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 ý
Filed by
a Party other than the Registrant o
Check the
appropriate box:
[
]ooo Preliminary
Proxy Statement
[
]o o Confidential, For Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
[ X
]ý ý Definitive
Proxy Statement
[
]oD o Definitive
Additional Materials
[ SoSo o Soliciting
Material Pursuant to § 240.14a-12
|
HIGHLANDS BANKSHARES,
INC.
(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):
ý No
fee required.
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title
of each class of securities to which transaction
applies:
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(2) Aggregate
number of securities to which transaction applies:
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(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):
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fee paid:
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o
Fee paid previously with preliminary materials:
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box if any part of the fee is offset as provided in 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.
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HIGHLANDS
BANKSHARES, INC.
340
West Main Street
Abingdon,
Virginia 24210
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
be held on May 26, 2010
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Shareholders of Highlands Bankshares,
Inc. (the “Corporation”) will be held at the Southwest Virginia Higher Education
Center ballroom on the campus of Virginia Highlands Community College, One
Partnership Circle, Abingdon, Virginia on May 26, 2010 at 7:00 p.m., for the
following purposes:
(1)
|
To
elect nine Directors for a term of one year or until their respective
successors are elected
and
qualify; and
|
(2)
|
To
ratify the appointment of Brown, Edwards & Company, LLP as our
independent registered public accounting firm for the year ending December
31, 2010;
and
|
(3)
|
To
transact such other business as may properly come before the meeting.
Management is not
aware
of any other business, other than procedural matters incident to the
conduct of the
Annual
Meeting.
|
The Board of Directors has fixed the
close of business on March 10, 2010 as the record date for the determination of
shareholders entitled to notice of, and to vote at, the Annual
Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/Robert M. Little, Jr.
Robert M. Little, Jr.
Secretary
Abingdon,
Virginia
April 26,
2010
YOU ARE
CORDIALLY INVITED TO ATTEND THIS MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU
OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE
PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN PERSON
OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR
IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING
TO BE HELD ON MAY 26, 2010:
The proxy
statement and the Corporation’s 2009 annual report
on Form 10-K are available at
www.hubank.com/2010shareholderproxy
HIGHLANDS
BANKSHARES, INC.
________________
PROXY
STATEMENT
___________________
ANNUAL
MEETING OF SHAREHOLDERS
May
26, 2010
GENERAL
INFORMATION
This Proxy Statement is furnished to
holders of common stock, $0.625 par value per share (“Common Stock”), of
Highlands Bankshares, Inc. (the “Corporation”), in connection with the
solicitation of proxies by the Board of Directors of the Corporation to be used
at the Annual Meeting of Shareholders to be held on May 26, 2010 at 7:00 p.m. at
the Southwest Virginia Higher Education Center ballroom on the campus of
Virginia Highlands Community College, One Partnership Circle, Abingdon, Virginia
24210 and any adjournment thereof (the “Annual Meeting”).
The principal executive offices of the
Corporation are located at 340 West Main Street, Abingdon, Virginia
24210. The approximate date on which this Proxy Statement, the
accompanying proxy card and the Annual Report to Shareholders (which is not part
of the Corporation’s soliciting materials) are being mailed to the Corporation’s
shareholders is April 26, 2010.
Voting
and Revocability of Proxy
The proxy solicited hereby, if properly
signed and returned to the Corporation and not revoked prior to its use, will be
voted in accordance with the instructions contained thereon. If no
contrary instructions are given, each proxy received will be voted “for” the
proposals described herein. Any shareholder giving a proxy has the
power to revoke it at any time before it is exercised by (i) filing written
notice thereof with the Secretary of the Corporation (Robert M. Little, Jr.,
Secretary, Highlands Bankshares, Inc., 340 West Main Street, P.O. Box 1128,
Abingdon, Virginia 24210); (ii) submitting a duly executed
proxy bearing a later date; or (iii) appearing at the Annual Meeting or at any
adjournment thereof and giving the Secretary notice of his or her intention to
vote in person. Proxies solicited hereby may be exercised only at the
Annual Meeting and any adjournment thereof and will not be used for any other
meeting.
A broker who holds shares in “street
name” has the authority to vote on certain items when it has not received
instructions from the beneficial owner. Except for certain items for which
brokers are prohibited from exercising their discretion, a broker is entitled to
vote on matters presented to shareholders without instructions from the
beneficial owner. “Broker shares” that are voted on at least one matter will be
counted for purposes of determining the existence of a quorum for the
transaction of business at the Annual Meeting. Where brokers do not have or do
not exercise such discretion, the inability or failure to vote is referred to as
a “broker nonvote.” Under the circumstances where the broker is not permitted
to, or does not, exercise its discretion, assuming proper disclosure to the
Company of such inability to vote, broker nonvotes will not be counted as voting
in favor of or against the particular matter. A broker is prohibited from voting
on the election of directors without instructions from the beneficial owner;
therefore, there may be broker nonvotes on Proposal One. A broker may vote on
the ratification of the independent public accountants; therefore, no broker
nonvotes are expected to exist in connection with Proposal Two. Abstentions and
broker nonvotes will not count as votes cast in the election of directors or in
the vote on ratifying the appointment of independent public accountants.
Therefore, abstentions and broker non-votes will have no effect on the voting on
these matters at the meeting.
The Board
of Directors is not aware of any matters other than those described in this
Proxy Statement that may be presented for action at the Annual Meeting. However,
if other matters do properly come before the Annual Meeting, the persons named
in the enclosed proxy card possess discretionary authority to vote in accordance
with their best judgment with respect to such other matters.
Persons
Making the Solicitations
The cost of soliciting proxies will be
borne by the Corporation. In addition to solicitation by mail, officers and
regular employees of the Corporation may solicit proxies in person or by
telephone.
Voting
Securities
Only shareholders of record at the
close of business on March 10, 2010 (the “Record Date”) will be entitled to vote
at the Annual Meeting. A majority of the shares of Common Stock
entitled to vote, represented by person or by proxy, constitutes a quorum for
the transaction of business at the Annual Meeting. On the Record Date, there
were 5,011,152 shares of Common Stock of the Corporation issued and outstanding
and 1,482 record holders. Each share of Common Stock is entitled to
one vote at the Annual Meeting. The Corporation had no other class of
voting securities outstanding at the Record Date.
In the
election of Directors, those nominees receiving the greatest number of votes
will be elected even if they do not receive a majority. Votes
withheld and broker non-votes will not be considered a vote for, or a vote
against, a Director.
PROPOSAL
ONE
ELECTION
OF DIRECTORS
The
Nominees
Nine Directors are to be elected at the
Annual Meeting to serve until the next Annual Meeting, and until the election
and qualification of their respective successors.
The following narratives set forth the
names, ages and business experience of nominees for election to the Board of
Directors as well as the year that each was first elected to the Board of
Directors of the Corporation or previously to the Board of Directors of
Highlands Union Bank (the “Bank”), the predecessor to and now a wholly owned
subsidiary of the Corporation. Unless otherwise indicated, the business
experience shown for each nominee has extended five or more years. In addition,
the narratives include the experience, qualifications, attributes or skills that
led the Board of Directors to conclude that each person should serve as a
director for the Corporation.
William
E.
Chaffin Age
60 First elected to the Board 1995
In 1983
Mr. Chaffin and other local business people helped organize Highlands Union
Bank. Mr. Chaffin has been a member of the Board of Directors of Highlands Union
Bank since 1991 and Highlands Bankshares, Inc. since its inception in
1995. He was born in Gallatin, Tennessee and has lived in Abingdon,
Virginia for 39 years. Mr. Chaffin has been active in the community
through various civic groups as well as being a veteran of the United States
Army. In addition to serving on the Board of Directors of Highlands Union Bank
and Highlands Bankshares, Inc., Mr. Chaffin is also serves on the Board of
Directors of Virginia Highlands Community College in Abingdon Virginia. Mr. Chaffin is
a member of Abingdon Baptist Church.
Mr.
Chaffin owns and operates Chaffin & Co and has served as a technologist in
the Abingdon area since 1979. Mr. Chaffin also serves as the technology
consultant to the Bank and Company and is a certified systems and network
engineer. Mr. Chaffin has been committed to the success of the Company, having
previously served on the Audit Committee and currently serving on the Loan
Committee for several years In recommending Mr. Chaffin for re-election to the
Board of Directors the Nominating Committee considered his technology expertise
as well as his work ethic demonstrated in running his own business.
E.
Craig
Kendrick Age
58 First elected to the Board 2000
Mr.
Kendrick has been a member of the Board of Directors of Highlands Union Bank and
Highlands Bankshares since 2000. He was born in Washington County,
Virginia and has lived in the Meadowview, Virginia area for his entire
life. He is a graduate of Emory & Henry College where he received
a B.A. degree. Mr. Kendrick also graduated from Mercer University Walter F.
George School of Law with a J.D. degree. Mr. Kendrick has been engaged in the
general practice of law continuosly since 1984. Mr. Kendrick is also the
co-owner of D & H Tractor Sales, Inc. with locations in Chilhowie, Virginia
and Wytheville, Virginia.
Mr.
Kendrick currently serves on the Audit Committee of the Board of Directors. In
recommending Mr. Kendrick for re-election to the Board of Directors the
Nominating Committee considered his legal experience as well as his experience
in running his own business and his strong ties to Southwest Virginia
community.
Clydes
B.
Kiser Age
72 First elected to the Board 1995
Mr. Kiser
has been a member of the Board of Directors of Highlands Union Bank since 1988
and Highlands Bankshares, Inc. since its inception in 1995. He was
born in Russell County, Virginia and has lived
in the Abingdon area for 62 years. He is a graduate of Emory &
Henry College. After serving in the U.S. Army Mr. Kiser co-founded Kiser
Furniture Co., Inc. and was appointed President. He later became Secretary /
Treasurer of Kiser Enterprise, Inc., Kiser Brothers, Inc., and a general partner
in Kiser Complex. In addition to serving on the Board of Directors of Highlands
Union Bank and Highlands Bankshares, Inc., Mr. Kiser has served as a board
member of The Southern Home Furnishing Association for several
years.
Mr. Kiser
currently serves on the Personnel and Compensation Committee and the Nominating
Committee. In recommending Mr. Kiser for re-election to the Board of Directors
the Nominating Committee considered his experience in the retail business as
well as his management and entrepreneural skills.
J.
Carter
Lambert Age
84 First elected to the Board 1995
Mr.
Lambert is a founding member of the Board of Directors of Highlands Union Bank
since 1983. He has been a member of the Board of Directors of Highlands
Bankshares, Inc. since its inception in 1995. He was born in
Dickenson County, Virginia and has lived in the Abingdon area for 30
years. In addition to serving on the Board of Directors of Highlands
Union Bank and Highlands Bankshares, Inc., Mr. Lambert was appointed to and
served for four years on a Coal Mining and Quarry Board by Governor Jerry
Baliles in the early 1980’s. Mr. Lambert is a member of Victory Baptist Church
in Bristol, Virginia.
Mr.
Lambert is currently retired. Prior to his retirement he owned and operated
Lambert Coal Company for 21 years. Mr. Lambert currently serves on the Audit
Committee, the Personnel / Compensation Committee and the Nominating Committee.
In recommending Mr. Lambert for re-election to the Board of Directors the
Nominating Committee considered his tenure on the board, his experience in the
coal industry, farming and community involvement. This broad spectrum of
knowledge serves well for the Board of Directors since many of the Company’s
customers are involved in the farm-related businesses.
Dr.
James D. Moore, Jr. Age
64 First elected to the Board 1995
Dr. Moore
is a founding member of the Board of Directors of Highlands Union Bank since
1983. He has been a member of the Board of Directors of Highlands Bankshares,
Inc. since its inception in 1995. He was born in Washington County,
Virginia and has lived in the in the Abingdon area for his entire
life. He is a graduate of Florida Presbyterian College and a graduate
of The Medical College of Virginia. Dr. Moore has been in medical practice in
Abingdon since 1975. Dr. Moore has served on various community boards over the
years.
Dr. Moore
currently serves on the Loan Committee of the Board of Directors. In
recommending Dr. Moore for re-election to the Board of Directors the Nominating
Committee considered his business experience in running his own medical practice
and his understanding of the financial needs of the medical community within the
Company’s market areas.
James
D.
Morefield Age
60 First elected to the Board 1995
Mr.
Morefield was a founding member of the Board of Directors of Highlands Union
Bank and has served on the Board of Directors of Highlands Union Bank since 1983
and Highlands Bankshares, Inc. since its inception in 1995. He was
born in Washington County, Virginia and has lived in Abingdon, Virginia his
entire life. He is a graduate of Virginia Military Institute and the
University Of Richmond School Of Law. Mr. Morefield has been engaged in the
general practice of law in Southwest Virginia continuosly since
1973.
Mr.
Morefield currently serves on the Loan Committee, Personnel Committee and the
Nominating Committee of the Board of Directors. In recommending Mr. Morefield
for re-election to the Board of Directors the Nominating Committee considered
his legal experience as well as his experience in running his own business and
his strong ties to Southwest Virginia community.
Charles
P.
Olinger Age
60 First elected to the Board 1995
Mr.
Olinger was first elected to the Board of Directors of Highlands Union Bank in
1988 and Highlands Bankshares, Inc. since its inception in 1995. He
was born in Smyth County, Virginia and has lived in Tri-Cities area for his
entire life. He is a graduate of Virginia Polytechnic Institute and
State University with a Bachelor of Science degree in Business with a major in
accounting. Mr. Olinger is a certified public accountant and currently is
principal partner with Blackley, Olinger & Associates, PLLC in Bristol,
Tennessee. Throughout his professional career Mr. Olinger has also been the
Chief Executive Officer of a local life insurance company, the Chief Executive
Officer of a local mutual burial association, the Comptroller of a local
construction company and its affiliates and has been associated with other
certified public accounting firms. Mr. Olinger is a member of the American
Institute of Certified Public Accountants and the Tennessee Society of Public
Accountants. Mr. Olinger currently sits on the Board of Directors of Gomez
Family Enterprises, Inc. which is the Holding Company for Prime Choice Foods,
Inc. and Choice Foods West both of which are snack food manufacturers. Mr
Olinger also is on the Board of Directors of Sacred Cross Assembly of
God.
Mr.
Olinger currently serves as the Chairman of the Audit Committee and also serves
on the Personnel and Compensation Committee, the Loan Committee and the
Nominating Committee. In recommending Mr. Olinger for re-election to the Board
of Directors the Nominating Committee considered his strong financial and
accounting experience, his work experience within the financial industry, his
experience in running his own business and his strong ties to Tri-Cities
community.
William
J.
Singleton Age
84 First elected to the Board 1995
Mr.
Singleton was first elected to the Board of Directors of Highlands Union Bank in
1991. He has been a member of the Board of Directors of Highlands Bankshares,
Inc. since its inception in 1995. He was born in Dickenson County,
Virginia and has lived in the Abingdon area for 45 years. In addition
to serving on the Board of Directors of Highlands Union Bank and Highlands
Bankshares, Inc., Mr. Singleton serves on the Board of Directors of Singleton
Properties, LLC. Mr. Singleton is a member of Primitive Baptist Association in
Abingdon, Virginia. Mr. Singleton is currently retired. Prior to his retirement
he co-founded and co-owned Singleton Stores, Inc. for 23 years. Singleton Stores
were forerunners to the big box discount stores and operated 12 retail /
discount stores in Virginia, Tennessee and North Carolina. Subsequent to
Singleton Stores Mr. Singleton and his sons founded and operated Single Stop
Food Shops, Inc. which operated five convenience stores in Southwest Virginia
for 15 years. Mr. Singleton and his sons also co-founded and co-owned Singleton
Properties, LLC which is a real estate investment company.
In
recommending Mr. Singleton for re-election to the Board of Directors the
Nominating Committee considered his experience experience as a small business
owner that provides experience to the Board relevant to its small business
customer base.
H.
Ramsey White, Jr. Age
64 First Elected to the Board 1995
Dr. White
was an organizing director of Highlands Union Bank and has served on the Board
since 1983. Dr. White is a graduate of Guilford College with a degree
in economics and the Medical College of Virginia with a Doctor of Dental Surgery
degree. Dr. White has lived in Abingdon, Virginia for 32 years and
has served on the boards of his church, country club, civic club, art
center/museum and Chamber of Commerce. Dr. White has retired from the practice
of dentistry and is now the Director of the College for Older Adults, part of
the Southwest Virginia Higher Education Center. The College has over
400 students over the age of 50 and offers more than 40 courses per term. Dr.
White served as the organizing treasurer of Highlands Union Bank and has served
on the Compensation, Audit and Loan Committees for over 25 years.
Based on
his experience in running his own business practice, his organizational and
community leadership skills and his experience with the various committees of
the bank, the Nominating Committee recommended his re-election to the
Board.
James D.
Morefield is the Chairman of the Board of Directors, and James D. Moore, Jr. is
President of the Corporation. Both individuals are considered
“officers” of the Corporation pursuant to the Corporation’s Bylaws, but not
“executive officers”. Neither individual performs any policy making
function for the Corporation or the Bank.
Unless
authority is withheld in the proxy, each proxy executed and returned by a
shareholder will be voted for the election of the nominees listed
above. Proxies distributed in conjunction herewith may not be voted
for persons other than the nominees listed above. If any person named
as nominee should be unable or unwilling to stand for election at the time of
the Annual Meeting, the proxy holders will nominate and vote for a replacement
nominee or nominees recommended by the Board of Directors. All of the
nominees listed above have consented to be nominated and to serve if elected
and, at this time, the Board of Directors knows no reason why any of the
nominees listed above may not be able to serve as a Director if elected. The
proxy also confers discretionary authority upon the persons named therein, or
their substitutes, with respect to any other matter that may properly come
before the meeting.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES BE ELECTED AS
DIRECTORS.
Executive
Officers Who Are Not Directors
Samuel L. Neese (Age 59) was
appointed Executive Vice President and Chief Executive Officer of the
Corporation in 1995 and Executive Vice President and Chief Executive Officer of
the Bank in 1991. He was first appointed as a bank officer to the
position of Vice President and Senior Loan Officer in 1988. Prior to
1988, he was associated with a Washington County, Virginia bank for 15
years.
Gary L. Dutton (Age 63) was
appointed Senior Vice President and Senior Loan Officer of the Corporation in
1995 and Senior Vice President and Senior Loan Officer of the Bank in 1993.
Prior to 1993, he was associated with a national bank operating in Washington
County, Virginia.
C. Wayne Perry (Age 57) was
appointed Senior Vice President and Branch Adminstrator and Senior Compliance
officer in 2002. He was first appointed as Vice Presidentand
Compliance Officer in 1997 when he joined the bank. Prior to 1997 he
was associated with a national bank operating in Wise County,
Virginia.
Edward T. Farmer (Age 43) was
appointed Senior Operations Officer of the Corporation in 2004 and Vice
President and Operations Officer of the Bank in 1996. He was first
appointed as a bank officer to the position of Assistant Vice President and
Internal Auditor in 1993.
James R. Edmondson (Age 47)
was appointed Chief Financial Officer of the Bank and Vice President of
Acoounting for the Corporation in 1998. He was first appointed as a bank officer
in 1997. Prior to 1997, he was associated with a regional savings
bank for 11 years.
Robert M. Little, Jr. (Age 47)
was appointed Chief Financial Officer of the Corporation and Vice President of
Acoounting for the Bank in 1998. He was first appointed as a bank officer to the
position of Controller in 1991 and Controller of the Corporation in
1995. Prior to 1991, he was associated with a regional certified
public accounting firm.
SECURITY
OWNERSHIP
Security
Ownership of Certain Beneficial Owners
The
following table sets forth as of March 10, 2010 (unless otherwise noted),
certain information with respect to the persons known by us to beneficially own
more than five percent of outstanding shares of Common Stock. For the purposes
of this table, beneficial ownership has been determined in accordance with the
provisions of Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), under which, in general, a person is deemed to be a
beneficial owner of a security if he has or shares the power to vote or direct
the voting of the security or the power to dispose or direct the disposition of
the security, or if he has the right to acquire beneficial ownership of the
security within 60 days.
Name and Address of Beneficial
Owner
|
|
Amount
and Nature
Of Beneficial Ownership
|
|
Percent
Of Class
|
|
|
|
|
|
James
D. Moore, Jr. (1)
P.O.
Box 1192
Abingdon,
VA 24212
|
|
549,884
|
|
10.97%
|
(1)
|
Amount
includes ownership of 294,088 shares held by the Dr. Moore in a
self-directed IRA, indirect ownership of 30,664 shares held solely in Dr.
Moore’s spouse’s name and options to acquire 8,000
shares.
|
Security
Ownership of Management
The following table sets forth
information as of March 10, 2010 regarding the beneficial ownership of shares of
Common Stock by (i) all Directors and nominees, (ii) the executive officers
named in the “Summary Compensation Table” below, and (iii) all Directors and
executive officers as a group. For the purposes of this table, beneficial
ownership has been determined in accordance with the provisions of Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
under which, in general, a person is deemed to be a beneficial owner of a
security if he has or shares the power to vote or direct the voting of the
security or the power to dispose or direct the disposition of the security, or
if he has the right to acquire beneficial ownership of the security within 60
days.
|
|
Common Stock
|
|
|
Name
|
|
Beneficially Owned
|
|
Percent of Class
|
|
|
|
|
|
Directors
|
|
|
|
|
William
E. Chaffin (1)
|
|
49,365
|
|
*
|
E.
Craig. Kendrick (2)
|
|
92,083
|
|
1.84%
|
Clydes
B. Kiser (3)
|
|
59,440
|
|
1.19%
|
J.
Carter Lambert (4)
|
|
106,741
|
|
2.13%
|
James
D. Moore, Jr. (5)
|
|
549,884
|
|
10.97%
|
James
D. Morefield (6)
|
|
242,650
|
|
4.84%
|
Charles
P. Olinger (7)
|
|
32,034
|
|
*
|
William
J. Singleton (8)
|
|
42,432
|
|
*
|
H.
Ramsey White, Jr. (9)
|
|
49,399
|
|
*
|
|
|
|
|
|
Named
Executive Officers
|
|
|
|
|
Samuel
L. Neese (10)
|
|
54,586
|
|
1.09%
|
Gary
L. Dutton (11)
|
|
30,658
|
|
*
|
C.
Wayne Perry (12)
|
|
10,940
|
|
*
|
Executive
officers and Directors as a
|
|
|
|
|
group
(15 persons)
|
|
1,342,115
|
|
26.78%
|
|
|
|
|
|
____________________
*Indicated
holdings amount to less than 1% of the issued and outstanding shares of Common
Stock.
(1)
|
Amount
includes indirect ownership of 3,600 shares held solely in Mr. Chaffin’s
spouse’s name and options to acquire 12,000
shares.
|
(2)
|
Amount
includes indirect ownership of 72,404 shares held in Mr. Kendrick’s
children’s names and options to acquire 12,000
shares.
|
(3)
|
Amount
includes indirect ownership of 45,576 shares held solely in Mr. Kiser’s
spouse’s trust and options to acquire 12,000
shares.
|
(4)
|
Amount
includes indirect ownership of 49,547 shares held solely in Mr. Lambert’s
spouse’s name and options to acquire 9,200
shares.
|
(5)
|
Amount
includes ownership of 294,088 shares held by the Dr. Moore in a
self-directed IRA, indirect ownership of 30,664 shares held solely in Dr.
Moore’s spouse’s name and options to acquire 8,000
shares.
|
(6)
|
Amount
includes indirect ownership of 44,384 shares held solely in Mr.
Morefield’s spouse’s name, ownership of 66,176 shares held in the names of
Mr. Morefield’s children, ownership of 53,556 shares held by Mr. Morefield
in a self-directed IRA and options to acquire 14,000
shares.
|
(7)
|
Amount
includes indirect ownership of 17,034 shares held solely in Mr. Olinger’s
spouse’s name and options to acquire 12,000
shares.
|
(8)
|
Amount
includes indirect ownership of 13,216 shares held solely in Mr.
Singleton’s spouse’s name and options to acquire 12,000
shares.
|
(9)
|
Amount
includes indirect ownership of 1,235 shares held by Dr. White in a
custodial relationship, indirect ownership of 11,080 shares held by Dr.
White’s spouse in a self-directed IRA and options to acquire 12,000
shares.
|
(10)
|
Amount
includes 1,000 shares held solely in Mr. Neese’s spouse’s name. Amount
includes options to acquire 12,000
shares.
|
(11)
|
Amount
includes options to acquire 9,500
shares.
|
(12)
|
Amount
includes options to acquire 8,300
shares.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Corporation’s Directors and executive
officers, and any persons who own more than 10% of the outstanding shares of
Common Stock, to file with the Securities and Exchange Commission (“SEC”)
reports of ownership and changes in ownership of Common
Stock. Directors and executive officers are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) reports
that they file. Based solely on review of the copies of such reports
furnished to the Corporation or written representation that no other reports
were required, the Corporation believes that, during fiscal year 2009, all
filing requirements applicable to its officers and Directors were complied
with.
CORPORATE
GOVERNANCE AND
THE
BOARD OF DIRECTORS
The
Board of Directors and its Committees
Meetings of the Board of Directors are
held regularly each month, and there is also an organizational meeting following
the conclusion of the Annual Meeting of Shareholders. The Board of
Directors held 13 meetings in the year ended December 31, 2009. No Director
attended fewer than 75 percent of the total number of meetings of the Board of
Directors and meetings held by all committees of the Board of Directors on which
he served.
The Board of Directors has determined
that the following eight individuals of its nine members are independent as
defined by the listing standards of the Nasdaq Stock Market: E. Craig Kendrick,
Clydes B. Kiser, J. Carter Lambert, James D. Moore, Jr., James D. Morefield,
Charles P. Olinger, William J. Singleton and H. Ramsey White, Jr. Because of his
retention as a technology consultant, Mr. Chaffin was determined not to be
independent. In reaching this conclusion, the Board considered that the
Corporation and its subsidiary bank conduct business with companies of which
certain members of the Board or members of their immediate families are or were
directors or officers. Other than those transactions discussed below
under “Certain Relationships and Related Transactions” the Board did not
consider any transactions between the Corporation and its directors to determine
whether such director was independent under the above standards:
The Board of Directors has an Audit
Committee, a Loan Committee, a Nominating Committee and a Personnel and
Compensation Committee.
Leadership
Structure of Board
The Board
believes that the Company and its shareholders are best served by having an
independent Board Chairman whose duties are separate from those of the CEO. In
accordance with our bylaws our Board of Directors elects our Chief Executive
Officer and our Board Chairman. The Chairman is selected from the independent
directors. The Board believes that the principal role of the Chief Executive
Officer is to manage the business of the company in a safe, sound, and
profitable manner. The role of the Board, including its Chairman, is to provide
independent oversight of the Chief Executive Officer, to oversee the business
and affairs of the organization for the benefit of its shareholders, and to
balance the interests of the Company’s constituencies including shareholders,
customers, employees, and communities.
Audit
Committee
The Audit Committee consists of Messrs.
Kendrick, Lambert, Olinger and White. The Audit Committee is
responsible for the selection and recommendation of the independent accounting
firm for the annual audit and, together with Management, for the establishment,
and the assurance of the adherence to, a system of internal
controls. It reviews and accepts the reports of the Corporation’s
internal audit department, its independent auditors and federal and state
examiners. The Audit Committee of the Board also has the
responsibility to review significant conflicts of interest involving directors
or executive officers. The Audit Committee of the Board of Directors met seven
times during the year ended December 31, 2009. Additional information
with respect to the Audit Committee is discussed below under “Audit
Information.”
The Board
of Directors has determined that Mr. Olinger, a member of the Audit Committee,
is qualified as an audit committee financial expert as that term is defined in
the rules of the SEC. Each member of the Audit Committee is
independent, as independence for audit committee members is defined in the
listing standards of the Nasdaq Stock Market and the rules of the
SEC.
The Board
of Directors has adopted a written charter for the Audit
Committee. The Audit Committee Charter was included as Appendix A to
the 2009 proxy statement.
Nominating
Committee
The Nominating Committee consists of
Messrs. Kiser, Lambert, Morefield and Olinger. The Nominating Committee is
responsible for making recommendations to the Board of Directors as to its size
and composition, and evaluating and recommending to the Board of Directors
candidates for election as directors at the Corporation’s annual meetings. The
Board of Directors has adopted a written charter for the Nominating Committee.
The Nominating Committee Charter is included as Appendix A to this proxy
statement. Each
member of the Nominating Committee is independent, as independence for
nominating committee members is defined in the listing standards of the Nasdaq
Stock Market. The Nominating Committee of the Board of Directors met
one time during the year ended December 31, 2009. The Nominating Committee met
on February 10, 2010 and nominated a slate of nine directors which is composed
of the existing directors of the Corporation.
The
Nominating Committee has not adopted specific minimum qualifications that it
believes must be met by a person it recommends for nomination as a director. In
evaluating candidates for nomination, the Nominating Committee will consider the
factors it believes to be appropriate, which would generally include the
candidate’s personal and professional integrity, business judgment, relevant
experience and skills, and potential to be an effective director in conjunction
with the rest of the Board of Directors in collectively serving the long-term
interests of the Corporation’s shareholders. Although the Nominating Committee
has the authority to retain a search firm to assist it in identifying director
candidates, there has to date been no need to employ a search firm. The
Nominating Committee does not evaluate potential nominees for director
differently based on whether they are recommended to the Nominating Committee by
a shareholder. The Nominating Committee will consider recommendations from
shareholders both informally and, as described below, formally.
The
following describes how the Committee goes about evaluating and selecting
prospective candidates for membership on the Board of Directors:
·
|
|
In
evaluating a candidate for recommendation as a director nominee, the
Committee shall consider such matters as it deems appropriate, including
the candidates personal and professional integrity, business judgment,
relevant experience and skills, and potential to be an effective director
in conjunction with the full Board of Directors in collectively serving
the long-term interest of the Corporation’s shareholders. Candidates may
be interviewed by the Committee where it deems it
appropriate.
|
· |
|
The
Committee shall consider director candidates recommended by the holders of
the Corporation’s common stock. Recommendations by security holders should
be submitted to the Committee in accordance with the Bylaws of the
Corporation.
|
· |
|
The
Committee shall have discretion and authority to retain any search firm to
assist in identifying director candidates, retain outside counsel or any
other internal or external advisors, and approve all related fees and
retention terms.
|
Shareholders
who themselves wish to effectively nominate a person for election to the Board
of Directors, as contrasted with recommending a potential nominee to the
Nominating Committee for its consideration, are required to comply with the
advance notice and other requirements set forth in the Corporation’s
Bylaws. See “Proposals for 2011 Annual Meeting of
Shareholders.”
The
Nominating Committee seeks to create a Board that is, as a whole, strong in its
collective knowledge and diversity of skills and experience and background with
respect to accounting and finance, management and leadership, business judgment,
industry knowledge and corporate governance. When the Nominating
Committee reviews a potential new candidate, it looks specifically at the
candidate’s qualifications in light of the needs of the Board and the Company at
that time, given the then-current mix of director attributes.
Personnel
and Compensation Committee
The
Personnel and Compensation Committee consists of Messrs. Kiser, Lambert,
Morefield, Olinger and White. The Compensation Committee is
responsible for making recommendations to the Board of Directors concerning
compensation for the Corporation’s executive officers. It is the responsibility
of the Compensation Committee to establish a framework for a competitive
compensation package for the CEO that adequately rewards performance and
provides incentives for retention. In carrying out its responsibilities, the
Compensation Committee considers the following: (1) the performance and
effectiveness of the executive officers; (2) the need to retain competent and
effective management personnel; (3) competitive terms and levels of compensation
relative to other companies of comparable size and operation within the
commercial banking industry; (4) comparative performance of the CEO as
benchmarked against peer groups of comparable commercial banks; and (5) the
achievement of overall corporate goals.
The Committee establishes current
compensation based primarily on review of competitive salary practices by
similarly sized banking organizations, locally and nationally, giving
appropriate weight to regional differences in cost of living and contrasting
relative performance of the Corporation and the designated peer group. In
performing this analysis, the Committee utilized the Virginia Bankers’
Association Salary Survey and compensation data from other specifically
identified banking peers. The compensation of Samuel L. Neese, the
Corporation’s chief executive officer, is determined in accordance with this
plan. The Personnel and Compensation Committee approve the other named executive
officers compensation as recommended to them by Mr. Neese.
Executive
officer compensation generally consists of salary, participation in the
Corporation’s 401(k) Plan, economic benefit attributable to the Bank’s Death
Benefit Only Plan, stock options granted under the Corporation’s non-qualified
stock option plan and equity compensation plan and fees received for serving on
the subsidiary bank’s board of directors as reflected in the “Summary
Compensation Table.” Bonuses are at the discretion of the
Compensation Committee and the Board of Directors and are indirectly related to
the Corporation’s annual performance. The named executive officer typically
receive compensation in all of the above forms.
Each
member of the Compensation Committee is independent, as independence for
compensation committee members is defined in the listing standards of the Nasdaq
Stock Market. The Compensation Committee does not have a formal
charter. The Compensation Committee met two times during the year ended December
31, 2009. Additional information with respect to the Compensation
Committee is discussed below in “Executive Compensation.”
Board
Oversight of Risk
The
Company’s Board of Directors recognizes that, although day-to-day risk
management is primarily the responsibility of the Company’s management team, the
Board plays a critical role in the oversight of risk. The Board
believes that an important part of its responsibilities is to assess the major
risks the Company faces and review the Company’s options for monitoring and
controlling these risks. The Board assumes responsibility for the
Company’s overall risk assessment. The Audit Committee has specific
responsibility for oversight of risks associated with financial accounting and
audits, as well as internal control over financial reporting. This
includes the Company’s risk assessment and management policies, the Company’s
major financial risk exposure and the steps taken by management to monitor and
mitigate such exposure. The Compensation Committee oversees the risks
relating to the Company’s compensation policies and practices, as well as
management development and leadership succession, in the Company’s various
business units. The Board as a whole examines specific business risks
including but not limited to credit risk, interest rate risk and operations
risk, in its regular reviews on a company-wide basis as part of its regular
strategic reviews. The Board and its Committees receive relative risk related
information in the form of analysis and reports from management, internal audit
and the Company’s external auditors on a regular basis.
Annual
Meeting Attendance
The Corporation encourages members of
the Board of Directors to attend the Annual Meeting of shareholders. All of the
directors attended the 2009 annual meeting.
Communications
with Directors
Any director may be contacted by
writing to him c/o Highlands Bankshares, Inc., 340 West Main Street, P.O. Box
1128, Abingdon, Virginia 24210. Communications to the non-management
directors as a group may be sent to the same address, c/o the Secretary of the
Corporation. The Corporation promptly forwards, without screening,
all such correspondence to the indicated directors.
Code
of Ethics
The Board of Directors has approved a
Code of Ethics for the Corporation’s senior officers who have financial
responsibilities. The Code of Ethics is designed to promote honest and ethical
conduct, proper disclosure of financial information in the Corporation’s
periodic reports, and compliance with applicable laws, rules and regulations by
the Corporation’s senior officers who have financial responsibilities. The Code
of Ethics is available on the Corporation’s web page at www.hubank.com. The
Corporation’s subsidiary bank has a Code of Ethics and Standards of Conduct for
all officers and employees.
EXECUTIVE
COMPENSATION
In the
tables and discussion below, we summarize the compensation earned during 2009
and 2008 by our named executive officers (1) our chief executive officer, (2)
our senior loan officer and, (3) our compliance officer, collectively referred
to as the named executive officers. During the years presented, we did not pay
any of the named executive officers in the form of stock awards, option awards
or non-equity incentive plan compensation. Also, we do not maintain a pension or
nonqualified deferred compensation plan.
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
All
Other
Compensation
($)
|
Total
Compensation
($)
|
|
|
|
|
|
|
Samuel
L. Neese
Executive
Vice President and Chief Executive Officer
|
2009
2008
|
$194,680
$194,818
|
$ 0
$ 0
|
$
32,643
|
$
230,309
$
227,461
|
|
|
|
|
|
|
Gary
L. Dutton
Senior
Vice President and Senior Loan Officer
|
2009
2008
|
$131,888
$131,888
|
$ 0
$ 0
|
$
17,351
|
$
150,144
$
149,239
|
|
|
|
|
|
|
C.
Wayne Perry
Senior
Vice President and Compliance Officer
|
2009
2008
|
$ 98,628
$ 98,628
|
$ 0
$ 0
|
$13,348
|
$
112,297
$
111,976
|
|
|
|
|
|
|
__________________________________
1 Includes board compensation fees paid
at the Bank level of $16,750 and $16,750 for 2009 and 2008, respectively; a
matching contribution by the Corporation into the 401(k) Savings Plan
of $9,859 and $9,284 for 2009 and 2008, respectively; country club
dues paid by the Corporation of $1,800 for 2009 and 2008; imputed value of group
term life insurance coverage in excess of $50,000 paid by the Corporation of
$3,932 and $3,679 for 2009 and 2008, respectively; bank owned life insurance
economic benefit of $788 and $736 for 2009 and 2008, respectively; and deferred
compensation relating to the exercise of common stock options of $2,500 and $0
for 2009 and 2008 respectively.
2 Includes board compensation fees paid
at the Bank level of $6,000 for 2009 and 2008; a matching contribution by the
Corporation into the 401(k) Savings Plan of $6,594 and $6,474 for 2009 and 2008,
respectively; country club dues paid by the Corporation of $1,800 for 2009 and
2008; imputed value of group term life insurance coverage in excess of $50,000
paid by the Corporation of $2,827 and $2,637 for 2009 and 2008; bank
owned life insurance economic benefit of $1,035 and $924 for 2009 and 2008,
respectively.
3 Includes board compensation fees paid
at the Bank level of $6,000 for 2009 and 2008; a matching contribution by the
Corporation into the 401(k) Savings Plan of $4,931 and $4,841for 2009 and 2008,
respectively; imputed value of group term life insurance coverage in excess of
$50,000 paid by the Corporation of $2,400 and $2,203 for 2009 and 2008; bank
owned life insurance economic benefit of $338 and $304 for 2009 and 2008,
respectively.
The following table shows the
unexercised stock options held at the end of fiscal year 2009 by the executive
officers named in the Summary Compensation Table. There are no other forms of
equity compensation outstanding at the end of 2009.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END 2009
|
Option
Awards
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of Shares or
Units
of Stock That Have
Not
Vested
(#)
|
|
|
|
|
|
|
Samuel
L. Neese
|
2,000
|
0
|
$ 11.75
|
07/12/10
|
0
|
2,000
|
0
|
$ 12.50
|
07/11/11
|
0
|
2,000
|
0
|
$ 13.00
|
07/10/12
|
0
|
2,000
|
0
|
$ 13.00
|
08/13/13
|
0
|
2,000
|
0
|
$ 14.50
|
07/14/14
|
0
|
2,000
|
0
|
$ 15.00
|
06/08/15
|
0
|
Gary
L. Dutton
|
1,500
|
0
|
$ 11.75
|
07/12/10
|
0
|
1,500
|
0
|
$ 12.50
|
07/11/11
|
0
|
1,500
|
0
|
$ 13.00
|
07/10/12
|
0
|
1,600
|
0
|
$ 13.00
|
08/13/13
|
0
|
1,600
|
0
|
$ 14.50
|
07/14/14
|
0
|
1,800
|
0
|
$ 15.00
|
06/08/15
|
0
|
|
|
|
|
|
|
C.
Wayne Perry
|
1,300
|
0
|
$ 11.75
|
07/12/10
|
0
|
1,300
|
0
|
$ 12.50
|
07/11/11
|
0
|
1,300
|
0
|
$ 13.00
|
07/10/12
|
0
|
1,300
|
0
|
$ 13.00
|
08/13/13
|
0
|
1,300
|
0
|
$ 14.50
|
07/14/14
|
0
|
1,800
|
0
|
$ 15.00
|
06/08/15
|
0
|
|
Employment
Agreements and Benefit Plans
|
Employment Agreements.
The Corporation has no employment agreements with any of the named
executive officers.
Survivor Benefit Agreements.
The Corporation has placed life insurance contracts on the named
executive officers, qualifying directors and certain other officers through Bank
Owned Life Insurance. The Corporation entered into separate survivor benefit
agreements with those covered individuals. Under the survivor benefit agreements
if the covered individual were to die, under qualifying conditions, while
employed by the Corporation the covered individuals’ beneficiary(ies) would
receive a lump sum payment from the proceeds of the bank owned life insurance
proceeds. These agreements provide for survivor benefit payments of $250,000 to
Mr. Neese and Mr. Dutton’s beneficiaries and $150,000 to Mr. Perry’s
beneficiaries.
Employee Benefit
Plans. The Corporation provides a benefit program, which
includes health and dental insurance, life and long term and short-term
disability insurance, a 401(k) plan for substantially all full time
employees. The Corporation also has adopted the 2006 Equity Compensation
Plan.
401(k) profit sharing
plan. The Bank has a 401(k) savings plan available to
substantially all employees meeting minimum eligibility
requirements. The Bank makes a discretionary 1.5% profit sharing
contribution to all employees exclusive of employee contributions and employer
matching. Employees may elect to make voluntary
contributions to the plan up to 15% of their base pay. In addition to
the 1.5% profit sharing contribution, the Bank matches 50% of the employee’s
initial 7% contribution; therefore, the maximum employer matching contribution
per employee could be 3.5% of base pay. The Corporation made $324,324 in
contributions to the 401(k) Plan in 2009.
__________________________________
4 These
nonqualified stock options were 100% vested upon grant and are immediately
exercisable by the grantee
Deferred Compensation
Plan. On January 8, 1997, the Board of Directors of the
Bank approved the Highlands Union Bank Rabbi Trust Deferred Compensation Plan
(the “Rabbi Trust Plan”). The Rabbi Trust Plan was effective January 1,
1997 for directors of the Bank. The purpose of the Rabbi Trust Plan is to allow
participants an opportunity to elect to defer the receipt of compensation.
Compensation eligible for deferral includes director’s annual retainer and
monthly board fees.
Equity Compensation
Plan. In 1996, Highlands Bankshares, Inc. adopted a
non-qualified stock incentive option plan, for key employees, officers, and
directors (the “1996 Option Plan’). As of December 31, 2009, the
Corporation had options for the purchase of 262,779 shares of common stock
issued and outstanding under the 1996 Option Plan. In 2006, the Board of
Directors adopted a similar Equity Compensation Plan (the “2006 Plan”) to
replace the 1996 Option Plan. The 2006 Plan provides for the granting of
nonqualified stock options, stock appreciation rights, stock awards and stock
units. Under the plan, the Corporation may grant options to its directors,
officers and employees for up to 200,000 shares of common stock. The Corporation
did not grant any options during the years ended December 31, 2009 or
2008.
Under the
2006 Plan, the exercise price of each option equals the market price of the
Corporation’s stock on the date of grant and an option’s maximum term is ten
years. Option exercise prices are determined by the Board of
Directors based on recent open market sales, but shall not be less than the
greater of the par value of such stock or 100% of the book value of such stock
as shown by the Corporation’s last published statement prior to granting of the
option.
During
2009, the directors of the Bank received monthly board fees totaling $7,500 as
well as $9,250 for an annual retainer. The directors did not receive any
compensation for the Corporation’s Board of Directors or its committee meetings.
Directors may elect to defer receipt of director fees and bonus under the
Highlands Union Bank Rabbi Trust Deferred Compensation Plan, discussed above.
All directors below are directors of the Bank as well.
Name
|
Fees
Earned
or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan Compensation
($)
|
Changes
in
Pension
Value
and
Nonqualified
Deferred
Compensation Earnings ($)
|
All
Other Compensation
|
Total
|
|
|
|
|
|
|
|
|
William
E. Chaffin
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
E.
Craig Kendrick
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
Clydes
B. Kiser
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
J.
Carter Lambert
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
James
D. Morefield
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
James
D. Moore, Jr.
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
Charles
P. Olinger
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
William
J. Singleton
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
H.
Ramsey White, Jr.
|
$16,750
|
N/A
|
N/A
|
N/A
|
N/A
|
$ -
|
$ 16,750
|
The fees
paid for director board meetings and committee meetings are based on comparable
amounts paid by other financial institutions in the Corporation’s geographic
market area.
Historically,
members of the Board of Directors of the Corporation also receive options to
acquire shares of common stock. The Corporation’s 1996 Nonqualified Stock Option
Plan expired in 2005 and a new Equity Compensation Plan was approved in October
2006. No director received options to acquire shares of common stock under the
new plan during 2009.
The Bank provides a Death Benefit Only
Plan (the “Plan”) to the following Directors: Messrs. Chaffin, Kendrick, Kiser,
Lambert, Moore, Morefield, Olinger and White. The Plan provides a
death benefit of $100,000. The death benefit is subject to income tax when
received, and is tax-deductible to the Bank. The Bank has purchased
life insurance policies that are intended to provide the funds to pay this
benefit.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the Directors and officers of
the Corporation and some of the corporations and firms with which these
individuals are associated are also customers of the Corporation and its
subsidiaries in the ordinary course of business, or are indebted to the
Corporation with respect to loans, and it is anticipated that some of the
persons, corporations and firms will continue to be customers of, and indebted
to, the Corporation on a similar basis in the future. All loans
extended to such persons, corporations and firms were made in the ordinary
course of business, did not involve more than normal collection risk or present
other unfavorable features, and were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time
for comparable Corporation transactions with unaffiliated persons. No
such loan as of December 31, 2009 was non-accruing, past due or
restructured.
Management is not aware of any
arrangements that may at a subsequent date result in a change in control of the
Corporation.
Management of the Corporation is not
aware of any material proceedings to which any Director, officer or affiliate of
the Corporation, any owner of record or beneficial owner of more than five
percent of the common stock, or any associate of any such Director, officer,
affiliate or shareholder, is a party adverse to the Corporation or has a
material interest adverse to the Corporation.
In the normal course of business, the
Corporation conducts arms length business transactions with some of its related
parties. The Corporation is required to disclose those transactions that exceed
$120,000.
During
2009, the Corporation retained William E. Chaffin, a Director, as a technology
consultant due to his expertise. The Corporation paid Mr. Chaffin $130,000 in
retainers for his consulting services during 2009. The terms of these
transactions were substantially similar to the terms of similar purchases that
are the result of “arms length” negotiations between unrelated parties, and the
prices involved were comparable to current market rates at that
time.
The Corporation has not adopted a
formal policy that covers the review and approval of related person transactions
by the Board of Directors. The Board, however, does review all such
transactions that are proposed to it for approval. During such a
review, the Board will consider, among other things, the related person’s
relationship to the Corporation, the facts and circumstances of the proposed
transaction, the aggregate dollar amount of the transaction, the related
person’s relationship to the transaction and any other material
information. The Audit Committee of the Board also has the
responsibility to review significant conflicts of interest involving directors
or executive officers.
All expenditures to related parties are
pre-approved by senior officers and are ratified monthly by the Board of
Directors.
APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of
Directors has appointed Brown, Edwards & Company, L.L.P. (“Brown Edwards”)
to perform the audit of the Corporation’s financial statements for the year
ending December 31, 2010. Brown Edwards has acted as the Corporation’s auditors
for 2009 and as the Bank’s auditors for the past 23 years and has reported on
financial statements during those periods. Representatives from Brown
Edwards will be present at the Annual Meeting, will be given the opportunity to
make a statement, if they so desire, and will be available to respond to
appropriate questions from shareholders.
AUDIT
INFORMATION
Services
and Fees
As the Corporation’s independent
registered accounting firm for 2009, Brown Edwards provided various audit and
non-audit services for which the Corporation was billed for fees as further
described below. None of the hours expended on Brown Edwards’ audit of the
Corporation’s financial statements were attributed to work performed by persons
other than the principal accountant’s full-time, permanent
employees. The Audit Committee has considered whether Brown Edwards’
provision of non-audit services is compatible with maintaining its
independence.
Audit
Fees
The aggregate fees billed by Brown
Edwards for professional services rendered for the audit of the Corporation’s
annual financial statements for the fiscal years ended December 31, 2009 and
2008, and for the review of the financial statements included in the
Corporation’s Quarterly Reports on Form 10-Q, and services that are normally
provided in connection with statutory and regulatory filings and engagements,
for those fiscal years were $88,000 for 2009 and $84,600 for 2008.
Audit
Related Fees
The
aggregate fees billed by Brown Edwards for professional services for assurance
and related services that are reasonably related to the performance of the audit
or review of the Corporation’s financial statements and not reported under the
heading “Audit Fees” above for the fiscal years ended December 31, 2009 and 2008
were $9,950 and $9,450, respectively. During 2009 and 2008, these
services included an audit of the Corporation’s 401(k) retirement
plan.
Tax
Fees
The
aggregate fees billed by Brown Edwards for professional services for tax
compliance, tax advice and tax planning for the fiscal years ended December 31,
2009 and 2008 were $11,400 and $11,000, respectively. During 2009 and 2008,
these services included the preparation of federal and state tax
returns.
All
Other Fees
The
aggregate fees billed by Brown Edwards for unplanned client assistance totaled
$4,617 and $3,075 for the fiscal years ended 2009 and 2008,
respectively.
Pre-Approved
Policies and Procedures
All services not related to the annual
audit and quarterly review of the Corporation’s financial statements, as
described above, were pre-approved by the Audit Committee, which concluded that
the provision of such services by Brown Edwards was compatible with the
maintenance of that firms’ independence in the conduct of their auditing
functions.
Audit
Committee Report
The Audit
Committee of the Board is responsible for providing independent, objective
oversight of the Corporation’s accounting functions and internal
controls. The Audit Committee is composed of independent directors,
and acts under a written charter adopted and approved by the Board of
Directors. Each of the members of the Audit Committee is independent
as defined by the Corporation’s policy and by the Nasdaq Stock Market’s listing
standards.
The
responsibilities of the Audit Committee include selecting and retaining an
accounting firm to be engaged as the Corporation’s independent
accountants. Additionally, and as appropriate, the Audit Committee
reviews and evaluates, and discusses and consults with the Corporation’s
management, the Corporation’s internal audit personnel and the independent
accountant regarding, the following:
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The
plan for, and independent accountants’ report on, each audit of the
Corporation’s financial statements.
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The
Corporation’s financial disclosure documents, including all financial
statements and reports filed with the Securities and Exchange Commission,
the Board of Governors of the Federal Reserve System and the Virginia
Bureau of Financial Institutions or sent to
shareholders.
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Changes
in the Corporation’s accounting practices, principles, controls or
methodologies, or in the Corporation’s financial
statements.
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Significant
developments in accounting rules.
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The
adequacy of the Corporation’s internal accounting controls, and
accounting, financial and auditing
personnel.
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Identifying
and resolving conflicts of
interest.
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The Audit
Committee is responsible for recommending to the Board that the Corporation’s
financial statements be included in the Corporation’s annual
report. The Committee took a number of steps in making this
recommendation for 2009. First, the Audit Committee discussed with
Brown, Edwards & Company, L.L.P., the Corporation’s independent accountant
for 2009, those matters that the accountant communicated to and discussed with
the Audit Committee under applicable auditing standards, including the matters
to be discussed by Statement on Auditing Standards No. 61, as amended, and
information regarding the scope and results of the audit. These
communications and discussions are intended to assist the Audit Committee in
overseeing the financial reporting and disclosure process. Second,
the Audit Committee discussed Brown, Edwards & Company, L.L.P.’s
independence with them and received a letter from them concerning independence
as required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and related guidance for auditors of public
companies. This discussion and disclosure informed the Audit
Committee of Brown, Edwards & Company, L.L.P.’s independence, and assisted
the Audit Committee in evaluating such independence. Finally, the
Audit Committee reviewed and discussed with the Corporation’s management and
Brown, Edwards & Company, L.L.P. the Corporation’s audited consolidated
balance sheets at December 31, 2009 and 2008 and consolidated statements of
income, cash flows and stockholders’ equity for the two years ended December 31,
2009. Based on the discussions with Brown, Edwards & Company,
L.L.P., and management concerning the audit, the independence discussions, and
the financial statement review, and such other matters deemed relevant and
appropriate by the Audit Committee, the Audit Committee recommended to the Board
that these financial statements be included in the Corporation’s 2009 Annual
Report on Form 10-K.
Audit
Committee
E. Craig
Kendrick
J. Carter
Lambert
Charles
P. Olinger
H. Ramsey
White, Jr.
PROPOSALS
FOR 2011 ANNUAL MEETING OF SHAREHOLDERS
Under the regulations of the SEC, any
shareholder desiring to make a proposal to be acted upon at the 2011 annual
meeting of shareholders must cause such proposal to be received, in proper form,
at the Corporation’s principal executive offices at 340 West Main Street, P.O.
Box 1128, Abingdon, Virginia 24212-1128, no later than December 13, 2010, in
order for the proposal to be considered for inclusion in the Corporation’s Proxy
Statement for that meeting. The Corporation presently anticipates
holding the 2011 annual meeting of shareholders on May 11, 2011.
The Corporation’s Bylaws also prescribe
the procedure that a shareholder must follow to nominate directors or to bring
other business before shareholders’ meetings outside of the proxy statement
process. For a shareholder to nominate a candidate for director at
the 2011 annual meeting of shareholders, notice of nomination must be received
by the Secretary of the Corporation not less than 60 days and not more than 90
days prior to the date of the 2011 annual meeting. The notice must
describe various matters regarding the nominee and the shareholder giving the
notice. For a shareholder to bring other business before the 2011
annual meeting of shareholders, notice must be received by the Secretary of the
Corporation not less than 60 days and not more than 90 days prior to the date of
the 2011 annual meeting. The notice must include a description of the
proposed business, the reasons therefore, and other specified
matters. Any shareholder may obtain a copy of the Corporation’s
Bylaws, without charge, upon written request to the Secretary of the
Corporation. Based upon an anticipated date of May 11, 2011 for the
2011 annual meeting of shareholders, the Corporation must receive any notice of
nomination or other business no later than March 12, 2011 and no earlier than
February 10, 2011.
ANNUAL
REPORT AND FINANCIAL STATEMENTS
A copy of the Corporation’s Annual
Report to Shareholders for the year ended December 31, 2009 accompanies this
Proxy Statement. Additional copies may be obtained without charge by
written request to the Secretary of the Corporation at the address indicated
below. Such Annual Report is not part of the proxy solicitation
materials.
UPON RECEIPT OF A WRITTEN REQUEST OF
ANY PERSON WHO, ON THE RECORD DATE, WAS RECORD OWNER OF SHARES OF COMMON STOCK
OR WHO REPRESENTS IN GOOD FAITH THAT HE OR SHE WAS ON SUCH DATE THE BENEFICIAL
OWNER OF SUCH STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS, THE
CORPORATION WILL FURNISH TO SUCH PERSON, WITHOUT CHARGE, A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009 AND THE EXHIBITS
THERETO REQUIRED TO BE FILED WITH THE SEC UNDER THE EXCHANGE ACT. ANY
SUCH REQUEST SHOULD BE MADE IN WRITING TO ROBERT M. LITTLE, JR., SECRETARY,
HIGHLANDS BANKSHARES, INC., 340 WEST MAIN STREET, P.O. BOX 1128, ABINGDON,
VIRGINIA 24212-1128. THE FORM 10-K IS NOT PART OF THE
PROXY SOLICITATION MATERIALS.
OTHER
MATTERS
The Board of Directors of the
Corporation is not aware of any other matters that may come before the Annual
Meeting. However, the proxies may be voted with discretionary
authority with respect to any other matters that may properly come before the
Annual Meeting.
APPENDIX
A
CHARTER
FOR THE NOMINATING COMMITTEE
OF
THE BOARD OF DIRECTORS OF
HIGHLANDS
BANKSHARES, INC.
The Nominating Committee (the
“Committee”) is appointed by the Board of Directors to assist the Board of
Directors in identifying qualified individuals to become directors, recommend to
the Board of Directors qualified director nominees for election at the
shareholders’ annual meeting, and recommend to the Board membership on its
committees.
Committee
Membership
The Committee members shall be
appointed and may be replaced from time to time by the Board of Directors of the
Corporation. The Committee shall consist of no fewer than three directors. Each
member of the Committee shall be an “independent director” as defined in the
applicable rules of the NASDAQ Stock Market. The Board of Directors may appoint
a Chairperson of the Committee. If the Board of Directors does not appoint a
Chairperson, the Committee may elect its own Chairperson.
Meetings
The Committee shall meet as often as
necessary to carry out its appointed responsibilities. Any member of the
Committee may call a meeting of the Committee. The Chairperson of the Committee,
or another of its members, shall report to the Board of Directors on Committee
meetings that are held. Minutes of the meetings shall be recorded by an
appointed member of the Committee or by the Secretary of the
Corporation.
Committee Goals and
Responsibilities
1.
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The
Committee shall recommend to the Board of Directors director nominees for
election at the shareholders’ annual
meeting.
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2.
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Prior
to nominating an existing director for re-election to the Board of
Directors, the Committee shall consider and review the existing
directors’:
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Board
of Director and Committee meeting attendance and
performance;
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·
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Length
of Board of Directors’ service;
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·
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Experience,
skills and contributions that the existing director brings to the Board of
Directors
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3.
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In
the event that a director vacancy arises, the Committee shall (a) seek and
identify a qualified director nominee to be recommended to the Board of
Directors for either (i) appointment by the Board of Directors to serve
the remainder of the term of the director position that is vacant, or (ii)
election at the shareholders’ annual meeting; or (b) recommend that the
size of the Board of Directors be decreased to eliminate the
vacancy.
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4.
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In
evaluating a candidate for recommendation as a director nominee, the
Committee shall consider such matters as it deems appropriate, including
the candidates personal and professional integrity, business judgment,
relevant experience and skills, and potential to be an effective director
in conjunction with the full Board of Directors in collectively serving
the long-term interest of the Corporation’s shareholders. Candidates may
be interviewed by the Committee where it deems it
appropriate.
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5.
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The
Committee shall consider director candidates recommended by the holders of
the Corporation’s common stock. Recommendations by security holders should
be submitted to the Committee in accordance with the By-Laws of the
Corporation.
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6.
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The
Committee shall have discretion and authority to retain any search firm to
assist in identifying director candidates, retain outside counsel or any
other internal or external advisors, and approve all related fees and
retention terms.
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7.
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The
Committee may review the Board of Director’s committee structure and may
recommend to the Board of Directors for its approval the size of
committees, and the directors to be appointed as members on each Board of
Directors committee. When evaluating a director for service on a Board of
Directors committee, the Committee may consider such
|
8. |
matters as it deems
appropriate, including the director’s independence, experience, skills and
other Board responsibilities, attendance, performance and contribution on
other Board of Directors committees and the potential to be an effective
member of the committee with its other
members. |
[FORM OF
PROXY]
HIGHLANDS
BANKSHARES, INC.
340
West Main Street, Abingdon, Virginia 24210
PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD
OF DIRECTORS. The undersigned hereby constitutes J.D. Morefield, James D.
Moore, Jr. and J. Carter Lambert or any of them, attorneys and proxies, with
power of substitution in each, to act for the undersigned with respect to all
shares of Common Stock of Highlands Bankshares, Inc. (the “Corporation”) held of
record by the undersigned on March 10, 2010 at the Annual Meeting of
Stockholders to be held at the Southwest Virginia Higher Education Center
ballroom on the campus of Virginia Highlands Community College, One Partnership
Circle, Abingdon, Virginia on May 26, 2010, at 7:00 p.m., or any adjournment
thereof, for the following purposes:
1.
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Election
of
Directors FOR all
nominees listed
below WITHHOLD AUTHORITY
to vote for all nominees
(except as marked to the
contrary)
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(INSTRUCTION: To withhold
authority to vote for any individual nominee, write such nominee’s name on the
line below)
William
E.
Chaffin E.
Craig
Kendrick
Clydes B. Kiser
J. Carter
Lambert
James D. Moore,
Jr. J.D.
Morefield
Charles
P.
Olinger William
J.
Singleton H.
Ramsey White, Jr.
2.
|
To
ratify the appointment of Brown, Edwards & Company, LLP. as our
independent registered public accounting firm for the year ending December
31, 2010; and
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3.
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In
their discretion, the proxies are authorized to vote on such other
business as may properly come before the
meeting.
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(Continued
and to be signed and dated on the reverse side and returned promptly in the
enclosed envelope.)
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS
MADE,
THIS PROXY WILL BE VOTED FOR THE
NOMINEES FOR ELECTION OF DIRECTORS LISTED IN ITEM 1.
Please
sign name exactly as it appears on the stock certificate. All owners should
sign. Fiduciaries should give full title.
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Signature |
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Signature |
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I plan________________, do not
plan___________________, to
attend the 2010 Annual
Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY
SHEET PROMPTLY.