DEF 14A 1 tmb-20210519xdef14a.htm DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )


Filed by the Registrant þ
Filed by a Party other than the Registrant ◻
Check the appropriate box:

◻	Preliminary Proxy Statement
◻	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ	Definitive Proxy Statement
◻	Definitive Additional Materials
◻	Soliciting Material under §240.14a-12

PARTNERS BANCORP
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):

þ	No fee required.
◻	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)	Title of each class of securities to which transaction applies:

	(2)	Aggregate number of securities to which transaction applies:

	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

	(4)	Proposed maximum aggregate value of transaction:

	(5)	Total fee paid:


◻	Fee paid previously with preliminary materials.
◻	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)	Amount Previously Paid:

	(2)	Form, Schedule or Registration Statement No.:

	(3)	Filing Party:

	(4)	Date Filed:

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PARTNERS BANCORP

2245 Northwood Drive

Salisbury, Maryland 21801

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To be held on May 19, 2021

TO THE SHAREHOLDERS OF PARTNERS BANCORP:

The 2021 Annual Meeting of Shareholders of Partners Bancorp (the “Company”), will be held online via live webcast on Wednesday, May 19, 2021 at 10:00 a.m. Eastern Time for the following purposes:

(1)

To elect four (4) persons as directors of the Company for a three-year term to hold office until the 2024 Annual Meeting of Shareholders, and until their successors shall be duly elected and qualified; and

(2)

To approve, in an advisory and non-binding vote, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement; and

(3)

To vote, on an advisory and non-binding basis, on the frequency of future advisory votes on the compensation of the Company’s named executive officers; and

(4)

To approve the Partners Bancorp 2021 Incentive Stock Plan; and

(5)

To ratify the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and

(6)

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

We are pleased to host the meeting as a completely virtual meeting that will be held online via webcast. You will be able to attend the meeting online, vote your shares electronically, and submit questions during the meeting. There will be no physical location for shareholders to attend. If you plan to attend the meeting online, please see the instructions on page 3 of the Proxy Statement under the heading “Attending and Participating in the Meeting.”

Shareholders of record as of the close of business on March 22, 2021 are entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting.

As permitted by rules adopted by the Securities and Exchange Commission, we are furnishing our Proxy Statement and 2020 Annual Report to Shareholders over the internet to most of our shareholders. This means that our shareholders will initially receive only a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy materials over the internet. This approach lowers the cost of delivering the annual meeting materials and reduces the environmental impact of the meeting. If you would like to receive a paper copy of the proxy materials, the Notice of Internet Availability of Proxy Materials contains instructions on how you can request copies of these documents.

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	By Order of the Board of Directors
	By: /s/ Betsy J. Eicher
	Betsy J. Eicher, CPA
	Corporate Secretary

April 7, 2021

Management desires to have maximum participation at the meeting and it is important that your shares are represented at the meeting. Whether or not you plan to attend the meeting online, we urge you to vote your shares via the toll-free telephone number or over the internet, as described in the Proxy Statement. If you receive these materials by mail, you may instead sign, date and mail your proxy card in the enclosed postage-paid envelope. If you decide to attend the meeting online, you will be able to vote electronically if you wish, even though you have previously submitted your proxy. A proxy may be revoked by a shareholder prior to its use by notice in writing to the Corporate Secretary of the Company, by submitting a later-dated proxy to the Corporate Secretary of the Company, by changing your vote via the toll-free telephone number or over the internet or by attending and voting during the Annual Meeting. Your vote is important regardless of the number of shares you own.

If you are the beneficial owner of shares held in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or nominee how to vote on your behalf. If you plan to attend the meeting online and vote electronically, you must contact your bank, broker or nominee to obtain a legal proxy and must register in advance to attend the meeting.

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	Page

INTRODUCTION‌	1

THE COMPANY‌	3

GENERAL INFORMATION‌	3

PROPOSAL ONE - ELECTION OF DIRECTORS‌	9

CORPORATE GOVERNANCE‌	15

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT‌	23

EXECUTIVE COMPENSATION‌	25

DIRECTOR COMPENSATION‌	33

PROPOSAL TWO – ADVISORY AND NON-BINDING VOTE TO APPROVE EXECUTIVE COMPENSATION‌	35

PROPOSAL THREE – ADVISORY AND NON-BINDING VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION‌	36

PROPOSAL FOUR - APPROVAL OF THE PARTNERS BANCORP 2021 INCENTIVE STOCK PLAN‌	37

CHANGE IN THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM‌	50

PROPOSAL FIVE – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM‌	51

OTHER MATTERS‌	53

SHAREHOLDER PROPOSALS‌	53

ANNUAL REPORT ON FORM 10-K‌	53

APPENDIX A - PARTNERS BANCORP 2021 INCENTIVE STOCK PLAN‌	A-1

-i-

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PARTNERS BANCORP

2245 Northwood Drive

Salisbury, Maryland 21801

ANNUAL MEETING OF SHAREHOLDERS

Proxy Statement

INTRODUCTION

This Proxy Statement is furnished to holders of the common stock, $0.01 par value per share, of Partners Bancorp, a Maryland corporation (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the Company for use at the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) to be held online on Wednesday, May 19, 2021, at 10:00 a.m. Eastern Time, and at any adjournment or postponement of the meeting. Shareholders will be able to listen, vote electronically and submit questions during the annual meeting.

The Annual Meeting is being held for the following purposes:

(1)

(2)

To approve, in an advisory and non-binding vote, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement; and

(3)

To vote, on an advisory and non-binding basis, on the frequency of future advisory votes on the compensation of the Company’s named executive officers; and

(4)

To approve the Partners Bancorp 2021 Incentive Stock Plan; and

(5)

To ratify the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and

(6)

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

On April 7, 2021, we commenced mailing to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy Statement and our 2020 Annual Report to Shareholders for the year ended December 31, 2020, which contains our audited financial statements, and vote over the internet.

Our priority remains the safety of our shareholders, employees and community. In response to the public health concerns regarding the COVID-19 pandemic, the meeting will be a virtual

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meeting held on the internet. There will be no physical location for the meeting. Shareholders of record as of the close of business on March 22, 2021 are entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting. Shareholders will be able to attend the meeting online, and, with a control number, vote shares electronically and submit questions during the meeting by visiting www.meetingcenter.io/202542114 at the meeting date and time. The password for the meeting is PTRS2021. If you plan to attend the meeting online, please see the instructions on page 3 of this Proxy Statement under the heading “Attending and Participating in the Meeting.”

As permitted by rules adopted by the Securities and Exchange Commission (the “SEC”), we are furnishing our Proxy Statement and 2020 Annual Report to Shareholders over the internet to our shareholders. You will not receive a printed copy of the proxy materials in the mail, unless specifically requested. Instead, the Notice of Internet Availability of Proxy Materials instructs you on how to access and review over the internet all of the important information contained in the Proxy Statement and 2020 Annual Report to Shareholders and on how you may submit your proxy over the internet. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on Wednesday, May 19, 2021

The Proxy Statement, including the notice of annual meeting, and 2020 Annual Report to Shareholders are available online by visiting www.envisionreports.com/PTRS.

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THE COMPANY

The Company is a Maryland corporation and a bank holding company that holds all of the issued and outstanding shares of common stock of The Bank of Delmarva (“Delmarva”) and Virginia Partners Bank (“Virginia Partners”). The Company was incorporated on January 6, 1988 under the general corporation law of Maryland for the purpose of becoming a bank holding company for Delmarva. Delmarva is a commercial bank which was established in Maryland in 1896, reorganized as a national bank in 1996, and reorganized as a Delaware state chartered bank in 2003. Virginia Partners is a commercial bank which was organized under the laws of the Commonwealth of Virginia and commenced regular operations on July 8, 2008. The Company acquired Virginia Partners on November 15, 2019 through an exchange of shares in an all-stock transaction (the “Share Exchange”) pursuant to which each share of Virginia Partners common stock was exchanged for 1.7179 shares of the Company’s common stock.

GENERAL INFORMATION

Voting Rights

Only shareholders of record at the close of business on March 22, 2021 will be entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting. On that date, the Company had outstanding 17,726,648 shares of common stock, par value $0.01 per share, held by approximately 615 shareholders of record, which does not reflect the number of individuals or institutional investors holding stock in nominee name through banks, brokerage firms, and others. Each share of common stock, which is the only outstanding class of the Company’s securities, is entitled to one vote on all matters submitted to a vote of the shareholders. The presence, in person or by proxy, of at least a majority of the total number of outstanding shares of common stock is necessary to constitute a quorum at the meeting. Virtual attendance at the Annual Meeting constitutes “in person” attendance for purposes of establishing a quorum.

Attending and Participating in the Meeting

The Annual Meeting will be a completely virtual meeting of shareholders, which will be conducted exclusively online by webcast. You are entitled to attend the Annual Meeting only if you were a shareholder of the Company as of the close of business on March 22, 2021, the record date, or if you hold a valid proxy for the Annual Meeting. No physical meeting will be held.

You will be able to attend the Annual Meeting online by webcast and submit your questions during the meeting by visiting www.meetingcenter.io/202542114. You also will be able to vote your shares online by attending the Annual Meeting by webcast.

To attend the Annual Meeting and be able to submit questions and to vote, you will need to review the information, including the control number, included on your Notice of Internet Availability of Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials. The password for the meeting is PTRS2021.

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If you hold your shares through an intermediary, such as a bank or broker, you must register in advance using the instructions below.

If you do not have your control number, you may attend the Annual Meeting as a guest (non-shareholder), but you will not have the ability to vote your shares or submit questions during the Annual Meeting.

The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time on May 19, 2021. We encourage you to access the meeting 10-15 minutes prior to the start time to leave ample time for the check in. Please follow the instructions as outlined below.

Registration for the Annual Meeting

Registered Shareholders. If you are a registered shareholder (i.e., you hold your shares through our transfer agent, Computershare), you do not need to register to attend the Annual Meeting online by webcast. However, you will need your control number located on your Notice of Internet Availability of Proxy Materials or proxy card that you received. Please follow the instructions on your Notice of Internet Availability of Proxy Materials or proxy card that you received.

Other Shareholders. If you hold your shares through an intermediary, such as a bank, broker or other nominee, then that organization is considered the shareholder of record and the shares are considered held in “street name.” If you hold your shares in street name and you wish to attend the Annual Meeting online, you must register in advance to attend the meeting online and to vote during the meeting.

To register to attend the Annual Meeting online by webcast you must submit proof of your proxy power (i.e., legal proxy or broker’s proxy card) reflecting your Company holdings, along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and directed to Computershare by one of the following methods:

Mail: Send a copy of your legal proxy, along with your name and email address, to

Computershare

Attention: Partners Bancorp Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

Email: Forward the email from your bank, broker or other nominee, or attach an image of your legal proxy, to legalproxy@computershare.com, and include your name and email address. Requests for registration must include the subject line “Legal Proxy”.

Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on May 14, 2021.

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You will receive a confirmation email from Computershare of your registration and a control number that you can use to vote during the Annual Meeting.

Voting at the Annual Meeting

All properly executed written proxies and all properly completed proxies submitted by telephone or internet pursuant to this solicitation will be voted in accordance with the directions given in the proxy unless the proxy is revoked prior to the completion of voting at the Annual Meeting (as described below). Execution of a proxy will not affect a shareholder’s right to attend the Annual Meeting and to vote during the meeting.

Registered Shareholders. If you are a registered shareholder, you may vote during the Annual Meeting using your control number found on your Notice of Internet Availability of Proxy Materials or proxy card that you received.

Other Shareholders. If you hold your shares through an intermediary, such as a bank, broker or other nominee, then that organization is considered the shareholder of record and the shares are considered held in “street name.” The Company provided its proxy materials to the shareholder of record for distribution to you along with their voting instructions. As the beneficial owner of the shares, you have the right to direct the shareholder of record how to vote your shares. Check the information forwarded to you by the shareholder of record to see which voting methods are available to you.

If you hold your shares in street name, you must register in advance to vote during the Annual Meeting. To register, you must first obtain a legal proxy from your bank, broker or other shareholder of record and mail or email the legal proxy to Computershare using the instructions set forth above under the heading “Registration for the Annual Meeting.” Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on May 14, 2021. You will receive a confirmation email from Computershare of your registration and a control number that you can use to vote during the Annual Meeting.

Questions

Shareholders may submit questions either before or during the Annual Meeting by logging into the Annual Meeting using your control number and following the instructions to submit a question. Questions pertinent to meeting matters will be answered during the meeting after voting is completed, subject to time constraints. Our Company representative will facilitate the process by posing questions to our management team. Questions or comments that relate to proposals that are not properly before the Annual Meeting, relate to matters that are not proper subject for action by shareholders, are irrelevant to the Company’s business, relate to material non-public information of the Company, relate to personal concerns or grievances, are derogatory to individuals or that are otherwise in bad taste, are in substance repetitious of a question or comment made by another shareholder, or are not otherwise suitable for the conduct of the Annual Meeting as determined in the sole discretion of the Company, will not be answered. Questions relevant to meeting matters that we do not have time to answer during the meeting will be posted to the Company’s website following the meeting.

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Technical Support

Support will be available to assist with any technical difficulties you may have in accessing the virtual meeting. If you encounter any difficulties, you can utilize the link available on the log-in webpage for the Annual Meeting at www.meetingcenter.io/202542114 or you may call 1-888-724-2416 beginning at 9:00 a.m. Eastern Time on May 19, 2021.

If there are any technical issues in convening or hosting the Annual Meeting, we will promptly post information to the Company’s website, www.partnersbancorp.com, under the heading “Annual Meeting and Proxy Statement,” including information on when the Annual Meeting will be reconvened.

Submitting Proxies in Advance of the Meeting

You will receive multiple Notices of Internet Availability of Proxy Materials or printed copies of the proxy materials if you hold your shares in different ways (e.g., joint tenancy, trusts, custodial accounts, etc.) or in multiple accounts. You should vote the shares represented by each Notice of Internet Availability of Proxy Materials and proxy card you receive to ensure that all of your shares are voted.

Registered Shareholders

Registered shareholders can vote during the Annual Meeting or by proxy. If you are a registered shareholder, there are three ways for you to vote your proxy at any time prior to the meeting:

●

by internet: you can vote over the internet by following the instructions on the Notice of Internet Availability of Proxy Materials or proxy card (you will need the control number on your Notice of Internet Availability of Proxy Materials or proxy card); or

●

by toll-free telephone: you can vote by telephone toll-free by following the instructions on the proxy card (you will need the control number on your Notice of Internet Availability of Proxy Materials or proxy card); or

●

by mail: if you received these proxy materials by mail, you can vote by mail by signing, dating and mailing the proxy card in the postage-paid envelope provided.

Other Shareholders

If you hold your shares through an intermediary, such as a bank, broker or other nominee, then that organization is considered the shareholder of record and the shares are considered held in “street name.” The Company provided its proxy materials to the shareholder of record for distribution to you along with their voting instructions. As the beneficial owner of the shares, you have the right to direct the shareholder of record how to vote your shares. Check the information forwarded to you by the shareholder of record to see which voting methods are available to you.

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If you hold your shares through an intermediary, such as a bank, broker or other nominee, you must register in advance to attend and vote during the Annual Meeting. To register, you must first obtain a legal proxy from your bank, broker or other shareholder of record and mail or email the legal proxy to Computershare using the instructions set forth above under the heading “Registration for the Annual Meeting.”

If you hold your shares through an intermediary, such as a bank, broker or other nominee, it is extremely important that you instruct your shareholder of record how to vote your shares, even if you plan to attend and vote during the Annual Meeting.

Revocability of Proxy

Registered Shareholders

Registered shareholders can change or revoke a proxy at any time before the shares are voted at the Annual Meeting. If you are a registered shareholder, you can change or revoke a proxy by any of the following methods:

●

by submitting a written notice of revocation to Betsy J. Eicher, Corporate Secretary, at 2245 Northwood Drive, Salisbury, Maryland 21801, at any time prior to the close of business on May 18, 2021; or

●

by submitting a completed proxy card bearing a later date than any other proxy submitted by you; or

●

by toll-free telephone by following the instructions on the proxy card (you will need the control number on your Notice of Internet Availability of Proxy Materials or proxy card); or

●

by visiting the web page listed on the Notice of Internet Availability of Proxy Materials or proxy card and following the instructions (you will need the control number on your Notice of Internet Availability of Proxy Materials or proxy card); or

●

by attending the Annual Meeting and voting during the Annual Meeting.

Your latest proxy card, telephone vote, or internet vote with respect to the same shares is the one that will be counted.

Other Shareholders

If you hold your shares through an intermediary, such as a bank, broker or other nominee, you should contact the shareholder of record to change your vote.

To revoke a proxy previously submitted electronically, a shareholder may simply submit a new proxy at a later date before the submission deadline indicated by the shareholder’s bank, broker or other nominee, in which case, the later submitted proxy will be recorded and the earlier proxy will be revoked. A shareholder who obtains a legal proxy and registers in advance to attend the Annual

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Meeting online may also revoke a previously submitted proxy by attending the meeting online and voting electronically at the meeting.

Proxies and Vote Required

Properly submitted proxies received by the Company in time to be voted at the meeting will be voted as specified by the shareholder submitting the proxy. If you properly submit a proxy without indicating your instructions, the shares of common stock represented by such proxy will be voted:

●

FOR the election of all of the nominees for election as director named in the Proxy Statement; and

●

FOR the approval of the compensation of the Company’s named executive officers as disclosed in the Proxy Statement; and

●

for the option of every ONE YEAR as the frequency for future advisory votes on the compensation of the Company’s named executive officers; and

●

FOR the approval of the Partners Bancorp 2021 Incentive Stock Plan; and

●

FOR the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and

in the discretion of the holders of the proxies on all other matters properly brought before the meeting and any adjournment or postponement of the meeting.

The inspector of election appointed by the Board of Directors for the meeting will determine the presence of a quorum and will tabulate the votes cast at the meeting. Abstentions will be treated as present for purposes of determining a quorum, but as unvoted for purposes of determining the approval of any matter submitted to the vote of shareholders.

If you own shares that are held in street name, meaning through a broker, bank, or other similar organization, and you do not provide the organization that holds the shares of record with specific voting instructions then, under the rules of the New York Stock Exchange applicable to its member firms, the organization that holds the shares may generally vote your shares with respect to “routine” matters but cannot vote your shares on “non-routine” matters. If the organization that holds such shares does not receive instructions from you on how to vote your shares on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on the matter with respect to your shares. This is generally referred to as a “broker non-vote.” If a bank, broker or other nominee indicates that it does not have the authority to vote on a particular matter with respect to your shares, such shares will be treated as present for purposes of determining a quorum, but as unvoted for purposes of determining the approval of that matter. Under the rules of the New York Stock Exchange applicable to its member firms, we expect that banks, brokers and other nominee holders will vote on certain routine matters, but not on non-routine matters. The only

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routine matter to be presented at the meeting is the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm in Proposal Five.

For the election of directors in Proposal One, votes may be cast in favor or withheld. If a quorum is present, the directors will be elected by a plurality of the votes cast in the election of directors; therefore, abstentions, broker non-votes or withheld votes will have no effect on the outcome of the election.

For the advisory vote to approve the compensation of the Company’s named executive officers in Proposal Two, the approval of the Partners Bancorp 2021 Incentive Stock Plan in Proposal Four, and the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm in Proposal Five, votes may be cast in favor or against, or you may abstain from voting. For these proposals, if a quorum is present, such proposal will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions or broker non-votes will have no effect on the outcome of any such proposals. Proposal Five is considered a routine matter under the rules of the New York Stock Exchange applicable to its member firms. A broker or other nominee may generally vote on routine matters, and therefore no “broker non-votes” are expected to occur in connection with Proposal Five.

For the advisory vote on the frequency of future advisory votes on the compensation of the Company’s named executive officers in Proposal Three, votes may be cast for one, two or three years, or you may abstain from voting. For Proposal Three, if a quorum is present, the option that receives the highest number of votes in favor will be the frequency that is selected by the shareholders. Abstentions or broker non-votes will have no effect on the outcome of Proposal Three.

Solicitation of Proxies

You have received these proxy materials because the Company’s Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. The costs of this solicitation will be borne by the Company. Proxy solicitations will be made by mail and electronic notice and access and also may be made by personal interview, telephone and email by directors, officers and regular employees of the Company, acting without compensation other than their regular compensation. Brokerage houses, fiduciaries and other custodians and nominees will be requested to forward the proxy soliciting material to the beneficial owners of shares of common stock and to obtain authorization for the execution of proxies. The Company will, upon request, reimburse such parties for their reasonable expenses in forwarding these proxy materials to such beneficial owners. The Company has not retained a professional proxy solicitor or other firm to assist it, for compensation, with the solicitation of proxies, although it may do so if deemed appropriate or necessary.

PROPOSAL ONE - ELECTION OF DIRECTORS

The size of the Company’s Board of Directors is currently set at eleven directors. The Company’s Board of Directors is divided into three classes as nearly equal in number as possible, with one class elected each year by the Company’s common shareholders.

Four directors will be elected at the Annual Meeting. The Company’s Board of Directors has nominated for election Mona D. Albertine, Michael W. Clarke, Mark L. Granger and Robert

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C. Wheatley to be elected as directors to serve until the 2024 Annual Meeting of Shareholders, or in each case until his or her successor is duly elected and qualified, subject to such director’s earlier resignation or removal. Each of the directors currently serves as a director of the Company. Ms. Albertine, Mr. Granger and Mr. Wheatley were previously elected by shareholders of the Company. Mr. Clarke was appointed to the Company’s Board of Directors by the Company’s Board of Directors on February 8, 2021 and was initially recommended by the Company’s Chief Executive Officer following consultation with Kenneth R. Lehman, a non-employee director and shareholder of the Company. Each nominee was nominated for election as a director of the Company by the Board of Directors, upon the recommendation of the Governance & Nominating Committee.

Unless authority is withheld, all proxies received in response to this solicitation will be voted FOR the election of the nominees listed below. The nominees have indicated a willingness to serve if elected. However, if the nominees become unable to serve, the proxies received in response to this solicitation will be voted for replacement nominees selected in accordance with the best judgment of the persons named as proxies.

Vote Required and Board Recommendation. With respect to Proposal One, votes may be cast in favor or withheld. Directors are elected by a plurality of the votes cast. If a quorum is present, the four nominees receiving the greatest number of affirmative votes at the meeting, even though less than a majority, will be elected as directors; therefore, votes withheld and broker non-votes will have no effect on the outcome of the election of directors. The Board of Directors recommends that shareholders vote FOR each of the nominees for election to the Company’s Board of Directors.

Nominees for Election as Directors

Set forth below is information concerning the names, ages, principal occupations and business experience for the past five years for all nominees for election as director, as well as the particular experience, qualifications, attributes or skills that led the Board of Directors to conclude that each should serve as a director.

Nominees for Election to Serve Until the 2024 Annual Meeting of Shareholders

Mona D. Albertine, 71, has served as a director of the Company since November 2019 and as a director of Virginia Partners since it was established in 2007. Ms. Albertine is co-founder, President and owner of Jabberwocky Books, a retail establishment which has been part of the Fredericksburg, Virginia business community since 1985. She is also a managing partner of Albertine Properties, which owns and manages commercial real estate in downtown Fredericksburg. She served eight years on the Board of Visitors of the University of Mary Washington, two years as Vice Rector and two years as Rector. Ms. Albertine served on the board of Virginia Heartland Bank prior to its merger with Second National Bank of Culpeper. For more than 33 years she has served on numerous charitable boards in the Fredericksburg area, most recently, the Community Foundation of the Rappahannock River Region and The Women and Girls Fund, where she served as President, and as a director of the Fredericksburg Regional Chamber of Commerce. She currently serves on the board of the University of Mary Washington Foundation. Ms. Albertine received a Bachelor of Arts degree in International Relations from the

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University of Mary Washington in 1971. Ms. Albertine’s extensive experience in banking, in leadership, in small business, and in real estate provide valuable expertise to the Company’s Board of Directors.

Mark L. Granger, 57, has served as a director of the Company and Delmarva since 1999. He is a certified public accountant, and specializes in tax and financial consulting for individuals, and tax, accounting and consulting for small and medium sized businesses on the Delmarva Peninsula. He has been Managing Partner of Granger & Magee, PA, Salisbury, Maryland since 2000, and previously served as a partner and manager of Faw, Casson & Co., LLP, Salisbury, Maryland from 1993 to 1999. He has over 30 years of accounting experience. He has a B.A. from the University of Lynchburg, and an M.S. in Taxation from Pace University, New York City. His service on the Board of Directors is supported by his specialized knowledge of accounting and financial matters, and his knowledge of the communities in which Delmarva operates and business connections in Delmarva’s markets.

Robert C. Wheatley, 64, has served as a director of the Company and Delmarva since 1998. Mr. Wheatley has been the managing member and owner of The Whayland Group LLC, a real estate project management and consulting firm since 2009, and was President and owner of The Whayland Company, Inc., a commercial construction company from 1993 to 2013. He serves on the Sussex County Planning and Zoning Commission, the Delaware Association of Professional Engineers, the Laurel Development Corp., Delaware Economic and Environmental Development Commission and other public and private economic development initiatives. A graduate of Salisbury University, he is also an associate real estate broker with Keller Williams Realty, Inc. since 2016. Mr. Wheatley’s service on the Board of Directors is supported by his extensive knowledge of commercial real estate and real estate development matters in the communities in which Delmarva operates, along with his knowledge of and contacts in the communities in which Delmarva operates.

Michael W. Clarke, 59, brings over 35 years of experience in the skilled front-line delivery of banking products, credit risk management, corporate finance, capital management and management of banking operations at all levels. Mr. Clarke manages a variety of investments in small to mid-sized businesses and serves on a variety of corporate and civic boards. Mr. Clarke is a senior portfolio advisor at FJ Capital Management assisting in the evaluation and management of investments in the U.S. financial services industry. Mr. Clarke also works as a manager of the Graystone Investment Fund, an entity focused on the development and operation of multi-family real estate in Virginia. Over the last five years, Mr. Clarke has served as a director of Atlantic Union Bankshares Corporation and Access National Corporation, each of which was registered under Section 12 of the Exchange Act. From February 2019 to January 2021, Mr. Clarke served on the Board of Directors of Atlantic Union Bankshares Corporation and its subsidiary, Atlantic Union Bank. Previously, Mr. Clarke served as President, Chief Executive Officer and a director of Access National Corporation from its formation in 2002 until being acquired by Atlantic Union Bankshares Corporation in February 2019. Mr. Clarke also previously served as Chief Executive Officer and a director of Access National Bank, the subsidiary of Access National Corporation, from its organization in 1999 until February 2019, and as President of Access National Bank from its organization in 1999 until June 2016. Prior to joining Access National Bank, Mr. Clarke served as Chief Credit Officer of Patriot National Bank, or Patriot, in Vienna, Virginia, from its inception in 1990 until the company was sold in 1997 and remained with the successor, United Bank, in the

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same capacity through 1998. Prior to joining Patriot, Mr. Clarke was Vice President of commercial lending at Crestar Bank in Alexandria, Virginia, from 1985 to 1989. Mr. Clarke graduated from Virginia Tech with a B.S. degree in finance and marketing and actively serves as a volunteer board member on numerous related organizations. Mr. Clarke’s active and past roles include: Virginia Tech Foundation Board of Directors (Audit Chair); Board of Virginia Bankers Association; Board of Business Finance Group (an SBA Certified Development Company); Advisory Board of Salem Halifax Capital Partners; Chairman, Greater Reston Chamber of Commerce; Founding Member & Chair of the IncSpire Business Incubator; Chair of the Finance Advisory Board at Virginia Tech; Chair & Treasurer of the Adult Community Education Foundation; and President of The Pamplin College of Business Advisory Council. Mr. Clarke’s qualifications to serve on the Company’s Board of Directors include his extensive executive and directorial experience in community banks, his administrative and leadership qualities, and his knowledge of and contacts in the communities in which the Company operates, particularly the Greater Washington and Northern Virginia markets.

Continuing Directors

Set forth below is information concerning the names, ages, principal occupations and business experience for the past five years for all of the directors of the Company whose terms continue beyond the 2021 Annual Meeting of Shareholders, as well as the particular experience, qualifications, attributes or skills that led the Board of Directors to conclude that each should serve as a director.

Serving Until the 2022 Annual Meeting of Shareholders

John W. Breda, 59, has served as a director of the Company and Delmarva since 2018. Mr. Breda has served as President and Chief Operating Officer of the Company since November 2019. He previously served as President and Chief Executive Officer of the Company since July 2017. He has been the President and Chief Executive Officer of Delmarva since July 2017. He joined the Company and Delmarva as Executive Vice President and Chief Credit Officer in August 2012. Prior to joining the Company, he served as Vice President of the Commercial Banking Team Leader/Group Manager, at M&T Bank from May 2011, and of Wilmington Trust Company from 1995 until that company was acquired by M&T Bank. Mr. Breda has over 31 years of banking experience. He is a graduate of the Stonier Graduate School of Banking. Mr. Breda’s service on the Board of Directors is supported by his many years of banking experience, and his knowledge of the Company’s business and its market areas.

George P. Snead, 51, has served as a director of the Company since November 2019 and as a director of Virginia Partners since it was established in 2007. Mr. Snead is a partner in Parrish Snead Franklin Simpson, PLC, a general practice law firm located in Fredericksburg, Virginia. Mr. Snead’s practice centers on estate planning and commercial transactions, specifically including commercial real estate purchases/sales, commercial leases, business organizations, and lending transactions. Mr. Snead graduated from Davidson College with a Bachelor of Arts in Economics, and he received his law degree from the College of William and Mary. He has served as a member of the Board of Directors of Germanna Community College Educational Foundation, the Central Virginia Housing Coalition, the Massad Branch of the YMCA, the Fredericksburg Regional Chamber of Commerce, the Board of Directors of the Central Rappahannock Heritage

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Center and the Board of Trustees of the Community Foundation of the Rappahannock River Region. Mr. Snead’s experience in and knowledge of commercial real estate matters provide valuable contributions to the Company’s Board of Directors.

Jeffrey F. Turner, 72, has served as a director of the Company and Delmarva since 2009, and as Chairman of the Board of Directors since January 2012. Until his retirement in 2008, Mr. Turner served as President and CEO of Mercantile Peninsula Bank and its predecessor, Peninsula Bank, from 1994 to 2008. He has over 44 years of banking experience. Over the years, he has been a member of the Salisbury Area Chamber of Commerce, member of the Greater Salisbury Committee, member of the Wicomico County Economic Development Committee, and member of the Somerset County Economic Development Committee. Mr. Turner is the former Chairman of the Board of the Peninsula Regional Medical Center, former President of the Life Crisis Center, Inc. and former member of the Board of Visitors of the University of Maryland, Eastern Shore. Currently, Mr. Turner serves as a Trustee of the John B. Parsons Home Foundation, a Corporate Member of the Community Foundation of the Eastern Shore, and as a Director of Qlarant, one of the first quality review organizations for the Centers of Medicare and Medicaid. Mr. Turner is a graduate of Towson University with a degree in Economics. Mr. Turner’s service on the Board of Directors is supported by his extensive executive and directorial experience in community banks, his administrative and leadership qualities, and his knowledge of and contacts in the communities in which Delmarva operates.

Serving Until the 2023 Annual Meeting of Shareholders

Lloyd B. Harrison, III, 63, has served as a director of the Company since November 2019 and as a director of Virginia Partners since it was established in 2007. Mr. Harrison has served as Chief Executive Officer of the Company since November 2019. Mr. Harrison served as President, Treasurer, Secretary and Chief Operating Officer of Virginia Partners from its inception in 2007 to July 2014, at which time he became President and Chief Executive Officer of Virginia Partners. In December 2020, Mr. Harrison ceased serving as President of Virginia Partners but continues to serve as Chief Executive Officer of Virginia Partners. Prior to his service to Virginia Partners, Mr. Harrison served as President and Chief Executive Officer of Mercantile Southern Maryland Bank and its predecessor, Calvert Bank and Trust, from 2001 to 2007. He has over 36 years of banking experience. Over the years, he has served on the boards of many civic and charitable organizations. Mr. Harrison is a former chairman of the board of directors of Asbury Communities, Inc. and a former director of Westminster American Insurance Company. Currently, Mr. Harrison serves as the Chairman of The Fredericksburg Regional Alliance and is the past chairman of the board of directors of the Virginia Association of Community Banks. He is a trustee and the treasurer of The George Washington Foundation. He has an undergraduate degree in English from The University of Virginia and a Master in Business Administration from The College of William & Mary. Mr. Harrison’s extensive banking, leadership, and governance experience provide valuable contributions to the Company’s Board of Directors.

Kenneth R. Lehman, 61, has served as a director of the Company and Delmarva since 2014 and has served as a director of Virginia Partners since 2016. He is a private investor and former banking and securities attorney. Over the last five years, Mr. Lehman has served as a director of several banks and bank holding companies, including three companies registered under

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Section 12 of the Exchange Act: Four Oaks Fincorp where he served as a director from 2014 through November 2017, First Capital Bancorp, Inc., where he served as a director from 2012 through January 2016, and Village Bank and Trust Financial Corp., where he served as a director from June 2016 to May 2018. In addition to his service as a director of the Company, Delmarva and Virginia Partners, Mr. Lehman currently serves as a director of Heritage Southeast Bancorporation and its wholly-owned subsidiary Heritage Southeast Bank, McDonough, Georgia, Marine Bancorp of Florida and its wholly-owned subsidiary Marine Bank and Trust Company, Vero Beach, Florida, and BankFLORIDA, Jupiter, Florida. Mr. Lehman’s extensive experience as a director of financial institutions and as an advisor to financial institutions is invaluable to the Board of Directors in governance and strategic thinking.

Steven R. Mote, 55, has served as a director of the Company since April 2020 and as a director of Virginia Partners since 2014. Mr. Mote is the President and Chief Executive Officer of Mote Management Company Inc., which he founded in 1991. Mote Management Company Inc. is a diversified real estate management and development company that operates primarily in the Southern Maryland market. The company owns and manages apartment communities, retail shopping centers, commercial mixed-use projects, car washes, and mini storage facilities. Mr. Mote has been active in a number of professional and civic organizations. He previously served as a director of Mercantile Southern Maryland Bank prior to the bank being purchased by PNC. Mr. Mote is a past President of the Waldorf Lions Club and served on the College of Southern Maryland’s Foundation Board and the local United Way board. Mr. Mote’s extensive business experience and knowledge of real estate matters in the Company’s Maryland market area support his service on the Board of Directors.

James A. Tamburro, 54, has served as a director of the Company and Delmarva since 2018. He previously served as a director of Liberty Bell Bank, a bank that was previously acquired by the Company. He has been an attorney in private practice with Tamburro Law Office, in Marlton, New Jersey, since 1999, and since 2014 he has been co-owner and manager of Global Contact Publishing Co.; and since 2016 a commercial/residential real estate broker with Berkshire Hathaway Real Estate, Marlton, New Jersey. Since 2012 he has served as an Ambassador of Georgetown University’s Alumni Admissions Program. Mr. Tamburro is a graduate of Georgetown University, where he earned a B.A., and Widener University School of Law, where he earned his J.D. Mr. Tamburro’s knowledge of real estate finance and investing, along with his experience as a director of Liberty Bell Bank and Delmarva and his knowledge of and contacts in Delmarva’s New Jersey market area support his service on the Board of Directors.

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CORPORATE GOVERNANCE

Director Independence

As required under The Nasdaq Stock Market LLC (“Nasdaq”) listing standards, a majority of the members of a listed company’s board must qualify as “independent,” as affirmatively determined by the board. Consistent with this consideration, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company and its senior management, the Company’s Board of Directors has affirmatively determined that each director and nominee for director, other than Mr. Breda and Mr. Harrison, is currently an “independent director” within the meaning of the applicable Nasdaq listing standards. John A. Janney also served as a director of the Company in 2020 until his service as a director ended at the Company’s 2020 Annual Meeting. During 2020, the Board of Directors determined that each director who served during 2020, other than Mr. Breda and Mr. Harrison, was an independent director as well. Each current director also served as a director during 2020 other than Mr. Clarke. Mr. Clarke was appointed to the Company’s Board of Directors by the Company’s Board of Directors on February 8, 2021. In determining that Mr. Clarke is an independent director in connection with his appointment to the Board of Directors, the Board of Directors considered Mr. Clarke’s consulting relationship with Virginia Partners and all other relevant information.

In reaching these conclusions, the Company’s Board of Directors found that none of the directors or nominees for director determined to be independent had a material or other disqualifying relationship with the Company. The Board of Directors was aware of and considered the loan and deposit relationships with directors and their related interests which Virginia Partners and Delmarva enter into in the ordinary course of business, which are disclosed under “Certain Relationships and Related Party Transactions” described below as well as the employment and consulting arrangements described under “Director Compensation” and “Executive Compensation.”

Board Leadership Structure

The Board of Directors has an independent Chairman who has authority, among other things, to preside over Board of Directors meetings, including meetings of shareholders, and shall have such powers and duties as may, from time to time, be assigned by the Board of Directors. Accordingly, the Chairman has substantial ability to shape the work of the Board of Directors. We believe that having separate positions for the Chairman of the Board of Directors and the Chief Executive Officer reinforces the independence of the Board of Directors in its oversight of the Company’s business and affairs. In addition, we believe that having an independent Chairman of the Board of Directors creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board of Directors to monitor whether management’s actions are in our best interests and those of our shareholders. As a result, we believe that having an independent Chairman of the Board of Directors can enhance the effectiveness of our Board of Directors as a whole.

Role of the Board in Risk Oversight

A key function of the Board of Directors is informed oversight of our risk management process. The Board of Directors has a standing Risk Committee to assist the Board of Directors in

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overseeing the Company’s management of its financial, operational, information technology (to include cyber risk), credit, market, capital, liquidity, reputation, strategic, legal, compliance, model and other risks and to oversee the Company’s enterprise risk management framework. In addition, other standing committees address risks inherent in their respective areas of oversight. The Audit & Compliance Committee oversees and discusses with management the Company’s major financial and other risk exposures and the steps that management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. The Audit & Compliance Committee also reviews with management the categories of risk the Company faces by line of business, product and region. The Audit & Compliance Committee holds a joint meeting with the Risk Committee at least once per year.

Management periodically reports to the Board of Directors or the relevant committee, which provides guidance on risk assessment and mitigation. Each committee charged with risk oversight reports to the Board of Directors on relevant matters and committee activities.

The Company currently has no policy with respect to transactions that are designed to hedge or offset decreases in the market value of securities granted to employees or directors as part of the compensation of the employee or director or otherwise held directly or indirectly by the employee or director. Under the Company’s Insider Trading Policy, directors, officers and any designated employees of the Company and its subsidiaries should obtain pre-clearance from the Company’s Chief Executive Officer or Chief Financial Officer for trades involving the Company’s securities, including derivative securities relating to the Company’s common stock.

Meetings of the Board of Directors

The Board of Directors met six times during 2020. Each director in 2020 attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he or she served during the portion of the year for which he or she was a director or committee member.

As required under applicable Nasdaq listing standards, in 2020, our independent directors met in regularly scheduled executive sessions at which only independent directors are present.

The Company has not adopted a formal policy on directors’ attendance at annual meetings of shareholders, although all directors are encouraged to attend. All directors of the Company attended the 2020 Annual Meeting of Shareholders on April 30, 2020.

Committees of the Board of Directors

The Board of Directors has a standing Audit & Compliance Committee, Compensation Committee and Governance & Nominating Committee. Each of these committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board of Directors has determined that each member of each of these committees currently meets the applicable Nasdaq rules and regulations regarding “independence.” The Board of Directors also has a standing Risk Committee, as discussed above under “Role of the Board in Risk Oversight.”

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Audit & Compliance Committee

The Audit & Compliance Committee assists the Board of Directors in overseeing:

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the quality and integrity of the accounting and financial reporting processes and financial statement audits of the Company and its subsidiaries;

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the independent registered public accounting firm’s qualifications and independence;

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the performance of the Company’s internal audit function and independent registered public accounting firm;

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the Company’s compliance with legal and regulatory requirements; and

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the Company’s disclosure controls and procedures and internal control over financial reporting.

Current members of the Audit & Compliance Committee are Mr. Granger (Chair), Ms. Albertine, Mr. Mote and Mr. Wheatley. In addition, John A. Janney served as a member of the Audit & Compliance Committee in 2020 until his service as a director ended at the Company’s 2020 Annual Meeting. The Board of Directors has determined that the current members of the Audit & Compliance Committee are independent under the heightened standards of independence required by Section 5605(c)(2)(A) of the Nasdaq rules and SEC Rule 10A-3. The Board of Directors has also determined that the members serving on the Audit & Compliance Committee in 2020 were independent under the heightened standards of independence required by Section 5605(c)(2)(A) of the Nasdaq rules and SEC Rule 10A-3, except with regard to Mr. Granger’s service on the Audit & Compliance Committee prior to July 2020. Mr. Granger is the Managing Partner of Granger & Magee, PA, an accounting firm that received a $475 fee in June 2020 for tax and consulting services performed for Delmarva. A company that lists its stock on Nasdaq in connection with the initial public offering of its securities is eligible to use applicable Nasdaq and SEC transition rules to phase in compliance with certain audit committee independence requirements over a period of one year from the date of effectiveness of its initial registration statement. The Company relied on this phase-in period with respect to the independence of Mr. Granger under applicable Nasdaq and SEC transition rules prior to July 2020 and all members of the Audit & Compliance Committee satisfied the independence requirements of the Nasdaq listing standards and applicable SEC regulations by the end of the phase-in period in July 2020. The Board of Directors determined that the Company’s reliance on the exemption applicable during the phase-in period in 2020 did not adversely affect the ability of the Audit & Compliance Committee to act independently or to satisfy the other requirements of the Nasdaq listing standards and applicable SEC regulations.

In addition, at least one member of the Audit & Compliance Committee has past employment experience in finance or accounting or comparable experience which results in the individual’s financial sophistication. The Board of Directors has also determined that Mr. Granger qualifies as an “audit committee financial expert” within the meaning of applicable regulations of the SEC.

The Audit & Compliance Committee met nine times during 2020. The Board of Directors has adopted a written Audit & Compliance Committee charter that is publicly available in the “Who We Are” section of our website at www.partnersbancorp.com.

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Report of the Audit Committee of the Board of Directors

The Audit & Compliance Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2020 with management of the Company. The Audit & Compliance Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit & Compliance Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit & Compliance Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit & Compliance Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2020.

Mark L. Granger

Mona D. Albertine

Steven R. Mote

Robert C. Wheatley

Compensation Committee

The Compensation Committee assists the Board of Directors in its responsibilities relating to compensation of the Company’s executive officers and has overall responsibility for approving and evaluating all compensation plans, policies and programs of the Company as they affect the executive officers.

Current members of the Compensation Committee are Mr. Mote (Chair), Mr. Granger, Mr. Lehman and Mr. Turner. These individuals also served as members in 2020; in addition, John A. Janney served as a member of the Compensation Committee until his service as a director ended at the Company’s 2020 Annual Meeting. The Board of Directors has determined that the current members of the Compensation Committee are (and that all of the members of the Compensation Committee serving during 2020 were) independent under applicable Nasdaq listing standards.

The Company’s executive compensation program is designed to attract and retain highly skilled and motivated officers who will manage the Company in a manner to promote our growth and profitability, prudently preserve our capital, and advance the interests of our shareholders. Delmarva and Virginia Partners currently have separate compensation programs. Compensation for executive officers of the Company, each of whom is also an executive officer of Delmarva or Virginia Partners, is initially approved by the board of directors or a committee of the board of directors of the respective bank and then approved by the Compensation Committee of the Company. In their roles as chief executive officer of the respective banks, Mr. Harrison and Mr. Breda may make recommendations regarding the compensation of executive officers. The Compensation Committee reviews the compensation for executive officers of the Company to ensure that it is appropriate.

As noted in Proposal Four below, the Company’s Board of Directors approved the Partners

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Bancorp 2021 Incentive Stock Plan on January 27, 2021, upon the recommendation of the Compensation Committee. The Company believes that equity incentive awards designed to reward long-term growth and profitability, to align compensation with shareholder interests and to attract and retain highly qualified executives are an essential component of a competitive compensation program. Subject to approval by shareholders at the Annual Meeting, the 2021 Incentive Stock Plan will become effective as of May 19, 2021 and will be administered by the Compensation Committee.

The Compensation Committee met six times during 2020. The Board of Directors has adopted a written Compensation Committee charter that is publicly available in the “Who We Are” section of our website at www.partnersbancorp.com.

Governance & Nominating Committee

The Governance & Nominating Committee identifies and evaluates qualified candidates and recommends nominees to the Board of Directors for election by shareholders or to fill any vacancies, oversees the annual evaluation of the Board of Directors, and assesses governance policies and practices and reports to the Board of Directors as needed. The Governance & Nominating Committee also evaluates and recommends director compensation to the Company’s Board of Directors for approval.

Current members of the Governance & Nominating Committee are Mr. Tamburro (Chair), Mr. Lehman, Mr. Snead and Mr. Turner. These individuals also served as members in 2020. The Board of Directors has determined that the current members of the Governance & Nominating Committee are (and that all of the members of the Governance & Nominating Committee serving during 2020 were) independent under applicable Nasdaq listing standards.

The Governance & Nominating Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements and having the highest personal integrity and ethics. The Governance & Nominating Committee also generally considers such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of the Company and its shareholders. The Governance & Nominating Committee retains the right to modify these qualifications from time to time as it deems appropriate.

Candidates for director are reviewed in the context of the current composition of the Board of Directors, including the size, organization, leadership and structure of the Board of Directors, the operating requirements of the Company and the long-term interests of shareholders.

In conducting the review of candidates for director, the Governance & Nominating Committee typically considers age, skills and such other factors as it deems appropriate, given our current needs and the needs of the Board of Directors, to maintain a balance of knowledge, experience and capability. Although the Company has no formal policy regarding diversity, as a matter of practice in its evaluation of candidates, the Governance & Nominating Committee considers whether the Board of Directors, as a whole, is diverse and includes individuals with

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various backgrounds, career experience, technical skills, industry knowledge and experience, financial expertise and local or community ties. The Governance & Nominating Committee also evaluates and makes a recommendation to the Board of Directors regarding whether each candidate is independent for Nasdaq purposes and under applicable SEC rules and regulations. Generally, potential candidates are identified and suggested by members of the Board of Directors or management using their business networks. The Governance & Nominating Committee may also engage, if it deems appropriate, a professional search firm or other third-party advisor. The Governance & Nominating Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board of Directors. The Governance & Nominating Committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the Board of Directors.

Although the Governance & Nominating Committee has no formal policy with respect to the consideration of director candidates recommended by shareholders, the committee will consider candidates for directors proposed by shareholders in writing. Such written submissions should include the name, address, and telephone number of the recommended candidate, along with a brief statement of the candidate’s qualifications to serve as a director. All shareholder recommendations should be submitted to the attention of the Governance & Nominating Committee of the Board of Directors, Partners Bancorp, 2245 Northwood Drive, Salisbury, Maryland 21801, and must be received by November 1, 2021 to be considered by the Governance & Nominating Committee for the 2022 election of directors. Any candidate recommended by a shareholder will be reviewed and considered in the same manner as all other director candidates considered by the Governance & Nominating Committee.

The Governance & Nominating Committee met four times during 2020. The Board of Directors has adopted a written Governance & Nominating Committee charter that is publicly available in the “Who We Are” section of our website at www.partnersbancorp.com.

Shareholder Communications with the Board of Directors

Shareholders may communicate with the entire Board of Directors or any member of the Board of Directors by addressing correspondence to the Board of Directors or to the individual director and sending such communication to the Corporate Secretary at Partners Bancorp, 2245 Northwood Drive, Salisbury, Maryland 21801. All communications so addressed will be forwarded to the Chairman of the Board of Directors (in the case of correspondence addressed to the Board of Directors), or to the individual director.

Code of Ethics

The Company has adopted a Code of Ethics that applies to its directors, executive officers and employees (the “Code”). The Code is available in the “About Us” section of our website at www.partnersbancorp.com. If the Company chooses to no longer post the Code on its website, it will provide a free copy to any person upon written request to Partners Bancorp, c/o Office of the President, 2245 Northwood Drive, Salisbury, Maryland 21801. The Company intends to provide any required disclosure of any amendment to or waiver from the Code that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons

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performing similar functions, in the “About Us” section of our website at www.partnersbancorp.com promptly following the amendment or waiver. The Company may elect to disclose any such amendment or waiver in a report on Form 8-K filed with the SEC either in addition to or in lieu of the website disclosure.

The information contained on or connected to the Company’s website is not incorporated by reference in this Proxy Statement and should not be considered part of this or any other report that the Company files or furnishes to the SEC.

Legal Proceedings and Family Relationships

The Board of Directors is not aware of any involvement in legal proceedings that would be material to an evaluation of the ability or integrity of any director or executive officer; nor is the Board of Directors aware of any family relationship between any director or executive officer.

Certain Relationships and Related Party Transactions

Delmarva and Virginia Partners have had, and expect to have in the future, banking transactions, including loans, in the ordinary course of business with some of the Company’s, Delmarva’s and Virginia Partners’ directors and executive officers and their associates. All of such transactions have been on substantially the same terms, including interest rates, maturities and collateral requirements as those prevailing at the time for comparable transactions with non-affiliated persons and did not involve more than the normal risk of collectability or present other unfavorable features. Loans to insiders require approval by the respective bank’s Board of Directors, with any interested director not participating. Delmarva and Virginia Partners also apply the same standards to any other transaction with an insider. Additionally, loans to directors or their related parties must be approved by the respective bank’s Directors’ Loan Committee and are reported to the Company’s Board of Directors and Audit & Compliance Committee. Other related party transactions involving directors must be reviewed and approved by the Board of Directors or a designated committee.

The maximum aggregate amount of loans (including lines of credit) to officers, directors and affiliates of the Company during the year ended December 31, 2020 and December 31, 2019 amounted to $25.9 million and $20.4 million, respectively. This represents approximately 19.0% and 15.6% of the Company’s total shareholders’ equity at December 31, 2020 and 2019, respectively. The aggregate amount of such loans outstanding at December 31, 2020 and 2019 to individuals who were officers, directors or affiliates of the Company during the year was $19.8 million and $15.6 million, respectively. None of such loans was classified as past due, nonaccrual or troubled debt restructurings at December 31, 2020 or 2019. In the opinion of the Company’s Board of Directors, the terms of these loans are no less favorable to Delmarva or Virginia Partners than terms of the loans from Delmarva or Virginia Partners to unaffiliated parties. At the time each loan was made, management believed that these loans involved no more than the normal risk of collectability and did not present other unfavorable features.

Executive Officers Who Are Not Directors

Set forth below is information as of March 22, 2021, concerning the name, age, positions held with the Company, the term of office as an executive officer and business experience for the

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past five years for each of the Company’s executive officers who are not directors. The biographies for Mr. Harrison and Mr. Breda are included above in the section titled “Proposal One – Election of Directors.”

J. Adam Sothen, 44, has served as Chief Financial Officer of the Company since November 2019 and Executive Vice President and Chief Financial Officer of Virginia Partners since April 2018. From June 2017 through March 2018, Mr. Sothen served as Executive Vice President and Chief Financial Officer of Sonabank and Sonabank’s parent company, Southern National Bancorp of Virginia, Inc. Previous to that, Mr. Sothen was employed by EVB as Vice President and Corporate Controller from June 2010 until October 2012, and from September 2011 through June 2017, as Executive Vice President and Chief Financial Officer of EVB and EVB’s parent company, Eastern Virginia Bankshares, Inc.

Elizabeth (“Betsy”) J. Eicher, 42, has served as Chief Accounting Officer of the Company since November 2019 and Senior Vice President and Chief Financial Officer of Delmarva since 2015. Ms. Eicher also served as Senior Vice President and Chief Financial Officer of the Company from 2015 to November 2019. She is a graduate of Salisbury University with a B.A. in Accounting, and she has a B.S. in Psychology from the University of Pittsburgh at Johnstown. Prior to joining the Company and Delmarva, she was an Accounting Manager at TGM Group LLC, where she had served in progressively responsible roles as an accountant on external audits since 2005.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 15, 2021, the amount and percentage of the common stock of the Company beneficially owned by each director, each named executive officer and all directors and current executive officers of the Company as a group. Unless otherwise indicated, each person has sole voting power and sole investment power with respect to the securities shown. The business address of each director and executive officer is the Company’s principal address. For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Exchange Act under which, in general, a person is deemed to be the beneficial owner of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within 60 days (“presently exercisable”). Unless otherwise indicated, none of the shares listed below are pledged as collateral for a loan.


Name of Beneficial Owner	Number of Shares of Common Stock		Shares Subject to Exercisable Options	Total Number of Shares Beneficially Owned	Percent of Class (1)
Directors
Mona D. Albertine	49,647	(2)	4,638	54,285	*	%
John W. Breda	29,946		—	29,946	*
Michael W. Clarke	104,439		—	104,439	*
Mark L. Granger	28,030	(3)	—	28,030	*	%
Lloyd B. Harrison, III	169,108	(4)	30,062	199,170	1.12	%
Kenneth R. Lehman	7,386,431	(5)	—	7,386,431	41.67	%
Steven R. Mote	27,010		—	27,010	*
George P. Snead	14,601		4,638	19,239	*	%
James A. Tamburro	18,751	(6)	1,028	19,779	*	%
Jeffrey F. Turner	50,702	(7)	—	50,702	*	%
Robert C. Wheatley	12,820		—	12,820	*	%

Named Executive Officers Who are Not Directors
J. Adam Sothen	—		25,768	25,768	*	%
Betsy J. Eicher	—		—	—	—	%

All Directors and Current Executive Officers as a Group (13 persons)	7,891,485		66,134	7,957,619	44.72	%

*	Percentage of ownership is less than one percent of the outstanding shares.

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(1)	Each percentage is based on 17,726,648 shares of common stock issued and outstanding on March 15, 2021.

(2)	Amount includes 46,383 shares over which Ms. Albertine shares voting and investment power with her spouse.

(3)	Amount includes 991 shares over which Mr. Granger shares voting and investment power with his spouse and 18,750 shares held by his mother over which Mr. Granger shares voting and investment power.

(4)	Amount includes 80,117 shares over which Mr. Harrison shares voting and investment power with his spouse and 34,358 shares held in Mr. Harrison’s spouse’s IRA account, for which account Mr. Harrison disclaims beneficial ownership.

(5)	All of these shares are pledged as collateral for a loan.

(6)

Amount includes 700 shares held by Mr. Tamburro’s spouse over which Mr. Tamburro shares voting and investment power with his spouse, 2,683 shares held jointly over which Mr. Tamburro shares voting and investment power with his spouse, 566 shares held in Mr. Tamburro’s spouse’s IRA account over which account Mr. Tamburro shares voting and investment power with his spouse, 488 shares held by Mr. Tamburro’s spouse as custodian for their children over which Mr. Tamburro shares voting and investment power with his spouse, 70 shares held by Mr. Tamburro’s spouse in trust for their children over which Mr. Tamburro shares voting and investment power with his spouse, and 72 shares held by Mr. Tamburro as custodian for their child over which Mr. Tamburro shares voting and investment power with his spouse.

(7)	Amount includes 29,002 shares over which Mr. Turner shares voting and investment power with his spouse and 6,012 shares held by JFT LLC, of which Mr. Turner is the sole member and owner.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires directors, executive officers, and beneficial owners of more than 10% of the Company’s common stock to file reports concerning their ownership of and transactions in the Company’s common stock. Based on a review of the copies of those reports furnished to the Company, or written representations that no other reports were required, the Company believes that its officers and directors complied with all such filing requirements under Section 16(a) during 2020, except for Mr. Harrison and Mr. Tamburro, each of whom inadvertently omitted certain holdings from his timely filed initial Form 3.

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EXECUTIVE COMPENSATION

Delmarva and Virginia Partners currently have separate compensation programs. Compensation for executive officers of the Company, each of whom is also an executive officer of Delmarva or Virginia Partners, is initially approved by the board of directors or a committee of the board of directors of the respective bank and then approved by the Compensation Committee of the Company. In their roles as chief executive officer of the respective banks, Mr. Harrison and Mr. Breda may make recommendations regarding the compensation of executive officers.

The following table sets forth a summary of certain information concerning the compensation awarded to or paid by the Company or its subsidiaries for services rendered in all capacities during the past two years to the following individuals (referred to herein as “named executive officers”):

●

Lloyd B. Harrison, III, Chief Executive Officer of the Company;

●

John W. Breda, President and Chief Operating Officer of the Company; and

●

J. Adam Sothen, Chief Financial Officer of the Company, who was not a named executive officer for 2019.

Except for Mr. Breda’s transaction bonus in 2019, which was paid by the Company, all compensation in the following table was paid by Delmarva for Mr. Breda, who is an employee of Delmarva, and by Virginia Partners for Mr. Harrison and Mr. Sothen, who are employees of Virginia Partners. The Company shares the cost of compensation for the executive officers of the Company based on cost-sharing arrangements with each of Delmarva and Virginia Partners.


												Nonqualified
										Non-Equity		Deferred
						Stock		Option		Incentive Plan		Compensation		All Other
Name and Principal Position	Year	Salary		Bonus (4)		Awards		Awards		Compensation (5)		Earnings		Compensation(6)		Total
Lloyd B. Harrison, III Chief Executive Officer, Company; Chief Executive Officer, Virginia Partners (1)	2020	$	315,869	$	32,443	$	—	$	—	$	56,269	$	—	$	37,257	$	441,838
	2019	$	33,846	$	525,000	$	—	$	—	$	66,000	$	—	$	51,350	$	676,196
John W. Breda President and Chief Operating Officer, Company; President and Chief Executive Officer, Delmarva (2)	2020	$	302,500	$	30,000	$	—	$	—	$	—	$	—	$	26,068	$	358,568
	2019	$	266,447	$	1,089,267	$	—	$	—	$	—	$	—	$	32,778	$	1,388,492
J. Adam Sothen Chief Financial Officer, Company; Executive Vice President and Chief Financial Officer, Virginia Partners (3)	2020	$	208,787	$	21,654	$	—	$	—	$	25,546	$	—	$	12,980	$	268,967

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(1)	Mr. Harrison became Chief Executive Officer of the Company on November 15, 2019 in connection with the Share Exchange.

(2)	Mr. Breda served as Chief Executive Officer of the Company until November 15, 2019.

(3)	Mr. Sothen became Chief Financial Officer of the Company on November 15, 2019 in connection with the Share Exchange and became a named executive officer of the Company in 2020.

(4)

For Mr. Harrison, for 2020, reflects a $30,000 discretionary bonus awarded for performance outside of the Virginia Partners management incentive plan and a $2,443 bonus under the Virginia Partners Discretionary Profit Sharing Plan. For Mr. Harrison, for 2019, reflects a $500,000 transaction bonus paid in connection with the Share Exchange and a $25,000 discretionary bonus awarded for performance outside of the Virginia Partners management incentive plan. For Mr. Breda, for 2020, reflects a $30,000 discretionary bonus awarded for performance. For Mr. Breda, for 2019, reflects a $1,048,000 transaction bonus paid in connection with the Share Exchange and a $41,267 discretionary bonus awarded for performance. For Mr. Sothen, for 2020, reflects a $20,000 sign on bonus from when he joined Virginia Partners in April 2018 that was paid in 2020 and a $1,654 bonus under the Virginia Partners Discretionary Profit Sharing Plan.

(5)	Reflects bonus awarded for 2020 and 2019 performance under the Virginia Partners management incentive plan. Mr. Harrison’s bonus amount for 2019 has been updated from the amount disclosed in the 2019 Summary Compensation Table.

(6)	“All other compensation” for 2020 consisted of the following:

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	Car		Company-paid		401(k)		Reimbursement
	Allowance/		Life Insurance		Matching		of Legal and Tax
Name	Company Car (1)		Premiums (2)		Contributions (3)		Advisor Fees		Other (4)
Lloyd B. Harrison, III	$	18,598	$	—	$	17,100	$	—	$	1,559
John W. Breda	$	14,436	$	3,177	$	8,455	$	—	$	—
J. Adam Sothen	$	—	$	—	$	12,980	$	—	$	—

(1)

For Mr. Harrison, reflects cost to Virginia Partners to provide company-owned car, including depreciation, with all maintenance, operating and insurance expense paid by Virginia Partners. For Mr. Breda, reflects cost to Delmarva to provide company-owned car, including depreciation, with all maintenance, operating and insurance expense paid by Delmarva.

(2)	For Mr. Harrison, no amounts are included with respect to BOLI because Virginia Partners had no incremental cost attributable to BOLI in 2020. For Mr. Breda, reflects cost to Delmarva to provide supplemental life insurance per his employment agreement.

(3)

For Mr. Harrison, reflects company match of $8,550 and profit-sharing contribution of $8,550 from the Virginia Partners 401(k) and profit-sharing plan. For Mr. Sothen, reflects company match of $7,646 and profit-sharing contribution of $5,334 from the Virginia Partners 401(k) and profit-sharing plan.

(4)	For Mr. Harrison, reflects cost to Virginia Partners to reimburse for business-related club expenses per his employment agreement. Mr. Breda reimburses Delmarva for any club expenses related to personal use.

Equity Compensation

The following table sets forth, on an award by award basis, information concerning all awards of stock options held by the named executive officers at December 31, 2020. All stock options were granted with an exercise price of 100% of fair market value as determined in accordance with the Company’s equity compensation plans (including acquired plans). The number of shares subject to each award and the exercise price have been adjusted to reflect any stock dividends, stock splits and merger or share exchange assumption adjustments effected after the date of such award, but have not otherwise been modified. None of the named executive officers held any unvested restricted stock or restricted stock units at December 31, 2020.

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	Option Awards					Stock Awards
	Number of	Number of				Number of	Market Value
	Securities	Securities				Shares or	of Shares or
	Underlying	Underlying				Units of	Units of
	Unexercised	Unexercised	Option		Option	Stock That	Stock That
	Options	Options	Exercise		Expiration	Have Not	Have Not
Name	Exercisable	Unexercisable	Price		Date	Vested	Vested
Lloyd B. Harrison, III	6,012	—	$	5.83	1/18/2022	—	—
	11,166	—	$	5.83	1/16/2023	—	—
	12,884	—	$	5.83	2/24/2024	—	—
John W. Breda	—	—	$	—	—	—	—
J. Adam Sothen	25,768	—	$	7.72	4/16/2028	—	—

All outstanding stock options were granted under equity plans that the Company assumed in connection with a merger or share exchange. The Company does not currently have an equity plan pursuant to which new equity awards can be granted with respect to Company common stock.

As noted in Proposal Four below, the Company’s Board of Directors approved the Partners Bancorp 2021 Incentive Stock Plan on January 27, 2021, upon the recommendation of the Compensation Committee. Subject to approval by shareholders at the Annual Meeting, the 2021 Incentive Stock Plan will become effective as of May 19, 2021 and will be administered by the Compensation Committee. Assuming the 2021 Incentive Stock Plan is approved by shareholders at the Annual Meeting, the Company intends to include equity compensation as a component of its future executive compensation program designed to reward long-term growth and profitability, to align compensation with shareholder interests and to attract and retain highly qualified executives.

Employment Agreements and Benefit Plans

Lloyd B. Harrison, III. In connection with the Share Exchange, Mr. Harrison entered into a termination agreement and an employment agreement. The termination agreement terminated his pre-existing employment agreement with Virginia Partners, dated January 1, 2018, and provided for a transaction bonus of $500,000 upon effectiveness of the Share Exchange, subject to Mr. Harrison’s execution of a general release and waiver of claims.

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In connection with the Share Exchange, Mr. Harrison became Chief Executive Officer of the Company, in addition to continuing to serve as Chief Executive Officer of Virginia Partners. Mr. Harrison also served as President of Virginia Partners until December 2020. Additionally, upon effectiveness of the Share Exchange, Mr. Harrison’s new employment agreement with the Company and Virginia Partners became effective. Under the new employment agreement, Mr. Harrison serves as Chief Executive Officer of the Company and as Chief Executive Officer of Virginia Partners. Subject to election requirements, Mr. Harrison will also serve as a director of the Company and Virginia Partners. On December 31, 2021, or such earlier date as the Company Board of Directors may determine, referred to herein as the management succession date, Mr. Harrison will depart the position of Chief Executive Officer of the Company, and serve only as Chief Executive Officer of Virginia Partners. Mr. Breda would become President and Chief Executive Officer of the Company at the management succession date. At December 31, 2021, Mr. Harrison may elect to continue as Chief Executive Officer of Virginia Partners, or he may elect to retire, although his compensation and benefits would continue through December 31, 2022 either way. The employment agreement has an initial term of three years and will be automatically renewed for successive one year periods, unless a party decides not to renew the agreement and provides notice thereof 60 days prior to the applicable renewal period or the agreement is terminated in accordance with its terms. Mr. Harrison will receive a base salary of $275,000 per year, increasing a minimum of ten percent on each of January 1, 2020 and January 1, 2021, with further increases being subject to the discretion of Virginia Partners’ board of directors with the recommendation of the compensation committee. Virginia Partners will also provide benefits to Mr. Harrison, such as five weeks of vacation, use of a company car, life insurance, retirement plans, reimbursement for business-related club expenses, reimbursement of legal and tax fees up to $7,500 in connection with the negotiation of the employment agreement, and all other benefits that Virginia Partners or the Company provide from time to time to senior executives. Mr. Harrison will be entitled to bonus incentive payments as approved by the Company Board of Directors and equity awards as approved by the Company Board of Directors or compensation committee. These stock awards vest upon a change in control event, as defined in the employment agreement. In connection with a change in control, Mr. Harrison will be paid three times his salary over 36 months and one times his average bonus. Mr. Harrison will also be provided with benefits during such 36-month period.

Mr. Harrison’s employment agreement will automatically terminate upon the death or “Disability,” as defined in the employment agreement, of Mr. Harrison. The Company or Virginia Partners may terminate the employment agreement immediately for “Cause,” as defined in the employment agreement, and may terminate the employment agreement without Cause upon providing 60 days prior notice. Additionally, the Company or Virginia Partners may terminate the employment agreement for regulatory purposes, which means the employment agreement needs to be revised as a result of applicable statute, rule, regulation order, agreement or understanding promulgated by any bank regulatory agency and the parties cannot agree on the changes necessary to bring the employment agreement in compliance. Mr. Harrison may terminate the employment agreement with “Good Reason,” as defined in the employment agreement, and may terminate the employment agreement without Good Reason upon providing 60 days prior notice. Additionally, Mr. Harrison may terminate the employment agreement within one year after the management succession date. In connection with a termination without Cause or for Good Reason, Mr. Harrison will be paid his salary for the longer of 12 months or the remainder of the then-current term and

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continue to receive health insurance. Mr. Harrison will receive the same benefits for a one year period if he terminates his employment within one year after the management succession date.

Mr. Harrison’s employment agreement contains non-compete, non-solicitation, non-interference, return of documents and confidentiality provisions. Additionally, Mr. Harrison agrees to devote his full business time and attention to his duties, and may not perform services for or obtain a financial or ownership interest in any other entity without the consent or approval of the Company and Virginia Partners boards of directors.

The Company, Virginia Partners, and Mr. Harrison intend during 2021 to amend Mr. Harrison’s employment agreement to modify the terms and conditions of his service following the management succession date.

John W. Breda. Mr. Breda had an employment agreement, dated as of December 10, 2015, with Delmarva pursuant to which he served as President and Chief Executive Officer of Delmarva. Under this agreement, Mr. Breda was entitled to an annual base salary of $265,225 during 2019. He was also entitled to incentive compensation as Delmarva’s board of directors determined, $1,000,000 of Company-paid life insurance (at standard rates), the use of an automobile with all maintenance, operating and insurance expense paid by Delmarva and participation in all other health, welfare, benefit, stock option and bonus plans, if any, generally available to officers or employees of Delmarva. The employment agreement also provided for payment of certain severance and other benefits in the event of Mr. Breda’s termination of employment under various scenarios.

In connection with the Share Exchange, Mr. Breda entered into a termination agreement with respect to his 2015 employment agreement and into a new employment agreement. The termination agreement terminated the 2015 employment agreement and provided for a transaction bonus of $1,048,000 and transfer of an automobile to Mr. Breda for nominal consideration upon effectiveness of the Share Exchange, subject to Mr. Breda’s execution of a general release and waiver of claims.

In connection with the Share Exchange, Mr. Breda became Chief Operating Officer of the Company, in addition to continuing to serve as President and Chief Executive Officer of Delmarva. Additionally, upon effectiveness of the Share Exchange, Mr. Breda’s new employment agreement with the Company and Delmarva became effective. Under the new employment agreement, Mr. Breda serves as Chief Operating Officer of the Company and President and Chief Executive Officer of Delmarva. Subject to election requirements, Mr. Breda will also serve as a director of the Company and Delmarva. The employment agreement has an initial term of three years and will be automatically renewed for successive one year periods, unless a party decides not to renew the agreement and provides notice thereof 60 days prior to the applicable renewal period or the agreement is terminated in accordance with its terms. Mr. Breda will receive a base salary of $275,000 per year, increasing a minimum of ten percent on January 1, 2020 and January 1, 2021, with further increases being subject to the discretion of Delmarva’s board of directors with the recommendation of the compensation committee. Delmarva will also provide benefits to Mr. Breda, such as five weeks of vacation, a car allowance, life insurance, retirement plans, reimbursement for business-related club expenses, reimbursement of legal and tax fees up to

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$7,500 in connection with the negotiation of the employment agreement, and all other benefits that Delmarva or the Company provide from time to time to senior executives. Mr. Breda will be entitled to bonus incentive payments as approved by the Company Board of Directors and equity awards as approved by the Company Board of Directors or compensation committee. These stock awards vest upon a change in control event, as defined in the employment agreement. Also in connection with a change in control, Mr. Breda will be paid three times his salary over 36 months and one times his average bonus. Mr. Breda will also be provided with benefits during such 36-month period.

Mr. Breda’s employment agreement will automatically terminate upon the death or “Disability,” as defined in the employment agreement, of Mr. Breda. The Company or Delmarva may terminate the employment agreement immediately for “Cause,” as defined in the employment agreement, and may terminate the employment agreement without Cause upon providing 60 days prior notice. Additionally, the Company or Delmarva may terminate the employment agreement for regulatory purposes, as described above. Mr. Breda may terminate the employment agreement with “Good Reason,” as defined in the employment agreement, and may terminate the employment agreement without Good Reason upon providing 60 days prior notice. In connection with a termination without Cause or for Good Reason, Mr. Breda will be paid his salary for the longer of 12 months or the remainder of the then-current term and continue to receive health insurance.

The employment agreement also contains non-compete, non-solicitation, non-interference, return of documents and confidentiality provisions. Additionally, Mr. Breda agrees to devote his full business time and attention to his duties, and may not perform services for or obtain a financial or ownership interest in any other entity without the consent or approval of the Company and Delmarva boards of directors.

J. Adam Sothen. Upon effectiveness of the Share Exchange, Mr. Sothen became Chief Financial Officer of the Company, in addition to continuing to serve as Executive Vice President and Chief Financial Officer of Virginia Partners. Mr. Sothen continues to serve under his pre-existing employment agreement with Virginia Partners, effective as of December 1, 2018. The employment agreement had an initial term of one year and will be automatically renewed for successive one year periods, unless either party provides written notice of non-renewal 60 days prior to the end of each renewal term or the agreement is otherwise terminated in accordance with its terms. Mr. Sothen is currently entitled to a base salary of $206,000 per year, subject to increase by Virginia Partners’ board of directors or its designee. Mr. Sothen is eligible to participate in the bank’s management incentive plan or other annual incentive plan, to receive equity awards and to participate in employee benefit plans, and is also entitled to five weeks of vacation, two weeks of personal leave and reimbursement of business-related expenses.

Mr. Sothen’s employment agreement will terminate automatically upon the death of Mr. Sothen. Virginia Partners may terminate Mr. Sothen’s employment with or without “Cause,” as defined in the employment agreement, or in the event of “Incapacity,” as defined in the employment agreement, upon 90 days prior written notice. Mr. Sothen may terminate the employment agreement with “Good Reason,” as defined in the employment agreement, and may terminate the employment agreement without Good Reason upon 90 days prior written notice. In connection with a termination without Cause or for Good Reason within one year after a “Change

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of Control”, as defined in the employment agreement, and subject to Mr. Sothen providing a release, Mr. Sothen will receive a lump sum payment equal to two times his salary, an additional lump sum payment equal to the highest annual bonus amount, if any, earned by Mr. Sothen during the preceding three years, and continued health care benefits for himself and his family for 18 months, with the bank paying the employer portion of the premium therefor. In connection with a termination without Cause or for Good Reason at any other time, and subject to Mr. Sothen providing a release, Mr. Sothen will be paid his base salary over a period of 12 months and will receive continued health care benefits for himself and his family for 12 months, with the bank paying the employer portion of the premium therefor.

The employment agreement also contains confidentiality, non-competition, non-piracy, and non-solicitation provisions.

Virginia Partners Bank Management Incentive Plan. Virginia Partners maintains a management incentive plan for the purpose of awarding annual cash bonuses to certain employees of the bank, including Mr. Harrison and Mr. Sothen, based on the achievement of annual performance objectives established each year under the plan. The plan is designed to reward performance against key bank-wide strategic objectives. Each year the compensation committee of the board of directors of Virginia Partners develops a template setting forth the percentage of base salary opportunity, performance measures and goals selected from the bank’s approved budget numbers or other objective measure and weightings assigned to each of the performance measures. The performance measures, goals and weightings assigned to them may change from year to year. The compensation committee of the board of directors of Virginia Partners approves or ratifies the amount of the bonus payout for each participant following the end of the annual performance period. Bonus payouts for executive officers of the Company are also reviewed and approved by the Company’s Compensation Committee.

Bank-Owned Life Insurance. Virginia Partners offers life insurance benefits to certain employees, including Mr. Harrison, in the form of a split dollar plan. Under the split dollar plan, Virginia Partners owns the policy and cash values provide an annual return to Virginia Partners while providing a term insurance benefit to Mr. Harrison, utilizing bank owned life insurance (BOLI) with a portion of the death benefit endorsed to Mr. Harrison through a split dollar agreement. The amount endorsed under the BOLI equals 100% of Mr. Harrison’s base salary at the time of death.

Health and Welfare Benefits. Delmarva and Virginia Partners provide health and welfare benefits to its executive officers, including the named executive officers, generally on the same basis as for all full-time employees of Delmarva and Virginia Partners. These benefits include medical, dental and vision insurance benefits, short-term and long-term disability insurance and life insurance coverage. The Company utilizes a partially self-funded medical plan and pays a portion of the premium attributable to each employee.

401(k) Plan. Delmarva’s 401(k) plan allows all officers and employees of Delmarva working 1,000 hours or more in a calendar year to defer a portion of their compensation and provides a match of up to 3% of their base salaries, subject to certain IRS limitations. While the

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decision to match employee contributions is discretionary, all employees receive the same percentage match. During 2020, Delmarva made the maximum matching contributions.

Virginia Partners’ 401(k) and profit-sharing plan allows all officers and non-temporary employees of Virginia Partners to defer a portion of their compensation and provides a match of up to 3% of their base salaries, subject to certain IRS limitations. Through September 30, 2020, the plan also provided a profit-sharing contribution of 3% of base salary to all employees. Effective October 1, 2020, the profit-sharing contribution of 3% of base salary to all employees was changed to a discretionary profit-sharing cash bonus of 3% of base salary to all employees. While the decision to match employee contributions is discretionary, all employees receive the same percentage match. During 2020, Virginia Partners made the maximum matching contributions.

The Company, Delmarva and Virginia Partners do not maintain any non-equity incentive plans, deferred compensation, defined benefit or other defined contribution retirement plans, for named executive officers, or in which such executives may participate.

DIRECTOR COMPENSATION

During 2020, the Company, Delmarva and Virginia Partners paid an aggregate of $349,300 in director fees to the non-employee members of the Company’s Board of Directors, including amounts paid for service as a member of the board of directors of Delmarva and Virginia Partners.

During 2020, non-employee directors of Delmarva were entitled to the following fees:

●

annual retainer fee of $10,000; and

●

annual retainer fee for chairman of the board of $24,000.

Prior to the Delmarva 2020 annual meeting held on April 21, 2020, non-employee directors of Delmarva were entitled to the following fees for meeting attendance:

●

per Delmarva board meeting attendance fee of $300; and

●

per Delmarva committee meeting attendance fee of $250.

Effective after April 21, 2020, non-employee directors of Delmarva are entitled to the same fees, except as follows:

●

per Delmarva board meeting attendance fee of $350; and

●

per Delmarva committee meeting attendance fee of $300.

During 2020, non-employee directors of the Company were entitled to the following fees:

●

annual retainer fee for the board of $5,000;

●

annual retainer fee for chairman of the board of $50,000;

●

annual retainer fee for vice chairman of the board of $15,000;

●

per Company board meeting attendance fee of $400; and

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●

per Company committee meeting attendance fee of $300 ($400 for committee chair).

During 2020, non-employee directors of Virginia Partners were entitled to the following fees:

●

annual retainer fee of $6,000 ($10,000 for chairman of the board);

●

additional annual committee chair retainer of $3,000 for audit & compliance committee and $2,000 for all other committees;

●

per board meeting attendance fee of $600 ($700 for chairman of the board); and

●

per committee meeting attendance fee of $300.

The following table sets forth information regarding compensation paid to non-employee directors of the Company during the year ended December 31, 2020 for service as members of the Company’s, Delmarva’s and Virginia Partners’ boards of directors and committees. Members of the Company’s Board of Directors who are employees of the Company, Delmarva or Virginia Partners do not receive additional cash compensation for service on the board of directors or committees of the Company, Delmarva or Virginia Partners.

	Fees Earned or		Option		All Other
Name (1)	Paid in Cash		Awards(4)		Compensation		Total
Mona D. Albertine	$	31,500	$	—	$	—	$	31,500
Mark L. Granger	$	29,100	$	—	$	—	$	29,100
John A. Janney (2)	$	23,133	$	—	$	—	$	23,133
Kenneth R. Lehman	$	38,300	$	—	$	—	$	38,300
Steven R. Mote (3)	$	23,900	$	—	$	—	$	23,900
George P. Snead	$	43,967	$	—	$	—	$	43,967
James A. Tamburro	$	37,650	$	—	$	—	$	37,650
Jeffrey F. Turner	$	83,100	$	—	$	—	$	83,100
Robert C. Wheatley	$	38,650	$	—	$	—	$	38,650

(1)	Compensation for Messrs. Breda and Harrison, who are both directors and executive officers of the Company, is provided in the Summary Compensation Table above.

(2)	Mr. Janney’s service as a director of the Company ended effective April 30, 2020, when his successor was duly elected at the Company’s 2020 Annual Meeting of Shareholders. Mr. Janney served on the board of directors of Virginia Partners for all of 2020.

(3)	Mr. Mote joined the Company’s Board of Directors effective April 30, 2020, when he was duly elected at the Company’s 2020 Annual Meeting of Shareholders. Mr. Mote served on the board of directors of Virginia Partners for all of 2020.

(4)	As of December 31, 2020, the following non-employee directors held outstanding options for the purchase of Company common stock: Ms. Albertine: 4,638 options; Mr. Snead: 4,638 options; and Mr. Tamburro: 1,028 options.

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The Company, Delmarva and Virginia Partners do not maintain any non-equity incentive plans or compensation programs, deferred compensation, defined contribution or defined benefit retirement plans, for non-employee directors, or in which such directors may participate.

The Company’s Board of Directors approved the Partners Bancorp 2021 Incentive Stock Plan on January 27, 2021, upon the recommendation of the Compensation Committee. Subject to approval by shareholders at the Annual Meeting, the 2021 Incentive Stock Plan will become effective as of May 19, 2021 and will be administered by the Compensation Committee. As noted in Proposal Four below, assuming the 2021 Incentive Stock Plan is approved by shareholders at the Annual Meeting, the Company anticipates granting restricted stock to director Michael W. Clarke and to two executive officers of Virginia Partners during the second quarter of 2021. Following the Annual Meeting, the Company may consider changes to the non-employee director compensation program for 2021, which may include equity compensation.

Consulting Agreement. As discussed above, Mr. Clarke was appointed to the Company’s Board of Directors by the Company’s Board of Directors on February 8, 2021. As previously disclosed by the Company, in addition to his service as a director of the Company and Virginia Partners, Mr. Clarke also provides consulting services to Virginia Partners to support the bank’s expansion efforts into the Greater Washington and Northern Virginia markets, a geography in which Mr. Clarke has substantial experience. Mr. Clarke is entitled to receive total compensation of $120,000 per year for his service as a director of the Company and Virginia Partners and for his service as a consultant to Virginia Partners. The amount of the consulting fee paid by Virginia Partners each year will be equal to the difference between $120,000 and the combined annual retainer and meeting fee compensation Mr. Clarke earns as a director of the Company and Virginia Partners for that year.

PROPOSAL TWO – ADVISORY AND NON-BINDING VOTE

TO APPROVE EXECUTIVE COMPENSATION

As required by SEC rules, we are providing shareholders the opportunity to vote to approve, on an advisory and non-binding basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC’s rules.

As described under the heading “Executive Compensation,” our executive compensation program is designed to attract and retain highly skilled and motivated officers who will manage the Company in a manner to promote our growth and profitability, prudently preserve our capital, and advance the interests of our shareholders. Please read the “Executive Compensation” discussion beginning on page 25 for additional details about our executive compensation program, including information about the fiscal year 2020 compensation of our named executive officers.

The Compensation Committee reviews the compensation for executive officers of the Company to ensure that it is appropriate. We are asking our shareholders to indicate their support for our named executive officer compensation as described in this Proxy Statement by voting for this proposal. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of

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our named executive officers and the policies and practices described in this Proxy Statement. Accordingly, we are asking shareholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the executive compensation disclosure, compensation tables and related disclosure.”

This say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or the Board of Directors. The Board of Directors and the Compensation Committee value the opinions of our shareholders and we will consider our shareholders’ concerns and the outcome of this vote when making future compensation decisions regarding our executive officers.

We anticipate that the next vote on a say-on-pay proposal will occur at the 2022 Annual Meeting of Shareholders.

Vote Required and Board Recommendation. With respect to Proposal Two, votes may be cast in favor or against, or you may abstain from voting. If a quorum is present, Proposal Two will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions or broker non-votes will have no effect on the outcome of Proposal Two.

The Board of Directors recommends that shareholders vote FOR approval of the

compensation of our named executive officers, as disclosed in this Proxy Statement.

PROPOSAL THREE – ADVISORY AND NON-BINDING VOTE ON

FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

As required by SEC rules, we are asking shareholders to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules. By voting on this Proposal Three (commonly known as a “say-on-pay frequency” proposal), shareholders may indicate whether they would prefer to have the say-on-pay vote every one, two or three years.

The Board of Directors believes a frequency of every year is the optimal frequency for the say-on-pay vote so that shareholders may annually express their views on our executive compensation program as disclosed in the proxy statement each year.

You may cast your vote on your preferred voting frequency by choosing the option of one year, two years or three years, or you may abstain from voting on this proposal.

The option of one year, two years or three years that receives the highest number of votes cast in favor will be the frequency for future say-on-pay votes that has been selected by shareholders. The Board of Directors values the opinions expressed by shareholders in their votes

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on this proposal and will consider the outcome of this vote when determining the frequency of future say-on-pay votes. However, because this vote is advisory and not binding on the Company or the Board of Directors in any way, the Board may decide that it is in the best interest of our shareholders and the Company to hold the say-on-pay vote more or less frequently than the option selected by our shareholders. We anticipate that the next vote on a say-on-pay frequency proposal will occur at the 2027 Annual Meeting of Shareholders.

Vote Required and Board Recommendation. With respect to Proposal Three, votes may be cast for one, two or three years, or you may abstain from voting. If a quorum is present, the option that receives the highest number of votes cast in favor will be the frequency that is selected by the shareholders. Abstentions or broker non-votes will have no effect on the outcome of Proposal Three.

The Board of Directors recommends that shareholders vote for the option of ONE YEAR as the frequency of future advisory votes on executive compensation.

PROPOSAL FOUR - APPROVAL OF THE PARTNERS BANCORP

2021 INCENTIVE STOCK PLAN

The Board of Directors is asking shareholders to approve the Partners Bancorp 2021 Incentive Stock Plan (the “Plan”), which was approved by the Board of Directors on January 27, 2021, upon the recommendation of the Compensation Committee. Subject to approval by shareholders at the Annual Meeting, the Plan will become effective as of May 19, 2021.

The Company does not currently have an equity compensation plan pursuant to which new equity awards can be granted with respect to Company common stock.

Reasons for the Plan

The purpose of the Plan is to promote the success of the Company and its subsidiaries by providing incentives to employees and non-employee directors that will promote the identification of their personal interests with the long-term financial success of the Company and with growth in shareholder value, consistent with the Company’s risk management practices. The Plan is designed to provide flexibility to the Company and certain of its subsidiaries as defined in the Plan in its ability to attract, retain the services of, and motivate key employees and non-employee directors upon whose judgment, interest, and special effort the successful conduct of its operation is largely dependent.

If approved by shareholders, the Plan will allow the Company to make grants of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), stock awards and performance units (collectively referred to as awards below) to employees and non-employee directors of the Company and certain of its subsidiaries (collectively referred to as participants below).

The Company believes that equity incentive awards designed to reward long-term growth and profitability, to align compensation with shareholder interests and to attract and retain highly qualified executives are an essential component of a competitive compensation program. Without

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the ability to grant such awards, the Company believes it would be at a disadvantage against its competitors for recruiting and retaining key talent. The Company anticipates that the shares of common stock that will be available for awards under the Plan if shareholders approve this proposal will provide the Company with flexibility to grant equity awards for approximately five to seven years following the Annual Meeting. However, this is only an estimate, in the Company’s judgment, based on current circumstances. The total number of shares awarded in any one year or from year to year may change based on any number of variables, such as the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in the Company’s equity grant practices, changes in the number of eligible recipients, whether and to what extent vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the number of shares that become available for new award grants pursuant to the terms of the Plan (for example, as a result of forfeitures), and changes in how the Company chooses to balance total compensation between cash and equity-based awards.

The following summary of certain principal features of the Plan is subject to the specific provisions contained in the full text of the Plan attached as Appendix A to this proxy statement. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan.

Plan Highlights

The Plan provides for the grant to key employees and non-employee directors of awards that may include one or more of the following: stock options, SARs, restricted stock, RSUs, stock awards and performance units. The Company believes the Plan will enable it to design an equity compensation program that is competitive in attracting, motivating, and retaining high level talent, is commensurate with the Company’s financial performance, and is generally aligned with the interests of the Company’s shareholders.

Some of the key features of the Plan that enable the Company to maintain sound governance practices in granting awards include:

●	No “Evergreen” Provision: Shares authorized for issuance under the Plan are not automatically replenished.

●

Limitation on Cash Compensation and Awards to Non-Employee Directors: The Plan generally places a $200,000 annual cap on the aggregate value of cash compensation and the aggregate grant date fair value of awards that may be granted under the Plan to any non-employee director of the Company for his or her service as a non-employee director during any fiscal year.

●

No Liberal Share Recycling: The Plan provides that shares of the Company’s common stock used to pay the exercise price of a stock option or SAR or to satisfy tax withholding obligations in connection with an award will not be added back (recycled) to the aggregate plan limit. In addition, the gross number of shares associated with a stock option or SAR exercise, and not just the net shares issued upon exercise, count against the aggregate plan limit.

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●	No Discounted Stock Options or SARs: The Plan prohibits the grant of stock options and SARs with an exercise price less than the fair market value of the Company’s common stock on the grant date.

●	No Repricing of Stock Options or SARs: The Plan generally prohibits the repricing of stock options and SARs without shareholder approval.

●

Limits on Dividends and Dividend Equivalents: The Plan prohibits the payment of dividends or dividend equivalents on stock options and SARs. The Plan also provides that any dividend equivalents in connection with any award of RSUs or performance units may only be paid to the extent the underlying award is earned and vested under the plan.

●	Clawback: The Plan subjects all awards under the Plan to the terms of any repayment, clawback, or similar policy in effect at the Company from time to time as well as any similar provisions of applicable law, regulation or stock exchange requirement.

●	Term of the Plan: No awards may be granted under the Plan more than ten years from the date of shareholder approval.

Description of the Plan

Plan Term. The Plan will become effective on May 19, 2021, if it is approved by the Company’s shareholders at the Annual Meeting, and, subject to earlier termination by the Board of Directors, the Company may grant awards under the Plan until May 18, 2031.

Administration. The Plan will be administered by the Compensation Committee (the “Committee”), unless the Board of Directors determines otherwise. Subject to the terms of the Plan, the Committee will have, among other powers, the power to: (i) determine the terms and conditions upon which the awards may be made, exercised, paid and distributed; (ii) determine all terms and provisions of each award agreement (collectively, the “Agreements”), which need not be identical; (iii) construe and interpret the Agreements and the Plan, including the ability to resolve any ambiguities and define any terms; (iv) establish, amend, or waive rules or regulations for the Plan’s administration; (v) accelerate the exercisability of any award or the end of any performance period or the termination of any period of restriction or other restrictions imposed under the Plan to the extent permitted by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); (vi) change any performance goal; (vii) determine to what extent leaves of absence shall not be deemed interruptions of employment or service; and (viii) make all other determinations and take all other actions necessary or advisable for the administration of the Plan in its discretion.

The members of the Committee will be indemnified by the Company against reasonable expenses, including attorneys’ fees, incurred by them in the defense of any action, suit or proceeding or any appeal therein to which they may be party by reason of any actions taken or failure to act under the Plan or any award granted or made under the Plan, and against all amounts reasonably paid by them in settlement thereof or in satisfaction of a judgment in any such action,

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suit, or proceeding, if they acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Company.

The Committee, in its discretion, may delegate to any of the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer of the Company all or part of the Committee’s authority and duties under the Plan, except in the case of awards to the Company’s executive officers or any individual who is subject to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”). If the Committee decides to delegate this authority, the Committee may establish the maximum number of shares that can be granted by such officer and may establish guidelines for the exercise of his or her authority and discretion.

Eligibility. The Plan provides that awards may be granted to key employees and non-employee directors, including members of advisory boards, of the Company and certain of its subsidiaries. Key employees include officers or other employees of the Company and certain of its subsidiaries who, in the opinion of the Committee, can contribute significantly to the growth and profitability of, or perform services of major importance to the Company and its subsidiaries.

If shareholders approve this proposal, approximately 220 employees and 20 non-employee directors would be eligible to receive awards under the Plan, as of March 22, 2021. Approximately six members of advisory boards would also be eligible to receive awards under the Plan as of March 22, 2021; the Committee would consider, on a case-by-case basis, whether members of advisory boards would be considered for awards under the Plan.

No Repricing. Neither the Board of Directors nor the Committee may, without obtaining prior approval of the shareholders, amend or modify the exercise price of any outstanding options or SARs, or cancel outstanding options or SARs under the Plan with an exercise price per share in excess of the then current fair market value per share for consideration payable in cash, another award or other equity securities (except as a result of certain capital adjustments or a change of control as set forth in the Plan).

Shares Available for Awards. Subject to approval by shareholders, and subject to any necessary capital adjustments as set forth in the Plan, the aggregate number of shares of the Company’s common stock reserved for issuance under the Plan is 1,250,000 shares. Shares of common stock related to an award that terminates, expires, is cancelled or lapses for any reason other than by virtue of exercise or settlement of the award, or shares of common stock issued pursuant to awards that are forfeited, will not count against this maximum. However, any shares of common stock delivered by a participant, withheld by the Company, or otherwise used to pay the exercise price of a stock option or SAR or to satisfy a participant’s tax withholding obligation will count against this maximum. When a participant exercises an option or SAR, the gross number of shares to which the option or SAR exercise relates, rather than the net number of new shares issued upon the exercise, will count against this maximum.

Subject to any necessary capital adjustments as set forth in the Plan, no more than an aggregate of 1,250,000 shares of the Company’s common stock may be issued pursuant to the exercise of incentive stock options granted under the Plan.

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As of March 22, 2021, the closing price per share of the Company’s common stock as reported on the Nasdaq Stock Market was $7.30 and there were 17,726,648 shares of the Company’s common stock outstanding. Potential dilution is equal to the number of shares associated with outstanding awards plus the number of shares available for future awards under a plan divided by the sum of (a) the total number of shares of common stock outstanding and (b) the total outstanding and available shares under the plan. If the Plan had been approved by shareholders as of March 22, 2021, the potential dilution from equity awards to be granted under the Plan with respect to the 1,250,000 shares reserved would have been approximately 6.6%. While the Company is aware of the potential dilutive effect of equity awards, it also recognizes the significant motivational and performance benefits that may be achieved in connection with making such awards.

Non-Employee Director Limitations on Cash Compensation and Awards. From time to time, the Board of Directors establishes the form and amount of compensation for the Company’s non-employee directors, taking into account such factors, circumstances and considerations as it determines relevant. However, the sum of any cash compensation paid outside of, and the grant date fair value of awards granted under, the Plan during a given fiscal year to a non-employee director for service as a non-employee director generally may not exceed $200,000. The independent members of the Board of Directors may make exceptions to this limit for the Chair of the Board of Directors or other individual non-employee directors in extraordinary circumstances, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.

Performance-Based Compensation Awards. The Committee may grant awards under the Plan that are vested or paid only if certain performance goals are met. The performance goals for any performance-based award will be determined by the Committee and may be particular to a certain participant, may relate to performance of a subsidiary, division, strategic business unit, line of business or business segment, or may be based on the performance of the Company generally. Under the Plan, performance goals may include, but are not limited to, goals based on one or more of the following:

the Company’s stock value or increases therein

earnings per share or earnings per share growth

net earnings

total shareholder return

operating revenue

tangible book value or tangible book value growth, tangible book value per share or growth in tangible book value per share

fully diluted earnings per share after extraordinary events

earnings and/or earnings growth (before or after one or more of taxes, interest,

non-interest income

non-interest expense

credit quality, net charge-offs and/or non-performing assets (excluding such loans or classes of loans as may be designated for exclusion)

percentage of non-accrual loans to total loans or net charge-off ratio

provision expense

productivity

customer satisfaction

satisfactory internal or external audits

improvement of financial ratings

achievement of balance sheet or income statement objectives

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depreciation and/or amortization), operating earnings and/or operating earnings growth

profits or profit growth (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures)

operating cash flow

operating or other expenses, or growth thereof

operating efficiency

return on equity

return on tangible equity or return on tangible common equity

return on assets, capital or investment

sales or revenues or growth thereof

deposits, loan and/or equity levels or growth thereof

working capital targets

assets under management or growth thereof

cost control measures

regulatory compliance

gross, operating or other margins

efficiency ratio (as generally recognized and used for bank financial reporting and analysis)

interest income

net interest income

net interest margin

quality measures

regulatory exam results

achievement of risk management objectives

achievement of strategic performance objectives

achievement of merger or acquisition objectives

implementation, management or completion of critical projects or processes

any component or components of the foregoing (including, without limitation, determination thereof, in the Committee’s discretion, with or without the effect of discontinued operations and dispositions of business units or segments, non-recurring items, material extraordinary items that are both unusual and infrequent, non-budgeted items, an event or series of events either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, special charges, accruals for acquisitions, reorganization and restructuring programs and/or changes in tax law, accounting principles or other such laws or provisions affecting the Company’s reported results).

Performance goals may include a threshold level of performance below which no payment or vesting may occur, levels of performance at which specified payments or specified vesting will occur, and a maximum level of performance above which no additional payment or vesting will occur. Performance goals may be absolute in their terms or measured against or in relationship to a pre-established target, the Company’s budget or budgeted results, previous period results, a market index, a designated comparison group of other companies comparably, similarly or otherwise situated, or any combination thereof. The attainment of each of the performance goals will be determined by the Committee. Except to the extent limited in an Agreement, the Committee may adjust the compensation or economic benefit due upon attainment of the performance goals, the performance goals themselves, and/or the length of the performance period in which one or more performance goals must be achieved.

Certain Terms of Awards. Unless specified below in the description of the particular awards available under the Plan or unless specified in the Plan itself, the prices, expiration dates,

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consideration to be received by the Company, and other terms of each Agreement will be determined by the Committee.

Stock Option Awards. Options to purchase shares of the Company’s common stock may be awarded under the Plan, which may be designated under the Code as nonqualified stock options (which may be granted to all participants) or incentive stock options (which may be granted only to employees). The exercise price for a stock option cannot be less than 100% of the common stock’s fair market value on the date of grant (or 110% if the option is intended to be an incentive stock option and the optionee owns more than 10% of the Company’s outstanding stock). The aggregate fair market value (determined as set forth in the Plan) of shares with respect to which any participant may exercise incentive stock options during any calendar year may not exceed $100,000 or such amount specified in Section 422 of the Code. The maximum term of a stock option shall be determined by the Committee on the date of grant but may not exceed 10 years (or five years if the option is intended to be an incentive stock option and the optionee owns more than 10% of the Company’s outstanding stock). The Committee will determine the method by which the exercise price may be paid, which may include cash payment, delivery of previously acquired shares, net settlement (the cancellation of a portion of the option to cover the cost of exercising the balance of the option), a broker-assisted cashless exercise, or any combination of these methods. The Committee has discretion to impose additional restrictions, as it may deem advisable, on any shares acquired pursuant to the exercise of an option under the Plan.

SAR Awards. The Plan authorizes the grant of SARs to employees and non-employee directors. SARs give the holder the right to receive, without any payment to the Company (other than required tax withholding amounts and the rendering of services), the difference, payable in cash or stock, as specified in the Agreement, between the fair market value per share of the Company’s common stock on the date of exercise over the exercise price for the SAR (which cannot be less than 100% of the common stock’s fair market value on the date of grant). The maximum term of a SAR shall be determined by the Committee on the date of grant but shall not exceed 10 years. A SAR may be exercised with respect to all or part of the shares of common stock upon whatever terms and conditions the Committee imposes consistent with the Plan. The Committee has discretion to impose additional restrictions, as it may deem advisable, on any shares delivered to a participant upon exercise of a SAR under the Plan.

Restricted Stock Awards. Restricted stock is stock that is subject to forfeiture and may not be sold or otherwise disposed of by a participant until the restrictions established by the Committee lapse. The restrictions may take the form of a vesting period during which the participant must remain employed or in service as a non-employee director or may require the achievement of one or more pre-established performance goals. Unless otherwise provided in the Agreement, participants receiving restricted stock are not required to make any payment to the Company therefor (other than required tax withholding amounts and the rendering of services). During the period of restriction, holders of restricted stock will have full voting rights and, unless otherwise provided in the Agreement and except with respect to restricted stock subject to one or more performance goals, will be entitled to receive all dividends and other distributions paid with respect to those shares. Unless otherwise provided in the Agreement, with respect to restricted stock subject to one or more performance goals, during the period of restriction, dividends on such shares may be accumulated but not paid to the holder unless and until the applicable performance goals have been met. If any such dividends or

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distributions are paid in shares, such shares shall be subject to the same restrictions on transferability as the shares of restricted stock with respect to which they were paid.

RSU Awards. RSUs represent the right to receive, without any payment to the Company (other than required tax withholding amounts and the rendering of services), shares of common stock (or an equivalent value in cash, as specified in the Agreement) after restrictions established by the Committee lapse. The restrictions may take the form of a vesting period during which the participant must remain employed or in service as a non-employee director or may require the achievement of one or more pre-established performance goals.

Holders of RSUs will have no right to vote the shares represented by the RSUs unless and until they actually receive the shares. In addition, unless otherwise provided in the Agreement, holders of RSUs will have no rights to dividend equivalents with respect to such RSUs. The Committee may provide in the Agreement for dividend equivalents with respect to the RSUs, provided that such dividend equivalents may be accumulated but not paid unless and until the period of restriction has ended and any applicable performance goals have been achieved. The Committee has discretion to impose additional restrictions, as it may deem advisable, on any shares delivered to a participant upon settlement of a RSU under the Plan.

Payment for vested RSUs may be made when the restrictions lapse, or, if provided for in the Agreement, on a delayed basis either on an elective or non-elective basis (in accordance with Section 409A of the Code). If paid on a delayed basis, the amount the participant receives may be adjusted for deemed interest, dividend equivalents, earnings or on such other basis as the Committee may provide.

Stock Awards. The Committee may grant unrestricted stock awards to employees and non-employee directors, provided, however, that no non-employee director may be granted stock awards for more than 15,000 shares in any calendar year. Participants receiving unrestricted stock awards are not required to make any payment to the Company therefor (other than required tax withholding amounts and the rendering of services). The shares subject to these unrestricted stock awards would not be subject to any restrictions and would be immediately transferable by the participant, subject to restrictions under applicable securities laws.

Performance Units. A performance unit is a fixed dollar award or an award that is valued by reference to a share of the Company’s common stock based on performance goals established and certified by the Committee. Performance units represent the right to receive, without any payment to the Company (other than required tax withholding amounts and the rendering of services), shares of common stock (or an equivalent value in cash, as specified in the Agreement) following achievement of the performance goals.

Holders of performance units have no right to vote the shares represented by the units unless and until they actually receive the shares. In addition, unless otherwise provided in the Agreement, holders of performance units will have no rights to dividend equivalents with respect to such performance units. The Committee may provide in the Agreement for dividend equivalents with respect to the performance units, provided that such dividend equivalents may be accumulated but not paid unless and until the applicable performance goals have been achieved. The Committee

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has discretion to impose additional restrictions, as it may deem advisable, on any shares delivered to a participant upon settlement of a performance unit under the Plan.

Termination of Employment or Service. The Committee may provide in an Agreement for vesting of awards in connection with the termination of a participant’s employment or service on such basis as it deems appropriate, including, without limitation, any provisions for vesting at death, disability, retirement, or in connection with a change of control. Except as the Committee may provide in the applicable Agreement, in the event a participant terminates his or her employment or service with the Company for any reason, the unvested or restricted portion of an award under the Plan will be forfeited. Unless otherwise provided in the Agreement or as required by applicable law, in determining cessation of employment or service, transfers between the Company and any subsidiary and changes in status between that of an employee and a non-employee director will be disregarded.

Change of Control. The Committee may, at the time an award is made or thereafter, take such action as it deems appropriate in connection with a change of control (as defined in the Plan). These actions may include, but are not limited to, the following actions: (i) provide for acceleration of the vesting, delivery and exercisability of, and the lapse of time-based and/or performance-based vesting restrictions with respect to, any such award so that such award may be exercised or realized in full on or before a date fixed by the Committee; (ii) provide for the purchase, settlement or cancellation of an award by the Company for an amount of cash equal to the amount which could have been obtained upon the exercise of such award or realization of such participant’s rights had such award been currently exercisable or payable; (iii) provide for the replacement of any stock-settled award with a cash-settled award; (iv) make such adjustment to an outstanding award as the Committee deems appropriate to reflect such change of control to retain the economic value of the award; or (v) cause an outstanding award to be assumed, or new rights substituted therefor, by the acquiring or surviving entity in such change of control.

Adjustments. In the event of a stock dividend, stock split, reverse stock split or combination of shares, spin-off, recapitalization, merger in which the Company is the surviving corporation, consolidation, reorganization, reclassification, exchange of shares or similar change in the Company’s capital stock in which the number or class of shares is changed, the number and kind of shares or securities of the Company to be issued under the Plan (under outstanding awards and awards to be granted in the future), the exercise price of options and/or SARs, any applicable annual limits on and the aggregate number and kind of shares for which awards thereafter may be made, and other relevant provisions shall be proportionately, equitably and appropriately adjusted by the Committee. Where an award being adjusted is an option or is subject to or falls under an exemption from Section 409A of the Code, the adjustment of any option and/or SAR shall also be effected so as to comply with Section 424(a) of the Code and not to constitute a modification within the meaning of Section 424(h) of the Code or Section 409A of the Code, as applicable.

Non-Transferability. Unless otherwise provided by the applicable Agreement, and except for certain permitted transfers (other than with respect to incentive stock options) to immediate family members and related entities or pursuant to a domestic relations order, generally no award granted under the Plan, nor any interest in such award or right to receive payment in connection such award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise

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transferred or alienated in any manner, other than upon the death of a participant, prior to the vesting or lapse of any and all restrictions applicable to the award or any shares issued under the award. A participant may designate a beneficiary to receive any award that may be paid or exercised after his death. No transfer of an award or of any right or interest in an award may be made for consideration.

Banking Regulatory Requirements. All awards under the Plan are subject to discretion by the Company’s primary federal banking regulator that requires participants to exercise or forfeit the stock rights contained in their awards if the Company’s capital falls below the minimum requirements, as determined by the Company’s state or primary federal banking regulator. All awards are subject to any other conditions, limitations and prohibitions under any other applicable financial institution regulatory policy or rule.

Clawback. All awards granted under the Plan (whether vested or unvested) will be subject to such recovery or clawback as may be required pursuant to the terms of any repayment, clawback or similar policy in effect at the Company from time to time, or any applicable law or regulation or any applicable listing standard of any national securities exchange or system on which the stock is then listed or reported, which could in certain circumstances require repayment or forfeiture of awards or any common shares or other cash or property received with respect to the awards, including any value received from a disposition of the common shares acquired upon payment of the awards.

Amendment and Termination of the Plan. The Board of Directors may amend, modify or terminate the Plan from time to time in any respect without shareholder approval, unless the particular amendment or modification requires shareholder approval under the Code, the rules and regulations under Section 16 of the Exchange Act, the rules and regulations of any national securities exchange or system on which the stock is then listed or reported, by any regulatory body having applicable jurisdiction or pursuant to any other applicable laws, rules, or regulations. No termination, amendment or modification of the Plan, other than capital adjustments pursuant to the Plan or action taken by the Committee in connection with a change of control or to comply with Section 409A of the Code or Section 16 of the Exchange Act, may adversely affect any award previously granted under the Plan without the participant’s written consent.

Federal Income Tax Consequences of Awards Granted under the Plan

The federal income tax consequences arising with respect to grants awarded under the Plan will depend on the type of award. The following provides only a general description of the application of federal income tax laws to participants and the Company with respect to certain awards under the Plan. This discussion is intended for the information of shareholders considering how to vote on this proposal and not as tax guidance to participants in the Plan, as the consequences may vary with the types of awards granted, the identity of the recipients, and the method of payment or settlement. The summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local, or foreign tax laws. This summary is based on U.S. federal income tax laws and regulations in effect on the date of this proxy statement and is not a complete description of the U.S. federal income tax laws. Under the Code as currently in effect, a grant under the Plan of options, SARs, restricted stock, RSUs or

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performance units would have no federal income tax consequence at the time of grant. Generally, all amounts taxable as ordinary income to participants under the Plan in respect of awards are expected to be deductible by the Company as compensation at the same time the participant recognizes the ordinary income, subject to certain caps on the deductibility of executive compensation imposed by Section 162(m) of the Code.

Option Awards. There will be no federal income tax consequences to the participant upon the grant of a non-qualified stock option under the Plan. A participant who exercises a non-qualified stock option will realize ordinary income in an amount measured by the excess of the fair market value of the shares on the date of exercise over the exercise price. Upon a subsequent sale or exchange of shares acquired pursuant to the exercise of a non-qualified option, the participant will have taxable short-term or long-term capital gain or loss, as the case may be, in an amount equal to the difference between the amount realized on the disposition and the tax basis of the shares of common stock sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the exercise price of the option. The Company generally will be entitled to a corresponding deduction for federal income tax purposes (subject to caps imposed by Section 162(m) of the Code).

The grant of an incentive stock option will not be a taxable event for the participant or for the Company. A participant will not recognize taxable income upon exercise of an incentive stock option, although taxable income may arise upon exercise for alternative minimum tax purposes. The participant will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of certain other dispositions. For federal tax purposes, dispositions are divided into two categories: (i) qualifying, and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two years after the date the option is granted and more than one year after the date the option is exercised for those shares. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition will result.

Upon a qualifying disposition, the participant will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the exercise price paid for the shares will be taxable as ordinary income to the participant. Any additional gain recognized upon the disposition will be a capital gain.

If the participant makes a disqualifying disposition of the purchased shares, then the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the amount of ordinary income recognized by the participant as a result of the disposition (subject to caps imposed by Section 162(m) of the Code). The Company will not be entitled to any income tax deduction if the participant makes a qualifying disposition of the shares.

Special rules govern the tax treatment of the use of stock to pay the exercise price of an incentive stock option or non-qualified stock option.

SAR Awards. A participant receiving a SAR under the Plan will not recognize income at

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the time the award is granted. A participant who exercises a SAR will realize ordinary income in an amount equal to the amount of cash and the fair market value of any shares received. The Company generally will be entitled to a corresponding deduction for federal income tax purposes. When a participant sells shares of stock acquired through the exercise of a SAR, the participant will have a capital gain or loss in an amount equal to the difference between the amount realized on the sale and the tax basis in the shares. The capital gain tax rate will depend on a number of factors, including the length of time the participant held the shares prior to selling them.

Restricted Stock Awards. Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income at the time a restricted stock award is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the stock as of that date (less any cash consideration paid for the stock). If the participant files an election under Section 83(b) of the Code within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any cash consideration paid for the stock). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Section 83(b) election. To the extent dividends are payable during the restricted period under the applicable Agreement, any such dividends will be taxable to the participant at ordinary income tax rates, unless the participant has elected to be taxed on the fair market value of the restricted shares upon transfer by making a Section 83(b) election, in which case they will thereafter be taxable to the participant as dividends and will not be deductible by the Company.

Stock Awards. A participant receiving an unrestricted stock award is required to include the fair market value of the shares received as ordinary income as of the date of grant in an amount equal to the fair market value of the shares received. The Company will generally be entitled to a federal income tax deduction in the corresponding amount at that time. When a participant sells shares of common stock received, the participant will have a capital gain or loss in an amount equal to the difference between the amount realized on the sale and the tax basis in the shares. The capital gain tax rate will depend on a number of factors, including the length of time the participant held the shares prior to selling them.

Restricted Stock Units and Performance Units. There are generally no federal income tax consequences to a participant or to the Company upon the grant of a RSU or performance unit or the credit of any dividend equivalents to his or her account. Upon distribution of shares or cash in respect of a RSU or performance share unit, the fair market value of those shares or the amount of that cash will be taxable to the participant as ordinary income and the Company will receive a deduction equal to the income recognized by the participant. The subsequent disposition of shares acquired pursuant to a RSU will result in capital gain or loss (based on the difference between the price received on disposition and the market value of the shares at the time of their distribution). The capital gain tax rate will depend on a number of factors, including the length of time the participant held the shares prior to selling them.

Section 409A. The Plan is intended to comply with Section 409A of the Code (“Section 409A”) to the extent that Section 409A would apply to any award under the plan. Section 409A

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provides certain requirements for non-qualified deferred compensation arrangements with respect to a participant’s deferral and distribution elections and permissible distribution events. Awards granted under the Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to, and fails to satisfy the requirements of, Section 409A, the recipient of that award will recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with the provisions of Section 409A, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as possible interest requirements with respect to such amounts, and will have certain withholding requirements.

New Plan Benefits

If the Plan is approved by shareholders, participation and the types of awards granted under the Plan will be determined by the Committee in its discretion. No determination has been made as to the awards, if any, that any individuals who would be eligible to participate in the Plan will be granted in the future, except that the Company anticipates granting approximately 8,333 shares of restricted stock to director Michael W. Clarke and an aggregate of 40,000 shares of restricted stock to two executive officers of Virginia Partners during the second quarter of 2021. Accordingly, the benefits or amounts that will be received by any participant or group of participants under the Plan, if it is approved by shareholders, are not currently determinable.

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2020 about the Company’s existing equity compensation plans pursuant to which equity securities are authorized for issuance, each of which was assumed by the Company in connection with either the merger of Liberty Bell Bank with and into Delmarva or the Share Exchange between the Company and Virginia Partners. The Company does not currently have an equity compensation plan pursuant to which new equity awards can be granted with respect to Company common stock.


	Number of securities to be issued upon exercise of outstanding options, warrants and rights (A)	Weighted- average exercise price of outstanding options, warrants and rights (B)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C)
Equity compensation plans approved by security holders	—	$	—	—
Equity compensation plans not approved by security holders	(1)	$	(1)	(1)

Total	(1)	$	(1)	(1)

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(1)

In connection with the merger of Liberty Bell Bank with and into Delmarva, the Company assumed the Liberty Bell Bank 2004 Incentive Stock Option Plan and the Liberty Bell Bank 2004 Non-Qualified Stock Option Plan (collectively, the “Liberty Plans”), and each option outstanding under the Liberty Plans was conv

SEC Form DEF 14A filed by Partners Bancorp