auditor for the 2003
fiscal year at the direction of the Audit Committee and the Board of Directors
of the Company. Perry-Smith LLP has no interests, financial or otherwise, in the
Company. The services rendered by Perry-Smith LLP during the 2003 fiscal year
were audit services, consultation in connection with various accounting matters,
and preparation of the Company's income tax returns.
The table below summarizes the services rendered to the Company by
Perry-Smith LLP during and for the 2003 and 2002 fiscal years.
2003 2002
-------- --------
Audit Fees (1) $ 81,960 $ 81,710
Audit-Related Fees (2) $ 7,415 $ 1,415
Tax Fees (3) $ 10,000 $ 11,500
All Other Fees (4) $ 0 $ 17,450
Total Accounting Fees $ 99,375 $112,075
(1) Audit fees consisted of services rendered by Perry-Smith LLP for the audit
of the Company's consolidated financial statements included in the annual
report on Form 10-K and for reviews of the financial statements included
in the Company's quarterly reports on Form 10-Q for fiscal years 2003 and
2002.
(2) In 2003, audit-related fees consisted of the audit of the Company's 401(k)
Plan as well as consulting services relating to the termination of
director stock options at North Coast Bank. In 2002, audit-related fees
consisted of consulting services related to lease accounting,
certifications, and stock options.
(3) Tax fees consisted principally of services rendered by Perry-Smith LLP for
assistance relating to tax compliance and reporting for fiscal years 2003
and 2002.
(4) Other fees for 2002 consisted of consultations related to executive
performance evaluations and compensation as well as facilitation of a
strategic planning meeting.
The Audit Committee approved each professional service rendered by
Perry-Smith LLP during the 2003 and 2002 fiscal years and considered whether the
provision of such services is compatible with Perry-Smith LLP maintaining its
independence. The approval of such professional services included pre-approval
of all audit and permissible non-audit services provided by Perry-Smith LLP.
These services included audit, tax and other services described above. The Audit
Committee Charter attached as Appendix D includes a policy of pre-approval of
all services provided by the Company's independent public accountants. The Audit
Committee approved one hundred percent (100%) of all such professional services
provided by Perry-Smith LLP during the 2003 and 2002 fiscal years.
It is anticipated that one or more representatives of Perry-Smith LLP will
be present at the Meeting and will be able to make a statement if they so desire
and answer appropriate questions.
The Board of Directors has selected Perry-Smith LLP to serve as the
Company's independent public accountants for the year 2004 and recommends that
shareholders vote "FOR" the ratification of the appointment of Perry-Smith LLP.
The ratification of the appointment of Perry-Smith LLP as the Company's
independent public accountants requires approval of a majority of the total
number of shares voting at the Meeting. In the event such appointment is not
ratified, the adverse vote will be deemed to be an indication to the Board of
Directors that it should consider selecting other independent public accountants
for 2004. Because of the difficulty and expense of making any substitution of
accounting firms after the beginning of the current year, it is the intention of
the Board of Directors that the appointment of Perry-Smith LLP for the year 2004
will remain in effect, unless for a reason other than such adverse vote of the
shareholders, the Board of Directors deems it necessary or appropriate to make a
change. The Board of Directors also retains the power to appoint another
independent public accounting firm to replace the accountants ratified by the
shareholders in the event the Board of Directors determines that the interests
of the Company require such a change.
17
AUDIT COMMITTEE REPORT
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE THIS PROXY STATEMENT OR FUTURE
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, IN WHOLE OR IN PART, THE
FOLLOWING REPORT SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILING.
The Audit Committee consists of the following members of the Company's
Board of Directors: Amador A. Bustos, Sam J. Gallina, (Chairman and Audit
Committee Financial Expert), Wayne C. Matthews, and William A. Robotham. Each
such member of the Committee is "independent" as defined under applicable rules
promulgated by the Securities and Exchange Commission pursuant to the
Sarbanes-Oxley Act of 2002, and applicable Nasdaq Stock Market Rules.
The Committee operates under a written charter adopted by the Board of
Directors which, among other matters, delineates the responsibilities of the
Committee. The Committee's responsibilities include responsibility for the
appointment, compensation, retention and oversight of the work of the Company's
independent public accountants engaged (including resolution of disagreements
between management and the independent public accountants regarding financial
reporting) for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company. The Company's
independent public accountants report directly to the Committee. The written
charter adopted by the Board of Directors is attached to this Proxy Statement as
Appendix D.
The Committee has reviewed and discussed the audited financial statements
of the Company for the fiscal year ended December 31, 2003 with management and
Perry-Smith LLP, the Company's independent public accountants. The Committee has
also discussed with Perry-Smith LLP, the matters required to be discussed by
Statement on Auditing Standards No. 61 (Codification of Statements on Auditing
Standards) as may be modified or supplemented. The Committee has also received
the letter from Perry-Smith LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) as may be
modified or supplemented, and the Committee has discussed the independence of
Perry-Smith LLP with that firm.
Based on the Committee's review and discussions noted above, the Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 for filing with the Securities and Exchange
Commission.
/s/ AMADOR S. BUSTOS /s/ SAM J. GALLINA /s/ WAYNE C. MATTHEWS, M.D. /s/ WILLIAM A. ROBOTHAM
-------------------- ------------------ --------------------------- ------------------------
Amador S. Bustos Sam J. Gallina Wayne C. Matthews, M.D. William A. Robotham
18
ANNUAL REPORT
The Annual Report of the Company containing audited financial statements
for the fiscal year ended December 31, 2003 is included in this mailing to
shareholders.
FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS
AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO STEPHEN H.
WAKS, ESQ., SECRETARY, AMERICAN RIVER HOLDINGS, 1545 RIVER PARK DRIVE, SUITE
107, SACRAMENTO, CALIFORNIA, 95815.
WEBSITE
Information regarding the Company may be obtained from the Company's
website at www.amrb.com. Copies of the Company's annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and Section 16
reports by Company insiders, including exhibits and amendments thereto, are
available free of charge on the Company's website as soon as they are published
by the Securities and Exchange Commission through a link to the Edgar reporting
system maintained by the Securities and Exchange Commission. To access Company
filings, select the "SEC Filings" menu item on the Company website, then select
either "SEC Filings" to view or download copies of reports including Form 10-K,
10-Q or 8-K, or "Section 16 Reports" to view or download reports on Forms 3, 4
or 5 of insider transactions in Company securities.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders will be held on May 19, 2005.
The deadline for shareholders to submit proposals for inclusion in the Proxy
Statement and form of Proxy for the 2005 Annual Meeting of Shareholders is
December 29, 2004. Management of the Company will have discretionary authority
to vote proxies obtained by it in connection with any shareholder proposal not
submitted on or before the December 29, 2004 deadline. All proposals should be
submitted by Certified Mail - Return Receipt Requested, to Stephen H. Waks,
Esq., Secretary, American River Holdings, 1545 River Park Drive, Suite 107
Sacramento, California 95815.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Meeting, but if such matters are properly presented to the Meeting,
proxies solicited hereby will be voted in accordance with the judgment of the
persons holding such proxies. All shares represented by duly executed proxies
will be voted at the Meeting in accordance with the terms of such proxies.
Dated: April 27, 2004 AMERICAN RIVER HOLDINGS
By: /s/ STEPHEN H. WAKS
-------------------------------
Stephen H. Waks, Esq.
Corporate Secretary
19
APPENDIX A
AMERICAN RIVER HOLDINGS
BOARD OF DIRECTORS
NOMINATING COMMITTEE CHARTER
I. Membership
The Nominating Committee shall be comprised of at least three
independent directors appointed annually by the independent members of
the Board of Directors. Director independence shall be determined in
accordance with applicable rules of the Securities and Exchange
Commission and the Nasdaq Stock Market Rules.
II. Purpose
The purpose of the Nominating Committee is to assist the Board of
Directors by (a) establishing criteria for candidates and identifying,
evaluating and recommending candidates, including candidates proposed
by shareholders, for election to the Board of Directors, and (b)
periodically reviewing and making recommendations on the composition of
the Board of Directors.
III. Nomination Process
1. Candidates shall be evaluated based on the criteria established
by the Nominating Committee which may include (a) satisfactory
results of any background investigation, (b) experience and
expertise, (c) financial resources, (d) time availability, (e)
community involvement, and (f) such other criteria as the
Nominating Committee may determine to be relevant. Candidates
selected for consideration as nominees must meet with the
Nominating Committee and thereafter with the Board of Directors.
2. Any candidate nominated for election to the Board of Directors
must (a) be recommended to the Board of Directors by the
unanimous vote of approval of the members of the Nominating
Committee and (b) receive a majority of votes in favor of
nomination from independent members of the Board of Directors.
Directors who are not independent shall not vote, but may be
present.
3. Each candidate recommended by the Nominating Committee shall be
required to complete one or more questionnaires and provide such
additional information as the Nominating Committee shall deem
necessary or appropriate. Such information shall include a
personal financial statement and a background investigation using
an outside firm which shall, among other matters, (a) verify the
accuracy of information provided by the candidate including that
the name and social security number is consistent with other
information provided, (b) conduct a review of criminal history
records, and (c) verify addresses associated with the applicant
and identification of persons with whom applicant has shared
addresses.
4. Each existing member of the Board of Directors whose term is
ending must be reviewed for recommendation for re-election by the
Nominating Committee. This review will include review of
attendance, participation, continuing education, investment in
shares, business development and community involvement. In lieu
of the information required to be provided by new candidates for
election to the Board of Directors described above in paragraph
3, the Nominating Committee may rely upon the information
contained in the most recent annual Directors and Officers
Questionnaire completed by the existing member of the Board of
Directors, subject to such updated information as the Nominating
Committee may deem appropriate.
A-1
5. Nominations for existing members of the Board of Directors must
receive a majority of votes in favor of nomination from the other
independent directors.
IV. Frequency of Meetings
The Nominating Committee shall meet at such times as it may deem
appropriate, but not less frequently than annually.
V. Conflicts
Any conflicts between the provisions of this Charter and the provisions
of the Company's bylaws shall be resolved in favor of the bylaw
provisions and nothing contained herein shall be construed as an
amendment of the Company's bylaws.
A-2
APPENDIX B
AMERICAN RIVER HOLDINGS
CODE OF ETHICS
General Policy Statement
------------------------
It is the policy of American River Holdings and it's subsidiary,
American River Bank (together, the "Company"), that the Company's directors,
officers (including the principal executive, financial and accounting officers,
or controller and persons performing similar functions) and employees conduct
business in accordance with the highest ethical standards and in compliance with
all laws, rules and regulations applicable to the Company in order to merit and
maintain the complete confidence and trust of the Company's customers,
shareholders and the public in general.
This Code of Ethics ("Code") establishes standards of compliance to
implement the above-referenced policy and is intended to supplement the
provisions of any other personnel policies of the Company or codes of conduct
which may establish additional standards of ethical behavior applicable to the
Company's directors, officers and employees. Any conflicts or inconsistencies
between this Code and such personnel policies or codes of conduct shall be
resolved in favor of the provisions of this Code.
I. CODE OF ETHICS PROVISIONS
A. Honest and Ethical Conduct. It is policy of the Company that
all of its directors, officers and employees shall act in an honest and ethical
manner, including the ethical handling of actual or apparent conflicts of
interest between personal and professional relationships. The Company expects
its directors, officers and employees to use good judgment, maintain high
ethical standards and to refrain from any form of illegal, dishonest or
unethical conduct. Additionally, directors, officers and employees may not
engage in any conduct directly or indirectly to influence, coerce, manipulate or
mislead any accountant engaged in preparing an audit for the Company.
B. Accurate and Timely Disclosure. It is the policy of the
Company that shareholders and financial markets receive full, fair, accurate,
timely and understandable disclosure in reports and documents that the Company
files with, or submits to the Securities Exchange Commission and in other public
communications. The Company realizes that only through compliance with such
disclosure obligations can shareholders and the public analyze the condition of
the Company. To the extent that directors, officers and employees of the Company
participate in the preparation or filing of such reports (which in each case
shall be presumed to include the principal executive officers, principal
financial and accounting officers, or controller, and persons performing similar
functions), such persons shall be responsible to ensure that those reports and
documents comply with such policy.
C. Compliance with Applicable Governmental Laws, Rules and
Regulations. All directors, officers and employees of the Company must fully
comply with the spirit and intent of all laws, rules and regulations applicable
to the Company.
D. Prompt Internal Reporting of Code Violations. The Company has
established procedures governing the receipt, investigation and treatment of
reports of violations of this Code and governmental laws, rules and regulations
applicable to the Company. The Company encourages its directors, officers and
employees to promptly report any such violations. Violations should be reported
to the Chairman of the Board of Directors of the Company. No retaliation against
a director or an officer or employee reporting such a violation in good faith
shall be permitted.
B-1
E. Accountability. It is the responsibility of each director,
officer and employee of the Company to be familiar with this Code and any
personnel policies or other codes of conduct of the Company which establish
ethical standards of behavior. The Company's Board of Directors is expected to
make every reasonable effort to ensure that the Company's directors, officers
and employees comply with the provisions of this Code and any such Company
personnel policies or other codes of conduct. Any Company director, officer or
employee who violates the provisions of this Code or any such Company personnel
policies or codes of conduct may be subject to disciplinary action including,
without limitation, termination of employment in the case of officers and
employees.
II. DISCLOSURE OBLIGATIONS
A. Public Availability. The Company will make a copy of this Code
publicly available in compliance with applicable laws, rules and regulations.
B. Changes and Waivers. Any change to this Code or waiver from
this Code may be made only with the prior consent of the Company's Board of
Directors. Any such change or waiver will be disclosed in compliance with
applicable laws, rules and regulations.
B-2
APPENDIX C
AMERICAN RIVER HOLDINGS
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
David T. Taber and Mitchell A. Derenzo certify that:
1. They are the President and Chief Executive Officer, and
Executive Vice President and Chief Financial Officer, respectively, of American
River Holdings, a California corporation.
2. Article One of the articles of incorporation of American River
Holdings is amended to read as follows:
"The name of the corporation is American River Bankshares."
3. The amendment herein set forth has been duly approved by the
board of directors of American River Holdings.
4. The foregoing amendment of Articles of Incorporation has been
duly approved by the required vote of shareholders in accordance with Section
902 of the Corporations Code. The total number of outstanding shares of the
corporation as of the Record Date, April 8, 2004, was 4,212,981. The number of
shares voting in favor of the amendment equaled or exceeded the vote required.
The percentage vote required was more than 50 percent.
---------------------------------
David T. Taber
President and Chief Executive Officer
---------------------------------
Mitchell A. Derenzo
Executive Vice President and
Chief Financial Officer
David T. Taber and Mitchell A. Derenzo declare under penalty of perjury
under the laws of the State of California that they have read the foregoing
certificate and know the contents thereof and that the same is true of their own
knowledge.
Dated: _______, 2004
---------------------------------
David T. Taber
President and Chief Executive Officer
---------------------------------
Mitchell A. Derenzo
Executive Vice President and
Chief Financial Officer
C-1
APPENDIX D
AMERICAN RIVER HOLDINGS
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee ("Committee") is appointed by the Board of
Directors to assist the Board of Directors, among other matters, in monitoring
the following:
1. The integrity of the Company's financial statements, financial
reporting processes and internal controls regarding finance, accounting,
regulatory and legal compliance;
2. The independence, qualifications and performance of the
Company's independent public accountants;
3. The performance of the Company's internal auditors;
4. Communications among the independent public accountants,
management, internal auditors, and the Board of Directors; and
5. Procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, including procedures for the confidential,
anonymous submission by the Company's employees of concerns regarding
questionable accounting or auditing matters.
COMMITTEE MEMBERSHIP
The Committee shall be comprised of at least three directors. Each
member of the Committee shall have the following attributes, subject to
permissible exceptions:
1. Independence, as defined in applicable rules promulgated by
the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of
2002, and applicable Nasdaq Stock Market Rules, including that a member shall
not have participated in the preparation of the financial statements of the
Company or any current subsidiary of the Company at any time during the past
three years; and
2. The ability to read and understand fundamental financial
statements, including the Company's balance sheet, income statement, and cash
flow statement.
At least one member of the Committee shall be an "Audit Committee
Financial Expert" as defined in the rules promulgated by the Securities and
Exchange Commission, or in the event that no member of the Committee qualifies
as an Audit Committee Financial Expert, at least one member of the Committee
shall be "financially sophisticated" as defined in applicable Nasdaq Stock
Market Rules. The members of the Committee shall be appointed by the Board of
Directors and serve at the pleasure of the Board of Directors.
MEETINGS
The Committee shall meet as often as it determines necessary, but not
less frequently than quarterly each fiscal year. The Committee shall meet
periodically with the Company's management, independent public accountants,
internal auditor, and compliance officer.
D-1
The Committee may request any officer or employee of the Company, or
the Company's counsel, or independent public accountants, or internal auditors,
or compliance officer, to attend a meeting of the Committee or to meet with any
members of, or advisors to, the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee, in its capacity as a committee of the Board of
Directors, shall be directly responsible for the appointment of the independent
public accountants (subject, if applicable, to shareholder ratification) and for
the retention, compensation and oversight of the work of the independent public
accountants (including resolution of disagreements between management and the
independent public accountants regarding financial reporting) for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services for the Company. The independent public accountant shall report
directly to the Committee.
The Committee shall pre-approve all audit services and permissible
non-audit services to be performed for the Company by the independent public
accountants, subject to any permitted exceptions for pre-approval of non-audit
services pursuant to rules and regulations of the Securities and Exchange
Commission and/or Nasdaq.
The Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Committee, for payment of compensation to the independent public accountants
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services and to any other advisors employed by the
Committee.
The Committee shall establish procedures for the receipt, retention,
and treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, including procedures for the
confidential, anonymous submission by the Company's employees of concerns
regarding questionable accounting or auditing matters.
The Committee shall make regular reports to the Board of Directors. The
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board of Directors for approval.
The Committee, to the extent required by applicable rules or
regulations of the Securities and Exchange Commission and/or Nasdaq, or as the
Committee deems necessary or appropriate, shall perform the following:
1. Financial Statement and Disclosure Matters
(a) Review with management and the independent public accountants
the annual audited financial statements, including disclosures made in the
Company's Annual Report on Form 10-K.
(b) Review with management, the independent public accountants,
the internal auditors and Company counsel any certification provided by
management related to the Company's financial statements. Review with
management, the independent public accountants, and the internal auditors
management's assertion regarding the design effectiveness and operation
efficiency of the Company's internal control over financial reporting and
compliance with the applicable laws and regulations.
D-2
(c) Review with management and the independent public accountants
significant financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any significant
changes in the Company's selection or application of accounting principles, any
material issues as to the adequacy of the Company's internal controls and any
actions taken or adopted in light of material control deficiencies.
(d) Review a report by the independent public accountants
concerning (i) all critical accounting policies and practices to be used; (ii)
alternative treatments of financial information within GAAP that have been
discussed with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the independent
public accountants; and (iii) any other material written communications between
the independent public accountants and the Company's management.
(e) Review with management and the independent public accountants
the effect of regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
(f) Review with management the Company's major financial risk
exposures and the actions management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management policies.
(g) Review with the independent public accountants (i) the matters
required to be discussed by the Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards), as modified or supplemented;
(ii) the letter from the independent public accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
as modified or supplemented, and the independence of the independent public
accountants related thereto; and (iii) matters relating to the conduct of the
audit, including any difficulties encountered in the course of the audit work,
any restrictions on the scope of activities or access to requested information,
and any significant disagreements with management.
(h) Review disclosures made to the Committee by the Company's
Chief Executive Officer and Chief Financial Officer during their certification
about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management or
other employees who have a significant role in the Company's internal controls.
2. Independent Public Accountant Oversight
(a) Review the length of time the lead and concurring partner of
the independent public accountants team has been engaged to audit the Company.
(b) On an annual basis, the Committee shall review and discuss
with the independent public accountants (i) all relationships they have with the
Company that could impair the independent public accountant's independence, (ii)
the independent public accountant's internal quality control procedures, and
(iii) any material issues raised by the most recent internal quality control
review or peer review of the independent public accountant's firm or by any
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the independent public accountant's firm, and the steps taken to deal with those
issues.
(c) Ensure the rotation of the lead audit partner of the
independent public accountants having primary responsibility for the Company's
audit and the audit partner responsible for reviewing the audit to the extent
required by applicable law or regulation.
(d) Prohibit, to the extent required by applicable law or
regulation, the hiring of any employee of the independent public accountants who
was engaged on the Company's account and who would be employed by the Company in
a financial reporting oversight role.
D-3
(e) Meet with the independent public accountants prior to the
Company's audit to discuss the planning and staffing of the audit.
3. Internal Audit Oversight
(a) Approve the appointment and replacement of the independent
firm of internal auditors; including the independence and authority of the
auditors' reporting obligations.
(b) Review significant reports to management prepared by the
auditors and management's responses.
(c) Review with the auditors and management the auditors'
responsibilities, budget and staffing and any recommended changes in the planned
scope of the internal audit.
(d) Review the audit scope and audit staffing plan and discuss the
completeness of coverage and effective use of audit resources with both the
auditors and the independent public accountants.
(e) Review with the auditors a progress report on the internal
audit plan and any significant changes with explanations for any changes from
the original plan.
(f) Receive confirmation from both the auditors and the
independent public accountants that no limitations have been placed on the scope
or nature of their audit process or procedures.
4. Compliance and Internal Control Oversight
(a) Review reports and disclosures of insider and affiliated party
transactions.
(b) Review with management and the independent public accountants
any correspondence with regulators or governmental agencies and any published
reports which raise material issues regarding the Company's internal controls,
financial statements or accounting policies.
(c) Review legal matters that may have a material impact on the
financial statements or the Company's compliance policies with the Company's
counsel.
(d) Review the adequacy and effectiveness of the Company's
internal controls and security matters with management, the auditors and the
independent public accountants.
D-4
DETACH PROXY CARD HERE
-------------------------------------------------------------
PROXY
-------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
AMERICAN RIVER HOLDINGS
for the Annual Meeting of Shareholders May 20, 2004
The undersigned shareholder(s) of American River Holdings
PLEASE DETACH (the "Company") hereby appoint(s) David T. Taber and
HERE Mitchell A. Derenzo as proxyholders, each with full powers
of substitution, to represent and to vote all stock of the
You Must Detach Company which the undersigned is (are) entitled to vote at
This Portion of the Annual Meeting of Shareholders of the Company to be
the Proxy Card held on Thursday, May 20, 2004 at the Capitol Mall Branch
Before Returning Office, located at 520 Capitol Mall, Suite 100, Sacramento,
it in the California 95814, and at any and all postponements or
Enclosed Envelope adjournments thereof, as fully and with the same force and
effect as the undersigned might or could do if personally
present at the Meeting and at any and all postponements or
adjournments thereof, upon the following items on the
reverse side of the proxy.
The Board of Directors recommends a vote "FOR" Proposal No.
1, Proposal No. 2, and Proposal No. 3 set forth on the
reverse side. This proxy, when properly executed, will be
voted as directed herein by the undersigned shareholder(s).
If no direction is indicated, this proxy will be voted
"FOR" all nominees listed in Proposal No. 1, "FOR" Proposal
No. 2, "FOR" Proposal No. 3, and in the proxyholders'
discretion as to any other business which may come before
the Meeting.
PLEASE SIGN AND DATE ON REVERSE SIDE
DETACH PROXY CARD HERE
--------------------------------------------------------------------------------------------------------------------
1. Election of Directors. To elect the following 2. Amendment of Articles of Incorporation. Approval of an
three (3) persons as Class I directors to serve amendment of the Articles of Incorporation to change the
for a three-year term until the 2007 Annual name of the Company from American River Holdings to
Meeting of Shareholders and until their American River Bankshares.
successors are duly elected and qualified.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Amador S. Bustos
Robert J. Fox 3. Ratification of Independent Public Accountants. To PLEASE DETACH
William A. Robotham ratify the selection of Perry-Smith LLP as independent HERE
public accountants for the 2004 fiscal year. You Must Detach
[ ] FOR ALL [ ] WITHHOLD ALL This Portion of
[ ] FOR [ ] AGAINST [ ] ABSTAIN the Proxy Card
[ ] FOR ALL EXCEPT Nominee(s) Written Below: Before Returning
4. Other Business. To transact such other business as it in the
--------------------------------------------- may properly come before the Meeting and any Enclosed
postponements or adjournments thereof. Envelope
Number of Shares:
---------------------------- Please date this Proxy and sign your name as it
appears on the stock certificates. Executors,
Date: , 2004 administrators, trustees, etc., should give their
--------------------- full titles. All joint owners should sign.
I/we do [ ] do not [ ] expect to attend the Signature of Shareholder(s)
Meeting
-----------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF -----------------------------------------------
DIRECTORS, AND MAY BE REVOKED BY THE Please print name(s)
SHAREHOLDER(S) PRIOR TO ITS EXERCISE BY FILING
WITH THE CORPORATE SECRETARY OF THE COMPANY AN
INSTRUMENT REVOKING THIS PROXY FOR A DULY EXECUTED
PROXY BEARING A LATER DATE OR BY APPEARING IN
PERSON AND VOTING AT THE MEETING.