ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Directors
In connection with the
Corporation’s acquisition of Middleburg Financial Corporation (“Middleburg”) and pursuant to the Agreement and
Plan of Reorganization, dated as of October 21, 2016, between the Corporation and Middleburg, the Corporation appointed six directors
of Middleburg to serve on the Corporation’s Board beginning on the acquisition date, April 1, 2017. John C. Lee, IV was appointed
Chairman of the Board effective April 1, 2017. Michael G. Anzilotti, who had served as Chairman of the Board since 2015, was appointed
Vice Chairman of the Board effective April 1, 2017.
The following biographical information discloses
as of April 1, 2017, each director’s age, business experience in the past five years and the specific experience, qualifications,
attributes and skills supporting the Board’s determination that each of these directors is a good fit for service on the
Board of Directors, as well as the year each director first joined the Board of Directors.
There are no family relationships
among any of our current directors and executive officers.
Michael G. Anzilotti
,
67, has served as a director since 2014.
Mr. Anzilotti has served
as a director of the Corporation and of Access National Bank (the “Bank”) since February 2014. He was elected Chairman
of both Boards in June 2015 and served in that role until March 2017. In connection with the acquisition of Middleburg, he was
appointed Vice Chairman of the Corporation’s Board and Chairman of the Bank Board, both effective April 1, 2017. He previously
served as President of Virginia Commerce Bancorp, Inc. and as a member of Virginia Commerce Bank’s Executive Management team from
2004 until his retirement from Virginia Commerce Bank in 2010. He remained a director of Virginia Commerce Bancorp, Inc. and Virginia
Commerce Bank until the company was acquired by United Bankshares, Inc. in January 2014. Prior to joining Virginia Commerce Bank,
Mr. Anzilotti spent virtually his entire banking career with First Virginia Bank. He began his career there in 1971 as a management
trainee in the accounting department. In 1975, Mr. Anzilotti left First Virginia Bank and became Assistant Comptroller at The National
Bank of Washington before returning to First Virginia in 1978. He went on to serve as Senior Vice President and CFO, President
of the Northern Virginia Operations Center, and Executive Vice President and Chief Administrative Officer before his ultimate role
as President and CEO of First Virginia Bank in Northern Virginia. Mr. Anzilotti graduated from Virginia Polytechnic Institute and
State University (“Virginia Tech”) with a B.S. in Marketing before earning an MBA at George Mason University. He also
graduated from the Stonier School of Banking and holds an Honorary Doctorate degree from George Mason University as well as an
Honorary Associates degree from the Northern Virginia Community College. Mr. Anzilotti brings to the Board over 45 years of experience
in banking including accounting, corporate finance, capital management and management of banking operations at all levels.
J. Randolph Babbitt
,
70, has served as a director since 2012.
Mr. Babbitt has served as
a director of the Corporation and the Bank since 2012. He also previously served as a director of the Corporation from 2002 to
2009, and as a director of the Bank from 1999 to 2009. Mr. Babbitt is currently Managing Principal of Babbitt & Associates,
LLC, an aviation consulting firm, which he formed in 2012. He was formerly Senior Vice President of Labor Relations for Southwest
Airlines Co. from 2011 to 2016. He also served as Administrator of the Federal Aviation Administration from 2009 to 2011. Prior
to that time, he was President and Chief Executive Officer of ECLAT Consulting, Inc., an aviation consulting practice, from its
organization in 2001 until its merger into Oliver Wyman in 2007, where Mr. Babbitt served as a Partner. He also formerly served
as President of the Air Line Pilots Association, International and has more than 44 years of experience in the aviation field,
including almost 25 years as a pilot for Eastern Air Lines. Mr. Babbitt attended the University of Georgia and University of Miami.
His extensive experience in a highly regulated industry, as well as his skills in consulting, management and finance, are valuable
contributions to the Board.
Childs F. Burden
,
66, has served as a director since April 1, 2017.
Mr. Burden was appointed
to the Board of Directors of the Bank and Corporation effective April 1, 2017, in connection with the acquisition of Middleburg.
Mr. Burden previously served as a director of Middleburg from 1997 until it was acquired by the Corporation on April 1, 2017. Since
1978, Mr. Burden was a partner with The Secor Group, a Washington, D.C. investment firm, until it was sold to Suddath Corporation
in 2015. In addition, he is committed to volunteer service for historic preservation and serves on many preservation associated
boards. Mr. Burden holds a Bachelor of Arts degree in English from the University of Virginia and is a Chartered Financial
Analyst. He brings to the Board extensive knowledge of investments and financial services.
Michael W. Clarke
,
55, has served as a director since 1999.
Mr. Clarke has served as
President, Chief Executive Officer and a director of the Corporation since it was formed in 2002 and has served as Chief Executive
Officer and a director of the Bank since it was organized in 1999. He also served as President of the Bank from its organization
in 1999 until June 2016. Prior to joining the Bank, Mr. Clarke served as Chief Credit Officer of Patriot National Bank from
its inception in 1990 until the company was sold in 1997 and remained with United Bank in the same capacity through 1998. Prior
to joining Patriot, Mr. Clarke was Vice President of commercial lending at Crestar Bank in Alexandria, Virginia, from 1985 to 1989.
Mr. Clarke graduated from Virginia Tech with a B.S. degree in finance. Mr. Clarke is a director of the Virginia Tech Foundation
and serves on its Audit Committee. Mr. Clarke brings to the Board over 32 years of experience in the skilled front line delivery
of banking products, credit risk management, corporate finance, capital management and management of banking operations at all
levels.
John W. Edgemond, IV
,
55, has served as a director since 1999.
Mr. Edgemond has served as
a director of the Corporation since it was formed in 2002 and has served as a director of the Bank since it was organized in 1999.
Mr. Edgemond is the owner and president of Greenworks Landscaping, a contract landscape and retail nursery in Chantilly, Virginia,
which he founded in 1987. Prior to that time, Mr. Edgemond operated as a sole proprietor in the landscape business in Northern
Virginia. Mr. Edgemond graduated from the University of California at Davis with a B.S. degree in plant science. Having started
his business as a sole proprietor more than 32 years ago, Mr. Edgemond brings to the Board his hands-on business experience in
sales, marketing, financial and human resource management, bank investment, and as a small business borrower and depositor throughout
the business life cycle, which experience has been critical to his success.
Martin S. Friedman
,
48, has served as a director since 2009.
Mr.
Friedman has served as a director of the Bank and of the Corporation since 2009. Mr. Friedman is co-founder and serves as CEO of
FJ Capital Management, an investment fund firm based in McLean, Virginia, since 2008. He formerly served on the Board of Directors
and Compensation Committee of Anchor Bancorp Wisconsin, Inc., the holding company for AnchorBank FSB, a federal savings bank located
in Madison, Wisconsin,
from 2013 until it was sold in 2016. He was previously director of Research for Friedman, Billings, Ramsey Group, a research and
securities trading firm, from 1998 to 2007. Prior to that, he was a securities analyst with the same firm from 1992 to 1998. Mr.
Friedman served on the Board of Directors for Guaranty Savings Bank in Metairie, Louisiana from 2008 to 2009. Mr. Friedman graduated
from the University of Maryland with a B.S. degree in Finance. He brings to the Board over 26 years of experience in and around
the commercial and investment banking industries, in which he applied and developed skills in financial analysis with an expertise
in financial institutions, corporate finance, SEC and banking compliance and management.
Thomas M. Kody
, 55,
has served as a director since 1999.
Mr. Kody has served as a
director of the Corporation since it was formed in 2002 and has served as a director of the Bank since it was organized in 1999.
Since 1994, Mr. Kody has owned and operated a network of automobile dealerships and related businesses in Maryland and Virginia.
Mr. Kody graduated from the University of Virginia with a B.A. degree in economics and government and completed a concentrated
studies program with the University of Virginia’s McIntire School of Commerce. Mr. Kody’s experience has enabled him
to successfully start, purchase and manage business enterprises of a variety of sizes. His particular skills in management, finance,
negotiations and investments have been critical to his success and are invaluable attributes with respect to his service on the
Board.
Gary D. LeClair
, 61,
has served as a director since April 1, 2017.
Mr. LeClair was appointed
to the Board of Directors of the Bank and Corporation effective April 1, 2017, in connection with the acquisition of Middleburg.
Mr. LeClair formerly served as a director of Middleburg from 2001 to 2006, and from 2008 until it was acquired by the Corporation
on April 1, 2017. Mr. LeClair also served as a director of Middleburg Investment Group during his time on the Middleburg Board
through the present and its subsidiary, Middleburg Trust Company from 1993 to 2006 and from 2008 to present. Mr. LeClair
is the founder and former CEO and Chairman of the law firm of LeClairRyan, a Professional Corporation. Mr. LeClair holds
a Bachelor of Business Administration degree in accounting from the College of William & Mary and a J.D. degree from Georgetown
University School of Law. Mr. LeClair’s extensive experience in the various aspects of the law and business, including
dispute resolution, employee relations and contract negotiations, combined with his focus on the capital needs of a growing company
and his extensive skills at managing risk and directing corporate strategy, provide the Board with an invaluable resource as it
manages the current environment and looks to its future.
John C. Lee, IV
, 59,
has served as a director since April 1, 2017.
Mr. Lee was appointed to
the Board of Directors of the Bank and to Chairman of the Corporation effective April 1, 2017, in connection with the acquisition
of Middleburg. Mr. Lee formerly served as a director of Middleburg from 2006, and Chairman from 2016, until Middleburg was acquired
by the Corporation on April 1, 2017. Mr. Lee founded Lee Technologies, a leading service provider for the data centers of the North
American market, in 1983. Schneider Electric, a global specialist in energy management, acquired Lee Technologies in 2011.
Mr. Lee maintained a senior leadership position with Schneider Electric until his departure in December 2014. Mr. Lee
serves on various corporate Boards including Canara (Columbia Capital), Primary Integration (Rotunda Capital), RedPeg Marketing
and Aegis Mobile. Mr. Lee also serves on various non-profit Boards including the Wolf Trap Foundation for the Performing
Arts, Cal Ripken Sr. Foundation, Loyola University Maryland Board of Trustees, Northern Virginia Technology Council and The Economic
Club of Washington, D.C. Previous Boards on which he has served include the Virginia Tech Board of Visitors and Randolph-Macon
College and Virginia Foundation for Independent Colleges (the “VFIC”). Mr. Lee holds a Bachelor of Arts degree
in economics and business administration from Randolph-Macon College. Mr. Lee’s entrepreneurial and professional experience,
together with his dedicated and wide-ranging philanthropic involvement as a business leader, provides the Board with valuable insight
in matters of corporate strategy and planning.
Mary Leigh McDaniel
,
63, has served as a director since April 1, 2017.
Ms. McDaniel was appointed
to the Board of Directors of the Bank and Corporation effective April 1, 2017, in connection with the acquisition of Middleburg.
Ms. McDaniel formerly served as a director of Middleburg from 2014 until it was acquired by the Corporation on April 1, 2017. Ms.
McDaniel is a partner in the public accounting firm of Updegrove, Combs & McDaniel, PLC, a full service accounting firm that
has been providing tax, accounting and financial consulting services throughout the Northern Virginia area for over 40 years. Ms.
McDaniel was appointed by Governor Timothy M. Kaine to serve on the Vint Hill Economic Development Authority, serves on the PATH
Foundation Board, and serves on the JV Board with LifePoint Hospitals. She has served on the Land Trust of Virginia, as Chair
of the Fauquier County Chamber of Commerce and was the recipient of their Business Person of the Year Award. Additionally, she
is a member of the Warrenton Garden Club. She was elected to the Fauquier County Board of Supervisors effective January 1,
2016. Ms. McDaniel graduated Magna Cum Laude from James Madison University with a Bachelor of Business Administration degree in
Accounting and Finance, is designated a Certified Public Accountant by the Virginia State Board of Accountancy, and holds the specialty
designation of Personal Financial Specialist from the American Institute of CPAs. She has been designated as a “Super
CPA” by Virginia Business Magazine for several years. Ms. McDaniel, as a highly successful executive with accounting
experience, is a valuable addition to our Board.
Janet A. Neuharth
,
61, has served as a director since April 1, 2017.
Ms. Neuharth was appointed
to the Board of Directors of the Bank and Corporation effective April 1, 2017, in connection with the acquisition of Middleburg.
Ms. Neuharth formerly served as a director of Middleburg from 2006 until it was acquired by the Corporation on April 1, 2017. Ms.
Neuharth is the Founder and President of Paper Chase Farms, Inc., an equestrian company based in Middleburg, Virginia. She is an
active participant in Paper Chase Farms’ subsidiaries, serving as director of Marketing for the retail area and Editorial
Director of the publishing division. Ms. Neuharth is also the Chair and CEO of The Freedom Forum, a nonpartisan foundation based
in Washington, D.C. that champions the First Amendment as a cornerstone of democracy. Ms. Neuharth is the former
Chair of the National Council at Vanderbilt University School of Law and currently serves on the boards of Guest Services, Inc.,
the Middleburg Forum, the Newseum, and the Newseum Institute. Ms. Neuharth holds a Bachelor of Arts degree in Political Science
and English from the University of Florida and a J.D. degree from Vanderbilt University School of Law. Ms. Neuharth’s
leadership skills in consensus-building, risk management and executive management and her legal acumen add an important dimension
and provide a valuable resource for the Board.
Robert C. Shoemaker
,
56, has served as a director since 1999.
Mr. Shoemaker has served
as Executive Vice President and a director of the Corporation since it was formed in 2002 and has served as Executive Vice President
and a director of the Bank since it was organized in 1999. He has served as Chief Lending Officer of the Bank since 2013. He also
served as Chief Credit Officer of the Bank from 1999 to 2010 and from 2012 to 2013. From 1990 to 1999, Mr. Shoemaker served as
Senior Vice President of construction and real estate lending for Patriot National Bank in Vienna, Virginia and its successor,
United Bank. Mr. Shoemaker graduated from the Hankamer School of Business at Baylor University with a B.A. degree in business administration.
Mr. Shoemaker has over 32 years of experience in the skilled front line delivery of banking products, credit risk management, corporate
finance and management of banking operations at all levels, which allows him to provide valuable contributions to the Board.
Gary R. Shook
, 56,
has served as a director since April 1, 2017.
Mr. Shook has
served as Chairman and Chief Executive Officer of Middleburg Investment Group, Chairman of Middleburg Trust Company and President
of the Middleburg Bank division of Access National Bank since April 1, 2017, in connection with the acquisition of Middleburg.
Mr. Shook was appointed to the Board of Directors of the Bank and Corporation effective April 1, 2017
in
connection
with the acquisition of Middleburg. He formerly served as a director of Middleburg from 2006 until it was acquired by the Corporation
on April 1, 2017. Mr. Shook formerly served as Chief Executive Officer and President of Middleburg from 2010 to 2017, and as President
and Chief Executive Officer of Middleburg Bank from 2008 to 2017. From 2007 to 2008, he served as President of Middleburg and Middleburg
Bank. From 2005 to 2007, Mr. Shook served as Executive Vice President, Investment Services and Fauquier Community Executive for
Middleburg. Mr. Shook has served as Chairman of the Board of Middleburg Investment Group since 2010 and as a director of Middleburg
Investment Group and Middleburg Trust Company since 2005. From 1995 to 2005, he was Senior Vice President of Fauquier Bankshares,
Inc. Mr. Shook has served as a director of the Loudoun County Chamber of Commerce, Vice Chairman of the Fauquier Chamber of Commerce,
Chairman of the Bluemont Concert Series, President of the Rotary Club of Warrenton, and Senior Warden and Vestryman of St. James’
Episcopal Church. He has served as a director and is a past Chairman of the Virginia Bankers Association. He is a member of the
Government Relations Administrative Committee of the American Bankers Association. He is a Trustee and member of the Executive
and Compensation Committees of the VFIC and a director of Shrine Mont, The Cathedral Shrine of the Transfiguration and Conference
Center. He is also a member of the CEO Cabinet of Loudoun County and a member of the Loudoun Laurels Committee. Mr. Shook holds
a Bachelor of Arts degree from the University of Virginia. Mr. Shook’s experience with Middleburg and Middleburg Bank provide
the Board with an invaluable resource for assessing and managing risks and planning for corporate strategy.
Executive Officers Who
Are Not Directors
The following biographical
information discloses as of April 1, 2017, each executive officer’s (who is not a director) age, the positions held with
the Corporation, the term of office as an executive officer and business experience for the past five years.
Margaret M. Taylor
,
53, has served as an executive officer since 2012.
Ms. Taylor has served as
Executive Vice President and Chief Financial Officer 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
, 48, has served as
an executive officer since 2017.
Mr. Culver has served as Executive Vice President
and Chief Operating Officer since April 1, 2017, in connection with the acquisition of Middleburg. 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 of Middleburg and Middleburg Bank
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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors,
executive officers and greater than 10% beneficial owners of companies whose securities are registered under Section 12 of the
Exchange Act to file reports with the SEC concerning their ownership of the companies’ securities. Based solely upon the
Corporation’s review of such reports, or written representations that no other reports were required, the Corporation believes
that all executive officers, directors and greater than 10% beneficial owners filed these required reports on a timely basis with
respect to 2016.
CORPORATE GOVERNANCE
Audit Committee.
Members
of the Audit Committee are Messrs. Edgemond (Chair), Anzilotti, Babbitt, Friedman and Kody, each of whom satisfied the independence
and financial literacy requirements of the NASDAQ Stock Market, Inc. (“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 the Corporation does not currently have an “audit committee financial
expert,” as defined by the SEC’s rules and regulations, serving on the Audit Committee. Nevertheless, the Board of Directors
believes that the cumulative experience of the directors serving on the Audit Committee is adequate to provide appropriate oversight
of the Corporation’s and the Bank’s audit functions. The members of the Audit Committee have significant management
and financial oversight experience in businesses of various size and complexity across a variety of industries. In addition, all
members of the Audit Committee have past employment experience in finance or accounting or comparable experience which results
in each individual’s financial sophistication.
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”.
While the Board is responsible
for risk oversight as part of its overall duties, the Audit Committee organizes and sets 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.
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”.
ITEM 11. 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 its proxy statement
for the 2016 Annual Meeting of Shareholders. 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 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 stock option 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 between 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: (i) Comprehensive Board approved policies and procedures are in place that define risk
limits, approval authorities, exception processes and reporting thereof; (ii) An effective audit program is in place that includes
an enterprise-wide risk management assessment, monitoring and testing program; and (iii) 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:
|
§
|
Minimum ownership requirements in the
Corporation’s stock;
|
|
§
|
Claw-back features; and
|
|
§
|
Oversight
of all executive compensation by the Compensation Committee, which is comprised of only non-employee “independent”
directors.
|
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 approving and administering compensation of the Corporation’s executive officers, including the named
executive officers, and directors. The Committee is comprised of all of the 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 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 Chief Executive Officer (“CEO”) or joint
authority to the Chief Financial Officer (“CFO”) and the Chief Banking Officer (“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, 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, ChaseCompGroup: (i) advised the Compensation Committee on industry standards, trends
and best practices for executive and director compensation and equity benefit plans; (ii) collected and evaluated external market
data and identified companies and comparison points to include in a compensation peer group; and (iii) 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. The Compensation Committee is considering these recommendations in making its executive
and director compensation decisions in 2017.
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 meeting takes place in February, the financial statements are deemed to be final and the Compensation Committee
has finalized its recommendations for action by the full Board of Directors. The Board reviews the recommendations, makes any changes
and approves the compensation elements at the same meeting as the financial statements are considered final.
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 provides 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 is provided by either party prior to the end of the initial term or any extended term. The current term of
the agreement ends on March 31, 2018. Mr. Clarke serves at the pleasure of the Bank’s Board of Directors. The agreement contains
certain severance and change in control provisions which are described in the
Termination and Change in Control Benefits
section. The agreement also contains clawback provisions subject to and in accordance with the Dodd-Frank Wall Street Reform and
Consumer Protection Act. If the Board of Directors determines 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 requires any
financial restatement or causes a material noncompliance with the financial reporting requirements for the Bank, then the Board
of Directors may require 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 contains 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 remains in effect.
On March 15, 2013, the
Bank and Mr. Shoemaker entered into an employment agreement under which Mr. Shoemaker serves as Executive Vice President of the
Bank. The current term of the agreement ends on March 31, 2018. The terms of Mr. Shoemaker’s agreement are 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
is up to 75% of his base salary, and he is 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 contains certain severance and change in control provisions which are described
in the
Termination and Change in Control Benefits
section. Mr. Shoemaker is 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 remains in effect.
On May 9, 2013, the Bank
and Ms. Taylor entered into an employment agreement under which Ms. Taylor serves as Senior Vice President (now Executive Vice
President) and CFO of the Bank. The current term of the agreement ends on March 31, 2018. The terms of Ms. Taylor’s agreement
are 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 is up to 30% of her base salary, and she is 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 contains certain severance and change in control provisions
which are described in the
Termination and Change in Control Benefits
section. Ms. Taylor is 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 remains in effect.
On March 15, 2013, the
Bank and Mr. Hackemer entered into an employment agreement under which Mr. Hackemer serves as President of Access National Mortgage,
a division of the Bank, and Senior Vice President of the Bank. Mr. Hackemer currently serves as President of Access National Mortgage.
The current term of the agreement ends on March 31, 2018. The terms of Mr. Hackemer’s agreement are 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 is up to
100% of his base salary, and he is 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 contains certain severance and change in control provisions which are described
in the
Termination and Change in Control Benefits
section. Mr. Hackemer is 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 remains in effect.
On November 19, 2013, Messrs.
Clarke, Shoemaker, Hackemer and Ms. Taylor entered into amendments to their employment agreements. Each amendment provides
that, if Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), could apply to compensation
to be paid under the executive’s employment agreement in connection with a change in control in the ownership or control
of the Bank, cash payments to the executive shall be reduced to the extent necessary so that none of the executive’s compensation
shall be considered an “excess parachute payment” under Section 280G of the Code (such reduction, the “280G Cutback”);
provided, however, that no such reduction shall be made if the net economic benefit to the executive of compensation to be paid
in connection with a change in control in the ownership or control of the Bank is greater without giving effect to the 280G
Cutback.
The Bank has not 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.
Evaluations of the named
executive officers are administered by the Compensation Committee and Board of Directors and are also performance based, with an
additional subjective element, at the full discretion of the Board. 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.
Name
|
|
2017 Base Salary
($)
|
|
|
2016 Cash Bonus
($)
|
|
Michael W. Clarke
|
|
|
585,000
|
(1)
|
|
|
425,000
|
|
Robert C. Shoemaker
|
|
|
334,750
|
|
|
|
243,750
|
|
Margaret M. Taylor
|
|
|
314,150
|
|
|
|
150,000
|
|
Dean F. Hackemer
|
|
|
386,250
|
|
|
|
400,000
|
|
Mark D. Moore
|
|
|
300,000
|
|
|
|
60,000
|
|
(1) Mr. Clarke’s salary
was $435,625 from January to March 2017, and was increased to $585,000 effective upon completion of the acquisition of Middleburg,
which occurred on April 1, 2017.
With respect to base salary
increases, cash bonuses and awards of stock options, 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.
|
¨
|
Regulatory
Exam / Audit results. The maximum bonus award would be achieved by maintaining high ratings against corporate objectives in all
of the sub-components.
|
|
¨
|
Asset
Quality
(This assessment factor only applies to the CEO and CBO, and is the most significant factor considered for the CBO).
The maximum bonus award would be achieved by maintaining outstanding ratings in Regulatory and Loan Reviews as well as outstanding
asset quality measures compared against various peer groups.
|
|
¨
|
Return
on Equity. The maximum bonus award would be achieved by both meeting budget goals and outperforming peers.
|
|
¨
|
General
Budget Performance. The maximum bonus award would be achieved by meeting or exceeding budget goals.
|
|
§
|
Net
Income - consolidated
|
|
§
|
Net
Income - Bank only before tax and provision for loan losses
|
|
¨
|
Leadership,
Governance and Relationships. The maximum bonus award would be achieved by ratings of outstanding in each of the sub-components.
|
|
§
|
Adherence
to Policies and Plans
|
|
¨
|
Strategic
Direction
(This assessment factor only applies to the CEO)
. The maximum bonus award would be achieved by ratings of outstanding
in each of the sub-components.
|
|
§
|
Maintenance
/ expansion of coverage by equity research firms
|
|
§
|
Performance
of other business lines
|
When evaluating the performance in Asset Quality
and Return on Equity, the Compensation Committee assesses data from the following sources:
|
Ø
|
All
FDIC-insured commercial banks with assets between $1 and $10 billion.
|
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.
|
Ø
|
Quarterly
Community Bank Report as published by Ambassador Financial Group.
|
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.
|
|
Total
Assets
($000,000)
|
|
|
ROE
(%)
|
|
Access National Bank, Reston
|
|
|
1,362
|
|
|
|
18.12
|
|
Cardinal Bank, McLean
|
|
|
4183
|
|
|
|
13.37
|
|
EagleBank, Bethesda
|
|
|
6,749
|
|
|
|
12.83
|
|
Capital Bank, Rockville
|
|
|
911
|
|
|
|
12.76
|
|
Congressional Bank, Bethesda
|
|
|
837
|
|
|
|
12.72
|
|
WashingtonFirst Bank, Reston
|
|
|
1912
|
|
|
|
9.81
|
|
Sonabank, McLean
|
|
|
1135
|
|
|
|
9.07
|
|
First Virginia Community Bank, Fairfax
|
|
|
837
|
|
|
|
9.06
|
|
Revere Bank, Laurel
|
|
|
1327
|
|
|
|
8.76
|
|
MainStreet Bank, Herndon
|
|
|
536
|
|
|
|
8.55
|
|
Old Line Bank, Bowie
|
|
|
1646
|
|
|
|
8.33
|
|
Chain Bridge Bank, McLean
|
|
|
619
|
|
|
|
8.26
|
|
John Marshall Bank, Reston
|
|
|
1017
|
|
|
|
6.67
|
|
Oak View National Bank, Warrenton
|
|
|
196
|
|
|
|
5.90
|
|
Freedom Bank, Fairfax
|
|
|
494
|
|
|
|
4.87
|
|
Frederick County Bank, Frederick
|
|
|
382
|
|
|
|
4.58
|
|
County First Bank, La Plata
|
|
|
227
|
|
|
|
3.66
|
|
City First Bank, Washington
|
|
|
257
|
|
|
|
2.69
|
|
Damascus Community Bank, Damascus
|
|
|
314
|
|
|
|
2.24
|
|
Monument Bank, Bethesda
|
|
|
513
|
|
|
|
(1.17
|
)
|
MEDIAN
|
|
|
837
|
|
|
|
8.44
|
|
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.
|
Ø
|
SNL
Financial, LC – Regional Peers
|
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.
|
|
Total
Assets
($000)
|
|
|
ROAA
(%)
|
|
|
ROAE
(%)
|
|
Access National Corporation
|
|
|
1,362,838
|
|
|
|
1.39
|
|
|
|
15.25
|
|
First Bancorp, Inc.
|
|
|
1,565,612
|
|
|
|
1.29
|
|
|
|
11.92
|
|
First National Corporation
|
|
|
712,672
|
|
|
|
0.81
|
|
|
|
11.46
|
|
Revere Bank
|
|
|
1,327,309
|
|
|
|
0.84
|
|
|
|
9.92
|
|
C&F Financial Corporation
|
|
|
1,425,010
|
|
|
|
0.90
|
|
|
|
9.40
|
|
Community Bankers Trust Corporation
|
|
|
1,204,231
|
|
|
|
0.87
|
|
|
|
9.33
|
|
WashingtonFirst Bankshares, Inc.
|
|
|
1,916,938
|
|
|
|
0.98
|
|
|
|
9.28
|
|
Virginia National Bankshares Corp.
|
|
|
569,539
|
|
|
|
0.94
|
|
|
|
9.18
|
|
MainStreet Bancshares
|
|
|
535,909
|
|
|
|
0.75
|
|
|
|
8.66
|
|
Chesapeake Financial Shares
|
|
|
718,922
|
|
|
|
0.94
|
|
|
|
8.65
|
|
Old Line Bancshares, Inc.
|
|
|
1,650,105
|
|
|
|
0.81
|
|
|
|
8.53
|
|
National Bancshares, Inc.
|
|
|
1,203,181
|
|
|
|
1.27
|
|
|
|
8.51
|
|
American National Bankshares
|
|
|
1,615,534
|
|
|
|
1.08
|
|
|
|
8.42
|
|
FVC Bankcorp, Inc.
|
|
|
837,014
|
|
|
|
0.84
|
|
|
|
8.26
|
|
Southern National Bancorp of Virginia, Inc.
|
|
|
1,135,436
|
|
|
|
0.90
|
|
|
|
7.88
|
|
Eagle Financial Services, Inc.
|
|
|
668,421
|
|
|
|
0.89
|
|
|
|
7.37
|
|
John Marshall Bank
|
|
|
1,017,477
|
|
|
|
0.84
|
|
|
|
7.08
|
|
Howard Bancorp, Inc.
|
|
|
1,014,787
|
|
|
|
0.63
|
|
|
|
6.77
|
|
Community Financial Corporation
|
|
|
1,281,874
|
|
|
|
0.57
|
|
|
|
6.66
|
|
Shore Bancshares, Inc.
|
|
|
1,157,866
|
|
|
|
0.83
|
|
|
|
6.24
|
|
Freedom Bank of Virginia
|
|
|
494,027
|
|
|
|
0.55
|
|
|
|
5.32
|
|
First United Corporation
|
|
|
1,338,189
|
|
|
|
0.45
|
|
|
|
5.22
|
|
Old Point Financial Corporation
|
|
|
905,756
|
|
|
|
0.32
|
|
|
|
2.99
|
|
Fauquier Bankshares, Inc.
|
|
|
623,877
|
|
|
|
(0.15
|
)
|
|
|
(1.64
|
)
|
MEDIAN
|
|
|
1,135,436
|
|
|
|
0.84
|
|
|
|
8.42
|
|
|
Ø
|
SNL
Financial, LC – National High Performing Peers
|
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 $207 million. For this peer set, minimum performance criteria was applied in order to obtain a
national, high performing peer set, which included last twelve months ROAE of at least 12.0%, last twelve months Return on Average
Assets (“ROAA”) of at least 1.2% and non-interest income of at least 12.0% as of September 30, 2016. The Corporation
was above the median for each of the three (3) performance categories. This peer data contains performance statistics for ten (10)
banks and consolidated public holding companies of banks and thrifts, ranked by ROAE in descending order in the table below. The
Corporation’s ROAE ranked 4th out of the 10 national peers.
|
|
Market
Cap
(in
millions)
($)
|
|
|
ROAA
(%)
|
|
|
ROAE
(%)
|
|
|
Non-Interest
Income/
Revenue
(%)
|
|
Xenith Bankshares, Inc.
|
|
|
651.2
|
|
|
|
6.32
|
|
|
|
46.61
|
|
|
|
27.06
|
|
Thomasville Bancshares, Inc.
|
|
|
207.4
|
|
|
|
1.50
|
|
|
|
17.62
|
|
|
|
29.98
|
|
Parke Bancorp, Inc.
|
|
|
137.9
|
|
|
|
2.09
|
|
|
|
16.24
|
|
|
|
13.77
|
|
Access National Corporation
|
|
|
295.2
|
|
|
|
1.40
|
|
|
|
15.31
|
|
|
|
41.96
|
|
Union Bankshares, Inc.
|
|
|
202.7
|
|
|
|
1.27
|
|
|
|
14.72
|
|
|
|
28.93
|
|
West Bancorp
|
|
|
398.6
|
|
|
|
1.29
|
|
|
|
14.62
|
|
|
|
11.58
|
|
Trinity Bank N.A.
|
|
|
59.3
|
|
|
|
1.78
|
|
|
|
13.47
|
|
|
|
6.80
|
|
Bank of South Carolina Corp.
|
|
|
103.4
|
|
|
|
1.27
|
|
|
|
12.75
|
|
|
|
14.57
|
|
Enterprise Financial Services Corporation
|
|
|
860.5
|
|
|
|
1.25
|
|
|
|
12.67
|
|
|
|
16.35
|
|
Preferred Bank
|
|
|
743.9
|
|
|
|
1.27
|
|
|
|
12.26
|
|
|
|
4.78
|
|
MEDIAN
|
|
|
207.4
|
|
|
|
1.29
|
|
|
|
14.62
|
|
|
|
14.57
|
|
The employment agreement
of the CEO of the Bank provides that he is eligible to receive an annual base salary increase and an annual cash bonus in an amount
which could exceed 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 CEO’s of most peer banks
performing at this level.
The employment agreement
of the Executive Vice President, Chief Banking Officer provides that he is 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 is at the discretion of the Board of Directors, and could exceed 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, Chief Financial Officer provides that she is 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 is at the discretion of the Board of Directors, and could exceed 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.
|
§
|
Net
Income – Access National Mortgage division, compared to budget
|
|
§
|
Net
Income - consolidated Corporation, compared to budget
|
|
¨
|
Infrastructure
Development / Business Plan Adherence
|
|
§
|
Expansion
of in-bound volume
|
|
§
|
Referral
Program with Bank
|
|
¨
|
Quality
Control Program
|
|
§
|
Regulatory
Compliance / Exam
|
|
§
|
Repurchases
/ Indemnifications
|
|
§
|
Post-Settlement
Documents
|
|
¨
|
Leadership,
Governance and Relationships
|
|
§
|
Adherence
to Policies and Plans
|
The employment agreement
of the President of the Mortgage division provides that he is 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 is at the discretion of the Board of Directors, and could exceed 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 March 31, 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 $30.02. Each of their beneficial
holdings exceeded their respective requirement.
|
|
Requirement: Lesser of
|
|
|
Actual
|
|
|
Ownership
Value vs.
|
|
Name
|
|
Shares(#)
|
|
|
Value
|
|
|
Shares (#)
|
|
|
Value
|
|
|
Requirement
|
|
Michael W. Clarke
|
|
|
100,000
|
|
|
$
|
1,850,000
|
|
|
|
799,403
|
|
|
$
|
23,998,078
|
|
|
|
1,297
|
%
|
Robert C. Shoemaker
|
|
|
50,000
|
|
|
$
|
742,000
|
|
|
|
444,790
|
|
|
$
|
13,352,596
|
|
|
|
1,796
|
%
|
Margaret M. Taylor
|
|
|
3,000
|
|
|
$
|
30,000
|
|
|
|
5,423
|
|
|
$
|
162,798
|
|
|
|
543
|
%
|
Dean F. Hackemer
|
|
|
50,000
|
|
|
$
|
875,000
|
|
|
|
285,638
|
|
|
$
|
8,574,853
|
|
|
|
980
|
%
|
Mark D. Moore
|
|
|
—
|
|
|
$
|
287,500
|
|
|
|
5,464
|
|
|
$
|
164,029
|
|
|
|
—
|
(1)
|
|
(1)
|
Mr. Moore has not entered into an employment agreement
with the Bank or Corporation. The requirements in the table for Mr. Moore are based on the guidelines of the Stock Ownership and
Patronage Policy as summarized on page 32. The requirement for the President of the Bank is to own stock valued at one times his
base annual salary, which Mr. Moore has until March 15, 2020 to attain.
|
Option Awards
In recent years, stock
options are the only form of equity compensation the Corporation has granted. The Corporation does not grant restricted stock or
other forms of equity compensation. The Corporation makes option awards to select officers and employees. The objective of the
option 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.
The Corporation’s
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 expects future option awards to have similar vesting, terms and pricing
provisions as the awards granted in the first quarter of 2017.
As outlined in their employment
agreements (except for Mr. Moore), the executive officers are each entitled to minimum annual option awards for any year in which
the executive earns 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.
Executive
|
|
Annual
Minimum Award
|
|
|
Actual
Award
|
|
Michael W. Clarke
|
|
|
10,000
|
|
|
|
10,000
|
|
Robert C. Shoemaker
|
|
|
7,500
|
|
|
|
7,500
|
|
Margaret M. Taylor
|
|
|
3,500
|
|
|
|
5,000
|
|
Dean F. Hackemer
|
|
|
5,000
|
|
|
|
7,500
|
|
Mark D. Moore
|
|
|
—
|
(1)
|
|
|
2,000
|
(2)
|
(1) Mr. Moore has not entered into an employment agreement with
the Bank or Corporation that would entitle him to a minimum option award.
(2) Mr.
Moore received an additional stock option award of 5,000 on October 25, 2016, in connection with his employment in 2016.
The awards for the named
executive officers are 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 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 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.
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.
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, Messrs. Clarke, Shoemaker
and Hackemer each receive a flat dollar amount for auto expenses and communication expenses. In addition, the Corporation also
provides Mr. Moore with a flat dollar amount for auto expenses 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. These auto 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, these monthly expense amounts will be:
Executive
|
|
Auto
|
|
|
Communication
|
|
|
Other
|
|
Michael W. Clarke
|
|
$
|
700
|
|
|
$
|
100
|
|
|
|
-0-
|
|
Robert C. Shoemaker
|
|
$
|
600
|
|
|
$
|
100
|
|
|
|
-0-
|
|
Margaret M. Taylor
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Dean F. Hackemer
|
|
$
|
600
|
|
|
$
|
100
|
|
|
|
-0-
|
|
Mark D. Moore
|
|
$
|
500
|
|
|
$
|
100
|
|
|
|
$691
|
(1)
|
|
(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 this benefit 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.
Mr. Clarke’s employment
agreement contains 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 terminates Mr. Clarke’s employment without
cause (as defined in the agreement) or Mr. Clarke terminates his employment for good reason (as defined in the agreement), Mr.
Clarke will be 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 will be entitled to any bonuses that
have been accrued or earned as of the termination date that remain unpaid, and medical, life and disability insurance paid by the
Bank (subject to elimination if Mr. Clarke becomes employed and substantially similar coverage is made available to him) for one
year from the termination date. If Mr. Clarke’s employment is terminated voluntarily by him within 180 days after a change
in control (as defined in the agreement), he will be 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 will have 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 contains 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 is terminated by his disability (as defined in the agreement)
or death, he or his estate will be 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 will not receive 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 terminates Mr. Clarke’s employment for cause or termination by Mr. Clarke without good reason, Mr. Clarke will be 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 are 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 will be 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 are 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 will be 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 are 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 will be equal to 1.5 times his highest
reported compensation reported on Form W-2 in the three full years preceding the termination date.
The Bank has not 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 to be received by each of the named executive officers upon the following termination events
or upon a change of control of the Corporation, 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 to be paid to or received by a named executive officer can only be determined at the time of termination or change
in control.
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.
|
|
|
|
Employer
termination without
cause, Employee
termination with
good reason, or
Employee
termination within
180 days after a
change in control
|
|
|
Employer
termination
with cause
or
Employee
termination
without
good
reason
|
|
|
Termination as
a
consequence
of death or
disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael W.
|
|
Post termination compensation
|
|
$
|
2,188,382
|
(1)
|
|
$
|
0
|
|
|
$
|
1,641,287
|
(7)
|
Clarke
|
|
Earned and unpaid cash bonus
|
|
$
|
425,000
|
(9)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Health care benefits continuation
|
|
$
|
27,265
|
(5)
|
|
$
|
24,269
|
(5)
|
|
$
|
0
|
|
|
|
Bank Owned Life Insurance Death Benefit
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100,000
|
|
|
|
Early vesting of unvested options
|
|
$
|
763,400
|
(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Total Value
|
|
$
|
3,404,047
|
(8)
|
|
$
|
24,269
|
|
|
$
|
1,741,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C.
|
|
Post termination compensation
|
|
$
|
1,035,144
|
(2)
|
|
$
|
0
|
|
|
$
|
776,358
|
(7)
|
Shoemaker
|
|
Earned and unpaid cash bonus
|
|
$
|
243,750
|
(9)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Health care benefits continuation
|
|
$
|
26,463
|
(5)
|
|
$
|
24,269
|
(5)
|
|
$
|
0
|
|
|
|
Bank Owned Life Insurance Death Benefit
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100,000
|
|
|
|
Early vesting of unvested options
|
|
$
|
572,550
|
(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Total Value
|
|
$
|
1,877,907
|
(8)
|
|
$
|
24,269
|
|
|
$
|
876,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret M.
|
|
Post termination compensation
|
|
$
|
542,397
|
(3)
|
|
$
|
0
|
(5)
|
|
$
|
406,797
|
(7)
|
Taylor
|
|
Earned and unpaid cash bonus
|
|
$
|
150,000
|
(9)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Health care benefits continuation
|
|
$
|
3,879
|
(5)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Bank Owned Life Insurance Death Benefit
|
|
$
|
0
|
(6)
|
|
$
|
0
|
|
|
$
|
100,000
|
|
|
|
Early vesting of unvested options
|
|
$
|
347,000
|
(8)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Total Value
|
|
$
|
1,043,276
|
|
|
$
|
0
|
|
|
$
|
506,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean F.
|
|
Post termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Hackemer
|
|
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned and unpaid cash
|
|
$
|
1,099,826
|
|
|
$
|
0
|
|
|
$
|
824,870
|
|
|
|
bonus
|
|
$
|
400,000
|
(4)(9)
|
|
$
|
0
|
|
|
$
|
0
|
(7)
|
|
|
Health care benefits continuation
|
|
$
|
33,589
|
(5)
|
|
$
|
29,545
|
(5)
|
|
$
|
0
|
|
|
|
Bank Owned Life Insurance Death Benefit
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100,000
|
|
|
|
Early vesting of unvested options
|
|
$
|
586,430
|
(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Total Value
|
|
$
|
2,119,845
|
(8)
|
|
$
|
29,545
|
|
|
$
|
924,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark D.
|
|
Bank Owned Life Insurance Death Benefit
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100,000
|
|
Moore
(10)
|
|
Total Value
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
100,000
|
|
|
(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, if such 280G Cutback is 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.
|
Compensation Committee Report
The Compensation Committee
has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussion, subsequently recommended to the Board that the Compensation Discussion and Analysis be included
in this Amendment.
Compensation Committee:
Martin S. Friedman (Chair)
Michael G. Anzilotti
J. Randolph Babbitt
John W. Edgemond, IV
Thomas M. Kody
The following table summarizes the total compensation
for the year ended December 31, 2016 of the Corporation’s Chief Executive Officer, Chief Financial Officer and each of the
Corporation’s next three most highly compensated executive officers. The Corporation did not have any other executive officers
during 2016. The Corporation refers throughout this Amendment to the individuals in the following table as the named executive
officers for 2016.
Summary Compensation Table
Fiscal 2016
Name
And
Principal
Position
|
|
Year
|
|
Salary
($)
1,2
|
|
|
Bonus
($)
1,3
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
4
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
1,2,3
|
|
|
Change in
Pension
Value and
Nonqual-
ified
Deferred
Compen-
sation
Earnings
($)
|
|
|
All
Other
Compen-
sation
($)
1,5
|
|
|
Total
($)
|
|
Michael W Clarke,
|
|
2016
|
|
|
425,000
|
|
|
|
212,500
|
|
|
|
—
|
|
|
|
35,254
|
|
|
|
212,500
|
|
|
|
—
|
|
|
|
45,865
|
|
|
|
931,119
|
|
President,
|
|
2015
|
|
|
385,000
|
|
|
|
192,500
|
|
|
|
—
|
|
|
|
28,202
|
|
|
|
192,500
|
|
|
|
—
|
|
|
|
43,140
|
|
|
|
841,342
|
|
Chief Executive Officer
|
|
2014
|
|
|
370,000
|
|
|
|
185,000
|
|
|
|
—
|
|
|
|
24,966
|
|
|
|
185,000
|
|
|
|
—
|
|
|
|
37,708
|
|
|
|
802,674
|
|
Robert C. Shoemaker,
|
|
2016
|
|
|
325,000
|
|
|
|
121,875
|
|
|
|
—
|
|
|
|
26,441
|
|
|
|
121,875
|
|
|
|
—
|
|
|
|
43,863
|
|
|
|
639,054
|
|
Executive Vice President
|
|
2015
|
|
|
310,000
|
|
|
|
116,250
|
|
|
|
—
|
|
|
|
21,152
|
|
|
|
116,250
|
|
|
|
—
|
|
|
|
41,315
|
|
|
|
604,967
|
|
|
|
2014
|
|
|
296,800
|
|
|
|
111,300
|
|
|
|
—
|
|
|
|
18,724
|
|
|
|
111,300
|
|
|
|
—
|
|
|
|
39,985
|
|
|
|
578,109
|
|
Margaret M.
|
|
2016
|
|
|
305,000
|
|
|
|
58,500
|
|
|
|
—
|
|
|
|
17,627
|
|
|
|
91,500
|
|
|
|
—
|
|
|
|
12,879
|
|
|
|
485,506
|
|
Taylor,
|
|
2015
|
|
|
290,000
|
|
|
|
38,000
|
|
|
|
—
|
|
|
|
14,101
|
|
|
|
87,000
|
|
|
|
—
|
|
|
|
12,237
|
|
|
|
441,338
|
|
Executive Vice President,
Chief Financial
Officer
|
|
2014
|
|
|
275,000
|
|
|
|
22,500
|
|
|
|
—
|
|
|
|
12,483
|
|
|
|
82,500
|
|
|
|
—
|
|
|
|
12,277
|
|
|
|
404,760
|
|
Dean F. Hackemer,
|
|
2016
|
|
|
374,400
|
|
|
|
39,083
|
|
|
|
—
|
|
|
|
26,441
|
|
|
|
360,917
|
|
|
|
—
|
|
|
|
50,989
|
|
|
|
851,830
|
|
Division President,
|
|
2015
|
|
|
360,000
|
|
|
|
39,480
|
|
|
|
—
|
|
|
|
21,151
|
|
|
|
335,520
|
|
|
|
—
|
|
|
|
45,428
|
|
|
|
801,579
|
|
Access National Mortgage
|
|
2014
|
|
|
344,167
|
|
|
|
18,836
|
|
|
|
—
|
|
|
|
18,724
|
|
|
|
341,164
|
|
|
|
—
|
|
|
|
40,775
|
|
|
|
763,666
|
|
Mark D. Moore,
President,
Access National
Bank
|
|
2016
|
|
|
157,879
|
6
|
|
|
60,000
|
|
|
|
—
|
|
|
|
24,644
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,252
|
|
|
$
|
257,775
|
|
|
(1)
|
Salaries and other cash compensation are paid by the
Bank.
|
|
(2)
|
Also includes any amounts contributed by the executive
to the 401(k) plan.
|
|
(3)
|
Except for the discretionary portions of annual cash
bonuses earned during 2016, 2015 and 2014, annual cash bonuses earned under each named executive officer’s employment agreement
based on an evaluation by the Compensation Committee and Board of performance during 2016, 2015 and 2014, respectively, are reported
in this table as “Non-Equity Incentive Plan Compensation.”
|
|
(4)
|
The amounts in this column reflect the aggregate grant
date fair value of options awarded to each named executive officer during each of 2016, 2015 and 2014 under the 2009 Stock Option
Plan, computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note
11 to the Corporation’s audited financial statements for the fiscal year ended December 31, 2016 included in the Original
10-K Filing.
|
|
(5)
|
The amounts in this column for 2016 are detailed in
the
All Other Compensation
table below.
|
|
(6)
|
Represents compensation paid since Mr. Moore’s
employment began in June 2016 based on his 2016 salary of $287,500.
|
All Other Compensation
Fiscal 2016
Name
|
|
Auto and
Communication
Expense
Allowance
($)
|
|
|
401(k)
Employer
Match
1
($)
|
|
|
Company
Paid
Insurance
Premiums
($)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
Michael W.Clarke
|
|
|
9,600
|
|
|
|
9,000
|
|
|
|
27,265
|
|
|
|
-0-
|
|
|
|
45,865
|
|
Robert C. Shoemaker
|
|
|
8,400
|
|
|
|
9,000
|
|
|
|
26,463
|
|
|
|
-0-
|
|
|
|
43,863
|
|
Margaret M. Taylor
|
|
|
-0-
|
|
|
|
9,000
|
|
|
|
3,879
|
|
|
|
-0-
|
|
|
|
12,879
|
|
Dean F. Hackemer
|
|
|
8,400
|
|
|
|
9,000
|
|
|
|
33,589
|
|
|
|
-0-
|
|
|
|
50,989
|
|
Mark D. Moore
|
|
|
7,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,052
2
|
|
|
|
15,252
|
|
|
(1)
|
Reflects amounts paid as 401(k) profit sharing match to participating employees.
|
|
(2)
|
Reflects club dues paid on behalf of Mr. Moore.
|
The following table summarizes certain information
with respect to incentive-based cash bonus awards granted to the named executive officers during or for the year ended December
31, 2016 and reflects the amounts that could have been paid under each such award. The table also reflects option awards that the
named executive officers could have received under their employment agreements in 2017 based on 2016 performance, or in the case
of Mr. Moore, received as an award for 2016 performance.
Grants of Plan-Based Awards
Fiscal 2016
|
|
|
|
|
Estimated
Possible Payouts
Under
Non-Equity Incentive Plan
Awards
|
|
|
Estimated
Possible Payouts
Under Equity Incentive Plan
Awards
|
|
|
All
Other
Stock
Awards:
Number
of
Shares
|
|
|
All
Other
Option
Awards:
Number of
Securities
|
|
|
Exercise
or Base
Price of
|
|
|
Grant
Date
Fair
Value of
Stock
and
|
|
Name
|
|
Grant
Date
|
|
|
Threshold
($)
|
|
|
Target
1,2
($)
|
|
|
Maximum
($)
|
|
|
Threshold
3
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
of
Stock
or Units
(#)
|
|
|
Underlying
Options
(#)
|
|
|
Option
Awards
($/Sh)
|
|
|
Option
Awards
4
($)
|
|
Michael W. Clarke
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
02/23/17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27.82
|
|
|
|
35,254
|
|
Robert C. Shoemaker
|
|
|
—
|
|
|
|
—
|
|
|
|
243,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
02/23/17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27.82
|
|
|
|
26,441
|
|
Margaret M. Taylor
|
|
|
—
|
|
|
|
—
|
|
|
|
91,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
02/23/17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27.82
|
|
|
|
12,355
|
|
Dean F. Hackemer
|
|
|
—
|
|
|
|
—
|
|
|
|
375,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
02/23/17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27.82
|
|
|
|
17,650
|
|
Mark D. Moore
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
02/23/17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,000
|
|
|
|
27.82
|
|
|
|
12,381
|
|
|
|
|
10/25/16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
23.85
|
|
|
|
24,644
|
|
|
(1)
|
Except for Mr. Clarke, reflects target amount that
could be earned as a non-equity incentive award based on 2016 performance. The employment agreements of each of the named executive
officers (other than for Mr. Moore) provide for non-equity incentive awards that do not have a minimum threshold or maximum payment
level. These bonuses can range anywhere from $0 to a specified percent of the named executive officer’s salary or above
in the Board’s discretion (see the
Base Salaries and Cash Bonuses (Non-Equity Incentive)
section of the Compensation
Discussion and Analysis for specific percentages for each executive). Mr. Clarke’s employment agreement does not provide
a target amount that could be earned as a non-equity incentive award.
|
|
(2)
|
All
of these target amounts are percentages of the individual’s 2016 base salary. The actual amount of the non-equity incentive
plan award earned was determined by the Compensation Committee and Board of Directors on February 23, 2017 and paid shortly thereafter
and is reported as “Non-Equity Incentive Plan Compensation” for Messrs. Clarke, Shoemaker and Hackemer and Ms. Taylor
in the
Summary Compensation Table
on page 27.
|
|
(3)
|
Reflects the minimum number of options that could be
awarded pursuant to the named executive officer’s employment agreement upon performance that earns an annual cash bonus
for the 2016 performance year. The total number of options awarded in 2017 to each named executive officer for 2016 performance
is discussed in the
Option Awards
section of the Compensation Discussion and Analysis.
|
|
(4)
|
The amounts in this column reflect the grant date fair
value of the minimum option awards under the 2009 Stock Option Plan for 2016, computed in accordance with FASB ASC Topic 718.
|
The
following table includes certain information with respect to all unexercised options held by the named executive officers at December
31, 2016. On that date, the named executive officers held no shares of restricted stock.
Outstanding Equity
Awards at 2016 Fiscal Year-End
|
|
Option Awards
1
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
Michael W. Clarke
|
|
|
2,500
|
2
|
|
|
—
|
|
|
|
|
|
|
$
|
9.24
|
|
|
01/31/17
|
|
|
|
2,500
|
|
|
|
2,500
|
3
|
|
|
|
|
|
$
|
15.21
|
|
|
01/28/18
|
|
|
|
2,500
|
|
|
|
2,500
|
4
|
|
|
|
|
|
$
|
16.22
|
|
|
03/15/18
|
|
|
|
2,500
|
|
|
|
5,000
|
7
|
|
|
|
|
|
$
|
15.97
|
|
|
01/22/19
|
|
|
|
2,500
|
|
|
|
7,500
|
8
|
|
|
|
|
|
$
|
17.96
|
|
|
01/21/20
|
|
|
|
—
|
|
|
|
10,000
|
9
|
|
|
|
|
|
$
|
18.32
|
|
|
01/21/21
|
Robert C. Shoemaker
|
|
|
3,750
|
2
|
|
|
—
|
|
|
|
|
|
|
$
|
9.24
|
|
|
01/31/17
|
|
|
|
5,625
|
|
|
|
1,875
|
3
|
|
|
|
|
|
$
|
15.21
|
|
|
01/28/18
|
|
|
|
5,625
|
|
|
|
1,875
|
4
|
|
|
|
|
|
$
|
16.22
|
|
|
03/15/18
|
|
|
|
3,750
|
|
|
|
3,750
|
7
|
|
|
|
|
|
$
|
15.97
|
|
|
01/22/19
|
|
|
|
1,875
|
|
|
|
5,625
|
8
|
|
|
|
|
|
$
|
17.96
|
|
|
01/21/20
|
|
|
|
—
|
|
|
|
7,500
|
9
|
|
|
|
|
|
$
|
18.32
|
|
|
01/21/21
|
Margaret M. Taylor
|
|
|
1,000
|
5
|
|
|
—
|
|
|
|
|
|
|
$
|
10.95
|
|
|
04/09/17
|
|
|
|
1,750
|
|
|
|
875
|
3
|
|
|
|
|
|
$
|
15.21
|
|
|
01/28/18
|
|
|
|
750
|
|
|
|
375
|
6
|
|
|
|
|
|
$
|
12.79
|
|
|
05/09/18
|
|
|
|
2,500
|
|
|
|
2,500
|
7
|
|
|
|
|
|
$
|
15.97
|
|
|
01/22/19
|
|
|
|
1,250
|
|
|
|
3,750
|
8
|
|
|
|
|
|
$
|
17.96
|
|
|
01/21/20
|
|
|
|
—
|
|
|
|
5,000
|
9
|
|
|
|
|
|
$
|
18.32
|
|
|
01/21/21
|
Dean F. Hackemer
|
|
|
—
|
|
|
|
3,000
|
3
|
|
|
|
|
|
$
|
15.21
|
|
|
01/28/18
|
|
|
|
—
|
|
|
|
1,250
|
4
|
|
|
|
|
|
$
|
16.22
|
|
|
03/15/18
|
|
|
|
—
|
|
|
|
3,750
|
7
|
|
|
|
|
|
$
|
15.97
|
|
|
01/22/19
|
|
|
|
—
|
|
|
|
5,625
|
8
|
|
|
|
|
|
$
|
17.96
|
|
|
01/21/20
|
|
|
|
—
|
|
|
|
7,500
|
9
|
|
|
|
|
|
$
|
18.32
|
|
|
01/21/21
|
Mark D. Moore
|
|
|
—
|
|
|
|
5,000
|
10
|
|
|
|
|
|
$
|
23.85
|
|
|
10/25/21
|
|
(1)
|
All options were granted under the 2009 Stock Option
Plan.
|
|
(2)
|
This option grant fully vested on 01/31/16.
|
|
(3)
|
This option grant vests in 4 equal installments as
follows: 25% on 01/28/14; 25% on 01/28/15; 25% on 01/28/16; and 25% on 01/28/17.
|
|
(4)
|
This option grant vests in 4 equal installments as
follows: 25% on 03/15/14; 25% on 03/15/15; 25% on 03/15/16; and 25% on 03/15/17.
|
|
(5)
|
This option grant fully vested on 04/09/16.
|
|
(6)
|
This option grant vests in 4 equal installments as
follows: 25% on 05/09/14; 25% on 05/09/15; 25% on 05/09/16; and 25% on 05/09/17.
|
|
(7)
|
This option grant vests in 4 equal installments as
follows: 25% on 01/22/15; 25% on 01/22/16; 25% on 01/22/17; and 25% on 01/22/18.
|
|
(8)
|
This option grant vests in 4 equal installments as
follows: 25% on 01/21/16; 25% on 01/21/17; 25% on 01/21/18; and 25% on 01/21/19.
|
|
(9)
|
This option grant vests in 4 equal installments as
follows: 25% on 01/21/17; 25% on 01/21/18; 25% on 01/21/19; and 25% on 01/21/20.
|
|
(10)
|
This option grant vests in 4 equal installments as
follows: 25% on 10/25/2017; 25% on 10/25/18; 25% on 10/25/19; and 25% on 10/25/20.
|
The table below provides information regarding the value realized
by our named executive officers upon the exercise of stock options during 2016. None of the named executive officers held restricted
stock that vested during 2016.
Option Exercises and
Stock Vested
Fiscal 2016
|
|
Option Awards
|
|
Name
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on Exercise
1
($)
|
|
Michael W. Clarke
|
|
|
—
|
|
|
|
—
|
|
Robert C. Shoemaker
|
|
|
—
|
|
|
|
—
|
|
Margaret M. Taylor
|
|
|
—
|
|
|
|
—
|
|
Dean F. Hackemer
|
|
|
10,500
|
|
|
$
|
27,504
|
|
Mark D. Moore
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Value realized is the aggregate number of options exercised
multiplied by the closing market price of the Corporation’s common stock on the date of exercise minus the aggregate exercise
price paid.
|
Director
and Executive Stock Ownership and Patronage Policy
To
elevate the visibility and importance of ownership and patronage, the Corporation adopted a Stock Ownership and Patronage Policy
for directors and executive officers effective March 15, 2017.
The Board believes that share ownership
and business patronage align the interests of its executive officers and directors with the interests of shareholders, promotes
sound corporate governance, and demonstrates a commitment to the Corporation. Executive officers who do not meet the stock ownership
requirements as of the effective date of the policy, or who are appointed after the effective date of the Policy, or who are subsequently
promoted to an executive officer position, will have three (3) years from the later of the effective date of the Policy or the
date of appointment or promotion to attain the required level of stock ownership. Directors who do not meet the requirement as
of the effective date will have three (3) years from their first day of service to attain the required level of stock ownership.
Director Compensation
The compensation philosophy
and objectives described earlier also apply to the Corporation’s non-employee directors. The Corporation’s general
practice is to pay the directors a basic cash retainer on a quarterly or monthly basis that is designed to compensate directors
for their participation on the Board and the execution of their basic duties and responsibilities. Beginning in 2006 (for 2005
performance), the Compensation Committee also conducts an annual evaluation of performance under criteria similar to that used
for its executive cash bonuses for payment of annual incentives to directors. Incentives are paid in cash, option awards or some
combination thereof.
The Corporation monitors
the level of compensation of its non-employee directors in the aggregate and by element as it compares to the compensation of its
CEO. The Corporation believes the collective responsibility of the directors is commensurate to that of its CEO, although the duties
do not require a full-time level of effort.
In 2016, the non-employee
directors received a basic retainer of $36,000 each, paid monthly. The Chairman received an additional $1,000 per month designed
to compensate him for the added responsibilities as Chairman. The collective retainer amount paid to the directors in 2016 was
$192,000, which equals 45.2% of the 2016 base salary of the CEO. These amounts are reflected in the
Director Compensation
table under the column “Fees Earned or Paid in Cash”.
With respect to incentive
payment for performance in 2016, the non-employee directors were granted stock option awards of 5,000 each or 25,000 in the aggregate.
The non-employee directors also received as a cash incentive award of $36,000 each, or $180,000 in the aggregate. The options awarded
for 2016 performance were granted in February 2017 under terms identical to option awards for executives and other employees.
The non-employee directors
agreed to a basic retainer of $36,000 each, payable monthly, for 2017 until completion of the acquisition of Middleburg, with the
Chairman to receive an additional $12,000 retainer, payable monthly, for 2017 until completion of the acquisition of Middleburg,
which occurred on April 1, 2017. The collective retainer amount paid to the directors for January to March 2017 was $48,000 in
the aggregate, or $192,000 annualized, which equates to 44.1% of the CEO’s initial base salary for 2017.
As described in the
Board
Process
section, in the first quarter of 2017 the Compensation Committee engaged an independent consultant, ChaseCompGroup,
to assist and advise on matters related to director compensation for the increased size of the Corporation and aggregate number
of non-employee directors as a result of the acquisition of Middleburg. The Committee subsequently approved the following compensation
arrangement for non-employee directors for 2017, effective upon completion of the acquisition of Middleburg, which occurred on
April 1, 2017. Upon the establishment and shareholder approval of an equity plan for this purpose, all retainers for the Board
Chair and Board Committee Chairs shall be paid in the form of equity awards in amounts equal to the dollar values in the below
table. Until such time, these fees will be paid in cash. For 2017, 50% of Board Chair and Board Committee Chair retainers will
be payable after the first Board meeting in April 2017, and the remaining 50% by March 15, 2018, provided attendance of at least
75% of all Board and Board Committee meetings and compliance with Board level policies. Retainers may be withheld or clawed back
for covenant or Board policy non-compliance, subject to approval by a majority of the Board of Directors. All per meeting fees
are payable monthly provided the director is in compliance with Board-level policies. Fees may be withheld or clawed back for covenant
or Board policy non-compliance, subject to approval by a majority of the Board of Directors. Directors can attend up to three (3)
scheduled Board or Board Committee meetings telephonically per year, and shall earn 50% of the per fee meeting for any additional
scheduled meetings during the remainder of the calendar year that are attended telephonically.
Board or Board Committee
|
|
Annual
Retainer
Member
($)
(1)
|
|
|
Annual
Retainer
Chair
($)
(1)
|
|
|
Per
Meeting
Fee
Member
($)
(2)
|
|
Board of Directors - Corporation
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
1,000
|
|
Board of Directors - Bank
|
|
|
12,000
|
|
|
|
12,000
|
|
|
|
1,000
|
|
Executive Committee
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
Directors Loan Committee
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
Audit Committee
|
|
|
—
|
|
|
|
12,000
|
|
|
|
1,000
|
|
Compensation Committee
|
|
|
—
|
|
|
|
12,000
|
|
|
|
1,000
|
|
Nominating & Governance Committee
|
|
|
—
|
|
|
|
12,000
|
|
|
|
1,000
|
|
Risk Committee
|
|
|
—
|
|
|
|
12,000
|
|
|
|
1,000
|
|
|
(1)
|
All retainer fees will be paid in equity in the form of restricted stock or stock options in
an amount equal to the value stated upon shareholder approval of an equity plan for this purpose. Until such time as said equity
plan is approved, fees will be paid in cash.
|
|
(2)
|
Per meeting fees will be paid in cash.
|
At the end of 2017 and into
the first quarter of 2018, the Compensation Committee expects to evaluate director performance for incentive awards in connection
with 2017 performance and set basic compensation for 2018.
The following table
provides compensation information for the year ended December 31, 2016 for each non-employee member of the Corporation’s
Board of Directors.
Director
Compensation
Fiscal
2016
Name
(1)
|
|
Fees
Earned or
Paid in
Cash
(2)
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
(3)
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Michael G. Anzilotti
|
|
|
84,000
|
|
|
|
—
|
|
|
|
17,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
101,627
|
|
J. Randolph Babbitt
|
|
|
72,000
|
|
|
|
—
|
|
|
|
17,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,627
|
|
John W. Edgemond, IV
|
|
|
72,000
|
|
|
|
—
|
|
|
|
17,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,627
|
|
Martin S. Friedman
|
|
|
72,000
|
|
|
|
—
|
|
|
|
17,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,627
|
|
Thomas M. Kody
|
|
|
72,000
|
|
|
|
—
|
|
|
|
17,627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,627
|
|
|
(1)
|
Messrs.
Clarke and Shoemaker are not included in this table as they are employees of the Corporation and thus receive no compensation
for services as directors on the Corporation’s Board. The compensation received by Messrs. Clarke and Shoemaker is
shown in the
Summary Compensation Table
on page 27.
|
|
(2)
|
Amounts include cash retainer paid for 2016 service
and cash incentive payment paid for 2016 performance.
|
|
(3)
|
The amounts in this column reflect the grant date fair
value of options awarded to each non-employee director during 2016 under the 2009 Stock Option Plan, computed in accordance with
FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 11 to the Corporation’s audited
financial statements for the fiscal year ended December 31, 2016 included in the Original 10-K Filing. As of December 31, 2016,
each non-employee director had the following number of options outstanding: Anzilotti: 12,084; Babbitt: 15,334; Edgemond: 21,500;
Friedman: 24,000; and Kody: 24,000.
|
The
Compensation Committee is responsible for establishing, administering and approving director compensation. See the
Director
Compensation
and
Board Process
sections of the Compensation Discussion and Analysis beginning on page 8 for
further
details.
Compensation Committee Interlocks and Insider
Participation
Members of the Compensation
Committee during 2016 were Messrs. Friedman (Chair), Anzilotti, Babbitt, Edgemond, and Kody. During 2016, none of our executive
officers or employees served as a member of our Compensation Committee, and no member of our Compensation Committee has previously
served as an executive officer of the Corporation. Further, during 2016 and as of the date of this Amendment, none of our executive
officers:
|
·
|
served
on the compensation committee, or other body performing a similar function, of any entity for which any member of the Compensation
Committee served as an executive officer;
|
|
·
|
served
as a director of any entity for which any member of the Compensation Committee served as an executive officer; or
|
|
·
|
served
as a member of the compensation committee, or other body performing a similar function, of any entity for which one of the Corporation’s
directors served as an executive officer.
|
During 2016 and as of the
date of this Amendment, there were transactions by the Bank, the Corporation’s wholly owned bank subsidiary, with certain
members of the Compensation Committee, or their associates, all consisting of extensions of credit by the Bank in the ordinary
course of its business.