UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.   20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014 or

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

001-34165

(Commission File Number)

Bridge Capital Holdings

(Exact name of registrant as specified in its charter)

55 Almaden Boulevard, San Jose, CA   95113

(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code:  (408) 423-8500

Securities registered pursuant to Section 12 (b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No  x

Indicate by check mark whether  the registrant i (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No  o

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No x

The aggregate market value of the voting stock held by non-affiliates of Bridge Capital Holdings was $238,739,725 as of June 30, 2014.

As of April 15, 2015, Bridge Capital Holdings had 15,935,819 shares of common stock outstanding.

Explanatory Note

Bridge Capital Holdings (the “Company” , “we” or “us”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual Report on Form 10-K for the year ended December 31, 2014 (the “Original Report”) to include Items 10, 11, 12, 13 and 14 of Part III to Form 10-K.  No changes are being made to the Original Report.  Unless expressly stated, this Amendment does not reflect events occurring after the filing of the Original Report and it does not modify or update in any way the disclosures contained in the Original Report, which speak as of the date of the original filing.

As reported on the Company’s Current Reports on Form 8-K filed with the Commission on March 10 and 13, 2015, the Company has entered into an Agreement and Plan of Merger dated as of March 9, 2015 with Western Alliance Bancorporation (the “Merger Agreement”), pursuant to which the Company would merge with and into Western Alliance Bancorporation.  A copy of the Merger Agreement (together with certain other information regarding the proposed merger) is provided in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 13, 2015.  As a result of the Merger Agreement, the Company’s Board of Directors has decided to postpone its 2015 Annual Meeting of Shareholders.

The Report of the Audit Committee, Compensation Committee Report on Executive Compensation, and the statement of independence of Audit Committee members included in this Amendment No. 1 on Form 10-K/A are not to be incorporated by reference into any other filings made with the Commission unless otherwise stated in those filings.

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PART III

Item 10.  Directors, Executive Officers and Corporate Governance

CORPORATE GOVERNANCE AND BOARD MATTERS

Audit Committee

The Audit Committee of the Board of Directors, which consists of Directors Christopher B. Paisley as Chair, Robert P. Latta, Terry Schwakopf, and Barry A. Turkus.  The Audit Committee oversees the accounting and financial reporting processes of the Company and audits of the financial statements of the Company, appoints and oversees a firm of independent public accountants who audit the books and records of the Company for the fiscal year for which they are appointed, approves each professional service rendered by such accountants and evaluates the possible effect of each such service on the independence of the Company’s accountants.  The Audit Committee also reviews the internal controls and reporting procedures of the Company’s wholly-owned bank subsidiary, Bridge Bank, N.A. (The “Bank”), and periodically consults with the independent auditors with regard to the adequacy of internal controls.

Independence

Each member of the Audit Committee is independent under the rules of Nasdaq governing the independence of directors and the independence of audit committee members, including the “audit committee financial experts” discussed below.

Audit Committee Financial Experts

The Board has determined that Mr. Christopher B. Paisley and Ms. Terry Schwakopf have:

·      an understanding of generally accepted accounting principles and financial statements;

·      the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

·      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 the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities;

·      an understanding of internal control over financial reporting; and

·      an understanding of audit committee functions.

Therefore, the Board has determined that Mr. Paisley and Ms. Schwakopf each meets the definition of “audit committee financial expert” under the rules of the SEC and are “financially sophisticated” under Nasdaq rules.

Our designation of each of Mr. Paisley and Ms. Schwakopf as an audit committee financial expert does not result in them being deemed an expert for any other purpose, including under Section 11 of the Securities Act of 1933. The designation does not impose on Mr. Paisley and Ms. Schwakopf 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.

Pre-Approval Policies

The Audit Committee has not approved a policy of pre-approving non-audit services.  All non-audit services must be brought before the Audit Committee for approval.

Shareholder Nominations: The Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee (the “Governance Committee”) is comprised of members of the Board who are independent under Nasdaq’s listing rules.  The Governance Committee has a charter, which is posted on our website at www.bridgebank.com.  The members of the Governance Committee are Allan C. Kramer, M.D. as Chair, Howard N. Gould, Dr. Francis J. Harvey, and Terry Schwakopf.  In addition, our Board has adopted resolutions establishing the requirements and qualifications (in addition to the requirement in Section 2.3 of the By-laws that a director be free of certain conflicting interests) for members of the Board as follows:

Nominees for director must be recommended to the Board by a majority of the directors of the Company who are independent as defined in the rules of Nasdaq.

We seek directors who are of high ethical character and have reputations, both personal and professional, which are consistent with the image and values of the Company.  Our independent directors review from time to time the appropriate skills and characteristics required of directors in the context of the current make-up of the board, including such factors as business experience, diversity, and personal skills in finance, marketing, business, and other areas that are expected to contribute to an effective board.

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We will consider director nominees recommended by shareholders who adhere to the procedure set forth in our By-Laws.

Historically we have selected our directors from prominent business persons and professionals in the communities in which we serve.  We have benefited from the broad contacts that our directors have in their communities, which enable them to recommend candidates for nomination as directors.  The Company considers nominees of shareholders in the same manner as all other nominees.

Code of Ethics

We have adopted a code of ethics governing the conduct of our directors, Chief Executive Officer, Chief Financial Officer and Controller.  The code of ethics is available without charge upon request by contacting Debra J. Bradford, our Corporate Secretary, at (408) 423-8500.

Contacting the Board

Shareholders may address inquiries to any of our directors or the full board by writing to Debra J. Bradford, Executive Vice President and Corporate Secretary, Bridge Capital Holdings, 55 Almaden Boulevard, San Jose, California 95113.  All such communications are sent directly to the intended recipient.

INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information with respect to our directors and for each of our executive officers, including their principal occupation for the past five years.  There is no family relationship between any director, nominee or executive officer.  Except as described below, no director of the Company holds a directorship in any other company with a class of securities registered pursuant to sections 12 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  No director or executive officer has been during the past five years, or is, involved in any legal proceedings material to an evaluation of the ability or integrity of such director. No significant business or personal relationships exist between any director and the Company or its management, except for any business relationships noted in the Compensation Discussion and Analysis noted in Item 11 or in Item 13 of this Amendment.  Except as described below, we are not aware of any arrangement or understanding between the nominees and any other person pursuant to which the nominee was or is to be selected as a director or nominee.

Directors

The following persons are directors of the Company. All directors of the Company are also directors of the Bank.

Lawrence Owen Brown, age 74, has been a director of the Company and the Bank since 2004.  From 1995 to 2002, Mr. Brown was a Managing Partner of the venture capital firm Technology, Strategy and Alliances of Menlo Park.  He is now retired.  In addition, Mr. Brown serves as a director on a number of privately held companies and has previously served as a director on a number of public companies.

Howard N. Gould, age 65, has been a director of the Company since 2009.  Mr. Gould is Vice Chairman of Carpenter and Company and is a managing member of Carpenter Fund Manager, GP, LLC, the general partner of the Carpenter Community BancFunds.  From 2004 to 2005, Mr. Gould was California Commissioner of Financial Institutions under Governor Arnold Schwarzenegger.  From 2002 to 2003, he was Vice Chairman of The Bank of the West which had acquired United California Bank where he was Vice Chairman and Chief Operating Officer from 1992 to 2002.  He was State Superintendent of Banks for the State of California under Governor George Deukmejian. Mr. Gould also served as an officer at Bank of America and Wells Fargo Bank.

In 2008, the Company sold $30 million of convertible preferred stock to the Carpenter Community BancFunds.  In connection with the sale, we agreed, for so long as the funds hold at least 10% of our common stock (includes shares of common stock that may be acquired upon conversion of securities convertible into our common stock), to nominate and recommend for election to our Board one individual named by the funds’ general partner who is reasonably acceptable to our Board.  The funds’ general partner designated Mr. Gould as its director under that agreement and our Corporate Governance and Nominating Committee approved his appointment and subsequent nominations for reelection.

Dr. Francis J. Harvey, age 71, served as the 19th Secretary of the U.S. Army from November 2004 to March 2007. Appointed by President George W. Bush and confirmed by the U.S. Senate, he had statutory responsibility for all matters relating to manpower, training, reserve affairs, installations, equipment, communications, and financial management.

Prior to becoming Secretary, Dr. Harvey served on several corporate boards, including three portfolio companies of the Carlyle Group where he was the vice chairman of the board for two of those companies. Between 1997 and 2004, he served on a total of ten different corporate and non-corporate boards. He currently serves on the boards of three privately held companies and is a strategic advisor to several other companies and private equity firms.

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Previously, Dr. Harvey was Chief Operating Officer of Westinghouse’s Industries and Technology Group. He held several senior leadership positions at Westinghouse, including General Manager of the Marine Division, Vice President of Science and Technology, President of the Government and Environmental Services Company, and President of the Defense and Electronics Systems Group.

Allan C. Kramer, M.D., age 78, serves as Chairman of the Boards of the Company and the Bank.  Dr. Kramer has been a director of the Company since its inception in 2004 and the Bank since its inception in 2001.  Dr. Kramer is currently an investment adviser for a partnership dealing with public, private and angel investments.  He has served and serves as a director on a number of public and privately held companies.  In addition, Dr. Kramer is President and Chief Executive Officer of KAM, Inc., a Los Altos-based asset management company.  Dr. Kramer practiced medicine in the Bay Area from 1968 through 2000.

Robert P. Latta, age 61, has been a director of the Company and the Bank since 2004.  Mr. Latta is a partner at Wilson Sonsini Goodrich & Rosati, one of the nation’s leading technology and growth business law firms, where he has served as a member of the firm’s investment, compensation, and nominating and executive committees.

Daniel P. Myers, age 55, has been a director, President, and Chief Executive Officer of the Company since its inception in 2004 and has held the same positions with the Bank since its inception in 2001.

Christopher B. Paisley, age 62, has been a director of the Company and the Bank since 2011.  Mr. Paisley has been the Dean’s Executive Professor of Accounting at the Leavey School of Business at Santa Clara University since January 2001. Mr. Paisley also serves as a member of the boards of directors of five other companies with securities that are registered pursuant to sections 12 of the Securities Exchange Act of 1934: Ambarella, Inc., a provider of high definition video processing solutions; Equinix, Inc., a provider of network colocation, interconnection and managed services; Fortinet, Inc., a provider of network security appliances and solutions; and Control 4, a provider of personalized automation and control solutions; each of which is traded on the Nasdaq Stock Market; and YuMe, a multi-screen video advertising technology company that is traded on the New York Stock Exchange.  Additionally, Mr. Paisley was Chief Financial Officer at 3Com Corporation, a networking products company, from 1985 to 2000.

Thomas A. Sa, age 53, has been a director of the Company and the Bank since 2012.  Mr. Sa has been the Executive Vice President and Chief Strategy Officer of the Company since 2009 as well as Chief Financial Officer of the Company since its inception in 2004.  Mr. Sa has been the Executive Vice President and Chief Risk Officer of the Bank since 2009.  In addition, he served as Chief Financial Officer of the Bank from its inception in 2001 until 2009.

Terry Schwakopf, age 64, has been a director of the Company and the Bank since 2010.  Ms. Schwakopf currently serves as a Senior Advisor to the banking practice of Deloitte & Touche, LLP, which provides governance, regulatory and risk strategies advisory services to clients in the banking industry.

Prior to Deloitte, Ms. Schwakopf worked for 23 years in increasingly senior positions with the Federal Reserve Bank of San Francisco, where she was Executive Vice President with overall responsibility for bank supervision. She also served three years with the Federal Reserve Board of Governors in Washington D.C. in a special unit that dealt with systemic issues in the banking and savings and loan industries.

Barry A. Turkus, age 68, has been a director of the Company since its inception in 2004 and the Bank since its inception in 2001.  Mr. Turkus is a principal of the commercial real estate firm of Cassidy Turley.

Executive Officers

In addition to Mr. Myers and Mr. Sa, who are directors of the Company and described above, the following persons are executive officers of the Company.

Timothy W. Boothe, age 50, has been the Executive Vice President and Chief Operating Officer of the Bank since 2006 and was the Executive Vice President and Chief Lending Officer of the Bank since inception in 2001.

Allen G. Williams, age 63, has been the Executive Vice President and Chief Credit Officer of the Bank since 2009. Mr. Williams has been in the banking industry for thirty-six years, most recently with Comerica Bank.

Margaret M. Bradshaw, age 64, has been the Executive Vice President and Chief Banking Officer of the Bank since 2009.  Ms. Bradshaw has over thirty years in the banking industry starting at Wells Fargo in San Francisco, and more recently Comerica Bank.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers to file reports with the SEC and the Nasdaq Stock Market on changes in beneficial ownership of our common stock and to provide us with copies of the reports.  Based solely on our review of these reports or of certifications to us that no report was required to be filed, we believe that all of our directors and executive officers complied with all Section 16(a) filing requirements applicable to them during the 2014 fiscal year, except for Daniel P. Myers, Thomas A. Sa, Timothy W. Boothe, Allen G. Williams, and Margaret M. Bradshaw who were eighty-one (81) days late in filing a Form 4 to report payment of tax liability using securities received by the Company.

Item 11.  Executive Compensation

Compensation Committee

The Compensation Committee of our Board of Directors is composed of Robert P. Latta as Chair, Lawrence Owen Brown, and Dr. Francis J. Harvey.  The committee operates under the authority of a charter, which is posted on our website at www.bridgebank.com.  The Committee oversees and monitors our human resources policies and practices, reviews and evaluates our salary and benefits structure, evaluates executive management performance and fixes bonus compensation for our executive officers and senior management as the Committee deems appropriate..

COMPENSATION DISCUSSION AND ANALYSIS

Overview

This Compensation Discussion and Analysis describes and analyzes our executive compensation philosophy and program in the context of the compensation paid, during the year ended December 31, 2014, to the individuals who served as our Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers (“named executive officers”).  Our named executive officers are as follows:

Daniel P. Myers — President and Chief Executive Officer

Thomas A. Sa — Executive Vice President, Chief Financial Officer and Chief Strategy Officer

Timothy W. Boothe — Executive Vice President and Chief Operating Officer

Allen G. Williams — Executive Vice President and Chief Credit Officer

Margaret M. Bradshaw — Executive Vice President and Chief Banking Officer

Following the heading “Executive Compensation” below, there are series of tables with specific information about the compensation earned by or paid in 2014 to the named executive officers.  This Compensation Discussion and Analysis is intended to help you understand the detailed information provided in those tables and put that information into context within our overall compensation program.

Executive Compensation Program Highlights

As discussed in greater detail below, our executive compensation program is designed to appropriately link executive pay to Company performance and shareholder results.  Some highlights of our compensation program include:

A High Percentage of Executive Compensation is Performance-Based

Approximately fifty-five percent (55%) of the named executive officers’ total direct compensation (base salary, bonus, cash incentive compensation, and long-term equity incentive awards) for 2014 was performance-based, meaning that it was earned on the basis of achievement of corporate and individual performance goals (in the case of annual cash incentive compensation), or its future value, if any, is contingent upon the future performance of the Company’s common stock (in the case of long-term equity incentive compensation).  Long-term performance of the Company’s common stock is contingent upon many factors, but is typically based upon consistent repetitive achievement of increasingly higher short-term corporate and individual performance goals.

Modest Perquisites

We generally provide modest perquisites to our executives, consistent with our goal of aligning our executives’ interests with the interests of our shareholders.

Executives are also Shareholders

Our executive compensation strategy strives to promote an ownership mentality that aligns the executives’ interests with the interests of our shareholders.  Accordingly, each executive is eligible to be considered for annual equity-based grants under the Company’s Equity Incentive Plan, which was designed to strengthen the linkage between compensation, retention, and long-term shareholder value by providing additional incentive to promote the success of the Company.

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Consideration of Say-On-Pay Vote Results

At our 2014 Annual Shareholders Meeting, we held our fourth non-binding shareholder advisory vote on executive compensation (say-on-pay).  Our shareholders approved our fiscal 2013 executive compensation, with approximately 99% of voting shareholders casting their vote in favor of the say-on-pay resolution.  While several compensation decisions have been made since that time, the Compensation Committee was mindful of the support our shareholders expressed for our 2013 compensation program when making executive compensation decisions for our 2014 compensation program, including long-term incentive awards.  In making these executive compensation decisions, which are discussed more fully below, the Compensation Committee’s main considerations included our shareholders’ strong support for our 2013 executive compensation program, the peer and market information provided by the Compensation Committee’s compensation consultant, and a review of updated competitive market trends and regulatory guidance.  The Compensation Committee will continue to consider our shareholders’ views when making executive compensation decisions in the future.

Role of the Compensation Committee

The Compensation Committee, which consists entirely of independent directors, has overall responsibility for evaluating, administering, monitoring, and approving the Company’s compensation plans, policies and programs in a manner that aligns the effort and interests of the Board members and executive management with our shareholders.  The primary purpose of our Compensation Committee is to establish our compensation policies and to determine the compensation of our chief executive officer and other named executives. The Compensation Committee also determines the compensation of Board members.

Compensation Consultant

The Compensation Committee from time to time retains independent executive compensation consultants to assist in evaluating the compensation practices at the Company and to provide advice and ongoing recommendations regarding executive compensation consistent with our business goals and pay philosophy.

During 2014, the Compensation Committee engaged McLagan, a consulting firm that provides compensation advisory services for the banking industry, for purposes of advising the Committee on all compensation related matters.  The Compensation Committee considers McLagan to be an independent compensation consultant and intends to annually review the performance of McLagan, as well as its continued independence.  McLagan attended Compensation Committee meetings, either in-person or telephonically, and met regularly with the Compensation Committee without members of management present.  McLagan and members of management both assisted the Compensation Committee in its review of proposed compensation packages for our executive officers and directors, as well as both short-term and long-term incentive programs for all employees.

In addition to advising the Compensation Committee on existing compensation related programs, McLagan also prepared competitive pay analysis and other benchmarking reviews for the Compensation Committee.  McLagan utilized information supplied by management, compensation related information obtained from public filings, compensation related industry surveys and reports, and information from its proprietary database.

During 2014, the Compensation Committee specifically engaged McLagan to:  (i) attend Compensation Committee meetings; (ii) provide guidance relative to regulatory requirements surrounding such compensation; and (iii); provide general advice and consultation as needed.

The Compensation Committee considered the independence of McLagan in light of new SEC rules and NASDAQ listing rules, including the following factors: (1) other services provided to the Compensation Committee by McLagan; (2) fees paid by the Company as a percentage of McLagan’s total revenue; (3) policies or procedures maintained by McLagan that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisors and a member of the Compensation Committee; (5) any company stock owned by the senior advisors; and (6) any business or personal relationships between our executive officers and the senior advisors. The Compensation Committee concluded that the work performed by McLagan and McLagan’s senior advisors involved in the engagements did not raise any conflict of interest.

Review of Market Data

The Compensation Committee recognizes that competitive compensation is critical for attracting, motivating, and rewarding qualified executives.  The Compensation Committee, management and McLagan jointly selected the following two peer groups for purposes of the bi-annual benchmarking of both cash and non-cash compensation for executive officers and directors during 2013.  All compensation-related decisions made during 2014 were based upon the 2013 peer analysis in conjunction with a review of updated competitive market trends and regulatory guidance.

·                  West Coast Peer Group — Peers were chosen primarily based on geographic location, asset size, and performance.  This peer group included banks and bank holding companies with assets ranging from $750.0 million to $5.0 billion in California, Oregon, and Washington.  The specific banks included in this peer group for the 2013 analysis were:  Columbia Banking System Inc., Westamerica Bancorp., Banner Corp., TriCo Bancshares, Farmers & Merchants Bancorp, Washington Banking Co., Heritage Financial Corp., Pacific Continental Corp., Bank of Marin Bancorp, Pacific Premier Bancorp, Sierra Bancorp, Heritage Commerce Corp, Cascade Bancorp, CU Bancorp, Heritage Oaks Bancorp, Pacific Mercantile Bancorp, Bank of Commerce Holdings, North Valley Bancorp, FNB Bancorp, Central Valley Community Bancorp, & First Northern Community Bancorp.

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·                  Business Model Peer Group — Peers were chosen from across the nation based on a percentage of core deposits, total non-real estate loans, and a net interest margin that resembled a business model similar to the Company.  The asset size for this peer group was $1.0 billion to $5.0 billion.  The specific banks included in this peer group for the 2013 analysis were:  Columbia Banking System Inc., Westamerica Bancorp., First Financial Bankshares, First Merchants Corp., Lakeland Financial Corp., Financial Institutions Inc., Sterling Bancorp, CoBiz Financial Inc., S.Y. Bancorp Inc., German American Bancorp Inc., MidSouth Bancorp Inc., Horizon Bancorp, Heritage Financial Corp., Sierra Bancorp, Heritage Commerce Corp, CU Bancorp, First Business Financial Services Inc, & Northrim BanCorp Inc.

The Compensation Committee, management and the compensation consultant regularly assess the appropriateness of selected peer groups for purposes of benchmarking compensation related matters.  As such, the parameters for selecting peer groups, and the banks included within those peer groups, may change over time depending on many factors regarding the Company, including our strategic focus, asset size, and business model.

Key Decisions

As a result of discussions with the compensation consultant and reviewing the competitive market data provided by the compensation consultant, the Compensation Committee made the following key decisions pertaining to 2014, the specific details of which are discussed further in the relevant sections of this analysis:

·                  Grants of plan-based awards for the named executive officers, including cash incentive compensation and equity-based awards; and

·                  Affirmation of the Company’s existing short-term and long-term compensation programs.

Objectives of Compensation Program

The primary objective of our compensation program, including our executive compensation program, is to maximize shareholder value by attracting and retaining qualified, energetic and experienced bankers who are enthusiastic about the Company’s mission and culture.  A further objective of our compensation program is to provide incentives and reward each employee for their contribution to the Company.  Our executive compensation strategy also strives to promote an ownership mentality that aligns the executive’s and director’s interests with the interests of our shareholders.  Finally, we endeavor to ensure that our compensation program is perceived as fundamentally fair to all stakeholders.

What Our Compensation Program is Designed to Reward

As noted above, our compensation program is designed to attract and retain bankers who think and act as owners in promoting the interests of the Company.

Our cash incentive compensation program is designed to reward teamwork and each executive’s contribution to the Company.  Under the incentive compensation program, each executive has a target opportunity stated as a percentage of base salary with the potential to earn additional compensation for performance beyond target level.  If target level performance is not achieved, executive officers may still have a reduced opportunity for incentive compensation provided a minimum threshold level of performance is achieved.  The measurement of an executive’s performance is a composite of corporate financial goals set by the Finance Committee of the Board and individual objectives that are established by management, and reviewed by the Compensation Committee, in setting the annual plan.

All of our executive officers participate in an incentive compensation plan that is heavily weighted toward achievement of corporate objectives.  The weighting between corporate and individual objectives in measuring performance for purposes of incentive compensation is set annually by the Compensation Committee. In measuring the named executive officers’ contribution to the Company, the Compensation Committee has determined that achievement of corporate objectives should be emphasized to encourage and reward teamwork and cohesiveness in execution of the Company’s plan.  For 2014, the weighting of corporate objectives in measuring performance under the incentive compensation plan was set by the Compensation Committee at 100% for Mr. Myers; and 75% for Mr. Sa, Mr. Boothe, Mr. Williams, and Ms. Bradshaw.

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The corporate objectives of the Company are set by the Finance Committee and the Board as part of the annual planning process.  The corporate objectives are a composite of financial metrics that are considered key to creating long-term value for our shareholders.  The Compensation Committee then adopts these metrics for use in our incentive compensation plan.  Historically, the metrics have typically included such measures as: (1) growth in average total assets, including loans and deposits; (2) performance in net income; (3) return on average equity; and (4) satisfactory relations with auditors and regulators.  The metrics are also weighted each year to promote execution of the plan in a manner that achieves balance between short-term and long-term performance.  For 2014, the Board emphasized metrics that promoted supporting the strength of the balance sheet and improving core profitability.  The key performance measurements and their relative weighting were as follows:

·                  Capital Deployment (30%)

Total Average Gross Loans (10%)

Total Average Deposits (15%)

Baseline Funding Growth (5%)

·                  Profit Improvement (45%)

Core Revenue (15%)

Pre-Tax Pre-Provision Net Income (15%)

Return on Average Equity (15%)

·                  Safety and Soundness (25%)

Net Loss / Total Average Gross Loans (15%)

Satisfactory Relations with Auditors and Regulators (10%)

In addition to the financial metrics noted above, the Company has established long-term strategic objectives related to, among other things (1) maintaining appropriate levels of capital for risks in the business; (2) establishing a functional framework for enterprise risk management; (3) implementing effective responses to risks presented by the uncertain economic and regulatory environment; and (4) continuing to manage credit risk throughout the loan portfolio.

The Board believes that the specific objectives for 2014 improved the competitive position of the Company and supported its ability to create long-term value for shareholders.  The targets for the financial objectives were determined through our annual financial planning and budgeting process.  In general, the target level of performance for each objective equates to the approved financial plan.  For the year ended December 31, 2014 the targets pertaining to financial objectives were as follows:  total average gross loans of $1.16 billion; total average deposits of $1.35 billion; baseline funding growth of $91.9 million; core revenue of $89.4 million; pre-tax pre-provision net income of $33.7 million; return on average equity of 8.72%; and net loss to total average gross loans of 0.43%.

As noted above, in addition to the corporate objectives, 25% of the incentive compensation for our named executives (other than Mr. Myers) was based upon the effectiveness in achievement of individual objectives specific to their respective organizational responsibilities.  The individual objectives for 2014 included such elements as:  efficiency, employee effectiveness, revenue growth, expense management, system enhancements, loan and deposit production, asset quality, enterprise risk management, capital utilization, and client profitability.  Consistent with our objective of developing a compensation program that supports the creation of shareholder value, the individual and corporate objectives strive to be fair to all shareholders by requiring that all performance measures be achieved net of any resulting incentive compensation.  The Compensation Committee has final discretion regarding all incentive compensation.

During 2014, the Company achieved significant progress with regard to the objectives related to managing credit risk, growing loans and deposits, and improving core revenue, with the objective of continuing to mitigate risk while maintaining sound profitability for the Company.  Achievement of these objectives also represented progress with regard to elements of the long-term strategic plan.  Specifically, in 2014 the Company’s level of classified loans was reduced to 18% of capital compared to 26% in the prior year.  The Company also achieved significant growth in loan and deposit balances.  Despite a persistent low interest rate environment, the improved balance sheet mix resulted in a 10% increase in total revenue and a stable net interest margin of 4.83%.  Collectively, these achievements drove a significant increase in the Company’s level of profitability and resulted in a 16% increase in earnings per share for 2014.  As a result of individual contributions of the named executives and the overall progress toward long-term strategic objectives, the Compensation Committee determined that it was appropriate to pay cash incentive compensation to the named executive officers for 2014.

Retention is an important element in the consistency and continuity of the execution of the Company’s strategy.  Unexpected turnover in key executive positions can be disruptive and is a potential threat to the Company’s progress.  Each of the named executives is eligible to participate in a supplemental executive retirement program (“SERP”) and/or a nonqualified deferred compensation program that are designed to reward long-term contribution to the Company.  The SERP benefit consists of fifteen annual payments following retirement and is earned and vested over time as a key element of the Company’s retention strategy.  The deferred compensation program accrues interest at an annual rate equal to the 5-year constant maturity plus 100 basis points as of January 1st of each applicable year.  Deferred amounts and their earnings become distributable in a lump sum or installments upon termination of employment.

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Our executive compensation strategy also strives to promote an ownership mentality that aligns the executive’s interests with the interests of our shareholders.  Accordingly, each executive is eligible to be considered for annual equity based grants under the Company’s Equity Incentive Plan (“EIP”).  The EIP is intended to encourage ownership of the Company’s stock by employees and directors and to provide additional incentive for them to promote the success of the Company.  Stock price performance has not been a factor in determining annual cash compensation because the price of the Company’s common stock is subject to a variety of factors outside our control.

Our Chief Executive Officer assists the Compensation Committee by providing recommendations regarding the compensation of our named executive officers, other than himself.  The Compensation Committee, however, does not delegate any of its functions to others in setting compensation.  In developing and administering executive compensation, the Compensation Committee directly engages a qualified outside compensation research firm from time to time primarily to review market competitive compensation data and report its findings to the Compensation Committee and the Board of Directors.

Elements of Company’s Compensation Plan and Why We Chose Each (How Elements Related to Objectives)

Annual executive officer compensation consists of a base salary component and the incentive component discussed above.  The current environment in which the Company operates has been extremely competitive and executive talent with experience in managing through an uncertain economic and regulatory environment is at a premium.  Further, in any environment, proven talent is a very valuable commodity to the Company’s strategy and therefore, to our shareholders.  It is the Compensation Committee’s intention to set total executive cash compensation sufficiently high to attract and retain a strong motivated and talented leadership team, but not so high that it creates a negative perception with our shareholders.

The Company has defined a strategy regarding executive cash compensation for executives that targets base salaries in the 50th to 60th percentiles of the competitive market.  Individual salary determinations will always be made based on the individual qualifications, experience and performance of the individual executives and value of the position to the organization.  The combination of salary plus the annual cash incentive makes up total cash compensation. The Bank targets total cash compensation at the 50th to 75th percentiles of the market for budgeted results. For stretch performance, the Bank targets annual cash compensation at the 75th to 95th percentiles of the market.  We believe that the combination of base pay and incentive compensation at these levels strongly aligns the effort and interests of the executives with shareholders.

Each of our executive officers is eligible to receive stock-based awards under the Company’s EIP.  The EIP is intended to encourage ownership of the Company’s stock by employees and directors and to provide additional incentive for them to promote the success of the Company and the creation of shareholder value.  All of our employees and directors are eligible to be considered for grants under the EIP, which are designed to strengthen the linkage between compensation, retention and long-term shareholder value.  Approximately 83% of all equity-based grants in 2014 were to employees who are not executive officers or directors.  We believe that through our broad-based plan, the economic interests of our employees, including our executives, are more closely aligned to those of the shareholders.

As noted above, each of the named executives is eligible to participate in a SERP and/or nonqualified deferred compensation plan that is designed to reward long-term contribution to the Company.  Under the SERP, after achieving defined length of service and vesting thresholds, each executive will receive fifteen annual payments upon reaching retirement.  The retirement payment is based on the average base salary of the employee in the last three years of service.  The level of the retirement payment increases at a rate of four percent of base salary per year of service, cumulatively, until reaching a level of 60% after fifteen years of service.  The executive’s right to receive retirement payments vests over a period of ten years of continuous service.  Under the nonqualified deferred compensation plan, participating executives may elect to defer portions of his or her compensation as follows:  i) up to 50% of base salary annually; and/or ii) up to 100% of annual incentive compensation.  Additionally, the Compensation Committee has the discretion to authorize employer contributions to a participant’s account.  The outstanding balance in a participant’s account accrues interest at an annual rate equal to the 5-year Treasury constant maturity plus 100 basis points.  Deferred amounts and their earnings become distributable in a lump sum or installments upon termination of employment.  We believe that the SERP and the nonqualified deferred compensation plan are key elements of the Company’s executive retention strategy.

The Company has entered into employment agreements with each of the named executives.  The agreements, among other things, set forth terms under which the Company and the executive would separate employment, both in the event of a change in control of the Company as well as under the “at-will” terms of employment.  The Committee believes the terms of the agreements provide an appropriate framework to enable executives to fully explore all strategic options for promoting the interests of shareholders.

How the Company Chose Amounts and/or Formulas for Each Element

The Compensation Committee establishes and administers the Company’s executive compensation program on behalf of the Board.  The Compensation Committee reviews and approves the recommendations of the Company’s President and Chief Executive Officer for all elements of executive compensation on an annual basis.  No officer of the Company is present during discussion or deliberations of his or her own compensation. In addition to periodically reviewing executive compensation in light of Company and individual performance, the Compensation Committee periodically compares all elements of compensation for the Company’s executive officers with compensation for comparable positions within and, when appropriate, outside of the banking industry.

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The Company engages a qualified outside compensation research firm from time to time to review market competitive compensation data and report its findings to the Compensation Committee and the Board of Directors.  Market data is viewed from multiple perspectives including size, maturity and performance characteristics of the subject banks and bank holding companies in developing compensation strategies.

Executive officer base annual salaries are determined by review of the responsibilities of each executive officer position, objective and subjective evaluations of performance, and by comparisons to peers within, and when appropriate, outside of, the banking industry utilizing the report of the independent compensation research firm. Each executive’s current and prior compensation is considered in setting future compensation.  In addition, we review the compensation practices of other companies.  To some extent, our compensation plan is based on the market and the companies we compete against for employees.

Executive officer performance incentive compensation is primarily contingent upon Company performance.  Performance incentive compensation is awarded in amounts determined by the Compensation Committee and Board of Directors in accordance with the Company’s incentive compensation plan adopted annually by the Board, which relates the amount of performance incentive compensation paid with the performance of the Company.  The Board of Directors annually determines, among other things, the key metrics and performance targets to be used in the incentive compensation plan.

The elements of our compensation plans (e.g. base salary, incentive compensation, equity-based grants, and retirement plans) are similar to the elements used by many companies.  Consistent with regulatory requirements and their fiduciary duties to the Company and its shareholders generally, the Compensation Committee and the Board of Directors seek to ensure that the compensation plans do not encourage executives to take unnecessary and excessive risks that threaten the value of the Company.  Ultimately, all elements of compensation are subject to the discretion and judgment of the Compensation Committee and the Board.  The exact base pay, cash incentive compensation opportunity, and equity-based award opportunity are chosen in an attempt to balance our competing objectives of fairness to all stakeholders and attracting/retaining employees.

Review of Risk Associated With Compensation Plans

The Company develops and implements compensation plans that provide strategic direction to the participant and engages them in the Company’s success, which contributes to shareholder value. We believe our approach to goal setting, establishing targets with payouts at multiple levels of performance, evaluation of performance results and discretion in the payout of incentives help to mitigate excessive risk-taking that could harm company value or reward poor judgment by our executives.  Compensation policies and practices are determined by reviewing compensation analyses including industry/market benchmarking reports to determine competitive pay packages. The Company’s cash incentive compensation programs are designed to reward outstanding individual and team performance while mitigating risk-taking behavior that might affect financial results.  Performance incentive rewards for all plans continue to be focused on results that possibly impact earnings, profitability, credit quality, reasonable loan growth, deposit growth, superior customer service, sound operations and compliance, sustainable culture, and leadership excellence.

In 2014, the primary components for incentive compensation paid to the named executive officers related to the effectiveness of management in maintaining credit quality while achieving net growth in loan balances, growing core deposit funding, and improving core revenue, with the objective of continuing to mitigate risk while maintaining sound profitability.  The Board regularly receives reports about key elements of risk and the steps undertaken by management to address risk.  In addition, the Company has adopted compensation practices, as discussed in this Report, that discourage excessive or unnecessary risk-taking.

Incentive plans, which are reviewed and revised on an annual basis, are designed to ultimately enable the Company to adjust the final scoring and payment at the discretion of the Board.  Objectives tied to annual Company financial performance are considered achieved, and resulting incentive compensation payments are paid, only after satisfactory completion of the annual audit by the Company’s external auditors.  In addition, some incentive plans may have specific and defined holdbacks and modifiers enabling adjustments at the time of payout.  Generally, there is more oversight for plans that have a higher degree of risk, larger payouts, and those plans that could have the greatest negative impact on the Bank’s safety and soundness.  For example, employees that have objectives tied to origination of loans are subject to approval limits that ensure senior management and Board oversight - the larger the loan the more direct the involvement by senior management and the Board in its approval.  The more risk associated with the incentive plan, the more review and approval hurdles must be crossed before payment is made.

Members of our Compensation Committee are well aware of the Company’s financial performance at the enterprise level and they use this information when reviewing and approving incentive payouts to our named executive officers.  For 2014, the Committee met with senior risk officers of the Company to review the incentive compensation plans and concluded, based on the controls described in this Item 11, that those plans do not present risks that are reasonably likely to have a material adverse effect on the Company.

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REPORT OF THE COMPENSATION COMMITTEE

We have reviewed and discussed with management the Compensation Discussion and Analysis provisions required by Item 402(b) of the SEC’s Regulation S-K.  Based on those reviews and discussions, we recommend to the Board of Directors that the Compensation Discussion and Analysis referred to above be included in this Amendment No 1 on Form 10-K/A.

Respectfully submitted by the Compensation Committee,

Robert P. Latta (Chairman), Lawrence Owen Brown, and Dr. Francis J. Harvey.

Compensation Committee Interlocks and Insider Participation

During 2014, there were no interlocking relationships where (a) an executive officer of the Company served as a member of the compensation committee of another entity, one of whose executive officers served on the Compensation Committee of the Company; (b) an executive officer served as a director of another entity, one of whose executive officers served on the Compensation Committee of the Company; or (c) an executive officer of the Company served as a member of the compensation committee of another entity, one of whose executive officers served as a director of the Company.

EXECUTIVE COMPENSATION

Compensation Summary

The following Summary Compensation Table includes information concerning compensation for the named executive officers of the Company for the three year period ended December 31, 2014.

(1)  For the year ended December 31, 2014, in addition to the performance-based non-equity incentive plan compensation, the Compensation Committee recommended discretionary cash bonuses for the executive officers.  These discretionary recommendations were to recognize achievement beyond stretch level for several corporate and individual performance metrics, and to recognize the effectiveness of work not anticipated in the original performance goals.

(2)  For the year ended December 31, 2014, Mr. Myers’ automobile allowance was $15,000.

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The amounts reported for stock awards and option awards in the Summary Compensation Table above reflect the fair market value of the equity awards on the grant date determined in accordance with FASB ASC Topic 718, using the valuation assumptions described in the “Notes to the Consolidated Financial Statements” section of the Company’s Annual Report on Form 10-K, as filed with the SEC on March 14, 2015.

Plan-Based Awards

The table below sets forth certain information with respect to non-equity plan-based awards earned by our named executive officers for 2014 performance, as well as equity plan-based awards granted to our named executive officers during the year ended December 31, 2014.

Non-Equity Incentive Plan Awards

Non-equity incentive plan awards represent the estimated range of potential payouts possible under our annual cash incentive compensation plan for performance related to 2014, as described in “Compensation Discussion and Analysis — What Our Compensation Program is Designed to Reward”.  Mr. Myers’ estimated range of potential payouts for target and stretch level performance is 70% and 105% of his base salary, respectively.  Each of the other named executive officers have an estimated range of potential payouts for target and stretch level performance of 45% and 80% of their base salary, respectively.  The actual incentive compensation amounts were approved by the Compensation Committee in January 2015 and are reflected in the Summary Compensation Table.

Equity Incentive Plan Awards

Equity incentive plan awards represent the estimated range of shares potentially issuable to the named executive officers on the date their respective grants were approved by the Board.  Mr. Myers’ estimated range of value for potential stock-based awards for target and stretch performance is 50% and 85% of his base salary, respectively.  Each of the other named executive officers have an estimated range of value for potential stock-based awards at target and stretch level performance of 35% and 60% of their base salary, respectively.  The actual number of shares awarded to an individual is determined based upon the closing price of our common stock on the date the grant is approved by the Board.

During the year ended December 31, 2014, all stock-based awards granted to the named executive officers were in the form of restricted stock.  Each award granted to the named executive officers in 2014 is subject to a three-year cliff vesting schedule from the date of the grant, combined with a performance factor equal to a return on average assets of 0.90% for four consecutive quarters, except for the awards granted to Messrs. Myers, Sa, and Boothe on May 21, 2014 which are subject to a three-year linear vesting schedule from the date of the grant.  These supplemental awards were granted to Messrs. Myers, Sa, and Boothe in exchange for foregoing the inclusion of a 280(G) gross-up provision in their new employment agreements and were based upon a value of $150,000, $50,000, and $50,000, respectively.

The stock awards granted in 2014 are intended to serve the dual purpose of promoting retention and reinforcing the ownership mentality of executive officers.  The performance factor further emphasizes that such grants require future performance for the shares to vest.

The amounts reported in the “Grant Date Fair Value” column reflect the fair market value of the award on the grant date which was based upon the closing price of our common stock on that date.  The grant date fair value will likely vary from the amount actually realized by any named executive officer, which will be based upon a variety of factors including the number of shares that ultimately become vested, the timing of any sale of those shares, and the price of our common stock at time of sale.

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Grants of Plan-Based Awards Table

(1)  Equity Incentive Plan award opportunity based upon a closing price of $22.50 for the Company’s common stock on 09/23/14, respectively.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth certain information with respect to the value of all outstanding equity grants previously awarded to our named executive officers as of December 31, 2014.

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The exercise price for each of the above stock option grants is equal to the closing market price on the grant date and the fair market value for each of the above restricted stock grants is based upon the closing market price on December 31, 2014.  Each stock option award vests in equal installments over a four-year period.  Each restricted stock grant awarded prior to 2011 vests in one installment five years after the grant date.

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Option Exercises and Stock Vested Table

The following table includes certain information with respect to the options exercised by the named executive officers named above during the year ended December 31, 2014.