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updated 5/6/11

Corporate Governance

Excessive and Luxury Expenditure Policy
Citizens Bancorp and Subsidiary, Citizens Bank of Northern California
(Adopted August 20, 2009)

The Boards of Directors (Board) and executive management of Citizens Bancorp and its wholly owned subsidiary, Citizens Bank of Northern California, collectively (“Company”) are committed to complying fully with requirements of the TARP (Troubled Asset Relief Program) Standards for Compensation and Corporate Governance as set forth by the Department of the Treasury (Treasury) in 31 CFR Part 30 pursuant to requirements set forth in the Emergency Economic Stabilization Act of 2008 ("EESA"), as amended by the American Recovery and Reinvestment Act of 2009 (ARRA) during the period that Company participates in the TARP Capital Purchase Program. It is Company policy that directors and employees of the Company shall utilize corporate assets in a prudent and reasonable manner, and as such are hereby prohibited from engaging in excessive or luxury expenditures. Excessive or luxury expenditures can occur in the following areas: office or facility renovations, entertainment and events, aviation or other transportation services or other activities, and events that are not reasonable expenditures for conferences, staff development, reasonable performance incentives or other similar measure conducted in the normal course of business operations.

Office or Facility Renovations: Renovations of facilities and office spaces are permitted only for approved projects that are part of an approved annual financial plan. An exception to this can be allowed if management must deal with an emergency situation, such as an act of nature, and the expenditure is necessary to make the facility operational for customer use. At no time should renovations be done that would have the appearance of being extraordinary, or excessively ornate from a shareholder perspective.

Entertainment: Entertainment is defined as an activity for which an employee or executive uses corporate funds for business development purposes relating to a current customer or prospective customer, to further enhance the Company’s marketing efforts.

Our policy is that all expenses incurred shall be for Company purposes, and used to promote and retain business or further the interests of the Company. Occasional events such as taking customers or prospects for golf, meals, or taking them to other events the customer/prospect/vendors would find pleasurable is a necessary part of the Company’s marketing and other business efforts and is not deemed as “luxury” or a violation of this Policy. These expenses should be documented and detailed as to the benefit derived by the Company through the normal accounts payable process. Entertainment and event expenditures anticipated to be in excess of $200 per person must be reviewed with and approved by the CEO or CFO prior to expenditure. Expenditures incurred in excess of this sum without the prior approval of the CEO or CFO will not be reimbursed without the approval of the Board.

Events and parties focused on customers/vendors for the purpose of attracting their business would not fall under this Policy.

Events: Events are defined to include conferences, holiday/employee recognition parties, and board/management retreats that are intended to provide the Board, management and employees with opportunities for individual and team education, development, recognition, business planning, market and industry networking, and related business purpose objectives.

Conferences: We encourage our employees to attend conferences that offer educational, skill development and industry networking opportunities that enhance participant performance. These conferences must be related to the financial services industry and have a direct correlation to their job. Typically, these conferences are sponsored by vendors, associations, or other industry related entities. At times it may be appropriate that a spouse would travel to these conferences with Company attendees, however, the Company does not pay the expenses of the accompanying spouse unless the spouse's attendance is required or the Board provides prior approval for payment of the spouse’s expenses.

Employee Recognition/Holiday Parties: We feel that employee recognition/ holiday parties are part of an employee appreciation process. These events should be local in geographic nature, and would include costs for such things as service awards and nominal door prizes. An event should not cost the Company more than an average day’s payroll of the participating employees.

Board/Management Retreats: Board/Management education and strategic planning is a vital part of maintaining and keeping a dynamic company. Retreats shall only be used for educational or business planning purposes, and should be kept in proportion and considered with the same view and discretion as all other expenses.

Aviation and Other Transportation Services: Transportation for Company staff to outlying locations, including Company locations, conferences, business development purposes and merger and acquisition research, should be conducted in the most cost appropriate way for the Company. Permitted modes of transportation to be used may consist of vehicle, commercial air or rail service. The selection of transportation services will be considered with respect to cost, efficiency and timeliness of travel. Private air services or traveling with a payment processing provider by First Class are not allowed without the prior written approval of the Chief Executive Officer (CEO).

Other Activities: All other activities or events that are not reasonable expenditures for staff development purposes in accordance with this Policy, or other similar expenditures incurred in the normal course of business must be approved in advance by the CFO or the CEO.

Administration: The CFO is responsible for the day-to-day administration of this Policy, and the CEO is accountable for overall adherence to this Policy and must approve any exceptions. Strict adherence to this Policy is mandated for all Company employees and directors. Violations of this Policy shall be promptly reported to the Board.

Reporting of Violations: Any individual who violates this Policy, or knows of any such violation by any other individual, must report the violation immediately to such individual's supervisor who shall then report the violation to the CEO or to the Chairman of the Board (if an alleged CEO violation). Any employee or director who engages in policy violations shall be subject to discipline up to and including reimbursing the Company for unauthorized expenditures, termination of employment or removal from or omission of re-nomination to the Board.

Certification: The CEO and the CFO of the Company shall certify to the Board at least annually that provisions of this Policy are being enforced and are sufficient to provide reasonable assurance that the Company's expenditures for such purposes are not excessive. Following any approval of any exception to the Policy, the CFO and the CEO shall certify that such approval was obtained. Such certification shall be maintained in the Company’s corporate records.

This Policy and any amendments hereto, shall be posted on the Company’s Internet website and provided to Treasury and the Company’s primary regulatory agency.

Fri, Jul 08, 2011