The Annual Meeting is being held for the following purposes:

Only shareholders of record at the close of business on April 1, 20169, 2019 are entitled to notice of and to vote at the Annual Meeting.

It is important that your shares are represented at the meeting. Accordingly, please sign, date, and mail the enclosed proxy in the enclosed postage-paid envelope, whether or not you plan to attend. If you do attend the Annual Meeting, you may revoke your proxy and vote your shares in person.

This proxy statement is furnished in conjunction with the solicitation by the Board of Directors (the “Board”) of American National Bankshares Inc. (the “Company”) of the accompanying proxy to be used at the Annual Meeting of Shareholders of the Company (the “Annual Meeting”) and at any adjournment thereof. The meeting will be held on Tuesday, May 17, 2016,21, 2019, 9:00 a.m., at The Wednesday Club, 1002 Main Street, Danville, Virginia 24541, for the purposes set forth below and in the Notice of Annual Meeting of Shareholders. The date of this proxy statement is April 7, 201612, 2019 and the approximate mailing date of this proxy statement and the enclosed proxy is April 12, 2016.15, 2019.

Only shareholders of record at the close of business on April 1, 2016,9, 2019, are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof. As of the close of business on April 1, 2016,9, 2019, there were 8,612,65811,151,486 shares of the Company’s common stock outstanding, of which 8,431,53910,948,041 shares were entitled to vote at the Annual Meeting. For the reasons explained below, the number of shares entitled to vote is less than the number of shares of the Company’s common stock outstanding on such date. The Company has no other class of stock outstanding. Each share of common stock entitles the record holder thereof to one vote upon each matter to be voted upon at the Annual Meeting.

A majority of the votes entitled to be cast, represented in person or by proxy, will constitute a quorum for the transaction of business. Shares for which the holder has elected to abstain or to withhold the proxy’s authority to vote on a matter will count toward a quorum but will not be included in determining the number of votes cast with respect to such matter.

Shares held by brokers or banks in street name (“broker shares”) that are voted on any matter are included in the quorum. Broker shares that are not voted on any matter will not be included in determining whether a quorum is present.

Ambro and Company, the nominee name that the Company’s banking subsidiary, American National Bank and Trust Company (the “Bank”), uses to register the securities it holds in a fiduciary capacity for customers, held 181,119203,445 shares of the Company’s common stock as sole fiduciary and with sole investment authority (with no qualifying co-fiduciary having been appointed) as of April 1, 2016,9, 2019, which constituted 2.10%1.82% of the issued and outstanding shares of the Company’s common stock on that date. Under Virginia law, such shares cannot be voted at the Annual Meeting and are not deemed to be outstanding and entitled to vote for purposes of determining a quorum.

If a beneficial owner of broker shares does not provide the broker or other nominee that holds the shares with specific voting instructions, then under applicable rules, such organization may generally vote on “routine” matters but cannot vote on “non-routine” matters. If the broker or other nominee that holds such shares does not receive instructions from the beneficial owner on how to vote shares on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to the shares. This is generally referred to as a “broker non-vote.”

Execution of a proxy will not affect a shareholder’s right to attend the Annual Meeting and to vote in person. Any shareholder who has executed and returned a proxy may revoke it by attending the Annual Meeting and requesting to vote in person. A shareholder may also revoke his or her proxy at any time before it is exercised by filing a written notice with the Company or by submitting a proxy bearing a later date. Proxies will extend to, and will be voted at, any adjourned session of the Annual Meeting.

The cost of solicitation of proxies will be borne by the Company. Solicitation is being made by mail, and if necessary, may be made in person, by telephone or Internet or special letter by officers and employees of the Company or the Bank, acting on a part-time basis and for no additional compensation.

The Company’s Board of Directors currently consists of 1416 persons. Pursuant to the Company’s Articles of Incorporation, the Board is to be divided into three classes (I, II and III), with each class as nearly equal in number as possible. The term of office for current Class II directors will expire at the Annual Meeting. NomineesThe five nominees to serve as Class II directors and the one nominee to serve as a Class IIII director are set forth below. All of the nominees except Susan K. Still currently serve as directors of the Company. Continuing members of the Board of Directors are also are set forth below.

Nancy Howell Agee and Kenneth S. Bowling were appointed to the Board effective July 21, 2015. She April 1, 2019, upon consummation of the merger of HomeTown Bankshares Corporation (“HomeTown”) into the Company and pursuant to the merger agreement between the Company and HomeTown. Ms. Agee is a former director of HomeTown and its banking subsidiary, HomeTown Bank, and Mr. Bowling is also a former director of HomeTown Bank. Pursuant to the merger agreement between the Company and HomeTown, Ms. Agee, Mr. Bowling and Susan K. Still, the former President and Chief Executive Officer of HomeTown and HomeTown Bank, as well as a director of such companies, are being nominated for election as directors of the Company at the Annual Meeting.

The persons named in the accompanying proxy will vote for the election of the nominees named below unless authority is withheld. If for any reason the persons named as nominees below should become unavailable to serve, an event that management does not anticipate, proxies will be voted for such other persons as the Board of Directors may designate.

The names of the nominees for election and the other continuing members of the Board of Directors, their principal occupations and qualifications to serve as directors, their ages as of

Information on the Company’s four executive officers as of December 31, 2018 who are not directors is disclosed in Part I, Item 1, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015,2018, which was mailed with this proxy statement.

The Company’s Board of Directors has determined that, except for Mr. Majors, and Mr. Jeffrey Haley, and Ms. Still, if elected, each director is independent within the director independence standard of the NASDAQNasdaq Stock Market LLC (“NASDAQ”Nasdaq”), as currently in effect, and within the Company’s director independence standards, as established and monitored by the Company’s Corporate Governance and Nominating Committee.

Michael P. Haley is not related to Jeffrey V. Haley, President and Chief Executive Officer of the Company and the Bank. In order to avoid any confusion, Michael P. Haley will be referred to as Michael Haley and Jeffrey V. Haley will be referred to as Jeffrey Haley in this proxy statement.

Michael HaleyMs. Agee has been a director of RGC Resources, Inc. since 2005 and Healthcare Realty Trust Incorporated since 2016. Michael Haley served as director of Stanley Furniture Company, Inc. sincefrom 2003 LifePoint Health, Inc. since 2005, andto 2017, Ply Gem Holdings, Inc. since 2006.from 2006 to 2018 and LifePoint Health, Inc. from 2005 to 2018. LifePoint Health, Inc. was acquired by Apollo Global Management LLC in 2018 and he continues to serve as a director.

Directors are expected to devote sufficient time, energy, and attention to ensure diligent performance of their duties, including attendance at board, committee, and shareholder meetings. The Board of Directors of the Company met 1011 times during 2015.2018. The non-management directors held 10 executive sessions during 2018, exclusive of the Chief Executive Officer and any other management. The Chairman of the Board presides at such sessions. In accordance with the Company’s Corporate Governance Guidelines, the independent directors, exclusive of the Chairman of the Board and Chief Executive Officer, also held 10quarterly executive sessions during 2015.2018. The Chairman of the Corporate Governance and Nominating Committee presides at such sessions. The Board of Directors of the Bank, which consists of all members of the Company’s Board, met 11 times during 2015.2018.

All incumbent directors and director nominees attended at least 75%80% of the aggregate total number of meetings of the boardsCompany's Boards of directorsDirectors and committees on which they served in 2015. Thirteen2018. Ten directors attended the 20152018 Annual Meeting of Shareholders.

The Boards of Directors of the Company and the Bank have established various committees, including the Audit Committee, the Capital Management Committee, the Corporate Governance and Nominating Committee, the Human Resources and Compensation Committee, and the Risk and Compliance Committee. Membership and other information on these committees are detailed below.

The Corporate Governance and Nominating Committee met threefour times in 2015.2018. This Committee currently consists of Messrs. Crist, Hornaday, Maddux, Owen, and Owen.Shepherd. Mr. Owen serves as the Chairman. The Committee is responsible for developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring implementation of the Company’s Corporate Governance Guidelines. In addition, the Committee develops and reviews background information on candidates for the Board and makes recommendations to the Board regarding such candidates. The Committee also supervises the Board’s annual review of director independence, oversees the Board’s performance self-evaluation and makes recommendations to the Board of Directors regarding director compensation. All the members of this Committee are considered independent within the meaning of SEC regulations, the listing standards of NASDAQ,Nasdaq, and the Company’s Corporate Governance Guidelines.

The charters of the Board Committees are available on the Company’s website, www.amnb.com. For access to the charters, select the “Investors” icon, then select “Governance Documents.”

No member of the Human Resources and Compensation Committee or executive officer of the Company has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity.

The Company’s Board of Directors has adopted, as a component of its Corporate Governance Guidelines, a process related to director nominations (the “Nominations Process”). The purpose of the Nominations Process is to describe the manner by which candidates for possible inclusion in the Company’s recommended slate of director nominees are selected. The Nominations Process is administered by the Corporate Governance and Nominating Committee of the Board.

The Committee considers candidates for Board membership suggested by its members, other Board members, management, and shareholders. A shareholder who wishes to recommend a prospective nominee for the Board may, at any time, notify the Company’s Chairman, President or any member of the Committee in writing with supporting material the shareholder considers appropriate. The Committee will consider the shareholder’s recommendation and will decide whether to recommend to the Board the nomination of any person recommended by a shareholder pursuant to the provisions of the Company’s bylaws relating to shareholder proposals, as described in the “Shareholder Communications and Proposals” section of this proxy statement.

Once the Committee has identified a candidate, it makes an initial determination whether to conduct a full evaluation of the candidate based on information accompanying the recommendation and the Committee members’ knowledge of the candidate, which may be supplemented by inquiries to the person making such recommendation or to others. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the candidate can satisfy the evaluation factors established in the Corporate Governance Guidelines. The Committee may seek additional information about the candidate’s background and experience. The Committee then evaluates the candidate against the criteria in the Company’s Corporate Governance Guidelines, including, but not limited to, independence, availability for time commitment, skills such as an understanding of the financial services industry, general business knowledge and experience, all in the context of an assessment of the perceived needs of the Board at that point in time. The Committee does not have a formal policy with respect to diversity on the Board. However, it considers diversity as a prerequisite for adequately representing the interests of the various stakeholders in the Company – shareholders, customers, and employees. The Committee seeks diversity in overall board composition. In the Committee’s nominee considerations, diversity is a much broader concept than just the traditional racial and gender dimensions, as it also includes education, geography, business and professional experience and expertise, and civic involvement and responsibility, especially within the Company’s market area. In connection with this evaluation process, the Committee determines whether to interview the candidate, and if warranted, one or more members of the Committee will conduct such interview. After completing the evaluation, the Committee makes a recommendation to the Board of Directors as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation of the Committee.

In a financial institution, the role of the Board is critical to the success or failure of the enterprise. The Board of Directors is led by the Company’s Chairman, Mr. Majors. The Chairman of the Corporate

This structure has evolved incrementally over the pastmore than 20 years, during the respective tenures of

The Board of Directors of a financial institution is the strategic linchpin in the risk oversight process. Financial institutions deal with credit risk, liquidity risk, interest rate risk, investment risk, operational risk, reputation risk, regulatory risk, and regulatorytechnology and information security risk in the day to dayday-to-day conduct of banking business. In order to better manage the risk oversight process, over the past few years the Board has evolved and enhanced its supervision oversight process.

As part of that evolution, there are three standing Board committees whose focus is specifically risk management and oversight: the Audit Committee, the Capital Management Committee, and the Risk and Compliance Committee. The Audit Committee is primarily concerned with financial reporting and internal control related risks. The Capital Management Committee is primarily concerned with credit risk, market risk, interest rate risk, liquidity risk, and investment risk, and capital management. The Risk and Compliance Committee is primarily concerned with developing an enterprise wide risk management strategy. Its focus is mainly operational, andcredit, regulatory compliance, and technology and information security risk. The Board’s Committee efforts are supplemented and supported by the EnterpriseExecutive Risk Management Committee, which is comprised of members of senior management and the Chairman of the Board.

In the opinion of the Board, this structure provides for a constantly evolving and improving approach to risk management and oversight.

The table below includes information on all shareholders of the Company known to management to beneficially own 5% or more of the Company’s common stock.

The Human Resources and Compensation Committee of the Board of Directors has reviewed and discussed with the Board and management the Company’s Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s definitive proxy statement on Schedule 14A for the Annual Meeting, portions of which are incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2018, as filed with the Securities and Exchange Commission.

The purpose of the Company’s compensation philosophy is to treat employees fairly and to pay compensation at a level commensurate with the market, given individual and Company factors and performance. The Company’s compensation programs, levels, practices and policies are consistent with the Company’s values, culture and mission. The Company supports a pay-for-performance culture, creation of an environment where employees can succeed, and values long-standing, productive employee service.

Each director who served on the Committee during 20152018 qualifies as a “non-employee director” as such term is defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934 and is an “independent director” as such term is defined in NASDAQNasdaq Marketplace Rule 5605(a)(2).

The Committee considers the results of the shareholder advisory say-on-pay vote in its deliberations regarding compensation of the named executive officers. At the Company’s 20152018 Annual Meeting, 86.4%81.7% of shareholders who voted at the meeting voted for the approval of the compensation levels and programs provided to the named executive officers. The Committee viewed the shareholder vote at the 2018 Annual Meeting as an expression of the shareholders’ overall satisfaction with the Company’s current executive compensation levels and programs. While the shareholder vote reflected support for the Company’s executive compensation, the Committee, the Board of Directors and executive management has evaluated the compensation programs each year to ensure they continue to align the interests of the executives with those of the Company’s shareholders, and continue to strengthen the linkage of pay to performance.

During 2014,2017, the Committee retained the services of Pearl Meyer & Partners, LLC (“PM&P”), an independent executive compensation consulting firm, to provide consulting services in connection with developing the Company’s compensation philosophy and providingconducting a competitive compensation review with respect to the organization’s executive management team, a larger group than the named executive officers. Management was not involved in the decision to use an outside consultant or the selection of PM&P.&P in 2017.

The compensation review encompassed (i) the development of a custom peer group consisting of community banks of comparable size in Virginia and contiguous states, publicly traded, with assets between $600 million$1.2 billion and $4$3 billion; (ii) an assessment of the Company’s executive compensation as compared to market (similar executives in the peer group); (iii) a high level assessment of the Company’s performance relative to peers; and (iv) establishing a basis for discussing potential pay or other compensation changes in future periods.

The customer2017 custom peer group of comparable community banks consisted of the following institutions:

The PM&P review in 2017 determined that overall cash compensationbase salaries provided to executive management approximated 102% of the 75th percentile and 122% of the market median, butmedian. The review further determined that total direct compensation (total cash plus equity awards) approximated 88% of the 75% percentile and 106% of the market median. The Committee determined that, due to the high performance of the Company, it is desired that salaries and total compensation was below market becausefor the Company’s executive officers should be in the range of a lack75% of long-term incentives and supplemental retirement benefits. Based on such information, the markets; therefore, PM&P considered 2017 compensation levels competitive with the market. The Board of Directors and the Committee determined to establish, for 2015, for membersChief Executive Officer considered this information as part of their decision making process on current executive management a formalized incentive program and the opportunity to participate in a nonqualified deferred compensation plan.levels.

During 2014,2017, PM&P reported directly to the Committee. In 2017, the Corporate Governance and Nominating Committee and did notalso engaged PM&P to provide any other services to the Company.a peer comparison of director compensation. The Committee has analyzed whether the work of PM&P has raised any conflicts of interest, taking into consideration the following factors, among others: (i) the provision of other services to the Company by PM&P (none);&P; (ii) the amount of fees from the Company paid to PM&P as a percentage of PM&P’s total revenues; (iii) PM&P’s policies and procedures that are designed to prevent

During 2015,2018, the Company did not engage PM&P for any services.

The base salary of each named executive officer named in the Summary Compensation Table (the “named executive officers”) is designed to be competitive with that of the Company’s peer banks and bank holding companies. In establishing the base salaries for the named executive officers in 2015,2018, the Committee and Board relied upon an evaluation of each officer’s level of responsibility and performance and on comparative information, including the Virginia Bankers Association’s Salary Survey of Virginia Banks and the SNL Bank Compensation Review.performance. The Committee and the independent members of the Board of Directors also took into account the information described above that was provided by PM&P, including the peer group data. In establishing the base salary for the executive officers other than the Chief Executive Officer, the Committee also received and took into account the individual compensation recommendations of the Chief Executive Officer. In executive session, the

    

For 2015, and based on the information described above that was provided by PM&P,2018, the Board of Directors and the Committee established anauthorized compensation and incentive programamounts for executive officers.officers based on achieving certain financial and non-financial goals. Pursuant to the terms of the incentive program, the Company’s executive officers had the opportunity to earn incentive payments for 20152018 performance, with the targeted payout for the Chief Executive Officer set at an amount up to $150,000$200,000 and the targeted payout for the other named executive officers set at an amount equal to a range of 25% to 30% of their respective base salaries. For the Chief Executive Officer, the targeted incentive payment was entirely based on achievement of growth goals inbased on core earnings per share ("EPS"(“EPS”). For the other named executive officers, 50% of the targeted incentive payment was based on achievement of certain position specific objective goals and the other 50% was based on the achievement of certain growth goals inbased on core EPS. Incentive payments will beare made in a combination of cash and restricted stock grants.grants, with the percentage mix established by the Committee in its sole discretion. The participants have the option of taking a larger percentage of the bonus payment in restricted stock and less in cash.

The financial target was growth ina certain level of core net income (defined as net income, per generally accepted accounting principles, less the impact of fair value and merger related adjustments) on an earnings per shareEPS basis. For the Chief Executive Officer, the targeted growth was an increase in core EPS of 7.1%,was $2.57, which would result in a $150,000$200,000 incentive payment. The minimum threshold was a 3% increase$2.51 in core EPS, which would result in a $30,000$100,000 payment. The maximum threshold was a 10% increase$2.67 in core EPS, which would result in a $225,000$300,000 payment. For 2015,2018, the Company achieved sufficientCompany's core EPS growthof $2.57 resulted in an incentive payment to result inMr. Jeffrey Haley of $100,000 with respect to the maximum incentive payments.cash component and 3,094 shares of common stock (grant date market value of $100,000) with respect to the stock component. For 2016,2019, the incentive program methodology will remain the same.same for the Chief Executive Officer, but with a different target and thresholds.

For each of the named executive officers other than the Chief Executive Officer, the targeted growth was an increase in core EPS of 7.1%, which$2.57 would result in an incentive payment equal to 30% of the respective base salaries for Messrs. Strader and Traynham, and an incentive payment equal to 25% of the respective base salaries for Messrs. Martin and Settle. The payment would decrease proportionately if core EPS was under budget and increase proportionately if core EPS exceeded budget, with a 100%maximum of 37.5% for Messrs. Strader and Traynham and 31.25% for Messrs. Martin and Settle. For 2018, the Company achieved $2.57 in core EPS. Accordingly, with respect to the cash

In addition, beginningBeginning in 2015, all of the Company’scertain named executive officers became eligible to participate in a voluntary, nonqualified deferred compensation plan pursuant to which the officers are able tomay defer any portion of their annual cash incentive payments. The eligible executive officers for 2018 were Messrs. Jeffrey Haley, Strader and Traynham. In addition, the Company may make discretionary cash bonus contributions to the deferred compensation plan. Such contributions, if any, are made on an annual basis after the Committee assesses the performance of each of the named executive officers and the Company during the most recently completed fiscal year. The plangoal of the Committee is administered throughto award such discretionary bonus payments commensurate with the Virginia Bankers Association.officer’s performance during such year. The discretionary cash bonus contributions are indicated under the “Bonus” column of the Summary Compensation Table on page 31. See also “Nonqualified Deferred Compensation” on page 36 for more information on the plan.

In the opinion of the Committee and the Board of Directors, the Company’s compensation practices do not encourage excessive or inappropriate risk taking and are not reasonably likely to have a material adverse effect on the Company, but rather will have a positive effect on the Company.

The Company maintains the 2008 Stock IncentiveAmerican National Bankshares Inc. 2018 Equity Compensation Plan (“20082018 Plan”), which iswas designed to attract and retain qualified key personnel, provide employees with a proprietary interest in the Company as an incentive to contribute to the success of the Company, and reward employees for outstanding performance and the attainment of goals. The 20082018 Plan was adopted by the Board of Directors of the Company on February 19, 2008 and20, 2018, approved by the shareholders on April 22, 2008May 15, 2018 at the Company’s 20082018 Annual Meeting.Meeting and expires on February 19, 2028. The 20082018 Plan provides for the granting of restricted stock awards, and incentive and non-statutory stock options, restricted stock units and other stock-based awards to employees and directors, on a periodic basis, at the discretion of the Board or a Board designated committee. The 20082018 Plan prohibits the payment of dividends or similar distributions on awards, whether subject to time-based or performance-based

The 20082018 Plan is administered by a Committee of the Board of Directors of the Company comprised of the independent directors.Committee. Under the 20082018 Plan, the Committee determines which employees will be granted restricted stock awards, other stock-based awards and options, whether such options will be incentive or non-statutory options, the number of shares subject to each option, whether such options maywill be exercised by delivering other shares of common stock, and when such options become vested and exercisable. In general, the per share exercise price of an incentive stock option must be at least equal to the fair market value of a share of common stock on the date the option is granted. Restricted stock is granted under terms and conditions established by the Committee.

Stock options become vested and exercisable in the manner specified by the Committee. Each stock option or portion thereof shall beis exercisable at any time on or after it vests and is exercisable until ten years after its date of grant. No stock options have been backdated or repriced. As of December 31, 2015,2018, options for 67,87113,200 shares are exercisable under the 2008 Plan, options for 60,555 shares are exercisable under optionsall of which were assumed in the MidCarolina Financial Corporation (“MidCarolina”) merger and options for 7,316 shares are exercisable under options assumed in the MainStreet BankShares, Inc. (“MainStreet”) merger. The MidCarolina and MainStreetThese option shares will be issued from the 2008 Plan.were all exercised in January 2019. There were no stock options awarded in 2015.2018.

The Company from time-to-time grants shares of restricted stock under the 2018 Plan to key employees and non-employee directors.  The Company believes the awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly

The current grants of restricted stock do not have performance conditions that must be satisfied in order for the shares to be earned and vest either at or ratably over 36 months after the award date. On January 20, 2015,15, 2019, the Company awarded an aggregate of 12,64918,926 shares of restricted stock to the named executive officers and 1125 other senior officers of the Bank.

As of December 31, 2015, there was $340,000 of2018, total unrecognized compensation cost related to nonvestedunvested restricted stock granted under the 2008 Plan.Plan and the 2018 Plan amounted to $647,000.  This cost is expected to be recognized over the next 12 to 3036 months.

    

Through December 31, 2009, the Company’s retirement plan was a non-contributory defined benefit pension plan that covered all full-time employees of the Company who were 21 years of age or older and who had at least one year of service. Advanced funding of the plan was accomplished by using the actuarial cost method known as the “collective aggregate cost method”.

The plan was closed to new participants at December 31, 2009. On that date, the Company converted the plan to a cash balance plan. Participant balances at that date reflected the net present value of the plan’s then existing obligation to the participants. Beginning January 1, 2010, participants earn income each year based on the ten yearten-year U.S. Treasury note yield established at December 31 of the prior year, subject to certain adjustments.

The Company sponsors a 401(k) Employee Savings Plan in which all full-time employees (age 21 and older) are eligible to participate. The Company matches 100% of employee contributions on the first 3% of earned compensation and 50% of employee contributions of the second 3% of earned compensation. Perquisites received by executive officers are not included as earned compensation under this plan. The Company’s contributions are not subject to a vesting schedule.

Due to the geographic size of the Company’s market area, in 20152018 the Company provided the Chief Executive Officer and the Chief Banking Officer with an automobile, and reimbursed himthem for the cost of fuel and maintenance for

    

The Company recognizes that, as a publicly held financial services company, it is imperative that it maintain stability and continuity in its executive management positions. The Company also understands that the possibility of a change in control of the Company exists. In order to protect the interests of the shareholders and the Company, to promote continuity in the event of a change in control and to minimize uncertainty among executive management, the Company and its executive officers have entered into employment agreements that contain severance arrangements in connection with a change in control of the Company. All named executive officers currently have operative employment agreements except Mr. Gilliam whose agreement terminated on March 31, 2016 due to his retirement.agreements.

On March 2, 2015, the Company entered into separate employment agreements with all of the named executive officers.Messrs. Jeffrey Haley, Strader and Traynham. Mr. Martin entered into his agreement on September 21, 2016, which was his hire date. Mr. Settle entered into his agreement on February 8, 2017, approximately four months after his hire date. Each agreement has an initial three year term that, other than with respect to Messrs. Martin and Settle, extended through December 31, 2017. Mr. Martin’s agreement provides for an initial three year term that extends through December 31, 2017.2019 and Mr. Settle’s agreement provides for an initial three year term that extends through October 31, 2019.

Effective January 1, 2016, Mr. Jeffrey Haley’s agreement renews automatically on a daily basis, beginning January 1, 2016, so that the term of employment always has at least two years to run. OnEffective January 1, 2017, the four other named executive officers’ agreements beginfor Messrs. Strader and Traynham renew automatically on a daily basis so that the term of employment always has at least one year to renewrun. Effective January 1, 2019, Mr. Martin’s agreement renews automatically on a daily basis so that the terms of employment always hashave at least one year to run. Effective November 1, 2018, Mr. Settle’s agreement renews automatically on a daily basis so that the terms of employment always have at least one year to run. Each agreement will automatically terminate on the first day of the month immediately following the month in which the officer turns 70.

The Company may give each of the named executive officers, other than Mr. Jeffrey Haley, notice of nonrenewal of such officer’s agreement at any time, on or after January 1, 2017, and the agreement will terminate one year thereafter, but not before completion of the initial three year term.thereafter. In the case of Mr. Jeffrey Haley, notice of nonrenewal may be given on or after January 1, 2016 due to the two year evergreen provisionat any time and ithis agreement will terminate two years later.thereafter.

The agreements provide that each officer’s base salary will be reviewed annually, and that the officers will be entitled to participate in such short-term and/or long-term cash and equity incentive plans as the Company may determine.

If the Company terminates the officer’s employment for any reason other than for “Cause” or if the officer terminates his employment for “Good Reason” (each as defined in the agreement), the Company will, subject to the officer’s execution and non-revocation of a general release of claims, make a lump sum payment in an amount equal to the product of (x) the officer’s “Final Monthly Compensation” (defined in the agreement as the sum of the officer’s base salary in effect at the date of termination and the annual bonus paid or payable for the most recently completed year, divided by twelve) times (y) the number of months remaining between the date of termination and the expiration of the current employment term. The Company will also make a lump sum payment in an amount equal to the product of (x) the amount of the monthly group insurance premiums contributed by the Company for the officer’s health, dental and vision insurance coverage (exclusive of the amounts paid by the officer for

The employment agreements include a double-trigger severance structure in the event of a change in control. If a change in control of the Company occurs and the officer’s employment is terminated without Cause or for Good Reason within 24 months following the change in control, the following severance benefits will be paid: (i) the amount of any incentive or bonus compensation earned which has not been paid; (ii) a pro-rated bonus based on the prior year’s cash bonus amount; (iii) a lump sum payment equal to 2.99 times Mr. Jeffrey Haley’s “Final Compensation” and 2.0 times each of the other named executive officers’ “Final Compensation” (defined in the agreements as the base salary in effect at the date of termination plus the highest annual cash bonus paid or payable for the two most recently completed years); and (iv) a lump sum payment equal to the monthly COBRA Premium times 36 months in the case of Mr. Jeffrey Haley and times 24 months in the case of each of the other named executive officers.

Pursuant to the 20082018 Plan, the Stock Grant and Option Committee may provide Changechange in Controlcontrol acceleration parameters under which all, or a portion, of the restricted stock will vest upon the occurrence of a Changechange in Control.control.

Each agreement provides that the severance payments and benefits to which the officer may be entitled in connection with a change in control will be reduced to the amount that does not trigger the golden parachute excise tax under Section 4999 of the Internal Revenue Code of 1986. No reduction, however, will be made and the officer will be responsible for all excise and other taxes if his after-tax position with no cutback exceeds his after-tax position with a cutback by at least 5%.

The Company’s practice is to expense salary, bonus and incentive compensation, and benefit costs as they are incurred for tax and accounting purposes. Salary, bonus and incentive compensation, and

Stock ownership guidance is in effect for executive officers of the Company. The Chief Executive Officer is expected to maintain stock ownership equal to at least three times his current base salary. The Executive Vice Presidents are expected to maintain stock ownership equal to at least two times their current base salary. No formal deadline has been set for compliance with the above guidelines. However, the executive officers are increasing their equity ownership in the Company as quickly as practical.

The Committee has adopted a policy which requires that any grants of restricted stock to executive officers be held by the grantee until fully vested, so long as shehe or heshe has achieved the overall ownership guidelines set by the Company. The Company does not have any policies regarding executive officers’ hedging the economic risk of ownership of the Company’s common stock.

The following table reflects total compensation paid to or earned by the Company’s named executive officers forduring the periods indicated below. During 2015, the Company had no executive officers other than those named in the table. The named executive officers are the highest paid employees of the Company and the Bank.year ended December 31, 2018.

The following table provides information on the restricted stock awards granted to the named executive officers during the year ended December 31, 2015.2018. The amounts in the column for the grant date fair value of the stock awards reflect the grant date fair market value of the stock awards. Assumptions made in the calculation of these amounts are contained in Note 13 to the Company’s audited financial statements for the year ended December 31, 2015,2018, included in the Company’s 20152018 Annual Report on Form 10-K. There were no stock options granted in 2015.2018.

The following table reflects the outstanding stock awards as of December 31, 20152018 for the named executive officers. All restricted stock awards were granted at fair market value at the grant date and vest after 36 months. There were no stock options outstanding as of December 31, 2015.2018.