AMERICAN RIVER HOLDINGS
INCENTIVE COMPENSATION PLAN
YEAR ENDED DECEMBER 31, 2000
INTRODUCTION
The establishment of the American River Holdings (ARH) Incentive
Compensation Plan (the "Plan") for the year ended December 31, 2000 by the Board
of Directors is intended to provide the employees of the companies of American
River Holdings with incentive compensation for achieving exemplary performance
standards during the year. It is the intention of the Board of Directors to
review the Plan for compliance with American River Holdings current operating
objectives and to evaluate the corresponding cost-benefit relationship achieved
by the Plan. At the sole and absolute discretion of the Board of Directors, the
Plan may be amended, revised or terminated at any time. The policy of the Board
of Directors will be to review the Plan annually.
Eligibility for incentive compensation under the Plan is dependent upon
achieving "MINIMUM FINANCIAL PERFORMANCE STANDARDS" SPECIFIED BY THE PLAN. Each
company will have its own "minimum financial performance standards." If the
"minimum financial performance standards" are not achieved, then no incentive
compensation will be paid to employees of that company for that plan year. The
Board of Directors retains the right to consider extraordinary circumstances
that may have contributed to any company not meeting one or more of the minimum
financial performance standards. While under no obligation to do so, the Board
of Directors may elect in its sole and absolute discretion to subsequently award
incentive compensation as a direct result of the extraordinary circumstances on
such terms and conditions as the Board of Directors may determine. Examples of
extraordinary circumstances would include but are not limited to:
o Natural Disasters
o Mergers and acquisitions
o Discontinued operations
o Organizational restructuring
o Development of "new" business components
o Acquisition or sale of capital assets
While not intended to be all-inclusive, these examples are indicative
of the types of "material" circumstances that may give rise to possible
consideration by the Board of Directors. Further, the event or events that the
Board of Directors may consider, both in the form of extraordinary income and
expense, must have occurred after the beginning of the current plan
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AMERICAN RIVER HOLDINGS
INCENTIVE COMPENSATION PLAN
YEAR ENDED DECEMBER 31, 2000
(CONTINUED)
year and not have been included in the adopted Annual Business Plan for that
year. Further, net income for purposes of measuring compliance with "minimum
financial performance standards" shall only include income derived from
recurring operations. Extraordinary income that would be excluded from net
income for measurement purposes would include gains resulting from the sale of
"material" capital assets, business components and branches, loans and
investments.
Once the Board of Directors has determined eligibility for incentive
compensation for each company, the actual amount paid to any employee will
result directly from the annual evaluation prepared for that employee.
Therefore, incentive compensation paid will reflect attainment of both corporate
goals and personal goals for the applicable employee. ARH will be able to
reallocate unearned incentive compensation within or between companies subject
to the maximum available under the plan. The Plan is designed to promote
exemplary performance and the enhancement of shareholder value.
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AMERICAN RIVER BANK (ARB)
MINIMUM FINANCIAL PERFORMANCE STANDARDS (MFPS)
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Per Plan (1) MFPS (1) Target (1)
------------ --------- ----------
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Deposit Growth Rate 8.7% 8.0% 10%
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Total Loan Growth Rate 10% 10% 15%
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Commercial Loan Growth Rate (2) 13.8% 15% 20%
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Interest Margin / Average Earning Assets 5.41% 5.4% 5.5%
--------------------------------------------------------------------------------
Return on Beginning Equity (FAS 115 Adjusted) 22.2% 21.5% 23%
--------------------------------------------------------------------------------
Return on Average Assets 1.77% 1.65% 1.80%
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Efficiency Ratio 45% 47% 45%
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Net Charge offs to Average Loans .25% .50% .25%
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Classified Assets to Equity 20% 40% 20%
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CAMELS Rating 1 2 1
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(1) The metrics above are after tax and Pre Incentive
(2) The loan growth minimums exclude participation's purchased by ARB
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FIRST SOURCE CAPITAL (FSC)
MINIMUM FINANCIAL PERFORMANCE STANDARDS (MFPS)
PER PLAN (1) MFPS (1) TARGET (1)
Net Income $335,000 $135,000 $285,000
Number of vendors averaging N/A 5 10
2 deals per month
The incentive Pool for FIRST SOURCE CAPITAL will be per American River Holdings
Plan adjusted as follows:
PRE INCENTIVE
NET INCOME
Pool per American River Holdings Plan X100% $285,000
X 85% $235,000
X 70% $185,000
X 50% $135,000
(1) The above is after tax and Pre Incentive
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NORTH COAST BANK (NCB)
MINIMUM FINANCIAL PERFORMANCE STANDARDS (MFPS)
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Per Plan (1) MFPS (1) Target (1)
------------ --------- ----------
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Core Deposit Growth Rate (Non-CD) 15% 16% 20%
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Total Loan Growth Rate 21% 21% 25%
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Commercial Loan Growth Rate 14.7% 15% 20%
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Interest Margin / Average Earning Assets 6.1% 6.0% 6.1%
--------------------------------------------------------------------------------
Return on Beginning Equity (FAS 115 Adjusted) 11.8% 11.84% 13.5%
--------------------------------------------------------------------------------
Return on Average Assets .90% .90% 1.0%
--------------------------------------------------------------------------------
Efficiency Ratio 69.3% 69% 65%
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Net Charge offs to Average Loans .25% .50% .25%
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Classified Assets to Equity 20% 40% 25%
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CAMELS Rating 2 2 2
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(1) The metrics above are after tax Pre Incentive/Pre Merger Expense
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AMERICAN RIVER HOLDINGS
CONSOLIDATED
MINIMUM FINANCIAL PERFORMANCE STANDARDS
Per Plan (1) MFPS (1)(3) Target (1)
------------ ------------ -----------
Return on Average Equity 18.45% 17.46% 19.00%
Basic Earnings Per Share (2) $1.86 $1.76 $1.90
Efficiency Ratio 51.5% 53.3% 51.5%
BOPEC Rating 2 1
(1) The metrics above are after tax Pre Incentive/Pre Merger Expense
(2) Future years we will target a 15% EPS growth rate. Due to the NCB deal 2000
will be dilutive to ARH
(3) The MFPS of each of the other companies will be incorporated within the
Performance Evaluation of the CEO of ARH.
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INCENTIVE 2000 ALLOCATIONS
<TABLE>
<CAPTION>
ARB FSC NCB ARH Consolidated
<S> <C> <C> <C> <C> <C>
S1 Net prior to incentive & Taxes $ 3,676,621 $ 335,342 $ 331,604 $ (279,732) $ 4,063,835
S Adjust fsc to reasonable 0 (200,000) 0
Adjusted net income $ 3,676,621 $ 135,342 $ 331,604 $ (279,732) $ 3,863,835
Incentive calculation 18% of consolidated $ 695,490
less 401k contribution
$ (100,000)
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Incentive Pool $ 595,490
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----------------------------------------------------------------------------------------------------
ARB FSC NCB ARH Consolidated
Potential Allocation Potential 58.0% 6.0% 11.3% 24.7% 100.0%
Allocation Pool 345,384 35,729 67,290 147,086 595,490
CEO 29.0% 37.2% 85.2%
CFO/COO 89.0% 0.0% 14.8%
Other 71.0% 11.0% 62.8% 0.0%
100.0% 100.0% 100.0% 100.0%
----------------------------------------------------------------------------------------------------
E CEO $ 100,161 $ 25,032 $ 125,317
F CFO/COO -- $ 31,799 -- $ 21,769
Other $ 245,223 $ 3,930 $ 42,258 --
$ 345,384 $ 35,729 $ 67,290 $ 147,086 $ 595,490
----------------------------------------------------------------------------------------------------
</TABLE>
S1
S2 Income from Incentive 2000 Sheet
Adjust fsc to more reasonable target
E Incentive for ARB
Assuming 2000 Budget is met 100,000
per executive comm. 100M Young 231,000
per 2000 budget others w/o Derenzo ($248M-$17M) $ 331,000
Targeted Incentive ARB
F Incentives FSC, ARH
FSC Per contract Christensen 10% of net if net is
Greater than 80% of Strategic plan
(393Mx80%=$314); $316>$314 10% of net $ 31,600
ARH
Per executive committee Taber 125M $ 125,000
Per 2000 Budget Derenzo (83Mx 19.5%) $ 17,000
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<TABLE>
<CAPTION>
Impact of $100,000 additional net income
Additional Net Income $ 100,000
Incentive calculation 18% 18%
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Incentive Pool $ 18,000
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ARB FSC NCB ARH Consolidated
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------
Potential Allocation 58.0% 6.0% 11.3% 24.7% 100.0%
Potential Allocation Pool 10,440 1,080 2,034 4,446 18,000
CEO 29.0% 37.2% 85.2%
CFO/COO 89.0% 0.0% 14.8%
Other 71.0% 11.0% 62.8% 0.0%
100.0% 100.0% 100.0% 100.0%
----------------------------------------------------------------------------------------------------
CEO $ 3,028 $ -0- $ 757 $ 3,788
CFO/COO $ -0- $ 961 $ -0- $ 658
Other $ 7,412 $ 119 $ 1,277 $ -0-
$ 10,440 $ 1,080 $ 2,034 $ 4,446 $ 18,000
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</TABLE>
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