Audit Committee.The Audit Committee engages the Company’s independent registered public accounting firm and meets with them in connection with their annual audit and reviews the Company’s accounting and financial and regulatory reporting policies and practices for accounting, financial reporting and regulatory reporting.practices. Other responsibilities of the Audit Committee include engagement of compliance and internal audit providers and the review with management of reports issued by such parties. The Board of Directors has determined that the Audit Committee does not have a member who is an “audit committee financial expert” as defined under the rules and regulations of the Securities and Exchange Commission. While the Board has not designated any individual Board member as an “audit committee financial expert,” the Board believes the level of financial knowledge and experience of the current members of the Audit Committee, including the ability to read and understand financial statements, is cumulatively sufficient to discharge the Audit Committee’s responsibilities. The Audit Committee acts under a written charter adopted by the Board of Directors, a copy of which is available free of charge in the Investor Relations portion of the“About Community Bank” section of the Company’s website (www.cbtc.com), and is available in print to any stockholder who requests a copy.

Enterprise Risk Management Committee.The Enterprise Risk Management Committee assists the Board in its oversight responsibilities by focusing specifically on the Company’s enterprise risk management activities including the significant policies, procedures and practices employed to manage capital adequacy, market risk, earnings, credit risk, liquidity, compliance, regulatory, legal, reputation, and strategic operational risk and by providing recommendations to the Board and management on strategic guidance with respect to the assumption, management and mitigation of risk. The Enterprise Risk Management Committee acts under a written charter adopted by the Board of Directors, a copy of which is available free of charge in the Investor Relations portion of the“About Community Bank” section of the Company’s website (www.cbtc.com), and is available in print to any stockholder who requests a copy.

Governance Committee.The Governance Committee is responsible for promoting sound corporate governance policies that promote the best interests of the Company and its stockholders. The Committee’s responsibilities include: identification of director candidates; director education; recommendations on the size and composition of the Board and the boards of any subsidiaries, review of any shareholder proposals; monitoring of regulatory and statutory compliance; review of committee charters; and evaluations of Board oversight and effectiveness. The Governance Committee also annually reviews and recommends, in conjunction with the Compensation Committee, the appropriate level of director compensation. The Governance Committee acts under a written charter adopted by the Board of Directors, a copy of which is available free of charge in the Investor Relations portion of the“About Community Bank” section of the Company’s website (www.cbtc.com), and is available in print to any stockholder who requests a copy.

Compensation Committee.The Compensation Committee approves the compensation objectives for the Company and the Bank and establishes the compensation for the Chief Executive Officer and other executives. Our Chief Executive Officer, Chief Operating Officer and Chief Administrative Officer make recommendations to the Compensation Committee from time to time regarding the appropriate mix and level of compensation for other executives. The Compensation Committee reviews compensation for the Company’s executive officers to ensure an appropriate balance between short-term pay and long-term incentives. In addition to reviewing competitive market values, the Compensation Committee also examines the total compensation mix, pay-for-performance relationship, and how all elements, in the aggregate, comprise the executive’s total compensation package. Decisions by the Compensation Committee with respect to the compensation of executive officers are approved by the full Board of Directors. The Compensation Committee also annually reviews and recommends, in conjunction with the Governance Committee, the appropriate level of director compensation. The Compensation Committee acts under a written charter adopted by the Board of Directors, a copy of which is available free of charge in the Investor Relations portion of the“About Community Bank” section of the Company’s website (www.cbtc.com), and is available in print to any stockholder who requests a copy.

Director Nomination Process.The Governance Committee selects nominees for election as directors. The Governance Committee seeks to create a Board that is strong in its collective knowledge and has a diversity of skills and experience in accounting and finance, management and leadership, vision and strategy, business operations, business judgment, industry knowledge and corporate governance. To accomplish this, the Governance Committee considers a candidate’s knowledge of the banking business and involvement in

community, business and civic affairs, and also considers whether the candidate would adequately represent the Company’s market area. Any nominee for director must be highly qualified with regard to some or all these attributes. In searching for qualified director candidates to fill vacancies on the Board, the Governance Committee solicits its current directors for the names of potential qualified candidates. The Governance Committee may also ask its directors to pursue their business contacts for the names of potentially qualified candidates. The Governance Committee would then consider the potential pool of director candidates, select the top candidates based on the candidates’ qualifications and the Company’s needs, and conduct a thorough investigation of each proposed candidate’s background. If a stockholder has submitted a proposed nominee in accordance with the procedures specified below, the Governance Committee would consider the proposed nominee, along with any other proposed nominees recommended by directors, in the same manner in which the Governance Committee would evaluate nominees for director recommended by the Board of Directors.

DIRECTOR COMPENSATION

The following table provides the compensation received by the non-employee directors of the Company and the Bank during 2014.2016.

Name		Fees Earned or Paid in Cash ($)				Option Awards ($)(1)				Non-qualified Deferred Compensation Earnings ($)(2)				Total ($)				Fees Earned or Paid in Cash ($)				Non-qualified Deferred Compensation Earnings ($)(3)				Total ($)
Philip T. Goldstein		$	40,825				—				—			$	40,825
M. Arshed Javaid(3)			22,650				—				—				22,650
Eric S. Goldberg																		$	23,692			$	—			$	23,692
Philip T. Goldstein(1)																			41,150				—				41,150
M. Arshed Javaid																			38,575				2,491				41,066
Louis P. Jenkins, Jr			45,625				—				—				45,625				47,125				—				47,125
Michael L. Middleton(4)																			25,000				10,099				35,099
Mary Todd Peterson			42,525				—				999				43,524				43,975				3,257				47,232
James R. Shepherd			40,925				—				—				40,925
James R. Shepherd(2)																			43,575				—				43,575
Austin J. Slater, Jr			47,000				—				—				47,000				47,850				—				47,850
H. Beaman Smith(4)			35,050				—				3,480				38,530
Joseph V. Stone, Jr			46,075				—				7,119				53,194				49,550				10,199				59,749

Board of Directors of the Bank:

Annual Retainer			$10,000
Fee per Board Meeting (Regular or Special)			$650 ($225 per telephone meeting)
Fee per Committee Meeting			$425 ($225 per telephone meeting)
Annual Retainer for Bank Committee Chairs			$2,500

Employee directors receive only the annual retainer and Board meeting fees; they do not receive fees for committee meetings.

Directors Retirement Plan.The Bank maintains a retirement plan for non-employee members of the Board of Directors of the Bank (the “Directors’ Plan”). Under the Directors’ Plan, each eligible director of the Bank will receive an annual retirement benefit for ten years following his or her termination of service on the Bank’s Board in an amount equal to the product of his “Benefit Percentage”, “Vested Percentage”, and $3,500. A participant’s “Benefit Percentage” is 0% for less than five years of service, 33 1/3% for five to nine years of service, 66 2/3% for 10 to 14 years of service, and 100% for 15 or more years of service. A participant’s “Vested Percentage” is 33 1/3% for less than one year of service, 66 2/3% for one year of service, and 100% for two or more years of service. If a participant terminates service on the Board due to disability, the Bank will pay the participant each year for ten years an amount equal to the product of his or her Benefit Percentage and $3,500. If a participant dies before collecting either his or her retirement or disability benefit, the participant’s surviving spouse or estate will receive a lump sum payment having a present value equal to five times the annual retirement benefit to which the participant was entitled, assuming the participant separated service on the date of death.death and was fully vested. If the participant dies after beginning to receive his or her retirement or disability benefits, the participant’s surviving spouse or estate will receive a lump sum payment having a present value equal to the remaining benefits to which the participant was entitled from the date of death through the fifthtenth annual payment thereafter. A participant will become fully vested in the event of a “change in control” (as defined in the Directors’ Plan) or upon separation from service on the Board after attaining the age 72 or incurring a disability.

The Directors’ Plan also establishes a deferred compensation program for participants, under which they may elect to defer all or any portion of the fees and/or salary otherwise payable. Deferred amounts may be invested in certain funds permissible under the Plan or may be credited quarterly and adjusted annually with a rate of return equal to the Company’sconsolidated return on equity of the Company for the calendar year, as determined under accounting principles generally accepted in the United States.States, and/or quarterly with the gain or loss generated on the investments in which the funds in those accounts are deemed to be invested.

Consulting Agreement with Michael L. Middleton.  Effective June 30, 2016, Community Bank of the Chesapeake entered into a Consulting Agreement with Michael L. Middleton. Under the terms of the Consulting Agreement, Mr. Middleton retired as an employee of the Bank and serves as a consultant to the Bank for a period of 12 months. The Consulting Agreement will automatically be extended for an additional 12-month period on the anniversary of the effective date of the agreement (and each anniversary thereafter), unless 30 days’ advance written notice of non-renewal is provided by either the Bank or Mr. Middleton. Mr. Middleton provides certain consulting services to the Bank, including but not limited to, advising on bank markets, operations and strategic direction of the Bank and as requested by the Board of Directors and Chief Executive Officer of the Bank. In consideration of the consulting services, Mr. Middleton will receive an annual fee of $100,000 payable in equal monthly installments in arrears and will be reimbursed for reasonable business expenses. Mr. Middleton is not entitled to participate in any benefit plans of the Bank or its affiliates.

AUDIT RELATED MATTERS

Report of the Audit Committee.  The Company’s management is responsible for the Company’s internal controls and financial reporting process. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States. The Audit Committee oversees the Company’s internal controls and financial reporting process on behalf of the Board of Directors.

The Audit Committee has met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standard No. 16, as amended (AICPA,Professional Standards, Vol. 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T, including the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements.

In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence from the Company and its management. In concluding that the registered public accounting firm is independent, the Audit Committee considered, among other factors, whether the non-audit services provided by the firm were compatible with its independence.

The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for its audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examination, its evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In performing all of these functions, the Audit Committee acts only in an oversight capacity. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of the independent registered public accounting firm that, in its report, expresses an opinion on the conformity of the Company’s financial statements to accounting principles generally accepted in the United States. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions with management and the independent registered public accounting firm do not assure that the Company’s financial statements are presented in accordance with accounting principles generally accepted in the United States, that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards or that the Company’s independent registered public accounting firm is “independent.”

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20142016 for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF THE COMMUNITY FINANCIAL CORPORATION

Mary Todd Peterson (Chair)
James R. Shepherd
Austin J. Slater, Jr.
Joseph V. Stone, Jr.
John K. Parlett, Jr.

Change in Independent Registered Public Accounting Firm

The Company’s independent registered public accounting firm, Stegman & Company, announced that effective June 1, 2016 substantially all directors and employees of Stegman & Company joined Dixon Hughes Goodman LLP. As a result, effective June 1, 2016 Stegman & Company resigned as the Company’s independent registered public accounting firm. The Audit Committee of the Company’s Board of Directors engaged Dixon Hughes Goodman to serve as the Company’s independent registered public accounting firm effective June 1, 2016.

The reports of Stegman & Company on the audits of the consolidated financial statements of the Company as of and for the years ended December 31, 2015 and 2014, and audit of internal control over financial reporting as of December 31, 2015, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through June 1, 2016, there were (i) no disagreements (as such term is used in Item 304(a)(1)(iv) of Regulation S-K) between the Company and Stegman & Company on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of Stegman & Company, would have caused Stegman & Company to make reference to the subject matter of the disagreement(s) in connection with its report on the Company’s financial statements and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

During the Company’s fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through June 1, 2016, the Company did not consult with Dixon Hughes Goodman regarding any of the matters set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

Audit Fees.  The following table sets forth the fees billed to the Company by Stegman & Company for the fiscal yearsyear ended December 31, 20142015 and 2013:through June 1, 2016 and by Dixon Hughes Goodman for the period from June 1, 2016 to December 31, 2016:

		2014				2013				2016				2015
Audit Fees(1)		$	125,121			$	104,965			$	149,223			$	128,883
Audit Related Fees(1)(2)			44,160				77,316				21,541				55,422
Tax Fees(2)			10,510				8,994				10,000				18,250
All Other Fees(3)			—				3,087				—				—

PRINCIPAL HOLDERS OF VOTING SECURITIES

The following table sets forth, as of March 6, 2015,9, 2017, certain information as to those persons known by the Company to beneficially own more than 5% of the Company’s outstanding shares of common stock and the shares of common stock beneficially owned by each director, each executive officer named in the summary compensation table and by all executive officers and directors of the Company as a group. All beneficial owners listed in the table have the same address as the Company, unless otherwise provided. Unless otherwise indicated, each of the named individuals has sole voting power and sole investment power with respect to the shares shown.

Name of Beneficial Owners		Number of Shares Owned (Excluding Options)(1)(2)				Number of Shares That May be Acquired within 60 Days by Exercising Options				Percent of Shares of Common Stock Outstanding(3)				Number of Shares Owned (Excluding Options)(1)(2)				Number of Shares That May be Acquired within 60 Days by Exercising Options				Percent of Shares of Common Stock Outstanding(3)
Directors
Philip T. Goldstein			7,027				500					*%
Directors:
Eric S. Goldberg															26				—					*
M. Arshed Javaid			3,500				—					*			3,520				—					*
Louis P. Jenkins, Jr.			19,151				9,000					*			19,518				—					*
Michael L. Middleton			255,366	(4)			11,866				5.6				258,746	(4)			—				5.58	%
John K. Parlett, Jr.															4,000				—					*
William J. Pasenelli			38,396				9,741				1.0				42,664				4,344				1.01	%
Mary Todd Peterson			6,529				—					*			6,529				—					*
James R. Shepherd			9,934				9,000					*
Austin J. Slater, Jr.			18,794				9,000					*			20,191				—					*
Joseph V. Stone, Jr.			28,625	(5)			500					*			28,625	(5)			500					*
Named Executive Officer Who is Not Also a Director
Kathryn Zabriskie															2,550				—					*
Named Executive Officers Who are Not Also Directors
James M. Burke															19,848				1,865					*
Todd L. Capitani															9,778				—					*
Gregory C. Cockerham			124,153				9,883				2.8				121,066				4,407				2.70	%
All Directors, Executive Officers and Nominees as a Group (16 persons)			564,490	(6)			66,395				13.2
Basswood Capital Management, L.L.C. Matthew Lindenbaum Bennett Lindenbaum 645 Madison Avenue, 10th Floor New York, New York 10022			393,921	(7)			—				8.3
Banc Fund VI L.P. Banc Fund VII L.P. Banc Fund VIII L.P. Banc Fund IX L.P.
20 North Wacker Drive, Suite 3300 Chicago, Illinois 60606			259,773	(8)			—				5.5
Community Bank of the Chesapeake Employee Stock Ownership Plan			234,974	(9)			—				5.0
James F. Di Misa															19,006				1,865					*
All Directors, Executive Officers and Nominees as a Group (17 persons)															573,054	(6)			13,231				12.60	%
5% Owners:
Basswood Capital Management, L.L.C. Basswood Partners, L.L.C. Basswood Enhanced Long Short GP, LLC Basswood Financial Fund, L.P. Basswood Financial Fund, Inc. Basswood Financial Long Only Fund, LP Basswood Enhanced Long Short Fund, LP Basswood Opportunity Partners, LP Basswood Opportunity Fund, Inc. BCM Select Equity I Master, Ltd. Matthew Lindenbaum
Bennett Lindenbaum 645 Madison Avenue, 10th Floor New York, New York 10022															456,209	(7)							9.83	%
Banc Fund VI L.P.
Banc Fund VII L.P.
Banc Fund VIII L.P.
Banc Fund IX L.P. 20 North Wacker Drive, Suite 3300 Chicago, Illinois 60606															261,132	(8)							5.63%

ITEMS TO BE VOTED ON BY STOCKHOLDERS

Item 1 — Election of Directors.Directors

The Company’s Board of Directors currently consists of nineten members. The Board is divided into three classes, each with terms of three years, one-third of whom are elected annually. The Board of Directors has nominated William J. Pasenelli, Austin J. Slater,M. Arshed Javaid, John K. Parlett, Jr. and Joseph V. Stone, Jr.Kathryn M. Zabriskie to serve for an additionala three-year term and until their successors arehis or her successor has been elected and qualified. In addition, the Board of Directors has nominated Eric S. Goldberg for election this year to serve for a one-year term and until his successor has been elected and qualified. Messrs. Pasenelli, SlaterJavaid, Parlett and StoneGoldberg and Ms. Zabriskie are currently directors of the Company and the Bank.Company.

It is intended that the persons named in the proxies solicited by the Board will vote for the election of the named nominees. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute nominee as the Board of Directors may recommend. At this time, the Board knows of no reason why any nominee might be unable to serve.

The Board of Directors recommends a vote “FOR” the election of each of the nominees.

Information regarding the nominees and the directors continuing in office is provided below. Unless otherwise stated, each individual has held his or her current occupation for the last five years. The age indicated in each biography is as of December 31, 2014.2016. There are no family relationships among the directors or executive officers. The indicated period for service as a director includes service as a director of Community Bank of the Chesapeake.

Board Nominees with Term Ending in 2020

M. Arshed Javaid is President of Smartronix, Inc., an information technology and engineering solutions provider. Mr. Javaid founded Smartronix, Inc. in 1995, and has extensive experience in business management and community relations. Currently, he serves on the Historic Sotterley Inc. Board of Trustees. Age 61. Director of the Bank and the Company since 2013.

Mr. Javaid provides the Board with significant management, strategic and operational knowledge through his experience as founder and president of an information technology and engineering solutions provider that has evolved from a start-up company to a company with over 650 employees. Mr. Javaid’s experience in the information technology industry, especially cyber security, provides the Board with valuable insight into the data security and reputational risk issues facing businesses.

John K. Parlett, Jr.is currently President of CMI General Contractors, Inc., a commercial design construction firm in Charlotte Hall, Maryland, and President of Computech Systems, Inc., a nationally marketed company that designs instrumentation and other electrical components for the motorsports industry. Independently, he also manages a number of real estate development companies, primarily focusing on commercial rental properties. Mr. Parlett also has an extensive history of community involvement. He has contributed his time and leadership experience to many organizations over the years including service organizations, community development groups and local government task forces. He has received many honors for his service, including the Jefferson Award Honoring Community and Public Service in America, the St. Mary’s Chamber of Commerce Community Service Award and the Governor William Donald Schaefer Salute to Excellence Award. Age 61. Director of the Bank since 2014 and Director of the Company since February 8, 2017.

Mr. Parlett provides the Board with important knowledge and insight necessary to guide the Company and its management through the various issues facing financial institutions.

Kathryn M. Zabriskieis president of Business Training Works, Inc., an employee-development firm specializing in soft-skills training, leadership development, and customer-experience initiatives. Ms. Zabriskie started the company in 2000. Since that time, she and her team have worked with hundreds of organizations across industries, including several members of the Fortune 50. Ms. Zabriskie holds an MBA from the University of Texas at Austin and a BA from George Mason University. She has served on several philanthropic boards and civic organizations in the Bank’s market. Age 45. Director of the Bank since 2013 and Director of the Company since February 8, 2017.

Ms. Zabriskie brings a depth and breadth of knowledge to the board related to best practices in employee development, human resources, facilitation, and organizational planning. Her experience working nationally, internationally, and across industries offers a broad perspective on issues related to training and development, corporate culture, managing and attracting talent, and planning for the future.

Nominee with Term Ending in 2018

Eric S. Goldberg is a senior analyst with Basswood Capital Management (“Basswood”), an alternative asset manager with over $1.2 billion of assets under management. Mr. Goldberg joined Basswood as a summer associate in 2005 and became an analyst in 2008. In his current role as a senior analyst, Mr. Goldberg is responsible for the research and investment analysis of companies in the financial sector, with a focus on small and regional banks. Mr. Goldberg graduated magna cum laude, with honors, from New York University’s Stern School of Business in 2008 with a B.S. in Finance and International Business and a minor in East Asian Studies. Mr. Goldberg also served on the board of directors of Florida-based Regent Bancorp, Inc. and Regent Bank as a director. Age 30. Director of the Bank and the Company since 2016.

Mr. Goldberg’s extensive experience in the capital markets and financial services industry make him a valuable member of the Board of Directors. In addition, as the representative of Basswood, one of the Company’s institutional shareholders, Mr. Goldberg provides valuable insights related to the Company’s institutional shareholder base and methods for further building shareholder value.

Directors Continuing in Office

Directors with Terms Ending in 2018

William J. Pasenelli is President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank. He also serves as Vice Chair for the Company and the Bank. Mr. Pasenelli joined the Bank as Chief Financial Officer in 2000 and was named President of the Bank in 2010, President of the Company in 2012 and Chief Executive OfficeOfficer in July 2014. Before joining the Bank, Mr. Pasenelli had been Chief Financial Officer of Acacia Federal Savings Bank, Annandale, Virginia, since 1987. Mr. Pasenelli serves on the Board of Directors for the Maryland Bankers Association and the Maryland Chamber of Commerce. Mr. Pasenelli is a member of the American Institute of Certified Public Accountants and the Greater Washington Society of Certified Public Accountants and other civic groups. He is a graduateAge 58. Director of the National School of BankingBank and holds a Bachelor of Arts from Duke University. He also attended the Harvard Business School Program on Negotiation. Age 56. DirectorCompany since 2010.

Mr. Pasenelli’s extensive experience in the local banking industry affords the Board valuable insight regarding the business and operations of the Bank. Mr. Pasenelli’s financial acumen and knowledge of the Company’s and the Bank’s business and history position him well to serve as President and Chief Executive Officer and as a Director.

Austin J. Slater, Jr.is the President and Chief Executive Officer of the Southern Maryland Electric Cooperative, which is one of the ten largest electrical distribution cooperatives in the country. Mr. Slater presently serves on the Board of Directors of the Federal Reserve Bank of Richmond, Baltimore Branch.Branch, serves on the Board of Directors and is the Chair of the Board Finance Committee of the University of Maryland Charles Regional Medical Center. He has also served as Chairman of the Board of the Maryland Chamber of Commerce and Chairman of the Board of Trustees for the College of Southern Maryland, as well as numerous other industry and civic organizations. Mr. Slater holds a MBA in Finance from George Washington University and a BS in Accounting from Shepherd University. Age 61.63. Director of the Bank and the Company since 2003.

Mr. Slater has extensive management level experience in a large company setting outside of the financial services industry. Mr. Slater’s financial acumen and operational experience allow him to understand the complexities of the Company and the Bank. His experience in a regulated industry has exposed Mr. Slater to many of the issues facing companies today, particularly regulated entities, making Mr. Slater a valued component of a well-rounded board.

Joseph V. Stone, Jr. has owned and operated Joe Stone Insurance Agency, which provides multi-line insurance services to clients in Maryland and Virginia, since 1981.from 1981 to 2016. He ishas served as a Director and former Chairman of the Board ofdirector for the Southern Maryland Electric Cooperative where he has served since 1996. Age 60.62. Director of the Bank and the Company since 2006.

Mr. Stone provides the Board with significant marketing and operational knowledge through his experience as owner of an insurance agency and various director positions with companies outside of the financial services industry. Mr. Stone also has considerable experience in the insurance industry, corporate governance and risk assessment practices necessary in banking operations.

Directors with Terms Ending in 2016

Louis P. Jenkins, Jr. is the principal of Jenkins Law Firm, LLC, located in LaPlata,La Plata, Maryland. Before entering private practice, Mr. Jenkins served as an Assistant State’s Attorney in Charles County, Maryland from 1997 to 1999. In addition to his private practice, Mr. Jenkins serves as Court Auditor for the Circuit Court for Charles County, Maryland and attorney for the Charles County Board of Elections. Mr. Jenkins currently serves as Chairmana member of the Board of Directors of the University of Maryland Charles Regional Medical Center, a member hospitalSystem which consists of twelve hospitals located throughout the UniversityState of Maryland Medical System, andwith annual revenue in excess of $3.7 billion. Mr. Jenkins has also served as a board member of several other public service organizations including the University of Maryland Charles Regional Medical Center, Southern Maryland Chapter of the American Red Cross, Charles County Chamber of Commerce and the Charles County Bar Association. Age 43.45. Director of the Bank and the Company since 2000.

As an attorney, Mr. Jenkins provides the Board with substantial knowledge regarding issues facing the Company and the Bank. In addition, Mr. Jenkins brings a critical perspective to the lending and governance function of the Company and the Bank. Mr. Jenkins’ experience in the public sector adds valuable expertise regarding local issues and provides first-hand understanding of the local political and business environment in which the Bank operates.

Michael L. Middleton is Chairman of the Board of the Company and the Bank and serves as a consultant to the Bank. On June 30, 2016, he retired as Executive Chairman of the Board of Directors of the Company and the Bank. Mr. Middleton joined the Bank in 1973 and served in various management positions until 1979 when he became President of the Bank, which he served as until 2010. He remained President of the Company until 2012 and Chief Executive Officer of the Company and the Bank until June 2014. Mr. Middleton is a lifetime member of the American Institute of Certified Public AccountantAccountants and holds a Masters of Business Administration. From 1996 to 2004, Mr. Middleton served on the Board of Directors of the Federal Home Loan Bank of Atlanta, serving as Chairman of the Board in 2004. Mr. Middleton served on the Board of Directors of the Federal Reserve Bank, Baltimore Branch, from 2004 to 2009. He completed his term as Chairman of the Maryland Bankers Association in June 2013 and is currently thea Trustee and former Chairman of the Board of Trustees for the College of Southern Maryland,Maryland. He serves on the Advisory Board of the Robert H. Smith School of Business Center for Financial Policy, the American Bankers Association Government Relations Council Administrative Committee and servescompleted his term on the Federal Reserve’s Community Depository Advisory Council.Council in October 2015. He also serves on several philanthropic and civic boards. Age 67.69. Director of the Bank since 1979.1979 and of the Company since 1989.

Mr. Middleton’s extensive experience in the local banking industry and involvement in the communities in which the Bank serves affords the Board valuable insight regarding the business and operations of the Bank. In addition to Mr. Middleton’shis extensive background in finance and corporate management, Mr. Middleton also has significant expertise in large financial institution governance providing a unique and broad-based decision-making capability for the Company and the Bank. Mr. Middleton’s knowledge of the Company’s and the Bank’s business and history, combined with his success and strategic vision, position him well to serve as our Executive Chairman.

Mary Todd Petersonis a senior advisor to the Chairman and CEO of ProAssurance Corporation supporting key strategic initiatives. In February 2016, she retired as the President and Chief Executive Officer of Medmarc Insurance Group and as a Director of Medmarc Casualty Insurance Company and its subsidiary Noetic Specialty Insurance Company.Company, both of which are subsidiaries of ProAssurance. Ms. Peterson has been associated with Medmarc since 2001 where she has also held the positions of Chief Financial Officer and Chief Operating Officer. From 1993 to 2001, Ms. Peterson was a Partner with Johnson Lambert & Co., a certified public accounting firm. Ms. Peterson has also held positions with Acacia Life Insurance Company, Oxford Development Corporation and Ernst & Whinney (now Ernst & Young). Ms. Peterson currently servespreviously served as a member of the Property Casualty Insurers Association of America (“PCI”) Board of Governors,

Chair of PCI’s Investment Committee and a member of PCI’s Executive and Finance Committees. Ms. Peterson is a member of the American Institute of Certified Public Accountants. Age 60.62. Director of the Bank and the Company since 2010.

COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis is intended to provide shareholders with a description of the Company’s executive compensation philosophy, components of its executive compensation program, and the factors considered by the Compensation Committee (or “Committee” in this section) for determining executive compensation for our named executive officers in 2016. Our 2016 named executive officers are our Chief Executive Officer, Chief Financial Officer and our next three most highly-compensated executive officers who were serving as an executive officer at the end of 2016, as well as our Executive Chairman who retired as an employee of the Company and the Bank in June 2016. This compensation discussion and analysis should be read in conjunction with the compensation tables and associated narrative that follows.

William J. Pasenelli		President & Chief Executive Officer
Todd L. Capitani		EVP, Chief Financial Officer
James M. Burke		Bank President, Chief Risk Officer
Gregory C. Cockerham		EVP, Chief Lending Officer
James F. Di Misa		EVP, Chief Operating Officer
Michael L. Middleton		Executive Chairman

The Company’s compensation program for our named executive officers is structured to motivate and retain our talented team of executives who are critical to the Company’s success. Our competitive salary and benefits program reflects a balanced and responsible pay approach while also considering the environment in which the Company operates. Our executive compensation program is designed to reward our executive management team for delivering results and driving sustainable growth. The Company seeks to accomplish this goal in a way that rewards performance and is aligned with its shareholders’ long-term interests.

2016 Performance Highlights

During 2016, the Company and its subsidiary, Community Bank of the Chesapeake, made a number of strategic decisions to meet our longer-term objectives of increased profitability and shareholder value. The Company continued to increase operating leverage by executing its plans to improve asset quality, increase transaction deposits, and slow the growth of expenses. Below are a few highlights of our 2016 performance:

A more detailed analysis comparing the results of operations for the years ended December 31, 2016 and 2015 is provided in the Annual Report on Form 10-K for the year ended December 31, 2016.

2016 Executive Compensation Decisions

The Committee began its work on executive compensation for 2016 by assessing competitive market compensation using a number of data sources including publicly disclosed information on a selected peer group of publicly traded banking organizations similar in asset size and geographic region. Consideration was given to the Company’s 2015 financial performance and the goals and objectives set forth in the Company’s strategic plan. Beginning in 2015, the Committee made changes in the structure of the annual incentive plan to include more competitive award opportunities and additional performance factors. In 2016, the Committee implemented a scorecard approach to executive incentive awards by establishing threshold, target and maximum incentive opportunities tied to a number of performance factors.

The Committee approved modest increases to base salaries for 2016. Incentive award targets and objectives were aligned with the annual strategic plan approved by the Board. Based on the Company’s performance and the achievement of specific strategic objectives, the Committee approved cash and equity awards as described under Performance-Based Incentive Compensation and Long-Term Equity Awards sections.

Say On Pay Vote Results

The Company provides its shareholders with the opportunity to cast an annual advisory vote on executive compensation. At the Company’s 2016 annual meeting of shareholders, approximately 93% of the votes cast on the say-on-pay proposal were voted for the proposal, demonstrating support of the Committee’s executive pay decisions.

The Committee will continue to consider the results of the Company’s say-on-pay votes when making future compensation decisions for the named executive officers.

Compensation Philosophy and Guiding Principles

Our compensation philosophy is grounded on the following guiding principles:

Team-Based Approach.  Each named executive officer is a member of the Company’s executive team. The Company’s executive compensation program is intended to promote and maintain stability within the executive team.

Performance Expectations.  The Company has clear performance expectations of its officers that are reinforced by its performance review and compensation programs. First, each executive officer must demonstrate exceptional personal performance in order to remain part of the executive team. Second, each executive officer must contribute to the Company’s overall success, rather than focus solely on specific objectives within the officer’s area of responsibility.

Internal Equity.  Because the Company’s executive officers operate as a team, the Committee considers internal pay equity to be an important factor in its decisions on executive compensation. As a result, the incentive portion of compensation awarded to each of the Company’s executive officers in 2016 was generally the same, when expressed as a percent of salary.

Ownership.  We believe executives should have an ownership position in our Company. Under the Company’s stock ownership guidelines, our CEO is expected to own shares of Company common stock that have a value equal to 2.0 times his base salary. The Bank’s President is expected to own shares with a value equal to 1.5 times his base salary and other named executives must own 1.0 times their salary. Until these target ownership levels are reached, an executive must retain 100% of his or her net shares from any vested awards (after taxes and any exercise price). All named executive officers, with the exception of Mr. Capitani, met the minimum stock ownership requirements at the end of 2016. Because an executive officer must retain 100% of net shares acquired from equity awards until the specified target of ownership is met, there is no minimum time period required to achieve the target level of ownership.

Risk Considerations

In addition to our guiding principles, the Company engages in the following practices to ensure its executive compensation program is aligned with shareholders’ interests and protects us against risk.

We believe that the design and objectives of our executive compensation program provide an appropriate balance of incentives for executives and avoid inappropriate risks. The Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. In this regard, our executive compensation program includes, among other things, the following design features:

The Committee conducts an annual evaluation of all of the Company’s compensation programs, policies and practices to ensure that compensation policies and incentive compensation programs in place are not reasonably likely to have a material adverse impact on the Company and do not encourage our employees to excessive risks.

Role of the Compensation Committee, Management, and Compensation Consultants

Role of the Compensation Committee.  The Committee is responsible for overseeing and administering the Company’s employee benefit plans and policies. The Committee determines all compensation for the named executive officers. Each year, the Committee conducts an evaluation of each executive officer to determine if any changes in the officer’s compensation would be appropriate based on the considerations described above.

The Committee is composed of at least three directors who are determined to be “independent directors” as defined by NASDAQ Rule 5605(d) (2) (A). The members of the Committee are appointed annually by the Board of Directors. Four members of the Company’s Board of Directors serve on the Committee, each of whom is an “independent director”. The Chair of the Committee reports to the Company’s Board regarding Committee actions.

Compensation Committee Interlocks and Insider Participation.  No member of the Committee is a current or former officer or employee of the Company or any of its subsidiaries. There are no compensation committee interlocks with other entities with respect to any such member.

Role of Management.  At the Committee’s request, Mr. Pasenelli, our Chief Executive Officer, provides input regarding the performance and appropriate compensation of the other executive officers. The Committee considers Mr. Pasenelli’s evaluation of the other executive officers because of his direct knowledge of each executive officer’s performance and contributions. In accordance with NASDAQ rules, Mr. Pasenelli is not present when his compensation is being discussed or approved.

Role of the Compensation Consultant.  In 2016, the Committee retained the services of ChaseCompGroup to perform a competitive assessment of our executive compensation programs, as well as to provide guidance on the changing regulatory environment governing executive compensation. The Committee assessed the independence of ChaseCompGroup pursuant to SEC and NASDAQ rules and concluded that no conflict of interest exists that would prevent ChaseCompGroup from serving as an independent consultant to the Committee. ChaseCompGroup was acquired by Arthur J Gallagher in August 2016, which was also deemed to be free of any conflict of interests.

The executive compensation review included an assessment of our financial performance relative to peers and a review of equity compensation and bonuses for named executive officers. The Committee sought input from ChaseCompGroup on a range of external market factors, including evolving compensation trends, appropriate peer companies, and market survey data. The compensation assessment provided the Committee with a broad array of information from which to assess the effectiveness of our compensation programs and served as a foundation for 2017 compensation decisions. ChaseCompGroup assisted the Committee in developing a more performance based incentive philosophy which was implemented in 2016.

Compensation Peer Group and Benchmarking.  With the assistance of ChaseCompGroup, the Committee identified a group of peer companies to use for compensation comparison purposes for compensation decisions. In determining the compensation peer group, the Committee selected regional, publicly traded banks with assets from approximately half to two times our asset size. These are banks in our view that compete with the Company for talent in the community banking industry. The Committee selected the following peer group for 2017, which ranged between $2.6 billion and $700 million in assets. The peer group remains unchanged from the prior year except for the removal of several banks due to merger and acquisition activity.

Company Name		City		State
WashingtonFirst Bankshares, Inc.		Reston		VA
American National Bankshares Inc.		Danville		VA
C&F Financial Corporation		West Point		VA
First United Corporation		Oakland		MD
Old Line Bancshares, Inc.		Bowie		MD
Middleburg Financial Corporation		Middleburg		VA
Access National Corporation		Reston		VA
Community Bankers Trust Corporation		Richmond		VA
National Bankshares, Inc.		Blacksburg		VA
Shore Bancshares, Inc.		Easton		MD
Southern National Bancorp of Virginia, Inc.		McLean		VA
Xenith Bankshares, Inc.		Richmond		VA
Old Point Financial Corporation		Hampton		VA
Howard Bancorp, Inc.		Ellicott City		MD
F & M Bank Corp.		Timberville		VA
Eagle Financial Services, Inc.		Berryville		VA

The Committee reviews both compensation and performance at peer companies to inform its decision-making process so it can set total compensation levels that it believes are commensurate with the market and the Company’s scope and performance. The Committee refers to executive compensation studies prepared by its independent consultants when it reviews and approves executive compensation. The studies reflect compensation levels and practices for executives holding comparable positions at peer group companies, which help the Committee set compensation at competitive levels. The Committee’s primary selection criteria are industry (commercially focused banks), asset size, and geography. The Committee compares each executive officer’s base salary, target total cash compensation, and target long-term incentive compensation value to amounts paid for similar positions at peer group companies.

The Committee believes that the market median is a useful reference point in helping to achieve the executive compensation program objectives. However, the Committee also considers other factors when setting compensation; and target total direct compensation for each executive may vary from the market median based on the factors the Committee considers relevant each year, including particular job responsibilities and scope, adjustments for individual skills and expertise, and internal pay equity.

The Committee’s executive compensation determinations are the result of the Committee’s business judgment, which is informed by the experiences of the members of the Committee and market data.

Compensation Framework and Allocation of Pay Components

The executive compensation program for named executive officers reflects our compensation philosophy and uses a full range of pay components to achieve our objectives. We believe that we can meet the objectives of our compensation philosophy by reaching a balance among base salary, short-term incentives and long-term incentives for our named executive officers.

The allocation of base salary and performance-based compensation (short-term cash incentives and equity awards) varies depending upon the role of a named executive officer in our organization and his or her individual performance and achievements in support of our strategic objectives.

Direct Compensation Elements

The Company’s executive compensation program consists of four components: base salary, annual cash incentives, equity awards, and benefits.

Base Salaries.  Competitive base salaries are critical in attracting and retaining our executives. We establish base salaries and assess market competitiveness by comparing our executives’ qualifications, experience, and responsibilities as well as their individual performance and value with similar positions among our peers. The following table reflects each active named executive officer’s increase in base pay for 2016 as well as his increase in base pay for 2017, based on 2016 performance and market data. The Committee generally increased the executives’ base salaries by 1% to 2% for 2017; however, Mr. Burke’s base salary was adjusted by 4.82% to reflect his promotion to Bank president in 2016 and the increased responsibilities associated with that position.

Executive		Title				2015 Salary				2016 Salary				% Increase				2017 Salary				% Increase
William J. Pasenelli			President, Chief Executive Officer			$	408,000			$	408,000				0.00	%		$	412,000				0.98	%
Todd L. Capitani			EVP, Chief Financial Officer				275,400				278,154				1.00	%			285,000				2.46	%
James M. Burke			Bank President, Chief Risk Officer				288,099				290,980				1.00	%			305,000				4.82	%
Gregory C. Cockerham			EVP, Chief Lending Officer				288,099				290,980				1.00	%			294,000				1.04	%
James F. Di Misa			EVP, Chief Operating Officer				288,099				290,980				1.00	%			294,000				1.04	%

Annual Performance-Based Incentive Compensation.  We maintain a short-term annual compensation plan which allows us to provide our active named executive officers with the opportunity to earn incentive compensation for achieving specific Company performance goals. In 2016, the Committee approved a plan that ties incentive payments to achievement levels in several key performance areas. A portion of the incentives, once earned, is paid in restricted stock which vests in thirds beginning on the first anniversary of the grant date.

For the 2016 year, the performance factors included profitability metrics, a regulatory results component and efficiency ratio. The CEO’s plan included non-performing assets as a percentage of total assets. These criteria were chosen because they reflect commonly recognized measures of overall company performance and are associated with shareholder value creation. The plan included threshold, target and maximum levels of performance for each performance factor and a corresponding payout, weighted as a percentage of salary, to each of the named executive officers based upon actual achievement. The annual bonus opportunity for the CEO ranged from 18% to 30% of base salary and 17.5% to 27.5% for the other named executive officers. At the end of the year, the Committee determines the amount of the bonus to be paid to each executive officer by comparing the Company’s financial results to the performance goals. For 2016, performance metrics were achieved at target levels. See “Grant of Plan-Based Awards” for information on the value of each active named executive officer’s incentive opportunity for 2016.

The Committee awarded each executive a discretionary incentive amount equal to 10% of his base salary as of December 31, 2016. Each active named executive officer received 25% of the discretionary incentive in restricted stock. This discretionary bonus recognized achievement of certain strategic objectives as well as financial performance and growth results which were not directly reflected in the 2016 annual incentive metrics. The discretionary awards are included in the table below. See also “Executive Compensation — Summary Compensation Table” for the bonus earned by our active named executive officers in 2016.

Total incentive awards to executive officers for 2016 performance, including annual incentive awards and discretionary bonuses, ranged from 31-32% of base salary. Each named executive officer received 25% of his 2016 total incentive award in restricted stock. The restricted stock awards vest over a three year period, beginning on the first anniversary of the grant date.

Executive		Title				2016 Annual Award				% of Salary				Portion of Award Paid in Equity
William J. Pasenelli			President, Chief Executive Officer			$	130,560				32.00	%			25.00	%
Todd L. Capitani			EVP, Chief Financial Officer				86,335				31.00	%			25.00	%
James M. Burke			Bank President, Chief Risk Officer				90,210				31.00	%			25.00	%
Gregory C. Cockerham			EVP, Chief Lending Officer				90,210				31.00	%			25.00	%
James F. Di Misa			EVP, Chief Operating Officer				90,210				31.00	%			25.00	%

For 2017, the Company adopted an incentive plan for the named executive officers that is similar in structure to the plan for the 2016 year. The 2017 plan retains several metrics (profitability, efficiency ratio and non-performing assets) and ROAA will continue to be the most heavily weighted performance measure. In 2017, the plans for the CEO and Bank President will both include the asset quality metric. The regulatory results component will be used as a qualifier rather than a performance factor in the 2017 plan. The overall incentive opportunity levels as a percentage of salary remain similar to the 2016 plan. The Board of Directors of the Company approved this plan on February 9, 2017.

Long-Term, Equity Based Compensation.  The Committee believes that equity should represent a meaningful portion of executive compensation to align the interests of our executives and stockholders. Additionally, we believe that equity provides for a longer-term retention tool. These ownership and retention objectives are supported by paying a portion of incentives in restricted stock and through the use of time-based vesting for equity awards. The Committee makes an annual determination as to who will receive equity awards, the type of awards, vesting conditions, and level of the awards. All equity grants made to named executives have a minimum three year vesting period. In addition, we require certain levels of stock ownership as described in the Compensation Philosophy and Guiding Principles section above.

Committee Discretion

The Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company performance shortfalls. The Committee also retains the discretion to increase awards or consider special awards for significant performance or due to subjective factors, or exclude extraordinary non-recurring results. For purposes of 2016 incentive payout calculations, the Committee awarded executives an additional discretionary incentive amount above the amounts earned in the annual incentive plan as described in the section above.

Executive Benefits and Perquisites

Our objective is to attract and retain talented executive officers who will make positive contributions to the overall success of the Company. The Committee feels that the benefits offered to named executives are effective in achieving retention objectives and maintaining stability within the management team. These types of benefits are commonly offered by peers within the industry. The Company offers named executives the following additional executive benefits and perquisites.

Employment Agreements.  Our named executive officers have employment agreements that protect both the Company and our named executive officers in the event of certain separation events. The Committee believes the terms of our employment agreements are in line with industry standards and are necessary to maintain a stable management team. See “Executive Compensation — Employment Agreements” for information on the terms and conditions of the employment agreements with our active named executive officers.

Business-Related Benefits and Perquisites.  The Company also provides company owned cars to executive officers and a local country club membership to Mr. Cockerham for business development purposes. The values for other benefits and perquisites, if applicable, are represented under All Other Compensation in the Summary Compensation table.

Retirement Benefits.  In addition to participation in the Bank’s employee stock ownership program and 401(k) plan, our active named executive officers are eligible for retirement benefits under the following non-qualified deferred compensation arrangements:

Pension Benefits.  The Company maintains Supplemental Executive Retirement Plans (SERPs) and Salary Continuation Agreements (SCAs) with each of the named executives which provide additional compensation at retirement or upon termination of employment due to death, disability, or a change of control. The SERPs and SCAs aim to provide named executives a percentage of projected final base salary for 15 years following retirement at age 65. The targets are based on final projected base salary and are approximately thirty-five percent (35%) for the CEO and twenty-five percent (25%) for our other named executives. See “Executive Compensation — Pension Benefits” for additional information on these arrangements.

Executive Deferred Compensation Plan.  The Company maintains a voluntary deferred compensation plan in which our named executives can defer all or a portion of their base salaries. Participants may elect to have their deferred account balances credited with earnings credit based on the consolidated ROE of the Company and/or the rate of return of mutual funds available as deemed investment options. See “Executive Benefits — Nonqualified Deferred Compensation” for additional information.

Life Insurance.  The Executive Chair and CEO have pre-retirement split dollar and supplemental life insurance benefits of $1 million and the other named executives have $500 thousand.

Other Benefits.  The named executive officers are also eligible to participate in the Company’s health and welfare programs and other broad-based programs on the same basis as other employees.

Accounting and Tax Considerations

The Committee considers the accounting and tax implications of compensation plans prior to making any changes. To the extent required by law, the Committee has structured the compensation program to comply with Section 162(m) and Section 409A of the Internal Revenue Code (the “Code”).

Section 162(m) of the Internal Revenue Code (the “Code”) places a $1 million limit on the amount of compensation the Company can deduct in any one year for compensation paid to the chief executive officer and the three most highly-compensated executive officers employed by the Company at the end of the year. However, the $1 million deduction limit generally does not apply to compensation that is performance-based and provided under a shareholder-approved plan. While the Committee considers the deductibility of awards as one factor in determining executive compensation, it also looks at other factors in making its decisions, as noted above, and retains the flexibility to grant awards it determines to be consistent with the Company’s goal for its executive compensation program, even if the award is not deductible by the Company for tax purposes.

In general, the Company’s performance-based cash bonuses have been designed to qualify for tax deductibility because they are paid based on achievement of pre-determined performance goals established by the Committee pursuant to its incentive plans.

Responsible Equity Practices.  The grant date for all equity awards is established when the grants and all key terms are approved by the Board or the Compensation Committee. Our 2016 Equity Compensation Plan includes prohibitions on the repricing of stock options without shareholder approval.

Prohibition on Hedging and Short Sales.  The Company prohibits short sales and transactions in derivatives of Company securities, including hedging transactions, for all directors and officers of the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has received and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussions, the Compensation Committee recommended to the Board of Directors that the section of this proxy statement entitled Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

March 9, 2017

Louis P. Jenkins, Jr., Chair
Joseph V. Stone, Jr.
Austin J. Slater, Jr.
Kathryn Zabriskie

EXECUTIVE COMPENSATION

Summary Compensation Table.  The following table provides information concerning total compensation earned or paid to the Chief Executive Officer, Chief Financial Officer and the twofour most highly compensated executive officers of the Company who served in such capacity as of December 31, 2014.2016. These threesix officers are referred to as the named executive officers in this proxy statement.

Name and Principal Position		Year				Salary ($)				Bonus ($)				Stock Awards ($)(1)				Non-qualified Deferred Compensation Earnings ($)(2)				All Other Compensation ($)(3)				Total ($)
Michael L. MiddletonExecutive Chairman			2014			$	397,132			$	3,228			$	44,942			$	27,349			$	65,085			$	537,736
			2013				478,899				—				—				36,509				56,565				571,973
William J. Pasenelli President and Chief Executive Officer			2014			$	382,762			$	78,809			$	76,497			$	—			$	58,254			$	596,322
			2013				355,131				56,497				32,652				—				50,431				494,711
Gregory C. CockerhamExecutive Vice President and Chief Lending Officer			2014			$	282,450			$	57,638			$	55,147			$	—			$	22,228			$	417,463
			2013				274,782				43,657				22,122				—				13,419				353,980

Name and Principal Position		Year				Salary ($)				Bonus ($)(2)				Stock Awards ($)(3)				Non-qualified Deferred Compensation Earnings ($)(4)				All Other Compensation ($)(5)				Total ($)
William J. Pasenelli President and Chief Executive Officer			2016			$	408,000			$	97,920			$	62,707			$	151,044			$	59,240			$	778,911
			2015				423,692				67,320				76,420				137,026				60,638				765,096
			2014				382,762				78,809				76,497				88,398				58,254				684,720
Todd L. Capitani Executive Vice President and Chief Financial Officer			2016			$	278,154			$	64,751			$	47,559			$	42,548			$	24,212			$	457,224
			2015				285,992				41,807				56,076				38,154				20,244				442,273
James M. Burke Executive Vice President and Chief Risk Officer			2016			$	290,980			$	67,658			$	47,829			$	44,378			$	28,656			$	479,501
			2015				299,180				43,735				57,325				41,079				24,870				466,189
Gregory C. Cockerham Executive Vice President and Chief Lending Officer			2016			$	290,980			$	67,658			$	47,829			$	80,809			$	34,213			$	521,489
			2015				299,180				43,735				57,325				73,700				27,421				501,361
			2014				282,450				57,638				55,147				64,003				22,228				481,466
James F. Di Misa Executive Vice President and Chief Operating Officer			2016			$	290,980			$	67,658			$	47,829			$	66,263			$	21,727			$	494,457
			2015				299,180				43,735				57,325				61,122				24,451				485,813
Michael L. Middleton(1) Executive Chairman			2016			$	328,095			$	—			$	110,700			$	55,841			$	75,467	(6)		$	570,103
			2015				330,366				—				13,041				46,026				58,854				448,287
			2014				397,132				3,228				44,942				100,598				65,085				610,985

Employment Agreements.The Community Financial Corporation and Community Bank of the Chesapeake maintain employment agreements with each of the named executive officers. Mr. Middleton’s employment agreement ends on July 1, 2016. The term of the employment agreements with Mr.Messrs. Pasenelli, Capitani, Burke, Cockerham and Mr. CockerhamDi Misa are automatically extended by one day each day so that the term remains at three years, until either party gives notice to the other of its intent to stop the renewal of the term of the agreement.agreement or if the officer’s employment with the Bank terminates, whether by resignation, discharge or otherwise. Among other things, the agreements provide for an annual salary, for participation in an equitable manner in any stock option plan or incentive compensation plan to the extent authorized by the Company’s Board of Directors for its key management employees and for participation in pension, group life insurance, medical coverage and in other employee benefits applicable to executive personnel.senior executives of the Bank.

See“Retirement Benefits” and“Other Potential Post-Termination Benefits” for a discussion of benefits and payments the named executive officers may receive under the employment agreements upon their retirement or termination of their employment.

Option Exercises and Stock Vested.  The following table provides information concerning the vesting of stock awards for each named executive officer, on an aggregate basis, during 2016.

		Stock Awards
Name		Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($)(1)
William J. Pasenelli			1,979			$	40,674
Todd L. Capitani			1,328				27,296
James M. Burke			1,396				28,692
Gregory C. Cockerham			1,403				28.836
James F. Di Misa			1,396				28,692
Michael L. Middleton			561				11,514

Pension Benefits.  The following table provides information about the participation of executive officers in our retirement programs as of December 31, 2016. See“Retirement Benefits” for a discussion of the material terms and conditions of payments under the salary continuation agreements and supplemental executive retirement plans.

Name		Plan Name				Number of Years Credited Service (#)				Present Value of Accumulated Benefit ($)				Payments During Last Fiscal Year ($)
William J. Pasenelli			Supplemental Executive Retirement Plan – 2011				6			$	226,295			$	—
			Supplemental Executive Retirement Plan – 2014				3				102,653				—
			Salary Continuation Agreement – 2003				16				360,775				—
			Salary Continuation Agreement – 2006				11				91,148				—
Todd L. Capitani			Supplemental Executive Retirement Plan – 2011				6			$	80,896				—
			Supplemental Executive Retirement Plan – 2014				3				51,027				—
James M. Burke			Supplemental Executive Retirement Plan – 2011				6			$	67,159				—
			Supplemental Executive Retirement Plan – 2014				3				6,002				—
			Salary Continuation Agreement – 2006				11				217,536				—