ovly20230426_def14a.htm

DEF 14A 1 ovly20230426_def14a.htm FORM DEF 14A ovly20230426_def14a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐	Preliminary Proxy Statement
☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒	Definitive Proxy Statement
☐	Definitive Additional Materials
☐	Soliciting Material under §240.14a-12


Oak Valley Bancorp
(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

☒	No fee required
☐	Fee paid previously with preliminary materials
☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

125 North Third Avenue

Oakdale, California 95361

(209) 848-2265

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 20, 2023 AT 2:00 P.M. (PDT)

The Annual Meeting of Shareholders of Oak Valley Bancorp, a California corporation (“Oak Valley” or the “Company”), will be held at Oak Valley Bancorp Headquarters at 338 East F Street, Oakdale, California 95361 on June 20, 2023 at 2:00 p.m. Pacific Daylight Time, to consider and vote on the following matters:

1. The election of the following four (4) director nominees as described within the Proxy Statement:

Christopher M. Courtney

Lynn R. Dickerson

Allison C. Lafferty

Terrance P. Withrow

2. The ratification of the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023; and

3. Such other business as may properly come before the Annual Meeting of Shareholders, and any adjournment or postponement.

The Board of Directors has fixed the close of business day on April 26, 2023, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting.

	By Order of the Board of Directors,

April 28, 2023	/s/ Jeffrey A. Gall
	Jeffrey A. Gall
	Secretary

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PROXY STATEMENT
OF
OAK VALLEY BANCORP

ANNUAL MEETING OF SHAREHOLDERS OF

OAK VALLEY BANCORP

TO BE HELD ON JUNE 20, 2023

GENERAL INFORMATION FOR SHAREHOLDERS

The following information is furnished in connection with the solicitation of the accompanying proxy by and on behalf of the Board of Directors of Oak Valley Bancorp (the “Company”) for use at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held at Oak Valley Bancorp Headquarters at 338 East F Street, Oakdale, California 95361 on June 20, 2023 at 2:00 p.m. Pacific Daylight Time (PDT).

Shareholders Entitled to Vote

Only shareholders of record at the close of business on April 26, 2023, (the “Record Date”) will be entitled to notice of, and to vote, at the Annual Meeting. On the Record Date, the Company had 8,281,661 outstanding shares of its common stock, of which 8,281,661 will be entitled to vote at the Annual Meeting and any adjournments thereof.

Internet Availability of Proxy Materials

We are furnishing proxy materials to our shareholders primarily via the Internet. On or about May 8, 2023, we will mail our shareholders on the record date a Notice Regarding the Internet Availability of Proxy Materials (the “Proxy Notice”) containing instructions on how to access and review all of the important information contained in our proxy materials, including this proxy statement, our 2022 Annual Report to Shareholders, our Annual Report on Form 10-K for the year ended December 31, 2022 and the proxy card. These materials are also available free of charge on the Internet at www.edocumentview.com/OVLY

The Proxy Notice also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose.

Vote By Proxy

Because many of the Company’s shareholders are not expected to attend the Annual Meeting, the Company solicits proxies so that each shareholder is given an opportunity to vote at the Annual Meeting. Shares represented by a duly executed proxy, received by the Board of Directors prior to the Annual Meeting, will be voted at the Annual Meeting. A shareholder executing and delivering the proxy may revoke the proxy at any time prior to exercise of the authority granted by the proxy by (i) filing with the Corporate Secretary of the Company an instrument revoking it or a duly executed proxy bearing a later date; or (ii) attending the Annual Meeting virtually and voting. A proxy is also revoked when written notice of the death or incapacity of the maker of the proxy is received by the Company before the vote is counted. If a shareholder specifies a choice with respect to any matter on the accompanying form of proxy, the shares will be voted accordingly. If no specification is made, the shares represented by the proxy will be voted in favor of the specified proposal.

Please note that if your shares are held in a brokerage account, by a trustee or by another nominee, you are considered the beneficial owner of shares held in street name, and the proxy materials were forwarded to you by your broker, trustee or nominee. As the beneficial owner, you have the right to direct your broker, trustee or nominee on how to vote and are also invited to participate in the Annual Meeting. Please review the voting instructions provided by your broker, trustee or nominee.

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Methods of Voting

Shareholders of record may vote on matters that are properly presented at the 2023 Annual Meeting in one of the following four ways:

	●	By submitting your vote electronically via the Internet at www.investorvote.com/OVLY;
	●	By submitting your vote telephonically;
	●	By completing the proxy card and returning it in a pre-paid envelope provided by the Company if you have requested a paper copy of the proxy materials; or
	●	By attending the Annual Meeting and casting your vote in person.

For the Annual Meeting, the Company is offering shareholders of record the opportunity to vote their shares electronically through the Internet or by telephone. The telephone and Internet voting instructions are provided in the Proxy Notice and the proxy card, and are also listed below. The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their voting instructions, and to confirm that shareholders’ instructions have been recorded properly. Shareholders voting through the Internet should understand that they may bear certain costs associated with Internet access, such as usage charges from their Internet service providers.

PROXY VOTING INSTRUCTIONS

Internet — Access www.investorvote.com/OVLY and follow the on-screen instructions, to cast your vote. Votes may be cast via the Internet until 11:00 PM PDT, June 19, 2023, the day before the meeting.

Telephone — Call toll free 1-800-652-8683 from any touch-tone telephone and follow the instructions to obtain your identification number, which will allow you to cast your vote. Votes may be cast via telephone until 11:00 PM PDT, June 19, 2023, the day before the meeting.

At the Annual Meeting — You may vote your shares by attending the Annual Meeting in person.

Mail — If you have requested a paper copy of proxy materials, you should sign, date and mail your proxy card in the envelope provided as soon as possible. Instructions on requesting a paper copy of the proxy materials are listed below.

If a shareholder chooses to submit the vote by mail, the shareholder should request a paper copy of the proxy materials, (which include this proxy statement, our 2022 Annual Report to Shareholders and our Annual Report on Form 10-K) and Company will send the shareholder the proxy card along with the rest of the proxy materials, as well as a pre-paid envelope. The shareholder then would vote by signing and returning the proxy card in the pre-paid envelope to the Company. There is no charge to a shareholder for requesting a paper copy of the proxy materials. If you wish to receive a paper copy of the proxy materials, you must request a copy as instructed below on or before June 9, 2023 to ensure timely delivery.

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Methods of requesting a paper copy of the proxy materials:	If you are a shareholder of record:	If you are beneficial owner of shares held in street name:

By Telephone:	Toll Free Telephone Number: 1-866-641-4276	Toll Free Telephone Number: 1-800-579-1639

From the Internet:	Go to www.investorvote.com/OVLY, click Request Materials	Go to www.proxyvote.com by following the instructions on the screen.

By Email	Write to investorvote@computershare.com with subject line: “Proxy Materials Oak Valley Bancorp.”	Send a blank email to sendmaterial@proxyvote.com with your 12-Digital Control Number in the subject line.

Method of Counting Votes

A holder of common stock of the Company is entitled to one vote for each share held of record by such holder. No holder of any class of stock of the Company is entitled to cumulate votes in connection with any election of directors of the Company.

The proxy holders, Richard A. McCarty and Jeffrey A. Gall, both of whom are officers of the Company, will vote all shares of Common Stock represented by the proxies unless authority to vote such shares is withheld or the proxy is revoked. However, the proxy holders cannot vote the shares of the shareholder unless the shareholder signs and returns a proxy card. Proxies also confer upon the proxy holders, discretionary authority to vote the shares represented thereby on any matter that was not known at the time this Proxy Statement was mailed, if such matter is properly presented for action at the Annual Meeting, including any motion to adjourn and any procedural matter pertaining to the conduct of the Annual Meeting. The total expense of soliciting the proxies in the accompanying form will be borne by the Company. While proxies are normally solicited by mail, proxies also may be solicited directly by officers, directors and employees of the Company or its wholly owned subsidiary, Oak Valley Community Bank (the “Bank”). Such officers, directors and employees will not be compensated for this service beyond normal compensation to them.

All abstentions and broker non-votes are included in the determination of the number of shares present and voting for the purpose of determining whether a quorum is present, and each is tabulated separately. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters, if the beneficial owner of the shares has not provided instructions to the broker on how to vote such shares. A “broker non-vote” occurs when a broker does not vote on a particular matter because the broker has not received instructions from the beneficial owner of the shares and does not have the discretion to vote such shares. The ratification of the selection of the Company’s independent registered public accounting firm and the amendment of the Company’s bylaws are routine matters on which brokers have the discretion to vote if the owner of shares has not provided voting instructions. The election of directors is a non-routine matter on which a broker may not vote unless the beneficial owner of shares has provided voting instructions.

Unless contrary instructions are indicated on the proxy, all shares represented by valid proxies received pursuant to this solicitation (and not revoked before they are voted) will be voted as follows:

●

FOR the election of each nominees for director named herein (Proposal No. 1).

●

FOR ratification of the selection of RSM US LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023 (Proposal No. 2).

In the event a shareholder specifies a different choice on the proxy, the shareholder’s shares will be voted in accordance with the specification so made. In addition, such shares will, at the proxy holders’ discretion, be voted on such other matters, if any, which may properly come before the Annual Meeting (including any proposal to adjourn the Annual Meeting and any procedural matter pertaining to the conduct of the Annual Meeting). Boxes and a designated blank space are provided on the proxy card for shareholders to mark if they wish either to abstain on one or more of the proposals or to withhold authority to vote for one or more nominees for director.

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A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 is available at www.edocumentview.com/OVLY. You may request a paper copy of this annual report and other proxy materials through one of the following methods:

Methods:	If you are a shareholder of record:	If you are beneficial owner of shares held in street name:

By Telephone:	Toll Free Telephone Number: 1-866-641-4276	Toll Free Telephone Number: 1-800-579-1639

Online:	Go to www.investorvote.com/OVLY, click Request Materials	Go to www.proxyvote.com by following the instructions on the screen.

By Email:	Write to investorvote@computershare.com with subject line: “Proxy Materials Oak Valley Bancorp.”	Send a blank email to sendmaterial@proxyvote.com with your 12-Digital Control Number in the subject line.

Vote Required For Election of Directors		The four (4) nominees receiving a plurality of the votes cast at the Annual Meeting will be elected as directors. This means that the four (4) nominees who receive the largest number of votes cast are elected as directors. Withholding authority to vote for a director nominee and broker non-votes on the election of directors will not affect the outcome of the election. Under California corporate law, votes against a director and votes withheld from a director shall have no legal effect. Our Board of Directors unanimously recommends that you vote FOR the election of each of its director nominees.

Ratification of Selection of Independent Accountants		The affirmative vote of a majority of our shares of common stock present at the Annual Meeting or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the selection of RSM US LLP as our independent registered public accounting firm for 2023. Abstentions will be treated as present and entitled to vote and therefore will have the same effect as a vote against this proposal. Our Board of Directors unanimously recommends that you vote FOR the proposal to ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT

Ownership of Securities

The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of March 31, 2023, by:

●

Each person known by us to be a beneficial owner of five percent (5%) or more of our common stock;

●

Each current director, each of whom is a nominee for election as a director;

●

Each named executive officer; and

●

All current directors and executive officers as a group.

Our common stock is the only class of voting securities outstanding. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”) and includes voting and investment power with respect to the securities. Except as indicated in the notes following the table, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 8,281,661 shares of common stock outstanding as of March 31, 2023.

	Common Stock Beneficially Owned on March 31, 2023
Beneficial Owner	Shares Beneficially Owned		Percentage of Shares Beneficially Owned
Five Percent Shareholder:
None		0		0.00	%

Executive Officers and Directors: (1)
Donald L. Barton (2)		36,000		0.43	%
Christopher M. Courtney (3)		220,190		2.66	%
Lynn Dickerson		17,777		0.21	%
Jeffrey A. Gall		30,711		0.37	%
James L. Gilbert (4)		155,810		1.88	%
Thomas A. Haidlen		171,146		2.07	%
H. Randolph Holder (5)		133,757		1.62	%
Allison C. Lafferty (6)		5,750		0.07	%
Daniel J. Leonard (7)		56,222		0.68	%
Ronald C. Martin (3)(8)		188,697		2.28	%
Richard A. McCarty		47,080		0.57	%
Janet S. Pelton		61,000		0.74	%
Michael J. Rodrigues		66,005		0.80	%
Gary W. Stephens		27,890		0.34	%
Gary Strong		1,000		0.01	%
Danny L. Titus		216,923		2.62	%
Terrance P. Withrow		30,302		0.37	%
All officers and directors as a group		1,624,026		19.61	%

(1)

The address for all officers and directors is c/o Oak Valley Community Bank, 125 North Third Avenue, Oakdale, California 95361.

(2)

Includes 1,500 shares held indirectly by Mr. Barton's spouse.

(3)

Excludes third party participant shares held by Mr. Courtney or Mr. Martin in their capacity as trustees of the Company’s 401(k) plan.

(4)

Includes 4,237 shares held indirectly in a custodial account for Mr. Gilbert's son, 24,795 shares held indirectly in Mr. Gilbert's spouse's trust, 5,483 shares held indirectly in Mr. Gilbert’s spouse’s IRA, and 32,905 shares held indirectly in the name of A.L. Gilbert Co.

(5)

Includes 123,492 shares held indirectly in the name of Holder Enterprises, LLC.

(6)	Includes 2,200 shares held indirectly in Ms. Lafferty’s spouse’s retirement account.

(7)

Includes 1,731 shares held indirectly in custodial accounts for Mr. Leonard’s grandchildren.

(8)

Includes 10,600 shares held indirectly in custodial accounts for Mr. Martin's grandchildren.

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CORPORATE GOVERNANCE AND BOARD MATTERS

We are committed to having sound corporate governance principles, good business practices, and transparency in financial reporting. Having such principles is essential to running our business efficiently and to maintaining our integrity in the marketplace. Our Board of Directors continually reviews its governance policies and practices, as well as the requirements of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the listing standards of the Nasdaq Stock Market, to help ensure that such policies and practices are compliant and up to date.

Board of Directors

Board Independence

For 2022 and through the date of this proxy statement, a majority of the Board of Directors consisted of independent directors, as defined by the applicable rules and regulations of the Nasdaq Stock Market, as follows:

Donald L. Barton

Lynn R. Dickerson

James L. Gilbert

H. Randolph Holder

Allison C. Lafferty

Daniel J. Leonard

Ronald C. Martin

Janet S. Pelton

Gary J. Strong

Danny L. Titus

Terrance P. Withrow

The non-independent directors of the Board are Thomas A. Haidlen, who has related party transactions as described in the Information About Directors and Executive Officers section of this proxy statement, and Christopher M. Courtney, the Company’s Chief Executive Officer.

In making its independence determinations, the Board considered transactions that occurred since the beginning of fiscal year 2022 between the Company and entities associated with the independent directors or members of their immediate family. All identified transactions that appeared to relate to the Company and a family member of, or entity with a known connection to, a director, was presented to the Board for consideration.

In making its subjective determination that each of the Company’s directors other than Mr. Courtney and Mr. Haidlen is independent, the Board reviewed and discussed additional information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and the Company’s management. These transactions are described below under “Certain Relationships and Related Party Transactions.”

Board and Committee Meeting Attendance

During the fiscal year ended December 31, 2022, our Board of Directors held a total of twelve (12) meetings. Each incumbent director who was a director during 2022 attended at least 75% of the aggregate of (a) the total number of such meetings; and (b) the total number of meetings held by all committees of the Board on which such director served during 2022.

Director Attendance at Annual Meetings of Shareholders

The Board believes it is important for all directors to attend the Annual Meeting of Shareholders in order to show their support for the Company and to provide an opportunity for shareholders to communicate any concerns to them. The Company’s policy is to encourage, but not require, attendance by each director at the Company’s Annual Meeting of Shareholders. Eleven (11) of our thirteen (13) then-current directors attended our Annual Meeting of Shareholders in 2022.

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Communications with the Board

The Board of Directors has established a process for shareholders to communicate with the Board of Directors or with individual directors. Shareholders who wish to communicate with the Board of Directors or with individual directors should direct written correspondence to our Corporate Secretary at our principal executive offices located at 125 North Third Avenue, Oakdale, California 95361. Our Corporate Secretary may (but is not required to) review all correspondence addressed to the Board, or to any individual member of the Board, for any correspondence that more suitably directed to management. Communications may be deemed inappropriate for this purpose if, for example, it is reasonably apparent from the face of the correspondence that it relates principally to a customer dispute. Our policies regarding the handling of shareholder communications to the Board were approved by a majority of our independent directors.

Nomination of Directors

The Board as a whole identifies and evaluates nominees for election as directors. The Board utilizes a variety of methods for identifying and evaluating nominees for director. Although there are no specific minimum qualifications, the Board considers some or all of the following criteria in considering candidates to serve as directors:

● commitment to ethical conduct and personal and professional integrity as evidenced by the person’s business associations; diversity efforts, service as a director or executive officer, involvement in other organizations (including any educational institutions), and any other commitment to ethical conduct and personal and professional integrity;

● objective perspective and mature judgment developed through business experiences and/or educational endeavors;

● the candidate’s ability to work with other members of the Board and management to further the Company’s goals and increase shareholder value;

● the ability and commitment to devote sufficient time to carry out duties and responsibilities as a director;

● demonstrated experience at policy-making levels in various organizations and in the areas that are relevant to our activities;

● the skills and experience of the potential nominee in relation to the capabilities already present on the Board of Directors;

● local community involvement; and

● such other attributes, including independence, that are relevant in constituting a board that satisfies the requirements imposed by the SEC, the Nasdaq Stock Market and applicable state law.

In addition to the factors discussed above, the Board regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Board considers various potential candidates for director. Candidates may come to the attention of the Board through current Board members, shareholders or other persons. As described below, the Board considers properly submitted shareholder nominations for candidates for the Board. Following verification of the shareholder status of persons nominating candidates, nominations are aggregated and considered by the Board at a regularly scheduled meeting, which is generally the first or second meeting prior to the issuance of the proxy statement for our annual meeting. If any materials are provided by a shareholder in connection with the nomination of a director candidate, such materials are forwarded to the Board.

The Board does not have a formal written policy regarding consideration of director candidates recommended by shareholders. Instead, the Board considers all candidates who meet the requirements for nomination by a shareholder, based on the criteria discussed above, but the Board has no obligation to nominate such candidates. The Board believes that requiring shareholder nominations of director candidates to comply with specific requirements would create an unnecessary distinction and may limit the potential pool of qualified director candidates for the Board.

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Term of Office

Directors serve for a three-year term or until their successors are elected. The Bylaws of the Company, as amended, authorize the Company to have a classified Board of Directors, divided into three classes, so long as the number of directors of the Company has been fixed at nine (9) or more directors. Currently, the Board has been fixed at thirteen (13) directors. Pursuant to Section 3.3 of the Company Bylaws, in the event that the authorized number of directors is fixed at nine (9) or more, the Board of Directors is to be divided into three classes, designated Class I, Class II and Class III. Each class shall consist of one-third of the directors or as close an approximation as possible. Each director in each class is elected for a term running until the third annual meeting next succeeding his or her election, until his successor shall have been duly elected and qualified. Accordingly, each nominee director, if elected, will hold office as follows until his or her successor is duly elected and qualified for the following terms:

Nominee		Expiration of Term

Christopher M.	Courtney		2026 (1)
Lynn R.	Dickerson		2026 (1)
Allison C.	Lafferty		2026 (1)
Terrance P.	Withrow		2026 (1)

(1) If elected at the Annual Meeting.

The following table indicates the terms of the incumbent directors who are not up for election at the Annual Meeting:

Nominee		Expiration of Term

Donald L.	Barton	2024
Thomas A.	Haidlen	2024
Daniel J.	Leonard	2024
Ronald C.	Martin	2024
James L.	Gilbert	2025
H. Randolph	Holder	2025
Janet S.	Pelton	2025
Gary J.	Strong	2025
Danny L.	Titus	2025

The Board does not have term limits, instead preferring to rely upon the evaluation procedures described herein as the primary methods of ensuring that each director continues to act in a manner consistent with the best interests of the shareholders and the Company.

Number and Composition of Board Committees

The Board may delegate portions of its responsibilities to committees of its members. These standing committees of the Board meet at regular intervals to attend to their particular areas of responsibility. Our Board has six (6) standing committees: Nominating Committee, Audit Committee, Loan Committee, Investment Committee, Compensation Committee and Community Reinvestment Act (“CRA”) Committee. An independent director, as defined by the applicable rules and regulations of the Nasdaq Stock Market, chairs the Board and its other standing committees. The chair of such committee determines the agenda, the frequency and the length of the meetings of such committee and receives input from committee members.

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Executive Sessions

Independent directors meet in executive sessions throughout the year, including meeting annually to consider and act upon the recommendation of the Compensation Committee regarding the compensation and performance of the Chief Executive Officer.

Evaluation of Board Performance

A Board assessment and director self-evaluations are conducted annually in accordance with an established evaluation process and includes performance of committees. The Chair of the Nominating Committee, who is a rotating independent director, oversees this process and reviews the assessment and self-evaluation with the full Board.

Management Performance and Compensation

The Compensation Committee reviews and approves the Chief Executive Officer’s evaluation of the top management team on an annual basis. The Board (largely through the Compensation Committee) evaluates the compensation plans for senior management and other employees to ensure they are appropriate, competitive and properly reflect objectives and performance.

Director Stock Ownership Guidelines

The Company’s Bylaws require each Board member to hold shares of the Company’s common stock. Although the Board has not fixed any particular target holding, each director is encouraged to hold Company’s common stock for his or her own investment.

Code of Ethics

The Board expects all directors, as well as officers and employees, to display the highest standard of ethics, consistent with the principles that have guided the Company over the years.

We have adopted a Code of Ethics, which is posted on our Internet website at www.ovcb.com, under the “About Us” tab, in the “Investor Relations” section, at the link for “Governance Documents.” Our Code of Ethics helps ensure that the financial affairs of the Company are conducted honestly, ethically, accurately, objectively, consistent with generally accepted accounting principles and in compliance with all applicable governmental law, rules and regulations. We will disclose any amendment to, or a waiver from a provision of our Code of Ethics on our website. Our Code of Ethics applies to our directors, executive officers, employees and consultants. Our Chief Executive Officer and all senior financial officers, including the Chief Financial Officer, are bound by our Code of Ethics.

Reporting of Complaints/Concerns Regarding Accounting or Auditing Matters

The Company’s Board of Directors has adopted procedures for receiving and responding to complaints or concerns regarding accounting and auditing matters. These procedures were designed to provide a channel of communication for employees and others who have complaints or concerns regarding accounting or auditing matters involving the Company.

Employee concerns may be communicated in a confidential or anonymous manner to the Audit Committee of the Board. The Audit Committee Chair will make a determination on the level of inquiry, investigation or disposal of the complaint. All complaints are discussed with the Company’s senior management and monitored by the Audit Committee for handling, investigation and final disposition. The Chair of the Audit Committee will report the status and disposition of all complaints to the Board of Directors.

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INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS

Executive Officers

Set forth below is certain information with respect to the executive officers of the Company as of the date of this proxy statement:

Name	Age	Position	Officer Since*

Christopher M. Courtney	60	Chief Executive Officer	2008
Richard A. McCarty	51	President and Chief Operating Officer	2008
Michael J. Rodrigues	53	Executive Vice President and Chief Credit Officer	2008
Janis L. Powers	64	Executive Vice President, Risk Management	2015
Russell E. Stahl	52	Executive Vice President, Chief Information Officer	2017
Gary W. Stephens	60	Executive Vice President, Commercial Banking Group	2019
Julie N. DeHart	49	Executive Vice President, Retail Banking Group	2021
Cathy Ghan	63	Executive Vice President, Commercial Real Estate Group	2021
Jeffrey A. Gall	47	Senior Vice President, Chief Financial Officer and Secretary	2016

* The Company was formed in 2008 as the bank holding company of Oak Valley Community Bank.

Biographical information for our senior executive officers (SEOs).

Christopher M. Courtney has been the Bank and Oak Valley Bancorp’s Chief Executive Officer and Director since July 2013 and 2004, respectively. He served as President from 2004 to January 1, 2022, when the title was transferred to Rick McCarty. Previously, Courtney has served as the Bank’s Chief Credit Officer, Chief Operating Officer since 1999 and 2000, respectively. Mr. Courtney has over 30 years of diverse banking experience, joining Oak Valley Community Bank in 1996, as a lender, after working for a major bank, a mid-size bank and a small community bank. He graduated from the Wells Fargo Bank Credit Training Program in 1989. Mr. Courtney has a B.S. in Finance and an MBA from California State University, Sacramento. He is also a graduate of the Pacific Coast Banking School at the University of Washington. Mr. Courtney adds banking and operations experience to the Board.

Richard A. McCarty first joined Oak Valley Community Bank in 1996. Mr. McCarty became our President in 2022, Chief Operating Officer in 2017, our Senior Executive Vice President in 2016, our Chief Administrative Officer in 2008 and our Secretary in February 2010. He also served as the Bank’s Executive Vice President and Chief Financial Officer from 2000 to 2015. Mr. McCarty has a B.S. in Finance from California State University, Stanislaus.

Michael J. Rodrigues first joined Oak Valley Community Bank in 1997. He has been the Bank’s Executive Vice President, Chief Credit Officer since 2006. Mr. Rodrigues has 29 years of diverse banking experience, joining Oak Valley Community Bank in 1997, as a commercial lender. He has a degree in Business Finance from California Polytechnic State University, San Luis Obispo. He is also a 2006 graduate of the Pacific Coast Banking School at the University of Washington.

Janis L. Powers joined Oak Valley Community Bank in 2000 after relocating from Wichita, Kansas, which is where her banking career began. Ms. Powers was promoted to her current position of Executive Vice President, Risk Management Officer in January 2015. With over 20 years of diverse banking experience, she has had the opportunity to immerse herself in several of the bank’s business units, including marketing, operations and compliance. In 2005, she moved into Risk Management and began overseeing the bank’s governance and strategy for enterprise risk. Powers also manages compliance, internal audit, BSA, CRA and fraud prevention.

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Russell E. Stahl has over 30 years of bank operations experience, including more than two decades within the information technology area. Since joining Oak Valley Community Bank in 1998, he has managed the development, operations, and security of the bank’s technology infrastructure. Mr. Stahl served as Senior Vice President, Information Technology prior to his promotion to Executive Vice President, Chief Information Officer in January 2017.

Gary W. Stephens joined Oak Valley Community Bank in 2004. Mr. Stephens served as Senior Vice President, Commercial Banking Group prior to his promotion to Executive Vice President, Commercial Banking Group in January 2019. He has over 30 years of commercial banking experience. Stephens has served the bank in a wide variety of roles including Commercial Loan Team Leader, Senior Vice President Credit Administrator, and Senior Vice President Senior Lending Officer. He earned his B.S. Degree in Finance and his MBA from San Jose State University. He is also a 2011 graduate of the Pacific Coast Banking School at the University of Washington.

Julie N. DeHart joined Oak Valley Community Bank in 2005. Prior to her promotion to Executive Vice President, Retail Banking Group in 2021, Ms. DeHart served as the Senior Vice President, Retail Banking Manager since 2017. DeHart has over 25 years of retail banking experience, including various roles in the branch, training and development, and branch administration. She is a 2019 graduate of the Pacific Coast Banking School at the University of Washington.

Cathy Ghan joined Oak Valley Community Bank in 2007 to develop the bank's Commercial Real Estate Group with a focus on cultivating new business relationships, centralization of CRE client portfolios, construction loan management, and third-party property services including real estate appraisal. environmental and inspections. Ghan previously served as Senior Vice President, Commercial Real Estate Group since 2007 before her promotion to Executive Vice President, Commercial Real Estate Group in 2021. Ghan has been a dedicated leader in the commercial real estate lending industry for 30 years. Ghan holds a Bachelor of Science in Organizational Behavior from the University of San Francisco.

Jeffrey A. Gall joined Oak Valley Community Bank in 2006. Mr. Gall served as Vice President, Finance since his arrival until he was promoted to Senior Vice President, Chief Financial Officer in January 2016 and also is the principal accounting officer. In 2022, Mr. Gall assumed the role of Corporate Secretary, previously held by Richard A. McCarty. Mr. Gall has 25 years of banking experience and manages the external audit, financial reporting, internal controls framework, and investor relations in his current role. Mr. Gall has a B.S. in Business Administration from California State University, Sacramento.

The Board of Directors

The Board of Directors oversees our business and monitors the performance of management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed through, among other things, discussions with the Chief Executive Officer, other key executives and our principal outside advisors (legal counsel, outside auditors, and other consultants), by reading reports and other materials that we send them and by participating in Board and committee meetings.

The Company’s Bylaws currently permit the number of Board members to range from eight (8) to fifteen (15), leaving the Board authority to fix the exact number of directors within that range. The Board has currently fixed the number of directors at thirteen (13).

Directors

Biographical information of our current directors, who are not executive officers and are not nominees for election, is set forth below:

Donald L. Barton, 66, has been a director of the Bank since 2006 and of Oak Valley Bancorp since 2008. Mr. Barton is the managing partner at GoldRiver Orchards, a local walnut processing operation which his family started in 2003. Mr. Barton is the past Chairman of the Board of Western Agricultural Processors Association, an organization that provides advocacy, training and consulting for the tree nut industry of California. Barton also serves as chairman of the Liaison Action Committee of the California Walnut Handlers Coalition. Previously, he was Vice President Marketing at The Wornick Company, and President at Heidi’s Gourmet Desserts. Before that he had a number of managerial and executive positions in the food and agribusiness industries, including positions with Cargill and HJ Heinz. Mr. Barton is a Stanford graduate and earned his MBA from Santa Clara University. Mr. Barton is an Oakdale, California resident. Mr. Barton adds knowledge of the local economy to the Board.

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Thomas A. Haidlen, 76, has been a director of the Bank since 1991 and of Oak Valley Bancorp since 2008. Mr. Haidlen was born in Oakdale and has resided in Oakdale for over 50 years. He owns and operates the Haidlen Ford Dealership in Oakdale, California that was established in Oakdale in 1955. Mr. Haidlen helps connect our banking operations with the local commercial community.

Daniel J. Leonard, 76, was appointed to fill a vacancy on the boards of the Bank and Oak Valley Bancorp in January 2012. Mr. Leonard currently serves as the Senior Vice President, Chief Financial Officer of Bronco Wine Company, where he has been employed for over 35 years. He is also the President and Chief Operating Officer of Bivio Transport & Logistics Company, providing logistic solutions to the wine industry. He has served on the Board of Directors for the Wine Institute, a voice for the California wine industry, for the past 28 years. Mr. Leonard is currently on the Board of Opportunity Stanislaus, a local non-profit Economic Development Agency. He also serves as Chairman Emeritus of the Board of the Parent Resource Center, a Modesto, California non-profit organization, in which he has been involved for over 25 years. Mr. Leonard brings business and financial experience and additional business ties in our communities to Oak Valley Bancorp.

Ronald C. Martin, 76, has served as a director of the Bank since 1992 and of Oak Valley Bancorp since 2008. He was also the Bank’s Chief Executive Officer until June 2013. Mr. Martin began his banking career in 1977 with River City Bank in Sacramento, California. Between 1977 and 1987, he was employed in the Sacramento area, and from December 1987 to January 1992 he served as President and Chief Executive Officer of Butte Savings in Chico, California. Mr. Martin has a B.S. in Business Administration with an Accounting major from the University of Arizona. Mr. Martin is a veteran banker with a deep understanding of our local community banking needs.

James L. Gilbert, 78, has been a Director of the Bank since 1991 and of Oak Valley Bancorp since 2008. Mr. Gilbert has lived in Oakdale, California since 1946. Mr. Gilbert is an owner and executive of A.L. Gilbert Co., a feed and seed business that has been in Oakdale for over 125 years. Mr. Gilbert has been involved in the feed and seed business as well as retail feed stores and almond farming for approximately 50 years. Mr. Gilbert enhances the connection between the Board and our community.

H. Randolph Holder, 68, has been a director of the Bank and Oak Valley Bancorp since January 2016. Mr. Holder is President and CEO of Clarke Broadcasting Corp., which owns and operates KVML, KZSQ, and KKBN, Sonora’s local radio stations since 1986. In 2000, he launched the mymotherlode.com website and community portal. Holder resided in Sonora from 1986 to 1999 and currently maintains his businesses and a home in the community. He has been active in community affairs and is past President of the Tuolumne County Chamber of Commerce, the Economic Development Company of Tuolumne County, and a past Director of the Sonora Community Hospital Governing Board. Mr. Holder brings valuable business experience as well as an understanding of the local community.

Janet S. Pelton, 68, has been a director of the Bank and Oak Valley Bancorp since June 2013. Ms. Pelton, a licensed certified public accountant since 1980, is currently the tax consultant and former tax partner from1995 to 2022 and managing partner from 2003 to 2013, for Atherton & Associates, LLP, a full-service public accounting firm based in Modesto, California. She has practiced in public accounting for over 40 years, providing income tax and estate tax planning and preparation services to individuals, partnerships and corporations. Ms. Pelton brings tax and accounting expertise to the Board.

Gary J. Strong, 60, was appointed to the boards of the Bank and Oak Valley Bancorp in November 2021. Mr. Strong was CEO of the California Gold Country Region of the American Red Cross from 2015 to March 2023 and is currently retired. He led the Sierra Delta and Northern California Chapters, which include more than 2,000 volunteers and 40 employees who respond to nearly 800 local disasters each year and serve close to four million residents in 26 counties. Mr. Strong is a CPA (inactive) having previously served as a big four accounting firm audit manager (1983-1990), as Controller at the Los Angeles Times (1990-2005) and as SVP/Finance at the Sacramento Bee (2005-2015). He has also served on board of directors of local American Red Cross chapters, the Sacramento Region Community Foundation, KVIE Public Television, Journalism Funding Partners, the Northern California Chapter of the National Association of Corporate Directors (NACD), and served on the local community advisory board of one of the largest banks in the nation. He currently resides in Granite Bay, California. Mr. Strong brings accounting experience to the board and a connection to the community through his non-profit background.

Danny L. Titus, 78, has been a director of the Bank since 1992 and of Oak Valley Bancorp since 2008. Mr. Titus served as the President of Situs Investments, Inc. from 1989 to 2017, which manages real estate and investments. During the period from 1979 to 1988, Mr. Titus was the general manager of Steelgard, Inc., which manufactured portable buildings. Mr. Titus brings investment expertise to the Board.

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Board Leadership Structure

The Board of Directors is committed to maintaining an independent Board, and for many years, a majority of the Board has been comprised of independent directors. It has further been the practice of the Company to separate the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company. The role of the Chairman is to preside at executive sessions of the independent directors, serve as principal liaison between the independent Directors and the CEO, work with the CEO to set and approve the schedule and agenda for meetings of our Board of Directors and its committees, and direct the retention of advisors and consultants who report directly to the Board of Directors. The Board believes that the separation of the duties of the Chief Executive Officer and the Chairman of the Board eliminates any inherent conflict of interest that may arise when the roles are combined, and that an independent director can best provide the necessary leadership and objectivity required as Chairman of the Board.

Board Authority for Risk Oversight

The Board has ultimate authority and responsibility for overseeing the risk management of the Company. The Board monitors, reviews and reacts to material enterprise risks identified by management. The Board receives specific reports from executive management on financial, credit, liquidity, interest rate, capital, operational, cyber security, legal compliance and reputation risks and the degree of exposure to those risks. The Board helps ensure that management is properly focused on risk by, among other things, reviewing and discussing the performance of senior management and business line leaders.

Several Board committees are responsible for risk oversight in specific areas. The Audit Committee oversees financial, accounting and internal control risk management policies. The Audit Committee also approves the independent auditor and its annual audit plan. The Audit Committee reports periodically to the Board on the effectiveness of risk management processes in place and the overall risk assessment of the Company’s activities. The Compensation Committee assesses and monitors risks in the Company’s compensation program. The Loan Committee reviews risks in our lending activities. The Investment Committee periodically assesses the risks of our investment portfolio.

Board Diversity

The table below provides certain highlights of the composition of our Board members. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f)(1).

Board Diversity Matrix (As of March 31, 2023)

Total Number of Directors	13
	Female	Male	Non-Binary	Did Not Disclose Gender
Part I: Gender Identity
Directors	3	10	0	0
Part II: Demographic Background
African American or Black	0	1	0	0
White	3	9	0	0
Did not disclose demographic background	0

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Committees of the Board

The Board delegates portions of its responsibilities to committees comprised of Board members. These standing committees of the Board meet at regular intervals to attend to their particular areas of responsibility. The Board has six (6) standing committees: the Nominating Committee, the Audit Committee, the Compensation Committee, the Loan Committee, the Investment Committee, and the CRA Committee.

The Compensation, Audit, and Nominating Committee charters are available on our Internet website at www.ovcb.com, under the “About Us” tab in the “Investor Relations” section at the link for “Governance Documents.”

Nominating Committee

The Nominating Committee identifies individuals that are qualified to become Board members and makes recommendations to the full Board regarding candidates for election to the Board, leads the Board in an annual review of its performance, and recommends director appointments to Board committees. Subject to the standards required by applicable Nasdaq Stock Market listing rules, the Nominating Committee is comprised solely of independent directors of the Board. The Nominating Committee, consisting of eleven (11) independent Directors, makes recommendations to the Board regarding the Board’s composition and structure, nominations for elections of Directors, and policies and processes regarding principles of corporate governance to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders. The Nominating Committee reviews the qualifications of, and recommends to the Board, candidates as additions, or to fill Board vacancies, if any were to occur during the year.

The Nominating Committee determines the required selection criteria and qualifications of Director nominees based upon the Company’s needs at the time nominees are considered. In general, Directors are expected to possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the Company’s shareholders. In addition to the foregoing considerations, the Nominating Committee considers criteria such as strength of character and leadership skills, general business acumen and experience, broad knowledge of the banking industry, number of other board seats, and willingness to commit the necessary time to ensure an active board whose members work well together and possess the collective knowledge and expertise required by the Board. The Nominating Committee considers these criteria for all candidates regardless of whether a candidate was identified by the Nominating Committee, by shareholders, or by any other source.

The goal of the Nominating Committee is to seek to achieve a balance of knowledge and experience on the Company’s Board. To this end, the Nominating Committee seeks nominees with the highest professional and personal ethics and values, an understanding of the Company’s business and industry, diversity of business experience, expertise and backgrounds, a high level of education, broad-based business acumen and the ability to think strategically. The Nominating Committee ensures that the composition of the current Board reflects diversity in business, professional experience, skills, gender, ethnicity, and underrepresented minorities, and complies with all applicable listing and state law requirements. Our Board and Nominating Committee are committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. The Nominating Committee reviews the effectiveness of its charter in achieving the goals of the Nominating Committee as stated therein annually.

The members of the Nominating Committee are Messrs. Barton, Dickerson, Gilbert, Leonard, Lafferty, Martin, Pelton, Holder, Strong, Titus and Withrow. Mr. Gilbert is the Chairman of the Nominating Committee. The Nominating Committee met two (2) times in 2022. The Board has determined that all members of the Nominating Committee are “independent” under the applicable rules and regulations of the Nasdaq Stock Market.

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Audit Committee

We have an Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). The Audit Committee assists the Board in fulfilling the Board’s responsibilities for general oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence, the performance of our internal audit function and independent auditors, and risk assessment and risk management. In addition, the Audit Committee reviews and discusses the annual audited financial statements with management and the independent auditors prior to finalizing and filing the Annual Report on Form 10-K with the SEC; reviews and discusses with management and the independent auditors any significant changes, significant deficiencies and material weaknesses regarding internal controls over financial reporting required by the Sarbanes-Oxley Act of 2002, oversees the internal audit function and the audits directed under its auspices, and establishes policies to ensure all non-audit services provided by the independent auditors are approved prior to work being performed. The Audit Committee also prepares the Audit Committee report for inclusion in the annual proxy statement; annually reviews the Audit Committee charter and the Committee’s performance; appoints, evaluates and determines the compensation of our independent auditors; reviews and approves the scope of the annual audit, the audit fee and the financial statements; reviews our disclosure controls and procedures, internal controls, internal audit function, and corporate policies with respect to financial information and earnings guidance; oversees investigations into complaints concerning financial matters; and reviews other risks that may have a significant impact on our financial statements. The Audit Committee works closely with management as well as our independent auditors. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from the Company to retain, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties.

The members of the Audit Committee are Messrs. Gilbert, Lafferty, Leonard, Pelton, Strong and Withrow. Ms. Pelton is the Chair of the Audit Committee. The Audit Committee held ten (10) meetings during fiscal 2022. The Board has determined that all members of the Audit Committee are “independent” as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules and Rule 10A-3(b)(1) promulgated under the Exchange Act.

The Board of Directors has determined that Mr. Withrow and Ms. Pelton, have: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal control over financial reporting; and (v) an understanding of audit committee functions.

Therefore, the Board has determined that Mr. Withrow and Ms. Pelton each meet the definition of “audit committee financial expert” under the applicable rules and regulations of the SEC and are “financially sophisticated” as defined by the applicable rules and regulations of the Nasdaq Stock Market. The designation of a person as an audit committee financial expert does not result in the person being deemed an expert for any purpose, including under Section 11 of the Securities Act of 1933, as amended. The designation does not impose on the person any duties, obligations or liability greater than those imposed on any other audit committee member or any other director and does not affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.

The Audit Committee Report for 2022 appears on page 47 of this Proxy Statement.

Compensation Committee

The Compensation Committee establishes our compensation policy, determines the compensation paid to our executive officers and non-employee directors, recommends executive incentive compensation plans and equity-based plans and approves other compensation plans and retirement plans, and performs the various reviews required by the regulations enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Compensation Committee approves corporate goals related to the compensation of the executive officers, evaluates the executive officers’ performance and compensates the executive officers based on this evaluation. Messrs. Barton, Dickerson, Gilbert, Lafferty, Leonard, Martin, Pelton, Holder, Strong, Titus and Withrow are members of the Compensation Committee. Mr. Leonard is the Chaitof the Compensation Committee. The Compensation Committee held three (3) meetings during fiscal 2022. The Board has determined that all members of the Compensation Committee are “independent” as that term is defined in Rule 5605(d)(2) of the Nasdaq Stock Market Rules, and the Compensation Committee consists solely of “independent directors” as defined in the Nasdaq Stock Market listing rules and Section 10C of the Securities Exchange Act of 1934.

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Loan Committee

The Loan Committee monitors the activities of our lending function utilizing information presented to it by management at regular meetings of the committee. This includes, but is not limited to, the review of trends in outstanding credit relationships, key quality measures, significant borrowing relationships, large problem loans, industry concentrations, all significant lending policies, and the adequacy of the allowance for loan losses. The Loan Committee also reviews lending-related reports from regulators, auditors, and internal personnel.

Each member of the Board of Directors serves on the Loan Committee, and Mr. Gilbert is the Chair of the Loan Committee. The Loan Committee held twenty (21) meetings during fiscal 2022.

Investment Committee

The Investment Committee reviews, identifies and classifies our assets based on credit risk, in accordance with regulatory guidelines. The Committee is also responsible for reviewing asset valuation and classification policies, as well as developing and monitoring asset disposition. In addition, the Committee reviews and monitors the Company’s investment portfolio, liquidity position and the risk of our interest-earning assets in comparison to its interest-bearing liabilities.

Messrs. Barton, Courtney, Dickerson, Holder, Leonard, Martin, Pelton, Strong and Titus serve on the Investment Committee, and Mr. Barton is the Chairof the Investment Committee. The Investment Committee held four (4) meetings during fiscal 2022.

CRA Committee

The CRA Committee is responsible for oversight of our performance under the requirements of the Federal Community Reinvestment Act of 1977 and similar state law requirements. Messrs. Barton, Courtney, Dickerson, Gilbert, Haidlen, Lafferty, Martin, Titus and Withrow serve on the CRA Committee, and Mr. Titus is the Chair of the CRA Committee. The CRA Committee held four (4) meetings during fiscal 2022.

Delinquent Section 16(a) Reports

Section 16(a) of the 1934 Act requires the Company’s officers and directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that for the 2022 fiscal year the officers and directors of the Company complied with all applicable filing requirements, except that due to administrative errors, Lynn Dickerson was late in reporting five transactions, Jay Gilbert was late in reporting one transaction, Allison Lafferty was late in reporting two transactions and Daniel Leonard was late in reporting one transaction.

Certain Relationships and Related Party Transactions

Some of our Directors and the companies with which they are associated, as well as some of our executive officers, are our customers, and we expect to have banking transactions with them in the future. All loans and commitments to lend were made in the ordinary course of our business and were in compliance with applicable laws. Terms, including interest rates and collateral, were substantially the same as those prevailing for comparable transactions with other persons of similar creditworthiness. These transactions do not involve credits which are different than extended to non-Board customers more than a normal risk of collectability or present other unfavorable features. We have a policy regarding the review of the adequacy and fairness of Bank loans to directors and officers. Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits a company from extending credit, arranging for the extension of credit or renewing an extension of credit in the form of a personal loan to one of its officers or directors. There are several exceptions to this general prohibition, including loans made by an FDIC insured depository institution that is subject to the insider lending restrictions of the Federal Reserve Act. All loans to our directors and officers comply with the Federal Reserve Act and the Federal Reserve Board’s Regulation O and, therefore, are excepted from the prohibitions of Section 402.

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All loans to Directors or executive officers would be subject to the limitations prescribed by California Financial Code Section 1360, et seq. and by the Financial Institutions Regulatory and Interest Rate Control Act of 1978.

From time to time, some of the Company’s Directors, directly or through affiliates, may perform services for the Bank. These activities are performed in the ordinary course of the Bank’s business and are subject to strict compliance with the policies outlined below. In 2022, the Company made payments totaling $782,000 to Crown Painting and Design Studio 120, companies affiliated with Thomas Haidlen’s daughter, for renovation and design work performed in connection with various projects and maintenance on the Bank’s branches.

Policies and Procedures for Approving Related Party Transactions

Our Board of Directors is committed to the highest levels of honesty and integrity and, as such, takes related party transactions very seriously and adheres to very strict written policies and procedures that exceed typical practices of other boards of directors to handle “related party transaction” issues.

A “related party transaction” is a transaction in an amount exceeding $120,000 between the Company or the Bank and any “related person,” including any transaction requiring disclosure under Item 404 of Regulation S-K. Generally, a “related person” is (i) any person who is, or was at any time since the beginning of the Company’s last fiscal year, a director or executive officer of the Company or the Bank or a nominee to become a director of the Company or the Bank; (ii) any person who is known to be the beneficial owner of more than 5% of any class of the Company’s voting securities; (iii) any immediate family member (i.e., any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law), and any person (other than a tenant or employee) sharing the household, of any of the persons described in (i) or (ii); and (iv) any firm, corporation or other entity in which any of the persons described in (i), (ii) or (iii) is employed or is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

The general policy of the Board of Directors is that each Director, prospective director and executive officer must disclose any “related party transaction” to the Board before such transaction may occur and, furthermore, that such transaction may thereafter be consummated if and only if (i) a majority of “non-interested” directors approves such transaction, and (ii) such transaction is on terms comparable to those that would be obtained in arm length dealings with an unrelated third party. A “non-interested” director is a director who is not directly or indirectly involved in the “related party transaction.” A director is deemed to be not directly involved if the director is not involved in the transaction, and a director is deemed to be not indirectly involved if the transaction does not involve any of the director’s immediate family members or any firm, corporation or other entity of which the director is an employee, partner, principal or in a similar position or a 10% or greater beneficial owner.

In making its decision on whether or not to approve a transaction, the Board also considers the benefits the Company or the Bank would receive in the transaction; the impact the transaction would have on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to our employees generally.

In addition, the Board has stated that it is the responsibility of each director and prospective director to disclose to the Board any relationship that may not necessarily involve a “related party transaction” but that could impair his or her independence or pose any conflict of interest with the Company or the Bank, including (i) affiliations of a director or prospective director; (ii) affiliations of an immediate family member (i.e., child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law) or anyone other person, other than a domestic employee, who shares a director or prospective director’s home; and (iii) affiliations of a director or prospective director with the Company or Bank (a) customer, supplier, distributor, dealer, reseller or other channel partner, (b) lender, outside legal counsel, investment banker or consultant, (c) significant shareholder, (d) charitable or not-for-profit institution that has received or receives donations from the Company or the Bank, or (e) competitor or other person having an interest adverse to us.

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee of the Board of Directors has responsibility for establishing, implementing and continually monitoring the compensation structure, policies and programs of the Company. The individuals who served as the Company’s Chief Executive Officer and Chief Financial Officer during 2022, as well as the other individuals included in the Summary Compensation Table, are referred to as the “named executive officers.”

The Compensation Committee is responsible for assessing and approving the total compensation structure paid to the Chief Executive Officer and the other executive officers, including the named executive officers. Thus, the Compensation Committee is responsible for determining whether the compensation paid to each of these executive officers is fair, reasonable and competitive, and whether it serves the interests of the Company’s shareholders.

This Compensation Discussion and Analysis identifies the Company’s current compensation philosophy and objectives and describes the various methodologies, policies and practices for establishing and administering the compensation programs of the named executive officers.

Overview

2022 was another record year of profitability for the company, driven by solid loan growth and strong core financial performance. We have experienced nominal negative impacts on liquidity resulting from the recent events in the banking industry. The deposit decrease during the first quarter of 2023 was related to normal seasonal activity and some movement to higher deposit rates offered by other financial institutions. Our liquidity position is very strong as evidenced by $389 million in cash equivalent balances of March 31, 2023. Credit Quality remained stable as evidenced by the fact that non-performing assets remained at zero as of December 31, 2022. Nevertheless, given the difficulty in assessing the timing and pace of the economic recovery cycle, the Company continues to manage executive compensation conservatively.

The objectives of the Company’s executive compensation program are to align a portion of each executive officer’s total compensation with the annual and long-term performance of the Company and the interests of the Company’s shareholders. The Compensation Committee continues to review our compensation program to seek to achieve shareholder value and continue to motivate and retain our senior management.

Overview of Compensation Philosophy

Our executive compensation policy is to provide the Company’s executive officers with compensation opportunities, which take into account their personal performance, the annual and long-term performance of the Company, and the interests of the Company’s shareholders, while maintaining a level of compensation that is competitive enough to attract and retain highly skilled individuals.

The Compensation Committee believes that the most effective executive compensation programs are those that align the interests of each executive officer with those of the Company’s shareholders. The Compensation Committee believes that a properly structured compensation program will attract and retain talented individuals and motivate them to achieve specific short-term and long-term strategic objectives. Over the years, we have been very successful in retaining a strong core group of executive officers, and we have been providing growth and value for our shareholders. For this reason, an important objective of the Compensation Committee is to ensure that the compensation of our named executive officers is comparable to that of similar positions at other financial institutions that are similar to us in terms of size and geographic service area, so that we can continue to attract and retain executives and achieve our strategic objectives.

Each executive officer’s compensation package is comprised of three elements: (i) base salary that is competitive with the market and reflects individual performance, (ii) annual variable performance awards payable in cash and tied to the Company’s achievement of annual financial, strategic and operational objectives in addition to individual contributions to these objectives, and (iii) long-term stock-based incentive awards designed to strengthen the mutual interest of the Company’s executive officers and its shareholders. As an officer’s level of responsibility increases, a greater proportion of his or her total compensation will be dependent upon the Company’s financial performance and stock price rather than base salary.

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Stock awards reward the long-term efforts of management and to retain management. Stock awards can also increase our management team’s ownership stake in the Company, further aligning the interests of the executives with those of our shareholders. We also consider other forms of executive pay, including salary continuation benefits, as a means to attract and retain our executive officers, including the named executive officers.

The Company and the Compensation Committee believe our compensation philosophy, policies and objectives outlined within this Compensation Discussion and Analysis are appropriately designed to allow us to effectively compensate our employees both during times of positive performance and in times of weak performance.

Compensation Program Objectives and Rewards

The Company’s compensation and benefits programs are driven by our business environment and are designed to enable us to achieve our mission and adhere to the Company values.

The programs’ objectives are to foster our position as a leading community bank in our service areas; attract, engage and retain a qualified workforce; maintain an effective administrative structure in line with our growth and performance; and incentivize our employees to reach our business objectives.

The guiding principles behind our programs are to promote and maintain a high-performance banking organization; continue to invest in our administration and operations; remain competitive in our marketplace for talent; and balance our compensation costs with our desire to provide value to our employees and shareholders.

We measure the success of our programs by our overall business performance and employee engagement; our ability to attract and retain key talent; our costs and business risks and return; and our ability to accommodate further growth in our organization using the existing administrative infrastructure.

All compensation and benefits for our executive officers reflect, as their primary purpose, our need to attract, retain and motivate the highly talented individuals who will engage in the behaviors necessary to execute the programs’ objectives outlined above, and to enable us to maintain and create shareholder value in a highly competitive marketplace.

Accordingly, each component of our compensation and benefits has a specific purpose designed to reward different behaviors:

● Base salary and benefits are designed to reward core competence in the executive role relative to skills, position and contributions to the Company, and to provide fixed cash compensation with merit increases that are competitive with the marketplace.

● Annual incentive variable cash awards are designed to focus employees on annual financial objectives derived from our business plan that lead to long-term success; reward and motivate achievement of critical annual performance metrics selected by the Compensation Committee; and foster a pay-for-performance culture that aligns our compensation programs with our overall business strategy.

● Equity-based compensation awards when granted link compensation to the creation of shareholder wealth; promote teamwork by tying compensation significantly to the value of our common stock; attract the next generation of management by providing significant capital accumulation opportunities; and retain executives by providing a long-term-oriented program, pursuant to which value can be achieved only by remaining with and performing with the Company.

● A supplemental executive retirement program facilitates our ability to attract and retain executives as we compete for talented employees in a marketplace where similar programs and plans are commonly offered.

We believe this combination of compensation and benefits provides an appropriate mix of fixed and variable pay, balances short-term operational performance with long-term shareholder value, and encourages executive recruitment and retention.

When considering all factors, total compensation is generally targeted at the median of our Compensation Peer Group, which consists of bank holding companies of community banks having deposit bases and geographical service areas similar to ours. We target that level in order to retain and motivate talented individuals, who can help us implement our objectives discussed above.

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Role of Compensation Committee in Determining Compensation

The Compensation Committee has overall responsibility and authority for approving and evaluating the compensation programs and policies pertaining to our executives, including the named executive officers. The Compensation Committee is also responsible for reviewing and submitting to the Board of Directors recommendations concerning director compensation. When making individual compensation decisions regarding a named executive officer, the Compensation Committee takes many factors into account, including the executive’s experience, responsibilities, management abilities and job performance, the overall performance of the Company, current market conditions and competitive pay for similar positions at comparable companies. In addition, the Compensation Committee reviews the relationship of various positions between departments, the affordability of desired pay levels, and the importance of each position within the Company. These factors are considered by the Compensation Committee in a subjective manner without any specific formula or weighting.

Our Chief Executive Officer’s compensation is determined solely by the Compensation Committee. Our Chief Executive Officer attends those portions of the Compensation Committee meetings relating to the compensation of the other executive officers. Decisions relating to the Chief Executive Officer’s pay are made by the Compensation Committee, without management present. The Compensation Committee reports its activities to our Board of Directors.

The Compensation Committee relies on the input and recommendations of our Chief Executive Officer when evaluating the compensation of other executive officers. Because the Chief Executive Officer works closely with and supervises our executive team, the Compensation Committee believes that the Chief Executive Officer provides valuable insight in evaluating their performance. Our Chief Executive Officer provides the Compensation Committee with his assessment of the performance of each named executive officer and his perspective on the factors described above in developing his recommendations for the compensation of the other executives, including salary adjustments, non-equity incentive plan compensation (“bonuses”), annual equity grants, and equity grants awarded in conjunction with promotions. The Chief Executive Officer also provides the Compensation Committee with additional information regarding the effect, if any, of market competition and changes in business strategy or priorities. The Compensation Committee discusses our Chief Executive Officer’s recommendations and then approves or modifies the recommendations in collaboration with the Chief Executive Officer.

Stockholder Advisory Vote on Executive Compensation

The Compensation Committee is very interested in the ideas and any concerns of our shareholders regarding executive compensation. An advisory vote on executive compensation was last presented at the 2022 Annual Meeting of Shareholders and approved by 97% of votes cast (for or against) by shareholders. In evaluating our compensation practices in 2022, the Compensation Committee was mindful of the support our shareholders expressed for the Company’s philosophy of linking compensation to operational objectives and the enhancement of stockholder value. As a result, the Compensation Committee retained its approach to executive compensation, and continued to apply the same general principles and philosophy as in the prior year in determining executive compensation and made no material changes to the design of our executive program during 2022.

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The Company Compensation Program

Market Positioning and Pay Benchmarking

The Compensation Committee considers the median compensation values of Northern California-based financial institutions that are similar in size to us in determining the compensation of the Chief Executive Officer and the other named executive officers. The data that the Compensation Committee considers are derived from reports from the California Bankers Association, prepared by Pearl Meyer & Partners, LLC (“Pearl Meyer”), a professional compensation consulting firm. These comparative survey data reports are used to benchmark executive compensation levels against banks that have executive positions with responsibilities similar in breadth and scope to ours and that compete with us for executive talent. For example, in 2022, our Compensation Committee reviewed the California Bankers Association report, which includes approximately 45 California banks. The Compensation Committee uses banks, each having assets between $801 million and $3.0 billion with average assets of about $1.54 billion, as the bank’s peer group. In 2020, our Compensation Committee also engaged the services of Pearl Meyer to conduct a thorough review of our executive compensation for fairness based on the California Bankers Association report. The results of the Pearl Meyers consultation in 2020 were used by the Compensation Committee in their determination of 2021 compensation. In the process of selecting Pearl Meyer as its compensation consultant, our Compensation Committee considered Pearl Meyer’s independence by taking into account the factors prescribed by the Nasdaq listing rules. Based on this evaluation, the Committee determined that no conflict of interest existed with respect to Pearl Meyer. Pearl Meyer did not provide any other services to the Company.

With such information, the Compensation Committee reviewed and analyzed compensation for each executive and made adjustments as appropriate. The actual positioning of each named executive officer’s compensation was based on considerations of the executive’s performance, the performance of the Company and the individual business or corporate function for which the executive is responsible, the nature and importance of the position and role within the Company, the scope of the executive’s responsibility (including risk management and corporate strategic initiatives), and the individual’s success in promoting our core values and demonstrating leadership.

Pay Mix

We do not allocate between cash and non-cash compensation or short-term versus long-term compensation based on specific percentages. Instead, we believe that the compensation package for our executives should be generally in line with the prevailing market, consistent with each executive’s level of impact and responsibility.

Chief Executive Officer Compensation

Each year, the Compensation Committee meets with the other independent directors on our Board of Directors in an executive session to evaluate the performance of the Chief Executive Officer. In 2022, the Compensation Committee considered management’s continuing achievement of its short- and long-term goals versus its strategic objectives as well as financial targets. Emphasis was placed on performance factors of the Company’s business units and on personal performance goals established annually by the Compensation Committee.

The Compensation Committee determined that the Chief Executive Officer’s base salary in 2022 was aligned with the Company’s compensation philosophy and is aligned with a comparable median salary of peer institutions.

Components of Executive Officer Compensation

Base Salaries

In accordance with our compensation objectives, salaries are set and administered to reflect the value of the position in the marketplace, the career experience of the individual, and the contribution and performance of the individual. The base salary of each named executive officer is determined annually by the Compensation Committee, in accordance with the Compensation Committee’s evaluation of the Company’s overall compensation programs and policies.

Base salaries for our executive officers are based on the scope of their responsibilities as well as review of competitive compensation data from peer institutions. For 2022, the Compensation Committee considered the pay practices of such institutions and data from the published compensation survey discussed above. In evaluation of the base salaries for the named executive officers, the Compensation Committee also considers the minimum, mid-range and maximum salaries paid to similarly situated positions at other comparable companies of our size in our geographic and market areas, as well as the performance levels of the named executive officer. In 2022, the Compensation Committee determined to increase the salaries of our executive officers by a range of 5% to 10%. The increases for executives in 2022 recognizes the significant growth of the Company’s earnings and were based on data published in the California Bankers Association report. The amount of base salary that each executive officer earned in 2022 is reflected below in the Summary Compensation Table. Base salary drives the formula used to determine any annual bonus payable to executive officers.

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Bonuses

Traditionally, our annual incentive compensation opportunities for named executive officers are established by the Compensation Committee upon consideration of many factors, including, but not only limited to, their performance as compared against performance objectives. Our bonuses to executive officers normally accrue quarterly based on the estimated annual financial metrics and corresponding annual bonuses reflected in the tables below, and are payable in the quarter immediately after the accrual, with any true-up occurring after the end of the fiscal year.

The accrual of bonuses is typically calculated as a percent of salary. Such incentive levels are designed to provide for the achievement of threshold, target and maximum performance objectives. The financial metrics, performance objectives, and the formula for computing the performance bonus are established by the Compensation Committee early in each fiscal year.

The bonus award opportunities are derived in part from comparative data and in part by the Compensation Committee’s judgment on internal equity of the positions, their relative value to the Company and the desire to maintain a consistent annual incentive target for the Chief Executive Officer and the other named executive officers.

The 2022 bonus award opportunities assigned as a percentage of base salary are as follows:

	As a percent of base salary
Position	Threshold		Target		Maximum

Christopher M. Courtney Chief Executive Officer		15%		50%		55%

Richard A. McCarty President and Chief Operating Officer		15%		50%		55%

Gary W. Stephens Executive Vice President/ Commercial Banking Group		15%		36%		40%

Michael J. Rodrigues Executive Vice President/Chief Credit Officer		15%		36%		40%

Jeffrey A. Gall Senior Vice President/ Chief Financial Officer and Secretary		15%		36%		40%

Each year, performance objectives are generally identified through our annual financial planning and budget process. Senior management develops a financial plan, and the financial plan is reviewed and approved by the Board of Directors. Management recommends and the Compensation Committee reviews and approves the financial metrics that must be met each year in order for awards to be paid, which metrics correspond to the financial plan that is approved by the Board of Directors. These financial metrics are weighted and are intended to motivate and reward eligible executives to strive for continued financial improvement of the Company, consistent with performance-based compensation and increasing shareholder value. The Compensation Committee typically identifies from three to five financial metrics which may be revised from year to year to reflect current business strategies.

The financial metrics selected for 2022 related to three base categories: profitability, growth and risk management. Within each category, the Compensation Committee sets specific financial metrics. The Compensation Committee believes return on assets and net income to be valid measurements in assessing how the Company is performing from a profitability standpoint. In addition, the Compensation Committee concluded that management’s compensation should continue to be tied to core loan growth and core deposit growth, since the strength of a Company’s core deposit base is an indication of the Company’s success in customer retention, reduction in interest rate sensitivity and liquidity stabilization. Finally, the Compensation Committee believes that asset quality measures and audit results are effective measures to monitor the Company’s progress in improving its credit quality.

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The Compensation Committee determines the weighting of financial metrics each year based upon recommendations from the senior management. For 2022, the Compensation Committee weighted the financial metrics as follow:

Category	Percentage Weight

Profitability		70%
Growth		10%
Risk-Management		20%

The Compensation Committee receives recommendations from senior management for financial performance objective ranges. The “target” level generally equates to the approved financial plan. The “threshold” performance level is set below the target level. In making the determination of the threshold and target levels, the Compensation Committee considered specific circumstances anticipated to be encountered by the Company during the coming year. Generally, the Compensation Committee sets the threshold and target levels such that the relative difficulty of achieving the target level is consistent from year to year. The annual performance objectives for fiscal year 2022 are shown below:

Financial Metrics	Threshold		Target		Maximum

Return on Assets (Profitability)		0.70%		0.90%		1.00%

Net Income (Profitability)		$12,750		$14,000		$14,500

Core Deposit Growth (Growth)		3%		6%		8%

Loan Growth (Growth)		3%		6%		8%

Nonperforming Assets to Equity (Risk Management)	<2.75%		<1.5%		<1.0%

The Compensation Committee believes that these targets were sufficiently challenging given the economic climate and the level of growth and improvement in the various financial metrics that would have to occur to meet the various performance objectives.

Upon completion of the 2022 fiscal year, the Compensation Committee assessed the performance of the Company for each financial metric, comparing the actual fiscal year results to the pre-determined performance objectives for each financial metric calculated with reference to the pre-determined weight assigned to the financial metric, and calculated the overall percentage amount for each named executive officer’s bonus award.

The table below reflects actual result of our financial metrics for 2022, three of which exceeded the target goal, while all five metrics exceeded the threshold goal:

Financial Metrics	2022 Actual Results

Return on Assets		1.17%

Net Income		$22,902

Core Deposit Growth		-3.6%

Loan Growth		10.2%

Nonperforming Assets to Equity		0.0%

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Consequently, bonuses were paid in the amounts set forth below.

Position	Payout ($)		Percentage of Target

Christopher M. Courtney Chief Executive Officer		240,240		104%

Richard A. McCarty President and Chief Operating Officer		169,884		104%

Gary W. Stephens Executive Vice President/ Commercial Banking Group		91,361		105%

Michael J. Rodrigues Executive Vice President/Chief Credit Officer		101,137		104%

Jeffrey A. Gall Senior Vice President/ Chief Financial Officer and Secretary		87,694		103%

Equity-Based Compensation

The Compensation Committee approves all awards under the 2018 Stock Plan and acts as the administrator of the 2018 Stock Plan. The Compensation Committee is responsible for determining equity grants to all staff members, including named executive officers, and in doing so considers past grants, corporate and individual performance, the individual title, role and responsibilities and the recommendations of our Chief Executive Officer for staff members other than himself. In 2022, the Compensation Committee granted 11,303 shares of restricted stock to our named executive officers as a group, under the 2018 Stock Plan, as set forth below, which vest 20% annually over five years beginning on February 28, 2023, subject to being a service provider through each vesting date, except in certain circumstances as described below in “Potential Payments Upon Termination or Change in Control”. These stock awards will vest immediately upon retirement if the named executive officer is at retirement age.

Position	Number of Shares

Christopher M. Courtney Chief Executive Officer		4,400

Richard A. McCarty President and Chief Operating Officer		2,970

Gary W. Stephens Executive Vice President/ Commercial Banking Group		1,311

Michael J. Rodrigues Executive Vice President/Chief Credit Officer		1,311

Jeffrey A. Gall Senior Vice President/ Chief Financial Officer and Secretary		1,311

Additional information on long-term awards for executive officers is shown on pages 32 through 37 of this proxy statement.

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401(k) Plan

The Company maintains a plan that complies with the provisions of Section 401(k) of the Internal Revenue Code (the “Code”). Substantially all our employees are eligible to participate in this plan, and eligibility for participation commences upon hiring. The Company’s executive officers are eligible to participate in this program, subject to any applicable tax laws. The Company contributes a percentage matching contribution to the same degree as all other employees. The matching contribution is 75% on all deferred amounts up to IRS limits.

Health and Welfare Benefits

The Company offers health and welfare programs to all eligible employees. The programs include medical, wellness, pharmacy, dental, vision, life insurance and accidental death and disability.

Automobile Benefits

Our named executive officers are offered Company-paid automobile allowances as indicated by the Auto Compensation in the table above. We believe that it is important to compensate our executive officers for all expenses incurred while traveling for work to allow our executive officers to concentrate on their responsibilities and our future success.

Salary Continuation Agreements

In August 2001, the Board of Directors of the Company approved salary continuation agreements (“Continuation Agreements”) between the Bank and Messrs. Courtney and McCarty. Under the original Continuation Agreements, Messrs. Courtney and McCarty were entitled to receive maximum annual payments of $85,000 and $65,000, respectively, for a period of 20 years following their retirement at the age of 62 (the “Normal Retirement Age”). These agreements were subsequently revised to provide for shorter benefit payment periods of fifteen years. As a result, Mr. Courtney will receive $104,000 annually for fifteen years and Mr. McCarty will receive 80,000 annually over fifteen years. In the event of disability while employed with us prior to the Normal Retirement Age, each named executive officer will receive a benefit equal to the retirement liability balance accrued by us at the time of disability. In the event of early termination, the named executive officer will receive a vested portion of his retirement liability balance accrued by the Company at the time of such early retirement. The benefit is fully vested. In the event the named executive officer dies prior to termination of the Continuation Agreement, the beneficiary of such named executive officer will receive from the Company a lump sum death benefit amount.

In February 2008, we entered into a Continuation Agreement with Michael J. Rodrigues. Under the Continuation Agreement, Mr. Rodrigues was originally entitled to receive a maximum annual payment of $50,000 for a period of 20 years following his retirement at the age of 62. The agreement for Mr. Rodrigues was subsequently revised to provide for a shorter benefit payment period of fifteen years. As a result, Mr. Rodrigues will receive $61,125 annually for fifteen years. In the event Mr. Rodrigues dies prior to termination of the agreement, his beneficiary will receive from the Company a lump sum death benefit amount.

In September 2016, we entered into a Continuation Agreement with Mr. Jeffrey A. Gall. Following his retirement at the age of 62 or upon a change in control, as defined in the Agreement, Mr. Gall will receive $61,125 annually for fifteen years. In the event of disability while employed with us prior to the age of 62, Mr. Gall will receive a benefit equal to the retirement liability balance accrued by the Bank at the time of disability. In the event of early termination, Mr. Gall will receive the vested portion of his or her retirement liability balance that has accrued at the time of such early retirement. The vesting schedule is 20% per year of service beginning with the sixth year of service. In the event Mr. Gall dies prior to termination of the Agreement, his beneficiary will receive from us a lump sum death benefit amount.

In July 2019, we entered into a Continuation Agreement with Mr. Gary W. Stephens. Following his retirement at the age of 65 or upon a change in control, as defined in the Agreement, Mr. Stephens will receive $61,125 annually for fifteen years. In the event of disability while employed with us prior to the age of 65, Mr. Stephens will receive a benefit equal to the retirement liability balance accrued by the Bank at the time of disability. In the event of early termination, Mr. Stephens will receive the vested portion of his or her retirement liability balance that has accrued at the time of such early retirement. The vesting schedule is 20% per year of service beginning with the sixth year of service. In the event Mr. Stephens dies prior to termination of the Agreement, his beneficiary will receive from us a lump sum death benefit amount.

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The Continuation Agreements also provide that, in lieu of any other benefit under such agreements, the Company will pay the executives any benefit under the agreement to the extent the benefit would not create an excise tax under the excess parachute rules of Section 280G of the Code, and to extent possible, such benefit payment shall be reduced to allow payment within the fullest extent permissible under applicable law.

If a named executive officer under the Salary Continuation Agreement is terminated for cause, we will not pay any benefits under such Salary Continuation Agreement. For this purpose, the term “cause” means an Executive’s gross negligence or gross neglect of duties, fraud, disloyalty, dishonesty or willful violation of law or significant bank policies in connection with the Executive’s service that results in an adverse effect on the Company.

Insurance Benefits

We have purchased insurance policies for the following named executive officers:

Executive officer	Date policy purchased	Net Employee Death Benefit ($)

Christopher M. Courtney	December 2001		880,000

Richard A. McCarty	December 2001		675,000

Gary W. Stephens	July 2019		250,000

Michael J. Rodrigues	December 2001		250,000
	January 2008		525,000

Jeffrey A. Gall	October 2010		50,000
	September 2016		200,000

Under our Split-Dollar Agreements and Split-Dollar Policy endorsements, the policy interests are divided between us and such individual. We are entitled to any insurance policy death benefits remaining after payment to the individual’s beneficiary.

Compensation Committee Interlocks and Insider Participation

No member of this committee was at any time during 2022 or at any other time an officer or employee of the Company, except for Mr. Martin who was our Chief Executive Officer until his retirement in 2013, and no member of this committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. No executive officer of the Company has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the Compensation Committee during 2022. Our Compensation Committee is comprised of Messrs. Barton, Dickerson, Gilbert, Lafferty, Leonard, Holder, Martin, Strong, Titus, Withrow, Ms. Lafferty and Ms. Pelton, all of whom are independent directors.

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Prohibition on Speculation in Company Stock

Our stock trading guidelines prohibit executives, employees and directors from speculating in our stock, whether such stock is held directly or indirectly by such executive, employee or director, which includes, but is not limited to, short selling (profiting if the market price of the securities decreases), buying or selling publicly traded options, including writing covered calls, and hedging or any other type of derivative arrangement that has a similar economic effect.

Tax Considerations

Section 162(m) of the Internal Revenue Code limits the deductibility of annual compensation in excess of $1 million paid to “covered employees” of the Company. For 2018 and after, our covered employees generally include anyone who (i) was the CEO or CFO at any time during the year, (ii) was one of the top three highest paid executive officers during the fiscal year other than the CEO and CFO, and (iii) was a covered employee for any previous year after 2016. As with prior years, while the Compensation Committee considers the deductibility of compensation as one factor in determining executive compensation, the Compensation Committee retains the discretion to award compensation that is not deductible as it believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation in order to structure a program that we consider to be the most effective in attracting, motivating and retaining key executives.

Section 409A (“Section 409A”) of the Code, among other things, limits flexibility with respect to the time and form of payment of deferred compensation. If a payment or award is subject to Section 409A but does not meet the requirements that exempt such amounts from taxation under Section 409A, the recipient is subject to (i) income tax at the time the payment or award ceases to be subject to a substantial risk of forfeiture, (ii) an additional 20% tax at that time, and (iii) an additional tax equal to the amount of interest (at the underpayment rate of the Code plus one percentage point) on the underpayment that would have accrued had the award been includable in the recipient’s income when first deferred, or if later, when the award ceases to be subject to a substantial risk of forfeiture. Payments or awards under certain of our plans and arrangements either are intended to not constitute “deferred compensation” for purposes of Section 409A (and therefore will be exempt from application of Section 409A) or, if they constitute “deferred compensation,” are intended to comply with the statutory provisions of Section 409A and final regulations issued with respect thereto.

Accounting Considerations

Accounting considerations play an important role in the design of our executive compensation program. Accounting rules require us to expense the fair value of restricted stock awards and the estimated fair value of our stock option grants, which reduces the amount of our reported profits. The Compensation Committee considers the amount of this expense when determining the amount of equity compensation to award.

Risk Assessment of Incentive Compensation Arrangements.

The Compensation Committee meets with the Company’s Chief Executive Officer and Chief Operating Officer, to discuss the overall risk structure, the significant risks identified within the Company, and the process by which the Chief Executive Officer and Chief Operating Officer analyze the risks associated with the executive compensation program. This process includes, among other things, a review of the Company’s programs and discussions with the Compensation Committee’s independent compensation consultant about the structure of the Company’s overall executive compensation program. This review includes the compensation potential under the Company’s incentive plans, the long-term view encouraged by the design and vesting features of the Company’s long-term incentive arrangements, and the extent to which the Compensation Committee and the Company’s management monitor the program. The Compensation Committee also identifies areas of enterprise risk of the Company and evaluates the degree to which participants in a plan perform functions that have the potential to significantly affect overall enterprise risk. The Compensation Committee then analyzes the extent to which design features have the potential to encourage behaviors that could significantly contribute to enterprise risk.

Based on its review, the Compensation Committee has determined that in 2022 the Company’s executive compensation program did not encourage the SEOs (as defined above) to take unnecessary and excessive risks that threaten the value of the Company, and that no changes to these plans were required for this purpose.

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In addition to the incentive plans in which our SEOs participate, the Company has incentive programs for other officers and branch employees which reward performance. The Compensation Committee reviewed all non-SEO programs and concluded that none of them, either individually or as a group, presented any material threat to our capital or earnings, encouraged taking undue or excessive risks, or encouraged manipulation or financial data in order to increase the size of an award. The rewards offered are typically based on subjective criteria and are not tied directly to Company performance. Several other plans reward loan production. Internal controls with different levels of review and approvals are designed to prevent manipulation to increase an award.

Compensation Committee Report

Compensation Discussion and Analysis. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 401(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Daniel J. Leonard (Chairman)

Donald L. Barton

Lynn R. Dickerson

James J. Gilbert

Allison C. Lafferty

H. Randolph Holder

Ronald C. Martin

Janet S. Pelton

Gary J. Strong

Danny L. Titus

Terrance P. Withrow

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Summary of Cash and Certain Other Compensation

The following table provides certain summary information concerning the compensation of our Chief Executive Officer, and the four next most highly compensated executive officers for services rendered in all capacities to us for the fiscal years ended December 31, 2020, 2021 and 2022 in their respective executive officer capacities with the Company and the Bank:

Summary Compensation Table

Name and Principal		Salary	Stock Awards	Non-Equity Incentive Plan Compensation	All Other Comp.	Total
Position	Year	($)	($)	($)	($)	($)
(a)	(b)	(c) (1)	(e)(2)	(g) (3)	(i)(4)	(j)
Christopher M. Courtney	2020	387,176	57,464	176,632	166,602	787,874
Chief Executive Officer	2021	473,434	68,438	213,400	177,045	932,317
	2022	470,885	83,600	240,240	34,151	828,876

Richard A. McCarty	2020	269,004	39,856	107,802	136,407	553,069
President and Chief	2021	314,761	47,462	126,760	149,923	638,906
Operating Officer	2022	347,433	56,430	169,884	39,658	613,405

Gary W. Stephens	2020	188,257	19,778	64,045	86,756	358,836
Executive Vice President/	2021	236,769	23,545	78,887	93,847	433,048
Commercial Banking	2022	253,592	24,909	91,361	100,482	470,344

Michael J. Rodrigues	2020	237,682	19,778	77,340	54,613	389,413
Executive Vice President/	2021	270,028	23,545	85,754	57,685	437,012
Chief Credit Officer	2022	296,104	24,909	101,137	61,253	483,402

Jeffrey A. Gall	2020	190,320	19,778	62,809	44,382	317,289
Senior Vice President/ Chief	2021	229,277	23,545	74,304	48,133	375,259
Financial Officer & Secretary	2022	256,057	24,909	87,694	52,578	421,237

(1)	Includes base salary plus cash paid in lieu of accrued vacation.

(2)	Represents the grant date fair value of restricted stock awards granted during the fiscal year, as calculated in accordance with FASB ASC Topic 718, by multiplying the closing price of our stock on the trading day prior to the grant date by the number of shares granted.

(3)	For more information on Non-Equity Incentive Plan Compensation, see “Bonuses” section above, and “Grants of Plan Based Awards” table below.

(4)	The amounts shown in column (i) in 2022 include the following for each named executive:

	Economic				Accrual for
	Value of Death		401(k) Plan		Salary		Perquisites-		Cash Dividends
	Benefit of Life		Company		Continuation		Golf Membership		On Unvested
	Insurance for		Matching		Agreement		Dues and Auto		Restricted
	Beneficiaries ($)		Contributions ($)		Benefits ($)		Allowance ($)		Stock Awards ($)
Christopher M. Courtney		1,417		19,499		—		9,825		3,410
Richard A. McCarty		581		20,250		—		16,476		2,351
Gary W. Stephens		427		20,250		73,596		5,100		1,109
Michael J. Rodrigues		1,160		20,250		33,595		5,100		1,148
Jeffrey A. Gall		145		15,375		20,944		14,965		1,148

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The economic value of the death benefit amounts shown above reflects the annual income imputed to each executive in connection with Company-owned split-dollar life insurance policies for which the Company has fully paid the applicable premiums. These policies are discussed under the sections of this Proxy Statement titled “Salary Continuation Agreements”.

The amounts shown above in the “Accrual for Salary Continuation Agreement Benefits” column represent the executive salary continuation plan accrual from January 1, 2022 to December 31, 2022. The amounts were determined using interest rate and mortality rate assumptions consistent with those used in the Company’s consolidated financial statements and include amounts which the named executive officer may not currently be entitled to receive because such amounts are not vested. The assumptions used in the calculation of these amounts are described in Note 18 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2023.

Grants of Plan-Based Awards

Grants of Plan-Based Awards—Fiscal 2022

		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)						Estimated Future Payouts Under Equity Incentive Plan Awards						All Other Stock Awards: Number of Shares of Stock or		All Other Option Awards: Number of Securities Underlying		Exercise or Base Price of Option		Grant Date Fair Value of Stock and Option
Name	Grant Date	Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)		Units (#) (2)		Options (#)		Awards ($/Sh)		Awards ($) (3)
Christopher M. Courtney	NA		69,300		231,000		254,100		—		—		—
	2/28/22														4,400		—		—		83,600

Richard A. McCarty	NA		49,005		163,350		179,685		—		—		—
	2/28/22														2,970		—		—		56,430

Gary W. Stephens	NA		36,428		87,426		97,140		—		—		—
	2/28/22														1,311		—		—		24,909

Michael J. Rodrigues	NA		40,520		97,247		108,052		—		—		—
	2/28/22														1,311		—		—		24,909

Jeffrey A. Gall	NA		35,475		85,140		94,600		—		—		—
	2/28/22														1,311		—		—		24,909

(1)

Reflects threshold, target and maximum cash bonus payments payable to each named executive. Target bonuses were set as a percentage of each named executive officer’s base salary earned for the fiscal year ended December 31, 2022. The dollar value of the actual bonus awards earned for the year ended December 31, 2022 for each named executive officer is set forth in the Fiscal 2022 Summary Compensation Table above. As such, the amounts set forth in these columns do not represent either additional or actual compensation earned by the named executive officers for the year ended December 31, 2022. For a description of the fiscal 2022 bonus opportunities, see “Compensation Discussion and Analysis — Components of Executive Officer Compensation— Bonuses” above.

(2)	Represents grants of restricted stoc