ANCX Access National Corp.

PROPOSAL FOUR

Ratification of the Selection of Independent Public Accountants

BDO USA, LLP served as the Corporation’s independent public accountants for the fiscal year ended December 31, 2016, and has been selected by the Audit Committee as independent public accountants for the Corporation for the fiscal year ending December 31, 2017. In the event the selection of BDO USA, LLP is not ratified by the shareholders, the Audit Committee will consider a change in independent public accountants for the fiscal year ending December 31, 2018.

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of BDO USA, LLP as the Corporation’s independent auditor.  In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be regular rotation of the independent auditor.  The members of the Audit Committee and the Board believe that continued retention of BDO USA, LLP to serve as the Corporation’s independent auditor is in the best interest of the Corporation and its shareholders.

If not otherwise specified, proxies will be voted FOR ratification of the selection of BDO USA, LLP. Representatives of BDO USA, LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and are expected to be available to respond to appropriate questions.

The Board of Directors recommends a vote “FOR” proposal FOUR to ratify the selection of BDO USA, LLP to serve as independent public accountants for the fiscal year ending December 31, 2017.

corporate governance and the board of directors

Director Independence. The current Board of Directors is comprised of 13 members, a majority of whom are “independent,” as defined by the listing standards of the NASDAQ Stock Market, Inc. (“Nasdaq”). The Board of Directors has determined in accordance with the Nasdaq listing standards that these independent directors have no relationships with the Corporation that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. The current independent directors are Messrs. Anzilotti, Babbitt, Burden, Edgemond, Friedman, Kody, LeClair and Lee, and Mses. McDaniel and Neuharth. During 2016, the Board of Directors was comprised of seven members, a majority of whom were “independent” as defined by Nasdaq listing standards. The independent directors during 2016 were Messrs. Anzilotti, Babbitt, Edgemond, Friedman and Kody.

During 2016, there were 15 meetings of the Board. Attendance at Board meetings and Board committees was in person or by telephone. All of the directors attended at least 75% of all meetings of the Board and Board committees on which he served. When directors are unable to attend a meeting, it is the Corporation’s practice to provide all meeting materials to the director, and the Chief Executive Officer (“CEO”) consults and apprises the director of the meeting’s subject matter, or the Committee Chair apprises the director if it is a committee on which the CEO does not serve.

The Corporation has not adopted a formal policy on directors’ attendance at its annual meetings of shareholders, although all board members are invited and encouraged to attend and, historically, most have done so. Six of the seven board members then serving attended the 2016 Annual Meeting of Shareholders.

Board Leadership Structure and Role in Risk Oversight. The Board believes the interests of the Corporation are best served with the CEO and Chairman positions separated. The Corporation believes this structure is most appropriate as it allows Mr. Clarke, the CEO, to focus on the day-to-day direction of the Corporation in furtherance of the long-term strategy established by the Board of Directors, while the Chairman is able to provide strategic guidance to the CEO, and set the agenda for and preside over the Board of Director meetings. While the Board is responsible for risk oversight as part of its overall duties, in 2016 and through April 2017, the Audit Committee organized and set the tone for risk management in the Corporation. The Audit Committee maintains a robust charter and oversees the internal and external audit programs, including loan review, to ensure appropriate integrity and controls are in place. The Audit Committee reviews and adopts enterprise-wide risk assessments, approves all audit contractors and audit engagements, and reviews and evaluates the work product of all auditors designed to monitor the effectiveness of policies and controls and identify potential weaknesses and the status of remediation efforts for previously identified weaknesses or potential weaknesses. The Audit Committee includes only independent directors and excludes and operates independently of the CEO. While the Audit Committee is still responsible for discussing the Corporation’s risk assessment and risk management policies with management and the Corporation’s auditor, effective April 2017, the Bank instituted a Risk Committee to assist with certain of the risk oversight and related responsibilities of the Audit Committee.

The Board meets regularly in Executive Sessions, excluding any employee-director or member of management, and includes the independent public accountants in those sessions no less than annually. The independent public accountant partner in charge of the Corporation’s audit communicates independently with the Audit Committee Chair on a quarterly basis.

The Board has standing Audit, Nominating and Governance, Compensation, and Loan Committees. In April 2017, the Bank instituted a Risk Committee to assist with certain of the risk oversight activities of the Audit Committee and related responsibilities. A majority of the Risk Committee Members are non-employee directors [of the Bank], independent under the Nasdaq listing standards. The primary focus of the Committee is to assist the Board of Directors in defining and communicating its risk appetite to management, and to provide oversight of the Corporation’s enterprise risk management program. The Committee is developing a written charter to be adopted by the Bank in 2017.

Nominating and Governance Committee. Members of the Nominating and Governance Committee during 2016 and through April 27, 2017 were Messrs. Anzilotti (Chair), Babbitt, Edgemond, Friedman and Kody, each of whom was independent under the Nasdaq listing standards. The current members of the Nominating and Governance Committee are Ms. Neuharth (Chair) and Messrs. Anzilotti, Burden, Kody, LeClair and Lee, each of whom is independent under the Nasdaq listing standards. The committee met two times in 2016. The committee is responsible for making recommendations to the full Board regarding nominations of individuals for election to the Board of Directors and for evaluating the Board’s structure, personnel, committee composition and general governance processes. The committee operates pursuant to a written charter adopted by the Board of Directors, which is available on the Corporation’s website, www.AccessNationalBank.com under “Investor Relations - Overview - Governance Documents”. The Board of Directors reviews and reassesses the adequacy of this charter annually.

Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing Board composition. However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting the Corporation and time available for meetings and consultation on company matters. In addition, in accordance with the Corporation’s bylaws, no person may be nominated to be or elected a director who would be 70 or older on the date of election. Although the Nominating and Governance Committee Charter does not set forth a formal policy regarding diversity, the committee seeks a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board of Directors, to the Corporation and to its shareholders.  The committee evaluates each candidate's qualities in the context of how that candidate would relate and contribute to the Board of Directors as a whole to ensure the Board is comprised of an appropriately diverse group that reflects the needs of the Board of Directors and Corporation at that time. The committee evaluates potential nominees, whether proposed by shareholders or otherwise, by reviewing their qualifications, results of personal and business reference interviews and other relevant information. Candidates whose evaluations are favorable are then recommended by the committee for selection by the full Board. The full Board then selects and recommends candidates for nomination as directors for shareholders to consider and vote upon at the annual meeting.

The Board has concluded that each director and director nominee possesses the personal traits described above. In considering the directors’ and director nominees’ individual experience, qualifications, attributes and skills, the Board has concluded that the appropriate experience, qualifications, attributes and skills are represented for the Board as a whole and for each of the Board’s committees. In addition, each director and director nominee possesses characteristics that led the Board to conclude that such person should serve as a director. The specific experience, qualifications, attributes and skills that the Board believes that each director and director nominee possesses are discussed under Proposal One Election of Directors beginning on page 5.

While there are no formal procedures for shareholders to submit director candidate recommendations, the Nominating and Governance Committee will consider candidates recommended by shareholders in writing. Such written submissions should include the name, address, and telephone number of the recommended candidate, along with a brief statement of the candidate’s qualifications to serve as a director. All such shareholder recommendations should be submitted to the attention of the Corporation’s Secretary at the Corporation's principal office in Reston, Virginia and must be received by January 31, 2018 in order to be considered by the Nominating and Governance Committee for the next annual election of directors. Any candidates recommended by a shareholder will be reviewed and considered in the same manner as all other director candidates considered by the Nominating and Governance Committee. There have been no material changes to the procedures by which shareholders may recommend nominees to the Corporation’s Board of Directors.

In addition, in accordance with the Corporation’s bylaws, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as director(s) at an annual meeting if advance notice of the nomination is provided in writing.  Notice of any such shareholder nominations for the next annual election of directors must be received by the Corporation’s Secretary at the Corporation’s principal office in Reston, Virginia, no later than March 19, 2018, provided that notice of nominations shall not be required to be made more than 90 days prior to the date of the 2018 Annual Meeting.

In order to be valid, notice of a shareholder nomination must set forth (1) the name and address of the shareholder who intends to make the nomination; (2) the name and address of the person or persons to be nominated; (3) a representation that the shareholder is a record holder of stock of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (4) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such persons) pursuant to which the shareholder is making the nomination; (5) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC, had the nominee been nominated, or intended to be nominated, by the Board of Directors, including the amount and nature of the nominee’s beneficial ownership of the Corporation, the nominee’s principal occupation for the past five years, his or her age and a discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that the nominee should serve as a director; and (6) the written consent of each nominee to serve as a director if elected.

Compensation Committee. Members of the Compensation Committee during 2016 and through April 27, 2017 were Messrs. Friedman (Chair), Anzilotti, Babbitt, Edgemond and Kody, each of whom was independent and eligible for compensation committee service under the Nasdaq listing standards. The current members of the Compensation Committee are Messrs. Friedman (Chair), Anzilotti, Babbitt, Edgemond and Lee, and Ms. McDaniel, each of whom is independent and eligible for compensation committee service under the Nasdaq listing standards. The committee met four times in 2016. The committee is responsible for overseeing, approving and administering the level of compensation of each executive officer of the Corporation and its subsidiaries, the granting of equity based compensation, employment agreements and other employee compensation plans. The CEO is not present during deliberations or voting with respect to his compensation, and the Executive Vice President / Chief Banking Officer (“CBO”) is not present during deliberations or voting with respect to his compensation. The committee operates pursuant to a written charter adopted by the Board of Directors, which the committee reviews and reassesses annually and recommends any changes to the Board of Directors for approval. The charter is available on the Corporation’s website, www.AccessNationalBank.com under “Investor Relations - Overview - Governance Documents”.

Audit Committee. Members of the Audit Committee during 2016 and through April 27, 2017 were Messrs. Edgemond (Chair), Anzilotti, Babbitt, Friedman and Kody, each of whom satisfied the independence and financial literacy requirements of the Nasdaq listing standards and SEC regulations applicable to audit committee members. The current members of the Audit Committee are Messrs. Edgemond (Chair), Anzilotti, Burden, Friedman and Lee, and Ms. McDaniel, each of whom satisfies the independence and financial literacy requirements of the Nasdaq listing standards and SEC regulations applicable to audit committee members.

While the Board of Directors believes that all of its Audit Committee members have the necessary experience and level of financial sophistication to serve effectively on the Audit Committee, the Board has determined that Messrs. Anzilotti and Friedman and Ms. McDaniel are qualified as “audit committee financial experts,” as defined by the SEC’s rules and regulations and that they have accounting or related financial management expertise.

The Audit Committee assists the Board in its oversight duties with respect to financial reporting, internal controls and other matters relating to corporate governance. The Audit Committee reviews and approves various audit functions including the year-end audit performed by the Corporation’s independent public accountants. The Audit Committee met six times during 2016. The committee operates pursuant to a written charter adopted by the Board of Directors, which is available on the Corporation’s website, www.AccessNationalBank.com under “Investor Relations - Overview - Governance Documents”. See Report of the Audit Committee on page 60.

Code of Ethics. The Corporation has adopted a Code of Ethics that applies to its directors, executives and employees.  The Corporation’s Code of Ethics is available on the Corporation’s website, www.AccessNationalBank.com under “Investor Relations - Overview - Governance Documents”.

Restrictions on Trading in Company Securities. The Corporation has adopted an Insider Trading Policy that applies to its directors, executives and employees. The Insider Trading Policy prohibits all directors, executives and employees from purchasing financial instruments or otherwise engaging in transactions designed to hedge or offset any decrease in the market value of the Corporation’s common stock, including prepaid variable forward contracts, equity swaps, collars and exchange funds. The Insider Trading Policy also prohibits directors, executives and employees from engaging in short sales involving the Corporation’s common stock. Under the Insider Trading Policy, directors, executives and employees may hold shares of the Corporation’s common stock in margin accounts and/or pledge such shares as collateral for a loan, although the Insider Trading Policy recommends limits on such transactions to prevent inadvertent violations of the securities laws.

Shareholder Communications with the Board of Directors

Shareholders who wish to contact the Board of Directors or any of its members may do so by addressing their written correspondence to the Board of Directors as a whole or the individual director, c/o Corporate Secretary, Access National Corporation, 1800 Robert Fulton Drive, Suite 300, Reston, Virginia 20191. All shareholder communications must be written and should contain the address, telephone number and email address, if any, of the person submitting the communication. All shareholder communications will be delivered to their addressees. Correspondence directed to an individual Board member will be referred, unopened, to that member. Correspondence not directed to a particular Board member will be referred, unopened, to the Secretary or CEO.

Executive Officers Who Are Not Directors

Margaret M. Taylor , 53, has served as an executive officer since 2012.

Ms. Taylor has served as Executive Vice President and Chief Financial Officer (“CFO”) of the Corporation and Bank since December 2015. Prior to this, Ms. Taylor served as Senior Vice President and Chief Financial Officer of the Corporation and Bank since June 2012 and Senior Vice President, Accounting and Finance, of the Corporation and Bank from April 2012 to June 2012. Before joining the Corporation and Bank, Ms. Taylor was a partner at Dixon Hughes Goodman LLP, an accounting firm providing attestation and consulting services to a client base consisting of financial institutions and public companies. Ms. Taylor is a certified public accountant and first joined Dixon Hughes Goodman LLP in September 1999. Ms. Taylor graduated from Kennesaw State University Summa Cum Laude with a Bachelor of Business Administration degree.

Dean F. Hackemer , 52, has served as an executive officer since 2004.

Mr. Hackemer currently serves as President of Access National Mortgage (“ANM”), a division of the Bank. He previously served as President of Access National Mortgage Corporation (“ANMC”) from 2004 to 2011 and Chief Executive Officer of ANMC from 2005 to 2011. In 2011, the Bank dissolved ANMC and established ANM, a division of the Bank. From 2002 to 2004, Mr. Hackemer served as Executive Vice President and Chief Operating Officer of ANMC. From 1992 to 2002 he served as a loan officer, Vice President and Senior Vice President of Mortgage Investment Corporation. Mr. Hackemer graduated from the University of Virginia with a B.A. degree in economics and has almost 30 years of banking and mortgage banking experience.

Mark D. Moore , 53, has served as an executive officer since 2016.

Mr. Moore has served as President of the Bank and a director of the Bank since June 2016. Prior to then, Mr. Moore was Executive Vice President and Chief Lending Officer of John Marshall Bank from 2008 to 2016. From 2006 to 2008, Mr. Moore was Senior Vice President of Commercial Lending with M&T Bank. Mr. Moore was formerly a Principal of two Washington, D.C. area investment banking firms (The McLean Group from 2001 to 2003 and Longstreet Partners from 2001 to 2006), where he specialized in mergers and acquisitions advisory services, private equity investments, and capital formation support to the government contracting and technology sectors. The first half of Mr. Moore’s career from 1985 to 2001 was spent with Washington, D.C. area community banks in various commercial lending and group management roles. Mr. Moore graduated from Virginia Tech with a B.S. degree in finance.

Jeffrey H. Culver , 49, has served as an executive officer since 2017.

Mr. Culver has served as Executive Vice President and Chief Operating Officer since April 1, 2017. Mr. Culver formerly served as Senior Executive Vice President and Chief Operating Officer of Middleburg and Middleburg Bank from 2013 until it was acquired by the Corporation on April 1, 2017, and as Executive Vice President and Chief Operating Officer from 2008 to 2012. Mr. Culver also served as Corporate Secretary of Middleburg from 2008 until it was acquired by the Corporation. From May 2007 to December 2008, he served as Senior Vice President, Credit Administration and Strategic Planning of Middleburg.  From 2003 to 2007, Mr. Culver was Senior Vice President, Credit Administration of Middleburg. Mr. Culver holds a Bachelor of Arts degree from Ursinus College and Master of Arts degree in economics from American University.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy and General Objectives

The overall objective of the Corporation’s various compensation programs is to attract and retain skilled personnel. The Corporation believes the attraction and retention of skilled professionals has been the single most important contributing factor to the Corporation’s success. The Corporation recruits for and places high performance expectations upon its personnel. In order to attract highly skilled personnel, the Corporation aims to provide attractive compensation plans that allow top performing personnel to be well compensated when compared to local bank competitors.

The Compensation Committee periodically assesses the overall compensation provided to its employees, executives and directors against a variety of benchmarks to provide points of reference. The Compensation Committee examines industry sponsored studies, industry white papers, reports in trade publications and practices within individual companies, composites and subgroups of publicly traded banking companies. In reviewing these various data sources and performance comparisons, the Compensation Committee examines and considers not only the absolute value of each element of compensation and the total compensation, but also the allocation of each element within the total. The Compensation Committee does not rely upon any single source or formula to explicitly benchmark and determine the pay of its employees and executives.

Although only an advisory vote, the Compensation Committee and Board of Directors also considered the results of the most recent shareholder advisory vote on executive compensation that occurred at the 2016 Annual Meeting of Shareholders. Approximately 90% of the shareholder votes cast were FOR approval of the compensation of the Corporation’s named executive officers as disclosed in the 2016 Proxy Statement. In consideration of affirmative shareholder approval as well as other factors addressed in this discussion, the Compensation Committee and Board of Directors have maintained the same compensation program for the Corporation’s executives, which it believes to be appropriate under its philosophy of aligning the interests of the executives with the interests of its shareholders.

For this discussion, compensation benefits may be characterized as current compensation and long-term compensation. The Corporation’s current compensation is designed to provide employees with current cash compensation that is viewed favorably and competitively by the employee. Examples of current compensation are base salaries, commissions and cash bonuses. Employees and officers responsible for revenue production and executive duties are compensated more highly than back office and administrative employees. Long-term compensation benefits are designed to provide each employee with the opportunity to create long-term wealth and financial security. Examples of long-term compensation currently include option awards and retirement plan contributions. Select long-term compensation benefits also serve to align the employee’s long-term interests with that of the Corporation’s shareholders. Furthermore, the Corporation fosters, and in some instances requires, ownership in the Corporation and use of the Corporation’s products and services by personnel at all levels.

Compensation of executive officers is based upon the Compensation Committee’s review of the performance and qualifications of each executive in the context of the business environment, defined job responsibilities, goals and objectives, and is established at least annually. Total compensation of each executive is comprised of base salary and performance-based compensation consisting of annual cash bonuses and equity awards. In addition, each executive is entitled to participate in all other Corporation-provided benefits such as health and life insurance coverage and the retirement savings plan. The basic compensation arrangement, as well as other covenants and terms designed to protect and benefit the interests of both parties, may be set forth in employment contracts.

Compensation Programs as They Relate to Risk Management

The Compensation Committee and Board conducted their annual risk assessment in January 2017 and March 2017 and believe the Corporation’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Corporation, do not encourage imprudent risk-taking behavior, and are consistent with maintaining the organization’s safety and soundness. The business of banking and the delivery of financial services involve a high degree of risk, and risk management is an integral ingredient to a successful enterprise in this industry. The Corporation places a priority on fundamental building blocks to guard against excessive risk taking as follows: 1) Comprehensive Board approved policies and procedures are in place that define risk limits, approval authorities, exception processes and reporting thereof; 2) An effective audit program is in place that includes an enterprise-wide risk management assessment, monitoring and testing program; and 3) Employees and management are held to standards of personal and professional conduct and standards with respect to industry sanctions or investigations, adverse personal financial circumstances, credit, issues with municipal and taxing authorities or creditors or criminal backgrounds.

The Corporation does not have any compensation arrangements whereby any individual at any level has direct or individual authority over any decision that directly enriches their income. The Corporation does employ individuals who work on a commission or incentive basis. There are enhanced quality control and audit programs contained in the Audit Committee’s audit program that monitor the quality and performance of business generated by such individuals to guard against potential abuse of such programs. Additionally, the compensation program as it relates to the Corporation’s named executive officers includes, but is not limited to, the following features as further safeguards to mitigate risk, as well as to align executive officer interests with those of the shareholders:

Board Process

The Compensation Committee of the Corporation’s Board of Directors (referred to in this section as the “Compensation Committee” or the “Committee”) is responsible for oversight, approval and administration of the compensation of the Corporation’s executive officers, including the named executive officers, and directors. The Committee is comprised of only non-employee “independent” directors, as such terms are defined by the SEC and the Nasdaq listing standards. The Committee operates pursuant to a written charter adopted by the Board of Directors. The Committee reviews and reassesses this charter annually and recommends any changes to the Board of Directors for approval.

Under the Corporation’s 2009 Stock Option Plan (the “2009 Plan”) and 2017 Plan, if approved by shareholders, the Committee may delegate all or part of its duties and obligations to a designated officer(s) to administer the plan with respect to awards to employees who are not subject to Section 16 of the Exchange Act. The Compensation Committee has delegated authority to the CEO or joint authority to the CFO and CBO to authorize option awards for the purpose of recruiting and retaining non-executive officers and employees of the Corporation. 

The Committee historically has not used the services of a compensation consultant with respect to executive and/or director compensation matters. However, in the first quarter of 2017, as a result of the pending acquisition of Middleburg and the need to consider a new equity compensation plan, the Committee deemed it appropriate to engage an independent consultant to assist and advise on matters related to director and executive compensation and equity benefit plans. Pursuant to its charter, after considering such independence factors as required by the Nasdaq listing standards and applicable SEC rules, the Compensation Committee retained ChaseCompGroup, LLC Community Bank Consultants, a division of Gallagher Benefit Services, Inc., (“ChaseCompGroup”) as its independent compensation consultant. The Compensation Committee assessed the independence of ChaseCompGroup and concluded that its engagement did not raise any conflict of interest with the Corporation or any of its directors or executive officers. ChaseCompGroup met with the Compensation Committee, including without management present. To assist the Compensation Committee, in 2017, ChaseCompGroup advised the Compensation Committee on industry standards, trends and best practices for executive and director compensation, executive employment agreements and equity benefit plans; collected and evaluated external market data and identified companies and comparison points to include in a compensation peer group; made recommendations from supporting analyses on executive and director compensation philosophy, structure and compensation categories for the Corporation’s executive officers and non-employee directors; and advised the Compensation Committee on the features of various types of equity compensation and the respective attributes and conditions, as well as equity compensation plan structure.

The Compensation Committee monitors the compensation environment by reviewing information from various trade resources and publications. The CEO prepares a spreadsheet of data for each executive officer based on performance, and with that, the Committee commences its work to prepare for annual reviews, performance evaluations, bonus awards and salary adjustments early in the fourth quarter of each year. The Committee begins by reviewing past practices and any current issues that have been brought to light that may affect the decision process. With the assistance of the CEO and the Corporate Secretary, the Committee Chair prepares draft evaluations of each named executive officer that outline performance assessments and the various components of compensation. The drafts are reviewed by the Compensation Committee and refined as the year-end financial statement closing process proceeds. The CEO also submits a draft of option award recommendations for all officers and employees other than the named executive officers. Generally, by the time the Board of Directors and Committee meetings take place in February, the financial statements are deemed to be final and the Compensation Committee finalizes and approves the compensation elements on the same meeting day as the financial statements are considered final by the Board of Directors. Prior to 2017, the Committee made recommendations on compensation elements for approval by the Board of Directors. Beginning in 2017, the Committee began approving the compensation elements under its existing authority.

Employment Agreements

The Corporation did not have any employment agreements with its executives in 2016. All executive officer employment agreements during 2016 were with the Bank, which are described below.

On March 15, 2013, the Bank and Mr. Clarke entered into an employment agreement under which Mr. Clarke served as President and CEO of the Bank for an initial annual base salary of $370,000, subject to annual increases at the discretion of the Board of Directors. Mr. Clarke has served as CEO of the Bank since June 2016, when Mr. Moore began serving as President of the Bank. Mr. Clarke’s agreement also provided for an annual cash performance bonus based upon a performance evaluation by the Board of Directors and in an amount determined in the discretion of the Board of Directors, which could exceed 100% of his base salary, eligibility for an annual grant of at least 10,000 stock options issued at market value and other benefits including life insurance, family health insurance, disability insurance coverage and privileges generally provided to executives, as well as vacation and reimbursement of reasonable business expenses. The agreement also provided for Mr. Clarke to receive 10,000 stock options upon entering into the agreement, which were awarded on the effective date of the agreement.

Mr. Clarke’s agreement was for an initial term of 3 years, which ended March 31, 2016, with automatic 1 year renewals unless at least 120 days advance notice of nonrenewal was provided by either party prior to the end of the initial term or any extended term. Mr. Clarke served at the pleasure of the Bank’s Board of Directors. The agreement contained certain severance and change in control provisions which are described in the Termination and Change in Control Benefits section. The agreement also contained clawback provisions subject to and in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act. If the Board of Directors determined that the financial information used to determine the cash bonus, other incentive-based compensation, the value of the Bank, any financial losses, or exposure to inappropriate risks required any financial restatement or caused a material noncompliance with the financial reporting requirements for the Bank, then the Board of Directors could have required the repayment of all or any portion of the cash bonus or other incentive-based compensation paid to Mr. Clarke for the year for which such financial restatement or material non-compliance occurred. Finally, the agreement contained a covenant requiring Mr. Clarke to maintain ownership in the Corporation’s common stock in an amount equal to the lesser of $1,850,000 (five times his initial base salary under the agreement) or 100,000 shares for so long as the agreement remained in effect.

On November 19, 2013, Mr. Clarke entered into an amendment to his employment agreement, providing for reduction in compensation in connection with a change in control in the ownership or control of the Bank, to the extent necessary so that none of his compensation would be considered an “excess parachute payment” under Section 280G of the Internal Revenue Code (the “Code”) (such reduction, the “280G Cutback”), unless the net economic benefit to him would be greater without giving effect to the 280G Cutback.

On March 15, 2013, the Bank and Mr. Shoemaker entered into an employment agreement under which Mr. Shoemaker served as Executive Vice President of the Bank. The terms of Mr. Shoemaker’s agreement were substantially the same as Mr. Clarke’s agreement, except as follows. Mr. Shoemaker’s initial annual base salary under the agreement was $296,800, subject to annual increases at the discretion of the Board of Directors, his annual cash performance bonus opportunity was up to 75% of his base salary, and he was eligible to receive an annual grant of at least 7,500 stock options issued at market value. The agreement also provided for Mr. Shoemaker to receive 7,500 stock options upon entering the agreement, which were awarded on the effective date of the agreement. The agreement contained certain severance and change in control provisions which are described in the Termination and Change in Control Benefits section. Mr. Shoemaker was also required to maintain ownership in the Corporation’s common stock in an amount equal to the lesser of $742,000 (two and one half times his initial base salary under the agreement) or 50,000 shares for so long as the agreement remained in effect.

On November 19, 2013, Mr. Shoemaker entered into an amendment to his employment agreement, to add the same 280G Cutback provision as in Mr. Clarke’s amended employment agreement.

On May 9, 2013, the Bank and Ms. Taylor entered into an employment agreement under which Ms. Taylor served as Senior Vice President (and then Executive Vice President) and CFO of the Bank. The terms of Ms. Taylor’s agreement were substantially the same as Mr. Clarke’s agreement, except as follows. Ms. Taylor’s initial annual base salary under the agreement was $260,000, subject to annual increases at the discretion of the Board of Directors, her annual cash performance bonus opportunity was up to 30% of her base salary, and she was eligible to receive an annual grant of at least 3,500 stock options issued at market value. The agreement also provided for Ms. Taylor to receive 1,500 stock options upon entering into the agreement, which were awarded on the effective date of the agreement. The agreement contained certain severance and change in control provisions which are described in the Termination and Change in Control Benefits section. Ms. Taylor was also required to maintain ownership in the Corporation’s common stock in the following amounts for so long as the agreement remains in effect: (i) during the first year of the agreement, the lesser of 500 shares or $5,000; (ii) during the second year of the agreement, the lesser of 1,000 shares or $10,000; and (iii) during the third year of the agreement, the lesser of 2,000 shares or $20,000 and increasing thereafter by the lesser of 1,000 shares or $10,000 on each anniversary of the commencement date until the requirement reaches the lesser of 5,000 shares or $50,000 where it shall remain for so long as the agreement remained in effect.

On November 19, 2013, Ms. Taylor entered into an amendment to her employment agreement, to add the same 280G Cutback provision as in Mr. Clarke’s amended employment agreement.

On March 15, 2013, the Bank and Mr. Hackemer entered into an employment agreement under which Mr. Hackemer served as President of Access National Mortgage, a division of the Bank, and Senior Vice President of the Bank (and then President of Access National Mortgage). The terms of Mr. Hackemer’s agreement were substantially the same as Mr. Clarke’s agreement, except as follows. Mr. Hackemer’s initial annual base salary under the agreement was $350,000, subject to annual increases at the discretion of the Board of Directors, his annual cash performance bonus opportunity was up to 100% of his base salary, and he was eligible to receive an annual grant of at least 5,000 stock options issued at market value. The agreement also provided for Mr. Hackemer to receive 5,000 stock options upon entering into the agreement, which were awarded on the effective date of the agreement. The agreement contained certain severance and change in control provisions which are described in the Termination and Change in Control Benefits section. Mr. Hackemer was also required to maintain ownership in the Corporation’s common stock in an amount equal to the lesser of $875,000 (two and one half times his initial base salary under the agreement) or 50,000 shares for so long as the agreement remained in effect.

On November 19, 2013, Mr. Hackemer entered into an amendment to his employment agreement, to add the same 280G Cutback provision as in Mr. Clarke’s amended employment agreement.

On August 8, 2017, the Corporation and the Bank entered into new employment agreements with Mr. Clarke, as President and CEO of the Corporation and CEO of the Bank (the “Clarke Agreement”), Mr. Shoemaker, as Executive Vice President of the Corporation and CBO of the Bank (the “Shoemaker Agreement”), and Ms. Taylor, as Executive Vice President and CFO of the Corporation and the Bank (the “Taylor Agreement”). The Bank also entered into a new employment agreement with its Mortgage Division President, Mr. Hackemer (the “Hackemer Agreement” and together with the Clarke Agreement, the Shoemaker Agreement and the Taylor Agreement, the “new agreements”). The new agreements are effective as of April 1, 2017 (the “Effective Date”). The terms of the new agreements are substantially similar to each other as described below.

The Clarke Agreement supersedes in their entirety the employment agreement, dated March 15, 2013 between the Bank and Mr. Clarke, and the amendment thereto dated November 19, 2013. The Shoemaker Agreement supersedes in their entirety the employment agreement, dated March 15, 2013 between the Bank and Mr. Shoemaker, and the amendment thereto dated November 19, 2013. The Taylor Agreement supersedes in their entirety the employment agreement, dated May 9, 2013 between the Bank and Ms. Taylor, and the amendment thereto dated November 19, 2013. The Hackemer Agreement supersedes in their entirety the employment agreement, dated March 15, 2013 between the Bank and Mr. Hackemer, and the amendment thereto dated November 19, 2013.

The new agreements provide for an initial three-year term ending April 1, 2020. If not previously terminated, the new agreements will automatically renew for up to two additional one-year terms on April 1, 2020 and 2021, respectively, unless any party gives written notice of non-renewal at least 60 days prior to the renewal date. The new agreements will not be renewed beyond April 1, 2022.

Under the new agreements, Mr. Clarke’s base salary will be at least $585,000; Mr. Shoemaker’s base salary will be at least $334,750; Ms. Taylor’s base salary will be at least $314,150; and Mr. Hackemer’s base salary will be at least $386,250. Each executive will be eligible to participate in any annual incentive plan of the Corporation and/or the Bank (together and individually, the “employer”) applicable to executives and to receive equity-based awards granted under any equity plan established by the Corporation, in accordance with the terms and conditions of such plans. The new agreements provide for the clawback of incentive compensation received from the Corporation or a related entity, including both equity and cash compensation, in the event of a material restatement of the Corporation’s financial results and material overpayment of the incentive compensation or to the extent otherwise required by federal or state law or regulation or stock exchange requirement or Corporation policy. The new agreements also require each executive to maintain a minimum ownership position in the Corporation’s common stock, measured as a multiple of the executive’s base salary, as follows: Mr. Clarke – 5x; Mr. Shoemaker – 3x; Ms. Taylor – 1x; and Mr. Hackemer – 2x. Each executive has three years from the Effective Date of the new agreement and one year from the date of any subsequent increase in base salary to acquire the shares of common stock needed to attain the required level of stock ownership.

Under the new agreements, each executive will also be eligible to participate in any benefit plans and programs offered by the employer to senior executives, in accordance with the terms and conditions of such plans or programs. The employer will pay for 100% of the premiums for the medical and dental benefits offered by the employer to the executives from time to time.

Under the new agreements, each executive’s employment may be terminated by the employer with or without cause (as defined in the new agreements), or the executive may resign for good reason (as defined in the new agreements). If the executive’s employment is terminated without cause or the executive resigns for good reason, the executive will be entitled to receive a lump sum severance payment equal to a multiple of the executive’s average compensation reported in Box 1 of Form W-2 for the three calendar years preceding the year of termination (the “average compensation”), except for Mr. Clarke whose average compensation will be based on the five calendar years preceding the year of termination. The multiples of average compensation in the new agreements are as follows: Mr. Clarke – 2.75% of his average compensation; Mr. Shoemaker – 2.00% of his average compensation; Ms. Taylor – 1.50% of her average compensation; and Mr. Hackemer – 1.50% of his average compensation. Each executive will also be entitled to a lump sum payment of any unpaid salary through the date of termination and any incentive or annual bonus compensation earned during the calendar year preceding the year of termination but not yet paid, any benefits or awards vested, due and owing pursuant to the terms of any other plans, policies or programs, payable when otherwise due (the “accrued obligations”) and continued employer-paid medical, dental and vision insurance coverage for 12 months (or the equivalent).

Under the new agreements, each executive will be entitled to the same severance payments and benefits, under the same conditions, in the event the executive’s employment is terminated without cause or the executive resigns for good reason following a change of control (as defined in the new agreements). Under the new agreements, the change of control severance benefits are “double-trigger,” which means that a termination without cause or for good reason is required to trigger the payments or benefits. The new agreements provide that, in the event of a change of control, any severance payments or benefits to be paid pursuant to the agreement will be limited (or cutback) to one dollar less than the maximum amount deductible under Section 280G of the Code.

If the executive’s employment terminates due to death, the new agreements provide that the executive’s spouse or the executive’s estate shall receive payment of the accrued obligations. If the executive’s employment terminates due to Incapacity (as defined in the new agreements) of the executive, termination for cause or termination by the executive other than for good reason, the employer shall have no obligation to the executive other than payment of the accrued obligations.

The new agreements also include the following covenants that apply to the executive following the cessation of the executive’s employment for any reason: (i) a confidentiality covenant that applies for five years following the cessation of the executive’s employment, (ii) a non-solicitation covenant that applies for 12 months following the cessation of the executive’s employment, (iii) a non-piracy covenant that applies for 12 months following the cessation of the executive’s employment, and (iv) a non-competition covenant that applies for 12 months following the cessation of the executive’s employment. Except for the accrued obligations, payment of all of the severance payments and benefits discussed above (other than termination due to death or incapacity) is contingent on the executive’s signing and not revoking a release and waiver of claims and on the executive’s compliance with these restrictive covenants.

In certain cases, some or all of the severance payments and benefits provided on termination of the executive’s employment may be delayed for six months following termination to comply with the requirements of Section 409A of the Code. Any payment required to be delayed would be paid at the end of the six-month period in a lump sum, with any payments due after the six-month period being paid at the normal payment date provided for under the new agreements. In the case of benefits that are delayed, the executive would pay the cost of benefits coverage during the six-month delay period and then be reimbursed by the employer at the end of the six-month period.

Neither the Corporation nor the Bank has entered into an employment agreement with Mr. Moore.

The Corporation presently utilizes the following elements of compensation that are discussed generally and specifically as it relates to its named executive officers.

Base Salaries and Cash Bonuses (Non-Equity Incentive)

As the practice is customary in the financial services industry, the Corporation chooses to pay base salaries on regular intervals to reward employees for their qualifications and the discharge of duties in tending to the daily affairs of the Corporation. The Corporation expects base salaries to provide its employees with adequate cash flow to afford a lifestyle commensurate with their professional status and accomplishments. Certain sales personnel receive commissions as their primary compensation in lieu of salaries in order to reward successful sales efforts. The Corporation determines base salaries within the framework of general practices within the industry and considers individual duties and responsibilities in making salary determinations. Salary adjustments are made from time to time to reward performance against periodic goals and expanding the scope of activity and responsibility. Base salaries are the most important element of compensation as many other elements discussed in this Compensation Discussion and Analysis are determined based upon the underlying base salary of the employee or executive.

Regarding non-equity incentives, the Corporation’s practice is to award cash bonuses annually to its officers and other select employees based upon satisfaction of selected performance objectives during the preceding year. This practice is designed to encourage executives and employees to reach and exceed financial and non-financial goals in the continuing development of the Corporation’s business. The Corporation pays this compensation element to motivate performance that advances the ongoing interests of its shareholders. Cash bonuses that are paid to officers and employees other than the named executive officers are predicated upon similar factors, adjusted for individual job responsibilities. In general, “line” or customer contact personnel are provided the opportunity to earn cash bonuses of up to 25% of their base salary, and administrative and back office positions up to 15% of base salary.

For officers and employees other than the named executive officers, salaries and cash bonuses are administered under policies and guidelines set forth by management that are deemed reasonable for the nature of each employee’s responsibility, business conditions, skills, and performance. Generally, all employees receive a competitive base salary commensurate with their skills, experience and responsibilities. The Corporation has a Salary Administration Program that is managed by the Director of Human Resources that ensures that properly documented performance reviews and salary adjustments are made in time intervals that are appropriate.

In 2016, evaluations of the named executive officers were administered by the Compensation Committee and Board of Directors. Beginning in 2017, evaluations of the named executive officers are administered by the Compensation Committee. Evaluations are performance based, with an additional subjective element, at the full discretion of the Compensation Committee. In addition to the base cash bonus, an additional amount of cash bonus may be awarded under this subjective evaluation and is intended to reward exceptional performance primarily in areas such as Return on Equity and Return on Assets, as such metrics compare to the Corporation’s historical and budgeted performance, as well as to the performance of the Corporation’s peers. The evaluation criteria for named executive officer base salary adjustments are substantially similar to and reviewed at the same time as the performance factors for cash bonuses.

The named executive officers for 2016 were Mr. Clarke, Mr. Shoemaker, Ms. Taylor, Mr. Hackemer and Mr. Moore. The following table summarizes each of the named executive officer’s current salaries for 2017 and the total cash bonus received as a result of their respective 2016 performance reviews, where applicable.

With respect to base salary increases, cash bonuses and equity awards, which are granted at the discretion of the Board, the Committee subjectively evaluates the factors in their totality and does not employ a formula which predetermines the relative weighting of the factors.

The named executive officers of the Corporation (other than the President of the Bank and the President of the Mortgage division) are primarily evaluated based upon their respective functional responsibilities and the quantitative and qualitative assessment factors indicated below. Under each assessment factor, there are sub-components that are rated on a scale of 0-5, with 0 indicating “Failure to Perform” and 5 indicating “Outstanding” performance. The sub-components are then aggregated into a composite rating or average resulting in a 0-5 rating for each of the broader assessment factors. The assessment factors are then aggregated into an overall composite or average rating that is applied toward the eligible base cash bonus as set forth in the executive’s employment contract. There is no minimum payment threshold.

When evaluating the performance in Asset Quality and Return on Equity, the Compensation Committee assesses data from the following sources:

The data is released quarterly by the FDIC ( www.fdic.gov/qbp ) and for 2016 summarizes the averages of key data points for approximately 506 commercial banks. The average asset size of banks within the group was $1.43 billion compared to the Bank’s reported total assets of $1.36 billion as of September 30, 2016. This data source is focused upon operating commercial banks and is used to compare performance of the Corporation’s subsidiary bank, exclusive of the holding corporation.

For 2016, this peer data contains performance statistics for 20 commercial banks established since 1980 in the Washington, D.C. MSA region. The Corporation’s total assets of $1.36 billion as of September 30, 2016 fall above the peer group median of $837 million. This peer group is ranked by Return on Equity (“ROE”) (year-to-date) in descending order in the table below.

This peer group comparison is used to obtain additional public data of financial institutions that are not tracked for operating banks through the FDIC source listed above.

Data generated from SNL Financial, LC of peer financial institutions comprised of banks or consolidated public holding companies located in Virginia, Maryland and Washington, D.C. operating during any portion of the 12 months ended September 30, 2016 with market capitalization of $50 million to $1 billion, and total assets between $494 million and $1.92 billion, with a median of $1.14 billion. This peer data contains performance statistics for 24 banks and consolidated public holding companies of banks and thrifts, ranked by Return on Average Equity (“ROAE”) (last 12 months) in descending order in the table below.

Data generated from SNL Financial, LC of peer financial institutions comprised of banks or consolidated public holding companies located in the United States operating during any portion of the 12 months ended September 30, 2016 with market capitalization (“market cap”) of $50 million to $1 billion, with a median of $207 million. For this peer set, minimum performance criteria was applied in order to obtain a national, high performing peer set, which included last twelve months ROAE of at least 12.0%, last twelve months Return on Average Assets (“ROAA”) of at least 1.2% and non-interest income of at least 12.0% as of September 30, 2016. The Corporation was above the median for each of the three (3) performance categories. This peer data contains performance statistics for ten (10) banks and consolidated public holding companies of banks and thrifts, ranked by ROAE in descending order in the table below. The Corporation’s ROAE ranked 4th out of the 10 national peers.

The employment agreement of the CEO of the Bank, in effect at the time of his 2016 performance evaluation, provided that he was eligible to receive an annual base salary increase and an annual cash bonus in an amount which could have exceeded 100% of his base salary, based upon a performance evaluation by the Board of Directors and as determined in the discretion of the Board of Directors. Based upon the Committee’s evaluation of 2016 performance, Mr. Clarke received a composite evaluation of 4.79. This resulted in a 2.5% base salary increase for 2017 over 2016 to $435,625. As part of his 2016 performance evaluation, Mr. Clarke was also awarded a cash bonus of $212,500 as a base level award and $212,500 as an additional discretionary amount for exceptional performance in ROAA, ROAE and Non-Interest Income compared to the peer data shown in the 3 peer tables above, the total of which represented 100.0% of his $425,000 base salary for 2016. The bonus was paid in March 2017. In March 2017, the Board of Directors approved an increase to Mr. Clarke’s base salary to $585,000, effective upon completion of the acquisition of Middleburg, which occurred on April 1, 2017. The increase was the result of an assessment by the Compensation Committee, with assistance from the independent compensation consultant as described in the Board Process section, of CEO compensation relative to the increased size of the Corporation as a result of the acquisition of Middleburg, and various performance metrics of the peer banks. The Committee concluded that the Corporation’s performance compares favorably to the peers, generally has a more complex business model, and that Mr. Clarke’s salary is generally lower than the CEOs of most peer banks performing at this level.

The employment agreement of the Executive Vice President, CBO, in effect at the time of his 2016 performance evaluation, provided that he was eligible to receive an annual base salary increase and annual cash bonus in an amount up to 75% of his base salary based upon a performance evaluation by the Board of Directors. The amount of his annual cash bonus was at the discretion of the Board of Directors, and could have exceeded 75% of his base salary. For 2016 performance, Mr. Shoemaker received a composite evaluation of 4.67. This resulted in a 3.0% base salary increase for 2017 over 2016 to $334,750. As part of his 2016 performance evaluation, Mr. Shoemaker was also awarded a cash bonus of $121,875 as a base level award and $121,875 as an additional discretionary amount for exceptional performance in ROAA and ROAE compared to the peer data shown in the SNL Financial, LC peer tables above, as well as recognition of strong year over year loan growth, effective oversight and development of leadership expansion, significant additional duties related to the acquisition of Middleburg, and continued good asset quality statistics and management thereof. The total award of $243,750 represented 75.0% of his $325,000 base salary for 2016. The bonus was paid in March 2017.

The employment agreement of the Executive Vice President, CFO, in effect at the time of her 2016 performance evaluation, provided that she was eligible to receive an annual base salary increase and annual cash bonus in an amount up to 30% of her base salary based upon a performance evaluation by the Board of Directors. The amount of her annual cash bonus was at the discretion of the Board of Directors, and could have exceeded 30% of her base salary. For 2016 performance, Ms. Taylor received a composite evaluation of 4.67. This resulted in a 3.0% base salary increase for 2017 over 2016 to $314,150. As part of her 2016 performance evaluation, Ms. Taylor was also awarded a cash bonus of $91,500 as a base level award and $58,500 as an additional discretionary amount for exceeding expectations in the areas of business strategy involvement, including capital planning, and internal management reporting effectiveness, and significant additional duties related to the acquisition of Middleburg. The total award of $150,000 represented 49.2% of her $305,000 base salary of 2016. The bonus was paid in March 2017 .

The President of the Mortgage division, which position is currently held by Mr. Hackemer, is evaluated based upon the following performance factors of such business unit. Each of the 4 factors is equally weighted. Within each factor are sub-components of performance factors. The same 0-5 rating scales as described above are utilized in Mr. Hackemer’s evaluation. The maximum bonus award would be achieved by meeting or exceeding the budget or established goals in each of the sub-components, and a minimum composite score of 2.5 is required to receive any base level cash bonus.

The employment agreement of the President of the Mortgage division, in effect at the time of his 2016 performance evaluation, provided that he was eligible to receive an annual base salary increase and annual cash bonus in an amount up to 100% of his base salary, based on an evaluation by the Board of Directors of the performance factors listed above. The amount of his annual cash bonus was at the discretion of the Board of Directors, and could have exceeded 100% of his base salary. Based upon the Committee’s evaluation of 2016 performance, Mr. Hackemer received a composite evaluation of 4.89, which was above the minimum performance threshold. This resulted in a 3.0% base salary increase for 2017 over 2016 to $386,250. As part of his 2016 performance evaluation, Mr. Hackemer was also awarded a base level cash bonus of $360,917, and in recognition of exceeding expectations in loan volume and profitability, increased margins, compliance updates and risk management and mitigation, the Compensation Committee awarded Mr. Hackemer a discretionary cash bonus of $39,083 for 2016. The total award of $400,000 represented 106.8% of his $374,400 base salary for 2016. The bonus was paid in March 2017.

The Bank or Corporation have not entered into an employment agreement with Mr. Moore. He is an employee-at-will. Mr. Moore’s 2016 base salary was $287,500. Based on his 2016 performance evaluation, prorated for his employment since June 2016, Mr. Moore received a 4.4% base salary increase over 2016 to $300,000, effective April 1, 2017. As part of his 2016 performance evaluation, Mr. Moore was also awarded a cash bonus of $60,000.

The cash bonuses as described above are also reported in the Summary Compensation Table under the columns “Bonus” and “Non-Equity Incentive Plan Compensation”, as well as in the Grants of Plan-Based Awards table under the “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” column.

Dividend Reinvestment and Stock Purchase Plan (DRSPP)

The Corporation maintains a DRSPP as a benefit to its shareholders. Consistent with its philosophy of facilitating employee stock ownership, the Corporation actively facilitates participation in the DRSPP by its officers and employees. The DRSPP is available to all shareholders of the Corporation on the same basis as employees, except that non-employee shareholders cannot use the payroll deduction feature to make optional purchases under the plan. The Corporation facilitates regular payroll deductions and permits after tax bonuses to be used to make purchases under the plan. The plan provides that shares acquired from the Corporation through the plan are purchased at a 5% discount from the market price. Once contributions are made to the plan, the employee participant is free to trade or withdraw funds from the plan in a manner consistent with any other shareholder participant.

This practice is designed to reward employee stock ownership. The Corporation chooses to provide this element because it believes employee stock ownership motivates the Corporation’s employees to pursue the long-term success of the Corporation and aligns their interests with those of the Corporation’s other shareholders.

Most of the Corporation’s named executive officers and directors participate in this plan.

Executive Stock Ownership Covenants

The Corporation requires its named executive officers to maintain ownership in the Corporation’s common stock as described in the Employment Agreements section. The following table shows as of August 15, 2017, the required and actual beneficial ownership of the Corporation’s common stock of each named executive officer, and the aggregate value based upon the closing price of $25.50. Each executive has three years from the Effective Date of the new agreements and one year from the date of any subsequent increase in base salary to acquire the shares of common stock needed to attain the required level of ownership.

Equity Awards

In recent years, stock options are the only form of equity compensation the Corporation has granted under the 2009 Plan. The Corporation did not grant restricted stock or other forms of equity compensation. The Corporation currently makes option awards to select officers and employees. If approved by shareholders, the 2017 Plan will provide for the grant of stock options, restricted stock, restricted stock units, SARs, performance units and performance cash awards to key employees, non-employee directors, consultants and advisors. For more information on the 2017 Plan, please see Proposal Two.

The objective of granting equity awards is to provide long-term compensation that aligns the officers’ and employees’ interests with those of the shareholders in building share value. The Corporation has chosen to pay this element of compensation as it finds it desirable for its employees to generate wealth due to favorable performance of the Corporation’s stock in the future. Furthermore, this long-term benefit helps the Corporation attract and retain high caliber professionals. As a replacement for the 2009 Plan, the Board believes the 2017 Plan will be an important factor in continuing to align the interests of our executives with the interests of our shareholders, to tie compensation to the Corporation’s performance and to attract and retain high caliber professionals.

The Corporation’s current practice is to grant option awards during the first quarter of each year to reward and recognize performance in the immediately preceding fiscal year. The Board’s schedule is determined several months in advance, and the proximity of any option awards to significant news announcements or other market events is coincidental. The option awards were granted in the first quarter of 2017 for performance in 2016 and provide for vesting in 4 equal annual installments. Vesting only requires passage of time and continued affiliation with the Corporation and does not require any level of future performance. The option awards were priced at the closing price on the award date. The Corporation intends to continue granting stock option awards that will expire 5 years from the date of grant and may also grant other types of awards if it determines that is appropriate under the 2017 Plan, if the 2017 Plan is approved by shareholders.

As outlined in their employment agreements (except for Mr. Moore) in effect at the time of their 2016 performance evaluation, the executive officers were each entitled to minimum annual option awards for any year in which the executive earned an annual cash bonus under the cash bonus methodology described above. The following is a summary of the annual minimum and actual awards made to each named executive officer for the year ended December 31, 2016.

The awards for the named executive officers were predicated upon the Compensation Committee’s evaluation of performance of the indicated executive. For 2016, Mr. Hackemer was awarded additional options over the annual minimum award provided in his employment agreement, in effect at the time, for exceeding expectations in loan volume and profitability, development and oversight of increased roles for senior management, additional duties related to the acquisition of Middleburg and risk management and mitigation. For 2016, Ms. Taylor was awarded additional options over the annual minimum award provided in her employment agreement, in effect at the time, for exceeding expectations in the areas of business strategy involvement, including capital planning and internal management reporting effectiveness and significant additional duties related to the acquisition of Middleburg.

The new employment agreements of the named executive officers, entered into on August 8, 2017, allow for the executive to participate in any annual incentive plan of the Corporation and/or the Bank applicable to executives and to receive equity-based awards under any equity plan established by the Corporation applicable to said executives and approved by the Board of Directors or Compensation Committee, for payment in accordance with the terms and conditions of such plans. There are no stated annual minimum or maximum award or payment levels.

Option awards for officers and select employees other than the named executive officers are administered in a similar manner. The terms are generally the same. The non-executive officer and employee awards are directed towards line personnel and other key support positions. General guidelines of annual awards are up to 10% of the employee’s base salary calculated upon the aggregate exercise price of the award. Awards are predicated upon the employee’s specific performance for the prior year just ended, as well as the overall corporate performance compared against goal objectives.

As described above, if approved by shareholders, long-term compensation under the 2017 Plan may also include restricted stock, restricted stock units, SARs, performance units or performance cash awards.

All Other Compensation (Including Perquisites)

The Corporation has a 401(k) defined contribution plan available to all employees subject to qualifications under the plan. The plan allows officers and employees of all levels to contribute earnings into a retirement account on a pre-tax basis. In addition, it has been the Corporation’s practice to make discretionary contributions to the plan. In 2016, the Corporation made discretionary contributions to participant accounts equal to 50% of the employees’ contributions. This element of compensation is designed to reward long-term savings and encourage financial security. The Corporation thinks it is in its best interest to encourage its employees to attain long-term financial security through active savings. This compensation benefit is consistent with that philosophy. Furthermore, an attractive retirement plan helps the Corporation attract and retain high caliber professionals. In 2016, each of the Corporation’s named executive officers participated in the 401(k) plan and received matching contributions that are reported under the “All Other Compensation” column of the Summary Compensation Table as well as in the All Other Compensation table.

The Bank has also purchased split-dollar life insurance policies that provide a death benefit of $100,000 for each named executive officer’s estate if the named executive officer dies while still employed. Policies with the same benefits have also been purchased for other officers of the Bank.

Certain positions within the Corporation require the Corporation’s officers and employees to travel and incur communications costs. The Corporation generally does not provide perquisites such as Corporation owned vehicles or cellular phones. The Corporation provides its named executive officers with expense allowances that are commensurate with the requirements of the duties and role of the individual within the Corporation’s business and the community. Under their employment agreements in effect in 2016, as well as their new employment agreements, Messrs. Clarke, Shoemaker and Hackemer each receive a flat dollar amount for automobile and communication expenses. Ms. Taylor also receives a flat dollar amount for communication expenses under her new employment agreement. In addition, the Corporation also provides Mr. Moore with a flat dollar amount for automobile and communication expenses, and reimburses him for base country club dues. The objective of these types of compensation benefits is to compensate select employees for use of their personal assets in the discharge of their duties. The Corporation does not “audit” the underlying activity so it is possible that actual expenses incurred by the employee may be more or less than the benefit provided. The amount paid is the Corporation’s estimate of the appropriate cost for the indicated service or asset. The aggregate amount of these benefits is reported on the employee’s Form W-2 and included in the taxable income reported by the Corporation for the employee. The automobile and communication expense amounts for the Corporation’s named executive officers for 2016 are reported under the “All Other Compensation” column of the Summary Compensation Table as well as in the All Other Compensation table. In 2017, under the new employment agreements (except for Mr. Moore), the monthly expense amounts will be:

(1)      Base country club dues.

The Corporation’s named executive officers participate in and receive the same health insurance benefits as all other employees. However, in some cases, in order to attract and retain high level executives, the Corporation has found it beneficial to pay the amount of the premium that would normally be payable by the employee. The premiums are reported in the “All Other Compensation” column of the Summary Compensation Table as well as in the All Other Compensation table.

The Corporation does not provide any perquisites (i.e., personal benefits) to its named executive officers outside of those discussed above. The Corporation currently does not provide any of the following to any of its named executives: extraordinary life insurance coverage, personal financial or tax advice, personal travel, housing or living expenses, security services, commuting expenses, or discounts on products or services that are not generally available to all other employees.

Termination and Change In Control Benefits

Termination and change in control benefits for certain named executive officers are designed to compensate executives in the event of certain termination events or if there is a significant change in the Corporation’s business that effectively renders the executives’ services and responsibilities unnecessary or diminished in stature. The Corporation has chosen to make these benefits available in order to attract and retain the executives. Such benefits are customary in the financial services industry and are designed to provide executives with a liquidity event that can assist them in maintaining their lifestyle while seeking new employment. The re-employment time for high level executives is generally longer than for other professionals. This element of compensation is an important long-term compensation component that facilitates retention in an industry segment that is characterized by high volumes of merger and acquisition activity.

The following discussion describes the agreements in place as of December 31, 2016, each of which provided for “single trigger” change in control benefits. The new agreements currently in effect contain “double trigger” change in control provisions.

Mr. Clarke’s employment agreement contained termination and change in control provisions which are detailed in the Potential Payments Upon Termination or Change in Control table. If, during the term of the agreement, the Bank terminated Mr. Clarke’s employment without cause (as defined in the agreement) or Mr. Clarke terminated his employment for good reason (as defined in the agreement), Mr. Clarke would have been entitled at termination to a lump sum payment equal to 2.75 times his highest reported compensation as reported on Form W-2 in the three full years preceding the termination date. Additionally, Mr. Clarke would have been entitled to any bonuses that had been accrued or earned as of the termination date that remained unpaid, and medical, life and disability insurance paid by the Bank (subject to elimination if Mr. Clarke became employed and substantially similar coverage was made available to him) for one year from the termination date. If Mr. Clarke’s employment was terminated voluntarily by him within 180 days after a change in control (as defined in the agreement), he would have been entitled to the same benefits as if termination were by him for good reason. Also, in the event of a change in control, Mr. Clarke would have had the right to assume at cost any insurance contracts owned by the Bank which were acquired for purposes of insuring against Mr. Clarke’s death or disability. The agreement also contained non-competition and non-solicitation covenants for a period of one year following termination of Mr. Clarke’s employment other than a termination by the Bank without cause or by Mr. Clarke for good reason (except that in the case of a termination in connection with a change in control, the covenants will apply). If Mr. Clarke’s employment was terminated by his disability (as defined in the agreement) or death, he or his estate would have been paid a lump sum payment at termination equal to 75% of the lump sum payment that would have been paid to him upon a termination following a change in control. (Mr. Clarke or his estate would not have received the bonus and medical, life and disability insurance that would have been received upon a termination following a change in control). In the event the Bank terminated Mr. Clarke’s employment for cause or termination was by Mr. Clarke without good reason, Mr. Clarke would have been entitled to Bank paid family coverage health insurance benefits for one year from the termination.

The termination and change in control provisions in Mr. Shoemaker’s employment agreement were substantially the same as Mr. Clarke’s agreement, except as follows. The lump sum payment due for termination by the Bank without cause or Mr. Shoemaker’s termination for good reason or in connection with Mr. Shoemaker’s termination following a change in control would have been equal to 2.0 times his highest reported compensation reported on Form W-2 in the three full years preceding the termination date.

The termination and change in control provisions in Ms. Taylor’s employment agreement were substantially the same as Mr. Clarke’s agreement, except as follows. The lump sum payment due for termination by the Bank without cause or Ms. Taylor’s termination for good reason or in connection with Ms. Taylor’s termination following a change in control would have been equal to 1.0 times her highest reported compensation reported on Form W-2 in the three full years preceding the termination date.

The termination and change in control provisions in Mr. Hackemer’s employment agreement were substantially the same as Mr. Clarke’s agreement, except as follows. The lump sum payment due for termination by the Bank without cause or Mr. Hackemer’s termination for good reason or in connection with Mr. Hackemer’s termination following a change in control would have been equal to 1.5 times his highest reported compensation reported on Form W-2 in the three full years preceding the termination date.

Neither the Corporation nor the Bank has entered into an employment agreement with Mr. Moore.

Potential Payments Upon Termination or Change in Control

The following table shows the estimated payments to or benefits that would have been received by each of the named executive officers upon the following termination events or upon a change in control of the Corporation (“single trigger” provisions), in each case assuming that each termination event or the change in control occurred on December 31, 2016, and assuming a stock price of $27.76 which was the closing stock price of the Corporation’s common stock on December 30, 2016 (the last business day of 2016). The amounts reflected in the following table are estimates, as the actual amounts that would have been paid to or received by a named executive officer can only be determined at the time of termination or change in control. The table reflects payments and benefits payable pursuant to agreements in effect as of December 31, 2016 and does not reflect any payments or benefits that would have been received by the named executive officers pursuant to their new employment agreements (which contain “double trigger” provisions), as those agreements were not in effect as of December 31, 2016.

At termination, a named executive officer is entitled to receive all amounts accrued and vested under our 401(k) plan according to the same terms as other employees participating in those plans, so these benefits are not reflected in the table below. A named executive officer is also entitled to receive amounts earned during his term of employment regardless of the manner in which the named executive officer’s employment is terminated. These amounts include earned and unpaid base salary and vested stock or option awards and are not reflected in the table below. As a benefit to all employees, the Bank provides life insurance in the amount of 2 times the employee’s annual salary at the time of death, subject to a maximum of $500,000. These amounts are not included in the table below as the benefit is available to all full-time employees on the same basis.

(1)  Lump sum payment equal to 2.75x highest reported compensation as reported on Form W-2 in 3 full years preceding termination date.

(2)  Lump sum payment equal to 2.0x highest reported compensation as reported on Form W-2 in 3 full years preceding termination date.

(3)   Lump sum payment equal to 1x highest reported compensation as reported on Form W-2 in 3 full years preceding termination date.

(4)   Lump sum payment equal to 1.5x highest reported compensation as reported on Form W-2 in 3 full years preceding termination date.

(5)  Continuation of medical, life and disability insurance for one year from the termination date for employer termination without cause, employee termination with good reason, and employee termination within 180 days after a change in control.  Continuation of medical insurance for one year from the termination date for employer termination with cause or employee termination without good reason. Ms. Taylor did not participate in the medical insurance program in 2016.

(6)  Options may first be exercised on the date of the change in control.

(7)  Lump sum payment equal to 75% of the lump sum payment that would have been paid upon a termination following a change in control.

(8)  For termination within 180 days after a change in control, these amounts do not take into account any reductions that may be required in order to comply with the 280G Cutback provision in each named executive officer’s employment agreement,

in effect as of December 31, 2016, if such 280G Cutback were applicable.

(9)  Cash bonus accrued or earned and unpaid as of the termination date.

(10) Mr. Moore has not entered into an employment agreement with the Bank or Corporation and does not have any severance or change in control provisions related to his employment.