UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 2)

(Mark One)

For the fiscal year ended December 31, 2011

For the transition period from                     to                    

Commission file number: 000-49976

ALLIANCE BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

14200 Park Meadow Drive, Suite 200 South, Chantilly, Virginia 20151

(Address of principal executive offices) (Zip Code)

(703) 814-7200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of Alliance Bankshares Corporation common stock held by non-affiliates as of December 31, 2011 was $23,855,189 based on the closing sale price of $4.90 per common share.

The number of shares of common stock outstanding as of April 10, 2012 was 5,109,969.

DOCUMENTS INCORPORATED BY REFERENCE

None

Explanatory Note

This Amendment No. 2 on Form 10-K/A (the “Amendment”) amends Alliance Bankshares Corporation’s (“Bankshares”) Annual Report on Form 10-K for the fiscal year ended December 31, 2011, originally filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2012 and amended by Amendment No. 1 on Form 10-K/A filed with the SEC on April 19, 2012 (as amended, the “Original Filing”). Bankshares is filing the Amendment solely for the purpose of amending and restating Part III (Items 10, 11, 12, 13 and 14) to provide disclosure that was omitted from the Original Filing in reliance on Instruction G(3) of Form 10-K. No attempt has been made in this Amendment to modify or update other disclosures presented in the Original Filing. This Amendment does not reflect events occurring after the date of the filing of the Original Filing or modify or update disclosures, including the exhibits to the Original Filing, affected by subsequent events.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our principal executive officer and principal financial officer are filed as exhibits to the Amendment under Item 15 of Part IV hereof.

PART III.

For purposes of this Part III, unless the context indicates otherwise, references to “we,” “us”, “our” and “Alliance” refer to Bankshares and Alliance Bank Corporation (“Alliance Bank”) collectively, and references to the “Board of Directors” or “Board” refer to the Board of Directors of Bankshares.

Item 10. Directors, Executive Officers and Corporate Governance

Information about Directors

The table below shows the current members of the Board of Directors of Bankshares, their ages as of April 1, 2012, the year they first became a director and their business experience during the past five years. In addition, the table below also shows the specific experience, qualifications, attributes and skills that led the Board of Directors of Bankshares to conclude that each person should serve as a director of Bankshares.

Information about Executive Officers

Information regarding Mr. Doyle, President and Chief Executive Officer is presented in the table above. The table below shows the other current executive officers of Bankshares, their ages as of April 1, 2012, and their business experience during the past five years.

George F. Cave (55), is an Executive Vice President and the Chief Lending Officer. He joined Bankshares and Alliance Bank in November 2010 as Head of Commercial Banking. Prior to joining Alliance, Mr. Cave served as Senior Vice President, Credit Advisor, Family Office Credit Solutions for

SunTrust Bank since July 2008 and, prior to that, served as Senior Vice President and Manager, Private Wealth Management Credit Advisory Services from 2002 to 2008. Mr. Cave has over 30 years of commercial banking and lending experience including 25 years in the Washington, D.C. metropolitan area serving in a variety of banking leadership roles for SunTrust Bank from 1986-2010 and prior to that as a Vice President with United Virginia Bank (later Crestar Bank and now SunTrust Bank) from 1982-1985. In addition, he is active in a number of community leadership roles including having served on the boards and executive committees, as well as serving as chairman of the board of directors, of both the Alexandria and Fairfax County Chambers of Commerce. He has also served on the boards for the Alexandria Hospital and the American Heart Association (Greater Washington Regional Board). Mr. Cave is also an Accredited Wealth Management Advisor.

Jean S. Houpert (47), serves as Executive Vice President and Chief Financial Officer. She served as Senior Vice President and Interim Chief Financial Officer of Bankshares and Alliance Bank from July 2011 until March 2012, served as Senior Vice President and Accounting Director of Alliance Bank from December 2009 to July 2011, and joined Alliance Bank as Accounting Director in October 2008. As Accounting Director, Ms. Houpert was responsible for general oversight of the accounting and financial reporting functions, and actively contributes to oversight and management of Alliance Bank’s operations and to Alliance Bank’s planning and budgeting processes. Before serving as Accounting Director for Alliance Bank, Ms. Houpert served as Vice President and Controller of Millennium Bank, N.A. in Sterling, Virginia from 2004 to 2006. As Vice President and Controller at Millennium Bank, Ms. Houpert was responsible for general oversight of the bank’s accounting function, including responsibility for preparing (i) consolidated financial statements for the holding company, bank and subsidiaries, (ii) call reports and other regulatory reports for the bank and (iii) SEC filings for the bank’s holding company. Before joining Millennium Bank, N.A., Ms. Houpert served as Quality Control Officer at 1st Service Bank in McLean, Virginia from 2003 to 2004 and was a member of audit and advisory engagement teams at Grant Thornton LLP from 1997 to 1999 and from 2000 to 2002, with a final position of Supervising Senior Accountant in Grant Thornton’s Vienna, Virginia office. Ms. Houpert earned a bachelor of business administration from Temple University, graduating cum laude.

Craig W. Sacknoff (62) is an Executive Vice President and a Senior Relationship Manager in commercial banking. He has worked for Alliance Bank since July 1998. He became a Senior Vice President of Alliance Bank when it opened in November 1998 and of Bankshares when it was formed in May 2002 and served in that capacity until his promotion in 2007. Mr. Sacknoff served as Vice President/Commercial Lending of Patriot National Bank from 1991 to 1998. Mr. Sacknoff has over 40 years of experience in banking including commercial, real estate, construction, mortgage and retail positions.

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.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires directors, executive officers, and any 10% or greater beneficial owners of Bankshares’ common stock to file reports concerning their ownership of and transactions in Bankshares’ common stock. Based on a review of the reports of changes in beneficial ownership of common stock, Bankshares believes that its directors and executive officers complied with all filing requirements under Section 16(a) of the Exchange Act with respect to 2011.

Code of Ethics

Bankshares has adopted a Code of Ethics (Code) that applies to its directors, executives and employees including the principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. This Code is posted on the homepage of our Internet website at http://www.alliancebankva.com under “Code of Ethics.” We will provide a copy of the Code to any person without charge upon written request to Alliance Bankshares Corporation, c/o Corporate Secretary, 14200 Park Meadow Drive, Suite 200S, Chantilly, Virginia 20151. We intend to provide any required disclosure of any amendment to or waiver from the Code that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on http://www.alliancebankva.com under “Code of Ethics” promptly following the amendment or waiver. We 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 our Internet website is not incorporated by reference in this report and should not be considered part of this or any other report that we file or furnish to the SEC.

Audit Committee

Bankshares has a separately designated standing Audit Committee established in accordance with the rules and regulations promulgated under the Exchange Act. Current members of the Audit Committee are Messrs. Kovarik, Wagoner and Weyers and Ms. Moy. The Board of Directors has determined that all of the members of the Audit Committee satisfy the independence and financial literacy requirements for audit committee members under the NASDAQ Stock Market (“Nasdaq”) listing standards and applicable SEC regulations. In addition, at least one member of the Audit 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. Kovarik, chairperson of the Audit Committee, and Ms. Moy qualify as “audit committee financial experts” within the meaning of applicable regulations of the SEC, promulgated pursuant to the Sarbanes-Oxley Act of 2002.

Item 11. Executive Compensation

EXECUTIVE COMPENSATION

In this discussion, we give an overview and analysis of our compensation program and policies. Included in this discussion are certain tables containing specific information about the compensation earned or paid in 2010 and 2011 to the following named executive officers: (i) the individual who served as Chief Executive Officer of Bankshares during 2011, (ii) the individuals who served as Chief Financial Officer (including Interim Chief Financial Officer) during 2011, and (iii) the next two most highly compensated executive officers of Bankshares who received total compensation of $100,000 or more during the fiscal year ended December 31, 2011. No other executive officer of Bankshares earned total compensation in excess of $100,000 for the fiscal year ended December 31, 2011.

Compensation Objectives

The primary objective of the Compensation Committee of the Board of Directors with respect to executive compensation is to evaluate and reward senior executives for performance consistent with

improving long-term shareholder value. The committee evaluates each executive’s individual performance along with his or her contribution to the overall organization. The Chief Executive Officer provides specific information to the committee relative to the performance of the other members of the senior management team. The committee considers any recommendations by the Chief Executive Officer; however, the committee determines final compensation for all executives. The core compensation philosophy maintained by the committee and the full Board of Directors is a reward system for achievement. Executives that achieve individual goals are eligible for certain financial rewards. Corporate achievement of organizational goals such as profitability, growth and market expansion warrants additional rewards.

Compensation Components and Committee Process

The key components of our executive compensation program consist of base salary, annual cash bonus program, stock option awards, perquisites and employee benefits.

The Compensation Committee recommends the level of compensation for each executive officer of Bankshares and Alliance Bank, the granting of stock options, employment agreements and other remuneration plans for approval by the Board of Directors. The Compensation Committee is supported by members of management (Human Resources Director, Chief Financial Officer and Chief Executive Officer). These executive officers provide supporting information requested by the Compensation Committee. The Chief Executive Officer regularly attends the Compensation Committee meetings as an invited attendee. The Chief Executive Officer is always excused from the Compensation Committee meetings when his compensation or employment is discussed.

Base Salary

The Compensation Committee believes that base salary for senior executive officers should be targeted at market competitive levels. Base salaries are reviewed annually and adjusted from time to time, based on our review of market data and assessment of Bankshares’ and individual senior executive performance. The base salaries of the named executive officers during 2010 were as follows: Mr. Harbolick $190,800 and Mr. Sacknoff $172,963. In connection with his hiring as Interim President and Chief Executive Officer effective January 28, 2010, Mr. Doyle’s monthly salary equated to an annual base salary of $291,500. In connection with his hiring as President and Chief Executive Officer effective May 4, 2010, his annual base salary was established at $299,500.

Effective March 7, 2011, in recognition of their respective contributions and performance, the Compensation Committee increased the base salaries for the named executive officers as follows: Mr. Harbolick $200,340, and Mr. Sacknoff $181,600. The Compensation Committee maintained Mr. Doyle’s base salary for 2011 at $299,500, and Mr. Cave’s base salary for 2011 at $200,000. In connection with Ms. Houpert’s appointment as Interim Chief Financial Officer, Ms. Houpert’s base salary was increased to $165,000 effective May 19, 2011.

In recognition of their respective contributions and performance for 2011, effective March 1, 2012, the Compensation Committee increased the base salaries for the named executive officers as follows: Mr. Doyle $314,475, and Mr. Cave $220,000. In connection with Ms. Houpert’s appointment as Executive Vice President and Chief Financial Officer, Ms. Houpert’s base salary was increased to $185,000 effective March 23, 2012. Mr. Sacknoff’s base salary remains $181,600 for 2012.

Annual Cash Bonus Program

The goal of the annual cash program in 2011 was to align annual cash bonus incentives with organizational performance and repositioning contributions. A second portion of the annual cash bonus program was based on individual performance. The senior executives were measured on achievement of nonfinancial, individual and department goals. In recognition of their respective contributions to the organization, repositioning and achievement of certain nonfinancial goals, Mr. Cave received a cash bonus of $15,000, Ms. Houpert received a cash bonus of $10,000 and Mr. Sacknoff received a cash bonus of $5,000. Each of these bonuses was paid in 2012.

Perquisites

The Compensation Committee and the Board of Directors believe that reasonable perquisites are necessary to attract and retain talented executives. These perquisites include use of a company-provided automobile or a car allowance, grossed-up for income taxes, and reimbursement of certain automobile expenses, dining club dues, country club dues and supplemental insurance as dictated by the employment agreements. In addition, in 2010, in connection with his service as Interim President and Chief Executive Officer, Mr. Doyle was provided with three months of temporary housing reimbursements and reimbursement of mileage for travel between Charlottesville and Bankshares’ headquarters, with housing costs grossed up for taxes, under his interim employment agreement and in connection with his relocation from Charlottesville, Virginia upon becoming President and Chief Executive Officer, Mr. Doyle was provided with six months of temporary housing reimbursements and reimbursement of moving expenses, with housing costs grossed-up for income taxes, under his employment agreement.

General Employee Benefits

Bankshares offers competitive health, dental, disability and life insurance for all employees. The senior executives are eligible to participate in all of the above programs. In addition, the senior executives are eligible to receive matching 401(k) plan contributions on the same basis as other employees.

Summary Compensation Table for 2011 ⁽¹⁾

The following table sets forth the compensation paid to or earned by Bankshares’ named executive officers for 2011 and 2010.

Stock Option Awards

The Compensation Committee, the Board of Directors and senior management believe aligning the long term interests of key employees, directors and senior management with shareholders is a key ingredient in the formula for organizational success. Over the years the Board of Directors and/or the Compensation Committee have granted stock option awards under the 1999 Stock Option Plan and the 2007 Incentive Stock Plan to align the long-term interests of key employees, directors and senior management with shareholders. The Compensation Committee has also delegated to the President and Chief Executive Officer authority to issue stock option awards to non-senior manager employees of Bankshares to align their respective interests with shareholders. The Chief Executive Officer may grant options to employees as necessary to recruit potential employees or to retain existing employees. Although the Chief Executive Officer has authority to grant the options as necessary, grants of more than 10,000 options are reviewed with the Compensation Committee prior to the grant issuance.

Stock option awards have traditionally been granted to employees with terms of ten years and a vesting schedule of four years. The typical vesting schedule is 15% vesting after the first year, 20% vesting after the second year, 25% vesting after the third year and the final 40% vesting after the fourth year. Stock option awards are granted at fair market value on the date of grant, which has been determined by the Compensation Committee as the closing market price on the date of grant. With the exception of option awards granted to new hires and any stock options granted to non-senior manager employees by the Chief Executive Officer, stock option grants by the Compensation Committee have traditionally been made at the committee’s periodic meetings. The committee’s schedule is determined in advance, and the proximity of any equity awards to the release of earnings announcements or other material news events is coincidental.

Outstanding Equity Awards at 2011 Fiscal Year-End

The following table provides information with respect to outstanding option awards held by the named executive officers at December 31, 2011. Bankshares has not issued any restricted stock.

Employment and Change of Control Agreements

We have entered into employment agreements with each of the named executive officers. We believe employment agreements, including providing for reasonable severance in the event a named executive officer’s employment is terminated by us without cause, are necessary to allow us to be competitive in recruiting and retaining talented executive officers in our industry. In addition, we believe employment agreements with the named executive officers are appropriate because they clarify the terms of the executives’ employment and ensure that Bankshares and its subsidiaries are protected by non-compete, non-solicitation and non-disclosure provisions in the event the executives leave the organization.

Our senior management has contributed significantly to our organization, and we believe that it is important to protect them in the event of a change of control. Further, it is Bankshares’ belief that the interests of shareholders will be best served if the interests of senior executives are aligned with the interests of shareholders, and providing change of control benefits should eliminate or substantially reduce any reluctance on the part of executive officers, because of the risk of losing their employment, to pursue potential change of control transactions that may be in the best interests of shareholders. Such arrangements also should keep executive officers focused on operating the business during any period of uncertainty associated with transaction that would result in a change of control. Each of the employment agreements for the named executive officers contains change of control provisions. Unlike the accelerated vesting of equity awards under the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, these change of control benefits have a “double trigger,” which means that the benefits under these provisions are payable only if employment is terminated after consummation of a transaction that constitutes a change of control.

William E. Doyle, Jr., President and Chief Executive Officer of Bankshares and Alliance Bank, was appointed President and Chief Executive Officer of Bankshares and Alliance Bank effective May 4, 2010, after serving as Interim President and Chief Executive Officer of Bankshares and Alliance Bank beginning January 28, 2010. Mr. Doyle is employed under an agreement with Bankshares and Alliance Bank, dated as of May 4, 2010. The agreement provides for Mr. Doyle’s employment as President and Chief Executive Officer of Bankshares and Alliance Bank for an initial term through May 4, 2012. On May 4, 2012, and on each May 4 thereafter, the agreement will automatically renew for an additional one year term, unless a party provides at least 90 days’ prior notice of nonrenewal. The agreement provides for an initial annual base salary of $299,500 with an opportunity for base salary increases and bonuses at the discretion of the Board of Directors. Mr. Doyle’s current annual base salary is $314,475. Mr. Doyle is eligible to participate in any employee benefit plans maintained by the company for the benefit of its senior executives and for which he is or will become eligible, such as medical, dental and optical insurance, group term life insurance, long term and short term disability insurance, and the 401(k) retirement plan. Mr. Doyle is also provided with a company-owned automobile for business and reasonable personal use during his employment. Under the agreement, Mr. Doyle received a signing grant of 50,000 stock options pursuant to the terms of the 2007 Incentive Stock Plan. In recognition that Mr. Doyle needed to relocate his personal residence from Charlottesville, Virginia to Bankshares’ geographic location, the company agreed to reimburse Mr. Doyle for the reasonable rent and utilities incurred while living in temporary housing in the vicinity of the company for up to six months, limited to a maximum of $2,300 per month, grossed up for taxes. The company also agreed to reimburse Mr. Doyle for necessary and reasonable moving costs, subject to approval by Bankshares’ Board of Directors. If Mr. Doyle’s employment is terminated for any reason, he is entitled to payment of any vested but not yet paid benefits provided under the agreement. If Mr. Doyle’s employment is terminated by the company other than for cause (as defined in the agreement), or if Mr. Doyle resigns for good reason (as defined in the agreement), Mr. Doyle will continue to receive his then current monthly base salary for twelve months following termination, subject to reduction in the event Mr. Doyle receives other income during that period. If Mr. Doyle’s employment is terminated by the company other than for cause or if he resigns for good reason within one year after a change of control (as defined in the agreement), he will receive 2.99 times his average taxable income from the company for the five calendar years immediately preceding the calendar year of the change of control (with compensation for any partial year of employment annualized) (the 5-year average taxable compensation), payable in equal monthly installments over twelve months following the date of termination, but limited to the maximum payment which could be made without any payment being considered an excess parachute payment under Section 280G of the Internal Revenue Code. The agreement includes noncompetition and non-solicitation provisions that are in effect during the term of the agreement and for a period of twelve months following

the termination of Mr. Doyle’s employment. The agreement also provides for confidentiality obligations during and following Mr. Doyle’s employment. If Mr. Doyle dies while employed, the company will pay his estate within 60 days of his death all salary and accrued bonus through the end of the month during which his death occurs. No other termination events result in termination payments under the agreement.

Jean S. Houpert, Executive Vice President and Chief Financial Officer of Bankshares and Alliance Bank, is employed under an employment agreement with Alliance Bank effective as of March 23, 2012 for a one-year term until March 22, 2013. The agreement provides for an automatic one-year renewal each March 22 subject to a requirement of 60 days’ prior notice in the event of nonrenewal by either party. The agreement provides for an initial annual base salary of $185,000 with an opportunity for base salary increases and bonuses at the discretion of the Board of Directors. Ms. Houpert is eligible for the usual and customary employee benefits from the company including life and disability insurance as provided to executive-level employees. If Ms. Houpert’ s employment is terminated by the company other than for cause (as defined in the agreement) or is terminated by Ms. Houpert for good reason (as defined in the agreement), Ms. Houpert will be entitled to continue receiving her then current monthly base salary for twelve months. If within one year after a change of control (as defined in the agreement), Ms. Houpert’ s employment is terminated by the company other than for cause or is terminated by Ms. Houpert for good reason, Ms. Houpert will receive $185,000 payable in equal monthly installments over twelve months. Additionally, Ms. Houpert is subject to non-disclosure commitments and to non-compete commitments within a defined geographic area and non-solicitation requirements for a period of twelve months following termination of her employment. If Ms. Houpert dies while employed, the company will pay her estate within 60 days of her death all salary and accrued bonus through the end of the month during which her death occurs. No other termination events result in termination payments under the agreement. Prior to March 23, 2012, Ms. Houpert did not have an employment agreement with Bankshares or Alliance Bank.

George F. Cave, Executive Vice President of Alliance Bank, is employed under a one-year employment agreement, with an original term commencing November 8, 2010, and currently in effect until November 8, 2012. The agreement provides for an automatic one-year renewal each November 8 subject to a requirement of 60 days’ prior notice in the event of nonrenewal by either party. The agreement provides for an initial annual base salary with an opportunity for base salary increases and bonuses at the discretion of the Board of Directors. Mr. Cave’s current annual base salary is $220,000. Mr. Cave is eligible for the usual and customary employee benefits from the company including life and disability insurance as provided to executive-level employees. In addition, the agreement provides that the company will pay to Mr. Cave a monthly automobile allowance of $750 per month, net of applicable taxes. Under the agreement, Mr. Cave received a signing bonus of $15,000, which is subject to repayment if Mr. Cave’s employment terminates for any reason prior to November 8, 2011, and a signing grant of 10,000 stock options pursuant to the terms of the 2007 Incentive Stock Plan. If Mr. Cave’s employment is terminated by the company other than for cause (as defined in the agreement) or is terminated by Mr. Cave for good reason (as defined in the agreement), Mr. Cave will be entitled to continue receiving his then current monthly base salary for twelve months. If within one year after a change of control (as defined in the agreement), Mr. Cave’s employment is terminated by the company other than for cause or is terminated by Mr. Cave for good reason, Mr. Cave will receive 1.5 times his 5-year average taxable compensation, payable in equal monthly installments over twelve months. Additionally, Mr. Cave is subject to non-disclosure commitments and to non-compete commitments within a defined geographic area and non-solicitation commitments for a period of twelve months following termination of his employment. If Mr. Cave dies while employed, the company will pay his estate within 60 days of his death all salary and accrued bonus, if any, through the end of the month during which his death occurs. No other termination events result in termination payments under the agreement.

Craig W. Sacknoff, Executive Vice President of Alliance Bank, is employed under an amended and restated employment agreement, originally effective March 1, 2003, and currently in effect until March 1, 2013. The agreement provides for an automatic one-year renewal each March 1 subject to a requirement of 60 days’ prior notice in the event of nonrenewal by either party. The agreement provides for an initial annual base salary with an opportunity for base salary increases and bonuses at the discretion of the Board of Directors. Mr. Sacknoff’s current annual base salary is $181,600. Mr. Sacknoff is eligible for the usual and customary employee benefits from the company including life and disability insurance as provided to executive-level employees. In addition, the agreement provides that the company will lease a car for Mr. Sacknoff with a lease payment of up to $734.05 per month (as subsequently increased by the Board) and will pay or reimburse Mr. Sacknoff for all maintenance, insurance, fuel and taxes on such car. If, before or after a change of control, Mr. Sacknoff’s employment is terminated by the company other than for cause (as defined in the agreement) or is terminated by Mr. Sacknoff for good reason (as defined in the agreement), Mr. Sacknoff will be entitled to continue receiving his then current monthly base salary for twelve months. If within one year after a change of control (as defined in the agreement), Mr. Sacknoff’s employment is terminated by the company other than for cause or is terminated by Mr. Sacknoff for good reason, Mr. Sacknoff will receive an additional amount equal to the excess of 1.5 times his 5-year average taxable compensation over one year’s base salary, payable in equal monthly installments over eighteen months. Additionally, Mr. Sacknoff is subject to non-disclosure commitments and to non-compete commitments within a defined geographic area and non-solicitation commitments for a period of twelve months following termination of his employment. If Mr. Sacknoff dies while employed, the company will pay his estate within 60 days of his death all salary and accrued bonus through the end of the month during which his death occurs. No other termination events result in termination payments under the agreement.

Paul M. Harbolick, Jr., Former Executive Vice President and Chief Financial Officer of Bankshares and Alliance Bank, was employed under an amended and restated employment agreement with Alliance Bank, originally effective March 1, 2003. The agreement terminated on May 18, 2011 upon Mr. Harbolick’s resignation from his positions with Bankshares and Alliance Bank. The agreement provided for an automatic one-year renewal each March 1 subject to a requirement of 60 days’ prior notice in the event of nonrenewal by either party. The agreement provided for an initial annual base salary with an opportunity for base salary increases and bonuses at the discretion of the Board of Directors. During 2011 through May 18, 2011, Mr. Harbolick’s annual base salary was $200,340. Mr. Harbolick was eligible for the usual and customary employee benefits from the company including life and disability insurance as provided to executive-level employees. In addition, the agreement provided that the company would provide a country club allowance of up to $457 per month (as subsequently increased by the Board), and an automobile allowance of $350 per month. If Mr. Harbolick’s employment were terminated by the company other than for cause (as defined in the agreement) or were terminated by Mr. Harbolick for good reason (as defined in the agreement), Mr. Harbolick would have been entitled to continue receiving his then current monthly base salary for the greater of the remainder of his contract term or twelve months. If within one year after a change of control (as defined in the agreement), Mr. Harbolick’s employment were terminated by the company other than for cause or were terminated by Mr. Harbolick for good reason, Mr. Harbolick would have been entitled to receive an amount equal to two years’ compensation (defined as annual base salary plus the average of his last three years’ bonuses) payable in equal monthly installments over twenty-four months. Additionally, Mr. Harbolick’s agreement contained non-disclosure commitments and non-compete commitments within a defined geographic area and non-solicitation commitments for a period of twelve months following termination of his employment. The agreement also provided that if Mr. Harbolick died while employed, the company would pay his estate within 60 days of his death all salary and accrued bonus through the end of the month during which his death occurred. No other termination events would have resulted in termination payments under the agreement.

Following his resignation from Bankshares and Alliance Bank, Mr. Harbolick was engaged as an independent contractor under a consulting agreement, which was effective as of May 19, 2011 for a term of up to six months, to provide certain financial accounting and other advisory and consulting services to Bankshares and Alliance Bank. The agreement provided for Mr. Harbolick to receive $125,000 for consulting services, with half to be paid in a lump sum on May 19, 2011 (subject to repayment if consulting services were not provided as requested) and the remaining half to be paid in monthly installments as consulting services were provided. The agreement also provided for Mr. Harbolick to be reimbursed for reasonable travel and business expenses incurred in connection with providing such consulting services.

In most cases, payment of the termination payments described above (other than the payments following death) for each executive will be delayed for six months following the executive’s termination date to comply with the requirements of Section 409A of the Internal Revenue Code. Any payments required to be delayed will be paid at the end of the six-month period in one lump sum. Any payments due after the end of the six-month period will be paid at the normal payment date provided for under the applicable employment agreement.

The definitions of “cause,” “good reason” and “change of control” under these employment agreements are discussed under “Potential Payments upon Termination or Change of Control” below.

Potential Payments upon Termination or Change of Control

Pursuant to the terms of their employment agreements and the terms of their outstanding stock options under Bankshares’ stock option plans, as applicable, the named executive officers are (or were) entitled to certain payments or benefits upon a change of control or in connection with certain termination events.

Employment Agreements

Compensation to Be Paid upon Termination for Cause

Under the employment agreements, in the event the company terminates the executive’s employment for cause, the executive is not entitled to any compensation from the company following the date of termination. Termination for cause would require purposeful and/or serious wrongdoing on the part of the executive which reflected poorly on his integrity or moral character or which resulted in a breach of certain commitments he had made to the company.

Compensation to Be Paid upon Death

Under the employment agreements, if the executive dies while he is employed by the company, his employment agreement will terminate but the company will pay to his estate that portion of his salary which he would have earned through the end of the month in which his death occurs, as well as that portion of his annual cash bonus, if any, which he had accrued through the end of the month in which his

death occurs. In addition, the company currently pays the premiums on a group life insurance policy which will entitle the executive’s beneficiaries to a death benefit equal to twice the executive’s base salary, or 2.5 times the executive’s base salary in the case of Mr. Cave.

Compensation to Be Paid upon Disability or Termination without Cause or for Good Reason

Under certain circumstances, either the executive or the company may desire to end his employment for a reason which is not set forth above. Among other events in this category, the company may terminate the executive’s employment even if he has done nothing wrong, the executive may resign from the company based on a “good reason,” or the company may determine that an executive is unable to continue working for the company due to disability. Under the employment agreements, if the executive is disabled (as defined in the agreement), the company will terminate his employment 90 days after notice of termination is provided to the executive. No additional compensation is payable under the agreements in the case of termination due to disability. Under the employment agreements, termination of an executive for any reason other than for cause, for disability or as a result of the executive’s death will entitle the executive to receive termination compensation from the company. If the executive decides to terminate his employment, then he is only entitled to receive termination compensation payments if he does so for “good reason,” which means the company has changed certain aspects of his employment in a significant way that is not acceptable to him or otherwise fails to fulfill a commitment the company had made to him. In each of these circumstances, for twelve months following the date of termination, the company will pay to the executive an amount equal to one-twelfth of the annual salary which he was earning immediately before the termination. In the event that the executive breaches the confidentiality, non-disclosure or non-competition commitments which he made to the company in his employment agreement, then the company will no longer be required to make these payments. These commitments generally last for twelve months after termination of employment.

Compensation to Be Paid upon Change of Control

Under the employment agreements, a change of control is a significant change of the company’s business or management that fits into one of these categories: (1) another party becomes the owner of enough of the company’s securities to control at least 50% of the voting power under certain circumstances; or (2) as a result of certain transactions, and within two years of the occurrence of such transactions, the people who formerly constituted a majority of the Board no longer constitute a majority of the Board. The executive’s employment agreements provide that any successor to the company, including an entity that becomes a successor as a result of a change of control, must assume and agree to perform the company’s obligations to the executives under the individual employment agreements. If a successor does not assume and agree to perform the company’s obligations under the individual employment agreements, then the executives will be entitled to terminate their employment for good reason and to receive the termination compensation described above. In the case of Mr. Doyle’s employment agreement, if within one year after a change of control (as defined in the agreement) his employment is terminated by the company other than for cause or he resigns for good reason, Mr. Doyle will be entitled to receive up to 2.99 times his 5-year average taxable compensation, payable in equal monthly installments over twelve months, limited to the maximum payment which could be made without any payment being considered an excess parachute payment under Section 280G of the Internal Revenue Code. In the case of Ms. Houpert, if within one year after a change of control, her employment is terminated without cause or she resigns for good reason, she will be entitled to $185,000, payable in equal monthly installments over twelve months. In the case of Mr. Cave, if within one year after a change of control, his employment is terminated without cause or he resigns for good reason, he will be entitled to an amount equal to 1.5 times his 5-year average taxable compensation, payable in equal monthly installments over twelve months. In the case of Mr. Sacknoff, if within one year after a change

of control, his employment is terminated without cause or he resigns for good reason, he will be entitled to one year’s base salary payable in equal monthly installments over twelve months, and an additional amount equal to the excess of 1.5 times his 5-year average taxable compensation over one year’s base salary, payable in equal monthly installments over eighteen months. In the case of Mr. Harbolick’s former employment agreement, if within one year after a change of control his employment had been terminated by the company without cause or he resigned for good reason, he would have been entitled to an amount equal to two times his “compensation” (defined in the agreement as current base salary plus the average of the last three years’ bonus payments), payable in equal monthly installments over twenty-four months.

Stock Options

The 1999 Stock Option Plan provides for the grant of stock options to our directors, consultants and key employees. The 2007 Incentive Stock Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and stock awards to our key employees, non-employee directors and non-employee service providers. As of April 1, 2012, only stock options have been granted under the 2007 Incentive Stock Plan.

Once granted under either the 1999 Stock Option Plan or the 2007 Incentive Stock Plan, options can be exercised to purchase Bankshares’ common stock only in accordance with a vesting schedule stated in each option award agreement and with the other terms of the individual grant. The following summarizes the treatment of stock options upon certain events under the 1999 Stock Option Plan and the 2007 Incentive Stock Plan.

Treatment of Stock Options upon Termination for Cause

Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if a person’s employment or service is terminated by the company for cause, all of his stock options which have not been exercised will immediately be forfeited. The definition of “cause” under the 1999 Stock Option Plan is substantially similar to the definition of “cause” in the employment agreements described above. The definition of “cause” under the 2007 Incentive Stock Plan is substantially the same as the definition of “cause” in the 1999 Stock Option Plan, with the exception that the definition of “cause” under the 2007 Incentive Stock Plan expressly refers to Bankshares’ subsidiaries.

Treatment of Stock Options upon Death or Incapacity

Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if a participant who has received stock options dies while he is working for or providing services to the company or one of its subsidiaries, his legal representative (usually his executor or administrator) has twelve months to exercise those vested options which the deceased person could have exercised as of the date of his death. Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if a participant who has received stock options becomes incapacitated while he is working for or providing services to the company or one of its subsidiaries, his guardian or legal representative also has twelve months following the date of incapacity to exercise those vested options which the incapacitated person could have exercised as of the date of his incapacitation. After the 12-month period, any options that have not been exercised will be forfeited.

Treatment of Stock Options upon Termination for Any Other Reason

The employment or service of a person may end for a reason other than those set forth above. Under both the 1999 Stock Option Plan and the 2007 Incentive Stock Plan, if termination occurs for any other reason, such as retirement or resignation, a participant who has received stock options has three months to exercise those vested options which he could have exercised as of the date his employment or service ended. After the three-month period, any options which have not been exercised will be forfeited.

Treatment of Stock Options upon Change of Control

Under the 1999 Stock Option Plan, a change of control is a significant change in our business that fits into one of these categories: (1) Bankshares transfers all or almost all of its assets to another party; (2) another party becomes the owner of more than 50% of Bankshares’ stock; or (3) Bankshares is involved in a reorganization, a consolidation, or a merger with another party. If a change of control occurs, then, regardless of the usual vesting schedule, an employee who has received stock options may exercise all of his options, as long as the parties who own Bankshares’ common stock immediately before the change of control are not the same parties who hold, either directly or indirectly, a majority of the common stock of the acquiring party involved in the change of control. If a change of control occurs, the committee appointed by the Board to administer the 1999 Stock Option Plan may also take steps to protect those people who have received options, including (i) changing the exercise dates or termination dates of the options so that a person may exercise his options before the change of control; (ii) canceling the options a person has received and instead paying him cash in an amount equal to the fair market value of the stock on the day the change of control occurs, minus the exercise price he would have had to pay to exercise the options; or (iii) canceling the options a person has received and arranging for him to receive equivalent options to purchase the stock of the acquiring party involved in the change of control, so long as he receives substantially the same treatment under the substituted options that he would have received under the original options. The Board may also take other steps in addition to or instead of the steps set forth above to protect those people who have received options under the 1999 Stock Option Plan.

Under the 2007 Incentive Stock Plan, a change of control is a significant change in our business that fits into one of these categories: (1) another party becomes the owner of 25% or more of Bankshares’ stock; (2) within any two-year period, the composition of the Board changes so that the directors who formerly constituted the Board no longer constitute a majority of the Board and the new directors were not approved by a sufficient number of former directors; (3) as a result of a merger or consolidation, Bankshares ceases to exist or Bankshares’ stock is converted into other property; (4) as a result of a merger or consolidation, we continue to exist but the holders of Bankshares’ stock immediately prior to the transaction do not own at least 51% of Bankshares’ stock immediately following the transaction; (5) Bankshares transfers all or almost all of its assets to another party; or (6) Bankshares’ shareholders approve the liquidation or dissolution of the company. If a change of control occurs, then, regardless of the usual vesting schedule, a participant who has received stock options may exercise all of his options. If a change of control occurs, the committee appointed by the Board to administer the 2007 Incentive Stock Plan may also take steps to protect those people who have received options, including (i) changing the exercise dates or termination dates of the options so that a person may exercise his options before the change of control; (ii) canceling the options a person has received and instead paying him cash in an amount which could have been obtained upon the exercise of the option, had the option been currently exercisable; (iii) adjusting the option in an appropriate way to reflect the change of control; or (iv) causing the outstanding options to be assumed, or new rights substituted for those options, by the acquiring or surviving party involved in the change of control.

Except in the case of Mr. Harbolick, the table below reflects potential payments to each of our named executive officers in the event of a termination of the named executive officer’s employment with us, whether due to retirement, death, disability, termination for cause, termination with good reason, or termination in connection with a change of control. The amounts shown assume in each case that the change of control or termination occurred on December 31, 2011, and that the relevant stock price was $3.48, which was the closing price of Bankshares’ common stock on December 30, 2011, the last trading day of 2011. Because Mr. Harbolick was no longer serving as an executive officer of the company on December 31, 2011, the information provided in the table below for him reflects the actual payments he received in connection with his departure.

The above table does not include benefits to which all salaried employees are entitled (such as life insurance) or the company’s 401(k) plan benefits that would be paid to a named executive officer, except to the extent that the named executive officer is entitled to an additional or accelerated benefit as a result of the termination or change of control. In addition, the table does not include the value of vested but unexercised stock options as of December 31, 2011. The footnotes to the table describe the assumptions used in estimating the amounts set forth in the table. Because the payments to be made to a named executive officer depend on several factors, the actual amounts to be paid out upon a named executive officer’s termination of employment can only be determined at the time of the executive’s separation from Bankshares.

DIRECTOR COMPENSATION

The Compensation Committee annually recommends to the full Board of Directors the compensation to be paid to Bankshares’ non-employee directors. Employee directors do not receive additional compensation for their board service.

During 2011, each non-employee director received an annual retainer of $7,650, with the Chairman of the Board receiving an additional annual retainer of $7,650 and the Chairman of each of the Audit Committee, Loan Committee, and Compensation Committee receiving an additional annual retainer of $2,975. The annual retainer fees are paid on an annual basis in January of the year to which the fee is applicable. Each non-employee director also received a monthly fee of $850. Directors received the same level of annual retainer and monthly compensation for 2011 as they received in 2010.

Each non-employee director is also eligible to receive non-qualified stock option awards pursuant to the Alliance Bankshares Corporation 2007 Incentive Stock Plan in the discretion of the Compensation Committee. No stock options were granted to the non-employee directors during 2011.

Director Compensation Table for 2011 ⁽¹⁾

The following table provides compensation information for 2011, for each member of the Board of Directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management

The following table shows as of April 1, 2012, the beneficial ownership of Bankshares’ common stock of the shareholders known to Bankshares to be the beneficial owners of more than 5% of Bankshares’ common stock and who are not also directors or executive officers of Bankshares.

The following table shows as of April 1, 2012 the beneficial ownership of Bankshares’ common stock of each director, each named executive officer and of all directors and executive officers of Bankshares as a group.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information as of December 31, 2011 about the shares that may be issued under all of our existing equity compensation plans.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Director Independence

The Board of Directors is comprised of a majority of “independent” directors, as defined by the Nasdaq listing standards as currently in effect and applicable to Bankshares. Independent directors do not receive consulting, legal or other fees from Bankshares or Alliance Bank, other than Board and committee compensation. Although companies affiliated with certain of these directors provide goods and services to Bankshares and Alliance Bank, the Board of Directors has determined in accordance with the Nasdaq listing standards that these independent directors have no relationships with Bankshares or Alliance Bank that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. The Board has determined that all current directors are independent with the exception of Mr. Doyle. In determining each director’s independence, the Board considered the fact that Carr Properties, of which Mr. Carr serves as President and CEO, leases the corporate headquarters to Bankshares under a lease that expires in July 2016, but determined that this relationship does not interfere with Mr. Carr’s ability to exercise independent judgment as a director of Bankshares, and also considered the fact that Lowers & Associates, LLC, of which Mr. Lowers serves as President and CEO, and Proforma Screening Services, of which Mr. Lowers is an owner and director, periodically provide information technology risk management and pre-employment background screening services, respectively, to Alliance Bank, but determined that these relationships will not interfere with Mr. Lowers’s ability to exercise independent judgment as a director of Bankshares.

Interest of Management in Certain Transactions

Alliance Bank grants loans and letters of credit to its executive officers, directors and their affiliated entities. These loans are made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated persons, and, in the opinion of management, do not involve more than normal risk of collectability or present other unfavorable features. The aggregate amount of such loans outstanding at December 31, 2011 and 2010 was approximately $1.5 million and $2.3 million, respectively. During 2011, new loans and line of credit advances to such related parties amounted to $19 thousand in the aggregate and payments amounted to $807 thousand in the aggregate.

Alliance Bank also maintains deposit accounts with some of its executive officers, directors and their affiliated entities. The aggregate amount of these deposit accounts at December 31, 2011 and 2010 amounted to $5.5 million and $1.1 million, respectively.

Under Bankshares’ Code of Ethics, all directors and employees (including the executive officers) are prohibited from having any direct or indirect financial or other participation in any business that competes with, supplies goods or services to, or is a customer of Bankshares. Bankshares’ President, Chief Financial Officer and Chairman of the Audit Committee are the Compliance Officers as identified in the Code of Ethics and are responsible for overseeing compliance with the Code of Ethics. These kinds of transactions are sometimes referred to as “related person transactions.”

In addition, the Audit Committee is responsible for reviewing, approving and/or ratifying all related person transactions, other than related person transactions with respect to routine banking matters, which are reviewed in accordance with Regulation O and are not reviewed by the Audit Committee. The Audit Committee’s decision whether or not to approve or ratify a related person transaction will be made in light of the committee’s determination as to whether the transaction is or is not in the best interests of Bankshares. Where such transactions involve a director, the committee may also take into account the effect of the transaction on the director’s status as an independent member of the Board and eligibility to serve on Board committees under SEC and Nasdaq rules and regulations.

The term “related person” generally means any of Bankshares’ directors or executive officers, nominees for director, persons known to own 5% or more of Bankshares’ common stock, and any member of the “immediate family” of such person.

A “related person transaction” is generally an existing or proposed transaction in which Bankshares was or is to be a participant and the amount involved exceeds $120,000, and in which the related person had or will have a direct or indirect material interest. A related person transaction does not include:

Item 14. Principal Accountant Fees and Services

Principal Accountant Fees and Services

The following table presents the fees for professional audit services rendered by Yount, Hyde & Barbour, P.C. for the audit of Bankshares’ consolidated financial statements for the fiscal years ended December 31, 2011 and 2010, and fees billed for other services rendered by Yount, Hyde & Barbour, P.C. during those periods. All services reflected in the following table for 2011 and 2010 were pre-approved in accordance with the policy of the Audit Committee of the Board of Directors.

The Audit Committee has determined that the provision by Yount, Hyde & Barbour, P.C. of the non-audit services referred to above is compatible with the maintenance of that firm’s independence.

Pre-Approval Policies

Pursuant to the terms of its charter, the Audit Committee is responsible for the appointment, compensation and oversight of the work performed by Bankshares’ independent accountants. The Audit Committee, or a designated member of the Audit Committee, must pre-approve all audit (including audit-related) and non-audit services performed by the independent accountants in order to ensure that the provisions of such services does not impair the accountants’ independence. The Audit Committee has delegated interim pre-approval authority to Mr. Bob Kovarik, chairperson of the Audit Committee. Any interim pre-approval of permitted non-audit services is required to be reported to the Audit Committee at its next scheduled meeting. In addition, pre-approved research and consultation fees requested by management may be performed throughout the engagement year not to exceed $5,000.

PART IV.

Item 15. Exhibits, Financial Statement Schedules

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALLIANCE BANKSHARES CORPORATION

(Registrant)