UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant þ
Filed by
a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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HIGHLANDS BANKSHARES,
INC.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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Title
of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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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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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
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Form,
Schedule or Registration Statement No.:
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Date
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March 26,
2009
Dear
Shareholders:
You are
cordially invited to attend the annual meeting of the shareholders of
Highlands Bankshares, Inc. on Tuesday, May 12, 2009, at 3:00 p.m., at The
Grant County Bank, 1 North Main Street (the "Old Bank Building"),
Petersburg, West Virginia.
Enclosed
in this mailing you will find formal notice of the meeting, a proxy and a proxy
statement detailing the matters upon which the shareholders will act at the
annual meeting. Our Company's Annual Report for 2008 is also
enclosed.
We urge you to complete, date and sign
the proxy and return it as soon as possible in the enclosed postage prepaid
envelope, even if you intend to attend the meeting. You may revoke
your proxy at any time prior to its exercise.
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Sincerely,
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/s/
John G. Van Meter
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John
G. Van Meter
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Chairman
of The Board
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To the
Shareholders of Highlands Bankshares, Inc.
The
annual meeting of shareholders of Highlands Bankshares, Inc. will be held on
Tuesday, May 12, 2009, at 3:00 p.m., at The Grant County Bank, 1 North Main
Street (the "Old Bank Building"), Petersburg, West Virginia, for the following
purposes:
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1.
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Election
of four Class B directors to serve until the annual meeting of
shareholders in 2012.
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2.
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Ratification
of the appointment of Smith Elliott Kearns & Company, LLC as
independent registered public accountants for
2009.
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3.
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Transaction
of other business as may properly come before the meeting, or any
adjournments thereof.
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The Board
of Directors recommends a vote in favor of the nominees for director and a vote
in favor of the ratification of the appointment of the independent registered
public accountants. Only shareholders of record at the close of
business on March 18, 2009 are entitled to notice of and to vote at the annual
meeting or any adjournments thereof.
To
assure that your shares are represented at the annual meeting, please complete,
date and sign the enclosed proxy, and return it as soon as possible in the
enclosed postage prepaid envelope. You may revoke your proxy at any
time prior to its exercise.
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By
Order of the Board of Directors
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/s/
Alan L. Brill
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Alan
L. Brill
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Corporate
Secretary
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March 26,
2009
TABLE
OF CONTENTS
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Page
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Outstanding
Shares and Voting Rights
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1
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Security
Ownership of Certain Beneficial Owners and Management
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2
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*-Election
of Directors
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4
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Information
Concerning Directors and Nominees
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6
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Board
Meetings and Compensation
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7
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Board
Committees
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7
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Executive
Compensation
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8
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Audit
Committee Report
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12
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Compliance
with Section 16(a) of the Securities Exchange Act
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13
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Certain
Related Transactions
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13
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*-Ratification
of Appointment of Independent Registered Certified Public
Accountants
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14
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Fees
of Independent Registered Certified Public Accountants
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14
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Shareholder
Proposals
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14
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Exhibits
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15
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*-Matters
to be voted on
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HIGHLANDS
BANKSHARES, INC.
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P.O.
Box 929 * Petersburg WV 26847 * (304) 257-4111
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PROXY
STATEMENT
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This
Proxy Statement is furnished in connection with the solicitation of proxies for
use at the annual meeting of shareholders of Highlands Bankshares, Inc.
(“Highlands” or the “Company”) to be held Tuesday, May 12, 2009, at 3:00 p.m.,
at The Grant County Bank, 1 North Main Street (the "Old Bank Building"),
Petersburg, West Virginia, and at any adjournments thereof (“Annual
Meeting”). The accompanying proxy is solicited by the Board of
Directors of the Company (the “Board”). The principal executive
offices of the Company are located at 3 North Main Street, Petersburg,
West Virginia 26847. The approximate mailing date of the proxy
statement and the accompanying proxy is April 3, 2009.
The
Company will bear the cost of soliciting proxies and will only make
solicitations by the use of the mail, except that, if necessary, officers,
directors and regular employees of the Company, or its affiliates, may solicit
proxies by telephone or by personal calls. The Company may request
brokerage houses and nominees to forward proxy solicitation material to the
beneficial owners of the stock held of record by such persons, and the Company
may reimburse them for their charges and expenses in doing so.
All
properly executed proxies delivered pursuant to this solicitation will be voted
at the Annual Meeting in accordance with any instructions thereon. A
shareholder executing a proxy may revoke it at any time before it is voted
by:
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Notifying
Highlands in person,
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Giving
written notice to Highlands of the revocation of the
proxy,
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Submitting
to Highlands a subsequently dated proxy,
or
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Attending
the meeting and withdrawing the proxy before it is voted at the
meeting.
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OUTSTANDING
SHARES AND VOTING RIGHTS
Only
shareholders of record at the close of business on March 18, 2009, will be
entitled to vote at the Annual Meeting. As of that date, the Company
had outstanding 1,336,873 shares of its common stock, $5 par value, each of
which is entitled to one vote at the Annual Meeting. Cumulative
voting rights are available, in certain instances, for the election of
directors, as further described in this proxy statement.
Any
number of shareholders holding together a majority of the stock outstanding, who
are either present in person or represented by proxy at the Annual Meeting,
shall constitute a quorum. If a share is represented for any purpose
at the Annual Meeting, it is deemed to be present for purposes of establishing a
quorum. Abstentions and shares held of record by a broker or its
nominee, which are voted on any matter, are included in determining the number
of votes present or represented at the Annual Meeting. Conversely,
broker shares that are not voted on any matter will not be included in
determining whether a quorum is present.
If a
quorum is established, directors will be elected by a plurality of the votes
cast by shareholders in person or by proxy at the Annual Meeting. As
required by West Virginia law, each share is entitled to one vote per nominee,
unless a shareholder requests cumulative voting at least 48 hours before the
meeting. Ratification of the appointment of the independent public accountants
will be approved if the votes cast in favor exceed the votes cast
opposing. Votes that are withheld and broker shares that are not
voted will not be included in determining the number of votes cast.
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Page
One
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth the name and address of and the number and percentage
of shares of common stock held as of February 28, 2009 by each of the Company's
directors, director nominees and Highlands’ executive officers and by all of the
Company's directors, director nominees and executive officers as a
group. To the best of the Company's knowledge, no person is the
beneficial owner of more than 5% of the Company's common stock.
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Name
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Position
with Company
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Amount
Beneficially
Owned
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Percent
of
Class
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Leslie
A. Barr
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Director
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6,876
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*
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Thomas
B. McNeill, Sr.
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Director
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16,023
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1.2%
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Clarence
E. Porter
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Director;
President
& Chief
Executive
Officer;
Treasurer
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2,002
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*
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Morris
M. Homan, Jr.
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Director
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1,890
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*
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Gerald
W. Smith
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Director
Nominee
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3,282
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*
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John
G. Van Meter
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Director
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59,183
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4.4%
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Jack
H. Walters
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Director
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10,824
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*
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L.
Keith Wolfe
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Director
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8,580
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*
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Kathy
G. Kimble
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Director
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4,596
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*
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Alan
L. Brill
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Director;
Secretary
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2,649
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*
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Steven
C. Judy
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Director
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5,205
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*
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R.
Alan Miller
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Finance
Officer
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227
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*
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All
of the directors, director nominees and executive
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officers
of the Company, as a group
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121,337
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9.1%
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An
asterisk denotes less than 1% of class.
Further
notes regarding ownership are on the following page.
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Page
Two
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NOTES
TO SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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Mr.
Barr’s beneficial ownership includes 2,820 shares owned directly, 3,300
shares owned jointly with his wife and 756 shares held by his wife over
which he holds no voting or dispositive powers.
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Mr.
McNeill’s beneficial ownership includes 9,216 shares owned directly and
6,807 shares held by his wife over which he holds no voting or dispositive
powers.
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Mr.
Porter’s beneficial ownership includes 300 shares owned directly, 50
shares held by his wife over which he holds no voting or dispositive
powers and 15 shares held by his wife as custodian for each of three minor
grandchildren and 1,607 shares held in Mr. Porter’s behalf through the
Company’s Employee Stock Ownership Program.
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Mr.
Homan’s beneficial ownership includes 1,890 shares owned
directly.
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Mr.
Smith’s beneficial ownership includes 540 shares owned directly and 2,742
shares owned jointly with his wife.
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Mr.
Van Meter’s beneficial ownership includes 29,183 shares owned directly and
30,000 shares held by his wife over which he holds no voting or
dispositive powers. Mr. Van Meter disclaims beneficial ownership of the
shares held by his wife.
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Mr.
Walters’ beneficial ownership includes 10,524 shares owned directly and
150 shares held as co-guardian for each of his two children. Mr. Walters
disclaims beneficial ownership of the shares held as co-guardian for each
of his children.
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Mr.
Wolfe’s beneficial ownership includes 7,830 shares owned directly, 300
shares held jointly with each of his two children and 150 shares held by
his wife over which he holds no voting or dispositive
powers.
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Ms.
Kimble’s beneficial ownership includes 3,651 shares owned directly and 945
shares held jointly with her husband.
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Mr.
Brill’s beneficial ownership includes 363 shares owned directly and 1,104
shares owned jointly with his wife and 1,182 shares held in Mr. Brill’s
behalf through the Company’s Employee Stock Ownership
Program.
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Mr.
Judy’s beneficial ownership includes 5,205 shares owned
directly.
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Mr.
Miller’s beneficial ownership includes 50 shares owned directly and 177
shares held in Mr. Miller’s behalf through the Company’s Employee Stock
Ownership Program.
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Page
Three
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PROPOSAL
ONE
ELECTION
OF DIRECTORS
General
Highlands’
articles of incorporation currently provide for a classified board of
directors. There are three classes. Each class is elected for a
three-year term. There are presently 10 directors on the Board, two
of whom are nominees for election at the 2009 Annual Meeting. In addition to the
two current directors who are director nominees, the Class B director nominees
for election at the 2009 Annual Meeting include a nominee who is not currently a
director and who has not previously served on the Company’s Board. Two of the
three nominees are non-employee directors.
Directors
are elected by a plurality of the shares voted. As required by West
Virginia law, each share is entitled to one vote per nominee, unless a
shareholder requests cumulative voting for directors at least 48 hours before
the meeting. If a shareholder properly requests cumulative voting for
directors, then each shareholder will have the right to vote the number of
shares owned by that shareholder for as many persons as there are directors to
be elected, or to cumulate such shares and give one candidate as many votes as
the number of directors multiplied by the number of shares owned shall equal, or
to distribute them on the same principle among as many candidates as the
shareholder sees fit. If any shares are voted cumulatively for the
election of directors, the proxies, unless otherwise directed, shall have full
discretion and authority to cumulate their votes and vote for less than all such
nominees. For all other purposes, each share is entitled to one
vote.
Nominations
Highlands
does not have a separate nominating committee and the entire board of directors
serves this function. The board of directors makes nominations based
upon its belief that candidates for director should have certain minimum
qualifications as defined by West Virginia state banking law. The Board of
Directors of Highlands Bankshares, Inc., in addition to adherence to state
banking law, has set forth the following as criteria for the Company’s
directors:
The board
of directors of Highlands Bankshares makes nominations based upon its belief
that candidates for director should have certain minimum qualifications. These
qualifications include the following:
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Directors should should be of
the highest ethical
character.
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·
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Directors should have
excellent personal and professional reputations in Highlands Bankshares,
Inc.’s market area.
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Directors should be
accomplished in their professions or
careers.
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Directors should be able to
read and understand financial statements and either have knowledge of, or
the ability and willingness to learn, financial institution
law.
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·
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Directors should have relevant
experience and expertise to evaluate financial data and provide direction
and advice to the chief executive officer and the ability to exercise
sound business judgment.
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·
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Directors must be willing and
able to expend the time to attend meetings of the Board of Directors of
Highlands Bankshares, Inc. and Highlands’ subsidiary banks (the “Banks”)
and to serve on board
committees.
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·
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The Board of Directors will
consider whether a nominee is independent, as legally
defined. In addition, directors should avoid the appearance of
any conflict and should be independent of any particular constituency and
be able to serve all shareholders of Highlands Bankshares,
Inc.
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·
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Because the directors of
Highlands Bankshares, Inc. also may serve as directors of either or both
of the Banks, a majority of directors must be residents of West Virginia,
as required by state banking
law.
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·
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Directors must be acceptable
to Highlands Bankshares, Inc.’s and the Banks’ regulatory agencies,
including the Federal Deposit Insurance Corporation and the West Virginia
Division of Banking and must not be under any legal disability which
prevents them from serving on the Board of Directors or participating in
the affairs of a financial
institution.
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·
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Directors must own or acquire
sufficient capital stock to satisfy the requirements of West Virginia law
and the bylaws of each of the
Banks.
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·
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Directors must be at least 21
years of age.
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Page
Four
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The Board
of Directors of Highlands Bankshares, Inc., reserves the right to modify these
minimum qualifications from time to time, except where the qualifications are
required by the laws relating to financial institutions.
The
process of the Board of Directors for identifying and evaluating nominees is as
follows: In the case of incumbent directors whose terms are set to
expire, the Board of Directors shall consider the directors’ overall service to
Highlands Bankshares, Inc. during their term, including such factors as the
number of meetings attended, the level of participation, quality of performance
and any transactions between such directors and Highlands Bankshares, Inc., and
the Banks. The Board of Directors also reviews the payment history of
loans, if any, made to such directors by either Bank to ensure that the
directors are not chronically delinquent and in default. The board
also considers whether any transactions between the directors and either Bank
have been criticized by any banking regulatory agency or either Banks’ external
auditors and whether corrective action, if required, has been taken and was
sufficient. The Board of Directors also confirms that such directors
remain eligible to serve on the Board of Directors of a financial institution
under federal and state law.
Shareholder
nominations for persons for election as directors are required to be done in
accordance with the provisions set forth in Company’s by-laws, as
amended. ARTICLE I, Section 9(b) of HIGHLANDS BANKSHARES, INC.
AMENDED AND RESTATED BYLAWS, which sets forth the requirements for shareholder
nominations is shown below.
(b) Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the corporation. Nominations of
persons for election to the board of directors of the corporation may be made at
a meeting of stockholders at which directors are to be elected only (i) by or at
the direction of the board of directors or (ii) by any stockholder of the
corporation who (1) is a stockholder of record on the date of giving the notice
provided for in this Section 9(b) and on the record date for the determination
of stockholders entitled to vote at such meeting, and (2) complies with the
notice procedures set forth in this Section 9(b). Such nominations,
other than those made by or at the direction of the board of directors, shall be
made by timely notice in writing to the Secretary of the
corporation. To be timely, a stockholder’s notice shall be delivered
or mailed to and received by the Secretary at the principal executive offices of
the corporation not less than 90 days prior to the date of the meeting;
provided, however, that in the event that less than 100 days’ notice or public
announcement of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or otherwise transmitted or the day on which public
announcement of the date of the meeting was first made by the corporation,
whichever shall first occur. A stockholder’s notice must be in
writing and set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director, all information relating to such person
that is required to be disclosed in connection with solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or any successor rule or regulation; and (b) as to the
stockholder giving the notice: (i) the name and address of such stockholder as
they appear on the corporation’s books and of the beneficial owner, if any, on
whose behalf the nomination is made; (ii) the class or series and number of
shares of capital stock of the corporation which are owned beneficially or of
record by such stockholder and such beneficial owner; (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder; (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice; and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Regulation 14A
under the Exchange Act or any successor rule or
regulation. Such notice must be accompanied by a written
consent of each proposed nominee to be named as a nominee and to serve as a
director if elected. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the provisions
of this Section 9(b). The officer of the corporation or other person
presiding at the meeting shall, if the facts so warrant, determine that a
nomination was not made in accordance with such provisions and, if he or she
should so determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded.
No
candidates for director were nominated by any stockholder for election at the
2009 annual meeting of shareholders.
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Page
Five
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INFORMATION
CONCERNING DIRECTORS AND NOMINEES
The
following information, including the principal occupation during the past five
years, is given with respect to the three director nominees and the seven
directors continuing in office.
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Name
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Position
with the
Company
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Age
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Director
Since
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Principal
Occupation During the Last
Five
Years
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DIRECTOR
NOMINEES
Class
B Directors to serve until the 2012 Annual Meeting of
Shareholders
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Gerald
W. Smith
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Director
Nominee
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65
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Self
employed
Envirco
Inc.
Specialty
Security Services, LLC
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Clarence
E. Porter
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Director;
President
&
Chief
Executive
Officer
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60
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April
1992
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President
& Chief Executive Officer of
Highlands
since 2004; President & Chief
Executive
Officer of The Grant County
Bank
since 1991
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L.
Keith Wolfe
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Director
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82
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May
1985
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Retired
owner of Petersburg Motor
Company
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Class
C Directors to serve until the 2010 Annual Meeting of
Shareholders
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Steven
C. Judy
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Director
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56
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June
2002
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Pharmacist
President
of JSG Foods, Inc.
President
of Judy’s Drug Store, Inc.
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Leslie
A. Barr
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Director
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71
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July
1987
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Retired
President & Chief Executive
Officer
of Highlands
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Jack
H. Walters
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Director
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61
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July
1987
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Attorney
at Law
Partner,
Walters, Krauskopf & Baker
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Class
A Directors to serve until the 2011 Annual Meeting of
Shareholders
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Alan
L. Brill
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Director:
Secretary
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54
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April
2001
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President
& Chief Executive Officer of
Capon
Valley Bank since 2001
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Kathy
G. Kimble
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Director
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63
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April
2001
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Retired
Retail Business Owner
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Morris
M. Homan, Jr.
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Director
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56
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May
2008
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Self
Employed Veterinarian
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John
G. Van Meter
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Director;
Chairman
of the
Board
of
Directors
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71
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May
1985
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Attorney
at Law
Van
Meter & Van Meter
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Page
Six
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Board
Meetings and Compensation
The Board
met 13 times during 2008. As required by Company policy, each
director attended at least 75% of the aggregate of (i) the total number of
meetings held by the Board and (ii) the total number of meetings held by the
committee on which the director served. Directors received $450.00
for attending Board meetings and $250.00 for attending committee meetings.
Members of the Audit Committee received $350.00 for attending meetings of the
Audit Committee.
During
2009, Directors will receive $525.00 for attending Board meetings and $300.00
for attending committee meetings. Members of the Audit Committee will receive
$350.00 for attending meetings of this Committee during 2009.
All
Directors of Highlands Bankshares, Inc. also serve as directors of one or more
of the Company’s subsidiaries. Both Capon Valley Bank and The Grant County Bank
have Directors who serve on the boards of the respective subsidiary who do not
serve on the Board of Highlands Bankshares. The Grant County Bank
also employs an advisory board for its Riverton location. The board
fees for the subsidiary banks are the same as those fees for Highlands
Bankshares, Inc.
The table
below sets forth the compensation received during the fiscal year ended December
31, 2008 by each of Highlands’ directors:
|
Name
|
Fees
Earned or
Paid in
Cash
|
All
Other
Compensation
|
Total
|
|
Leslie
A. Barr
|
$ 22,455
|
$
|
$
22,455
|
|
Jack
H. Walters
|
21,975
|
33,750
|
55,725
|
|
Alan
L. Brill
|
19,500
|
19,500
|
|
|
Morris
M. Homan, Jr.
|
21,803
|
21,803
|
|
|
Thomas
B. McNeill, Sr.
|
21,521
|
21,521
|
|
|
C.
E. Porter
|
23,650
|
23,650
|
|
|
John
G. Van Meter
|
20,050
|
14,250
|
34,300
|
|
Kathy
G. Kimble
|
22,050
|
22,050
|
|
|
Steven
C. Judy
|
22,890
|
22,890
|
|
|
L.
Keith Wolfe
|
21,550
|
21,550
|
All fees
paid to directors during the fiscal year ended December 31, 2008 were paid in
cash. Fees include Board and Committee fees earned by each of the directors for
serving on the Boards of Highlands and one or more of the subsidiary banks and
any Committees of the Board of Highlands or one or more of the subsidiary banks
on which the director might serve. In addition, directors, at their discretion,
receive reimbursement for mileage to and from Board or Committee
meetings.
The
amounts disclosed above as other compensation for Mr. Van Meter and Mr. Walters
relate to legal retainers and other legal fees paid by the Company and its
subsidiary banks to the law firms of Mr. Van Meter and Mr. Walters. In addition,
Mr. Van Meter and Mr. Walters may, from time to time, be remunerated for other
services rendered related to lending and other operations of the subsidiary
banks. Portions of the fees earned by Mr. Van Meter and Mr. Walters, or their
legal firms, for work in this capacity are ultimately borne by the customer(s)
of the subsidiary banks, and not by the Company or its subsidiary banks, and as
such are not shown within the table above.
Board
Committees
The Board
of Directors of Highlands Bankshares, Inc. has designated the following
Committees: Nominating Committee, Compensation Committee, Audit Committee and
Asset/Liability Management Committee. The Audit Committee Charter is included in
this Proxy Statement as EXHIBIT A and the Compensation Committee Charter is
included as EXHIBIT B. The table on the following page illustrates which members
served, during the past year, on the Nominating, Compensation and Audit
Committees:
|
Page
Seven
|
|
Director
|
Nominating
Committee
|
Compensation
Committee
|
Audit
Committee
|
|
Leslie
A. Barr
|
X
|
X
|
X
|
|
Thomas
B. McNeill, Sr.
|
X
|
X
|
|
|
Clarence
E. Porter
|
X
|
||
|
Morris
M. Homan, Jr.
|
X
|
X
|
X
|
|
John
G. Van Meter
|
X
|
X
|
|
|
Jack
H. Walters
|
X
|
X
|
|
|
L.
Keith Wolfe
|
X
|
X
|
X
|
|
Kathy
G. Kimble
|
X
|
X
|
X
|
|
Alan
L. Brill
|
X
|
||
|
Steven
C. Judy
|
X
|
X
|
X
|
EXECUTIVE
COMPENSATION
The table
below, in accompaniment with the notes found below and on the following page,
sets forth the compensation totals for the Company’s Principal Executive
Officer, Principal Financial Officer and other most highly compensated
executives of the Company.
|
Name and
Principal
Position
|
Year
|
Salary
($)
|
Non
Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
and
Deferred
Compensation
Earnings
(1)
|
All
Other
Compen-
sation
(2)
|
Total
|
|||||||||||||||
|
C.E.
Porter
|
2008
|
$ | 273,525 | $ | 7,623 | $ | 169,714 | $ | 27,374 | $ | 478,236 | ||||||||||
|
Principal
Executive Officer
|
2007
|
260,500 | -- | 132,659 | 27,804 | 420,963 | |||||||||||||||
|
Alan
L. Brill
|
2008
|
$ | 171,150 | $ | 4,655 | $ | 61,165 | $ | 23,224 | $ | 260,194 | ||||||||||
|
President,
Capon Valley Bank
|
2007
|
163,368 | -- | 56,377 | 23,754 | 243,499 | |||||||||||||||
|
Gerald
Sites
|
2008
|
$ | 108,000 | -- | $ | 79,132 | -- | $ | 187,132 | ||||||||||||
|
Sr.
Vice President, The Grant County Bank
|
2007
|
100,000 | -- | 66,968 | -- | 166,968 | |||||||||||||||
Notes to Executive
Compensation Table
Note
One:
|
|
·
|
Mr.
Brill and Mr. Porter both received incentive pay for achievement of 2008
goals under the Company’s INCENTIVE BONUS PLAN FOR SUBSIDIARY BANK
PRESIDENTS (“the Plan”). Under the Plan, Mr. Porter’s maximum incentive
pay for reaching 2008 targets was $7,623 and Mr. Porter achieved full
payment. Mr. Brill’s maximum incentive pay for reaching 2008 targets was
$6,846 and Mr. Brill was paid $4,655. Actual cash payment to Mssrs. Brill
and Porter relating to this incentive plan were made during 2009, but are
included in the table above. Further details relating to the Plan can be
found on Page Nine.
|
Note
Two:
|
|
·
|
Mr.
Porter’s Change in Pension Value and Nonqualified and Deferred
Compensation Earnings is comprised of the increase in value of Mr.
Porter’s defined benefit pension plan, Mr. Porter’s portion of
contributions by the Company and by The Grant County Bank to the Bank’s
profit sharing plan, the dollar value of the economic benefit under The
Grant County Bank’s split dollar life insurance plan (BOLI), and
contributions to the Company’s employee stock ownership plan (ESOP) on
behalf of Mr. Porter.
|
|
Page
Eight
|
|
|
·
|
Mr.
Brill’s Change in Pension Value and Nonqualified and Deferred Compensation
Earnings is comprised of contributions by Capon Valley Bank on Mr. Brill’s
behalf to the Bank’s 401(k) plan, the dollar value of the economic benefit
under Capon Valley Bank’s split dollar life insurance plan (BOLI), and
contributions to the Company’s employee stock ownership plan (ESOP) on
behalf of Mr. Brill.
|
|
|
·
|
Mr.
Site’s Change in Pension Value and Nonqualified and Deferred Compensation
Earnings is comprised of the increase in value of Mr. Sites’ defined
benefit pension plan, Mr. Sites’s portion of contributions by The Grant
County Bank to the Bank’s profit sharing plan, the dollar value of the
economic benefit under The Grant County Bank’s split dollar life insurance
plan (BOLI), and contributions to the Company’s employee stock ownership
plan (ESOP) on behalf of Mr. Sites.
|
Note
Three:
|
|
·
|
Mr.
Porter’s Other Compensation is comprised of directors fees paid to Mr.
Porter by the Company and by The Grant County Bank and the economic
benefit of use of an automobile.
|
|
|
·
|
Mr.
Brill’s Other Compensation is comprised of directors fees paid to Mr.
Brill by the Company and by Capon Valley Bank and the economic benefit of
use of an automobile.
|
The Grant
County Bank participates in a defined benefit pension plan offered through the
West Virginia Banker’s Association. Mssrs. Porter and Sites
participate in this plan. The table below illustrates the years of credited
service and the present value of the accumulated benefit for these executives at
December 31, 2008. No payments from the plan were made to any of these
executives during the year ended December 31, 2008.
|
Name
|
Number
of Years of
Credited
Service
|
Present
Value of
Accumulated
Benefit
|
|
C.
E. Porter
|
20.33
|
$
560,709
|
|
Gerald
Sites
|
45.33
|
472,847
|
INCENTIVE
BONUS PLAN FOR SUBSIDIARY BANK PRESIDENTS
The
Compensation Committee approved an Incentive Bonus Plan (the “Plan”) for the
Presidents of the subsidiary banks for 2008. Upon approval of the Plan, The
Compensation Committee determined the maximum bonus opportunity for each of
Messrs. Porter and Brill under the Plan to be 4% of their applicable subsidiary
bank salaries. Bonuses under the Plan were based primarily on the extent to
which Grant County Bank, in the case of Mr. Porter, and Capon Valley Bank, in
the case of Mr. Brill, achieved performance goals, determined by the
compensation Committee for 2008. The full text of the Plan is shown
following:
HIGHLANDS
BANKSHARES, INC. 2008 INCENTIVE BONUS PLAN FOR SUBSIDIARY BANK
PRESIDENTS
|
I.
|
Purpose. The
purpose of the Plan is to provide the Presidents of the Company’s
subsidiary banking organizations with direct incentives for achieving
specific financial goals aimed at enhancing
profitability.
|
|
II.
|
Definitions.
|
|
|
(a)
|
“Applicable
Subsidiary Bank” means Grant County Bank, in the case of the President of
Grant County Bank, and Capon Valley Bank, in the case of the President of
Capon Valley Bank.
|
|
|
(b)
|
“Average
Total Assets” means the average of the Applicable Subsidiary Bank’s total
assets at the beginning of the Plan Year and the Applicable Subsidiary
Bank’s total assets at the end of the Plan Year, determined in accordance
with GAAP.
|
|
|
(c)
|
“Average Total Equity”
means the average of the Applicable Subsidiary Bank’s total equity capital
at the beginning of the Plan Year and the Applicable Subsidiary Bank’s
total equity capital at the end of the Plan Year, determined in accordance
with GAAP, subject to Section VII.
|
|
|
(d)
|
“Capon
Valley Bank” means Capon Valley Bank, a West Virginia-chartered bank and
wholly owned subsidiary of the
Company.
|
|
|
(e)
|
“Committee”
means the Compensation Committee of the Board of Directors of the
Company.
|
|
|
(f)
|
“Company”
means Highlands Bankshares, Inc., a West Virginia
corporation.
|
|
|
(g)
|
“Efficiency
Ratio” means the Applicable Subsidiary Bank’s non-interest expenses for
the Plan Year divided by the sum of the Applicable Subsidiary Bank’s net
interest income and non-interest income for the Plan Year, each as
determined in accordance with GAAP, subject to Section
VII.
|
|
Page
Nine
|
|
|
(h)
|
“GAAP”
means accounting principles generally accepted in the United States of
America.
|
|
|
(i)
|
“Grant
County Bank” means Grant County Bank, a West Virginia-chartered bank and
wholly owned subsidiary of the
Company.
|
|
|
(j)
|
“Growth
in Net Income” means the increase, if any, in the Applicable Subsidiary
Bank’s annual Net Income from 2007 to
2008.
|
|
|
(k)
|
“Net
Income” means the net income of the Applicable Subsidiary Bank, as
determined in accordance with GAAP, subject to Section
VII.
|
|
|
(l)
|
“Plan”
means this Highlands Bankshares, Inc. 2008 Incentive Bonus Plan for
Subsidiary Bank Presidents.
|
|
|
(m)
|
“Plan
Year” means the 2008 calendar year.
|
|
|
(n)
|
“Return
on Average Assets” means the Applicable Subsidiary Bank’s Net Income for
the Plan Year divided by the Applicable Subsidiary Bank’s Average Total
Assets for the Plan Year, as determined in accordance with GAAP, subject
to Section VII.
|
|
|
(o)
|
“Return
on Average Equity” means the Applicable Subsidiary Bank’s Net Income for
the Plan Year divided by the Applicable Subsidiary Bank’s Average Total
Equity for the Plan Year, as determined in accordance with GAAP, subject
to Section VII.
|
|
III.
|
Administration. The
Plan will be administered by the Committee. The Committee shall
have the authority, in its sole and absolute discretion, to interpret the
Plan, adopt rules and procedures for the administration of the Plan,
determine the extent to which any bonuses have been earned under the Plan
and perform the other responsibilities assigned to the Committee under the
Plan. All actions and decisions of the Committee pursuant to
the foregoing authority shall be conclusive and binding on all persons
having or claiming to have any right or interest in or under the
Plan.
|
|
IV.
|
Participants. The Plan
participants shall consist of the Presidents of Grant County Bank and
Capon Valley Bank.
|
|
V.
|
Bonus
Opportunity. Each participant is eligible to earn a cash
bonus for the Plan Year in an amount up to a percentage, specified by the
Committee, of his gross annual base salary payable by the Applicable
Subsidiary Bank effective as of January 1,
2008.
|
Corporate
Performance. Ninety percent of the participant’s bonus shall
be based on the extent to which the Applicable Subsidiary Bank achieves
corporate performance goals established for the Plan Year by the
Committee. The criteria to be used for corporate performance goals,
and the relative weighting of each are as follows:
Growth in
Net Income (25%)
Return on
Average Assets (25%)
Return on
Average Equity (25%)
Efficiency
Ratio (25%)
Achievement
of 100% or greater than 100% of a performance goal will result in payment of
100% of the portion of the potential bonus based on that
goal. Achievement of 90% to 99% of a performance goal will result in
payment of 90% of the portion of the potential bonus based on that
goal. Achievement of 80% to 89% of a performance goal will result in
payment of 75% of the portion of the potential bonus based on that
goal. Achievement of 70% to 79% of a performance goal will result in
payment of 25% of the portion of the potential bonus based on that
goal. Achievement of less than 70% of a performance goal will result
in no payment of the portion of the potential bonus based on that
goal. Percentages shall be rounded up or down to the nearest whole
percent (for example, 89.6% shall be rounded up to 90% and 89.4% shall be
rounded down to 89%).
Individual
Performance. The remaining ten percent of the participant’s
bonus shall be based on the Committee’s assessment of the participant’s
individual performance during the Plan Year; provided, however, that if no
payment of the potential bonus is to be made based on the corporate performance
goals (because none of the corporate performance goals are achieved at or above
the 70% level), then no payment of the potential bonus will be made based on
individual performance either, resulting in no bonus paid for the Plan Year,
subject to Section VIII.
|
Page
Ten
|
Example. The following example
illustrates how the bonus amount is to be determined. A participant’s
gross annual base salary payable by the Applicable Subsidiary Bank effective
January 1, 2008 is $180,000 and the Committee has determined that he will be
eligible to earn a cash bonus for the 2008 calendar year of up to 15% of his
gross annual base salary, or $27,000, 90% of which, or $24,300, is based on the
achievement of corporate performance goals and 10% of which, or $2,700, is based
on the Committee’s assessment of his individual performance during
2008. After the end of 2008, the Committee determines that the
corporate performance goals have been achieved to the following
extent: Growth in Net Income: 83% of performance goal; Return on
Average Assets: 77% of performance goal; Return on Average Equity: 107% of
performance goal; and Efficiency Ratio: 68% of performance goal. The
Committee also determines, based on the participant’s individual performance
during 2008, to award 95% of the portion of the bonus based on individual
performance. This results in a total bonus for the Plan Year of
$14,715, determined as follows:
|
Growth
in Net Income
|
$
24,300 X 25% X 75%
|
equals
|
$
4,556
|
|
Return
on Average Assets
|
$
24,300 X 25% X 25%
|
equals
|
1,519
|
|
Return
on Average Equity
|
$
24,300 X 25% X 100%
|
equals
|
6,075
|
|
Efficiency
Ratio
|
$
24,300 X 25% X 0%
|
equals
|
0
|
|
Total
Based on Corporate Performance
|
$
12,150
|
||
|
Individual
Performance
|
$2,700
X 95%
|
equals
|
2,565
|
|
Total
Bonus
|
$
14,715
|
|
VI.
|
Timing of Determination and Payment of
Bonus Amount. Following the end of the Plan Year, once
each Applicable Subsidiary Bank’s results of operations for the Plan Year
are reasonably certain, the Committee shall determine the amount of the
bonus, if any, earned by each participant, in the manner described in
Section V. Any bonus earned for the Plan Year shall be paid by
the Applicable Subsidiary Bank to the participant in cash by March 15,
2009.
|
|
VII.
|
Extraordinary
Items. In determining the extent to which corporate
performance goals have been met, the Committee may, but is not required
to, exclude extraordinary or other non-recurring
items.
|
|
VIII.
|
Additional Committee
Discretion. The Committee may, in its sole and absolute
discretion, increase or reduce (but not below zero) the amount of any
bonus earned under the Plan. Nothing in the Plan shall preclude
the Committee, in its discretion, from awarding bonuses to participants in
addition to any bonuses which they may earn under the
Plan.
|
|
IX.
|
Employment
Status. A participant must be employed by the Applicable
Subsidiary Bank as of the end of the Plan Year in order to qualify for a
bonus under the Plan; provided, however, that if the participant’s
employment is terminated prior to the end of the Plan Year due to death or
disability, the participant (or his estate) shall qualify for a prorated
bonus, to the extent earned, for the portion of the Plan Year the
participant was employed by the Applicable Subsidiary Bank, based on
achievement of the corporate performance goals for the full year and the
Committee’s assessment of the participant’s individual performance during
the Plan Year through the termination date. Any such prorated
bonus shall be determined and paid at the times specified in Section
VI.
|
|
X.
|
Termination, Amendment or
Other Modification of Plan. The Committee may terminate,
amend or otherwise modify the Plan at any
time.
|
|
XI.
|
Miscellaneous.
|
|
|
A.
|
No Right to Continued
Employment. The Plan does not give any participant any
right to continued employment, and the right to terminate the employment
of any participant is specifically reserved to the Company and/or the
Applicable Subsidiary Bank.
|
|
|
B.
|
Withholding for
Taxes. The Applicable Subsidiary Bank shall be entitled
to deduct from any bonus payment hereunder the amount of all applicable
income and employment taxes required by law to be withheld with respect to
such payment.
|
|
|
C.
|
No
Assignment. No right or interest of any participant in
the Plan shall be assignable or transferable, whether by operation of law
or otherwise (except by will or the laws of descent and
distribution).
|
|
|
D.
|
Governing Law.
The Plan shall be governed by and construed in accordance with the laws of
the State of West Virginia, except to the extent preempted by the Federal
laws of the United States of
America.
|
|
Page
Eleven
|
AUDIT
COMMITTEE REPORT
The
Company has an Audit Committee, which consists of Steven C. Judy, Chairman,
Kathy G. Kimble, L. Keith Wolfe, Morris M. Homan Jr. and Leslie A.
Barr. The Audit Committee met four times during the year ended
December 31, 2008. The Board of Directors has adopted a written charter for the
Audit Committee, which is reviewed annually and has been resolved by the
Committee to be sufficient. The Audit Committee’s charter is included in
this document as EXHIBIT A.
The audit
committee oversees Highlands’ financial reporting process on behalf of the board
of directors. The Audit Committee is responsible for communicating to
the board of directors its recommendation regarding the appointment,
replacement, compensation and oversight of the independent registered public
accounting firm engaged to prepare or issue audit reports on the Company’s
financial statements. The audit committee relies on the expertise and
knowledge of management, the company’s internal auditors and the independent
registered public accounting firm in carrying out its oversight
responsibilities. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements in the annual report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments and the
clarity of disclosures in the financial statements.
The
committee reviewed with the independent registered public accounting firm, who
is responsible for expressing an opinion on the conformity of those audited
financial statements with U.S. generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of Highlands’
accounting principles and such other matters as are required to be discussed
with the committee under generally accepted auditing standards. In
addition, the committee has discussed with the independent registered public
accounting firm the firm’s independence from management and Highlands, including
the matters in the written disclosures required by the PCAOB Rule 3526
“Communication with Audit Committees Concerning Independence” and considered the
compatibility of non-audit services with auditors’ independence. The committee
has discussed with the independent registered public accounting firm the matters
required to be discussed by the Public Company Accounting Oversight Board
Auditing Standard AU Section 380 “Communication with Audit Committees,” and Rule
2-07 of Regulation S-X promulgated by the Securities and Exchange
Commission.
The
committee discussed with Highlands’ internal auditor and with the independent
registered public accounting firm the overall scope and plans for their
respective audits. The committee meets with the internal auditor and
with the independent registered public accounting firm, with and without
management present, to discuss the results of the respective audits, their
evaluations of Highlands’ internal controls and the overall quality of
Highlands’ financial reporting.
The audit
committee charter requires that the audit committee approve all services
performed by the independent auditors.
All
members of the Audit Committee have been deemed by the Board of Directors to be
financially literate. All members of the Audit Committee are independent as that
term is defined under NASDAQ rules. The Audit Committee does not have one of its
members designated as an “audit committee financial expert” as
defined by rules adopted under the Securities Act of 1933, as amended. Because
the Company operates in a substantially rural area, the availability of
potential Directors, and especially Directors who may qualify as an audit
committee financial expert and still meet the independence requirements of a
member of the Audit Committee, is limited. The Company believes that
each member of the Audit Committee has sufficient knowledge in financial and
auditing matters to serve on the Committee. As such, the Board does not believe
that it is necessary to actively search for an outside person to serve on the
Board to qualify as an audit committee financial expert. The Committee has
authority to engage legal counsel, other experts or consultants, as it deems
appropriate, to carry out its responsibilities. The Audit Committee is
responsible for the appointment, replacement, compensation and oversight of the
independent auditor engaged to prepare or issue audit reports on our financial
statements.
The Audit
Committee’s primary responsibilities fall into three broad
categories:
|
Page
Twelve
|
|
|
·
|
The Committee
is charged with monitoring the preparation of quarterly and annual
financial reports prepared by the Company’s management, including
discussion with management and the Company’s outside auditors about
financial statements, key accounting practices, and
reporting.
|
|
|
·
|
The Committee is responsible
for matters concerning the relationship between the Company and its
outside auditors, including recommending their appointment or removal,
reviewing the scope of their audit services and related fees, as well as
any other services being provided to the Company, also determining if the
outside auditors are independent (based in part on the annual letter
provided to the Company pursuant to Independence Standards Board Standard
No. 1).
|
|
|
·
|
The Committee oversees
management’s implementation of effective systems of internal controls,
including review of policies relating to legal and regulatory compliance,
ethics and conflicts of interest; and review of the activities and
recommendations of the Company’s internal auditing
program.
|
This
report shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement and to any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this report by reference, and
shall not otherwise be filed under such acts.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2008, for filing with the Securities and Exchange
Commission.
L.
Keith Wolfe
Kathy
G. Kimble
Steven
C. Judy
Leslie
A. Barr
Morris
M. Homan, Jr.
March 19,
2009
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXHANGE ACT
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers to file reports of holdings and transactions in Highlands
shares with the SEC. Based solely on our records and other known information, in
2008 all Directors and executive officers met all applicable SEC filing
requirements under Section 16(a), except for Kathy G. Kimble. Ms. Kimble had one
late filing.
CERTAIN
RELATED TRANSACTIONS
Loans
made by The Grant County Bank and Capon Valley Bank to directors, director
nominees and their affiliates were made in the ordinary course of business, were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time the loans were made for comparable transactions
with other persons, and did not involve more than the normal risk of
collectibility or present other unfavorable features.In addition, the Company or
its subsidiaries, may, from time to time, obtain goods or services from a
director or their affiliates. Any such business transaction with a related party
did not, during 2008, exceed $120,000 nor was made under terms unfavorable to
the Company or its affiliates as compared to the obtaining of similar goods or
services from non related parties.
The
Company has adopted a Related Party Transaction Policy. This policy covers
substantially all material business transactions between related parties and the
Company or its subsidiaries. The policy requires that all loans or business
transactions above certain thresholds with insiders, as defined by the policy,
be approved by the Board of Directors of Highlands Bankshares, Inc. This policy
has been designed in an attempt to ensure the appropriateness of all related
party transactions and in an attempt to ensure that all required reporting of
related party transactions is achieved.
|
Page
Thirteen
|
PROPOSAL
TWO
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTANTS
Smith
Elliott Kearns & Company, LLC was the auditor for 2008 and is being
recommended to the Company's shareholders for appointment as the auditor for
2009. A representative of Smith Elliott Kearns & Company, LLC is
expected to attend the Annual Meeting with the opportunity to make a statement
or to respond to appropriate questions from shareholders.
The
Board Recommends that Shareholders vote “FOR” Proposal Two
Fees of Independent
Registered Certified Public Accountants
The
following fees were paid to Smith Elliott Kearns & Company, LLC (“SEK”), the
Company’s Independent Registered Certified Public Accountants for services
provided to the corporation for the fiscal year ending December 31, 2008 and
2007:
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2008
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2007
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|||||||
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Audit
Fees
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$ | 72,855 | $ | 69,845 | ||||
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All Other
Fees
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0 | 0 | ||||||
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Total
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$ | 72,855 | $ | 69,845 | ||||
Audit
fees are substantially all fees related to the audit of year-end financial
statements and corresponding regulatory filings.
SHAREHOLDER
PROPOSALS
Under the
rules of the SEC, proposals by shareholders intended to be presented at the
Company's 2009 Annual Meeting must be received by the Secretary of the Company,
at its principal executive offices at 3 North Main Street, Petersburg, West
Virginia 26847, for inclusion in its Proxy Statement relating to the meeting, by
January 10, 2010.
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By
Order of the Board of Directors
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/s/
Alan L. Brill
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Alan
L. Brill
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Corporate
Secretary
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March 26,
2009
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Page
Fourteen
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EXHIBIT
A
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HIGHLANDS
BANKSHARES, INC.
AUDIT
COMMITTEE CHARTER
I. PURPOSE
The
primary function of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Corporation to any governmental
body or the public; the Corporation’s systems of internal controls regarding,
finance, accounting, legal compliance and ethics that management and the Board
have established; and the Corporation’s auditing, accounting and financial
reporting processes generally. Consistent with this function, the
Audit Committee should encourage continuous improvement of, and should foster
adherence to, the Corporation’s policies, procedures and practices at all
levels. The Audit Committee’s primary duties and responsibilities are
to:
Serve as
an independent and objective party to monitor the Corporation’s financial
reporting process and internal control system.
Review
and appraise the audit efforts of the Corporation’s independent accountants and
internal auditing department.
Provide
an open avenue of communication among the independent accountants, financial and
senior management, the internal auditing department, and the Board of
Directors.
The Audit
Committee will primarily fulfill these responsibilities by carrying out the
activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit
Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the
Committee. An independent director is one who: (1) is not and has not
been employed as an executive of the Corporation for at least three years prior
to election to the Audit Committee; (2) did not accept compensation from the
Corporation or any of its affiliates in excess of $60,000 during the previous
fiscal year, except for compensation for service on the Board for certain types
of non-discretionary compensation; (3) no member of the director’s immediate
family serves or has served as an executive officer of the Corporation or any of
its affiliates during the past three years; (4) is not a partner, controlling
shareholder or executive officer of a business organization to which the
Corporation makes or from which it receives significant payments during any of
the past three years; and (5) does not serve as an executive of another entity
where any of the Corporation’s executives serve on the other entities’
Compensation Committee.
All
members of the Committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise. Committee
members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Corporation or an outside
consultant.
The
members of the Committee shall be appointed annually by the Board of
Directors. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
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Fifteen
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III. MEETINGS
The
Committee shall meet at least twice annually, or more frequently as
circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with management, the
director of the internal auditing department and the independent accountants in
separate executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the
Committee or at least its Chair should meet with the independent accountants and
management quarterly to review the Corporation’s financials consistent with
IV.4. below.
IV. RESPONSIBILITIES
AND DUTIES
To
fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports
Review
1. Review
and assess the adequacy of this Charter periodically, at least annually, as
conditions dictate.
2. Review
the organization’s annual financial statements and any reports or other
financial information submitted to any governmental body, or the public,
including any certification report, opinion, or review rendered by the
independent accountants.
3. Review
the regular internal reports to management prepared by the internal auditing
department and management’s response.
4. Review
with financial management and the independent accountants the 10-Q prior to its
filing or prior to release of earnings. The Chair of the Committee
may represent the entire Committee for purposes of this review.
Independent
Accountants
5. Recommend
to the board of Directors the selection of the independent accountants,
considering independence and effectiveness, and approve the fees and other
compensation to be paid to the independent accountants. On an annual
basis, the Committee should review and discuss with the accountants all
significant relationships the accountants have with the Corporation to determine
the accountants’ independence.
6. Review
the performance of the independent accountants and approve any proposed
discharge of the independent accountants when circumstances
warrant.
7. Periodically
consult with the independent accountants out of the presence of management about
internal controls and the fullness and accuracy of the organization’s financial
statements.
8. Pre-approve
all non-audit services provided by the independent accountants.
Financial Reporting
Process
9. In
consultation with the independent accountants and the internal auditors, review
the integrity of the organization’s financial reporting processes, both internal
and external.
10. Consider
the independent accountants’ judgments about the quality and appropriateness of
the Corporation’s accounting principles as applied in its financial
reporting.
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Page
Sixteen
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11. Consider
and approve, if appropriate, major changes to the Corporation’s auditing and
accounting principles as applied in its financial reporting.
Process
Improvement
12. Establish
regular and separate systems of reporting to the Audit Committee by each of
management, the independent accountants and the internal auditors regarding any
significant judgment made in management’s preparation of the financial
statements and the view of each as to appropriateness of such
judgments.
13. Following
completion of the annual audit, review separately with each of management, the
independent accountants and the internal auditing department any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information.
14. Review
any significant disagreement among management and the independent accountants or
the internal auditing department in connection with the preparation of the
financial statements.
15. Review
with the independent accountants, the internal auditing department and
management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been
implemented. (This review should be conducted at an appropriate time
subsequent to implementation of changes or improvements, as decided by the
Committee.)
Ethical and Legal
Compliance
16. Review
activities, organizational structure, and qualifications of the internal audit
department.
17. Review,
with the organization’s counsel, legal compliance matters including corporate
securities trading policies.
18. Review,
with the organization’s counsel, any legal matter that could have a significant
impact on the organization’s financial statements.
19. Perform
any other activities consistent with this Charter, the Corporation’s By-laws and
governing law, as the Committee or the Board deems necessary or
appropriate.
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Page
Seventeen
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EXHIBIT
B
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CHARTER
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF HIGHLANDS BANKSHARES,
INC.
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I.
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Statement
of Policy
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The
Compensation Committee (the “Committee”) of the Board of Directors (the “Board”)
of Highlands Bankshares, Inc. (the “Corporation”) shall discharge the Board’s
responsibilities relating to the compensation of the Corporation’s executive
officers and other key management personnel, and make recommendations to the
Board regarding director compensation.
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II.
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Committee
Composition and Meetings
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The
Committee shall be comprised of three or more directors (including a
chairperson) as appointed by the Board, each of whom shall be an independent
director as defined by the NASDAQ Stock Market listing standards and each of
whom shall be free from any relationship that would interfere with the exercise
of his or her independent judgment. The Board shall also consider whether it is
advisable for members of the Committee to also qualify as “non-employee
directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, “outside directors” within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended, or any other standards of applicable law, rule
or regulation.
The
members of the Committee shall be selected annually by the Board. The
Board shall have the power at any time to change the membership of the Committee
and to fill vacancies, subject to the qualification requirements of this
Charter. The Committee shall meet at least two times annually or more
frequently as circumstances require.
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III.
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Committee
Duties, Responsibilities and
Process
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The
Committee will cause to be kept adequate minutes of all its proceedings, and
will report its actions at the next meeting of the Board. Committee
members will be furnished with copies of the minutes of each meeting and any
action taken by unanimous consent. The Committee is governed by the
same rules regarding meetings (including meetings by conference telephone or
similar communications equipment), action without meetings, notice, waiver of
notice, and quorum and voting requirements as are applicable to the
Board. The Committee is authorized and empowered to adopt its own
rules of procedure not inconsistent with (a) any provision of this Charter, (b)
any provision of the Bylaws of the Corporation, or (c) the laws of the State of
West Virginia.
The
Committee may request that any directors, officers or employees of the
Corporation, or other persons whose advice and counsel are sought by the
Committee, attend any meeting of the Committee to provide such pertinent
information as the Committee requests.
The
Committee shall have the following responsibilities:
(1) Review
from time to time the goals and objectives of the Corporation’s compensation
plans, and, if the Committee deems it appropriate, amend or recommend that the
Board amend these goals and objectives.
(2) Review
from time to time the Corporation’s compensation plans in light of the
Corporation’s goals and objectives with respect to such plans, and, if the
Committee deems it appropriate, adopt or recommend to the Board the adoption of
new incentive-compensation plans, equity-based plans, other compensation plans
or amendments to existing plans.
(3) Annually
review and approve corporate goals and objectives relevant to the compensation
of the Presidents of the Company’s subsidiary banks, evaluate their performance
in light of these goals and objectives, and determine and approve their
compensation levels based on this evaluation.
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Page
Eighteen
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(4) Oversee
the evaluation of management of the Corporation, including the other executive
officers of the Corporation, and establish the compensation for the
Corporation’s other executive officers and approve the compensation for other
key members of management.
(5) Perform
such duties and responsibilities as may be assigned to the Committee under the
terms of any executive or employee compensation plan.
(6) If
required by the regulations of the Securities and Exchange Commission or if
otherwise desired by the Corporation, review and discuss with the Corporation’s
management a Compensation Discussion and Analysis (“CD&A”) section to appear
in the Company’s Annual Report on Form 10-K and/or annual proxy statement,
recommend whether the CD&A should be included in the Annual Report on Form
10-K and/or annual proxy statement and issue a report to appear in the Annual
Report on Form 10-K and/or annual proxy statement stating that the Committee has
conducted such review and made such recommendation.
(7) Review,
at least annually, on management development efforts to assure development of a
pool of candidates for adequate and orderly management succession.
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(8)
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Discharge
any other duties and responsibilities delegated to the Committee from time
to time.
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IV.
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Investigations
and Studies; Outside Advisers
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The
Committee may conduct or authorize studies of or investigations into matters
within the Committee’s scope of responsibilities, and may retain, at the
Corporation’s expense, such counsel or other advisers as it deems necessary
(which may, if the Committee deems it appropriate, be the Corporation’s regular
counsel or advisers). The Committee shall have the authority to retain or
terminate a compensation consultant to assist the Committee in carrying out its
responsibilities, including authority to approve the consultant’s fees and other
retention terms, which fees shall be borne by the Corporation.
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Page
Nineteen
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| ý | PLEASE MARK VOTES AS IN THIS EXAMPLE |
REVOCABLE
PROXY
HIGHLANDS
BANKSHARES, INC.
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For
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With-
hold
Authority
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Annual Meeting of Shareholders,
May 12, 2009
THIS PROXY IS SOLICITED ON
BEHALF OF
THE BOARD OF
DIRECTORS.
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1. PROPOSAL
ONE:
ELECTION OF
DIRECTORS
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¨
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¨
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The
undersigned hereby appoints Leslie A. Barr and Steven C. Judy, either of
whom may act with full power of substitution, as proxies to vote, as
designated below, at the Annual Meeting of Shareholders to be held on May
12, 2009, and at any adjournment thereof, the shares of Highlands
Bankshares, Inc. common stock held of record by the undersigned as of
March 28, 2009. Each share is entitled to one vote per nominee unless a
shareholder requests cumulative voting at least 48 hours before the
meeting. If cumulative voting for the election of directors is requested,
the proxies, unless otherwise directed, shall have full discretion and
authority to cumulate their votes and vote for less than all such
nominees.
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Class
A: Gerald W. Smith Clarence
E. Porter
L. Keith Wolfe
(INSTRUCTION: To withhold
authority to vote for any individual nominee, write that nominee’s name in
the space below.)
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| The shares to which this proxy relates will be voted as specified. If no specification is made, such shares will be voted in favor of the proposals set forth on this proxy. | |||||
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For
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Against
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Abstain
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2. PROPOSAL
TWO:
RATIFICATION OF APPOINTMENT OF
SMITH ELLIOTT KEARNS & COMPANY, LLC AS INDEPENDENT REGISTERED
CERTIFIED PUBLIC ACCOUNTANTS
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¨
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¨
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¨
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IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME
BEFORE THE ANNUAL
MEETING.
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Please
be sure to sign and date
this proxy
card in the box below.
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Date | |||
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sign
above
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Ç Detach
above card, sign, date and mail in postage paid envelope provided. Ç
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HIGHLANDS
BANKSHARES, INC.
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Please
complete, date and sign the proxy and return it as soon as possible in the
enclosed postage prepaid envelope. The proxy must be signed exactly as the
name or names appear on the label attached to this proxy. If signing as a
trustee, executor, etc., please so indicate.
PLEASE ACT
PROMPTLY
SIGN, DATE & MAIL YOUR
PROXY CARD TODAY
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IF YOUR
ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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PROXY
MATERIALS ARE
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AVAILABLE
ON-LINE AT:
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http://www.cfpproxy.com/4993
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