Edgar Filing: Southern National Bancorp of Virginia Inc

Definitive Proxy Statement


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant x Filed by a Party other than the Registrant ¨

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

Southern National Bancorp of Virginia, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

THE HOLDING COMPANY

FOR

LOGO

6830 Old Dominion Drive

McLean, Virginia 22101

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON THURSDAY, APRIL 28, 2011

Stockholders of Southern National Bancorp of Virginia, Inc.:

NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of Stockholders (the “Annual Meeting”) of Southern National Bancorp of Virginia, Inc. (the “Company”) will be held at International Country Club, 13200 Lee Jackson Highway, Fairfax, Virginia 22033, on Thursday, April 28, 2011, beginning at 2:00 p.m. (local time), for the following purposes:

ELECTION OF DIRECTORS. To elect three (3) directors of Class II to serve on the Board of Directors of the Company until the Company’s 2014 Annual Meeting of Stockholders, and each until their successors are duly elected and qualified, or until their earlier resignation or removal;

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS. To ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2011;

ADVISORY VOTE ON EXECUTIVE COMPENSATION. To conduct an advisory (non-binding) vote regarding the compensation of the Company’s named executive officers;

ADVISORY VOTE ON FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION. To conduct an advisory (non-binding) vote regarding the frequency of holding future advisory votes regarding the compensation of the Company’s named executive officers; and

OTHER BUSINESS. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

The foregoing items of business are more fully described in the Proxy Statement, which is attached hereto and made a part thereof.

The close of business on March 4, 2011 has been fixed as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or at any adjournments thereof. A list of stockholders entitled to vote at the Annual Meeting will be available for inspection by any stockholder at the Company’s principal office at 550 Broadview Avenue, Warrenton, Virginia 20186 during usual business hours for a period of at least ten days prior to the Annual Meeting.

Your Vote is Important.

You are cordially invited and urged to attend the Annual Meeting. Whether or not you plan to attend the Annual Meeting in person, you are urged to submit your proxy as soon as possible so that your shares can be voted at the meeting in accordance with your instructions. You may vote by signing, dating and mailing the proxy card, or by telephone or over the Internet by following the instructions at www.cfpproxy.com/6090. The proxy is revocable in the manner described in the proxy statement at any time before it is voted at the Annual Meeting. If you attend the Annual Meeting, you may vote in person if you wish, even if you have previously returned your proxy card or voted by telephone or over the Internet.

If you plan to attend the Annual Meeting, please note that we may ask to see a valid picture identification, such as a driver’s license, to identify you as a stockholder. Stockholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date.

Cameras (including cellular phones with photographic capabilities), recording devices and other similar electronic devices will not be permitted at the meeting. Please silence your cell phones during the Annual Meeting as a courtesy to others.

By order of the Board of Directors,

LOGO

Georgia S. Derrico

Chairman of the Board and Chief Executive Officer

March 18, 2011

McLean, Virginia

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

PROXY STATEMENT

FOR

2011 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON THURSDAY, APRIL 28, 2011

General Information

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Southern National Bancorp of Virginia, Inc. (the “Company”) for use at the 2011 Annual Meeting of Stockholders of the Company to be held at International Country Club, 13200 Lee Jackson Highway, Fairfax, Virginia, on Thursday, April 28, 2011, beginning at 2:00 p.m. (local time), and any adjournments thereof (the “Annual Meeting”) for the purposes set forth in this Proxy Statement and the accompanying Notice of 2011 Annual Meeting of Stockholders. This Proxy Statement, the Notice of Meeting and the enclosed proxy will first be sent to stockholders on or about March 18, 2011. For information on how to vote your shares, see the instructions included on the enclosed proxy card and under “Important Notice regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 28, 2011” and “Information About Voting” below.

Important Notice regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 28, 2011.

The Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 are available at www.cfpproxy.com/6090.

Under rules adopted by the United States Securities and Exchange Commission (the “SEC”), the Company is furnishing proxy materials to its stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On or about March 18, 2011, the Company mailed to certain of its stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access the Company’s proxy materials, including the Company’s Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and how to access your proxy card to vote through the Internet or by telephone. This new process is designed to expedite stockholders’ receipt of proxy materials and lower the cost of the Annual Meeting. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice.

Information About Voting

You are entitled to vote at the meeting if you were a holder of record of the Company’s common stock, $0.01 par value (“Common Stock”), at the close of business on March 4, 2011.

Stockholders can vote in person at the Annual Meeting or by proxy. You can vote by mail by signing, dating and mailing the enclosed proxy card, or by telephone or over the Internet by following the instructions at www.cfpproxy.com/6090.

If your shares are held in the name of a bank, broker of other holder of record, you will receive instructions from the holder of record, which you should follow in order to vote your shares. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the Annual Meeting in order to vote.

If you vote by proxy, the individuals named on the proxy card (your “proxies”) will vote your shares in the manner you indicate. You may specify whether your shares should be voted for or against each of the proposals. If you sign and return the card without indicating your instructions, your shares will be voted as follows:

•

FOR the election of the three (3) nominees for directors;

•

FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011;

•

FOR the advisory (non-binding) proposal to approve the compensation of the Company’s named executive officers; and

•

FOR the advisory (non-binding) proposal to hold future advisory votes on executive compensation EVERY YEAR.

You may revoke or change your proxy at any time before it is exercised by (1) delivering to us a signed proxy card with a date later than your previously delivered proxy, (2) voting in person at the Annual Meeting, (3) granting a subsequent proxy through the Internet or telephone, or (4) sending a written revocation to the Company’s Secretary, Devon Porter, prior to the Annual Meeting. Your most current proxy card or Internet proxy is the one that is counted. All written notices of revocation and other communications with respect to revocation or proxies should be sent to: Southern National Bancorp of Virginia, Inc., 550 Broadview Avenue, Warrenton, Virginia 20186, (540) 347-4521, Attention: Corporate Secretary. Any stockholder who holds shares in street name with a bank or broker must contact that bank or broker if he or she wishes to revoke his or her proxy.

The Board of Directors knows of no other matters to be presented at the Annual Meeting. If any other matter should be presented at the Annual Meeting upon which a vote may be properly taken, shares represented by an executed and unrevoked proxy will be voted with respect thereto in accordance with the judgment of the persons designated in the proxy. The proxy also confers on the proxies the discretionary authority to vote with respect to any matter presented at the Annual Meeting for which advance notice was not received by the Company in accordance with the Company’s Amended and Restated Bylaws.

Solicitation of Proxies

This proxy solicitation is made by the Board of Directors of the Company and the cost of this solicitation is being borne by the Company. Proxies will be solicited through the mail and, if deemed advisable, directors, officers and regular employees of the Company may solicit proxies personally or by telephone or other means of communication, without being paid additional compensation for such services. The Company will reimburse banks, brokerage houses and other custodians, nominees and fiduciaries for their reasonable expense in forwarding the proxy materials to beneficial owners of the Company’s Common Stock.

Annual Report

The Company’s Annual Report on Form 10-K, including consolidated financial statements and related notes, for the fiscal year ended December 31, 2010, as filed with the SEC, accompanies but does not constitute part of this Proxy Statement.

VOTING SHARES AND VOTING RIGHTS

Only holders of record of Common Stock at the close of business on March 4, 2011 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. On that date there were 11,590,212 shares of Common Stock outstanding, which is the only outstanding class of voting securities of the Company. The holders of at least a majority of the outstanding shares of Common Stock must be represented at the Annual Meeting, in person or by proxy, in order to constitute a quorum for the transaction of business. Abstentions and shares held of record by a broker or nominee that are voted on any matter will be included in determining whether a quorum exists. Each holder of Common Stock shall have one vote for each share of Common Stock registered, on the Record Date, in such holder’s name on the books of the Company.

A broker non-vote occurs when a broker does not have discretionary authority to vote the shares and has not received voting instructions from the beneficial owner of the shares. Brokers, as holders of record, are permitted to vote on certain routine matters, but not on non-routine matters. The ratification of the appointment of the independent registered public accounting firm is the only matter to be presented at the Annual Meeting that is considered routine under applicable rules. The election of directors, the advisory (non-binding) vote regarding the compensation of the Company’s named executive officers and the advisory (non-binding) vote on the frequency of future advisory votes regarding the compensation of the Company’s named executive officers are not deemed to be routine matters, so a broker is not permitted to vote on these matters without instructions from the beneficial owner of the shares. If a stockholder holds shares in street name and does not provide voting instructions to its broker, those shares will be counted as broker non-votes in the election of directors, the advisory (non-binding) vote regarding executive compensation and the advisory (non-binding) vote on the frequency of future advisory votes regarding executive compensation.

Directors will be elected by a plurality of the votes cast in person or by proxy. Accordingly, the three Class II nominees receiving the highest number of votes cast by the holders of Common Stock will be elected. There will be no cumulative voting in the election of directors. A broker non-vote or a withholding of authority to vote with respect to one or more nominees for director will not have the effect of a vote against such nominee or nominees since broker non-votes and abstentions are counted for purposes of determining the presence or absence of a quorum, but are not counted as votes cast at the Annual Meeting.

The affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the Annual Meeting and entitled to vote on such matter is required to ratify the appointment of the independent registered public accounting firm. Broker non-votes will be deemed shares not present to vote on such matter and will not count as votes for or against the proposal and will not be included in calculating the number of votes necessary for approval of such matter. However, since the ratification of the appointment of the independent registered public accounting firm is considered a routine matter under applicable rules and a broker or other nominee may generally vote on routine matters, no broker non-votes are expected to exist in connection with this proposal. Abstentions will have the effect of a vote against the ratification of the appointment of the independent registered public accounting firm.

The affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the Annual Meeting and entitled to vote on such matter is required to approve the advisory (non-binding) proposal regarding the compensation of the Company’s named executive officers. Broker non-votes will be deemed shares not present to vote on such matter and will not count as votes for or against the proposal and will not be included in calculating the number of votes necessary for approval of such matter. Abstentions will have the effect of a vote against the advisory (non-binding) proposal regarding the compensation of the Company’s named executive officers.

The affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the Annual Meeting and entitled to vote on such matter is required to approve the advisory (non-binding) proposal regarding the frequency of future advisory votes on the compensation of the Company’s named executive officers. Because Item 4 seeks the input of stockholders and provides the Company’s stockholders with the option to vote to hold an advisory vote on the compensation of the Company’s named executive officers every one, two or three years, the affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the Annual Meeting and entitled to vote on such matter may not be reached for any of the frequency options presented. If the resolution is not adopted by the required vote of stockholders, the Board of Directors will evaluate the votes cast and consider the frequency option that receives the highest number of stockholder votes as the recommendation of the stockholders. Although the Board of Directors recommends holding a say-on-pay vote every year, stockholders have the option to specify one of four choices for this matter on the proxy card: one year, two years, three years or abstain. Stockholders are not voting to approve or disapprove of the Board’s recommendation. Abstentions and broker non-votes will be deemed shares not present to vote on such matter and will not count as votes for or against the proposal.

Item 1.

ELECTION OF DIRECTORS

Election Procedures; Term of Office

The Board of Directors currently consists of seven directors. In accordance with the Company’s Amended and Restated Bylaws, members of the Board of Directors are divided into three classes, Class I, Class II and Class III. The members of each class are elected for a term of office to expire at the third succeeding annual meeting of stockholders following their election. The term of office of the current Class II directors expires at the Annual Meeting. The terms of the Class III and Class I directors expire at the annual meeting of stockholders in 2012 and 2013, respectively.

The Nominating Committee has recommended to the Board, and the Board has approved, the nomination of Frederick L. Bollerer, Neil J. Call and John J. Forch to fill three expiring Class II director positions. The three Class II nominees, if elected at the Annual Meeting, will serve until the annual meeting of stockholders in 2014. The three Class II nominees receiving the affirmative vote of the holders of a plurality of the shares of Common Stock represented at the Annual Meeting will be elected. Unless the authority to vote for the election of directors is withheld as to one or all of the nominees, all shares of Common Stock represented by proxy will be voted FOR the election of the nominees. If the authority to vote for the election of directors is withheld as to one but not all of the nominees, all shares of Common Stock represented by any such proxy will be voted FOR the election of the nominee as to whom such authority is not withheld.

If a nominee becomes unavailable to serve as a director for any reason before the election, the shares represented by proxy will be voted for such other person, if any, as may be designated by the Board of Directors. The Board of Directors has no reason to believe that any nominee will be unavailable to serve as a director. All of the nominees have consented to being named herein and to serve if elected.

Any director vacancy occurring after the election may be filled only by a majority vote of the remaining directors, even if less than a quorum of the Board of Directors. A director appointed to fill a vacancy will be appointed to serve until the next annual meeting held for the election of directors, regardless of whether the class of director in which he serves is to be elected at such annual meeting.

The biographies of each of the nominees and continuing directors and executive officers below contains information regarding the person’s service as a director and/or executive officer, business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating Committee and the Board of Directors to determine that the person should serve as a director and/or executive officer.

Nominees for Election

The following table sets forth the name, age and positions with the Company and Sonabank (the “Bank”) for each nominee for election as a director of the Company:


Name	Age		Positions with the Company and the Bank
Frederick L. Bollerer		68	Class II Director of the Company; Director of the Bank

Neil J. Call		77	Class II Director of the Company; Director of the Bank

John J. Forch		61	Class II Director of the Company; Director of the Bank

Frederick L. Bollerer has served as a director of the Company and the Bank since May 2007. Mr. Bollerer is currently the Director and CEO of the Corcoran Gallery of Art. Previously, Mr. Bollerer was one of two organizing partners of Venture Philanthropy Partners, a consulting firm focused on strategy and execution of

strategy in the non profit arena. Clients of the firm include medium and large non profits as well as foundations, arts groups and conservation organizations. The company also does a limited amount of work with for profit companies. In addition, for the last ten years he has been a Partner of Venture Philanthropy Partners. Prior thereto, Mr. Bollerer was President and CEO of Riggs Bank, N.A. Mr. Bollerer has spent over 30 years in the banking industry. The Company believes Mr. Bollerer’s qualifications to sit on the Board of Directors include his over 35 years of banking experience and expertise in corporate strategy development.

Neil J. Call has served as a director of the Company and the Bank since April 2005. Mr. Call, now retired, was an Executive Vice President of MacKenzie Partners, Inc., a New York City financial consulting company, since 1990. Mr. Call was formerly executive Vice President and co-founder of the Proxy/M&A Group at Dewe Rogerson, Inc., the predecessor firm to MacKenzie Partners. Mr. Call was a director of Southern Financial Bancorp, Inc. and Southern Financial Bank from 1986 until April 2004 and was chairman of that board’s Audit Committee. From 1986 to 1989, he served as Executive Vice President of D.F. King and Co. Prior to that he was with Gulf + Western Industries (now Paramount Communications), most recently as Executive Vice President/Finance, and previously as Director of Corporate Communications and Investor Relations. He also spent six years with Ford Motor Company’s Finance Division. Mr. Call is a Certified Public Accountant in the State of Michigan. The Company believes Mr. Call’s qualifications to sit on the Board of Directors include his many years of service as a board member of financial institutions and his financial expertise.

John J. Forch has served as a director of the Company and the Bank since July 2005. Mr. Forch is the founder and the Managing Partner of Forch & Associates, LLC, a financial services firm based in Northern Virginia. Mr. Forch was formerly a partner with PricewaterhouseCoopers LLC, from which he retired in 2002. With the firm he served in various senior management and client service partner positions in the Miami and Washington, D.C. offices. Mr. Forch is a Certified Public Accountant in the Commonwealth of Virginia and the State of Florida. The Company believes Mr. Forch’s qualifications to sit on the Board of Directors include his extensive experience with public and financial accounting matters for a variety of organizations.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE FOR ELECTION TO THE BOARD OF DIRECTORS.

CONTINUING DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the Company’s Class III and Class I directors whose terms of office do not expire at the Annual Meeting, and the executive officers of the Company and the Bank who are not also directors:


Name	Age		Positions with the Company and Bank
Directors:

Georgia S. Derrico		66	Class III Director of the Company; Director of the Bank; Chairman of the Board and Chief Executive Officer of each of the Company and the Bank

Charles A. Kabbash		73	Class III Director of the Company; Director of the Bank

R. Roderick Porter		65	Class I Director of the Company; Director of the Bank, Vice Chairman of the Board and President and Chief Operating Officer of each of the Company and the Bank

Robin Shield		48	Class I Director of the Company; Director of the Bank

Executive officers who are not also directors:

Thomas P. Baker		64	Senior Vice President and Chief Credit Officer of each of the Company and the Bank

William H. Lagos		60	Senior Vice President and Chief Financial Officer of each of the Company and the Bank

William H. Stevens		66	Executive Vice President and Chief Risk Officer of each of the Company and the Bank

Georgia S. Derrico has served as the Chairman of the Board and Chief Executive Officer of each of the Company and the Bank since July 2004. Prior to co-founding the Company in July 2004, she was the Chairman of the Board and Chief Executive Officer of Southern Financial Bancorp, Inc. from 1986 until April 2004. Southern Financial Bancorp, Inc. was the Nasdaq National Market System-listed bank holding company for the $1.5 billion (assets) Southern Financial Bank in Warrenton, Virginia, which was acquired by Provident Bankshares, Inc. in April 2004. She founded Southern Financial Bank in 1986. Prior to that, she served as Senior Vice President, Chief Administrative and Credit Officer of the Multinational Division of Chemical Bank in New York City. She also served at Chemical Bank as the Vice President and District Head of the Mid-Atlantic region of the United States for the Corporate Banking Division. She is the wife of Mr. R. Roderick Porter. The Company believes Ms. Derrico’s qualifications to sit on the Board of Directors and serve as Chairman of the Board and Chief Executive Officer of the Company include her prior experience founding and growing banks in our market and her many years of banking experience, including those with the Company.

Charles A. Kabbash has served as a director of the Company and the Bank since April 2005. Mr. Kabbash is the owner of 414 Associates, a real estate investment and holding company, operating primarily in the Charlottesville, Virginia, area, since 1984. He also is a partner in Kabbash, Fox & Gentry Commercial Real Estate and the owner of Kabbash Business Brokerage, which negotiates the purchase or sale of businesses. Both of these firms also operate primarily in the Charlottesville area. Mr. Kabbash is also the co-owner, along with his wife, Rebecca Gentry, of CandR LLC, a company investing in emerging businesses. Mr. Kabbash is heavily involved in the business, political and civic community in Charlottesville, Virginia. The Company believes Mr. Kabbash’s qualifications to sit on the Board of Directors include his management and operational expertise from years spent as a professional realtor, investor and consultant.

R. Roderick Porter has served as the Vice Chairman of the Board, President and Chief Operating Officer of each of the Company and the Bank since July 2004. Prior to co-founding the Company in July 2004, he was the President and Chief Operating Officer of Southern Financial Bancorp, Inc. from April 1998 until April 2004. Southern Financial Bancorp, Inc. was the Nasdaq National Market System-listed bank holding company for the $1.5 billion (assets) Southern Financial Bank, Warrenton, Virginia, which was acquired by Provident Bankshares, Inc. in April 2004. From 1994 to 1998, he was President of FX Concepts, Ltd., an international money management firm located in New York City. Prior to that, he served as Chairman of Newmarket Capital Corp., a mortgage banking company, and a Principal of Morgan Stanley. Mr. Porter spent 15 years at Chemical Bank, including as a Senior Vice President in Chemical Bank’s treasury department where he was responsible for asset/liability management, the U.S. government and municipal securities portfolio, all U.S. dollar-denominated funding for the bank and the holding company, money market trading and the discount brokerage operation. Prior experience at Chemical Bank included tours as Vice President and General Manager for northern Europe, based in London, and for Chemical Japan, based in Tokyo. Mr. Porter is the husband of Ms. Georgia S. Derrico. The Company believes Mr. Porter’s qualifications to sit on the Board of Directors and serve as Vice Chairman of the Board and President and Chief Operating Officer of the Company include his many years of banking experience and proven leadership in the success of the Company.

Robin R. Shield has served as a director of the Company and the Bank since July 2005. She is currently a private investor. In addition, Ms. Shield is the Managing and General Partner of Clear View LLP, a real estate development and investment partnership. She is a founder and Chairman of the Norwich Partners affiliated companies, hotel development and hotel investment management firms, based in the Northeast and Florida. She is a member of the Board of Directors of the Robins Foundation of Richmond, Virginia. The Company believes Ms. Shield’s qualifications to sit on the Board of Directors include her 14 years of experience in the financial evaluation of business and investment risks and 25 years of experience in portfolio asset management.

Executive Officers of the Company

Thomas P. Baker joined the company in 2005 as Senior Vice President in charge of Commercial Lending in Central Virginia and became Senior Vice President and Chief Credit Officer in July 2010. Prior to this he was Executive Vice President of Southern Financial Bank responsible for Commercial Lending in Central Virginia from 2001 to April 2004 when it was acquired by Provident Bankshares, Inc. He held a similar position with Provident until he left in late 2004 to help form the Bank. From 1990 until 2001, he was President and Chief Executive Officer of Guaranty Financial Corporation in Charlottesville, Virginia. Prior to 1990, he was the President of a financial institution in Central Virginia for 14 years and previously, had worked as the Chief Financial Officer of another small financial institution, having started his career as a certified public accountant with a national accounting firm. The Company believes Mr. Baker’s qualifications to serve as Senior Vice President and Chief Credit Officer of the Company include his many years of banking experience in commercial lending and other management positions with financial institutions in the Bank’s primary markets.

William H. Lagos has served as the Senior Vice President and Chief Financial Officer of the Company and the Bank since November 2004. From September 1986 until April 2004, Mr. Lagos was the Senior Vice President and Controller of Southern Financial Bank, the operating subsidiary of Southern Financial Bancorp, Inc., which was acquired by Provident Bankshares, Inc. in April 2004. Mr. Lagos participated in the Company’s organization commencing in November 2004. The Company believes Mr. Lagos’s qualifications to serve as Senior Vice President and Chief Financial Officer of the Company include his prior experience at Southern Financial Bank and his continuing role and experience with the Company.

William H. Stevens has served as the Executive Vice President and Chief Risk Officer of the Company and the Bank since February 2010. Prior to then, he was Executive Vice President of Credit Administration of the Company and the Bank since April 2005. From 1999 until April 2004, Mr. Stevens was the Executive Vice President of Credit Administration for Southern Financial Bank, the operating subsidiary of Southern Financial Bancorp, Inc., which was acquired by Provident Bankshares, Inc. in April 2004. He resigned as a Senior Vice President of Credit Administration from Provident Bankshares, Inc. in April 2005 when he joined the Company.

From 1991 to 1999, Mr. Stevens served as a Senior Analyst in the Office of the Inspector General of the Federal Deposit Insurance Corporation. Prior to that he was an Executive Vice President at Riggs Bank, N.A. in Washington, D.C. where he managed the bank’s commercial real estate and single family lending activities. He served for three years as President and COO of Anchor Mortgage Services. His background also includes 18 years at Chemical Bank, where he was a Senior Vice President, Real Estate. The Company believes Mr. Stevens’s qualifications to serve as Executive Vice President and Chief Risk Officer of the Company include his many years of banking experience, both at financial institutions and at the FDIC.

Each executive officer of the Company is elected by the Board of Directors of the Company and holds office until his successor is duly elected and qualified or until his or her earlier death, resignation or removal.

CORPORATE GOVERNANCE

Meetings of the Board of Directors

The Board of Directors of the Company held ten (10) meetings during 2010. There was no director who attended less than 75% of the aggregate of the (1) total number of meetings of the Board and (2) total number of meetings held by committees on which he or she served. Each director is expected to dedicate sufficient time, energy and attention to company matters to ensure the diligent performance of his or her duties, including by attending annual and special meetings of the stockholders of the Company, the Board and Committees of which he or she is a member.

Board Leadership Structure

Georgia S. Derrico has served as the Chairman of the Board and Chief Executive Officer of the Company since January 2005 and of the Bank since it commenced operations in April 2005.

The Chairman of the Board organizes the work of the Board and ensures that the Board has access to sufficient information to enable the Board to carry out its functions, including monitoring the Company’s and the Bank’s performance and the performance of management. In carrying out this role, the Chairman, among other things: (1) presides over all meetings of the Board of Directors and stockholders; (2) establishes the annual agenda of the Board and agendas of each meeting in consultation with the President of the Company, R. Roderick Porter; (3) oversees the distribution of information to Directors; (4) advises with respect to the work of each Committee and reviews (with the Nominating Committee) changes in Board membership and the membership and chair of each committee; (5) coordinates periodic review of management’s strategic plan for the Company and the Bank; and (6) coordinates the annual performance review of the key senior officers.

The Board believes that the Company’s Chief Executive Officer is best situated to serve as Chairman because she is the director most familiar with the Company’s business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Independent directors and management have different perspectives and roles in strategy development. The Company’s independent directors bring experience, oversight and expertise from outside the Company and industry, while the Chief Executive Officer brings company-specific experience and expertise. The Board believes that the combined role of Chairman and Chief Executive Officer promotes strategy development and execution, and facilitates information flow between management and the Board, which are essential to effective governance.

The Board of Directors has not formally designated a lead independent director.

Oversight of Risk Management

The Board has an active role, as a whole and also at the committee level, in overseeing management of the Company’s risks. The Board regularly reviews information regarding the Company’s asset quality, securities portfolio, capital, liquidity and operations, as well as the risks associated with each. The Company’s Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements as well as overseeing succession planning. The Audit Committee oversees management of financial and regulatory risks. The Nominating Committee manages risks associated with Board of Directors, including the independence and competence of the directors. The Asset-Liability Management Committee is responsible for overseeing the management of risks regarding the Bank’s policies and procedures related to investments in securities. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks.

Committees of the Board of Directors

The Company’s Board of Directors has four committees, the Audit Committee, the Compensation Committee, the Asset-Liability Management Committee and the Nominating Committee, each of which is described below.

Audit Committee. The members of the Audit Committee are Neil J. Call (Chairman), John J. Forch and Frederick L. Bollerer all of whom the Board has determined to be “independent directors” as defined under the NASDAQ Stock Market listing standards and in Section 10A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has determined that all of the Audit Committee members have the financial knowledge, business experience and independent judgment necessary for service on the Audit Committee. The Board has further determined that Neil J. Call, the Chairman of the Audit Committee, has the requisite attributes of an “audit committee financial expert” as defined by the rules and regulations of the SEC, and has the financial literacy and accounting or financial qualifications and experience to provide effective oversight of the Audit Committee. The Audit Committee operates pursuant to a written charter, which is available electronically in the corporate governance section of the Investor Relations page of the Company’s website at www.sonabank.com.

As set forth in the Audit Committee’s charter the functions of the Audit Committee are to assist the Board in its oversight of:

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the integrity of the Company’s financial statements;

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the adequacy of the Company’s system of internal controls;

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the Company’s compliance with regulatory requirements;

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the qualifications and independence of the Company’s independent registered public accountants; and

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the performance of the Company’s independent registered public accountants and of the Bank’s internal audit function.

In carrying out these responsibilities, the Audit Committee, among other things:

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monitors the preparation of quarterly and annual financial reports by the Company’s management;

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supervises the relationship between the Company and its independent registered public accountants, including: having direct responsibility for their appointment, compensation and retention; reviewing the scope of their audit services; approving audit and non-audit services; and confirming the independence of the independent registered public accountants; and

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oversees management’s implementation and maintenance of effective systems of internal and disclosure controls, including review of the Company’s policies relating to legal and regulatory compliance, ethics and conflicts of interests and review of the Bank’s internal auditing program.

The Audit Committee meets at least quarterly and met four times during 2010. The Audit Committee’s meetings include, whenever appropriate, executive sessions with the Company’s independent registered public accountants and with the Bank’s internal auditors, in each case without the presence of the Company’s or the Bank’s management.

As part of its oversight of the Company’s financial statements, the Audit Committee reviews and discusses with both management and the independent registered public accountants all annual and quarterly financial statements prior to their issuance. During 2010, management of the Company advised the Audit Committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles, and reviewed significant accounting and disclosure issues with the Audit Committee.

Compensation Committee. The members of the Compensation Committee are John J. Forch (Chairman), Neil J. Call, Frederick L Bollerer and Charles A. Kabbash, all of whom the Board has determined to be “independent directors” as defined under the NASDAQ Stock Market listing standards. The Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the Bank’s senior management, which includes the Company’s named executive officers, evaluating the performance of senior management and, either as a committee or together with the other independent members of the Board, determining and approving the compensation level for the Chief Executive Officer, and making recommendations regarding compensation of other executive officers and certain compensation plans to the Board. In addition, the Compensation Committee is responsible for the oversight of succession planning for the Company and the Bank. The Compensation Committee operates pursuant to a written charter, a copy of which is available electronically in the corporate governance section of the Investor Relations page of the Company’s website at www.sonabank.com. In 2010, the Compensation Committee met two times.

Asset-Liability Management Committee. The members of the Asset-Liability Management Committee are R. Roderick Porter (Chairman), Charles A. Kabbash and Robin R. Shield. The Asset-Liability Management Committee ensures that the Bank’s investment policies and procedures are adequate and that the Bank’s investments in securities are consistent with the guidelines established in the Bank’s policies and comply with applicable laws and regulations. The Committee evaluates the performance of the securities portfolio to ensure that the Bank’s objectives with respect to diversification, liquidity, and quality are met. While management is responsible for purchase decisions with respect to investment securities, the Asset-Liability Management Committee is responsible for reviewing and ratifying management’s investment transactions. The Asset-Liability Management Committee is also responsible for reviewing the entire balance sheet to ensure that products and funding sources meet with the Board’s policies relating to asset-liability and interest rate risk management. The Asset-Liability Management Committee generally meets quarterly and met four times in 2010.

Nominating Committee. The Nominating Committee is responsible for making recommendations to the Board regarding the membership of the Board, including:

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recommending to the Board the slate of director nominees for election at the annual meeting of stockholders;

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considering, recommending and recruiting candidates to fill any vacancies or new positions on the Board, including candidates that may be recommended by stockholders;

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establishing criteria for selecting new directors; and

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reviewing the backgrounds and qualifications of possible candidates for director positions.

The Nominating Committee operates pursuant to a written charter, a copy of which is available electronically in the corporate governance section of the Investor Relations page of the Company’s website at www.sonabank.com. The members of the Nominating Committee are Charles A. Kabbash (Chairman), Neil J. Call and John J. Forch, all of whom the Board has determined to be “independent directors” as defined under the NASDAQ Stock Market listing standards. The Nominating Committee met one time in 2010.

Director Nominations Process

The Nominating Committee considers nominees to serve as directors of the Company and recommends such persons to the Board of Directors. The Nominating Committee also considers director candidates recommended by stockholders if such candidates appear to be qualified to serve on the Company’s Board of Directors and meet the criteria for nominees considered by the Nominating Committee. The Nominating Committee may choose not to consider an unsolicited recommendation if no vacancy exists on the Board of Directors and the Nominating Committee does not perceive a need to increase the size of the Board. In order to avoid the unnecessary use of the Nominating Committee’s resources, the Nominating Committee will consider only those director candidates recommended in accordance with the procedures set forth below in the section titled “Procedures to be Followed by Stockholders.”

Criteria for Director Nominees.

The Nominating Committee has adopted a set of criteria that it considers when it selects individuals to be nominated for election to the Board of Directors. The Nominating Committee considers the following criteria in selecting nominees: financial expertise and business experience; familiarity with and participation in the local community and the nominee’s ability to refer business to the Company; integrity, honesty and reputation; dedication to the Company and its stockholders, including the nominee’s ownership of the Company’s Common Stock; independence; and any other factors the Nominating Committee deems relevant, including age, size of the Board of Directors and regulatory disclosure obligations. The Nominating Committee does not have a formal policy with respect to diversity; however, the Board and Nominating Committee believe that it is essential that the Board members represent diverse viewpoints.

The Nominating Committee may weigh the foregoing criteria differently in different situations, depending on the composition of the Board at the time. The Nominating Committee will strive to maintain at least one director who meets the definition of “audit committee financial expert” under the regulations of the SEC.

In addition, prior to nominating an existing director for re-election to the Board of Directors, the Nominating Committee considers and reviews an existing director’s Board and committee attendance and performance; length of Board service; experience, skills and contributions that the existing director brings to the Board; and independence.

Process for Identifying and Evaluating Director Nominees.

Pursuant to the Nominating Committee Charter as approved by the Board of Directors, the Nominating Committee is responsible for the process relating to director nominations, including identifying, interviewing and selecting individuals who may be nominated for election to the Board of Directors. The process that the Nominating Committee follows when it identifies and evaluates individuals to be nominated for election to the Board of Directors is set forth below.

Identification. For purposes of identifying nominees for the Board of Directors, the Nominating Committee will rely on personal contacts of the members of the Board of Directors as well as their knowledge of members of the Bank’s local communities. The Nominating Committee will also consider director candidates recommended by stockholders in accordance with the policy and procedures set forth below in the paragraph titled “Procedures to be Followed by Stockholders.” The Nominating Committee has not previously used an independent search firm in identifying nominees.

Evaluation. In evaluating potential nominees, the Nominating Committee determines whether the candidate is eligible and qualified for service on the Board of Directors by evaluating the candidate under the selection criteria set forth above. In addition, for any new director nominee, the Nominating Committee will conduct a check of the individual’s background and interview the candidate.

Procedures to be Followed by Stockholders.

Any stockholder of the Company may nominate one or more persons for election as a director of the Company at an annual meeting of stockholders if the stockholder complies with the prior notice and information provisions contained in the Company’s Amended and Restated Bylaws. In order for a director nomination to be timely, a stockholder’s notice to the Company must be received at the Company’s offices not later than the 90^th day prior to the anniversary date of the immediately preceding annual meeting. To submit a nomination of a director candidate, a stockholder must submit the following information in writing, addressed to the Chairman of the Nominating Committee, care of the Corporate Secretary, at the Company’s main office:

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The name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated;

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A representation that the stockholder is a holder of record of stock of the Company entitled to vote at the annual meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

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If applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;

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Such other information regarding each nominee that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor regulation thereto; and

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Such nominee’s consent to serve as a director of the Company if so elected.

A nomination of any person not made in compliance with the foregoing procedures may not be eligible to be voted upon by the stockholders at the meeting.

If the Nominating Committee receives a director nomination from a stockholder or group of stockholders who (individually or in the aggregate) beneficially owned greater than 5% of the Company’s outstanding Common Stock for at least one year as of the date of such recommendation, the Company, as required by applicable securities law, will identify the candidate and stockholder or group of stockholders recommending the candidate and will disclose in its proxy statement whether the Nominating Committee chose to nominate the candidate, as well as certain other information.

Stockholder Communications with Directors; Director Attendance at Annual Meeting

The Board of Directors will give appropriate attention to written communications received from stockholders, and will respond if and as appropriate. Stockholders or other interested parties can contact any director or committee of the Board of Directors by writing to them in care of Devon Porter, Corporate Secretary, 550 Broadview Avenue, Warrenton, Virginia 20186. Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee. Other concerns will also generally be referred to the Audit Committee.

In addition, the Board of Directors encourages directors to attend the annual meeting of stockholders. All but one of the Company’s directors attended the Company’s 2010 Annual Meeting of Stockholders held on April 22, 2010.

Code of Ethics

The Company’s Board of Directors has adopted a Code of Ethics that applies to all directors, officers and employees, including the Company’s Chairman of the Board and Chief Executive Officer and senior financial officers. The Board designed the Code in an effort to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of conflicts of interest, full, fair and accurate disclosure in filings and other public communications made by the Company, compliance with applicable laws, prompt internal reporting of violations of the Code of Ethics, and accountability for adherence to the Code. The Code of Ethics is available electronically in the corporate governance section of the Investor Relations page of the Company’s website at www.sonabank.com.

Director Independence

During the review by the Company’s Board of Directors of director independence, the Board considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates, including those reported under “Certain Relationships and Related Party Transactions” below. The Board also considered whether there were any transactions or relationships

between directors or any member of their immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder) and members of the Company’s senior management or their affiliates. The purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.

As a result of this review, the Board affirmatively determined that all of the Company’s directors, with the exception of Georgia S. Derrico and R. Roderick Porter, are independent directors as defined by the listing standards of the NASDAQ Stock Market. Both Ms. Derrico and Mr. Porter are considered to be “inside” directors because of their employment as senior executives of the Company. Ms. Derrico and Mr. Porter are husband and wife, and their adult son, R. Devon Porter, is the Secretary of each of the Company and the Bank and is employed by the Bank as a Senior Vice President.

The independent directors of the Company hold executive sessions from time to time without the Chief Executive Officer or any other member of management present. In 2010, the independent directors held two executive sessions.

DIRECTOR COMPENSATION

In 2010, directors of the Company did not receive a fee for attending Company, Board or committee meetings. All of the directors of the Company are also directors of the Bank and each non-employee director of the Bank received a fee of $500 for each Bank Board meeting attended and $250 for each Bank committee meeting attended, plus any travel, food and lodging expenses. Any non-employee directors who attended either Bank Board or committee meetings by conference telephone received one-half of the fee for such meeting. Further, in October 2006, the Compensation Committee determined that Board members should receive 1,000 options for each year of service on the Board after the initial election held in 2005. In January 2011, for service as a director in 2010, the Board granted options to each non-employee director to acquire 1,000 shares of Common Stock of the Company that will vest ratably over five years. Directors who are also employees of the Company or the Bank received no additional compensation for their service as a director.

In April 2010, the Compensation Committee determined that directors shall be entitled to have the Bank match their purchases of Company Common Stock by funding the purchase of additional shares of Company Common Stock on their behalf. Pursuant to the stock matching program, which became effective in July 2010, the Bank funds the purchase of additional shares of Company Common Stock, in an amount equal to 50% of the shares of Company Common Stock purchased by the director, up to an annual value of $5,000 per director.

The following table contains information concerning the compensation of the directors of the Bank for the fiscal year ended December 31, 2010. The named executive officers who also serve as directors did not receive any compensation for their service as directors for the fiscal year ended December 31, 2010.

Director Compensation for the Fiscal Year Ended December 31, 2010


Name	Fees Earned or Paid in Cash		Stock Awards⁽¹⁾		All Other Compensation⁽²⁾		Total
Frederick L. Bollerer	$	6,550	$	4,040	$	4,969	$	15,559
Neil J. Call		7,300		4,040		5,000		16,340
John J. Forch		6,200		4,040		3,950		14,190
Charles A. Kabbash		7,125		4,040		4,992		16,157
Robin R. Shield		6,075		4,040		—		10,115

(1)

Represents the grant date fair value of stock options awarded pursuant to the Company’s Option Plans in the fiscal year ended December 31, 2010, which were computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Options (“ASC Topic 718”). Assumptions used in the calculation of these amounts are included in Note 13 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2010 included in its Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC.

(2)	Represents the value of the additional shares of Company Common Stock purchased by the director for which the Bank provided funding pursuant to the Company’s stock matching program described above.

EXECUTIVE COMPENSATION AND OTHER MATTERS

Compensation Discussion and Analysis

This section discusses the Company’s compensation program, including how it relates to the executive officers named in the compensation tables that follow (who we sometimes refer to below and elsewhere in this proxy statement as the “named executive officers”). The primary objective of our executive compensation program is to attract, retain and motivate key employees and enable those persons to participate in the long-term success of the Company while also advancing the interests of our stockholders. As such, the compensation program is designed to provide levels of compensation which are reflective of both the individual’s and the organization’s performance in achieving certain goals and objectives and in helping to build value for our stockholders. Set forth below is an analysis of our compensation program, the material compensation policy decisions we have made under this program and the material factors that we considered in making those decisions.

Overview of Compensation Program

The Compensation Committee of the Board of Directors is responsible for developing and making recommendations to the Board with respect to the Company’s executive compensation policies. John J. Forch, Neil J. Call, Frederick L. Bollerer and Charles A. Kabbash, each of whom the Board of Directors has determined to be an independent director, as defined in the NASDAQ Stock Market listing standards, serve on the Compensation Committee. In addition, the Compensation Committee and the Board have reviewed the compensation policies and practices for all employees and concluded that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on the Company.

This discussion and analysis describes the components of the Company’s compensation program for its named executive officers and describes the basis on which the 2010 compensation determinations were made by the Compensation Committee with respect to the executive officers of the Company and the Bank.

Role of Executives in Establishing Compensation

The Compensation Committee makes all decisions with respect to compensation of the named executive officers, subject to review and approval by the full Board of Directors. The Chairman of the Board and Chief Executive Officer reviews the performance of the Company’s executive officers (other than herself and the President) and, based on that review, provides input regarding the performance of the other executive officers and makes recommendations to the Compensation Committee for compensation amounts payable to the other executive officers of the Company, including the other named executive officers. Neither the Chairman of the Board and Chief Executive Officer nor the President is involved with any aspect of determining her or his own pay.

Compensation Committee Activity

When reviewing executive compensation in 2010, the Compensation Committee reviewed the overall compensation of the named executive officers. As a result of that review, the Compensation Committee implemented an increase of approximately 5% in the Chief Executive Officer’s and President’s base salary and also chose to implement increases of less than 5% in the base salaries of the other named executive officers.

Compensation Philosophy

No executive officer of the Company is paid a salary, bonus or other form of compensation other than options to purchase shares of the Company’s Common Stock for their service to the Company. The executive officers of the Company currently hold the same executive officer positions with the Bank and all executive compensation is paid by the Bank for services performed by executives of the Bank. Accordingly, the following discussion of executive compensation relates to the compensation by the Bank to executives of the Bank.

The fundamental objectives of the Bank’s executive compensation policies are to ensure that Bank executives are provided incentives and compensated in a way that advances both the short- and long-term interests of stockholders while also ensuring that the Company and the Bank are able to attract, retain and motivate executive management talent. Accordingly, compensation is based on: (1) the employee’s individual performance and his or her ability to lead the Company and the Bank to achieve their respective financial goals and (2) the Company’s consolidated financial performance. In making decisions with respect to any element of an executive officer’s compensation, the Committee considers the total compensation that may be awarded to the executive officer, including salary, annual bonus, long-term equity incentive compensation, accumulated realized and unrealized stock option gains, and the dollar value to the executive and cost to the Company of all perquisites and other personal benefits. The Committee’s goal is to award compensation that is reasonable when all elements of potential compensation are considered.

Peer Groups and Benchmarks

In 2010, the Compensation Committee, with the assistance of an outside consultant, reviewed the overall compensation of the named executive officers in comparison to the compensation of executive officers at Mid-Atlantic banks with total assets comparable to that of the Company during the prior year. The Compensation Committee reviewed the base salary, bonus, value of stock compensation and value of option compensation of similarly situated executive officers at the bank holding companies included in the Company’s peer group and considered the performance of its competitors and general economic and market conditions in its analysis.

The Compensation Committee believes that the following peer group of companies is representative of the sector in which the Company operates. The group includes public bank holding companies located in the Company’s market areas as of December 31, 2010. The group was chosen because of the relative size as measured by total assets. The Company’s peer group for 2010 consisted of the following companies:

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Access National Corporation;

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C&F Financial Corporation;

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Carrollton Bancorp;

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Cecil Bancorp, Inc.;

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DNB Financial Corporation;

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Eagle Financial Services, Inc.;

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Fauquier Bankshares, Inc.;

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First National Corp;

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Middleburg Financial Corporation;

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Monarch Financial Holdings, Inc.;

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Old Line Bancshares, Inc.;

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Old Point Financial Corporation; and

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Tri-County Financial Corporation.

The Company does not benchmark the compensation of its named executive officers to a certain percentage or range of compensation within its peer group. Instead, the Compensation Committee used this information as a point of reference for measurement, but not as the determinative factor in setting the compensation of the Company’s named executive officers. The Compensation Committee does not use compensation data of its peer group to “target” a specific peer group compensation level for any given executive. Rather, the Compensation Committee uses its understanding of peer group compensation as a starting point for its decision making.

Because the comparative compensation information is just one of the analytical tools that is used in setting named executive officer compensation, the Compensation Committee has discretion in determining the nature and extent of its use. Further, given the limitations associated with comparative pay information for setting individual executive compensation, including the difficulty of assessing and comparing wealth accumulation through equity gains and post employment amounts, the Compensation Committee may elect not to use the comparative compensation information at all in the course of making compensation decisions.

Setting Executive Compensation

The Compensation Committee chose not to retain a compensation consultant in 2010. In reviewing the 2010 compensation of each of the named executive officers, the Compensation Committee reviewed all components of their respective compensation, including base salary, annual bonus, long-term equity incentive compensation, accumulated realized and unrealized stock option gains, and the dollar value to the executive and cost to the Company of all perquisites and other personal benefits. In addition, the Compensation Committee reviewed each executive officer’s compensation history and performance information. As a result of this review, the Compensation Committee implemented an increase of approximately 5% in the Chief Executive Officer’s and President’s base salary and also chose to implement increases of less than 5% in the base salaries of the other named executive officers.

In making compensation decisions with respect to each of the components of executive compensation set forth below, the Compensation Committee considers the competitive market for executives. While no executive officer of the Company or the Bank has a written employment or severance agreement with the Company or the Bank, the Company and the Bank have entered into change in control agreements with Ms. Derrico and Mr. Porter, which are described below.

Components of Executive Compensation

The principal components of the executive compensation program of the Company (through the Bank) are:

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Base salary;

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Cash incentive;

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Long-term equity incentive awards;

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Perquisites and other personal benefits; and

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In the case of the Chief Executive Officer and President, a SERP as described more fully below.

Base Salary

Salaries provide executive officers with a base level of monthly income and help achieve the objectives outlined above by attracting and retaining strong talent. Generally, base salaries are not based on specific measures of corporate performance, but are determined by tenure of service, scope of the position, including current job responsibilities, relative salaries of the Company’s peers and the officer’s individual performance and contribution to the Company. The Company’s base salaries are adjusted based on factors such as individual experience, individual performance, individual potential, cost of living considerations and specific issues particular to the Company as well as the Compensation Committee’s subjective judgment.

The Compensation Committee monitors the base salary levels and the various incentives of the named executive officers of the Company to ensure that overall compensation is consistent with the Company’s objectives and remains competitive within the area of the Company’s operations. In setting the goals and measuring an executive’s performance against those goals, the Company considers the performance of its competitors and general economic and market conditions. None of the factors included in the Company’s strategic and business goals are assigned a specific weight. Instead, the Compensation Committee

recognizes that the relative importance of these factors may change in order to adapt the Company’s operations to specific business challenges and to reflect changing economic and marketplace conditions.

Cash Incentive

The annual compensation of the Company’s named executive officers consists primarily of a base salary and a cash incentive, or bonus. The purpose of the bonus is to motivate, reward and retain the named executive officers who are critical to the Company’s ongoing success. In determining the cash incentive, the Compensation Committee takes into consideration the Company’s performance compared to its budget, stockholder return over the long term, the operating ratios of return on assets and return on equity and the efficiency ratio. In addition, the Compensation Committee may also perform a subjective evaluation of the extent to which the named executive officers contributed to the enhancement of the Company during an acquisition and/or exhibited team oriented behavior that contributed to the success of the Company. The Compensation Committee considers the Chief Executive Officer’s and President’s participation in the SERP and the benefits to be provided by that plan when determining the cash incentive to be paid to those individuals.

Long- Term Equity Incentive Awards

The Company maintains an equity compensation program for its named executive officers and other key employees, in order to attract, retain and motivate key employees and enable those persons to participate in the long-term success of the Company. Stock options have been the Company’s only form of long-term incentive compensation, and may be subject to performance-based and/or time-based vesting requirements. Stock options currently outstanding have been granted pursuant to two Company plans: the Company’s 2004 Stock Option Plan (the “2004 Plan”) and the Company’s 2010 Stock Awards and Incentive Plan (the “2010 Plan”). As of February 28, 2011, there were 285,675 options outstanding under the 2004 Plan, 181,800 of which were held by named executive officers of the Company, and there were 27,000 options outstanding under the Company’s 2010 Plan, 17,000 of which were held by named executive officers of the Company.

Perquisites and Other Personal Benefits

Perquisites and other personal benefits represent a small part of the Company’s executive compensation program. The named executive officers are eligible to participate in the Company’s employee benefits plans, which are generally available to all Company employees. The Compensation Committee reviews the perquisites and other personal benefits provided to the named executive officers annually, and offers such benefits after consideration of the business need. Currently, the Company provides a car allowance to the named executive officers other than the Chief Executive Officer and, for the Chief Executive Officer and President, a part time personal assistant as described in the footnotes to the Summary Compensation Table.

Supplemental Executive Retirement Plan

Effective August 1, 2007, the Bank has entered into a SERP with each of the Chief Executive Officer and the President to encourage such officers to remain employees of the Bank and the Company. The SERP is designed to provide a certain level of post-retirement income to the two individuals who have a significant impact on the long-term growth and profitability of the Company. The SERP will begin payout 10 years from the date of implementation and be payable for a period of 10 years with an annual benefit designed to provide 50% of each executive’s estimated annual salary per year for a 10-year period at retirement. In April 2010, the SERP for each of the Chief Executive Officer and President was amended to increase the amount of the annual benefit under the SERP from $137,357 to $159,701 and $106,330 to $123,627, respectively.

Tax and Accounting Implications

Stock-Based Compensation. The Company accounts for stock-based compensation, including options and awards granted pursuant to its 2004 Plan and 2010 Plan (together, the “Option Plans”) in accordance with the requirements of ASC Topic 718, which the Company adopted effective January 1, 2006.

Deductibility of Executive Compensation. Under Section 162(m) of the Internal Revenue Code, a limitation was placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1,000,000 in any taxable year, unless the compensation is performance-based. The Company has no individuals with non-performance based compensation paid in excess of the Internal Revenue Code Section 162(m) tax deduction limit.

Nonqualified Deferred Compensation. If an executive is entitled to nonqualified deferred compensation benefits that are subject to Section 409A of the Internal Revenue Code, and such benefits do not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, the recipient is subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit includible in income.

Summary Compensation Table

The following table provides certain summary information concerning compensation paid or accrued by the Company to or on behalf of the Company’s Chief Executive Officer, Chief Financial Officer and the other three most highly compensated executive officers of the Company (determined as of the end of the last fiscal year) (the “named executive officers”) for the fiscal years ended December 31, 2010, 2009 and 2008. As of the end of the last fiscal year, in addition to the Chief Executive Officer and the Chief Financial Officer, Thomas P. Baker, R. Roderick Porter and William H. Stevens were the only other executive officers of the Company and the Bank.

Summary Compensation Table for the Fiscal Years Ended December 31, 2010, 2009 and 2008


Name	Year			Salary		Bonus			Option Awards⁽²⁾		Change in Pension Value and Nonqualified Deferred Compensation Earnings⁽³⁾		Other			Total
Thomas P. Baker Senior Vice President and Chief Credit Officer		2010	⁽¹⁾	$	161,161	$	—		$	12,120	$	—	$	—		$	173,281

Georgia S. Derrico Chairman of the Board and Chief Executive Officer		2010 2009 2008		$	267,969 255,208 224,917	$	— 36,000 30,000	⁽⁴⁾	$	20,200 42,180 35,100	$	117,919 94,904 90,385	$	23,675 14,344 12,917	⁽⁵⁾ ⁽⁶⁾ ⁽⁶⁾	$	424,763 442,636 393,319

William H. Lagos Senior Vice President Chief Financial Officer		2010 2009 2008		$	133,324 127,673 122,092	$	— 8,000 6,000		$	10,100 11,520 12,285	$	— — —	$	— — —		$	143,424 147,193 140,377

R. Roderick Porter President and Chief Operating Officer		2010 2009 2008		$	209,016 199,063 175,167	$	— 28,000 23,333	⁽⁴⁾	$	20,200 42,180 35,100	$	91,283 73,468 69,968	$	28,475 19,144 17,717	⁽⁵⁾ ⁽⁷⁾ ⁽⁷⁾	$	343,974 361,855 321,285

William H. Stevens Executive Vice President and Chief Risk Officer		2010 2009 2008		$	184,818 182,988 178,883	$	— — 8,000		$	6,060 3,345 5,265	$	— — —	$	— — —		$	190,878 186,333 192,148

(1)	Mr. Baker has been in the employ of the Company since 2005 and became a named executive officer of the Company in 2010. The amounts presented reflect the compensation Mr. Baker received in 2010.

(2)

Represents the aggregate grant date fair value of stock options awarded pursuant to the Company’s Option Plans in the fiscal years ended December 31, 2010, 2009 and 2008, which were computed in accordance with ASC Topic 718. Assumptions used in the calculation of the amounts for 2010 are included in Note 13 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2010 included in its Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC. Assumptions used in the calculation of the amounts for 2009 are included in Note 13 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2009 included in its Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC. Assumptions used in the calculation of the amounts for 2008 are included in Note 14 to the Company’s consolidated financial statements for the fiscal year ended December 31, 2008 included in its Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC.

(3)

Reflects the amounts accrued by the Company for the named executive officer’s accumulated benefit under the SERP, computed as of December 31, 2010. For year 2008, the amount represents the accrual for the twelve month period ending December 31, 2008 and is also representative of the aggregate change in the present value from December 31, 2007 to December 31, 2008. For year 2009, the amount represents the accrual for the twelve month period ending December 31, 2009 and is also representative of the aggregate change in the present value from December 31, 2008 to December 31, 2009. For year 2010, the amount represents the accrual for the twelve month period ending December 31, 2010 and is also representative of the aggregate change in the present value from December 31, 2009 to December 31, 2010.

(4)

These amounts reflect one-third of the aggregate bonus awarded to each of the Chief Executive Officer and the President in 2006 in consideration of the Bank’s net income as well as the successful completion of the Company’s initial public offering and the acquisition of 1^st Service Bank. The aggregate bonus amount was paid over a period of three years, from 2006-2008.

(5)

These amounts include the value of Company Common Stock purchased by the Chief Executive Officer and the President for which the Bank provided funding pursuant to the Company’s stock matching program discussed in the above portion of this Proxy Statement entitled “Director Compensation”. Pursuant to the program, in 2010, the Bank funded the purchase of additional shares of Company Common Stock by each of the Chief Executive Officer and the President at a value of $5,000. These amounts also reflect one-quarter of the total 2010 compensation of $74,700 of a bank employee of who devotes 25% of her time acting as a personal assistant to Georgia S. Derrico, 25% of her time acting as a personal assistant to R. Roderick Porter and 50% of her time to the Bank.

(6)

This amount reflects one-quarter of the total compensation of $57,375 in 2009 and $51,667 in 2008 of a bank employee of who devotes 25% of her time acting as a personal assistant to Georgia S. Derrico, 25% of her time acting as a personal assistant to R. Roderick Porter and 50% of her time to the Bank.

(7)

This amount reflects (a) one-quarter of the total compensation of $57,375 in 2009 and $51,667 in 2008 of a bank employee of who devotes 25% of her time acting as a personal assistant to Georgia S. Derrico, 25% of her time acting as a personal assistant to R. Roderick Porter and 50% of her time to the Bank and (b) an automobile allowance of $4,800.

Outstanding Equity Awards

The following table contains information concerning the unexercised options and other equity incentive plan awards for each named executive officer as of December 31, 2010:

Outstanding Equity Awards at 2010 Fiscal Year-End


Name	Number of securities underlying unexercised options Exercisable		Number of securities underlying unexercised options Unexercisable		Option exercise price		Option expiration date
Thomas P. Baker		22,000 800 400 400		1,200 1,600 1,600 3,000	$	9.09 9.20 5.50 8.02 7.04		11/17/2015 01/23/2018 01/27/2019 07/29/2019 07/27/2020

Georgia S. Derrico		27,500 2,750 4,000 2,200 1,000		6,000 8,800 4,000 5,000	$	9.09 9.09 9.20 5.50 8.02 7.04		04/14/2015 11/17/2015 01/23/2018 01/27/2019 07/29/2019 07/27/2020

William H. Lagos		12,650 1,650 1,400 400 400		2,100 1,600 1,600 2,500		9.09 9.09 9.20 5.50 8.02 7.04		04/14/2015 11/17/2015 01/23/2018 01/27/2019 07/29/2019 07/27/2020

R. Roderick Porter		27,500 2,750 4,000 2,200 1,000		6,000 8,800 4,000 5,000		9.09 9.09 9.20 5.50 8.02 7.04		04/14/2015 11/17/2015 01/23/2018 01/27/2019 07/29/2019 07/27/2020

William H. Stevens		16,500 600 300		900 1,200 1,500		9.09 9.20 5.50 7.04		04/14/2015 01/23/2018 01/29/2019 07/27/2020

During 2010, no named executive officer of the Company exercised any stock options.

Pension Benefits

The following table contains information concerning each plan that provides for payments or other benefits at, following, or in connection with retirement for each named executive officer as of December 31, 2010:

Pension Benefits


Name	Plan Name⁽¹⁾	Number of Years of Credited Service		Present Value of Accumulated Benefit⁽²⁾		Payments During Last Fiscal Year
Georgia S. Derrico	Supplemental Executive Retirement Plan		3.42	$	340,101	$	—

R. Roderick Porter	Supplemental Executive Retirement Plan		3.42	$	263,278		—

(1)	The terms of the Supplemental Executive Retirement Plan are described in the section captioned “Compensation Discussion and Analysis” above.

(2)	Reflects the amounts accrued by the Company for the named executive officer’s accumulated benefit under the Supplemental Executive Retirement Plan, for the period from August 1, 2007, the effective date of the SERP, through December 31, 2010.

Payments Upon Termination or Change in Control

Change in Control Agreements

In August 2006, the Company and the Bank entered into change in control agreements with Ms. Derrico and Mr. Porter. These agreements provide such officers certain lump sum cash payments in the event the officer’s employment is terminated without cause at any time or if such employment is terminated by the executive for “good reason” and the officer signs the form of mutual general release.

For purposes of the change in control agreements, “cause” is defined as:

•

the officer’s commission of a willful act (including, without limitation, a dishonest or fraudulent act which dishonest or fraudulent act results in personal gain to the officer) or a grossly negligent act, or the willful or grossly negligent omission to act by the officer, which causes material financial or reputational harm to the Company or an affiliate of the Company;

•

the officer’s conviction of, or plea of nolo contendere to, any felony involving dishonesty or fraud or that causes significant material financial or reputational injury to the Company or an affiliate; or

•

the officer’s willful neglect of, or continued failure to substantially perform, in any material respect, his or her duties (as assigned to the officer from time to time) or obligations, including a material violation of the Company’s or an affiliate’s policy or procedures to the Company or an affiliate other than any such failure resulting from the officer’s incapacity due to physical or mental illness. An act or omission is “willful” if it was knowingly done, or knowingly omitted to be done, by the officer not in good faith and without reasonable belief that the act or omission was in the best interests of the Company or an affiliate. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by

the Board or based upon the advice of counsel for the Company or an affiliate shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company or an affiliate, as applicable. The Board of Directors of the Company (the officer and any of his or her immediate family members recusing themselves from discussions, deliberations and voting) has the discretion, in other circumstances to determine in good faith, from all the facts and circumstances reasonably available to it, whether the officer’s act or omission was “willful.”

Under the change in control agreements, “good reason” is defined as one of the following events, without the written consent of the officer, following a Change in Control:

•

the assignment to the officer of duties materially inconsistent with the officer’s then-current level of authority or responsibilities, or any other action by the Company or an affiliate that results in a material diminution in the officer’s position, compensation, authority, duties or responsibilities;

•

a breach by the Company or an affiliate of any material term or covenant of any agreement with the officer;

•

a requirement that the officer be based at any office or location that is more than twenty-five (25) miles from the officer’s principal office location immediately preceding a change in control; or

•

a failure by any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or the affiliate employing the officer to assume expressly and agree to perform the change in control agreement in the same manner and to the same extent that the Company or any affiliate would be required to perform it if no such succession had taken place.

Under the change in control agreements, a “Change in Control” is defined generally to mean: a change in the ownership of the Company or the Bank, a change in the effective control of the Company or the Bank or a change in the ownership of a substantial portion of the assets of the Company or the Bank as provided under Section 409A of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), and any Internal Revenue Service guidance, including Notice 2005-1, and regulations issued in connection with Section 409A of the Code. In no event, however, will a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank, or a subsidiary of either of them, by the Company, the Bank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

Upon a qualifying termination, the officers will receive a lump sum cash payment equal to a multiple (three times for Ms. Derrico and two times for Mr. Porter) of the sum of the named executive officer’s annual base salary and his or her targeted bonus as set by the Board of Directors, or if the Board has not set a target bonus amount, the bonus paid by the Company or the Bank for the year prior to the year in which termination occurs. In addition to the cash payment, the officers will receive continuation of health insurance for a period ending on the earlier of (x) the date of receipt of comparable benefits from a new employer or (y) 24 months. The agreement also provides for the immediate and total vesting of all awards under the Company’s 2004 Plan, any restricted stock, stock appreciation right, phantom stock or other equity-based compensation plan held by the officer. Such awards shall become exercisable in full, all restrictions shall lapse and all performance measures shall be deemed satisfied in full. The Company and the Bank have also agreed to pay all taxes and penalties (including the excise tax that may be levied on “excess parachute payments” under Section 4999 of the Code, plus all taxes on such payments (known as a “gross-up payment”)). In addition, if the provision of any of the benefits under these agreements would trigger the 20% excise tax and interest penalties under Section 409A of the Code, then such benefits will not be provided, and in lieu, thereof, the Company or the Bank will pay the named executive officer, in a lump sum, a cash amount equal to the cost of providing such benefit. The officers will also be entitled to the indemnity provided by the Company’s Articles of Incorporation, as amended, and Amended and Restated Bylaws and to any directors and officers liability insurance to the same extent, upon a change in control, as other of the Company’s or affiliate’s directors and officers are covered.

The table below reflects the amount of compensation payable to the officers upon a qualifying termination. The amounts shown below assume that the conditions for a payment under the change in control agreements occurred on December 31, 2010, and assumes a price per share of the Common Stock equal to $7.60 based on the closing price of the Common Stock on the NASDAQ Global Market on December 31, 2010. These amounts are estimates of the amounts which would have been paid out to the officers upon a termination as of that date under the specified circumstances. The actual amounts to be paid out can only be determined at the time of such qualifying termination.


Name	Salary and Bonus⁽¹⁾		Health Insurance Benefits		Acceleration and Continuation of Equity Awards⁽²⁾		Total Termination Benefits
Georgia Derrico	$	803,907	$	10,429	$	21,280	$	835,616
R. Roderick Porter		418,032		10,429		21,280		449,741

(1)	This column reflects an amount equal to three times Ms. Derrico’s and two times Mr. Porter’s annual base salary plus bonus as of December 31, 2010 and assumes a target bonus set by the Board of Directors equal to the bonus awarded for 2010.

(2)

Reflects the value of any unexercised options and options that would be accelerated upon a qualifying termination equal to the spread between the exercise price and $7.60 per share based on the closing price of the Company’s Common Stock on the NASDAQ Global Market on December 31, 2010. For purposes of this calculation, options with an exercise price greater than $7.60 were not included.

If the above payments constituted parachute payments under Section 280G of the Code, Ms. Derrico and Mr. Porter would also be entitled to receive gross-up payments to cover the applicable amount of taxes. No funds have been set aside or accrued to provide for the cash payments described in the agreements. Moreover, the Company has no present plans to engage in any transaction that could trigger the payment provisions of these agreements. All such payments are subject to any prohibitions, limitations and restrictions that may be applicable under the Federal Deposit Insurance Act and the regulations of the FDIC.

In consideration of these cash payments, the officers have agreed:

•

to maintain the confidentiality of the Company’s and the Bank’s trade secrets;

•

not compete with the Company and the Bank for the longer of 12 months after termination of employment or the period during which payments under the change in control agreement are being made (the “Restricted Period”);

•

not to solicit the Company’s or the Bank’s employees during the Restricted Period;

•

not to solicit the Company’s or the Bank’s customers during the Restricted Period; and

•

to sign a mutual general release, releasing the Company and the Bank of all potential claims relating to the officer’s employment and covenanting not to sue the Company or the Bank on any such claims.

Supplemental Executive Retirement Plans

Effective August 1, 2007, the Bank entered into a SERP with each of Ms. Derrico and Mr. Porter. In the event of a termination of employment in connection with a change in control of the Bank, the plan provides that these officers would be entitled to receive their normal retirement benefits under the SERP regardless of the time of the change in control. The normal retirement benefit is an annual cash payment made to the executive for ten years. Assuming that these conditions for a payment under the SERP had been met as of December 31, 2010, Ms. Derrico and Mr. Porter would have been entitled to receive from the Bank an annual payment equal to $159,701 and $123,627, respectively, beginning seven months after termination and continuing for ten years. If the above payments constituted parachute payments under Section 280G of the Code, Ms. Derrico and Mr. Porter would also be entitled to receive gross-up payments to cover the applicable amount of taxes.

In the event of a termination of employment not for cause (as defined in the SERP), death, disability or following a change in control, the plan provides that these officers would be entitled to receive their accrued benefits under the SERP calculated as of the date of termination. The accrued benefit is the benefit accrued and recorded by the Company on behalf of the officer pro-rated based on the number of full months the officer was employed during the year of termination. Assuming that these conditions for a payment under the SERP had been met as of December 31, 2010, Ms. Derrico and Mr. Porter would have been entitled to receive from the Bank a payment equal to $340,101 and $263,278, respectively, paid out in ten equal annual installments. In the event of a termination of employment for cause (as defined in the SERP), the plan provides that these officers would not be entitled to receive any benefits under the SERP.

Change in Control Provisions in Equity Plans and Agreements

The named executive officers hold stock options under the Company’s 2004 Plan, which was approved by the stockholders in 2004, for officers, directors and employees. The 2004 Plan provides for the grants of both incentive stock options which qualify under Section 422 of the Code and nonqualified stock options. Options will become vested and exercisable at the rate determined by the Compensation Committee at the time of grant; provided, however, that options granted will generally vest in approximately equal percentages each year over a period no shorter than three years. Unless otherwise determined by the Compensation Committee, all options will become immediately vested and exercisable upon the optionee’s death or disability. Options granted under the 2004 Plan may not be transferred except by will or the laws of descent and distribution after the death of the optionee.

The named executive officers hold awards under the Company’s 2010 Plan, which was approved by the stockholders at the Company’s 2010 Annual Meeting of Stockholders held on April 22, 2010, for directors and employees. The 2010 Plan provides for the grants of incentive stock options (which qualify under Section 422 of the Code), nonqualified stock options, stock appreciation rights, restricted stock awards, performance awards, phantom stock awards, or any combination of the foregoing, as is best suited to the circumstances of the particular employee or director. The Compensation Committee has the sole authority, in its discretion, to determine which

employees or directors shall receive an award, the time or times when such award is made, the terms of such award, whether an incentive stock option, nonqualified option or stock appreciation right is granted, the number of shares of stock which may be issued under each option, stock appreciation right or restricted stock award, and the value of each performance award and phantom stock award. Awards granted under the 2010 Plan may not be transferred except by will or the laws of descent and distribution after the death of the holder.

Acceleration upon a Change in Control

For all stock options granted to the named executive officers under the 2004 Plan, the individual award agreements between the Company and the optionee provide that if a tender offer or exchange offer for shares of the Company’s Common Stock (other than such an offer by the Company) is commenced, or if the stockholders of the Company approve an agreement providing either for a transaction in which the Company will cease to be an independent publicly-owned institution or for the sale or other disposition of all or substantially all of the assets of the Company, all outstanding stock options will immediately vest and become fully exercisable.

For all options, restricted stock awards, phantom stock awards, performance awards or stock appreciation rights granted to the named executive officers under the 2010 Plan, the individual award agreements between the Company and the holder provide that if any of the following change of control events occurs, all outstanding awards will immediately vest and become exercisable or satisfiable: (i) the Company is not the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly-owned subsidiary of the Company), (ii) the Company’s subsidiary bank is merged or consolidated into, or otherwise acquired by, an entity other than a wholly-owned subsidiary of the Company, (iii) the Company sells, leases or exchanges all or substantially all of its assets to any other person or entity (other

than a wholly-owned subsidiary of the Company), (iv) the Company is to be dissolved and liquidated, (v) any person or entity, including a “group” as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the outstanding shares of the Company’s voting stock (based upon voting power), or (vi) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board. The Compensation Committee, in its discretion, may take any other action with respect to outstanding awards that it deems appropriate, which action may vary among awards granted to individual holders; provided, however, that such action shall not reduce the value of an award.

Assuming such an event occurred on December 31, 2010, under the Option Plans, Ms. Derrico and Messrs. Baker, Lagos, Porter and Stevens would have received a benefit of $21,280, $5,040, $4,760, $21,280 and $3,360, respectively, which reflects the value of any options that would be accelerated upon a change in control equal to the spread between the exercise price and $7.60 per share based on the closing price of the Company’s Common Stock on the NASDAQ Global Market on December 31, 2010. For purposes of these calculations, options with an exercise price greater than $7.60 were not included.

Termination Without a Change in Control

Pursuant to the 2004 Plan, if an optionee ceases to be a director or employee of the Company for any reason other than death or disability, he may, at any time within three months after his date of termination, or such longer period as may be determined by the Compensation Committee, exercise any option only to the extent it was vested and he was entitled to exercise the option on the date of termination. Any options which are not so exercised will terminate and be forfeited. If an optionee dies or ceases to be a director, officer or employee of the Company due to his disability, all unvested options of such optionee will immediately become vested and exercisable and he, or the person or persons to whom the option is transferred by will or by the laws of descent and distribution, may, at any time within 12 months after the death or date of termination, or such longer period as may be determined by the Compensation Committee, exercise any option with respect to all shares subject thereto. Any options which are not so exercised will terminate and be forfeited. Any options which are not exercised by an optionee upon termination of service as director or employee that are not exercised within the periods described above (three months for termination other than death or disability and one year due to death or disability) will terminate and be forfeited.

Pursuant to the 2010 Plan, except as may be determined by the Compensation Committee or as may otherwise be provided in the award at the time granted, if the holder does not remain continuously in the employ of the Company or in service as a director of the Company or its affiliates at all times during the applicable vesting period, performance awards and phantom stock awards shall terminate. Each option agreement, restricted stock award agreement and stock appreciation rights agreement shall specify the effect of termination of employment or service on its exercisability.

Compensation Committee Interlocks and Insider Participation

During 2010, no executive officer of the Company served as (1) a member of a compensation committee (or other Board committee performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of another entity, one of whose executive officers served on the Company’s Compensation Committee, (2) a director of another entity, one of whose executive officers served on the Company’s Compensation Committee or (3) a member of the compensation committee (or other Board committee performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of another entity, one of whose executive officers served as a director of the Company. In addition, none of the members of the Compensation Committee (a) was an officer or employee of the Company or any of its subsidiaries in 2010; (b) was formerly an officer or employee of the Company or any of its subsidiaries or (c) had any relationship that required disclosure under “Certain Relationships and Related Party Transactions.”

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, the following report of the Compensation Committee shall not be deemed to be incorporated by reference into any such filing.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

The Compensation Committee

John J. Forch (Chairman)

Neil J. Call

Charles A. Kabbash

Frederick L. Bollerer

AUDIT COMMITTEE REPORT

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, the following report of the Audit Committee shall not be deemed to be incorporated by reference into any such filing.

In accordance with its written charter adopted by the Company’s Board of Directors, the Company’s Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company. The Board of Directors has determined that each Audit Committee member is independent in accordance with the listing standards of the NASDAQ Stock Market and in Section 10A of the Securities Exchange Act of 1934, as amended, and that Neil J. Call has the requisite attributes of an “audit committee financial expert” as defined by the rules and regulations of the SEC.

In discharging its oversight responsibility as to the audit process, the Audit Committee (1) obtained from the independent registered public accounting firm a formal written statement describing all relationships between the independent registered public accounting firm and the Company that might bear on the independent registered public accounting firm’s independence consistent with the applicable requirements of the Public Company Accounting Oversight Board, (2) discussed with the independent registered public accounting firm any relationships that may impact their objectivity and independence and (3) satisfied itself as to the independent registered public accounting firm’s independence. The Audit Committee also discussed with management, the internal auditors and the independent registered public accounting firm the quality and adequacy of the Company’s internal controls. The Audit Committee reviewed with both the independent registered public accounting firm and the internal auditors their audit plans, audit scope and identification of audit risks.

The Audit Committee discussed and reviewed with the independent registered public accounting firm all communications required by generally accepted auditing standards, including those described in Statement on Auditing Standards No. 61, “Communication with Audit Committees.” With and without management present, the Audit Committee discussed and reviewed the results of the internal and external audit examinations.

The Audit Committee reviewed the audited financial statements of the Company as of and for the fiscal year ended December 31, 2010, with management and the independent registered public accounting firm. Management has the responsibility for the preparation of the Company’s financial statements and the independent registered public accounting firm has the responsibility for the examination of those statements.

Based on the above-mentioned review and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010, for filing with the Securities and Exchange Commission.

The Audit Committee

Neil J. Call (Chairman)

John J. Forch

Frederick L. Bollerer

FEES AND SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following table sets forth the fees billed to the Company for the fiscal years ending December 31, 2010 and 2009 by Crowe Horwath LLP:


	2010		2009
Audit fees⁽¹⁾	$	176,000	$	141,500
Audit related fees⁽²⁾		—		78,950
Tax fees⁽³⁾		24,235		11,250
All other fees⁽⁴⁾		3,600		1,160

(1)

Includes fees billed for professional services rendered in connection with the audits of the Company’s annual consolidated financial statements and quarterly reviews of the Company’s consolidated financial statements. In 2009, includes the audit of the opening balances related to the Bank’s assumption of the deposits, borrowings, and substantially all of the assets of Greater Atlantic Bank from the FDIC.

(2)	Includes fees billed for professional services rendered for services provided in connection with the public offering and related SEC filings in 2009.

(3)	Includes fees billed for professional services rendered for guidance regarding and the preparation of federal, state and franchise tax returns for the Company and Bank.

(4)	Includes fees billed for professional services rendered for guidance related to certain accounting consultations regarding fixed assets.

The Audit Committee will consider, on a case-by-case basis, and approve, if appropriate, all audit and permissible non-audit services to be provided by the Company’s independent registered public accounting firm. Pre-approval of such services is required unless a “de minimus” exception is met. To qualify for the “de minimus” exception, the aggregate amount of all such services provided to the Company must constitute not more than five percent of the total amount of revenues paid by the Company to its independent registered public accounting firm during the fiscal year in which the non-audit services are provided; such services were not recognized by the Company at the time of the engagement to be non-audit services; and the non-audit services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee to whom authority to grant such approval has been delegated by the Committee.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Pursuant to the Company’s policy, the Board of Directors is required to review all related party transactions for potential conflicts of interest. Under the policy, any related party transaction may be consummated or may continue only (1) if the Board approves or ratifies such transaction and if the transaction is on terms comparable to those that could be obtained in arms’-length dealings with an unrelated third party, (2) if the transaction involves compensation that has been approved by the Company’s Compensation Committee or (3) if the transaction has been approved by the disinterested members of the Board of Directors. The Board may approve or ratify the related party transaction only if the Board determines that, under all of the circumstances, the transaction is in the best interests of the Company.

Many of the directors and executive officers of the Company and the Bank and their associates, which include corporations, partnerships and other organizations in which they are officers or partners or in which they and their immediate families have at least a 5% interest, are customers of the Bank. During 2010, the Bank made loans in the ordinary course of business to certain of the directors and executive officers of the Company and the Bank and their associates, all of which were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons unaffiliated with the Company and did not involve more than the normal risk of collectibility or present other unfavorable features. Loans to directors and executive officers and certain significant stockholders of the Company and the Bank are subject to limitations contained in the Federal Reserve Act, the principal effect of which is to require that extensions of credit by the Bank to executive officers, directors and certain significant stockholders of the Company and the Bank satisfy the foregoing standards. As of December 31, 2010, all of such loans aggregated $223,449 which was approximately 0.25% of the Company’s Tier 1 capital at such date. The Company expects the Bank to have such transactions or transactions on a similar basis with the directors, executive officers and certain significant stockholders of the Company and the Bank and their associates in the future.

BENEFICIAL OWNERSHIP OF COMMON STOCK

BY MANAGEMENT OF THE COMPANY AND PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial ownership of the Company Common Stock as of February 28, 2011, by (1) each director, director nominee and named executive officer of the Company, (2) each person who is known by the Company to own beneficially 5% or more of the Common Stock and (3) all directors, director nominees and named executive officers as a group. Unless otherwise indicated, based on information furnished by such stockholders, management of the Company believes that each person has sole voting and dispositive power over the shares indicated as owned by such person and the address of each stockholder is the same as the address of the Company.


Name	Position With the Company and the Bank	Number of Shares of Common Stock Owned			Percentage Beneficially Owned⁽¹⁾
5% or Greater Holders:
Banc Fund VI L.P. 20 North Wacker Drive, Suite 3300 Chicago, IL 60606	Investor		809,845	⁽²⁾		7.00	%

Patriot Financial Partners, L.P. 2929 Arch Street Philadelphia, Pennsylvania 19104	Investor		1,000,000	⁽³⁾		8.63

Wellington Management Company, LLP 280 Congress Street Boston, MA 02210	Investor		1,173,256	⁽⁴⁾		10.12

Directors and Executive Officers:
Georgia S. Derrico⁽⁵⁾	Chairman of the Board and Chief Executive Officer of the Company and the Bank		518,245	⁽⁶⁾		4.43
R. Roderick Porter⁽⁵⁾	Vice Chairman of the Board and President of the Company and the Bank		518,245	⁽⁷⁾			⁽⁵⁾
Neil J. Call	Director of the Company and the Bank		106,734	⁽⁸⁾		*
Charles A. Kabbash	Director of the Company and the Bank		81,204	⁽⁹⁾		*
Robin R. Shield	Director of the Company and the Bank		72,280	⁽¹⁰⁾		*
John J. Forch	Director of the Company and the Bank		41,374	⁽¹¹⁾		*
Frederick L. Bollerer	Director of the Company and the Bank		15,157	⁽¹²⁾		*
William H. Lagos	Senior Vice President and Chief Financial Officer of the Company and the Bank		37,654	⁽¹³⁾		*
William H. Stevens	Executive Vice President and Chief Risk Officer of the Bank		22,036	⁽¹⁴⁾		*
Thomas P. Baker	Senior Vice President and Chef Credit Officer of the Bank		26,549	⁽¹⁵⁾		*
Directors, Director Nominees and Named Executive Officers as a Group (10 persons)			1,439,478	⁽¹⁶⁾		12.22	%

*	Indicates ownership which does not exceed 1.0%.

(1)

The percentage beneficially owned was calculated based on 11,590,212 shares of Company Common Stock outstanding as of February 28, 2011 and assumes the exercise by the stockholder or group named in each row of all options or warrants for the purchase of Company Common Stock held by such stockholder or group and exercisable within 60 days.

(2)

The information regarding beneficial ownership is included in reliance on a Schedule 13G filed with the SEC on February 11, 2011 jointly on behalf of Banc Fund VI L.P., Banc Fund VII L.P. and Banc Fund VIII L.P. (collectively the “Banc Fund Group”.) The Banc Fund Group may be deemed to have beneficial ownership of the shares reflected in the table as of December 31, 2010. The Banc Fund Group reported aggregate beneficial ownership of 809,845 shares, or 7.0% of the Company’s common stock as of such date, including 230,110 shares beneficially owned by Banc Fund VI L.P., 309,000 shares beneficially owned by Banc Fund VII L.P. and 270,735 shares beneficially owned by Banc Fund VIII L.P.

(3)

The information regarding beneficial ownership is included in reliance on a Schedule 13D filed with the SEC on November 5, 2009 jointly on behalf of Patriot Financial Partners, L.P., Patriot Financial Partners Parallel, L.P., Patriot Financial Partners GP, L.P., Patriot Financial Partners GP, LLC, W. Kirk Wycoff, Ira M. Lubert and James J. Lynch (collectively, the “Patriot Financial Group”). The Patriot Financial Group may be deemed to have beneficial ownership of the shares reflected in the table as of November 4, 2009. The Patriot Financial Group reported aggregate beneficial ownership of 1,000,000 shares, or 8.6% of the Company’s common stock as of such date, including 852,698 shares beneficially owned by Patriot Financial Partners, L.P. and 147,302 shares beneficially owned by Patriot Financial Partners Parallel, L.P.

(4)

Wellington Management Company, LLP (“Wellington”) may be deemed to have beneficial ownership of the shares reflected in the table as of December 31, 2010. The information regarding beneficial ownership is included in reliance on a Schedule 13G filed with the SEC on February 12, 2010 by Wellington, whereby Wellington reported aggregate beneficial ownership of 1,146,556 shares, or 9.89% of the Company’s common stock as of December 31, 2009. The aggregate beneficial ownership reported by Wellington includes shares beneficially owned by Bay Pond Partners, L.P. and Wellington Hedge Management, LLC (“Bay Pond”) as of December 31, 2010. Bay Pond reported its aggregate beneficial ownership as 579,521 shares, or 5.0% of the Company’s common stock, in a Schedule 13G filed with the SEC on November 9, 2009. That amount was increased by 26,700 shares to 606,221 shares, or 5.23% of the Company’s common stock, in a Schedule 13G/A filed with the SEC on February 14, 2011 jointly on behalf of Bay Pond Partners, L.P. and Wellington Hedge Management, LLC. The total number of shares of common stock reflected in the table as being beneficially owned by Wellington includes the increase in Bay Pond’s aggregate beneficial ownership.

(5)	Ms. Derrico and Mr. Porter are married. Ms. Derrico and Mr. Porter together beneficially own 4.47% of the outstanding shares of Common Stock.

(6)

Consists of (a) 312,250 shares of Common Stock held jointly with Mr. Porter, (b) 70,125 shares of Common Stock held of record by an IRA account for the benefit of Ms. Derrico, (c) 30,495 shares of Common Stock held of record by an IRA account for the benefit of Mr. Porter, (d) 2,837 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Ms. Derrico, (e) 2,738 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Mr. Porter, (f) 8,250 shares of Common Stock which may be acquired upon the exercise of the warrants issued to Ms. Derrico who advanced funds to the Company to pay organizational and pre-opening expenses, (g) 41,650 shares of Common Stock which may be acquired upon the exercise of stock options granted to Ms. Derrico under the Option Plans, (h) 8,250 shares of Common Stock which may be acquired upon the exercise of the warrants issued to Mr. Porter who advanced funds to the Company to pay organizational and pre-opening expenses and (i) 41,650 shares of Common Stock which may be acquired upon the exercise of stock options granted to Mr. Porter under the Option Plans. Does not include 11,000 shares of Common Stock held individually by R. Devon Porter, the adult son of Ms. Derrico who resides in the same home.

(7)

Consists of (a) 312,250 shares of Common Stock held jointly with Ms. Derrico, (b) 30,495 shares of Common Stock held of record by an IRA account for the benefit of Mr. Porter, (c) 70,125 shares of Common Stock held of record by an IRA account for the benefit of Ms. Derrico, (d) 2,738 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Mr. Porter, (e) 2,837 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Ms. Derrico, (f) 8,250 shares of Common Stock which may be acquired upon the exercise of the warrants issued to Mr. Porter who advanced funds to the Company to pay organizational and pre-opening expenses, (g) 41,650 shares of Common Stock which may be acquired upon the exercise of stock options granted to Mr. Porter under the Option Plans, (h) 8,250 shares of Common Stock which may be acquired upon the exercise of the warrants issued to Ms. Derrico who advanced funds to the Company to pay organizational and pre-opening expenses and (i) 41,650 shares of Common Stock which may be acquired upon the exercise of stock options granted to Ms. Derrico under the Option Plans. Does not include 11,000 shares of Common Stock held individually by R. Devon Porter, the adult son of Mr. Porter who resides in the same home.

(8)

Includes (a) 11,000 shares of Common Stock which may be acquired pursuant to the exercise of the warrants issued to Mr. Call who advanced funds to the Company to pay organizational and pre-opening expenses and (b) 1,880 shares of Common Stock which may be acquired upon the exercise of stock options granted to Mr. Call under the Option Plans.

(9)

Includes (a) 14,433 shares of Common Stock held jointly by Mr. Kabbash and his spouse, (b) 9,664 shares of Common Stock held of record by an IRA account for the benefit of Mr. Kabbash, (c) 6,187 shares of Common Stock held of record by an IRA account for the benefit of Mr. Kabbash’s spouse, (d) 11,000 shares of Common Stock which may be acquired pursuant to the exercise of the warrants issued to Mr. Kabbash who advanced funds to the Company to pay organizational and pre-opening expenses and (e) 1,880 shares of Common Stock which may be acquired upon the exercise of stock options granted to Mr. Kabbash under the Option Plans.

(10)

Includes (a) 70,400 shares of Common Stock held of record by the Robin R. Shield Revocable Trust, of which Ms. Shield is the trustee and (b) 1,880 shares of Common Stock which may be acquired upon the exercise of stock options granted to Ms. Shield under the Option Plans. Does not include, and Ms. Shield disclaims beneficial ownership with respect to, 45,572 shares of Common Stock held in trusts for the benefit of her minor children, of which her husband is the voting trustee.

(11)	Includes (a) 5,000 shares of Common Stock held of record by an IRA account for the benefit of Mr. Forch and (b) 1,880 shares of Common Stock which may be acquired upon the exercise of stock options granted to Mr. Forch under the Option Plans.

(12)	Includes 1,000 shares of Common Stock which may be acquired upon the exercise of stock options granted to Mr. Bollerer under the Option Plans.

(13)	Includes (a) 1,197 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Mr. Lagos and (b) 17,600 shares of Common Stock which may be acquired upon exercise of stock options granted to Mr. Lagos under the Option Plans.

(14)

Includes (a) 973 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Mr. Stevens, (b) 1,492 shares of Common Stock held of record by an IRA account for the benefit of Mr. Stevens and (c) 18,000 shares of Common Stock which may be acquired upon exercise of stock options granted to Mr. Stevens under the Option Plans.

(15)

Includes 1,428 shares of Common Stock held of record by the Company’s 401(k) Plan as custodian for Mr. Baker, (b) 721 shares of Common Stock held of record by an IRA account for the benefit of Mr. Baker and (c) 24,400 shares of Common Stock which may be acquired upon exercise of stock options granted to Mr. Baker under the Option Plans.

(16)

Includes (a) 38,500 shares of Common Stock which may be acquired pursuant to the exercise of the warrants issued to the above-named directors who advanced funds to the Company to pay organizational and pre-opening expenses and (b) 151,820 shares of Common Stock which may be acquired upon the exercise of stock options granted to the above-named directors and officers under the Option Plans.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who own more than 10% of the outstanding Common Stock to file reports of ownership and changes in ownership of Common Stock and other equity securities of the Company with the SEC. Such persons are required by SEC regulations to furnish the Company with copies of all Section 16 forms they file.

Based solely on the Company’s review of the copies of such reports furnished to it and representations from certain reporting persons that they have complied with the applicable filing requirements, the Company believes that during the year ended December 31, 2010, all Section 16(a) reporting requirements applicable to its officers, directors and greater than 10% stockholders were complied with, except that Thomas P. Baker did not timely file a Form 4 to report the grant of stock options. During the calendar year ended December 31, 2009, Ms. Derrico and Messrs. Porter, Baker and Lagos did not timely file a Form 4 or Form 5 to report grants of stock options in July 2009; however, the omission was identified in the Form 5’s prepared for 2010. These transactions have been reported to the SEC.

Item 2

PROPOSAL TO RATIFY APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

On March 9, 2011, the Audit Committee of the Board of Directors dismissed Crowe Horwath LLP (“Crowe Horwath”) as the Company’s independent registered public accounting firm, effective as of the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The reports of Crowe Horwath on the consolidated financial statements of the Company for the years ended December 31, 2010 and 2009 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the two most recent fiscal years ended December 31, 2010 and 2009 and from January 1, 2011 through March 15, 2011, (i) there were no disagreements with Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure that, if not resolved to Crowe’s satisfaction, would have caused Crowe to make reference to the subject matter thereof in connection with its report on the Company’s consolidated financial statements for such years and (ii) except as disclosed below, there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K. As of December 31, 2010, the Company had a material weakness in internal controls over financial reporting related to the identification of one subsequent event and management believes that there were no other deficiencies that constituted a material weakness as of such date. Management was informed by Crowe Horwath that a material weakness existed related to subsequent event evaluation following the notification of dismissal by the Company. The Company has implemented improved controls intended to remediate this material weakness. This material weakness was disclosed in Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The Chairman of the Audit Committee has discussed this matter with Crowe Horwath. The Company has authorized Crowe Horwath to respond fully to the inquiries of KPMG LLP (“KPMG”) concerning this matter.

Based on the Audit Committee’s approval and recommendation, on March 9, 2011, the Board of Directors has selected KPMG as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011. During the two most recent fiscal years ended December 31, 2010 and 2009 and from January 1, 2011 through March 9, 2011, neither the Company nor anyone on its behalf consulted KPMG regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report or oral advice was provided to the Company that KPMG concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement or reportable event as defined in Regulation S-K, Item 304(a)(1)(iv) and Item 304(a)(1)(v), respectively.

At the Annual Meeting, the stockholders will be asked to consider and act upon a proposal to ratify the appointment of KPMG. The ratification of such appointment will require the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote and present in person or represented by proxy at the Annual Meeting. Representatives of KPMG will be present at the Annual Meeting, will be given an opportunity to make a statement (if they desire to do so) and will be available to respond to appropriate questions.

Stockholder ratification of the selection of KPMG as the Company’s independent registered public accounting firm for the 2011 fiscal year is not required by the Company’s Amended and Restated Bylaws, state law or otherwise. However, the Board of Directors is submitting the selection of KPMG to the Company’s stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain KPMG. Even if the selection of KPMG is ratified, the Audit Committee may, in their discretion, direct the appointment of a different independent registered public accounting firm at any time during the 2011 fiscal year if they determine that such a change would be in the best interests of the Company and its stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP.

Item 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act) and the related rules of the SEC, the Company is providing shareholders the opportunity to vote on a non-binding, advisory resolution to approve the compensation of its named executive officers.

The Company urges shareholders to read the section titled “EXECUTIVE COMPENSATION AND OTHER MATTERS — Compensation Discussion and Analysis” beginning on page 15 of this Proxy Statement, which describes in more detail how its executive compensation policies and procedures operate and are designed to achieve its compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 19 – 26, which provide detailed information on the compensation of the Company’s named executive officers. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the Compensation Discussion and Analysis are effective in advancing both the short- and long-term interests of stockholders while also ensuring that the Company and the Bank are able to attract, retain and motivate executive management talent, and that the compensation of its named executive officers reported in this Proxy Statement has contributed to the Company’s recent and long-term success.

The Company is asking for stockholder approval of the compensation of its named executive officers as disclosed in this Proxy Statement in accordance with the SEC rules, which disclosures include the information contained in the Compensation Discussion and Analysis, the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s named executive officers and the policies and practices described in this Proxy Statement.

Accordingly, the Company is asking its stockholders to vote on the following resolution at the Annual Meeting:

“Resolved, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2011 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2010 Summary Compensation Table and the other related tables and disclosure.”

This advisory vote, commonly referred to as a “say-on-pay” vote, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding its executive compensation program.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NON-BINDING PROPOSAL TO APPROVE THE COMPENSATION OF ITS NAMED EXECUTIVE OFFICERS.

Item 4

ADVISORY VOTE ON FREQUENCY OF SAY-ON-PAY VOTE

Pursuant to recently adopted Section 14A of the Exchange Act, the Company is asking stockholders to vote on whether future advisory votes on executive compensation of the nature reflected in Item 3 above should occur every year, every two years or every three years. Stockholders also may, if they wish, abstain from casting a vote on this proposal.

After careful consideration and dialogue with its stockholders, the Board has determined that holding an advisory vote on executive compensation every year is the most appropriate policy for the Company at this time, and recommends that stockholders vote for future advisory votes on executive compensation to occur every year. The Company’s executive compensation program is straightforward and does not tend to materially change from year to year; nonetheless, the Board recognizes that the “say-on-pay” advisory vote provisions are new and believes that holding an annual advisory vote on executive compensation provides the Company with more direct and immediate feedback on its annual compensation program and disclosures. However, stockholders should note that because the advisory vote on executive compensation occurs well after the beginning of the compensation year, and because the different elements of its executive compensation program are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change its executive compensation program in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of stockholders. The Company believes that an annual advisory vote on executive compensation is consistent with its practice of seeking input and engaging in dialogue with its stockholders on corporate governance matters (including the Company’s practice of annually providing stockholders the opportunity to ratify the Audit Committee’s selection of independent auditors) and its executive compensation philosophy, policies and practices.

This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on the Board. Stockholders will be able to specify one of four choices for this item on the proxy card: every one year, every two years, every three years or abstain. Stockholders are not voting to approve or disapprove the Board’s recommendation. Although non-binding, the Board and the Compensation Committee will carefully review the voting results. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on a less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.

THE BOARD RECOMMENDS A VOTE FOR THE NON-BINDING PROPOSAL TO HOLD FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY YEAR.

DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS

FOR 2012 ANNUAL MEETING

In order for stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act to be presented at the Company’s 2012 Annual Meeting of Stockholders and included in the Company’s proxy statement and form of proxy relating to such meeting, such proposals must be submitted to the Secretary of the Company at the Company’s principal executive offices no later than November 19, 2011. Stockholder proposals should be submitted to Southern National Bancorp of Virginia, Inc., 550 Broadview Avenue, Warrenton, Virginia 20186, Attention: Corporate Secretary.

ANNUAL REPORT ON FORM 10-K

The Company will furnish, without charge, a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC, to any stockholder upon written request to Southern National Bancorp of Virginia, Inc., 550 Broadview Avenue, Warrenton, Virginia 20186, Attention: Corporate Secretary.

ATTENDANCE AT THE ANNUAL MEETING

All stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting, and each may be accompanied by a guest. Registration of attendees of the Annual Meeting will begin at 1:30 p.m. If you attend, please note that you may be asked to present valid picture identification, such as a driver’s license. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the Annual Meeting. Please also note that if you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the Annual Meeting.

OTHER MATTERS

The Board of Directors does not intend to bring any other matter before the Annual Meeting and does not know of any other matters that are to be presented for action at the Annual Meeting. However, if any other matter does properly come before the Annual Meeting or any adjournment thereof, the proxies will be voted in accordance with the discretion of the person or persons voting the proxies.

You are cordially invited to attend the Annual Meeting. Regardless of whether you plan to attend the Annual Meeting, you are urged to complete, date, sign and return the enclosed proxy in the accompanying envelope or vote your proxy by telephone or over the Internet by following the instructions at www.cfpproxy.com/6090 at your earliest convenience.

LOGO

PLEASE MARK VOTES

AS IN THIS EXAMPLE

PROXY

SOUTHERN NATIONAL BANCORP OF VIRGINIA, I NC.

2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, APRIL 28, 2011

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The 2011 Annual Meeting of Stockholders of Southern National Bancorp of Virginia, Inc. (the “Company”) will be held at International Country Club at 13200 Lee Jackson Highway, Fairfax, Virginia 22033, on Thursday, April 28, 2011, beginning at 2:00 p.m. (local time). The undersigned hereby acknowledges receipt of the related Notice of 2011 Annual Meeting of Stockholders and Proxy Statement dated March 18, 2011 accompanying this proxy.

The undersigned stockholder hereby appoints Georgia S. Derrico and R. Roderick Porter, and each of them, attorneys and agents, with full power of substitution, to vote as proxy all shares of Common Stock, par value $0.01 per share, of the Company owned of record by the undersigned and otherwise to act on behalf of the undersigned at the 2011 Annual Meeting of Stockholders and any postponement or adjournment thereof in accordance with the directions set forth herein and with discretionary authority with respect to such other matters as may properly come before such meeting or any postponement or adjournment(s) thereof.

For

Withhold

For All Except

1. ELECTION of three Class II directors to serve until the 2014 annual meeting of stockholders, and until their successors are duly elected and qualified, or until their earlier resignation or removal.

Frederick L. Bollerer Neil J. Call John J. Forch

INSTRUCTION: To withhold authority to vote for any individual nominee, mark “For All Except” and write that nominee’s name in the space provided below.

2. RATIFICATION of the appointment of KPMG LLP as the For Against Abstain independent registered public accounting firm of the Company for the fiscal year ending December 31, 2011.

For Against Abstain

3. APPROVAL of an advisory (non-binding) proposal on the compensation of the Company’s named executive officers.

4. APPROVAL of an advisory (non-binding) proposal on the frequency of advisory votes on the One Two Three

Year Years Years Abstain

Compensation of the Company’s named executive officers.

The Board of Directors recommends a vote FOR the election of all nominees for

director named herein, FOR proposals 2 and 3 and FOR the ONE YEAR frequency on

proposal 4.

This proxy is solicited by the Board of Directors and will be voted in accordance

with the undersigned’s directions set forth herein.

If no direction is made, this proxy will be voted FOR the election of all nominees for director named herein, FOR proposals 2 and 3 and FOR the ONE YEAR frequency on proposal 4.

Please be sure to date and sign this proxy card in the box below. Date

Sign above Co-holder (if any) sign above

Detach above card, sign, date and mail in postage paid envelope provided.

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

PLEASE ACT PROMPTLY

PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

Please sign your name exactly as it appears below. If shares are held jointly, all joint owners must sign. If shares are held by a corporation, please sign the full corporate name by the president or any other authorized corporate officer. If shares are held by a partnership, please sign the full partnership name by an authorized person. If you are signing as attorney, executor, administrator, trustee or guardian, please set forth your full title as such.

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.