UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Exchange Act of 1934
Filed by the Registrant
|
þ | |
Filed by a Party other than the Registrant
|
o |
Check the appropriate box:
| o | Preliminary Proxy Statement | |
| o | Confidential, for Use of the Commission Only | |
| (as permitted by Rule 14a-6(e)(2)) | ||
| þ | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material Pursuant to §240.14a-12 |
WASHINGTON BANKING COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
| þ | No fee required. | |
| o | $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. | |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) Title of each class of securities to which transaction applies:
| o | Fee paid previously with preliminary materials | |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1) Amount Previously Paid:
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MAY 19,
2011
NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of
Shareholders of Washington Banking Company will be held at the
Best Western Harbor Plaza, 33175 State Route 20, Oak Harbor,
Washington, on Thursday, May 19, 2011 at 3:00 p.m., to
consider and to vote upon the following matters:
1. AMENDMENT TO ARTICLES OF INCORPORATION. To approve
an amendment to our Articles of Incorporation to declassify the
Board of Directors and provide for the annual election of
directors.
2. ELECTION OF DIRECTORS. To elect the six nominees named
in the attached proxy statement to the Board of Directors to
serve one-year terms expiring at the 2012 annual meeting and
upon their successors being duly elected and qualified. In the
event the proposed amendment to our Articles of Incorporation to
declassify the Board of Directors does not pass, shareholders
will be asked to elect the two nominees named in the attached
proxy statement whose terms expire at the 2011 annual meeting to
serve three-year terms as Class 3 directors until the
2014 annual meeting and upon their successors being duly elected
and qualified.
3. NON-BINDING ADVISORY
“SAY-ON-PAY”
VOTE ON EXECUTIVE COMPENSATION. To consider an advisory vote on
named executive officer compensation.
4. NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF THE
“SAY-ON-PAY”
VOTE. To consider an advisory vote on the frequency (annually,
every two years or every three years) of the advisory vote on
named executive officer compensation.
5. NON-BINDING RATIFICATION OF AUDITOR APPOINTMENT. To
ratify the Audit Committee’s appointment of Moss Adams LLP
as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2011.
6. OTHER BUSINESS. To consider and act upon such other
business as may properly be brought before the 2011 Annual
Meeting, or any adjournments or postponements thereof.
Only shareholders of record at the close of business on
March 15, 2011 are entitled to notice of and to vote at the
Annual Meeting, and any adjournments or postponements thereof.
Your Board of Directors unanimously recommends that
shareholders vote “FOR” the amendment to our Articles
of Incorporation, “FOR” each of the Board’s
nominees in the election of directors, “FOR” the
advisory vote on named executive officer compensation,
“ANNUALLY” for the advisory vote on the frequency of
the vote on named executive officer compensation, and
“FOR” ratification of Moss Adams LLP.
By Order of the Board of Directors
Shelly L. Angus
Corporate Secretary
Oak Harbor, Washington
April 1, 2011
Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting to be Held on May 19,
2011. A full set of proxy materials, including a
copy of the accompanying proxy statement and the annual report
to shareholders is available at
http://www.edocumentview.com/WBCO.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING. YOU MAY ALSO VOTE BY PHONE OR ON THE
INTERNET — PLEASE FOLLOW THE INSTRUCTIONS ON THE
PROXY CARD. IF YOU ATTEND THE ANNUAL MEETING, AND ARE THE RECORD
HOLDER OF YOUR SHARES (OR HOLD A “LEGAL PROXY” FROM
YOUR BROKER) YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE IN
PERSON. YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE BY FOLLOWING THE INSTRUCTIONS IN THE ACCOMPANYING
PROXY STATEMENT
WASHINGTON
BANKING COMPANY
450 SW Bayshore Drive
Oak Harbor, Washington 98277
360-240-6458
450 SW Bayshore Drive
Oak Harbor, Washington 98277
360-240-6458
PROXY
STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION,
VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Proxy Card are being
first sent to shareholders on or about April 1, 2011, for
use in connection with the Annual Meeting of Shareholders of
Washington Banking Company (“WBCO” or the
“Company”) to be held on Thursday, May 19, 2011
at 3:00 p.m. at the Best Western Harbor Plaza, 33175 State
Route 20, Oak Harbor, Washington. Only those shareholders of
record of WBCO’s common stock at the close of business on
March 15, 2011 will be entitled to notice of and to vote at
the Annual Meeting. The number of shares of common stock
outstanding and entitled to vote at the Annual Meeting is
15,332,823.
Solicitation
WBCO’s Board of Directors is soliciting your proxy. Giving
us your proxy means that you authorize another person or persons
to vote your shares of common stock at the Annual Meeting in the
manner you direct. The written document you complete is referred
to as a Proxy Card or Voting Instruction Form depending on
how you own shares.
The costs of solicitation will be borne by the Company. In
addition to the use of the mails, solicitation may be made,
without additional compensation by directors, officers and other
employees of WBCO or its subsidiary, Whidbey Island Bank (the
“Bank”), by telephone, facsimile or personal contact.
The Company does not expect to pay any compensation for the
solicitation of proxies, except to brokers, nominees and similar
recordholders for reasonable expenses in mailing proxy materials
to beneficial owners.
Voting on
Matters before the Annual Meeting
We must have a quorum to conduct any business at the Annual
Meeting. A majority of shareholders entitled to vote at the
Annual Meeting, represented in person or by proxy, constitutes a
quorum. The shares of a shareholder whose ballot on any or all
proposals is marked as “abstain” will be included in
the number of shares present at the Annual Meeting for the
purpose of determining the presence of a quorum.
On each matter before the annual meeting, including the election
of directors, shareholders have one vote for each share of
common stock held. The proposed amendment to our Articles of
Incorporation requires the affirmative vote of a majority of all
votes entitled to be cast on the proposed amendment. The
nominees for election as directors who receive the greatest
number of votes will be elected directors. Shareholders are not
entitled to cumulate their votes in the election of directors.
Approval of the ratification of auditors and other matters
require the affirmative vote of the holders of a majority of
shares represented in person or by proxy and entitled to vote at
the annual meeting. The advisory votes on auditor ratification,
named executive officer compensation and the frequency of voting
on named executive officer compensation are non-binding and the
results will be considered by the Board and the Audit or
Compensation Committee.
The Company has not received any director nominations from
shareholders or timely notice of any shareholder proposals to be
considered at the annual meeting. Shareholders may submit
nominees
1
and matters for a vote only in accordance with SEC rules and the
Company’s Bylaws. The Board of Directors does not presently
know of any matters to be brought before the Annual Meeting,
other than the amendment to the Articles of Incorporation, the
election of directors, the advisory votes on executive
compensation and frequency of executive compensation votes and
the ratification of auditors.
With regard to the election of directors, votes may be cast in
favor of some or all of the nominees or withheld as to some or
all of the nominees. Abstentions may be specified on all
proposals except the election of directors. An abstention from
voting can have the practical effect of voting against a
proposal when a majority vote is required, since the shares
which are the subject of the abstention will be considered
present and entitled to vote but will not be voted in favor of
the proposal.
If shares are held in “street name” through a broker
or other nominee (that is, the broker or nominee is the record
holder but not the beneficial owner), the broker or nominee is
permitted to exercise voting discretion with respect to the
ratification of auditors but not with respect to the amendment
to our Articles of Incorporation, the election of directors or
the advisory votes on named executive officer compensation.
Thus, if the broker or nominee is not given specific voting
instructions by the beneficial owner, shares may be voted on the
ratification of auditors by the broker or nominee at their own
discretion. However, if your shares are held in street name and
neither you nor your broker votes them, the votes will be
“broker non-votes” which will have the effect of
excluding your vote from the tallies.
For properly executed Proxies received by WBCO in time for the
annual meeting, the persons named in the Proxy to vote the
shares will vote them as instructed, but if no instructions are
given it is the intention of the persons named in the Proxy to
vote the shares represented by the Proxy: “FOR”
the proposed amendment to the Articles of Incorporation,
“FOR” each of the nominees for director listed
in this Proxy Statement, “FOR” the advisory
vote on named executive officer compensation,
“ANNUALLY” for the frequency of the advisory
vote on named executive officer compensation, and
“FOR” the ratification of auditors.
You may also vote by phone or on the Internet. Please see the
instructions on the proxy card that accompanied this Proxy
Statement.
Revoking
a Proxy
Any Proxy given by a shareholder may be revoked before its
exercise (1) by delivery to WBCO’s Secretary of a
written notice of revocation, (2) by delivery to
WBCO’s Secretary of a subsequently dated Proxy, or
(3) at the annual meeting prior to the taking of the
shareholder vote. If you vote through your broker, please
contact your broker to change or revoke your vote.
Counting
Votes
The proxy votes will be tabulated by the Company’s transfer
agent, Computershare Trust Company. At the Annual Meeting,
the votes will be counted and inspected by WBCO’s corporate
secretary, or her designate, as appointed by the Company’s
Board of Directors. We will report the voting results in a
Form 8-K
filed with the SEC within four business days of the annual
meeting.
Attending
the Annual Meeting
All shareholders of record as of March 15, 2011, are
welcome to attend the Annual Meeting. If you wish to vote shares
you own beneficially at the meeting, you must first request and
obtain a “legal proxy” from your broker or other
custodian. At the entrance to the meeting, we will verify that
your
2
name appears in our stock records or will inspect your brokerage
or bank statement and legal proxy as proof of ownership.
Additional
Information
If you have questions about the Annual Meeting, submitting your
Proxy or if you need copies of materials, please contact our
corporate Secretary, Shelly Angus, at 450 SW Bayshore Drive,
Oak Harbor, Washington 98277,
360-240-6458.
PROPOSAL 1:
AMENDMENT TO ARTICLES OF INCORPORATION
Our articles of incorporation currently provide that the
Company’s board of directors is divided into three classes
and each year the term of office of one class expires. A board
divided into multiple classes is often referred to as a
“classified” or “staggered” board. At the
2010 Annual Meeting, shareholders voted on a resolution to
recommend that the Board of Directors review and take steps
necessary to eliminate the classified board and require all
directors annually stand for election. A majority of the shares
that voted on the proposal at the 2010 Annual Meeting voted in
favor and approximately 45.2% of the then outstanding shares
voted in favor with 27.5% voting against. The proposal passed.
In preparation for the 2011 annual meeting our Corporate
Governance / Nominating Committee reviewed the
shareholder vote and the arguments in favor of and against a
classified board and recommended to the Board of Directors that
we amend our Articles of Incorporation to provide for annual
election of directors. On February 24, 2011, our Board of
Directors adopted a resolution recommending that shareholders
approve an amendment to our Articles of Incorporation to remove
the classified board provisions and provide for the annual
election of all directors. The committee and the Board of
Directors considered that classified board structures have been
criticized from a corporate governance perspective because they
do not allow for an annual shareholder referendum on the
performance of the Board of Directors, and that the election of
directors is the primary avenue for shareholders to influence
corporate governance policies and to hold management accountable
for implementing those policies.
If shareholders approve the proposed amendment to provide for
the annual election of all directors, the terms of all directors
elected this year will expire at the 2012 annual meeting. If
this proposal is not approved, our board of directors will
remain classified and two directors — Jay Lien and
Edward Wallgren, who are currently serving as
Class 3 Directors — will stand for election
to three year terms that will expire at the 2014 annual meeting.
Amendment
to the Articles of Incorporation
The Board of Directors approved an amendment to the Articles of
Incorporation to delete Section 4.2 and replace it with the
following:
‘‘Section 4.2. Commencing
with the 2011 Annual Meeting of Shareholders, each director
shall be elected to serve a term of one year, with each
director’s term to expire at the next annual meeting
following the director’s election. Notwithstanding the
expiration of the term of a director, the director shall
continue to hold office until his or her successor has been
elected and qualified. A decrease in the number of directors
will not have the effect of shortening the term of any incumbent
director. At each annual meeting, the shareholders will elect
directors by a plurality of the votes cast by the shares
entitled to vote in the election.”
3
Vote
Required to Approve the Amendment
A majority of the outstanding shares as of March 15, 2011,
must vote in favor of the proposed amendment.
Board
Recommendation
The Board of Directors recommends a vote “FOR” the
proposed amendment.
PROPOSAL 2:
ELECTION OF DIRECTORS
Directors are currently divided into three classes, each class
serving three-year terms. At each annual meeting, approximately
one-third of the members of the Board of Directors have been
elected. The terms of current Class 3 directors Jay
Lien and Edward Wallgren expire at the 2011 Annual Meeting. The
Board of Directors, however, has approved and recommends that
shareholders approve the proposed amendment to our Articles of
Incorporation described above to eliminate the classes of
directors effective immediately and to require each director to
annually stand for election.
Messrs. Lien and Wallgren have been nominated by the Board
of Directors for re-election at the Annual Meeting, and the
Board of Directors has nominated each of the incumbent
Class 1 and Class 2 directors to stand for
election at the Annual Meeting. If the proposed amendment does
not pass, only Messrs. Lien and Wallgren will stand for
re-election for terms expiring at the 2014 annual meeting and we
will maintain our classified board with the
Class 1 directors’ terms expiring at the 2012
annual meeting and the Class 2 directors’ terms
expiring at the 2013 annual meeting. If the proposed amendment
passes, the nominees will be each of the six incumbent directors
and their terms will expire at the 2012 annual meeting.
WBCO’s Articles of Incorporation provide that the number of
directors to be elected by the shareholders shall be not less
than five nor more than 12 and that, within such minimum and
maximum, the exact number of directors shall be fixed by
resolution of the Board of Directors. The Board of Directors has
fixed the number of directors at six.
Each nominee has indicated that he is able and willing to serve
on the Board of Directors. If any nominee should become unable
or unwilling to serve, the Proxy will be voted for such person
as is designated by the Board of Directors to replace any such
nominee. The Board of Directors presently has no knowledge that
any of the nominees will be unable or unwilling to serve.
Information
about the Nominees
The address for each of the nominees and all incumbent directors
is care of WBCO, 450 SW Bayshore Drive, PO Box 7001,
Oak Harbor, Washington 98277. All nominees are presently
directors of both WBCO and the Bank.
|
Jay T. Lien
|
Director since 1987 |
Mr. Lien, 67, has been the president of a real estate
company since 1986. He is currently the President of Saratoga
Passage LLC, a real estate company that was established in 2004.
Mr. Lien served as Chairman of the Board of WBCO and the
Bank from September 1998 until April 2001. In addition to
providing diversity in geographic representation through his
activity on Camano Island and in San Juan County,
Mr. Lien’s experience in the real estate industry and
as a business owner provides specialized knowledge of the
Bank’s market areas and real estate economic conditions. A
significant portion of the Bank’s lending activity is in
commercial real estate and an understanding of real estate in
each of our primary markets is essential to our loan review
process.
4
Mr. Lien currently serves as Class 3 director and
his term is set to expire at the Annual Meeting.
|
Edward J. Wallgren
|
Director since 1991 |
Mr. Wallgren, 72, has been the President of Island O.K.
Tires, Inc. since 1968. Island O.K. Tires, Inc. is currently the
owner of one Les Schwab Tire store in northwestern Washington.
Mr. Wallgren served as Chairman of the Board of WBCO and
the Bank from February 1996 until September 1998. As a longtime
business owner, Mr. Wallgren has experience in managing a
growing company, as well as having human resources experience
through his management of large numbers of employees at various
locations. Mr. Wallgren lives and is active in the Island
County business community, home to the Bank’s headquarters.
As a community banking organization, local business
relationships are important to the continued success of the
company.
Mr. Wallgren currently serves as Class 3 director
and his term is set to expire at the Annual Meeting.
|
Robert T. Severns
|
Director since 2010 |
Mr. Severns, 60, has been in the title insurance business
for nearly 40 years. Since 1999, he has been the President
of Chicago Title Insurance Company/ Island Division, Oak
Harbor. He served on the Island Title Company Board of
Directors for 15 years and is currently Chairman of the
Board for Land Title of Kitsap and Mason Counties.
Mr. Severns serves as an Oak Harbor City Council member. He
holds a Bachelor of Arts Degree in Administrative Management
from Central Washington University, and has varied experience in
board and committee memberships at local and state levels.
Mr. Severns brings to the board a specialized knowledge of
the title insurance industry, extensive community involvement,
and a considerable amount of experience as a director.
Mr. Severns currently serves as a
Class 2 director and his term was originally set to
expire in 2013. As described above, we are proposing to
eliminate classes of directors and have each director serve for
one-year terms.
|
John L. Wagner
|
Director since 2007 |
Mr. Wagner, 67, has been the President and Chief Executive
Officer of WBCO since October 2008 and the President and Chief
Executive Officer of the Bank since April 2007. He joined the
Bank in 1999 as Senior Vice President and Regional Manager in
Whatcom County. In 2002, Mr. Wagner was selected to oversee
branch administration and was promoted to COO in 2004.
Mr. Wagner has a broad background in banking and
international finance as well as comprehensive administrative
experience as former President of Bank of Washington in
Bellingham, Washington. Mr. Wagner has extensive experience
regarding the operations and products of the Company, gained
through his position as President of the Company and his prior
operations experience with the Bank. He brings to the Board
specialized knowledge of the banking and financial services
industries, extensive experience in human resources management,
and community relations experience.
Mr. Wagner currently serves as a Class 2 director
and his term was originally set to expire in 2013. As described
above, we are proposing to eliminate classes of directors and
have each director serve for one-year terms.
|
Gragg E. Miller
|
Director since 2009 |
Mr. Miller, 59, is the President of Coldwell Banker
Miller-Arnason realtors in Bellingham, a position he has held
since 1978. Miller holds a Bachelor’s Degree from the
University of Washington. He has attended numerous professional
institutes in the real estate field and was honored with the
Lifetime Achievement Award from the Whatcom County Board of
Realtors in 2006. Mr. Miller has extensive community
relations experience, with involvement in civic and business
organizations in
5
Bellingham. He brings to the board a specialized knowledge of
the real estate industry, with a focus in Whatcom County, and
experience in overseeing a growing company.
Mr. Miller currently serves as a Class 1 director
and his term was originally set to expire in 2012. As described
above, we are proposing to eliminate classes of directors and
have each director serve for one-year terms.
|
Anthony B. Pickering
|
Director since 1996 |
Mr. Pickering, 63, owned Max Dale’s Restaurant and
Stanwood Grill from 1983 and 2001, respectively, until 2008. He
holds a Bachelor’s Degree in Mathematics from Washington
State University. He is a past-President of the Skagit Valley
Hospital Foundation and previously served as a Trustee for the
Washington State University Foundation Board of Trustees and on
the board of the Economic Development Association of Skagit
County. Mr. Pickering currently serves as Chairman of the
Board of WBCO and the Bank, on the board of directors of the
Skagit Preschool and Resource Center and the Skagit Regional
Public Facilities District. Mr. Pickering’s reputation
as a well-respected member of the Skagit County community,
including Mt. Vernon citizen of the year and his prior board
experience bring leadership qualities to the board.
Mr. Pickering’s business background gives him
experience in financial literacy, human resources management,
and community relations.
Mr. Pickering currently serves as a
Class 1 director and his term was originally set to
expire in 2012. As described above, we are proposing to
eliminate classes of directors and have each director serve for
one-year terms.
Board
Recommendation
The Board of Directors recommends a vote “FOR” the
nominees.
PROPOSAL 3:
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank”), and recently adopted SEC rules,
require us to include the following resolution, often referred
to as
“Say-On-Pay”,
for shareholders to consider and approve, in a non-binding
advisory vote:
“RESOLVED, that the shareholders approve the compensation
paid to the Company’s named executive officers as disclosed
pursuant to the compensation disclosure rules of the Securities
and Exchange Commission, including the Compensation
Discussion & Analysis, the executive compensation
tables and accompanying narrative disclosure in this Proxy
Statement.”
We believe our compensation practices are strongly aligned with
the long-term interests of shareholders. The
Say-On-Pay
vote is advisory and will not be binding upon the Board of
Directors. The Compensation Committee will, however, take into
account the outcome of the vote when considering future
executive compensation arrangements.
Board
Recommendation
The Board of Directors recommends that you vote
“FOR” the approval of the compensation of our named
executive officers as disclosed in this Proxy Statement.
6
PROPOSAL 4:
NON-BINDING VOTE ON THE FREQUENCY OF SHAREHOLDER
VOTES ON EXECUTIVE COMPENSATION
VOTES ON EXECUTIVE COMPENSATION
In addition to
“Say-On-Pay”,
Dodd-Frank and recently adopted SEC rules require us to include
a proposal for shareholders to recommend, in a non-binding
advisory vote, how often we should include a vote on the
compensation of our named executive officers. We are providing
you with the opportunity to abstain or to recommend that the
vote occur annually, every two years or every three years.
After careful consideration of this proposal, our Board of
Directors determined that an annual advisory vote on executive
compensation is the most appropriate alternative for the Company
at this time. An annual vote aligns shareholder feedback with
management decision making. Compensation decisions are reviewed
and typically made on an annual basis.
Because the vote on this proposal is advisory in nature, it will
not be binding on or overrule any decisions by the Board of
Directors.
Board
Recommendation
The Board of Directors recommends that you vote to recommend
that the non-binding shareholder vote on named executive officer
compensation occur “ANNUALLY”.
PROPOSAL 5:
RATIFICATION OF AUDITOR APPOINTMENT
The Audit Committee selected the firm of Moss Adams LLP
(“Moss Adams”), the Company’s independent
auditors for the year ended December 31, 2010, to act in
such capacity for the fiscal year ending December 31, 2011,
and recommends that shareholders vote in favor of ratification
of such appointment. There are no affiliations between the
Company and Moss Adams, its partners, associates or employees,
other than those which pertain to the engagement of Moss Adams
in the previous year (i) as independent auditors for the
Company and (ii) for certain consulting services. Moss
Adams has served as the Company’s independent auditors
since 2002.
Shareholder approval of the selection of Moss Adams as the
Company’s independent auditors is not required by law, the
Company’s bylaws or otherwise. The Sarbanes-Oxley Act of
2002 requires the Audit Committee to be directly responsible for
the appointment, compensation and oversight of the audit work
and the independent auditors. The Audit Committee will consider
the results of the shareholder vote on this proposal and, in the
event of a negative vote, will reconsider its selection of Moss
Adams. However, the Audit Committee is not bound by the
shareholder vote.
Even if Moss Adams’ appointment is ratified by the
shareholders, the Audit Committee may, in its discretion,
appoint a new independent registered public accounting firm at
any time if it determines that such a change would be in the
best interests of the Company and its shareholders. A
representative of Moss Adams is expected to attend the annual
meeting and that representative will have the opportunity to
make a statement, if they desire to do so, and to answer
appropriate questions.
Board
Recommendation
The board of directors unanimously recommends a vote
“FOR” the ratification of Moss Adams as independent
auditor.
7
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to
beneficial ownership of WBCO’s common stock by
(a) each director as of March 15, 2011; (b) the
named executive officers (who constitute all of the
Company’s executive officers) as of March 15, 2011;
(c) all directors and executive officers as a group as of
March 15, 2011 and (d) all shareholders known by WBCO
to be the beneficial owners of more than 5% of the outstanding
shares of WBCO common stock as of the date indicated in filings
by such owners with the SEC. Except as noted below, WBCO
believes that the beneficial owners of the shares listed below,
based on information furnished by such owners, have sole voting
and investment power with respect to such shares. The
percentages shown are based on the number of shares of WBCO
common stock deemed to be outstanding, under applicable
regulations (including options exercisable and RSUs vesting
within sixty days of the record date). WBCO has one outstanding
class of securities — common stock.
|
Shares Beneficially Owned at |
||||||||
| March 15, 2011 | ||||||||
|
Percentage of Outstanding |
||||||||
|
Name
|
Number | Common Stock | ||||||
|
John L. Wagner,
Director, President and CEO |
58,032 | (1) | * | |||||
|
Joseph W. Niemer,
Executive Vice President and CCO |
18,205 | (2) | * | |||||
|
Richard A. Shields,
Executive Vice President and CFO |
34,021 | (3) | * | |||||
|
Bryan McDonald,
Executive Vice President and COO |
13,718 | (4) | * | |||||
|
Jay T. Lien,
Director |
68,653 | (5) | * | |||||
|
Gragg E. Miller,
Director |
14,000 | * | ||||||
|
Anthony B. Pickering,
Director |
55,435 | (6) | * | |||||
|
Robert T. Severns,
Director |
916 | * | ||||||
|
Edward J. Wallgren,
Director |
199,728 | (7) | 1.3 | % | ||||
|
Directors and executive officers as a group (9 persons)
|
462,708 | (8) | 3.0 | % | ||||
|
Name and Address
|
||||||||
|
The Banc Funds Company, LLC
|
1,081,086 | (9) | 7.0 | % | ||||
|
20 North Wacker Dr, Suite 3300
|
||||||||
|
Chicago, IL 60606
|
||||||||
|
Lord, Abbett & Co.
LLC(10)
|
957,696 | (10) | 6.2 | % | ||||
|
90 Hudson Street
|
||||||||
|
Jersey City, NJ 07302
|
||||||||
|
Endicott Management
Company(11)
|
901,600 | (11) | 5.9 | % | ||||
|
360 Madison Ave,
21st Floor
|
||||||||
|
New York, NY 10017
|
||||||||
|
Wellington Management Co, LLP
|
842,506 | (12) | 5.5 | % | ||||
|
75 State Street
|
||||||||
|
Boston, MA 02109
|
||||||||
| * | Represents less than 1.0% |
8
| (1) | Includes 11,146 shares issuable upon exercise of options and 175 RSU shares issuable at vesting. Of the 11,146 option shares, 549 are exercisable at $6.15 per share, 8,000 are exercisable at $9.11 per share, 496 are exercisable at $14.60 per share, and 2,101 are exercisable at $15.98 per share. | |
| (2) | Includes 9,913 shares issuable upon exercise of options and 175 RSU shares issuable at vesting. Of the 9,913 option shares, 6,666 are exercisable at $9.11 per share, 620 are exercisable at $14.60 per share and 2,627 are exercisable at $15.98 per share. | |
| (3) | Includes 10,930 shares issuable upon exercise of options and 175 RSU shares issuable at vesting. Of the 10,930 option shares, 8,333 are exercisable at $9.11 per share, 496 are exercisable at $14.60 per share and 2,101 are exercisable at $15.98 per share. | |
| (4) | Includes 4,288 shares issuable upon exercise of options and 80 RSU shares issuable at vesting. Of the 4,288 option shares, 3,333 are exercisable at $9.11 per share and 955 are exercisable at $15.98 per share. | |
| (5) | Includes 5,149 shares issuable upon exercise of options, and 700 shares owned by Dan Garrison, Inc. Profit Sharing Plan, for which Mr. Lien is the Trustee. Of the 5,149 option shares, 844 are exercisable at $4.50 per share, 1,380 are exercisable at $6.54 per share, 1162 are exercisable at $14.60 per share and 1,763 are exercisable at $15.98 per share. | |
| (6) | Includes 10,591 shares issuable upon exercise of options. Of those shares, 4,216 are exercisable at $4.50 per share, 3,450 are exercisable at $6.54 per share, 1,162 are exercisable at $14.60 per share and 1,763 are exercisable at $15.98 per share. | |
| (7) | Includes 2,925 shares issuable upon exercise of options. Of those shares, 1,162 are exercisable at $14.60 per share and 1,763 are exercisable at $15.98 per share. | |
| (8) | Includes (a) 54,942 shares issuable pursuant to options exercisable within 60 days of the date of this table at exercise prices ranging from $4.50 to $15.98 per share, and (b) 605 restricted stock units issuable as common stock upon vesting within 60 days of this table. | |
| (9) | Based on information set forth in Schedule 13G/A filed with the SEC on February 11, 2011. |
| (10) | Based on information set forth in Schedule 13G filed February 14, 2011, which indicated sole voting power of 812,496 of the shares indicated. | |
| (11) | Endicott Management Company includes: Endicott Opportunity Partners II LP, Endicott Opportunity Partners III LP, W.R. Endicott IIp LLC, and W.R. Endicott III LLC; Messrs. Wayne K. Goldstein and Robert I. Usdan, Managing Members. Based on information set forth in Schedule 13G filed with the SEC on February 16, 2010. | |
| (12) | Based on information set forth in Schedule 13G/A filed with the SEC on February 14, 2011. |
9
CORPORATE
GOVERNANCE
Information
Regarding the Board and Its Committees
The Board has determined that all non-management directors of
the Company are “independent” as that term is defined
in The Nasdaq Global Select Market listing requirements. In
determining independence of directors, the Board considered the
responses to annual Director & Officer Questionnaires
that indicated no transactions between the directors and the
Company or the Bank other than routine banking transactions with
Bank. The Board also considered the lack of any other reported
transactions or arrangements; directors are required to report
conflicts of interest and transactions pursuant to our Code of
Conduct.
The Company’s non-management directors meet in executive
session, without management present, on a regular basis. The
Board of Directors of WBCO has established standing committees,
including an Audit Committee, a Compensation Committee and a
Corporate Governance/Nominating Committee. Only non-management,
independent directors serve on such committees. The table below
shows current membership for each of the standing Board
committees.
|
Audit |
Compensation |
Corporate Governance/ |
||
|
Committee
|
Committee | Nominating Committee | ||
|
Gragg E. Miller*
|
Jay T. Lien | Jay T. Lien* | ||
|
Anthony B. Pickering
|
Anthony B. Pickering | Gragg E. Miller | ||
|
Robert T. Severns
|
Robert T. Severns | Anthony B. Pickering | ||
| Edward J. Wallgren* | Edward J. Wallgren |
* Committee Chairman
Audit Committee. The Audit Committee
reviews and approves the services of our independent auditors;
reviews the plan, scope, and audit results of our internal
auditors and independent auditors; and reviews the examination
reports of bank regulatory authorities. The Audit Committee also
reviews the Company’s annual and other reports to the
Securities and Exchange Commission (“SEC”) and the
annual report to WBCO shareholders. Each of the Audit Committee
members is independent of management within the meaning of
currently applicable SEC rules and the Nasdaq Global Select
Market listing requirements.
Based on its review of the criteria for a “financial
expert” under applicable rules, the Board of Directors
believes that Mr. Miller qualifies as an audit committee
financial expert. The Company’s Board of Directors has
adopted a written charter for the Audit Committee which is
available on our web page, www.wibank.com. The document can be
accessed by clicking on the “Investor Relations” tab
and then the “Governance” tab. There were four
meetings of the Audit Committee during 2010 and each of the
Audit Committee members attended at least 75% of the meetings.
Compensation Committee. The
Compensation Committee is responsible for establishing and
monitoring compensation programs, and for evaluating the
performance of executive officers of WBCO and its subsidiaries.
Each of the Compensation Committee members is independent within
the meaning of currently applicable SEC rules and the Nasdaq
Global Select Market listing requirements. The Company’s
Board of Directors has adopted a written charter for the
Compensation Committee, which is posted on the Company’s
website, www.wibank.com. The document can be accessed by
clicking on the “Investor Relations” tab and then the
“Governance” tab. During 2010, there were five
meetings of the Compensation Committee and each of the
Compensation Committee members attended at least 75% of the
meetings.
10
Corporate Governance/Nominating
Committee. The Corporate
Governance/Nominating Committee performs a critical role in
guiding the Company’s strategic direction and oversees the
management of the Company, as well as performing the functions
of a nominating committee. Board candidates, including directors
up for reelection and potential candidates recommended by
shareholders, are considered based upon various criteria, such
as business and professional skills and experiences, banking
experience, concern for long-term interests of the shareholders,
personal integrity, freedom from conflicts of interest, sound
business judgment, community involvement and time available to
devote to board activities. The committee identifies nominees
for director through recommendations of directors, executive
officers, and shareholders; neither the committee nor the board
have paid search companies to locate potential candidates, but
reserve the ability to do so in the future. The committee
considers the attributes and experience of retiring directors
when seeking nominees. The committee has not historically
considered diversity in identifying nominees for director, and
does not have a specific policy with regard to the consideration
of diversity in identifying director nominees.
The Corporate Governance/Nominating Committee is comprised
solely of directors who are independent within the meaning of
currently applicable SEC rules and the Nasdaq Global Select
Market listing requirements. The Company’s Board of
Directors has adopted a written charter for the Corporate
Governance/Nominating Committee, which is posted on the
Company’s website, www.wibank.com. The document can be
accessed by clicking on the “Investor Relations” tab
and then the “Governance” tab. During 2010, the
Corporate Governance/Nominating Committee met four times and
each of committee member attended at least 75% of the meetings.
Board of Directors Meetings. There were
15 meetings of the Board of Directors of the Company during
2010. All directors attended at least 75% of the total meetings
of the Board in 2010.
Board
Leadership Structure
The Board of Directors, in its discretion, may elect a Chairman
of the Board. The Chairman leads the board and presides at all
Board meetings, and is responsible for delivery of information
for the Board’s informed decision-making.
Based upon the structure that we believe best serves the
interests of the Company and its shareholders, the Board
determines whether the role of the Chairman of the Board and the
Chief Executive Officer should be held by one individual or
should be separated. Currently, the Chairman of the Board is an
independent director.
The
Board’s Role in Risk Oversight
Throughout the year, the Board assesses the primary operational
and regulatory risks facing the Company and the Bank. In their
discussions, the Board considers the relative magnitude of the
risks, the likelihood of the risks coming to fruition, and
reviews the plans that management has to mitigate those risks.
The Audit Committee, which is responsible for the oversight of
the Bank’s internal auditor and the Bank’s independent
auditors, meets directly with those auditors at various times
during the course of the year, reports to the entire Board on
the risks discussed in its committee meetings and
management’s plans and progress in the supervision and
control of those risks.
The Company has a Risk Management Committee comprised of
representatives from each operating area of the Bank. The
primary purpose of the committee is to review financial and
operating risks, identify potential new risks and evaluate the
effectiveness of the bank’s risk management process. The
committee is chaired by the Chief Financial Officer, who
provides periodic reports to the Board of Directors regarding
the committee’s assessments of risks.
11
The Board will continue to review and approve or modify the
level of risk that is acceptable, monitor the status of
significant risks and the responses thereto, evaluate the status
of new initiatives to identify and control risks, and monitor
the enterprise risk management strategy and infrastructure.
Director
Attendance at Annual Meeting
It is the Company’s policy that the directors who are up
for election at the annual meeting attend the meeting. All
directors who were up for election at the 2010 annual meeting
attended the meeting.
Communications
with Directors
The Board provides a process for shareholders to send
communications to the Board or any of the directors.
Shareholders may send communications to the attention of the
Company’s Secretary, Shelly Angus, Washington Banking
Company, 450 SW Bayshore Drive, P.O. Box 7001, Oak
Harbor, Washington 98277. All communications will be compiled by
the Secretary and submitted to the Board or the individual
director on a periodic basis.
Shareholder
Recommendations for Director Nominees and Nominations by
Shareholders
The Board will consider candidates recommended by security
holders, and the Company also accepts shareholder nominations
made in accordance with the Company’s Bylaws.
Recommendations by shareholders are duly considered by the Board
or Corporate Governance/Nominating Committee and the committee
does not have a specific policy unique to the consideration of
director candidates recommended by security holders. The
committee does not feel a policy is necessary as it applies the
same analysis to all candidates. Shareholders interested in
making a recommendation of a potential candidate should follow
the procedure for Board communications described above, and the
Secretary will forward the recommendation to the Board or the
committee. The committee believes that qualified candidates have
a combination of one or more of the following: business and
professional skills and experience, banking experience, concern
for long-term interests of the shareholders, personal integrity,
freedom from conflicts of interest, sound business judgment,
community involvement and time available to devote to board
activities.
The Company’s Bylaws require that shareholder nominations
for the 2011 Annual Meeting of Shareholders, if any, must be
made in writing not less than 14 nor more than 50 days
prior to the Annual Meeting, and must be delivered or mailed to
the Chairman of WBCO. However, if less than 21 days’
notice of the Annual Meeting is given to shareholders, the
notification must be mailed or delivered to the Chairman not
later than the close of business on the seventh day following
the day on which notice of the Annual Meeting was mailed. Such
notification must 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 total number
of shares of stock of WBCO that will be voted for each proposed
nominee; (d) the name and address of the notifying
shareholder; (e) the number of shares of stock of WBCO
owned by the notifying shareholder; and (f) whether the
nominee has agreed to serve if elected. Nominations not made in
accordance with the above requirements may be disregarded by the
Chairman of the Annual Meeting, in his discretion, and upon the
Chairman’s instruction, the inspector of elections and vote
tabulator may disregard all votes cast for such a nominee.
There have been no material changes to the procedures by which
shareholders may recommend nominees to our board of directors
since our procedures were disclosed in the proxy statement for
the 2010 Annual Meeting.
12
EXECUTIVE
OFFICERS
The following table sets forth certain information about the
Company’s executive officers (“Named Executives”):
|
Has Served as an |
||||||||||
|
Executive Officer of the |
||||||||||
|
Name
|
Age |
Position
|
Company or Bank Since | |||||||
|
John L. Wagner
|
67 | President and Chief Executive Officer | 2004 | |||||||
|
Joseph W. Niemer
|
59 | Executive Vice President and Chief Credit Officer | 2005 | |||||||
|
Richard A. Shields
|
51 | Executive Vice President and Chief Financial Officer | 2004 | |||||||
|
Bryan McDonald
|
39 | Executive Vice President and Chief Operating Officer | 2010 | |||||||
John L. Wagner. Mr. Wagner has been the
President and Chief Executive Officer of WBCO since October 2008
and the President and Chief Executive Officer of the Bank since
April 2007. He joined the Bank in 1999 as Senior Vice President
and Regional Manager in Whatcom County. In 2002, Mr. Wagner
was selected to oversee branch administration and was promoted
to COO in 2004. Mr. Wagner has an extensive background in
banking and international finance as well as comprehensive
administrative experience as former President of Bank of
Washington in Bellingham, Washington.
Joseph W. Niemer. Mr. Niemer is the
Executive Vice President and Chief Credit Officer of the Bank.
Mr. Niemer has over 30 years of experience in various
credit-related positions with Pacific Northwest-based banks.
Most recently, he was the Senior Vice President and Chief Credit
Officer for Washington Mutual Bank’s Commercial Group, a
position he held from 1995 — 2004, where he oversaw
commercial and commercial real estate credit decisions.
Richard A. Shields. Mr. Shields is the
Executive Vice President and Chief Financial Officer of the
Company and the Bank. Mr. Shields joined the Bank in 2004
and has over 20 years of experience in various
accounting-related positions with Pacific Northwest-based banks.
From November 1998 until October 2004, he was the Vice President
and Controller at a bank in the Pacific Northwest that grew
substantially both organically and through multiple acquisitions.
Bryan McDonald. Mr. McDonald is the
Executive Vice President and Chief Operating Officer of the
Bank. Mr. McDonald joined the Bank in 2006 as Commercial
Banking Manager and he served as Senior Vice President and Chief
Operating Officer of the Bank from April 1, 2010 until his
promotion to Executive Vice President on August 26, 2010.
Mr. McDonald has been serving in the banking industry since
1994, including in regional commercial lending management roles
since 1996 for Washington Mutual and Peoples Bank.
All officers are elected by the Board of Directors for one year
terms or until their successors are appointed and qualified.
Each of the named executives has an employment agreement with
the Company or the Bank. See the narrative discussion following
the Summary Compensation table below.
13
Section 16(a)
Beneficial Ownership Reporting Compliance
WBCO is a reporting company under the Exchange Act.
Section 16(a) of the Exchange Act, and the rules
promulgated thereunder, require directors, officers, greater
than 10% shareholders, and certain other key personnel (the
“Reporting Persons”) to report their ownership and any
change in ownership of WBCO securities to the SEC. Based solely
upon our review of (i) Forms 3, 4 and 5 that we filed
on behalf of directors and executive officers, or received from
them with respect to the fiscal year ended December 31,
2010, and (ii) their written representations that no
Form 5 is required, we believe that all reporting persons
made all required Section 16 filings with respect to the
2010 fiscal year on a timely basis.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis describes the
Company’s compensation philosophy and the process that the
Compensation Committee undertakes, and factors it considers, in
determining appropriate compensation for Named Executives. The
Compensation Committee is responsible for establishing and
monitoring compensation programs, and for evaluating the
performance of executive officers of WBCO and its subsidiaries.
Any action taken by the Compensation Committee is reported to
the Board at the next Board of Directors meeting with the
Compensation Committee’s recommendation, and the Board
considers recommended compensation plans and arrangements with
Named Executives. The Compensation Committee consists of
directors who are independent under NASDAQ and SEC definitions,
and the committee operates under a charter available on our web
site.
The Chief Executive Officer is actively involved in the
compensation process as he recommends, when appropriate,
salaries, incentives and awards for other executive officers to
the Compensation Committee. The Compensation Committee, however,
ultimately reviews and approves individual executive officer
salaries, incentives, bonuses, stock option grants and other
equity-based awards.
Compensation Philosophy. The
Compensation Committee believes that compensation of executive
officers and other key personnel should reflect and support the
Company’s goals and strategies and should attract and
retain employees who are critical to the Company’s
long-term success. In 2010, the Company remained subject to the
executive compensation rules governing Troubled Asset Relief
Program (“TARP”) participants. Accordingly, the
Compensation Committee continued to suspend cash incentive
compensation programs for Named Executives that are believed to
link compensation with performance.
Principles guiding the compensation philosophy include:
| • | providing a competitive salary; | |
| • | maintaining flexibility within the compensation programs to adapt to changes, such as the local competitive environment or recruiting conditions; and | |
| • | providing incentive compensation to reward performance, align employee and corporate goals, and retain key members of senior management. |
The Company has historically emphasized cash incentives for
performance and equity-based compensation as a long term
retention tool and an additional tie to the long-term success of
WBCO. Cash incentives were awarded to create a close link
between the interests of employees and shareholders by rewarding
growth in assets and earnings while maintaining good asset
quality. Although the Compensation Committee believes that cash
incentives are an important part of the
14
Company’s compensation program, the TARP restrictions
required the Company to shift its focus. In addition, the
Compensation Committee considered retirement benefits for the
Chief Executive Officer as an important element of a competitive
compensation package that also serves as a retention tool. The
Compensation Committee anticipates that it will continue to
emphasize both cash incentive and equity-based compensation in
the future.
U.S. Department of the Treasury TARP Capital Purchase
Program. On October 14, 2008, Treasury
announced the TARP Capital Purchase Program (“CPP”)
under the Emergency Economic Stabilization Act of 2008
(“EESA”). WBCO participated in the CPP by selling
preferred stock and a warrant to purchase common stock to the
Treasury on January 16, 2009. On February 17, 2009,
President Obama signed into law the American Recovery and
Reinvestment Act of 2009 (“ARRA”), which contained
significant, additional restrictions on executive compensation
for CPP participants, and amended the executive compensation and
corporate governance provisions of EESA. Although we redeemed
the preferred stock and repurchased the warrant in 2011, the
executive compensation restrictions applied to the Company in
2010.
In addition to reporting and Treasury enforcement provisions,
the material executive compensation requirements of EESA, ARRA
and related Treasury regulations are as follows:
| • | Prohibition on bonus and similar payments. ARRA prohibits the payment of any “bonus, retention award, or incentive compensation” to the top 5 most highly-compensated employees for as long as any CPP-related obligations are outstanding. “Long-term” restricted stock is excluded from ARRA’s bonus prohibition, but only to the extent the value of the stock does not exceed one-third of the total amount of annual compensation of the employee receiving the stock, the stock does not “fully vest” until after all CPP-related obligations have been satisfied, and any other conditions which the Treasury may specify have been met. | |
| • | Prohibition on Compensation that Provides an Incentive to Take Unnecessary and Excessive Risks or Encourage Earnings Manipulation. The Compensation Committee is required to review Named Executives compensation arrangements with the Company’s senior risk officers to ensure that officers are not encouraged to take these risks. | |
| • | Clawbacks. EESA required WBCO to recover any bonus or incentive compensation paid to a Named Executive where the payment was later found to have been based on statements of earnings, gains, or other criteria which prove to be materially inaccurate, on the basis of materially inaccurate financial or other performance criteria. ARRA extended this recovery requirement to the next 20 most highly compensated employees. | |
| • | Restrictions on “Golden Parachute Payments”. ARRA prohibits any payment to a senior executive officer or any of the next five most highly-compensated employees upon termination of employment for any reason for as long as any CPP-related obligations remain outstanding. | |
| • | Limit on Tax Deduction. The Company’s tax deduction for compensation paid to any Named Executive was reduced to $500,000 annually from $1,000,000. |
Review of Risk Associated With Compensation
Plans. The Compensation Committee reviews
incentive plans on an annual basis to determine appropriate
awards for the prior year and to make adjustments for the
current year’s incentives and award levels. Historically,
incentive compensation plans have included provisions that
enable adjustment for the final scoring and payments based on
audited results and other factors. The Company expects to
continue such plans in future years; in 2010 there were limits
in the ability to make awards under cash-based incentive plans
due to TARP restrictions.
15
All members of the Compensation Committee are provided
information regarding the Company’s financial performance
and they use this information when reviewing and approving
incentive payouts to the Named Executives. The board regularly
receives reports about key credit measures and steps undertaken
by management to address credit risk and discourage excessive or
unnecessary risk-taking.
In 2010, the Committee met with senior risk officers of the
Company to review the incentive compensation plans and concluded
that those plans that were permitted to continue did not present
risks that were reasonably likely to have a material adverse
effect on the Company, encourage earnings manipulation or expose
the Company to unnecessary risk. The Company suspended cash
incentive-based compensation plans for all employees in 2010,
with the exception of the real estate department employees, none
of whom are Named Executives. All but one of eleven real estate
loan officers received incentive-based compensation for
originating mortgages; the remaining real estate officer
received commission-based compensation for originations. Risk
related to incentive and commission based compensation to loan
officers is mitigated through internal audits and the fact that
loans are sold into the secondary market and must meet certain
conditions for sale. In recognition of efforts to integrate two
banks and continued positive earnings in a difficult economic
and banking environment, a Company-wide bonus was paid at year
end 2010, which was not part of a formal incentive plan and was
not tied to specific results. Named Executives were not entitled
to receive the Company-wide bonus due to TARP restrictions.
Following its discussion with senior risk officers, the
Committee unanimously authorized the TARP certification found in
the Compensation Committee report, below.
Compensation Programs and 2010 Compensation
Decisions. For 2010, WBCO’s compensation
program included competitive salaries and benefits and also
opportunities for employee ownership of WBCO common stock
through a stock incentive plan. The Company completed a
comprehensive review of the Chief Executive Officer’s
compensation package and worked with Bank Compensation
Consulting, a compensation consultant, to design equity awards
and a retirement benefit that both complied with TARP and met
Company goals for the Chief Executive Officer’s
compensation. A description of the compensation decisions for
2010 related to the Company’s Chief Executive Officer is
included below.
In determining compensation packages for individual executives,
the Compensation Committee considers WBCO’s overall
performance, as measured by attainment of strategic and budgeted
financial goals and prior performance. The Compensation
Committee also reviews peer data and industry surveys of
compensation for comparable positions with similar institutions
in the State of Washington, the Pacific Northwest and the United
States. Industry surveys are used as one element in determining
the competitiveness of the compensation of the Company’s
executives.
The Compensation Committee does not target a specific
percentage, or benchmark, of peers or survey data. It is not
anticipated that the limitations on deductibility, under the
Internal Revenue Code Section 162(m), of compensation to
any one executive that exceeds $1,000,000 (or $500,000 for
2010) in a single year will apply to WBCO or its
subsidiaries in the foreseeable future. In the event that such
limitation would apply, the Compensation Committee will analyze
the circumstances presented and act in a manner that, in its
judgment, would be in the best interests of the Company. This
may or may not involve actions to preserve deductibility.
Components of WBCO’s compensation programs for Named
Executives are as follows:
Base Salary and Bonus. Salary levels of
executive officers are designed to be competitive within the
banking industry. In setting competitive salary ranges, the
Compensation Committee
16
works with management to periodically evaluate current salary
levels of other financial institutions with size, lines of
business, geographic locations and market place position similar
to WBCO’s. The Compensation Committee does not use a
targeted benchmark, or other formula, to establish salaries. The
Chief Executive Officer provides recommendations for the base
salaries of the Company’s other executive officers. The
Compensation Committee reviews and approves or disapproves such
recommendations. Salary levels are typically considered annually
as part of the Company’s performance review process as well
as upon a promotion or other change in job responsibility.
Merit-based increases to salaries are based on the
Committee’s assessment of the individual’s
performance. From time to time, the Company considers cash
bonuses unrelated to incentive plans and paid such a bonus to
employees in December 2010; under TARP rules, however, such
bonuses were prohibited for Named Executives.
Cash Incentive Plan Awards. The Company
continued to suspend cash incentives for 2010.
Stock Option and Other Stock-Based
Compensation. Equity-based compensation is
intended to more closely align the financial interests of
WBCO’s executives with long-term shareholder value and to
assist in the retention of executives who are key to the success
of WBCO and Whidbey Island Bank. Equity-based compensation
generally has been in the form of incentive stock options and
restricted stock awards pursuant to existing stock plans. The
Compensation Committee determines from time to time which of the
Named Executives, if any, will receive stock awards and
determines the number of shares subject to each grant.
Recommendations for awards to other officers are made by
executive management to the Compensation Committee. The total
number of shares allocated for annual disbursement is determined
by assuming a ten-year life of the stock award plan and
disbursing up to 10% of the total available shares. The Company
typically awards a mix of restricted stock and incentive stock
options to support both motivation and longer term retention of
employees. Grants of stock options and awards are based on the
performance of WBCO and various subjective factors relating
primarily to the responsibilities of individual executives,
their expected future contributions to WBCO and prior grants.
Stock options are granted at the closing price of the
Company’s Common Stock as reported on NASDAQ on the date of
the grant. The majority of the awards granted by the Committee
vest at a rate of equal percentages per year over three- to
five-year periods, although the Stock Plan has provisions for
exceptions in the case of certain terminations of employment or
extraordinary events. Individual vesting periods of awards are
determined by the Compensation Committee and may, at the
Committee’s discretion, be considered independently from
other awards. Requirements imposed on TARP recipients limit the
transferability (or vesting) of restricted stock awards to no
sooner than the achievement of repayment of certain percentage
levels of TARP funds. For each 25% of the TARP funds repaid, an
additional 25% of the restricted stock shares/units granted
become transferable to the employee.
Equity-based compensation generally has been in the form of
incentive and nonqualified stock options, and restricted stock
awards pursuant to shareholder approved stock incentive plans,
including the current 2005 Stock Incentive Plan. The plans are
designed to provide a form of incentive compensation that
promotes high performance and achievement of corporate goals by
directors and employees, encourages the growth of shareholder
value, and allows employees to participate in the long-term
growth and profitability of the Company.
Hiring Incentives. The Company
considers hiring bonuses as an effective leverage point in
attracting executive talent. Bonuses may be used as an incentive
to an executive candidate to provide compensation in lieu of
forfeited benefits from a previous employer in an effort to
17
promote acceptance of a job offer from WBCO. Discretion is used
in determining the amount of the hiring bonus to be offered,
based, in part, on the amount and type of compensation
forfeited, negotiated individual requirements, and common
industry practices. The Compensation Committee reviews hiring
bonus incentives. During 2010, no hiring bonuses were paid to
the Named Executives.
In connection with the hiring of a new executive and consistent
with industry practices, the Company may offer cash assistance
to move household goods in the event that relocation is
necessary. In addition, the Company may pay costs of housing and
utilities for a short period of time after employment to allow
time for relocation, or for a longer period in cases where the
executive is not relocating permanently. Type and amount of
relocation expenses will vary recognizing different recruiting
conditions. Pursuant to a hiring agreement entered into in 2005,
Mr. Niemer, who is not relocating permanently, received
$15,600 for housing expenses (reflected on the Summary
Compensation Table as taxable income to Mr. Niemer) as part
of his 2010 compensation. Mr. Niemer’s housing expense
is reviewed annually as part of his compensation and there is no
guarantee from the Company or contractual requirement that it
will be continued.
Deferred Compensation Plan. In December
2000, the Bank approved the adoption of an Executive Deferred
Compensation Plan (“Comp Plan”) to take effect January
2001, under which select participants may elect to defer receipt
of a portion of eligible compensation. In December 2007, the
Bank’s Board of Directors approved a resolution to suspend
the Comp Plan effective January 1, 2008 and no
contributions were allowed during calendar year 2008 due to the
then-pending merger. The Comp Plan was reinstated and new
contributions were permitted beginning January 2009.
The following is a summary of the principal provisions of the
Comp Plan:
Purpose. The purpose of the Comp
Plan is to (1) provide a deferred compensation arrangement
for a select group of management or highly compensated employees
within the meaning of Sections 201(2) and 301(a)(3) of
ERISA and directors of the Bank, and (2) attract and retain
the best available personnel for positions of responsibility
with the Bank and its subsidiaries. The Comp Plan is an unfunded
deferred compensation agreement. Participation in the Comp Plan
is voluntary and available to the Company’s executive
officers, senior vice presidents, and directors.
Contributions and
Earnings. Eligible compensation for
executives includes 25% of salary and 50% of annual cash
incentive award. In no event may a participant’s total
deferral reduce his taxable income to an amount less than the
Social Security Wage Base in any calendar year. Participants may
change their deferral election only during the annual open
enrollment period, but may request a change in their investment
strategy as often as monthly. The Bank retains the deferrals and
credits a bookkeeping account in the participant’s name.
Earnings accumulate on a tax-deferred basis and are based on the
participant’s election of an investment index including
various mutual funds. A third-party service provider tracks the
contributions and earnings; the Bank audits the reports and
provides periodic statements of account activity and balance
information to individual participants.
Source of Benefits. Benefits
under the Comp Plan are payable solely by the Bank. To enable
the Bank to meet its financial commitment under the Comp Plan,
assets may be set aside in a corporate-owned vehicle. These
assets are available to all general creditors of the Bank in the
event of the Bank’s insolvency. Participants of the Comp
Plan are unsecured general creditors of the Bank with respect to
the Comp Plan benefits.
18
Deferrals under the Comp Plan may reduce compensation used to
calculate benefits under the Bank’s 401(k) Plan. To the
extent applicable, it is intended that the Comp Plan and any
awards made under the Comp Plan comply with the requirements of
Section 409A of the Internal Revenue Code. Any provision
that would cause the Comp Plan or any award to fail to satisfy
Section 409A will have no force or effect until amended to
comply with Section 409A, which amendment may be
retroactive to the extent permitted by Section 409A.
Distributions. In-service
distributions are allowed. The participant may take a lump sum
distribution by January 20th of a chosen year at least two years
after the deferral unit is complete. The participant may also
apply for an in-service distribution in the event of a financial
hardship.
If a participant in the Comp Plan terminates employment for a
reason other than retirement, the account balance will be paid
in a lump sum distribution. Upon retirement, the participant
will receive a lump sum distribution or annual installments over
a 5, 10 or 15 year period, depending on the option chosen
at the time of enrollment.
In the event of death of a participant prior to distribution,
the participant’s beneficiary will receive the balance of
the account.
Chief Executive Officer
Compensation. In 2010, the Compensation
Committee completed a multi-year process that involved a review
of Mr. Wagner’s compensation package. In 2007, the
Company had entered into a merger agreement with Frontier
Financial. As a result of the merger agreement, Mr. Wagner
was scheduled to retire and receive a change in control
termination benefit with the closing of the merger. Subsequently
in 2008, the Company and Frontier Financial terminated the
merger agreement. The time period between announcing the merger
agreement and termination had been a challenging one for the
Company, including loss of personnel and disruption to
customers. Following termination of the merger agreement, the
Board of Directors focused on ensuring that key members of the
Company’s senior management remained with the Company.
Specifically, the Board of Directors recognized Mr. Wagner
as an essential member of the team who could rebuild the
Company, recruit personnel, maintain customer relations and
ultimately position the Company for growth. The Compensation
Committee began to discuss retirement benefits and stock awards
for Mr. Wagner to approximate the amount of change in
control termination benefit Mr. Wagner had expected with
his retirement — approximately $900,000.
In 2009, with the Company’s participation in the TARP
Capital Purchase Program and subsequent Treasury restrictions on
compensation, the Compensation Committee engaged Bank
Compensation Consulting (“BCC”) to advise on the
appropriate design of retirement benefits and stock awards for
Mr. Wagner that complied with TARP restrictions and met the
goals of providing Mr. Wagner a retirement benefit and
incentives to maintain his focus on rebuilding the Company and
positioning it for growth. BCC discussed a number of
alternatives with the Compensation Committee and ultimately
recommended a mix of a salary continuation plan, a
post-retirement benefit with targeted retirement at age 69
(in 2012), and restricted stock awards vesting over three years.
The Compensation Committee also considered qualitative
accomplishments in 2010. The Compensation Committee recognized
the substantial time and effort expended by management
(1) in continuing the successful operations of the company
and maintaining profitability, while operating under the vast
economic environment adversely affecting the entire financial
industry, (2) sustaining corporate performance and
regaining momentum following the downturn to current recession,
and (3) successful acquisitions and recruitment of key
personnel.
19
Based on the foregoing, and consistent with the Compensation
Committee’s overall compensation philosophy, the
Compensation Committee made the following determinations with
respect to the Chief Executive Officer’s compensation in
2010: Mr. Wagner’s salary was continued at $280,000
for 2010. In addition, Mr. Wagner received, in accordance
with the U.S. Treasury’s Interim Final Rule regarding
TARP CPP executive compensation, a restricted stock unit award
totaling 11,257 units vesting on three annual dates
beginning December 31, 2010, which followed a restricted
stock award of 11,930 units vesting over three years
beginning on December 30, 2009. These grants were also
subject to the TARP vesting requirements, which could lengthen
the stated vesting requirements. The restricted stock unit
awards granted to Mr. Wagner were part of the Compensation
Committee’s comprehensive review of Mr. Wagner’s
compensation and designed to provide retention incentive and
reward him for his efforts in guiding the Company through the
challenging economic environment during 2009. Further, the award
was made to comply with the TARP requirements that limit the
method of delivery of incentive compensation. The limitations
require that incentive-based compensation be made only in the
form of restricted stock and also require the recipient employee
substantially work for at least two years from the date of the
grant. The Company entered into Salary Continuation Agreements
with Mr. Wagner that provide for a retirement benefit of an
initial lump sum (from the Bank) and $75,000 per year ($50,000
from the Bank and $25,000 from the Company) commencing upon
separation from service with the Company after reaching
age 69 (with respect to the Bank) and age 72 (with
respect to the Company). The Compensation Committee offered
stock awards and the salary continuation plans based on the
advice of BCC, with the goal of providing a retention plan that
the Company had committed to following the terminated Frontier
merger and the goal of ensuring a portion of
Mr. Wagner’s compensation is tied to equity and the
success of the Company.
Conclusion. The Compensation Committee
believes that for the 2010 fiscal year, the compensation of
Mr. Wagner, as well as for the other Named Executives, was
consistent with WBCO’s overall compensation philosophy and
the performance of the Company for the year.
Summary
Compensation Table
|
Change in |
||||||||||||||||||||||||||||||||||||
|
Pension Value |
||||||||||||||||||||||||||||||||||||
|
and |
||||||||||||||||||||||||||||||||||||
|
Nonqualified |
||||||||||||||||||||||||||||||||||||
|
Non-Equity |
Deferred |
|||||||||||||||||||||||||||||||||||
|
Stock |
Option |
Incentive Plan |
Compensation |
All Other |
||||||||||||||||||||||||||||||||
|
Name and |
Salary |
Bonus |
Awards |
Awards |
Compensation |
Earnings |
Compensation |
Total |
||||||||||||||||||||||||||||
|
Principal Position
|
Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||
|
PEO John Wagner
|
2010 | 280,000 | 0 | 143,752 | (1) | 0 | 0 | 38,591 | (2)(3) | 12,837 | (4) | 475,180 | ||||||||||||||||||||||||
|
Wagner
|
2009 | 280,000 | 0 | 143,756 | (5) | 0 | 0 | 56,698 | (2) | 13,273 | (4) | 493,727 | ||||||||||||||||||||||||
|
Wagner
|
2008 | 266,000 | 0 | 0 | 33,840 | (6) | 55,000 | (7) | (86,104 | )(2) | 8,043 | (4) | 276,779 | |||||||||||||||||||||||
|
PFO Richard Shields
|
2010 | 176,400 | 0 | 44,765 | (8) | 0 | 0 | NA | 23,325 | (9) | 244,490 | |||||||||||||||||||||||||
|
Shields
|
2009 | 176,400 | 0 | 0 | 0 | 0 | NA | 24,086 | (9) | 200,486 | ||||||||||||||||||||||||||
|
Shields
|
2008 | 176,400 | 0 | 0 | 56,400 | (6) | 38,377 | (7) | NA | 23,907 | (9) | 295,084 | ||||||||||||||||||||||||
|
CCO Joseph Niemer
|
2010 | 183,855 | 0 | 44,765 | (8) | 0 | 0 | NA | 21,996 | (10) | 250,616 | |||||||||||||||||||||||||
|
Niemer
|
2009 | 183,855 | 0 | 0 | 0 | 0 | NA | 22,775 | (10) | 206,630 | ||||||||||||||||||||||||||
|
Niemer
|
2008 | 183,855 | 0 | 0 | 28,200 | (6) | 39,998 | (7) | NA | 22,831 | (10) | 274,884 | ||||||||||||||||||||||||
|
COO Bryan McDonald
|
2010 | 168,779 | 0 | 31,975 | (8) | 0 | 0 | NA | 5,446 | (11) | 206,200 | |||||||||||||||||||||||||
20
| (1) | Reflects an award of restricted stock units granted on 7/1/10 at the Nasdaq market closing price of $12.77, which is the “fair value” of the grant on the grant date. For information concerning the valuation assumptions used for the FASB ASC 718 fair value awards, see Note (1)(r) and Note (16) of Notes to Consolidated Financial Statements of the Company’s Form 10-K for the year ended December 31, 2010. | |
| (2) | Reflects the participant’s net annual change in value for Comp Plan earnings; employee elected not to contribute in 2010; contributions to the Comp Plan were not allowed in 2008 due to a pending merger that was later terminated. | |
| (3) | Pursuant to TARP restrictions, no benefits accrued under the Salary Continuation Plan during 2010. | |
| (4) | The amount disclosed represents matching contributions under the Company’s 401(k) Plan, insurance premiums for long-term disability, group term life, and accidental death and dismemberment insurance; and the value associated with the personal use of a Company-owned vehicle. | |
| (5) | Reflects an award of restricted stock units granted on 12/30/09 at the Nasdaq market closing price of $12.05, which is the “fair value” of the grant on the grant date. For information concerning the valuation assumptions used for the FASB ASC 718 fair value awards, see Note (1)(r) and Note (16) of Notes to Consolidated Financial Statements of the Company’s Form 10-K for the year ended December 31, 2010. | |
| (6) | Reflects the “fair value” of a stock option award granted on 6/26/08 at the Nasdaq market closing price of $9.11. For information concerning the valuation assumptions used for the FASB ASC 718 fair value awards, see Note (1)(r) and Note (16) of Notes to Consolidated Financial Statements of the Company’s Form 10-K for the year ended December 31, 2010. | |
| (7) | Reflects non-equity incentive plan compensation earned in 2008 but paid in 2009. | |
| (8) | Reflects an award of restricted stock units granted on 6/30/10 at the Nasdaq market closing price of $12.79, which is the “fair value” of the grant on the grant date. For information concerning the valuation assumptions used for the FASB ASC 718 fair value awards, see Note (1)(r) and Note (16) of Notes to Consolidated Financial Statements of the Company’s Form 10-K for the year ended December 31, 2010. | |
| (9) | The amount disclosed represents retention bonus of $16,667 plus: matching contributions under the Company’s 401(k) Plan, together with long-term disability, group term life, and accidental death and dismemberment insurance premiums. | |
| (10) | The amount disclosed represents a housing expense of $15,600 plus: matching contributions under the Company’s 401(k) Plan, together with long-term disability, group term life, and accidental death and dismemberment insurance premiums. | |
| (11) | The amount disclosed represents matching contributions under the Company’s 401(k) Plan, together with long-term disability, group term life, and accidental death and dismemberment insurance premiums. |
Employment Agreements. For the reported
periods, the Company had executive employment agreements with
Messrs. Niemer, Shields and Wagner. The agreement with each
of these executives annually renew, with automatic extensions of
one year unless written notice of nonrenewal is provided by
either party. The agreements provide for the executive to
receive a severance benefit in the event of a “change of
control” and termination of the executive either by
employer without “cause”, or by the executive for
“good reason” (all as defined in the agreements). The
agreements contain a covenant not to compete, whereby the
executive agrees to not directly or indirectly be employed by,
own, manage, operate, join, or benefit in any way from any
business activity that is competitive with the Company’s
business. For Mr. Wagner, the non-compete period is up to
two years following a change of control and receipt of a
severance benefit. For Messrs. Niemer and Shields, the
non-compete period is up to 18 months. Further, in order to
receive the severance benefit, the executive cannot resign from
the Company during a change of control period, as defined
21
in the employment agreements. On August 26, 2010, the Bank
promoted Mr. McDonald to an executive officer
position — Executive Vice President/Chief Operating
Officer. Effective
12/31/10,
the Company entered into an employment agreement with
Mr. McDonald that has the same terms as Messrs. Niemer
and Shields.
Retirement Agreement for
Mr. Wagner. The Company and the Bank are
each party to a Salary Continuation Plan with Mr. Wagner
dated December 10, 2010 (collectively, the
“SCP”). The SCP provides for a fixed schedule of
retirement benefits to be paid to Mr. Wagner if he retires
on or after reaching age 69 (with respect to the Bank), on
August 24, 2012, and age 72, on August 24, 2015
(with respect to the Company). The SCP normal retirement benefit
is an initial lump sum of $100,000 (from the Bank) and $75,000
per year for five years from retirement age ($50,000 from the
Bank and $25,000 from the Company). The SCP also provides for a
lump sum payment equal to the Accrual Balance as of the date
Mr. Wagner’s employment terminates if Mr. Wagner
is terminated or leaves prior to his normal retirement date. The
Accrual Balance is the liability amount due under the SCP as
determined for financial accounting purposes. If, however,
Mr. Wagner is terminated following a change of control, he
would be entitled to a lump sum payment equal to $375,000. The
SCP includes limits on benefits if the benefit would be
non-deductible as an excess parachute payment under
Sections 280G and 4999 of the Internal Revenue Code, as
well as provisions to ensure compliance with Section 409A
of the Internal Revenue Code and applicable bank regulations
related to golden parachute payments. If Mr. Wagner dies
while employed and prior to receiving benefits under the SCP,
his estate is entitled to receive an initial lump sum of
$100,000 (from the Bank) and $75,000 per year for five years
($50,000 from the Bank and $25,000 from the Company). If
Mr. Wagner dies while receiving payments, his estate will
receive the remainder of the scheduled payments. The SCP
includes a condition whereby no benefits may accrue as long as
TARP funds remain outstanding and benefits will only begin to
accrue after TARP is repaid in accordance with the regulation.
During 2010, Mr. Wagner was not entitled to receive or
accrue benefits under the Salary Continuation Plan as the TARP
investment remained outstanding.
Other Benefits. The Company maintains a
salary savings 401(k) Plan for its employees, including its
executive officers. All persons employed by the Company who are
at least 21 years of age may elect to contribute a portion
of their salary to the 401(k) Plan beginning the first of the
month following the employee’s date of hire. Participant
employees are eligible to receive Company contributions
following completion of at least one year of service and an
annual minimum of 1,000 service hours; contributions of up
to 6% of salary are matched 50% by the Company, subject to
certain specified limits. WBCO contributed approximately $23
thousand in matching funds for the named Executives to the
401(k) Plan during 2010.
The Company provides the Named Executives benefits generally
available to all employees including a group health insurance
plan, and vacation and sick-pay benefits.
Grants of
Plan-Based Awards
|
All Other Stock |
All Other Option |
Grant Date |
||||||||||||||||||||||
|
Awards: Number |
Awards: |
Exercise or Base |
Fair Value of |
|||||||||||||||||||||
|
of Shares of Stock |
Number of Securities |
Price of Option |
Stock and |
|||||||||||||||||||||
|
Grant |
Approval |
or Units |
Underlying Options |
Awards |
Option Awards |
|||||||||||||||||||
|
Name
|
Date | Date | (#) | (#) | ($/Sh) | ($)(2) | ||||||||||||||||||
|
PEO John Wagner
|
7/1/2010 | 6/24/2010 | 11,257 | (1) | 0 | NA | 143,752 | (1) | ||||||||||||||||
|
PFO Richard Shields
|
6/30/2010 | 6/24/2010 | 3,500 | (1) | 0 | NA | 44,765 | (1) | ||||||||||||||||
|
CCO Joseph Niemer
|
6/30/2010 | 6/24/2010 | 3,500 | (1) | 0 | NA | 44,765 | (1) | ||||||||||||||||
|
COO Bryan McDonald
|
6/30/2010 | 6/24/2010 | 2,500 | (1) | 0 | NA | 31,975 | (1) | ||||||||||||||||
22
| (1) | Also reported on the Summary Compensation Table and Outstanding Equity Awards at Fiscal Year-End Table. | |
| (2) | For information concerning the valuation assumptions used for the FASB ASC 718 fair value awards, see Note (1)(r) and Note (16) of Notes to Consolidated Financial Statements of the Company’s Form 10-K for the year ended December 31, 2010. |
Stock Incentive Plan. WBCO shareholders
approved the 2005 Stock Incentive Plan (“2005 Plan”),
which makes available 833,333 shares of common stock for
incentive and nonqualified stock options, or ISOs and NSOs,
restricted stock awards and other equity-based awards. The
following is a summary of the principal provisions of the 2005
Plan:
Purpose. The purpose of the 2005 Plan
is to (1) enhance the long-term profitability and
shareholder value by offering equity-based incentive awards to
employees, directors, consultants and agents of, and individuals
to whom offers of employment have been made by, WBCO and its
subsidiaries; (2) attract and retain the best available
personnel for positions of responsibility with WBCO and its
subsidiaries; and (3) encourage employees and directors to
acquire and maintain stock ownership in WBCO.
Shares Subject to Plan. The number
of shares available under the 2005 Plan is adjusted for any
stock splits, stock dividends, or other changes in the
capitalization of the Company. To the extent permitted by
applicable law, expired, forfeited, terminated or canceled award
shares will become available again for new awards. As of
March 15, 2011, there were: 203,955 shares subject to
options granted but not exercised, and 46,604 restricted stock
units and 1,353 restricted stock awards that remain subject to
vesting conditions. As of March 15, 2011, shares issued
pursuant to grants under the 2005 Plan include:
13,458 shares issued upon exercise of options;
47,924 shares issued upon vesting of restricted stock
units; and 18,758 shares issued as restricted stock that
have since satisfied the restrictions and are now unrestricted
shares.
Limitations. Not more than 25% of the
aggregate number of shares available under the Plan may be
issued to any participant during any one calendar year. In
addition, in the case of ISOs, the aggregate fair market value
of all shares becoming exercisable in any one year shall not
exceed $100,000.
Types of Awards. Awards may include:
stock options, restricted stock awards, restricted stock units,
performance shares, performance units, stock appreciation rights
or dividend equivalent rights. ISOs are intended to meet all the
requirements of an “Incentive Stock Option” as defined
in Section 422 of the Internal Revenue Code.
Stock Option Grants. The exercise price
for each option granted is determined by the Compensation
Committee, and for ISOs will not be less than 100% of the fair
market value of WBCO common stock on the date of grant. For
purposes of the 2005 Plan, “fair market value” means
the closing transaction price of the common stock on the date of
grant as reported on the Nasdaq Global Select Market System.
NSOs are also issued at fair market value on the date of grant.
The term of options are fixed by the Compensation Committee. No
ISO can be exercisable after 10 years from the date of the
grant. Each option is exercisable pursuant to a vesting schedule
determined by the Compensation Committee.
Amendment and Termination. The Plan
expires ten years after its effective date, provided that any
outstanding awards at that time will continue for the duration
of the award. The Board may terminate the 2005 Plan at any time.
The Board may amend the Plan at any time, except
23
that shareholder approval is required to (i) increase the
number of shares of common stock subject to the Plan,
(ii) increase the type of eligible participants, or
(iii) make any amendment that would require shareholder
approval under any applicable law or regulation.
Outstanding
Equity Awards at Fiscal Year-End
The following table summarizes the outstanding equity awards
held by the Named Executives as of December 31, 2010.
| Option Awards | Stock Awards | |||||||||||||||||||||||
|
Number of |
Number of |
Number of |
||||||||||||||||||||||
|
Securities |
Securities |
Shares or |
Market Value of |
|||||||||||||||||||||
|
Underlying |
Underlying |
Option |
Units of Stock |
Shares or Units of |
||||||||||||||||||||
|
Unexercised |
Unexercised |
Exercise |
Option |
That Have |
Stock that Have |
|||||||||||||||||||
|
Options |
Options |
Price |
Expiration |
Not Vested |
Not Vested |
|||||||||||||||||||
|
Name
|
(#) | (#) | ($) | Date | (#)(7) | ($)(6) | ||||||||||||||||||
| Exercisable | Unexercisable | |||||||||||||||||||||||
|
PEO John Wagner
|
8,000 | 4,000 | (1)(5) | 9.11 | 6/26/18 | 11,257 | (4) | 154,333 | (4) | |||||||||||||||
| 1,576 | 1,051 | (2) | 15.98 | 4/26/17 | 11,930 | (5) | 163,560 | (5) | ||||||||||||||||
| 372 | 124 | (3) | 14.60 | 4/17/16 | 351 | 4,812 | ||||||||||||||||||
| 549 | 0 | 6.15 | 1/2/13 | 50 | 685 | |||||||||||||||||||
|
PFO Richard Shields
|
8,333 | 6,667 | (1)(5) | 9.11 | 6/26/18 | 3,500 | (4) | 47,985 | (4) | |||||||||||||||
| 1,576 | 1,051 | (2) | 15.98 | 4/26/17 | 351 | 4,812 | ||||||||||||||||||
| 372 | 124 | (3) | 14.60 | 4/17/16 | 50 | 685 | ||||||||||||||||||
|
CCO Joseph Niemer
|
6,666 | 3,334 | (1)(5) | 9.11 | 6/26/18 | 3,500 | (4) | 47,985 | (4) | |||||||||||||||
| 1,576 | 1,051 | (2) | 15.98 | 4/26/17 | 351 | 4,812 | ||||||||||||||||||
| 496 | 124 | (3) | 14.60 | 4/17/16 | 50 | 685 | ||||||||||||||||||
|
COO Bryan McDonald
|
3,333 | 1,667 | (1)(5) | 9.11 | 6/26/18 | 2,500 | (4) | 34,275 | (4) | |||||||||||||||
| 716 | 478 | (2) | 15.98 | 4/26/17 | 160 | 2,194 | ||||||||||||||||||
| 125 | 1,714 | |||||||||||||||||||||||
| (1) | 3-year equal annual vesting beginning 6/26/09. | |
| (2) | 5-year equal annual vesting beginning 4/26/08. | |
| (3) | 5-year equal annual vesting beginning 4/17/07. | |
| (4) | Also reported on Summary Compensation Table and Grants of Plan-Based Awards Table. | |
| (5) | Also reported on Summary Compensation Table. | |
| (6) | Market value on 12/31/10 using closing price of $13.71. | |
| (7) | At 12/31/10, the Company was subject to TARP restrictions that restricted the vesting of executives’ equity awards. |
Option Exercises and Stock Vested. The
following table summarizes the realized value of option
exercises and restricted stock vested during 2010 held by the
Named Executives:
| Option Awards | Stock Awards | |||||||||||||||
|
Number of |
Number of |
|||||||||||||||
|
Shares |
Value |
Shares |
Value |
|||||||||||||
|
Acquired on |
Realized on |
Acquired on |
Realized on |
|||||||||||||
|
Exercise |
Exercise |
Vesting |
Vesting |
|||||||||||||
|
Name
|
(#) | ($) | (#) | ($) | ||||||||||||
|
PEO John Wagner
|
0 | NA | 224 | 3,107 | ||||||||||||
|
PFO Richard Shields
|
5,000 | 17,650 | 224 | 3,107 | ||||||||||||
|
CCO Joseph Niemer
|
0 | NA | 224 | 3,107 | ||||||||||||
|
COO Bryan McDonald
|
0 | NA | 204 | 2,766 | ||||||||||||
24
Retirement Plan for
Mr. Wagner. The Salary Continuation Plan
discussed in the CD&A expressly prohibited accrual of
benefits while TARP funds remained outstanding; therefore,
Mr. Wagner was not entitled to any benefits or vesting
under the SCP during 2010.
Non-qualified Deferred
Compensation. The following table summarizes
contributions and earnings in the Comp Plan by the Named
Executives as of December 31, 2010:
|
Executive |
Registrant |
Aggregate |
Aggregate |
Aggregate |
||||||||||||||||
|
Contributions |
Contributions |
Earnings |
Withdrawals/ |
Balance at Last |
||||||||||||||||
|
in Last FY |
in Last FY |
in Last FY |
Distributions |
Fiscal Year End |
||||||||||||||||
|
Name
|
(1)($) | ($) | ($) | ($) | ($) | |||||||||||||||
|
PEO John Wagner
|
0 | 0 | 38,591 | (2) | 0 | 324,117 | ||||||||||||||
|
PFO Richard Shields
|
0 | NA | NA | NA | NA | |||||||||||||||
|
CCO Joseph Niemer
|
0 | NA | NA | NA | NA | |||||||||||||||
|
COO Bryan McDonald
|
0 | NA | NA | NA | NA | |||||||||||||||
| (1) | None of the executives elected to participate in the Comp Plan during 2010. | |
| (2) | Reflects the participant’s net annual change in value for Comp Plan earnings. Also reported on Summary Compensation Table. |
Potential
Payments on Termination or Change in Control
The section below describes the payments that may be made to
Named Executives upon Separation, as defined below, pursuant to
individual agreements, or in connection with a Change in Control.
Executive Severance and Employment
Agreements. The Company is party to executive
employment agreements with Messrs. McDonald, Niemer,
Shields and Wagner. In the event of a Change of Control and
termination of the executive either by employer without Cause,
or by the executive for Good Reason (all as defined in the
agreements), a severance benefit would be paid. The severance
benefit for Mr. Wagner would be an amount equal to two and
one half times the amount of his highest base salary over the
prior three years plus two times the amount of the annual bonus
last paid, or two times the average bonus paid over the prior
three years, whichever is greater. The agreements for
Messrs. Shields, Niemer and McDonald provide that the
executive would receive a severance benefit in an amount equal
to two times the amount of his highest base salary over the
prior three years plus one and one half times the amount of the
annual bonus last paid, or two times the average bonus paid over
the prior three years, whichever is greater.
The provisions of the executive employment agreements are
triggered by a “change of control,” which means a
change “in the ownership or effective control” or
“in the ownership of a substantial portion of the
assets” of the Company, as such terms are defined and used
in Section 280G of the Internal Revenue Code.
Termination Due to Disability or Upon
Death. If the Company terminates
Mr. Niemer, Shields, McDonald or Wagner on account of any
mental or physical disability that prevents him from discharging
his duties under his employment agreement, he is entitled to all
base salary earned and reimbursement for expenses incurred
through the termination date, plus a pro rata portion of any
annual bonus for the year of termination. In case of the death
of Mr. Niemer, Shields, McDonald or Wagner, the Company is
obligated to pay to his surviving spouse, or if there is none,
to his estate that portion of his base salary that would
otherwise have been paid to him for the month in which his death
occurred, and any amounts due him pursuant to any deferred
compensation plan, and any other death, insurance, employee
benefit plan or stock benefit plan provided to him by the
Company.
25
The table below estimates amounts payable upon a separation as
if the Named Executive separated from service on
December 31, 2010, using the closing share price of WBCO
common stock of $13.71 as of that date.
|
Before or After |
||||||||||||
|
Change in |
||||||||||||
|
Control |
||||||||||||
|
Termination |
||||||||||||
|
w/o Cause or |
||||||||||||
|
for Good |
||||||||||||
|
Reason |
Death |
Disability |
||||||||||
|
Name
|
(1)(2)($) | ($) | ($) | |||||||||
|
PEO John Wagner
|
1,464,243 | (3) | 1,079,020 | (2)(3)(4) | 361,126 | (3)(5) | ||||||
|
PFO Richard Shields
|
471,328 | 553,501 | (6) | 12,321 | (7) | |||||||
|
CCO Joseph Niemer
|
482,883 | 556,392 | (6) | 15,585 | (8) | |||||||
|
COO Bryan McDonald
|
552,106 | 451,569 | (9) | 11,569 | (10) | |||||||
| (1) | Includes salary and non-equity incentive plan payouts, premiums for health and dental insurance for 18 months, accrued vacation (if any), and the value of accelerated vesting of restricted stock. | |
| (2) | At 12/31/10, the Company was subject to TARP restrictions on golden parachute payments, which would have restricted payments in connection with termination. Pursuant to TARP restrictions, no benefits accrued under the Salary Continuation Plan during 2010. | |
| (3) | Includes deferred compensation balance of $324,117. | |
| (4) | Includes vacation accrual, $317,894 in value of accelerated vesting of restricted stock, life insurance benefit of $260,000 and BOLI survivor benefit of $150,000. | |
| (5) | Includes accrued vacation, plus $10,000 reflecting the first payment of a monthly benefit paid to the individual by a fully-insured policy while the individual remains disabled but for a maximum of 18 months. | |
| (6) | Includes vacation accrual, life insurance benefit of $400,000 and BOLI survivor benefit of $150,000. | |
| (7) | Includes accrued vacation, plus $8,820 reflecting the first payment of a monthly benefit paid to the individual by a fully-insured policy while the individual remains disabled up to age 65. | |
| (8) | Includes accrued vacation, plus $9,193 reflecting the first payment of a monthly benefit paid to the individual by a fully-insured policy while the individual remains disabled up to age 65. | |
| (9) | Includes vacation accrual, life insurance benefit of $400,000 and BOLI survivor benefit of $50,000. | |
| (10) | Includes accrued vacation, plus $10,000 reflecting the first payment of a monthly benefit paid to the individual by a fully-insured policy while the individual remains disabled up to age 65. |
26
Director
Compensation
|
Changes in |
||||||||||||||||||||||||||||||||
|
Pension Value |
||||||||||||||||||||||||||||||||
|
and |
||||||||||||||||||||||||||||||||
|
Nonqualified |
||||||||||||||||||||||||||||||||
|
Fees Earned |
Non-Equity |
Deferred |
||||||||||||||||||||||||||||||
|
or paid in |
Stock |
Option |
Incentive Plan |
Compensation |
All Other |
|||||||||||||||||||||||||||
|
Cash |
Awards |
Awards |
Compensation |
Earnings |
Compensation |
Total |
||||||||||||||||||||||||||
|
Name
|
Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
|
Gregg Davidson(1)
|
2010 | 10,000 | 0 | 0 | 0 | N/A | 0 | 10,000 | ||||||||||||||||||||||||
|
Jay Lien(2)
|
2010 | 25,950 | 19,185 | (8) | 0 | 0 | N/A | 0 | 45,135 | |||||||||||||||||||||||
|
Gragg
Miller(3)
|
2010 | 26,550 | 19,185 | (8) | 0 | 0 | N/A | 0 | 45,735 | |||||||||||||||||||||||
|
Anthony Pickering(4)
|
2010 | 32,500 | 19,185 | (8) | 0 | 0 | N/A | 0 | 51,685 | |||||||||||||||||||||||
|
Robert Severns(5)
|
2010 | 22,000 | 0 | 0 | 0 | 935 | (9) | 0 | 22,935 | |||||||||||||||||||||||
|
Edward Wallgren(6)
|
2010 | 25,450 | 19,185 | (8) | 0 | 0 | 12,779 | (9) | 0 | 57,414 | ||||||||||||||||||||||
|
Dennis Wintch(7)
|
2010 | 11,450 | 0 | 0 | 0 | 4,938 | (9) | 0 | 16,388 | |||||||||||||||||||||||
| (1) | Resigned as a director as of June 14, 2010; as of 12/31/10, there were zero stock awards and stock options outstanding. | |
| (2) | As of 12/31/10, the aggregate number of stock awards outstanding was 3,234; the aggregate number of stock options outstanding was 5,149. | |
| (3) | As of 12/31/10, the aggregate number of stock awards outstanding was 1,500; and zero stock options outstanding. | |
| (4) | As of 12/31/10, the aggregate number of stock awards outstanding was 3,234; the aggregate number of stock options outstanding was 10,591. | |
| (5) | As of 12/31/10, there were zero stock awards and stock options outstanding. | |
| (6) | As of 12/31/10, the aggregate number of stock awards outstanding was 3,234; the aggregate number of stock options outstanding was 2,925. | |
| (7) | Director term expired at the conclusion of the May 13, 2010 Annual Meeting of Shareholders; as of 12/31/10, there were zero stock awards and stock options outstanding. | |
| (8) | The value as of the grant date of a Restricted Stock Unit award for 1,500 units granted June 30, 2010 based on the Nasdaq closing price of $12.79 on June 30, 2010. | |
| (9) | Reflects the participant’s net annual change in value for Comp Plan contributions. |
During 2010, the Company’s non-officer directors received a
monthly retainer of $1,000 plus $500 for each monthly board
meeting attended, and $500 for each special board meeting
attended. The Chairman of the Board received an additional
$1,000 per month, but did not receive committee fees. The Audit
Committee Chairman received an additional $450 per month, the
Compensation Committee Chairman and the Corporate Governance/
Nominating Committee Chairman each received an additional $250
per month. Excluding the Chairman of the Board, non-officer
directors received $350 for each committee meeting attended for
which they were a member. The Company has one
officer-director
who does not receive fees for service as a director. While it is
recommended that directors are also shareholders of WBCO stock,
there is no requirement that a director must have an equity
ownership position in the Company.
Since 1993, the Company has used shareholder-approved stock
award plans that allow for stock options and awards to be
granted to directors, as well as officers and key employees. On
June 30, 2010, four of the non-officer directors (those who
had served for more than 12 months) were each granted a
restricted stock unit award of 1,500 units (each unit
represents one share) of WBCO stock and the value was reported
as part of their compensation for 2010. As of March 15,
2011 no stock awards had been granted to directors in 2011.
27
Equity Compensation Plan
Information. The following table summarizes
the number of shares subject to exercise and the number
available for future issuance as of March 15, 2011:
|
Number of |
Number of |
|||||||||||
|
Securities to be |
Securities |
|||||||||||
|
Issued Upon |
Weighted Average |
Remaining |
||||||||||
|
Exercise of |
Exercise Price of |
Available for |
||||||||||
|
Plan Category
|
Outstanding Options | Outstanding Options | Future Issuance | |||||||||
|
Equity compensation plans approved by security
holders(1)
|
203,955 | $ | 10.09 | 539,482 | ||||||||
|
Equity compensation plans not approved by security holders
|
— | — | — | |||||||||
|
Total
|
203,955 | $ | 10.09 | 539,482 | ||||||||
| (1) | As of March 15, 2011 and in addition to stock options, there were 46,604 restricted stock units awarded (each unit represents one share), which are subject to issuance upon vesting of the awards. Of the 46,604 currently outstanding RSU awards, 18,127 are scheduled to vest during the remainder of 2011. |
COMMITTEE
REPORTS
The following reports of the Audit Committee and Compensation
Committee are made pursuant to the rules of the Securities and
Exchange Commission and NASDAQ listing standards. These reports
shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933, as amended or the
Exchange Act, except to the extent that the Company specifically
incorporates the information by reference, and shall not
otherwise be deemed filed under such acts.
Report of the Audit Committee. The
following report of the Audit Committee is made pursuant to SEC
rules and the Company’s Audit Committee Charter. In this
context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented
to the Audit Committee that the Company’s consolidated
financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America,
and the Audit Committee has reviewed and discussed the
consolidated financial statements with management and the
independent auditors.
The Audit Committee discussed with the independent auditors
matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The
Audit Committee discussed with the Company’s internal and
independent auditors the overall scope and plans for their
respective audits. The Audit Committee meets with the internal
and independent auditors, with and without management present,
to discuss the results of their examinations, the evaluations of
the Company’s internal controls, and the overall quality of
the Company’s financial reporting.
The Audit Committee has received the written disclosures and the
letter from the independent auditors required by Independence
Standards Board Standard No. 1 (Independence Standards
Board Standards No. 1, Independence Discussions with Audit
Committees), as may be modified or supplemented, and has
discussed with the independent auditors the independent
auditors’ independence.
As outlined in the Company’s Audit Committee Charter, the
Audit Committee’s job is one of oversight. Management is
responsible for the preparation of the Company’s financial
statements and the independent auditors are responsible for
auditing those financial statements. The Audit
28
Committee and the Board recognize that management, the internal
audit staff and the independent auditors have more resources,
time, detailed knowledge and information regarding the
Company’s accounting, auditing, internal control and
financial reporting practices than the Audit Committee does.
Accordingly, the Audit Committee’s oversight role does not
provide any expert or special assurance as to the financial
statements and other financial information provided by the
Company to its shareholders and others.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements for the fiscal year ended December 31,
2010 be included in the Company’s Annual Report on
Form 10-K
for the last fiscal year for filing with the SEC.
Respectfully submitted by:
Audit Committee:
Gragg E. Miller, Chairman
Anthony B. Pickering
Robert T. Severns
Gragg E. Miller, Chairman
Anthony B. Pickering
Robert T. Severns
29
COMPENSATION
COMMITTEE REPORT.
The Compensation Committee certifies that:
1. It has reviewed with senior risk officers the senior
executive officer (SEO) compensation plans and has made all
reasonable efforts to ensure that these plans do not encourage
SEOs to take unnecessary and excessive risks that threaten the
value of the Company;
2. It has reviewed with senior risk officers the employee
compensation plans and has made all reasonable efforts to limit
any unnecessary risks these plans pose to the Company; and
3. It has reviewed the employee compensation plans to
eliminate any features of these plans that would encourage the
manipulation of reported earnings of the Company to enhance the
compensation of any employee.
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K.
The Compensation Committee recommended to the board of directors
that the Compensation Discussion and Analysis be included in
this Proxy Statement and incorporated by reference into the
Company’s annual report on
Form 10-K
for the year ended December 31, 2010.
Respectfully submitted by
Compensation Committee:
Edward J. Wallgren, Chairman
Jay T. Lien
Anthony B. Pickering
Robert T. Severns
Edward J. Wallgren, Chairman
Jay T. Lien
Anthony B. Pickering
Robert T. Severns
INTEREST
OF DIRECTORS AND MANAGEMENT IN CERTAIN TRANSACTIONS
During 2010, certain directors and executive officers of WBCO
and the Bank, and their associates, were customers of the Bank,
and it is anticipated that such individuals will be customers of
the Bank in the future. Insider “related interests”
are disclosed through annual questionnaires and reported in
compliance with applicable federal and state laws, and banking
regulations. Pursuant to written Company policies and
procedures, insider transactions are promptly and fully
disclosed to the Board by senior management in conjunction with
the Bank’s compliance department. All transactions between
the Bank and its officers and directors, and their associates,
were made in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with
other unrelated persons. In the opinion of management, such
transactions with executive officers and directors did not
involve more than the normal risk of collectability or present
other unfavorable features. The aggregate outstanding amount of
loans to directors and officers and their related parties was
approximately $3.3 million on December 31, 2010, which
represented approximately 1.8% of our consolidated
shareholders’ equity at that date. All such loans are
currently in good standing and are being paid in accordance with
their terms.
We have a formal review and approval process for loans extended
by the Bank to related persons. WBCO does not extend credit to
any officers or directors. However, many of our directors and
officers, their immediate family members and affiliated
businesses, borrow from and have deposits with the Bank. All
loans to related parties are made in the ordinary course of the
Bank’s business, and on substantially the same terms,
including interest rates and collateral, as those prevailing at
the time for comparable loans with persons not related to the
Bank. These loans did not and do not involve more than the
normal risk of collection or present other unfavorable features
to the Bank. Loans by the Bank to directors and designated
executive officers are governed by Regulation O,
12 CFR Part 215. All of our Named Executives are
designated as executive officers of the Bank under
Regulation O.
30
RELATIONSHIP
WITH
INDEPENDENT PUBLIC ACCOUNTANTS
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Moss Adams LLP (“Moss Adams”) was engaged
by WBCO as its independent accountants for the year ended
December 31, 2010. WBCO has selected the firm of Moss Adams
as its independent accountants for the year ending
December 31, 2011. A representative of Moss Adams is
expected to be present at the Annual Meeting to make a
statement, if desired, and to be available to respond to
appropriate questions.
Fees
Billed By Moss Adams During 2010
Audit and Non-audit Fees. The following
table presents fees for professional audit services rendered by
Moss Adams for the audit of the Company’s annual financial
statements for 2010 and 2009, and fees billed for other services
rendered by Moss Adams.
| 2010 | 2009 | |||||||
|
Audit
fees(1):
|
$ | 384,000 | $ | 263,000 | ||||
|
Audit related
fees(2):
|
119,000 | 59,000 | ||||||
|
Tax fees:
|
0 | 0 | ||||||
|
All other fees:
|
0 | 0 | ||||||
|
TOTAL
|
$ | 503,000 | $ | 322,000 | ||||
| (1) | Includes fees for audit of the Company’s annual consolidated financial statements; reviews of the Company’s quarterly consolidated financial statements; and audit of internal controls over financial reporting. | |
| (2) | For assistance with comfort letter to underwriters for capital raising activities; audit of the Company’s 401(k) plan; and acquisition audits. |
The Company’s Audit Committee charter contains the
Company’s policy on pre-approval of all non-audit services
permitted under Commission rules that may be provided to the
Company by the independent auditors. The Company requires that
all non-audit services rendered to the Company by Moss Adams be
approved by the Audit Committee. The Audit Committee
pre-approves, on a quarterly basis, the provision of certain
permissible tax services and services related to compliance with
the Sarbanes Oxley Act of 2002 up to a designated dollar amount
per quarter. All other proposals for non-audit services are
submitted to the Audit Committee for prior approval. In all
cases, the Audit Committee considers whether the provision of
such services would impair the independence of the
Company’s auditors.
CODE OF
ETHICS
The Company has adopted a Code of Conduct which contains a Code
of Ethics that is applicable to the Chief Executive Officer,
Chief Financial Officer and all other persons performing similar
functions. The Company’s Code of Conduct is available on
the Company’s website at www.wibank.com and is also
available free of charge by writing to Washington Banking
Company, Investor Relations, 450 SW Bayshore Drive, Oak Harbor,
WA 98277. We require all employees to adhere to the Code of
Conduct in addressing legal and ethical issues that they
encounter. The Code requires employees to avoid conflicts of
interest, comply with all laws and regulations, and conduct
business in an honest and ethical manner. Our employees may
report confidential and anonymous complaints to an “ethics
hotline” by calling a toll-free phone number maintained by
an independent vendor.
31
INFORMATION
CONCERNING SHAREHOLDER PROPOSALS
A shareholder proposing to transact business at WBCO’s 2012
Annual Meeting of Shareholders must provide notice of such
proposal to the Corporate Secretary of WBCO no later than
December 3, 2011 for the shareholder proposal to be
considered for inclusion in WBCO’s proxy statement and form
of proxy relating to its 2012 Annual Meeting of Shareholders.
If WBCO receives notice of a shareholder proposal after
February 16, 2012, the persons named as proxies in the form
of proxy will have discretionary authority to vote on such
shareholder proposal.
In addition, shareholders seeking to include proposals in the
proxy materials for the 2012 Annual Meeting of Shareholders must
comply with all applicable regulations, including
Rule 14a-8
under the Exchange Act.
ANNUAL
REPORT
The Company’s Annual Report, including the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 filed with the
SEC, accompanies this proxy statement. Additional copies will be
furnished to shareholders upon written request to Washington
Banking Company, Investor Relations, 450 SW Bayshore Drive,
PO Box 7001, Oak Harbor, WA 98277.
OTHER
MATTERS
The Board of Directors knows of no other matters to be brought
before the Annual Meeting. If other matters should properly come
before the Annual Meeting, it is the intention of the persons
appointed in the Proxy to vote the shares represented by the
Proxy in accordance with recommendations of management on such
matters.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING IN PERSON. IF YOU DO ATTEND THE ANNUAL MEETING, AND ARE
THE RECORD HOLDER OF YOUR SHARES (OR HOLD A “LEGAL
PROXY” FROM YOUR BROKER) YOU MAY THEN WITHDRAW YOUR PROXY
AND VOTE IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR
TO ITS EXERCISE BY FOLLOWING THE INSTRUCTIONS SET FORTH
UNDER “SOLICITATION, VOTING AND REVOCABILITY OF
PROXIES.”
32
IMPORTANT ANNUAL MEETING INFORMATION
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. |
x | |||
Annual Meeting Proxy Card
6
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
6
A
|
Proposals — The Board of Directors recommends a vote “FOR” Proposals 1, 2, 3 and 5 and to recommend an annual (every year) vote on Proposal 4. | For | Against | Abstain | ||||
1.
|
AMENDMENT TO ARTICLES OF INCORPORATION. To approve an amendment to our Articles of Incorporation that would declassify the Board of Directors and provide for the annual election of directors. | o | o | o |
+
| 2. | ELECTION OF DIRECTORS. To elect as directors the individuals listed below to serve until the 2012 annual meeting of shareholders (or in the event proposal #1 does not pass, to elect Jay T. Lien and Edward J. Wallgren to serve until the 2014 annual meeting of shareholders) and until their successors are duly elected and qualified. |
| For | Withhold | For | Withhold | For | Withhold | |||||||||||
01 - Jay T. Lien
|
o | o | 02 - Gragg E. Miller | o | o | 03 - Anthony B. Pickering | o | o | ||||||||
04 - Robert T.
Severns
|
o | o | 05 - John L. Wagner | o | o | 06 - Edward J. Wallgren | o | o |
3. |
NON-BINDING ADVISORY “SAY-ON-PAY” VOTE ON EXECUTIVE COMPENSATION. To consider a resolution to approve the compensation of named executive officers as disclosed in the proxy statement. |
For o |
Against o |
Abstain o |
||||
5.
|
NON-BINDING RATIFICATION OF AUDITOR APPOINTMENT. To ratify the Audit Committee’s appointment of Moss Adams LLP as the Company’s independent registered public accountant for the fiscal year ending December 31, 2011. | For o |
Against o |
Abstain o |
| 1 Yr | 2 Yrs | 3 Yrs | Abstain | |||||||
4.
|
NON-BINDING ADVISORY VOTE ON FREQUENCY OF THE “SAY-ON-PAY” VOTE. To consider an advisory vote on how often to hold the non-binding advisory vote on executive compensation. | o | o | o | o | |||||
| 6. | OTHER MATTERS. The Board of Directors knows of no other matters to be brought before the Annual Meeting. If other matters should properly come before the Annual Meeting, it is the intention of the persons appointed in the Proxy to vote the shares represented by the Proxy in accordance with recommendations of management. | |||||||||
B
|
Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name appears above. Joint owners each should sign. Fiduciaries should
add their full title to their signature. Corporations should sign in full corporate name by an
authorized officer. Partnerships should sign in partnership name by an authorized person.
Date (mm/dd/yyyy) — Please print date below.
|
Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||
/ / |
| g | 
|
+ |
6
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
6
Proxy — Washington Banking Company
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF WASHINGTON BANKING COMPANY
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 19, 2011
OF WASHINGTON BANKING COMPANY
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 19, 2011
The undersigned shareholder of WASHINGTON BANKING COMPANY (“WBCO”) hereby appoints Anthony B.
Pickering and Edward J. Wallgren, or either of them acting in the absence of the other, with full
power of substitution, my true and lawful attorneys and proxies for me in my place and stead to act
and vote all the common stock of WBCO standing in my name and on its books on March 15, 2011, at
the Annual Meeting of Shareholders to be held at the Best Western Harbor Plaza, 33175 State Route
20, Oak Harbor, Washington on May 19, 2011 at 3:00 p.m., and at any adjournment or postponement
thereof, with all the powers the undersigned would possess if personally present.
This proxy is solicited by the management of WBCO. This proxy, when properly executed, will be
voted as directed. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” PROPOSALS 1, 2, 3 AND 5
AND WITH RESPECT TO PROPOSAL 4 TO RECOMMEND AN “ANNUAL” VOTE. Proxies may vote in their discretion
as to such other matters as may properly come before the meeting.