PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
AMENDED AND RESTATED CORPORATE GOVERNANCE GUIDELINES OF BELMONT RIDGE BANK NA
DRAFT — Prepared by Calderwood & Harkness LLP for Review and Adoption by the Board of Directors
Matter Number: 1045-00003
Draft dated July 18, 2025 — Marked to show changes from Corporate Governance Guidelines last amended March 2022
Privileged & Confidential — Attorney Work Product
Prepared for:
Board of Directors Belmont Ridge Bank NA 600 Lexington Avenue, 34th Floor New York, NY 10022
Prepared by:
Calderwood & Harkness LLP 425 Park Avenue, 28th Floor New York, NY 10065
Engagement Team:
Colette Whitman, Responsible Partner Brendan Walsh, Lead Associate
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PREAMBLE
These Amended and Restated Corporate Governance Guidelines (the "Guidelines") have been adopted by the Board of Directors (the "Board") of Belmont Ridge Bank NA ("BRB" or the "Bank"), a nationally chartered bank organized under the laws of the United States, OCC Charter Number 24-0738, headquartered at 600 Lexington Avenue, 34th Floor, New York, NY 10022.
BRB is a wholly owned subsidiary of Belmont Ridge Financial Group, Inc. ("BRFG"), a Delaware corporation and registered bank holding company, EIN 83-4127560, with its registered office at 1209 North Orange Street, Wilmington, DE 19801. The Bank's common stock is listed on the Nasdaq Stock Market under the ticker symbol "BRBK" (traded as a consolidated reporting entity through BRFG).
Purpose. These Guidelines provide a comprehensive framework for the governance of the Board and its committees, reflecting the Board's commitment to sound governance practices, regulatory compliance, and the long-term interests of shareholders, depositors, and other stakeholders. The Board recognizes that robust corporate governance is essential to the safe and sound operation of a nationally chartered bank and to maintaining the confidence of the Bank's regulators, customers, and the communities it serves. These Guidelines are intended to promote the effective functioning of the Board and its committees, establish clear expectations for directors, and facilitate constructive engagement between the Board and management.
Regulatory Context. These Guidelines have been updated to address, among other things, supervisory expectations communicated by the Office of the Comptroller of the Currency (the "OCC") in MRA Letter SA-2024-0315 dated November 15, 2024 (the "OCC MRA Letter"), and by the Board of Governors of the Federal Reserve System (the "Federal Reserve") in Supervisory Letter SR-BHC-2024-1107 dated December 3, 2024 (the "Federal Reserve Supervisory Letter"), issued to BRFG. Both letters identified matters requiring attention in connection with the Bank's governance, risk oversight, and compliance infrastructure, and the revisions set forth in these Guidelines are designed in part to remediate those findings and demonstrate the Board's responsiveness to its supervisory obligations.
Supersession. These Guidelines supersede in their entirety the Corporate Governance Guidelines of Belmont Ridge Bank NA last amended in March 2022. All prior versions of the Guidelines are hereby rescinded and shall have no further force or effect.
Interpretation and Related Documents. These Guidelines are intended to be interpreted consistently with the Bank's committee charters (as each may be amended from time to time), the Bank's Director Independence Standards, the Board Code of Conduct, and all applicable law, including OCC regulations, Nasdaq listing standards, and applicable rules of the U.S. Securities and Exchange Commission (the "SEC"). In the event of any inconsistency between these Guidelines and any applicable law, regulation, or listing standard, such law, regulation, or listing standard shall control. These Guidelines should also be read together with the Bank's ongoing remediation plan submitted to the OCC on February 28, 2025, and acknowledged by the OCC with comments on April 4, 2025, which establishes a remediation deadline of December 31, 2025 for the matters identified in the OCC MRA Letter.
Nothing in these Guidelines is intended to create, and nothing in these Guidelines shall be construed to create, any enforceable rights in any third party, including any shareholder, depositor, employee, or other person or entity.
SECTION 1: ROLE AND RESPONSIBILITIES OF THE BOARD
1.1 General Oversight Responsibilities
The Board is responsible for overseeing the management, business, and strategic direction of the Bank. The Board's fundamental role is one of oversight and stewardship: while the day-to-day affairs of the Bank are managed by the Bank's senior management under the leadership of the Chief Executive Officer, the Board provides the overarching framework of governance, direction, and accountability within which management operates.
Each director owes fiduciary duties to the Bank, including the duty of care and the duty of loyalty, as established under applicable federal banking law and OCC regulations. The duty of care requires that each director act in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the director reasonably believes to be in the best interests of the Bank. The duty of loyalty requires that each director act in the interest of the Bank and its stakeholders, and not in the director's own interest or the interest of any other person or entity where such interest conflicts with the Bank's interest.
The Board shall oversee the Bank's risk profile, financial soundness, and compliance with all applicable laws and regulations, including the National Bank Act, OCC regulations, the Bank Secrecy Act, anti-money laundering requirements, consumer protection laws, and other federal and state laws and regulations applicable to nationally chartered banks. The Board's oversight responsibilities are commensurate with the size, complexity, and risk profile of the Bank. As of the first quarter of 2025, BRB maintains total assets of approximately $38.7 billion, total deposits of approximately $29.4 billion, and employs approximately 4,200 individuals across 147 branches in eight states: New York, New Jersey, Connecticut, Pennsylvania, Massachusetts, Maryland, Virginia, and the District of Columbia.
The Board's oversight extends to the Bank's digital banking platform and technology initiatives, which represent a material and growing component of the Bank's operations and customer interface. The Board recognizes that the prudent management of technology risk, including cybersecurity risk, is integral to the safety and soundness of the Bank and the protection of its customers.
1.2 Key Areas of Board Oversight
The Board shall exercise oversight over the following key areas, which the Board considers central to the effective governance and prudent management of the Bank:
(a) Strategic Planning and Major Transactions. The Board shall review and approve the Bank's strategic plan, shall receive periodic updates from management regarding implementation of the strategic plan, and shall approve any major transaction, including significant acquisitions, divestitures, joint ventures, strategic investments, and capital market transactions.
(b) Risk Management. The Board shall oversee the Bank's enterprise risk management framework, including the identification, assessment, monitoring, and mitigation of all categories of risk to which the Bank is exposed. This oversight encompasses, without limitation, enterprise risk, credit risk, market risk, operational risk, liquidity risk, compliance risk, model risk, reputational risk, and cybersecurity risk. The Board shall ensure that the Bank maintains risk management processes and controls that are commensurate with its size, complexity, and risk profile.
(c) Financial Performance and Integrity of Financial Reporting. The Board shall monitor the Bank's financial performance and the integrity of its financial reporting. For reference, the Bank's net income for fiscal year 2024 was approximately $412 million, representing a return on assets ("ROA") of 1.06% and a return on equity ("ROE") of 10.7%. The Board shall satisfy itself that the Bank's financial statements fairly present the Bank's financial condition and results of operations, and that the Bank's internal controls over financial reporting are effective.
(d) Capital Adequacy. The Board shall oversee the Bank's capital planning and ensure that the Bank maintains capital levels adequate to support its risk profile and strategic objectives, and in compliance with all applicable regulatory capital requirements. As of the most recent reporting period, the Bank's Tier 1 capital ratio was 10.8%, its Common Equity Tier 1 ("CET1") ratio was 10.2%, and its total risk-based capital ratio was 12.9%.
(e) Regulatory Compliance and Relationships. The Board shall oversee the Bank's compliance with all applicable laws, regulations, and supervisory expectations, and shall maintain constructive and transparent relationships with the OCC, the Federal Reserve, the Federal Deposit Insurance Corporation (the "FDIC"), and other regulatory bodies with jurisdiction over the Bank's activities.
(f) BSA/AML Compliance Program. The Board shall ensure that it receives timely and complete information regarding the Bank's compliance programs, with particular emphasis on the Bank's Bank Secrecy Act and anti-money laundering ("BSA/AML") programs. The Board acknowledges that the OCC, in MRA Finding 3 of the OCC MRA Letter, identified insufficient board-level information flow regarding compliance and BSA/AML matters, and the Board is committed to implementing the remedial measures described in Section 6.3 and elsewhere in these Guidelines to address that finding.
(g) Talent Management, Compensation Practices, and Corporate Culture. The Board shall oversee the Bank's human capital management, including talent development and retention, compensation practices and incentive structures, and the cultivation of a corporate culture that promotes ethical conduct, accountability, and regulatory compliance.
(h) Shareholder Relations and Stakeholder Engagement. The Board shall oversee the Bank's communications and engagement with shareholders and other stakeholders, as further described in Section 14 of these Guidelines.
1.3 Relationship Between Bank Board and Holding Company Board
The Board acknowledges that BRB is a wholly owned subsidiary of BRFG and that eleven (11) of the thirteen (13) current Bank directors also serve on the board of directors of BRFG. While this overlapping membership facilitates coordination and information-sharing between the Bank and its parent holding company, the Board recognizes that its fiduciary obligations as the board of directors of a nationally chartered bank are independent of, and in certain respects distinct from, the obligations of the BRFG board.
In particular, the Bank Board has independent fiduciary obligations specific to the Bank, its depositors, and its safety and soundness, which are distinct from the obligations of the BRFG board to BRFG's shareholders and other stakeholders. The Bank Board's obligations are governed by federal banking law, OCC regulations, and the Bank's national charter, and must be discharged with due regard for the interests of depositors and the safety and soundness of the Bank, even where such interests may diverge from the interests of the holding company.
To ensure the appropriate discharge of these independent obligations, the Board has adopted the following protocols for managing dual-board service:
(i) Matters specific to the Bank's safety and soundness, regulatory compliance, and depositor interests shall be deliberated by the Bank Board in its capacity as such, and shall not be delegated to or subsumed within the proceedings of the BRFG board.
(ii) The Bank Board shall maintain separate meeting agendas, meeting materials, and minutes where Bank-specific regulatory, compliance, or safety-and-soundness matters are at issue. Such materials shall be clearly identified as pertaining to the Bank Board's independent deliberations.
(iii) Directors serving on both the Bank Board and the BRFG board shall be mindful of the distinct fiduciary duties owed to each entity and shall exercise independent judgment in their capacity as Bank directors.
The Board further recognizes the OCC's supervisory expectation that nationally chartered banks maintain governance structures that are appropriately independent of their holding company affiliations where required by regulation, and the Board is committed to satisfying those expectations in its governance practices.
1.4 Delegation to Management
The Board delegates day-to-day management of the Bank to the Chief Executive Officer, Richard A. Montague, and to the Bank's senior management team, subject at all times to the Board's oversight and applicable policies and procedures. The Board recognizes that effective governance requires a clear delineation of the respective roles and responsibilities of the Board and management, and that management is responsible for implementing the Bank's strategies, managing its operations, and ensuring compliance with applicable laws and regulations, all within the framework of policies and risk tolerances established by the Board.
Notwithstanding the foregoing delegation, the following matters are reserved for Board action and may not be acted upon by management without prior Board approval:
(i) Significant acquisitions, divestitures, mergers, or other strategic transactions exceeding materiality thresholds established by the Board;
(ii) Capital actions, including the issuance or repurchase of equity or debt securities, dividend declarations, and changes to the Bank's capital plan;
(iii) Material changes to the Bank's strategic plan;
(iv) Material regulatory submissions, including responses to Matters Requiring Attention, consent orders, formal and informal enforcement actions, and other material supervisory correspondence;
(v) Amendments to the Bank's charter, bylaws, or governance documents;
(vi) The appointment or removal of the CEO, CFO, General Counsel, Chief Risk Officer, Chief Compliance Officer, or BSA Officer; and
(vii) Any other matter required by law, regulation, or the Bank's charter or bylaws to be approved by the Board.
The Board shall receive regular reports from the CEO, the Chief Financial Officer (Catherine L. Ng), the General Counsel (James W. Prescott), the Chief Risk Officer, the Chief Compliance Officer, and other senior officers as appropriate, to enable the Board to fulfill its oversight responsibilities. The nature, frequency, and format of such reports shall be governed by the Board Information Flow Policy described in Section 6.3 of these Guidelines.
SECTION 2: BOARD COMPOSITION
2.1 Size of the Board
The Board shall consist of not fewer than nine (9) and not more than fifteen (15) directors. The current Board consists of thirteen (13) directors. The Board may adjust its size within this range upon the recommendation of the Governance & Nominating Committee and approval by the full Board. In determining the appropriate size of the Board, the Board shall consider the need for a sufficient number of directors to staff the Board's standing committees effectively, the benefits of diverse perspectives and expertise, and the importance of a Board that is small enough to facilitate meaningful deliberation and efficient decision-making.
2.2 Independence Requirements
A majority of the Board shall consist of independent directors at all times. Currently, ten (10) of the thirteen (13) directors are independent, representing approximately 77% of the Board.
Independence shall be determined annually by the Board upon the recommendation of the Governance & Nominating Committee, applying the criteria set forth in Section 3 of these Guidelines and the Bank's Director Independence Standards, as most recently amended. The Board's independence determination is a substantive assessment, not merely a formulaic exercise, and requires the Board to consider all relevant facts and circumstances bearing on each director's independence.
The three current directors who are not independent are:
(i) Richard A. Montague, Chief Executive Officer and President of the Bank;
(ii) Franklin D. Reeves, Chief Operating Officer of the Bank; and
(iii) Alma G. Brashear, Executive Vice President and Head of Digital Banking.
Each of the foregoing directors is considered non-independent by virtue of his or her employment relationship with the Bank. The Board notes that, as a nationally chartered bank, BRB is subject to heightened independence standards required by the OCC, which may in certain cases impose standards more stringent than those required by the Nasdaq listing standards.
2.3 Director Qualifications and Skill-Matrix Requirements
Directors shall possess the qualifications, skills, experience, and attributes necessary for effective oversight of a nationally chartered bank with over $38 billion in total assets and a complex, multi-state business. The Board believes that the quality and diversity of its members is critical to the Board's ability to provide effective governance and to satisfy its fiduciary and regulatory obligations.
In response to MRA Finding 4 of the OCC MRA Letter, the Board has adopted a formalized director skill-matrix requirement. The Governance & Nominating Committee shall develop and maintain a board-level skill matrix identifying the skills, experience, and competencies represented on the Board and any gaps that should be addressed through future nominations. The skill matrix shall encompass the following core competency areas, each of which the Board considers important to be represented across the Board as a whole:
(i) Banking and financial services;
(ii) Risk management;
(iii) Accounting and financial reporting;
(iv) Legal and regulatory compliance;
(v) Technology and cybersecurity;
(vi) Human capital and compensation;
(vii) Strategic planning and mergers and acquisitions;
(viii) Public company governance;
(ix) Consumer and retail banking; and
(x) Government and public affairs.
Each director nominee shall be evaluated against the skill matrix as part of the nomination process, and the Governance & Nominating Committee shall identify how each nominee's qualifications, experience, and skills contribute to the Board's overall competency profile. The skill matrix shall be reviewed and updated at least annually by the Governance & Nominating Committee and reported to the full Board. The results of the skill-matrix assessment shall be disclosed in the Bank's annual proxy statement to the extent required by applicable SEC rules and Nasdaq listing standards, and to the extent the Board determines that such disclosure is appropriate in furtherance of its commitment to transparency.
In addition to the skill-matrix requirements, each director shall have the ability to dedicate sufficient time to Board and committee service, and shall promptly notify the Chair of the Board of any material change in his or her principal occupation, professional responsibilities, or other board memberships. The Governance & Nominating Committee shall consider the number and nature of each director's other board memberships and professional commitments in evaluating whether the director is able to devote adequate time and attention to service on the Bank's Board.
2.4 Board Diversity
The Board values diversity of background, experience, perspectives, gender, race, ethnicity, and age in its composition. The Board believes that a diverse board is better positioned to understand and serve the needs of the Bank's customers, employees, communities, and other stakeholders, and to provide the range of perspectives necessary for effective oversight and decision-making.
The Governance & Nominating Committee shall consider diversity as a significant factor in evaluating director candidates and shall report to the Board on the diversity of the Board's current composition and the diversity of the director pipeline. The Governance & Nominating Committee shall also consider whether the Board's composition reflects a diversity of viewpoints, professional experiences, geographic backgrounds, and personal characteristics. The Board's commitment to diversity is not limited to any single dimension, but encompasses a broad view of the characteristics and experiences that contribute to a well-functioning and effective board.
2.5 Director Tenure and Retirement Policy
The Board has adopted the following policies regarding director tenure and retirement in order to promote periodic refreshment and renewal of the Board while preserving continuity and institutional knowledge:
(a) Age Limit. No director shall stand for re-election after reaching the age of seventy-five (75). A director who reaches the age of seventy-five during his or her then-current term may serve until the expiration of that term.
(b) Tenure Limit. No director shall serve more than fifteen (15) consecutive years on the Board, unless the Board determines, upon the recommendation of the Governance & Nominating Committee, that an exception is warranted by reason of the director's unique qualifications, the Board's succession planning needs, or other extraordinary circumstances. Any such exception shall be disclosed to shareholders in the Bank's proxy statement.
(c) Transition Planning. Directors approaching the tenure limit or retirement age shall discuss transition planning with the Chair of the Board and the Governance & Nominating Committee at least twelve (12) months in advance of the anticipated date of departure, to facilitate an orderly transition and the identification and onboarding of a successor.
(d) Staggered Board Terms. Directors are divided into three classes, with approximately equal numbers of directors in each class. Each class serves a three-year term, and one class stands for election at each annual meeting of shareholders. The staggered board structure is intended to provide continuity and stability, while also ensuring regular opportunities for board refreshment through the election process.
2.6 Succession Planning for Committee Chairs
In response to MRA Finding 4 of the OCC MRA Letter, the Governance & Nominating Committee shall develop and maintain a written succession plan for each committee chair position. Committee chair succession planning is an essential element of good governance, as it ensures the continuity of effective committee leadership and mitigates the risks associated with unexpected transitions.
The succession plans shall include the following elements:
(i) Identification of at least one potential successor for each committee chair, selected from among the current committee members or other qualified Board members;
(ii) A development plan for each identified successor, which may include additional committee service, participation in relevant continuing education programs, or other measures designed to prepare the successor for committee leadership;
(iii) A timeline for planned leadership transitions, taking into account the tenure and anticipated retirement or rotation of each current committee chair; and
(iv) Contingency provisions for the unexpected departure or incapacity of a committee chair.
Succession plans shall be reviewed at least annually by the Governance & Nominating Committee and reported to the full Board. In the event of the unexpected departure or incapacity of a committee chair, the Governance & Nominating Committee shall recommend an interim appointment to the Board within thirty (30) days of such event, and the Board shall act promptly to designate an interim or permanent successor.
SECTION 3: DIRECTOR INDEPENDENCE STANDARDS
3.1 Definition of Independence
A director is "independent" if the Board affirmatively determines that the director has no material relationship with the Bank, its subsidiaries, or its affiliates (either directly or as a partner, shareholder, or officer of an organization that has a relationship with the Bank). A "material relationship" is one that, in the Board's judgment, could impair the director's ability to exercise independent judgment in the discharge of his or her duties as a director.
In making its independence determination, the Board shall apply, at a minimum, the independence criteria set forth in Nasdaq Listing Rule 5605(a)(2) and the additional heightened standards set forth in the Bank's Director Independence Standards, as most recently amended. The Board shall also consider the heightened standards for bank director independence prescribed by the OCC for nationally chartered banks, including expectations set forth in 12 C.F.R. Part 7 and applicable OCC supervisory guidance, which may require the Board to apply standards more stringent than those required by the Nasdaq listing rules.
The Board's independence determination is not merely a check-the-box exercise. It requires a holistic assessment of each director's relationships and circumstances, and the Board may conclude that a director who meets the categorical standards described in Section 3.2 below is nonetheless not independent if the Board identifies any other relationship or circumstance that, in the Board's judgment, would impair the director's independence.
3.2 Categorical Standards
In addition to the general standard set forth in Section 3.1, the Board shall apply the following categorical standards in determining whether a director is independent:
(a) Employment Relationships. No director shall be deemed independent who is, or at any time during the preceding three (3) years has been, an employee of the Bank, BRFG, or any of their respective subsidiaries or affiliates, or whose immediate family member is, or at any time during the preceding three (3) years has been, an executive officer of the Bank, BRFG, or any of their respective subsidiaries or affiliates.
(b) Compensation. No director shall be deemed independent who has received, or whose immediate family member has received, during any twelve-month period within the preceding three (3) years, direct compensation from the Bank, BRFG, or any of their respective subsidiaries or affiliates in excess of $120,000, other than (i) compensation for Board or committee service, (ii) pension or other forms of deferred compensation for prior service that is not contingent on continued service, and (iii) compensation received by an immediate family member for service as an employee (other than an executive officer) of the Bank or its affiliates.
(c) Audit Relationships. No director shall be deemed independent who is a current partner or employee of the Bank's independent auditor (currently Ridgewell & Haines LLP), or who was at any time during the preceding three (3) years a partner or employee of the independent auditor who personally worked on the Bank's audit engagement. No director shall be deemed independent whose immediate family member is a current partner of the independent auditor, is a current employee of the independent auditor who personally works on the Bank's audit engagement, or was at any time during the preceding three (3) years a partner or employee of the independent auditor who personally worked on the Bank's audit engagement.
(d) Business Relationships. The Board shall consider all commercial, banking, consulting, legal, accounting, charitable, and familial relationships between a director (or a director's immediate family member) and the Bank, its management, and its affiliates. A director shall not be deemed independent if the director or an immediate family member is, or at any time during the preceding three (3) years has been, a partner, controlling shareholder, or executive officer of any entity to which the Bank made, or from which the Bank received, payments for property or services in an amount that, in any single fiscal year, exceeded the greater of $200,000 or 5% of such entity's consolidated gross revenues.
(e) Interlocking Directorships. No director shall be deemed independent who is, or at any time during the preceding three (3) years has been, employed as an executive officer of another entity where any of the Bank's or BRFG's executive officers serves or served on the compensation committee of such entity.
3.3 Annual Independence Determination Process
The Governance & Nominating Committee shall conduct an annual review of director independence, considering all relevant facts and circumstances, including information provided by directors in response to the annual director questionnaire and any other information available to the Committee.
Each director shall complete an annual questionnaire (the "Director & Officer Questionnaire") disclosing all relationships and transactions with the Bank, BRFG, and their respective subsidiaries and affiliates, including business relationships, familial relationships, charitable relationships, and any other relationships or circumstances that could bear on the director's independence. The questionnaire shall be designed to elicit the information necessary for the Board to make an informed independence determination and shall be reviewed annually by the General Counsel and updated as needed.
The General Counsel (James W. Prescott) shall coordinate the annual independence review process, compile the results of the Director & Officer Questionnaires, and present the Governance & Nominating Committee with a summary of the relevant relationships and transactions for each director. The Governance & Nominating Committee shall consider the General Counsel's summary, along with any other information known to the Committee, and shall make a recommendation to the Board regarding the independence of each director.
The Board shall consider the Governance & Nominating Committee's recommendation and shall make an affirmative independence determination with respect to each director. The results of the Board's annual independence determination shall be disclosed in the Bank's annual proxy statement, including identification of each director determined to be independent and, where required by Nasdaq listing standards or SEC rules, a description of any relationships considered by the Board in reaching its determination.
The General Counsel shall maintain records of all independence determinations, supporting documentation, and related correspondence, and such records shall be retained for a period of not less than seven (7) years.
3.4 Special Independence Requirements for Committee Members
In addition to the general independence requirements applicable to all Board members, certain committees require their members to satisfy enhanced independence standards, as follows:
(a) Audit Committee. Each member of the Audit Committee must satisfy the enhanced independence requirements of Nasdaq Listing Rule 5605(c)(2)(A) and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended. Among other things, these requirements prohibit Audit Committee members from accepting, directly or indirectly, any consulting, advisory, or other compensatory fee from the Bank or any of its subsidiaries (other than fees for Board and committee service) and from being an affiliated person of the Bank or any of its subsidiaries.
(b) Risk Committee. Each member of the Risk Committee must satisfy the independence requirements applicable to the Risk Committee under OCC guidance for banks with total consolidated assets exceeding $10 billion. These requirements are designed to ensure that Risk Committee members are free from any relationship with management or the Bank that could impair their ability to exercise independent judgment regarding risk oversight.
(c) Compensation & Human Capital Committee. Each member of the Compensation & Human Capital Committee must satisfy the independence requirements of Nasdaq Listing Rule 5605(d), including consideration of all factors relevant to determining whether a director has a relationship to the Bank that is material to the director's ability to be independent from management in connection with the duties of a compensation committee member, including the source of the director's compensation and whether the director is affiliated with the Bank or any of its subsidiaries or affiliates.
SECTION 4: BOARD LEADERSHIP STRUCTURE
4.1 Chair of the Board
The Board shall have a Chair who presides over all meetings of the Board and shareholders and who serves as the primary point of contact between the Board and the CEO. The Chair shall have such other duties and responsibilities as may be prescribed by the Board from time to time. The current Chair of the Board is Margaret R. Ellsworth, an independent director.
The roles of Chair of the Board and CEO may be held by the same person or by different persons, as the Board determines is in the best interests of the Bank. The Board believes that it should retain the flexibility to determine the optimal leadership structure based on the Bank's circumstances, the qualifications and experience of the individuals involved, and best governance practices. The Board's current determination is that the roles of Chair and CEO should be separated, and the Board believes that this separation provides an appropriate balance between management authority and Board oversight.
If, at any time, the Chair of the Board is also the CEO, or if the Chair is not an independent director, the Board shall designate a Lead Independent Director with the enhanced responsibilities described in Section 4.2 below.
4.2 Lead Independent Director
The Board shall have a Lead Independent Director when the Chair is not independent, and may have a Lead Independent Director at other times as the Board determines to be appropriate. The current Lead Independent Director is David K. Sorrento, an independent director who has served on the Board since 2016. Even though the current Chair, Margaret R. Ellsworth, is independent, the Board has determined that maintaining a Lead Independent Director provides an additional governance safeguard and enhances the Board's independence and effectiveness.
The Lead Independent Director shall have the following responsibilities and authority:
(i) Preside over executive sessions of the independent directors held in accordance with Section 6.4 of these Guidelines;
(ii) Serve as a liaison between the independent directors and the Chair and CEO, conveying the views and concerns of the independent directors as appropriate;
(iii) Approve Board meeting agendas and schedules, in consultation with the Chair and the CEO, to ensure that the Board devotes adequate time and attention to all matters requiring Board oversight;
(iv) Have the authority to call special meetings of the independent directors at any time;
(v) Be available for consultation and direct communication with major shareholders on governance matters, to the extent requested by shareholders and determined by the Lead Independent Director to be appropriate;
(vi) Coordinate the annual Board self-evaluation process in conjunction with the Governance & Nominating Committee, as described in Section 9 of these Guidelines; and
(vii) Perform such other duties as the Board may assign from time to time.
The Lead Independent Director shall be appointed by the Board upon the recommendation of the Governance & Nominating Committee, and shall serve in that capacity until his or her resignation, removal, or replacement by the Board.
4.3 CEO. The Chief Executive Officer, Richard A. Montague, serves as a member of the Board and is responsible for managing the Bank's business and operations, subject to the oversight of the Board and within the framework of policies, risk tolerances, and strategic direction established by the Board. The CEO is the Bank's principal spokesperson and the primary liaison between the Board and management.
The CEO's performance shall be evaluated annually by the independent directors, coordinated by the Chair and the Compensation & Human Capital Committee (Sandra M. Okafor, Chair). The evaluation shall consider the CEO's effectiveness in implementing the Bank's strategic plan, managing the Bank's risk profile, maintaining regulatory compliance, developing senior leadership talent, and fostering a culture of integrity and accountability. The results of the CEO evaluation shall be discussed in executive session of the independent directors and communicated to the CEO by the Chair and the Lead Independent Director.
SECTION 5: BOARD COMMITTEES
5.1 Standing Committees
The Board shall maintain the following standing committees, each operating under a written charter approved by the Board:
(a) Audit Committee. The Audit Committee is chaired by Thomas J. Callahan and consists of five (5) members, all of whom are independent directors. The Audit Committee meets at least eight (8) times per year. The Audit Committee's primary responsibilities include oversight of the Bank's financial reporting, internal controls, internal audit function, and the Bank's independent auditor, as well as oversight of the Bank's whistleblower and complaint procedures, as further described in Section 8 of these Guidelines and the Audit Committee Charter.
(b) Risk Committee. The Risk Committee is chaired by Priya Venkataraman and consists of five (5) members, all of whom are independent directors. The Risk Committee meets at least eight (8) times per year. The Risk Committee's primary responsibilities include oversight of the Bank's enterprise risk management framework, risk appetite, and risk policies, as further described in Section 7 of these Guidelines and the Risk Committee Charter.
(c) Compensation & Human Capital Committee. The Compensation & Human Capital Committee is chaired by Sandra M. Okafor and consists of four (4) members, all of whom are independent directors. The Compensation & Human Capital Committee meets at least four (4) times per year. The Committee's primary responsibilities include oversight of the Bank's compensation programs, executive compensation, talent management, and human capital strategy.
(d) Governance & Nominating Committee. The Governance & Nominating Committee is chaired by Margaret R. Ellsworth and consists of four (4) members, all of whom are independent directors. The Governance & Nominating Committee meets at least four (4) times per year. The Committee's primary responsibilities include oversight of the Bank's governance practices, director nominations, Board composition and refreshment, the director skill matrix, committee chair succession planning, and the Board self-evaluation process.
(e) Technology & Innovation Committee. The Technology & Innovation Committee is chaired by Lawrence B. Huang and consists of three (3) members, all of whom are independent directors. The Technology & Innovation Committee meets at least four (4) times per year. The Committee's primary responsibilities include oversight of the Bank's technology strategy, digital banking initiatives, cybersecurity risk, and technology-related vendor management.
The Board may establish additional committees or subcommittees as it deems appropriate, whether on a standing or ad hoc basis, to address specific matters or emerging issues. Any such committee or subcommittee shall operate under terms of reference approved by the Board.
5.2 Committee Composition
All members of the Audit Committee, Risk Committee, Compensation & Human Capital Committee, and Governance & Nominating Committee shall be independent directors, as determined by the Board in accordance with Section 3 of these Guidelines. Committee members and committee chairs are appointed by the Board upon the recommendation of the Governance & Nominating Committee. The Governance & Nominating Committee shall consider each director's qualifications, expertise, and interests in recommending committee assignments, and shall seek to ensure that each committee's composition reflects the skills and experience necessary for effective discharge of the committee's responsibilities.
Committee members shall have relevant expertise for their committee assignments. In particular:
(i) At least one member of the Audit Committee shall be an "audit committee financial expert" as defined by the SEC rules adopted under the Sarbanes-Oxley Act of 2002. The current audit committee financial expert is Thomas J. Callahan, CPA (inactive), who served as an audit partner at Ridgewell & Haines LLP prior to joining the Board.
(ii) At least one member of the Risk Committee shall have demonstrated experience in risk management at a financial institution. The current member satisfying this requirement is Priya Venkataraman, who served as Chief Risk Officer of Lakemont Financial Corporation prior to joining the Board.
Committee membership and chair assignments shall be reviewed annually by the Governance & Nominating Committee, taking into account the Board's succession plans for committee chairs as described in Section 2.6 of these Guidelines.
5.3 Committee Charters
Each committee shall operate under a written charter that sets forth the committee's purpose, authority, responsibilities, and procedures. Committee charters shall be reviewed at least annually by the respective committee and submitted to the Board for approval. The review process shall include consideration of whether the charter adequately addresses the committee's current responsibilities, applicable regulatory requirements, and industry best practices.
Committee charters shall be made available on the Bank's website and shall be referenced or included in the Bank's annual proxy materials to the extent required by applicable SEC rules and Nasdaq listing standards.
The following committee charters are currently under review to address the findings set forth in the OCC MRA Letter:
(i) Risk Committee Charter — last amended January 2021, currently under revision to incorporate the formalized escalation protocol required by MRA Finding 1;
(ii) Audit Committee Charter — last amended February 2023, currently under revision to incorporate the independent verification procedures required by MRA Finding 2;
(iii) Governance & Nominating Committee Charter — last amended March 2022, currently under revision to incorporate the director skill-matrix requirements and committee chair succession planning provisions required by MRA Finding 4.
The Technology & Innovation Committee Charter (adopted September 2021, not yet amended) and the Compensation & Human Capital Committee Charter (last amended June 2022) are also subject to periodic review and will be assessed in due course.
5.4 Committee Reporting
Each committee chair shall report to the full Board on the committee's activities, findings, and recommendations following each committee meeting. Committee reports shall be included on the agenda of the next regularly scheduled Board meeting following each committee meeting, and committee chairs shall be available to respond to questions from the full Board regarding committee activities.
Committee minutes shall be prepared for each committee meeting and shall be distributed to all Board members as promptly as practicable following the meeting, subject to any attorney-client privilege, work-product, or confidentiality restrictions applicable to the matters discussed.
The Board shall receive written reports from each committee at least quarterly, and more frequently as circumstances require. Written reports shall include a summary of the matters considered by the committee, any significant findings or concerns, and any recommendations for Board action. The form and content of committee reports shall be sufficient to enable the full Board to exercise informed oversight of the matters delegated to each committee.
SECTION 6: BOARD MEETINGS AND INFORMATION FLOW
6.1 Regular and Special Meetings
The Board shall hold at least eight (8) regularly scheduled meetings per year. The meeting schedule shall be established in advance by the Chair, in consultation with the Lead Independent Director and the CEO, and shall be distributed to all directors prior to the beginning of each fiscal year. The Board's meeting schedule shall take into account the timing of regulatory examinations, earnings releases, the annual meeting of shareholders, and other significant events.
Special meetings may be called at any time by the Chair, the Lead Independent Director, the CEO, or any three (3) directors. Notice of special meetings shall be provided in accordance with the Bank's bylaws.
Directors are expected to attend at least seventy-five percent (75%) of all Board and applicable committee meetings in each fiscal year. Attendance records shall be maintained by the Corporate Secretary and reviewed by the Governance & Nominating Committee in connection with director renomination decisions. Directors are also expected to attend the annual meeting of shareholders; the 2025 Annual Meeting was held on May 14, 2025. Any director who is unable to attend a Board or committee meeting shall notify the Chair (or, in the case of a committee meeting, the committee chair) in advance and may participate by telephone or video conference to the extent permitted by the Bank's bylaws and applicable law.
6.2 Meeting Agendas and Materials
The Chair, in consultation with the Lead Independent Director and the CEO, shall establish the agenda for each Board meeting. The Lead Independent Director shall have the authority to add items to the Board meeting agenda. Any director may request that an item be placed on the agenda by communicating with the Chair, the Lead Independent Director, or the Corporate Secretary.
Meeting materials shall be distributed to directors at least five (5) business days in advance of regularly scheduled meetings, and as soon as practicable in advance of special meetings. Meeting materials shall be prepared by management under the direction of the CEO and the Corporate Secretary, and shall provide directors with sufficient information for informed decision-making, including relevant data, analysis, and recommendations from management and, where appropriate, from independent advisors. Supplemental materials may be distributed in advance of or during meetings as circumstances warrant.
The Board recognizes that the quality, timeliness, and completeness of meeting materials are essential to the Board's ability to provide effective oversight. Directors who believe that meeting materials are insufficient or incomplete should promptly communicate their concerns to the Chair, the Lead Independent Director, or the Corporate Secretary.
6.3 Board Information Flow Policy
The Board shall adopt and maintain a Board Information Flow Policy (the "Information Flow Policy") governing the regular and ad hoc reporting of material information to the Board and its committees. The Information Flow Policy is being developed concurrently with these Guidelines as part of the remediation of MRA Finding 3 of the OCC MRA Letter, and is expected to be adopted by the Board upon the same date as these Guidelines or as promptly thereafter as practicable.
The Information Flow Policy shall specifically address information flow regarding the following matters:
(i) Compliance risk, including the status of the Bank's compliance programs, material compliance failures or deficiencies, and remediation efforts;
(ii) BSA/AML program status, including the results of BSA/AML monitoring, the filing and disposition of Suspicious Activity Reports, and the outcomes of internal and external BSA/AML reviews and examinations;
(iii) Regulatory examination findings, including preliminary and final examination reports, Matters Requiring Attention, Matters Requiring Immediate Attention, and other supervisory observations or recommendations;
(iv) Enforcement actions, including formal and informal actions, consent orders, civil money penalties, and cease-and-desist orders;
(v) Any other matter requiring Board attention, including material litigation, material cyber incidents, and significant operational disruptions; and
(vi) Any other matter that the Board or any committee identifies as requiring regular or ad hoc reporting.
The Chief Compliance Officer and BSA Officer shall provide regular reports directly to the Board (or its designated committee, as determined by the Board) on a cadence defined by the Information Flow Policy, and shall have the authority and obligation to escalate material matters to the Board or the relevant committee chair on an ad hoc basis without the need for management approval or filtering. The Information Flow Policy shall define materiality thresholds and specific criteria for immediate escalation of compliance and BSA/AML matters to the Board or the relevant committee.
The Board recognizes that the effectiveness of its oversight depends in substantial part on the quality and timeliness of the information it receives, and the Board is committed to maintaining information flow practices that satisfy regulatory expectations and support informed and effective governance.
6.4 Executive Sessions of Independent Directors
The independent directors shall meet in executive session without management present at each regularly scheduled Board meeting, resulting in at least eight (8) executive sessions per year. Executive sessions provide the independent directors with an opportunity to discuss matters freely and candidly, without the presence of management, and are an essential element of the Board's governance practices.
Executive sessions shall be presided over by the Lead Independent Director (David K. Sorrento) or, in his absence, by the Chair of the Board if independent. The agenda for executive sessions may include any matters the independent directors deem appropriate, including, without limitation:
(i) CEO performance and compensation;
(ii) Senior management performance and succession planning;
(iii) Board and committee effectiveness;
(iv) Regulatory matters and supervisory relationships;
(v) Risk appetite and risk tolerance;
(vi) Related-party transactions and conflicts of interest; and
(vii) Any other matter of concern to the independent directors.
The Lead Independent Director shall communicate the results of executive sessions to the CEO as appropriate, and shall ensure that any action items or concerns arising from executive sessions are addressed by the Board or management in a timely manner.
6.5 Access to Management and Independent Advisors
Directors shall have unrestricted access to the Bank's management and employees. The Board encourages directors to engage with senior management and key employees to deepen their understanding of the Bank's operations, risks, and strategic initiatives, and to satisfy themselves that the Bank is being managed in a safe and sound manner.