Exhibit 10.22.1

The Middlefield Banking Company

Annual Incentive Plan

Potential incentive award for 2014 performance:

 

Officer

  

potential cash award as a percentage of annual salary based on achievement of 
performance goals

  

minimum

  

midpoint

  

maximum

Tier 1:

        

[name of officer(s)]

   10% of salary    20% of salary    30% of salary

Tier 2:

        

[name of officer(s)]

   10% of salary    15% of salary    20% of salary

Tier 3:

        

[name of officer(s)]

   7.5% of salary    10% of salary    12.5% of salary

Award criteria / performance goals:

For 2014 the performance goals, and the weight assigned to each goal, are –

(1) GAAP net income for 2014 of $[confidential] (minimum), $[confidential]
(midpoint), or $[confidential] (maximum) – 60% weight,

(2) reduction of the classified asset coverage ratio to [confidential]%
(minimum), [confidential]% (midpoint), or [confidential]% (maximum) – 20%
weight. For this purpose classified assets means securities or loans graded
substandard, doubtful, or loss, as well as other real estate owned. The
classified asset coverage ratio is total classified assets divided by the sum of
Tier 1 capital and the allowance for loan and lease losses. The classified asset
coverage ratio shall be determined by the Compensation Committee. The
Compensation Committee’s determinations concerning the classified asset ratio
and concerning all other interpretive questions are final and binding,

(3) regulatory status – 20% weight. If this goal is achieved, the executive will
be entitled to the maximum award attributable to this goal. If this goal is not
achieved, this goal will account for no award. Regulatory status shall be
determined by the Compensation Committee, but it means the existence of or the
vulnerability of Middlefield Banc Corp. and The Middlefield Banking Company to –

• serious regulatory criticism expressed in Matters Requiring Attention set
forth in reports of examination1,

 

1  Matter Requiring Attention/Matter Requiring Board Attention (“MRA”) are
issued by examiners when bank examiners find a deficiency or violation: (a) that
has the potential to become a serious problem if not addressed promptly,
(b) that can be remedied with defined action, and (c) where examiners are
comfortable that management has the ability and desire to address the problem
successfully. Although not enforceable, failure to successfully address the
identified issues can lead to an enforcement action.

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• formal or informal regulatory enforcement action,2

• being considered to be in troubled condition, as defined in FDIC rules at 12
C.F.R. 303.101(c),3

• being considered not well managed, as defined in Federal Reserve Board rules
at 12 C.F.R. 225.2(s),4

• being subject to the golden parachute payment limitations of FDIC rules at 12
C.F.R. Part 359,

• being requested or encouraged by a bank regulatory agency to withdraw an
application or notice on account of the probability of the application or notice
being acted upon unfavorably by the bank regulatory agency,

• being unable to take advantage of expedited processing at the holding company
level because of failure to satisfy the well-capitalized criterion of 12 C.F.R.
225.14(c)(1) or the well-managed criterion of 12 C.F.R. 225.14(c)(2), or

• being unable to take advantage of expedited processing at the bank level
because of failure to satisfy the criteria of an eligible depository
institution, as defined in 12 C.F.R. 303.2(r).5

Serious regulatory criticism can include having or likely to have an
unsatisfactory Bank Secrecy Act or anti-money laundering rating, or having or
likely to have an unsatisfactory rating for information technology.

For purposes of the Annual Incentive Plan, regulatory status is determined not
by actual examination ratings issued by applicable bank regulatory authorities,
but is instead a judgment by the Compensation Committee of Middlefield Banc
Corp.’s and The Middlefield Banking Company’s ability to obtain prompt
regulatory approval of or non-objection to regulatory applications or notice
filings and the ability of Middlefield Banc Corp. and The Middlefield Banking
Company to take advantage of business opportunities, including but not limited
to merger or other expansion opportunities, without significant regulatory
obstacles (other than obstacles having to do with antitrust competitive
considerations relating to a particular business opportunity). For purposes of
2014 award criteria and the 20% weight given to regulatory status,
[confidential] is a preexisting condition that the Compensation Committee will
not consider in the Compensation Committee’s determination of regulatory
status.6

 

 

2  including a consent order, cease-and-desist order, formal written agreement,
prompt corrective action order, memorandum of understanding, board resolutions
requested by a federal or state bank regulatory agency, or similar formal or
informal regulatory enforcement actions applicable to the institution or holding
company

3  an institution (or holding company) is in troubled condition if it has a
composite safety and soundness rating of 4 or 5, if it is subject to a formal
enforcement action, or if the bank regulatory authority informs the institution
(or holding company) in writing that it is in troubled condition

4  to be considered well managed the composite safety and soundness rating must
be at least satisfactory and the management component rating also must be at
least satisfactory

5  under 12 C.F.R. 303.2(r) an eligible depository institution is one that has a
composite safety and soundness rating of 1 or 2, has a CRA rating of
satisfactory or better, has a compliance rating of 1 or 2, is well capitalized,
and is not subject to formal or informal regulatory enforcement

6  The [confidential].

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Assessment of performance:

It is not necessary to achieve minimum performance or better for all three goals
in order to earn an incentive payment. An incentive payment is earned as long as
performance for at least one of the three goals equals or exceeds the minimum
level. Each performance goal is evaluated independently of the other performance
goals, so an incentive payment can be earned based on achieving minimum or
better performance in one of the three goals even if minimum performance is not
achieved for the other goals. If performance for all three goals is less than
the minimum level, no incentive payment shall be considered earned and no
incentive payment shall be made. If performance for all three goals instead
exceeds the maximum, the maximum incentive payment shall be considered earned
and shall be paid. The percentage achievement of the midpoint over the minimum
and of the maximum over the midpoint will determine the proportionate incentive
payment earned and paid for each of the three goals. The Compensation Committee
of The Middlefield Banking Company has sole and absolute discretion to interpret
and apply this Annual Incentive Plan statement of goals for 2014. The
Committee’s conclusions are final and binding. Net income, classified assets,
Tier 1 capital, allowance for loan and lease losses, and other financial
measures shall be determined by the Committee by reference to the audited,
consolidated year-end financial statements of Middlefield Banc Corp. and, in the
Committee’s discretion, the quarterly Call Reports filed by The Middlefield
Banking Company.

The following illustration is intended merely to clarify application of the
performance goals and goal weights.

 

    

if actual

performance is . . .

  

annual incentive payment earned by . . .

     

Mr. A [tier 1 executive, salary
$250,000]

  

Mr. B [tier 2 executive, salary
$175,000]

  

Mr. C [tier 3 executive, salary
$125,000]

   at least minimum    $15,000 [10% for achievement of the minimum goal,
multiplied by the 60% weight, multiplied by salary]    $10,500 [10% for
achievement of the minimum goal, multiplied by the 60% weight, multiplied by
salary]    $5,625 [7.5% for achievement of the minimum goal, multiplied by the
60% weight, multiplied by salary]    between minimum and midpoint    in
proportion to the percentage achievement of the midpoint over the minimum    in
proportion to the percentage achievement of the midpoint over the minimum    in
proportion to the percentage achievement of the midpoint over the minimum

net income – 60% weight

   midpoint    $30,000 [20% for achievement of the midpoint goal, multiplied by
the 60% weight, multiplied by salary]    $15,750 [15% for achievement of the
midpoint goal, multiplied by the 60% weight, multiplied by salary]    $7,500
[10% for achievement of the midpoint goal, multiplied by the 60% weight,
multiplied by salary]    between midpoint and maximum    in proportion to the
percentage achievement of the maximum over the midpoint    in proportion to the
percentage achievement of the maximum over the midpoint    in proportion to the
percentage achievement of the maximum over the midpoint    maximum or better   
$45,000 [30% for achievement of the maximum goal, multiplied by the 60% weight,
multiplied by salary]    $21,000 [20% for achievement of the maximum goal,
multiplied by the 60% weight, multiplied by salary]    $9,375 [12.5% for
achievement of the maximum goal, multiplied by the 60% weight, multiplied by
salary]

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if actual

performance is . . .

  

annual incentive payment earned by . . .

     

Mr. A [tier 1 executive, salary
$250,000]

  

Mr. B [tier 2 executive, salary
$175,000]

  

Mr. C [tier 3 executive, salary
$125,000]

classified asset coverage ratio – 20% weight

   at least minimum    $5,000 [10% for achievement of the minimum goal,
multiplied by the 20% weight, multiplied by salary]    $3,500 [10% for
achievement of the minimum goal, multiplied by the 20% weight, multiplied by
salary]    $1,875 [7.5% for achievement of the minimum goal, multiplied by the
20% weight, multiplied by salary]    between minimum and midpoint    in
proportion to the percentage achievement of the midpoint over the minimum    in
proportion to the percentage achievement of the midpoint over the minimum    in
proportion to the percentage achievement of the midpoint over the minimum   
midpoint    $10,000 [20% for achievement of the midpoint goal, multiplied by the
20% weight, multiplied by salary]    $5,250 [15% for achievement of the midpoint
goal, multiplied by the 20% weight, multiplied by salary]    $2,500 [10% for
achievement of the midpoint goal, multiplied by the 20% weight, multiplied by
salary]    between midpoint and maximum    in proportion to the percentage
achievement of the maximum over the midpoint    in proportion to the percentage
achievement of the maximum over the midpoint    in proportion to the percentage
achievement of the maximum over the midpoint    maximum or better    $15,000
[30% for achievement of the maximum goal, multiplied by the 20% weight,
multiplied by salary]    $7,000 [20% for achievement of the maximum goal,
multiplied by the 20% weight, multiplied by salary]    $3,125 [12.5% for
achievement of the maximum goal, multiplied by the 20% weight, multiplied by
salary]

regulatory status – 20% weight

   did not achieve goal    0    0    0    achieved goal    $15,000 [30% for
achievement of the goal, multiplied by the 20% weight, multiplied by salary]   
$7,000 [20% for achievement of the goal, multiplied by the 20% weight,
multiplied by salary]    $3,125 [12.5% for achievement of the goal, multiplied
by the 20% weight, multiplied by salary]