West
Virginia
|
55-0650743
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
P.O.
Box 929 Petersburg, WV
|
26847
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Part
I
|
Page
|
|
3
|
||
Not
applicable
|
||
9
|
||
9
|
||
9
|
||
9
|
||
Part
II
|
||
9
|
||
10
|
||
11
|
||
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Not
applicable
|
26
|
||
58
|
||
58
|
||
58
|
||
Part
III
|
||
59
|
||
59
|
||
59
|
||
59
|
||
60
|
||
Part
IV
|
||
60
|
||
61
|
Item 1.
|
Business
|
Actual
Ratio
|
Actual
Ratio
|
Regulatory
|
||||||||||
December 31, 2009
|
December 31, 2008
|
Minimum
|
||||||||||
Total Risk Based Capital
|
||||||||||||
Highlands
Bankshares
|
14.33 | % | 14.20 | % | ||||||||
The
Grant County Bank
|
14.12 | % | 13.99 | % | 8.00 | % | ||||||
Capon
Valley Bank
|
12.86 | % | 12.77 | % | 8.00 | % | ||||||
Tier 1 Leverage Ratio
|
||||||||||||
Highlands
Bankshares
|
9.81 | % | 10.18 | % | ||||||||
The
Grant County Bank
|
9.91 | % | 10.00 | % | 4.00 | % | ||||||
Capon
Valley Bank
|
8.38 | % | 9.11 | % | 4.00 | % | ||||||
Tier 1 Risk Based Capital
Ratio
|
||||||||||||
Highlands
Bankshares
|
13.08 | % | 12.98 | % | ||||||||
The
Grant County Bank
|
12.89 | % | 12.79 | % | 4.00 | % | ||||||
Capon
Valley Bank
|
11.60 | % | 11.52 | % | 4.00 | % |
Age
|
Position with the Company
|
Principal Occupation (Past Five
Years)
|
||||
C.E.
Porter
|
61
|
Chief
Executive Officer
|
CEO
of Highlands since 2004, President of The Grant County Bank since
1991
|
|||
Alan
L. Brill
|
55
|
Secretary
and Treasurer; President of Capon Valley Bank
|
President
of Capon Valley Bank since 2001
|
Item 1A.
|
Risk
Factors
|
Item 1B.
|
Unresolved
Staff Comments
|
Item 2.
|
Properties
|
Location
|
Description
|
3
N. Main Street, Petersburg, WV 26847
|
Primary
Office, The Grant County Bank
|
Route
33, Riverton, WV 26814
|
Branch
Office, The Grant County Bank
|
500
S. Main Street, Moorefield, WV 26836
|
Branch
Office, The Grant County Bank
|
Route
220 & Josie Dr., Keyser, WV 26726
|
Branch
Office, The Grant County Bank
|
Main
Street, Harman, WV 26270
|
Branch
Office, The Grant County Bank
|
William
Avenue, Davis, WV 26260
|
Branch
Office, The Grant County Bank
|
Route
32 & Cortland Rd., Davis, WV 26260
|
Branch
Office, The Grant County Bank
|
2
W. Main Street, Wardensville, WV 26851
|
Primary
Office, Capon Valley Bank
|
717
N. Main Street, Moorefield, WV 26836
|
Branch
Office, Capon Valley Bank
|
17558
SR55, Baker, WV 26801
|
Branch
Office, Capon Valley Bank
|
6701
Northwestern Pike, Gore, VA 22637
|
Branch
Office, Capon Valley Bank
|
5511
Main Street, Stephens City, VA 22655
|
Future
Branch Office, Capon Valley Bank
|
Item 3.
|
Legal
Proceedings
|
Item 4.
|
(Removed
and Reserved)
|
Item 5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
Highlands
Bankshares, Inc. Common Stock
|
||||||||||||
Estimated
Market Range
|
||||||||||||
Dividends Per Share
|
High
|
Low
|
||||||||||
2009
|
||||||||||||
First
Quarter
|
$ | .29 | $ | 35.00 | $ | 26.50 | ||||||
Second
Quarter
|
$ | .29 | $ | 27.65 | $ | 27.25 | ||||||
Third
Quarter
|
$ | .29 | $ | 27.50 | $ | 21.50 | ||||||
Fourth
Quarter
|
$ | .29 | $ | 22.50 | $ | 21.00 | ||||||
2008
|
||||||||||||
First
Quarter
|
$ | .27 | $ | 30.00 | $ | 27.00 | ||||||
Second
Quarter
|
$ | .27 | $ | 38.00 | $ | 27.75 | ||||||
Third
Quarter
|
$ | .27 | $ | 38.00 | $ | 31.00 | ||||||
Fourth
Quarter
|
$ | .27 | $ | 35.00 | $ | 29.00 |
Item 6.
|
Selected
Financial Data
|
Years
Ending December 31,
|
||||||||||||||||||||
(In
thousands of dollars, except for per share amounts)
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
Total
Interest Income
|
$ | 24,274 | $ | 26,203 | $ | 27,664 | $ | 23,894 | $ | 19,813 | ||||||||||
Total
Interest Expense
|
7,841 | 8,866 | 10,703 | 7,909 | 5,761 | |||||||||||||||
Net
Interest Income
|
16,433 | 17,337 | 16,961 | 15,985 | 14,052 | |||||||||||||||
Provision
for Loan Losses
|
1,864 | 909 | 837 | 682 | 875 | |||||||||||||||
Net
Interest Income After Provision for Loan Losses
|
14,569 | 16,428 | 16,124 | 15,303 | 13,177 | |||||||||||||||
Other
Income
|
2,532 | 2,699 | 2,080 | 1,997 | 1,669 | |||||||||||||||
Other
Expenses
|
12,053 | 11,419 | 10,952 | 10,394 | 9,128 | |||||||||||||||
Income
Before Income Taxes
|
5,048 | 7,708 | 7,252 | 6,906 | 5,718 | |||||||||||||||
Income
Tax Expense
|
1,692 | 2,738 | 2,599 | 2,391 | 1,916 | |||||||||||||||
Net
Income
|
$ | 3,356 | $ | 4,970 | $ | 4,653 | $ | 4,515 | $ | 3,802 | ||||||||||
Total
Assets at Year End
|
$ | 407,810 | $ | 378,295 | $ | 380,936 | $ | 357,316 | $ | 337,573 | ||||||||||
Long
Term Debt at Year End
|
$ | 10,866 | $ | 11,317 | $ | 11,819 | $ | 14,992 | $ | 15,063 | ||||||||||
Net
Income Per Share of Common Stock
|
$ | 2.51 | $ | 3.59 | $ | 3.24 | $ | 3.14 | $ | 2.65 | ||||||||||
Dividends
Per Share of Common Stock
|
$ | 1.16 | $ | 1.08 | $ | 1.00 | $ | .94 | $ | .82 | ||||||||||
Return
on Average Assets
|
0.84 | % | 1.32 | % | 1.24 | % | 1.29 | % | 1.21 | % | ||||||||||
Return
on Average Equity
|
8.33 | % | 12.38 | % | 12.03 | % | 12.67 | % | 11.53 | % | ||||||||||
Dividend
Payout Ratio
|
46.19 | % | 30.12 | % | 30.88 | % | 29.91 | % | 30.99 | % | ||||||||||
Year
End Equity to Assets Ratio
|
10.16 | % | 10.41 | % | 10.66 | % | 10.38 | % | 10.07 | % |
Item 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results or
Operations
|
2009
|
2008
|
|||||||
Annualized
return on average assets
|
0.84 | % | 1.32 | % | ||||
Annualized
return on average equity
|
8.33 | % | 12.38 | % | ||||
Net
interest margin (1)
|
4.50 | % | 4.97 | % | ||||
Efficiency
Ratio (2)
|
63.55 | % | 56.99 | % | ||||
Earnings
per share (3)
|
$ | 2.51 | $ | 3.59 |
Impact
of non- recurring item, year ended December 31,
|
||||||||||||
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
Description of non-recurring
item
|
||||||||||||
Gains
(losses) recorded on calls of securities available for
sale
|
$ | (7 | ) | $ | 110 | $ | (117 | ) | ||||
Gains
(losses) recorded on sale of other real estate owned
|
80 | 4 | 76 | |||||||||
Gain
on life insurance settlement
|
0 | 30 | (30 | ) | ||||||||
Net
gains recorded on sale of fixed assets
|
2 | 32 | (30 | ) | ||||||||
Total
impact of non-recurring items on non-interest income
|
$ | 75 | $ | 176 | $ | (101 | ) |
Due
to change in:
|
||||||||||||
Average Volume
|
Average Rate
|
Total Change
|
||||||||||
Interest Income
|
||||||||||||
Loans
|
$ | 1,146 | $ | (2,587 | ) | $ | (1,441 | ) | ||||
Taxable
investment securities
|
(19 | ) | (239 | ) | (258 | ) | ||||||
Non-taxable
investment securities
|
39 | (4 | ) | 35 | ||||||||
Interest
bearing deposits
|
(3 | ) | (34 | ) | (37 | ) | ||||||
Federal
funds sold
|
2 | (216 | ) | (214 | ) | |||||||
Total
Interest Income
|
1,165 | (3,080 | ) | (1,915 | ) | |||||||
Interest Expense
|
||||||||||||
Demand
deposits
|
(3 | ) | (0 | ) | (3 | ) | ||||||
Savings
deposits
|
2 | (193 | ) | (191 | ) | |||||||
Time
deposits
|
583 | (1,431 | ) | (848 | ) | |||||||
Borrowings
|
(5 | ) | 22 | 17 | ||||||||
Total
Interest Expense
|
577 | (1,602 | ) | (1,025 | ) | |||||||
Net
Interest Income
|
$ | 588 | $ | (1,478 | ) | $ | ( 890 | ) |
2009
|
2008
|
|||||||||||||||||||||||
Average
Balance
|
Income
/Expense
|
Yield
/Rate
|
Average
Balance
|
Income
/Expense
|
Yield
/Rate
|
|||||||||||||||||||
Earning
Assets
|
||||||||||||||||||||||||
Loans
|
$ | 331,740 | $ | 23,368 | 7.04 | % | $ | 315,473 | $ | 24,809 | 7.86 | % | ||||||||||||
Taxable
investment securities
|
20,180 | 729 | 3.61 | % | 20,745 | 987 | 4.76 | % | ||||||||||||||||
Non-taxable
investment securities
|
4,059 | 240 | 5.92 | % | 3,392 | 205 | 6.04 | % | ||||||||||||||||
Interest
bearing deposits
|
1,028 | 7 | .68 | % | 1,419 | 44 | 3.10 | % | ||||||||||||||||
Federal
funds sold
|
10,288 | 20 | .19 | % | 9,354 | 234 | 2.50 | % | ||||||||||||||||
Total
Earning Assets
|
367,295 | 24,364 | 6.63 | % | 350,383 | 26,279 | 7.50 | % | ||||||||||||||||
Allowance
for loan losses
|
(3,755 | ) | (3,637 | ) | ||||||||||||||||||||
Other
non-earning assets
|
34,097 | 30,276 | ||||||||||||||||||||||
Total
Assets
|
$ | 397,637 | $ | 377,022 | ||||||||||||||||||||
Interest
Bearing Liabilities
|
||||||||||||||||||||||||
Demand
deposits
|
$ | 22,430 | $ | 74 | .33 | % | $ | 23,258 | $ | 77 | .33 | % | ||||||||||||
Savings
deposits
|
49,618 | 192 | .39 | % | 49,363 | 383 | .78 | % | ||||||||||||||||
Time
deposits
|
213,483 | 7,049 | 3.30 | % | 195,963 | 7,897 | 4.03 | % | ||||||||||||||||
Overnight
and other short-term debt
|
1,407 | 7 | 0.50 | % | 1,412 | 19 | 1.35 | % | ||||||||||||||||
Long-term
debt
|
11,237 | 519 | 4.62 | % | 11,357 | 490 | 4.31 | % | ||||||||||||||||
Total
Interest Bearing Liabilities
|
298,175 | 7,841 | 2.63 | % | 281,353 | 8,866 | 3.15 | % | ||||||||||||||||
Demand
deposits
|
50,650 | 49,827 | ||||||||||||||||||||||
Other
liabilities
|
8,524 | 5,711 | ||||||||||||||||||||||
Stockholders’
equity
|
40,288 | 40,131 | ||||||||||||||||||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 397,637 | $ | 377,022 | ||||||||||||||||||||
Net
Interest Income
|
$ | 16,523 | $ | 17,413 | ||||||||||||||||||||
Net
Yield on Earning Assets
|
4.50 | % | 4.97 | % | ||||||||||||||||||||
Notes:
|
At
December 31,
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
Real
estate mortgage
|
$ | 162,619 | $ | 156,877 | $ | 169,122 | $ | 164,243 | $ | 153,646 | ||||||||||
Real
estate construction
|
30,759 | 27,210 | 15,560 | 14,828 | 12,201 | |||||||||||||||
Commercial
|
97,606 | 97,709 | 79,892 | 70,408 | 57,908 | |||||||||||||||
Installment
|
44,499 | 43,958 | 45,625 | 43,337 | 46,265 | |||||||||||||||
Total
Loans
|
335,483 | 325,754 | 310,199 | 292,816 | 270,020 | |||||||||||||||
Allowance
for loan losses
|
(4,021 | ) | (3,667 | ) | (3,577 | ) | (3,482 | ) | (3,129 | ) | ||||||||||
Net
Loans
|
$ | 331,462 | $ | 322,087 | $ | 306,622 | $ | 289,334 | $ | 266,891 |
Maturity
Range
|
||||||||||||||||
Less than 1 Year
|
1-5 Years
|
Over 5 Years
|
Total
|
|||||||||||||
Loan Type
|
|
|||||||||||||||
Commercial
|
$ | 34,241 | $ | 20,615 | $ | 42,750 | $ | 97,606 | ||||||||
Real
estate mortgage and construction
|
61,927 | 42,567 | 88,884 | 193,378 | ||||||||||||
Installment
|
14,017 | 25,287 | 5,195 | 44,499 | ||||||||||||
Total
Loans
|
$ | 110,185 | $ | 88,469 | $ | 136,829 | $ | 335,483 |
At
December 31,
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
Loans
accounted for on a non-accrual basis
|
||||||||||||||||||||
Consumer
|
$ | 269 | $ | 180 | $ | 71 | $ | 83 | $ | 124 | ||||||||||
Commercial
|
90 | 0 | 0 | 0 | 0 | |||||||||||||||
Real
estate
|
2,208 | 1,166 | 845 | 161 | 619 | |||||||||||||||
Total
Non-accrual Loans
|
2,567 | 1,346 | 916 | 244 | 743 | |||||||||||||||
Restructured
Loans
|
1,836 | 705 | 198 | 0 | 0 | |||||||||||||||
Loans
delinquent 90 days or more
|
||||||||||||||||||||
Consumer
|
167 | 575 | 497 | 122 | 74 | |||||||||||||||
Commercial
|
90 | 65 | 3 | 0 | 966 | |||||||||||||||
Real
estate
|
1,935 | 2,832 | 1,744 | 1,335 | 149 | |||||||||||||||
Total
delinquent loans
|
2,192 | 3,472 | 2,244 | 1,457 | 1,189 | |||||||||||||||
Total
Non-performing loans
|
$ | 6,595 | $ | 5,523 | $ | 3,358 | $ | 1,701 | $ | 1,932 |
December
31, 2009
|
||||||||
Identified
|
||||||||
Loan Type
|
Balance
|
Impairment
|
||||||
Consumer
mortgage
|
$ | 2,124 | $ | 335 | ||||
Commercial
|
276 | 66 | ||||||
Commercial
mortgage
|
689 | 87 | ||||||
Installment
|
336 | 174 | ||||||
$ | 3,425 | $ | 662 |
Dollars
|
Percent of Total
|
|||||||
Commercial
|
$ | 1,180 | 31 | % | ||||
Real
Estate
|
631 | 16 | % | |||||
Consumer
|
2,031 | 53 | % | |||||
Total
|
$ | 3,842 |
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
Balance
at beginning of period
|
$ | 3,667 | $ | 3,577 | $ | 3,482 | $ | 3,129 | $ | 2,530 | ||||||||||
Charge-offs:
|
||||||||||||||||||||
Commercial
loans
|
492 | 198 | 540 | 27 | 45 | |||||||||||||||
Real
estate loans
|
445 | 228 | 47 | 1 | 8 | |||||||||||||||
Consumer
loans
|
863 | 524 | 494 | 551 | 567 | |||||||||||||||
Total
Charge-offs:
|
1,800 | 950 | 1,081 | 579 | 620 | |||||||||||||||
Recoveries:
|
||||||||||||||||||||
Commercial
loans
|
10 | 20 | 59 | 5 | 28 | |||||||||||||||
Real
estate loans
|
72 | 2 | 4 | 20 | 0 | |||||||||||||||
Consumer
loans
|
208 | 109 | 276 | 225 | 150 | |||||||||||||||
Total
Recoveries
|
290 | 131 | 339 | 250 | 178 | |||||||||||||||
Net
Charge-offs
|
1,510 | 819 | 742 | 329 | 442 | |||||||||||||||
Provision
for loan losses
|
1,864 | 909 | 837 | 682 | 875 | |||||||||||||||
Other
additions
|
0 | 0 | 0 | 0 | 166 | |||||||||||||||
Balance
at end of period
|
$ | 4,021 | $ | 3,667 | $ | 3,577 | $ | 3,482 | $ | 3,129 | ||||||||||
Percent
of net charge-offs to average net loans outstanding during the
period
|
.46 | % | .26 | % | .24 | % | .11 | % | .17 | % |
At
December 31,
|
||||||||||||||||||||||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||||||||||||||||||||||
Amount
|
Percent
of
Loans
|
Amount
|
Percent
of
Loans
|
Amount
|
Percent
of
Loans
|
Amount
|
Percent
of
Loans
|
Amount
|
Percent
of
Loans
|
|||||||||||||||||||||||||||||||
Commercial
|
$ | 1,669 | 29 | % | $ | 1,349 | 30 | % | $ | 1,140 | 26 | % | $ | 1,492 | 24 | % | $ | 900 | 21 | % | ||||||||||||||||||||
Mortgage
|
1,034 | 58 | % | 994 | 57 | % | 1,200 | 59 | % | 996 | 61 | % | 1,139 | 62 | % | |||||||||||||||||||||||||
Consumer
|
1,220 | 13 | % | 1,285 | 13 | % | 1,172 | 15 | % | 967 | 15 | % | 1,082 | 17 | % | |||||||||||||||||||||||||
Unallocated
|
98 | 39 | 65 | 27 | 8 | |||||||||||||||||||||||||||||||||||
Totals
|
$ | 4,021 | 100 | % | $ | 3,667 | 100 | % | $ | 3,577 | 100 | % | $ | 3,482 | 100 | % | $ | 3,129 | 100 | % |
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
Revenues
|
||||||||||||
Gross
commissions and insurance revenues
|
$ | 195 | $ | 303 | $ | (108 | ) | |||||
Expenses
|
||||||||||||
Benefits
Paid
|
44 | 23 | 21 | |||||||||
Changes
in required policy and claim reserves
|
(90 | ) | (38 | ) | (52 | ) | ||||||
Expense
allowance
|
89 | 107 | (18 | ) | ||||||||
Total
Expenses
|
43 | 92 | (49 | ) | ||||||||
Net
insurance income
|
$ | 152 | $ | 211 | $ | 59 |
Salary
and Benefits Expense
|
||||||||||||
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
Employee
salaries
|
$ | 4,443 | $ | 4,198 | $ | 245 | ||||||
Employee
benefit insurance
|
976 | 878 | 98 | |||||||||
Payroll
taxes
|
352 | 346 | 6 | |||||||||
Post
retirement plans
|
803 | 866 | (63 | ) | ||||||||
Total
|
$ | 6,574 | $ | 6,288 | $ | 286 |
Amount
|
||||
Changes
due to increase in average cost per full time equivalent
employee
|
$ | 443 | ||
Changes
due to decrease in the average full time equivalent employees for the
periods
|
(198 | ) | ||
Total
increase in salary expense
|
$ | 245 |
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
Depreciation
of buildings and equipment
|
$ | 672 | $ | 702 | $ | (30 | ) | |||||
Maintenance
expense on buildings and equipment
|
401 | 439 | (38 | ) | ||||||||
Utilities
expense
|
121 | 94 | 27 | |||||||||
Real
estate and personal property tax
|
101 | 88 | 13 | |||||||||
Other
expense related to occupancy and equipment
|
90 | 95 | (5 | ) | ||||||||
Total
occupancy and equipment expense
|
$ | 1,385 | $ | 1,418 | $ | (33 | ) |
2009
|
2008
|
Increase
(Decrease)
|
||||||||||
Office
supplies and postage & freight expense
|
487 | 502 | (15 | ) | ||||||||
ATM
expense
|
192 | 193 | (1 | ) | ||||||||
Advertising
and marketing expense
|
159 | 189 | (30 | ) | ||||||||
Amortization
of intangible assets
|
194 | 182 | 12 | |||||||||
Franchise
taxes
|
110 | 125 | (15 | ) | ||||||||
FDIC
assessment
|
576 | 77 | 499 | |||||||||
Miscellaneous
components of other non-interest expense
|
836 | 782 | 54 | |||||||||
Total
|
$ | 2,554 | $ | 2,050 | $ | 504 |
Available
for Sale
Carrying
Value
December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
U.S.
Treasuries and Agencies
|
$ | 12,426 | $ | 7,726 | $ | 15,245 | ||||||
Mortgage
backed securities
|
5,836 | 10,342 | 7,784 | |||||||||
State
and municipals
|
3,946 | 3,609 | 3,039 | |||||||||
Certificates
of deposit
|
4,703 | 0 | 0 | |||||||||
Marketable
equities
|
25 | 15 | 22 | |||||||||
Total
|
$ | 26,936 | $ | 21,692 | $ | 26,090 |
Amortized Cost
|
Fair Value
|
Equivalent Average Yield
|
||||||||||
Securities
Available for Sale
|
||||||||||||
Due
in 3 months through one year
|
$ | 4,329 | $ | 4,385 | 2.64 | % | ||||||
Due
after one year through five
|
16,124 | 16,365 | 2.20 | % | ||||||||
Due
five years through ten years
|
325 | 326 | 4.47 | % | ||||||||
Mortgage
backed securities
|
5,630 | 5,835 | 5.06 | % | ||||||||
Equity
securities with no maturity
|
15 | 25 | ||||||||||
Total
Available For Sale
|
$ | 26,423 | $ | 26,936 | 2.91 | % |
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Market
Value
|
||||||||||||||||
Ratings
Provided by Ratings Agencies
|
|||||||||||||||||||
Moody’s
|
S&P
|
||||||||||||||||||
U.S. Treasuries and
Agencies
|
|||||||||||||||||||
Aaa
|
AAA
|
$ | 12,250 | $ | 177 | $ | 1 | $ | 12,426 | ||||||||||
Mortgage Backed Securities
|
|||||||||||||||||||
Aaa
|
AAA
|
$ | 5,630 | $ | 206 | $ | 0 | $ | 5,836 | ||||||||||
State and Municipals
|
|||||||||||||||||||
Aaa
|
AA+
|
$ | 2,026 | $ | 41 | $ | 0 | $ | 2,067 | ||||||||||
Aa3
|
AAA
|
335 | 23 | 0 | 358 | ||||||||||||||
Aa3
|
A+ | 511 | 40 | 0 | 551 | ||||||||||||||
Aa3
|
No
Rating
|
140 | 7 | 0 | 147 | ||||||||||||||
A3
|
No
Rating
|
140 | 1 | 0 | 141 | ||||||||||||||
Baa1
|
A | 130 | 0 | 0 | 130 | ||||||||||||||
No
Rating
|
No
Rating
|
550 | 2 | 0 | 552 | ||||||||||||||
Marketable Equities
|
|||||||||||||||||||
No
Rating
|
$ | 15 | $ | 10 | $ | 0 | $ | 25 |
At
December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Three
months or less
|
$ | 11,133 | $ | 12,136 | $ | 19,609 | ||||||
Four
to twelve months
|
36,512 | 32,828 | 30,204 | |||||||||
One
year to three years
|
23,447 | 14,127 | 10,067 | |||||||||
Four
years to five years
|
4,504 | 5,688 | 5,606 | |||||||||
Total
|
$ | 75,596 | $ | 64,779 | $ | 65,486 |
Item 8.
|
Financial
Statements and Supplementary Data
|
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ | 7,062 | $ | 7,589 | ||||
Interest
bearing deposits in banks
|
1,880 | 502 | ||||||
Federal
funds sold
|
8,936 | 160 | ||||||
Investment
securities available for sale
|
26,936 | 21,692 | ||||||
Restricted
investments
|
2,185 | 2,177 | ||||||
Loans
|
335,483 | 325,754 | ||||||
Allowance
for loan losses
|
(4,021 | ) | (3,667 | ) | ||||
Bank
premises and equipment
|
9,326 | 8,031 | ||||||
Interest
receivable
|
1,908 | 2,164 | ||||||
Investment
in life insurance contracts
|
6,755 | 6,499 | ||||||
Foreclosed
Assets
|
3,223 | 1,359 | ||||||
Goodwill
|
1,534 | 1,534 | ||||||
Other
intangible assets
|
1,020 | 1,215 | ||||||
Other
assets
|
5,583 | 3,286 | ||||||
Total
Assets
|
$ | 407,810 | $ | 378,295 | ||||
LIABILITIES
|
||||||||
Deposits
|
||||||||
Non-interest
bearing deposits
|
$ | 52,378 | $ | 49,604 | ||||
Interest
bearing transaction and savings accounts
|
73,053 | 68,610 | ||||||
Time
deposits over $100,000
|
75,596 | 64,779 | ||||||
All
other time deposits
|
148,850 | 133,294 | ||||||
Total
Deposits
|
349,877 | 316,287 | ||||||
Overnight
and other short-term debt instruments
|
0 | 4,800 | ||||||
Long-term
debt instruments
|
10,866 | 11,317 | ||||||
Accrued
expenses and other liabilities
|
5,645 | 6,492 | ||||||
Total
Liabilities
|
366,388 | 338,896 | ||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Common
Stock, $5 par value, 3,000,000 shares authorized, 1,436,874
shares issued
|
7,184 | 7,184 | ||||||
Surplus
|
1,662 | 1,662 | ||||||
Treasury
stock (100,001 shares, at cost)
|
(3,372 | ) | (3,372 | ) | ||||
Retained
earnings
|
36,963 | 35,157 | ||||||
Accumulated
other comprehensive loss
|
(1,015 | ) | (1,232 | ) | ||||
Total
Stockholders’ Equity
|
41,422 | 39,399 | ||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 407,810 | $ | 378,295 |
2009
|
2008
|
|||||||
Interest
and Dividend Income
|
||||||||
Loans,
including fees
|
$ | 23,368 | $ | 24,809 | ||||
Federal
funds sold
|
20 | 234 | ||||||
Interest
bearing deposits
|
7 | 44 | ||||||
Investment
securities
|
879 | 1,116 | ||||||
Total
Interest Income
|
24,274 | 26,203 | ||||||
Interest
Expense
|
||||||||
Interest
on deposits
|
7,315 | 8,357 | ||||||
Interest
on overnight and other short term debt instruments
|
7 | 19 | ||||||
Interest
on long term debt instruments
|
519 | 490 | ||||||
Total
Interest Expense
|
7,841 | 8,866 | ||||||
Net
Interest Income
|
16,433 | 17,337 | ||||||
Provision
for Loan Losses
|
1,864 | 909 | ||||||
Net
Interest Income after Provision for Loan Losses
|
14,569 | 16,428 | ||||||
Non-interest
Income
|
||||||||
Service
charges
|
1,718 | 1,746 | ||||||
Life
insurance investment income
|
233 | 281 | ||||||
Gain
(loss) on securities transactions
|
(7 | ) | 110 | |||||
Gain
on sale of foreclosed property
|
80 | 4 | ||||||
Gain
on sale of fixed assets
|
2 | 32 | ||||||
Other
operating income
|
506 | 526 | ||||||
Total
Non-interest Income
|
2,532 | 2,699 | ||||||
Non-interest
Expenses
|
||||||||
Salaries
and benefits
|
6,574 | 6,288 | ||||||
Occupancy
and equipment expense
|
1,385 | 1,418 | ||||||
Data
processing expense
|
680 | 842 | ||||||
Legal
and professional fees
|
457 | 465 | ||||||
Directors
fees
|
403 | 356 | ||||||
Other
operating expenses
|
2,554 | 2,050 | ||||||
Total
Non-interest Expenses
|
12,053 | 11,419 | ||||||
Income
Before Income Tax Expense
|
5,048 | 7,708 | ||||||
Income
Tax Expense
|
1,692 | 2,738 | ||||||
Net
Income
|
$ | 3,356 | $ | 4,970 | ||||
Earnings
Per Weighted Average Share Outstanding
|
$ | 2.51 | $ | 3.59 | ||||
Dividends
Per Share
|
$ | 1.16 | $ | 1.08 | ||||
Weighted
Average Shares Outstanding
|
1,336,873 | 1,383,214 |
Common Stock
|
Surplus
|
Treasury Stock
|
Retained Earnings
|
Accumulated Other Comprehensive Income
(Loss)
|
Total
|
|||||||||||||||||||
Balances
at January 1, 2008
|
$ | 7,184 | $ | 1,662 | $ | 0 | $ | 32,032 | $ | (285 | ) | $ | 40,593 | |||||||||||
Cumulative
effect adjustment to
Retained
earnings for change in
Accounting
principle
|
(348 | ) | (348 | ) | ||||||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
4,970 | 4,970 | ||||||||||||||||||||||
Change
in other comprehensive income
|
(947 | ) | (947 | ) | ||||||||||||||||||||
Total
comprehensive income
|
4,023 | |||||||||||||||||||||||
Purchase
of treasury stock
|
(3,372 | ) | (3,372 | ) | ||||||||||||||||||||
Cash
dividends
|
(1,497 | ) | (1,497 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Balances
at December 31, 2008
|
7,184 | 1,662 | (3,372 | ) | 35,157 | (1,232 | ) | 39,399 | ||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||
Net
income
|
3,356 | 3,356 | ||||||||||||||||||||||
Change
in other comprehensive income
|
217 | 217 | ||||||||||||||||||||||
Total
comprehensive income
|
3,573 | |||||||||||||||||||||||
Cash
dividends
|
(1,550 | ) | (1,550 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Balances
at December 31, 2009
|
$ | 7,184 | $ | 1,662 | $ | (3,372 | ) | $ | 36,963 | $ | (1,015 | ) | $ | 41,422 |
Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
Income
|
$ | 3,356 | $ | 4,970 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||
(Gain)
loss on securities transactions
|
7 | (110 | ) | |||||
(Gain)
on sale of property and equipment
|
(2 | ) | (32 | ) | ||||
(Gain)
on sale of OREO
|
(80 | ) | (4 | ) | ||||
Depreciation
|
672 | 702 | ||||||
Income
from life insurance contracts
|
(233 | ) | (281 | ) | ||||
Net
amortization of securities premiums
|
95 | 32 | ||||||
Provision
for loan losses
|
1,864 | 909 | ||||||
Write-down
on OREO property
|
107 | 0 | ||||||
Deferred
income tax expense (benefit)
|
120 | (65 | ) | |||||
Amortization
of intangibles
|
195 | 182 | ||||||
Decrease
in interest receivable
|
256 | 109 | ||||||
Increase
in other assets
|
(2,348 | ) | (2,284 | ) | ||||
Increase
(decrease) in accrued expenses
|
(881 | ) | 946 | |||||
Net
purchase of intangible assets
|
0 | 175 | ||||||
Net
Cash Provided by Operating Activities
|
3,128 | 5,248 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds
from sale of OREO and fixed assets
|
1,095 | 46 | ||||||
Proceeds
from maturity of securities available for sale
|
12,357 | 17,096 | ||||||
Purchase
of securities available for sale
|
(17,542 | ) | (12,537 | ) | ||||
Net
change in other investments
|
(9 | ) | (679 | ) | ||||
Net
change in interest bearing deposits in other banks
|
(1,378 | ) | 1,351 | |||||
Net
change in federal funds sold
|
(8,776 | ) | 14,086 | |||||
Net
increase in loans
|
(14,224 | ) | (16,374 | ) | ||||
Settlement
on insurance contract, net of gain
|
0 | 82 | ||||||
Purchase
of property and equipment
|
(1,967 | ) | (643 | ) | ||||
Net
Cash Provided by (Used in) Investing Activities
|
(30,444 | ) | 2,428 | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Net
change in time deposits
|
26,373 | (3,324 | ) | |||||
Net
change in other deposit accounts
|
7,217 | (4,127 | ) | |||||
Additional
long-term debt
|
0 | 1,500 | ||||||
Repayment
of long-term debt
|
(451 | ) | (2,002 | ) | ||||
Additional
(repayment of) short-term borrowings
|
(4,800 | ) | 4,800 | |||||
Purchase
of treasury stock
|
0 | (3,372 | ) | |||||
Dividends
paid in cash
|
(1,550 | ) | (1,497 | ) | ||||
Net
Cash Provided by (Used in) Financing Activities
|
26,789 | (8,022 | ) | |||||
CASH
AND CASH EQUIVALENTS
|
||||||||
Net
(decrease) in cash and due from banks
|
(527 | ) | (346 | ) | ||||
Cash
and due from banks, beginning of year
|
7,589 | 7,935 | ||||||
Cash
and due from banks, end of year
|
$ | 7,062 | $ | 7,589 | ||||
Supplemental
Disclosures, Cash Paid For:
|
||||||||
Interest
Expense
|
$ | 8,028 | $ | 9,147 | ||||
Income
Taxes
|
$ | 1,511 | $ | 2,827 |
(a)
|
Principles
of Consolidation
|
(b)
|
Use
of Estimates in the Preparation of Financial
Statements
|
(c)
|
Cash
and Cash Equivalents
|
(d)
|
Foreclosed
Real Estate
|
(e)
|
Loans
|
(f)
|
Securities
|
(g)
|
Allowance
For Loan Losses
|
(h)
|
Per
Share Calculations
|
(i)
|
Bank
Premises and Equipment
|
(j)
|
Comprehensive
Income
|
(k)
|
Bank
Owned Life Insurance Contracts
|
(l)
|
Advertising
|
(m)
|
Goodwill
and Other Intangible Assets
|
(n)
|
Income
Taxes
|
(o)
|
Reclassifications
|
(p)
|
Recent
Accounting Standards
|
Year
Ended December 31
|
||||||||
2009
|
2008
|
|||||||
Investment
securities, taxable
|
$ | 728 | $ | 987 | ||||
Investment
securities, non-taxable
|
151 | 129 |
Available
for Sale Securities
|
||||||||||||||||
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair Value
|
|||||||||||||
December
31, 2009
|
||||||||||||||||
U.S.
Treasuries and Agencies
|
$ | 12,250 | $ | 177 | $ | 1 | $ | 12,426 | ||||||||
Mortgage
backed securities
|
5,630 | 206 | 0 | 5,836 | ||||||||||||
State
and municipals
|
3,832 | 114 | 0 | 3,946 | ||||||||||||
Certificates
of deposit
|
4,696 | 9 | 2 | 4,703 | ||||||||||||
Marketable
equities
|
15 | 10 | 0 | 25 | ||||||||||||
Total
Securities Available for Sale
|
$ | 26,423 | $ | 516 | $ | 3 | $ | 26,936 | ||||||||
December
31, 2008
|
||||||||||||||||
U.S.
Treasuries and Agencies
|
$ | 7,504 | $ | 222 | $ | 0 | $ | 7,726 | ||||||||
Mortgage
backed securities
|
10,211 | 148 | 17 | 10,342 | ||||||||||||
State
and municipals
|
3,596 | 29 | 16 | 3,609 | ||||||||||||
Marketable
equities
|
28 | --- | 13 | 15 | ||||||||||||
Total
Securities Available for Sale
|
$ | 21,339 | $ | 399 | $ | 46 | $ | 21,692 |
Securities
Available for Sale
|
||||||||
Amortized Cost
|
Fair Value
|
|||||||
Due
in one year or less
|
$ | 4,329 | $ | 4,386 | ||||
Due
after one year through five years
|
16,124 | 16,363 | ||||||
Due
after five years through ten years
|
325 | 326 | ||||||
Mortgage
backed securities
|
5,630 | 5,836 | ||||||
Equity
securities with no maturity
|
15 | 25 | ||||||
Total
Securities Available for Sale
|
$ | 26,423 | $ | 26,936 |
Total
|
Less
than 12 Months
|
12
Months or Greater
|
||||||||||||||||||||||
Fair
Value
|
Gross
Unrealized Losses
|
Fair
Value
|
Gross
Unrealized Losses
|
Fair
Value
|
Gross
Unrealized Losses
|
|||||||||||||||||||
December
31, 2009
|
||||||||||||||||||||||||
Investment
Category
|
||||||||||||||||||||||||
U.S.
Treasuries and Agencies
|
$ | 999 | $ | (1 | ) | $ | 999 | $ | (1 | ) | $ | 0 | $ | (0 | ) | |||||||||
Mortgage
backed securities
|
24 | (0 | ) | 24 | 0 | 0 | (0 | ) | ||||||||||||||||
Certificates
of deposit
|
246 | (2 | ) | 246 | (2 | ) | 0 | (0 | ) | |||||||||||||||
Marketable
equities
|
0 | (0 | ) | 0 | (0 | ) | 0 | (0 | ) | |||||||||||||||
Total
|
$ | 1,269 | $ | (3 | ) | $ | 1,269 | $ | (3 | ) | $ | 0 | $ | (0 | ) | |||||||||
December
31, 2008
|
||||||||||||||||||||||||
Investment
Category
|
||||||||||||||||||||||||
U.S.
Treasuries and Agencies
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Mortgage
backed securities
|
1,225 | (17 | ) | 1,156 | (16 | ) | 69 | (1 | ) | |||||||||||||||
State
and municipals
|
1,908 | (16 | ) | 1,708 | (15 | ) | 200 | (1 | ) | |||||||||||||||
Marketable
equities
|
15 | (13 | ) | 0 | 0 | 15 | (13 | ) | ||||||||||||||||
Total
|
$ | 3,148 | $ | (46 | ) | $ | 2,864 | $ | (31 | ) | $ | 284 | $ | (15 | ) |
Total
|
Loss
Position less than 12
Months
|
Loss
Position greater than 12
Months
|
||||||||||
U.S.
Treasuries and Agencies
|
1 | 1 | 0 | |||||||||
Mortgage
backed securities
|
2 | 2 | 0 | |||||||||
Certificates
of deposit
|
1 | 1 | 0 | |||||||||
Total
|
4 | 4 | 0 |
2009
|
2008
|
|||||||
Commercial
|
$ | 97,606 | $ | 97,709 | ||||
Real
Estate Construction
|
30,759 | 27,210 | ||||||
Real
Estate Mortgage
|
162,619 | 156,877 | ||||||
Consumer
Installment
|
44,499 | 43,958 | ||||||
Total
Loans
|
$ | 335,483 | $ | 325,754 |
2009
|
2008
|
|||||||
Year
end balance, impaired loans
|
$ | 3,425 | $ | 3,841 | ||||
Allowance
for impairments, year end
|
662 | 272 | ||||||
Average
balance impaired loans, year ended December 31
|
3,691 | 2,333 | ||||||
Income
recorded on impaired loans, year ended December 31
|
246 | 179 |
2009
|
2008
|
|||||||
Non-accrual
loans at year end
|
$ | 2,567 | $ | 1,346 | ||||
Loans
past due ninety days or greater and still accruing interest at year
end
|
2,192 | 3,472 |
2009
|
2008
|
|||||||
Balance
at beginning of year
|
$ | 3,667 | $ | 3,577 | ||||
Provision
charged to operating expenses
|
1,864 | 909 | ||||||
Loan
recoveries
|
290 | 131 | ||||||
Loans
charged off
|
(1,800 | ) | (950 | ) | ||||
Balance
at end of year
|
$ | 4,021 | $ | 3,667 | ||||
Allowance
for Loan Losses as percentage of outstanding loans at year
end
|
1.20 | % | 1.13 | % |
2009
|
2008
|
|||||||
Land
|
$ | 2,227 | $ | 1,528 | ||||
Buildings
and improvements
|
8,736 | 8,288 | ||||||
Furniture
and equipment
|
5,519 | 4,915 | ||||||
Total
Cost
|
16,482 | 14,731 | ||||||
Less
accumulated depreciation
|
(7,156 | ) | (6,700 | ) | ||||
Net
Book Value
|
$ | 9,326 | $ | 8,031 |
Year
|
Provision
for Depreciation
|
|||
2009
|
$ | 672 | ||
2008
|
702 |
Year
|
Amount Maturing
|
|||
2010
|
$ | 137,548 | ||
2011
|
58,643 | |||
2012
|
15,998 | |||
2013
|
7,057 | |||
2014
|
5,100 | |||
2015
|
100 | |||
Total
|
$ | 224,446 |
2009
|
2008
|
|||||||
Loans
to related parties, beginning of year
|
$ | 8,384 | $ | 5,236 | ||||
New
loans
|
809 | 3,989 | ||||||
Repayments
|
(881 | ) | (841 | ) | ||||
Loans
to related parties, end of year
|
$ | 8,312 | $ | 8,384 |
Year
|
Balance
|
|||
2010
|
$ | 1,473 | ||
2011
|
1,255 | |||
2012
|
5,695 | |||
2013
|
289 | |||
2014
|
622 | |||
Thereafter
|
1,532 | |||
Total
|
$ | 10,866 |
2009
|
2008
|
|||||||
Current
Expense
|
||||||||
Federal
|
$ | 1,356 | $ | 2,433 | ||||
State
|
216 | 370 | ||||||
Total
Current Expense
|
1,572 | 2,803 | ||||||
Deferred
Expense (Benefit)
|
||||||||
Federal
|
110 | (60 | ) | |||||
State
|
10 | (5 | ) | |||||
Total
Current Expense (Benefit)
|
120 | (65 | ) | |||||
Income
Tax Expense
|
$ | 1,692 | $ | 2,738 |
2009
|
2008
|
|||||||
Provision
for loan losses
|
$ | (119 | ) | $ | (61 | ) | ||
Depreciation
|
93 | 13 | ||||||
Deferred
compensation
|
135 | 18 | ||||||
Loss
carry forward
|
0 | 0 | ||||||
Miscellaneous
|
11 | (35 | ) | |||||
Net
increase in deferred income tax benefit
|
$ | 120 | $ | (65 | ) |
2009
|
2008
|
|||||||
Deferred
Tax Assets
|
||||||||
Provision
for loan losses
|
$ | 1,204 | $ | 1,086 | ||||
Insurance
commissions
|
24 | 35 | ||||||
Deferred
compensation
|
938 | 932 | ||||||
Pension
obligation
|
466 | 677 | ||||||
Other
|
2 | 0 | ||||||
Total
Assets
|
2,634 | 2,730 | ||||||
Deferred
Tax Liabilities
|
||||||||
Accretion
income
|
10 | 9 | ||||||
Unrealized
gains on securities available for sale
|
190 | 131 | ||||||
Depreciation
|
462 | 362 | ||||||
Other
|
0 | 6 | ||||||
Total
Liabilities
|
662 | 508 | ||||||
Net
Deferred Tax Asset
|
$ | 1,972 | $ | 2,222 |
2009
|
2008
|
|||||||
Amounts
at federal statutory rates
|
$ | 1,716 | $ | 2,621 | ||||
Additions
(reductions) resulting from:
|
||||||||
Tax
exempt income
|
(104 | ) | (64 | ) | ||||
Partially
exempt income
|
(28 | ) | (34 | ) | ||||
State
income taxes, net
|
170 | 233 | ||||||
Income
from life insurance contracts
|
(94 | ) | (87 | ) | ||||
Non
deductible income related to branch acquisitions
|
65 | 66 | ||||||
Other
|
(33 | ) | 3 | |||||
Income
tax expense
|
$ | 1,692 | $ | 2,738 |
2009
|
2008
|
|||||||
Change in Benefit
Obligation
|
||||||||
Benefit
obligation, beginning
|
$ | 4,492 | $ | 3,859 | ||||
Service
Cost
|
168 | 179 | ||||||
Interest
Cost
|
276 | 283 | ||||||
Actuarial
Loss (Gain)
|
281 | 260 | ||||||
Benefits
Paid
|
(81 | ) | (89 | ) | ||||
Benefit
obligation, ending
|
$ | 5,136 | $ | 4,492 | ||||
Accumulated
Benefit Obligation
|
$ | 4,261 | $ | 3,858 | ||||
Change in Plan Assets
|
||||||||
Fair
value of assets, beginning
|
$ | 2,650 | $ | 3,335 | ||||
Actual
return on assets, net of administrative expenses
|
699 | (1,042 | ) | |||||
Employer
contributions
|
590 | 446 | ||||||
Benefits
paid
|
(81 | ) | (89 | ) | ||||
Fair
value of assets, ending
|
$ | 3,858 | $ | 2,650 | ||||
Funded Status
|
||||||||
Fair
value of plan assets
|
$ | 3,858 | $ | 2,650 | ||||
Projected
benefit obligation
|
5,136 | 4,492 | ||||||
Funded
status
|
(1,278 | ) | (1,842 | ) | ||||
Liabilities
Recognized in the Statement of Financial Position
|
$ | (1,278 | ) | $ | (1,842 | ) | ||
Amounts
Recognized in Accumulated Other Comprehensive Income
|
||||||||
Prior
Service Cost
|
$ | 0 | $ | 0 | ||||
Net
(Gain)/Loss
|
2,124 | 2,310 | ||||||
Total
|
$ | 2,124 | $ | 2,310 |
2009
|
2008
|
|||||||
Service
cost
|
$ | 168 | $ | 154 | ||||
Interest
cost
|
276 | 243 | ||||||
Expected
return on plan assets
|
(306 | ) | (294 | ) | ||||
Recognized
net actuarial loss
|
47 | 47 | ||||||
Amortization
of prior service cost
|
0 | 3 | ||||||
Adjustment
due to change in measurement date
|
25 | 25 | ||||||
Net
Periodic Pension Expense
|
$ | 210 | $ | 178 |
Year
|
Expected
Benefit Payments
|
|||
2010
|
$ | 169 | ||
2011
|
198 | |||
2012
|
213 | |||
2013
|
262 | |||
2014
|
360 | |||
Years
2015 – 2019
|
1,956 |
2009
|
2008
|
|||||||
Discount
rate
|
6.25 | % | 6.25 | % | ||||
Expected
return on plan assets
|
8.00 | % | 8.00 | % | ||||
Rate
of compensation increase
|
3.00 | % | 3.00 | % |
2009
|
2008
|
|||||||
Equity
Securities
|
63 | % | 64 | % | ||||
Debt
Securities
|
32 | % | 30 | % | ||||
Other
|
5 | % | 6 | % |
Target Allocation
|
Allowable Allocation Range
|
|||||||
Equity
Securities
|
70 | % | 40%-80 | % | ||||
Debt
Securities
|
25 | % | 20%-40 | % | ||||
Other
|
5 | % | 3%-10 | % |
Fair Value Measurements
Using
|
||||||||||||||||
Balance
as of December 31,
|
Quoted
Prices In Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||||||
Asset Category
|
2009
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Cash
and cash equivalents
|
$ | 193 | $ | 193 | $ | 0 | $ | 0 | ||||||||
Equity
securities:
|
||||||||||||||||
U.S.
Companies
|
1,814 | 1,814 | ||||||||||||||
International
Companies
|
425 | 425 | ||||||||||||||
Debt
Securities
|
1,233 | 1,233 | ||||||||||||||
Real
Estate
|
193 | 193 |
2009
|
2008
|
|||||||
Commitments
to extend credit
|
$ | 16,289 | $ | 24,204 | ||||
Standby
letter of credit
|
858 | 836 |
2009
|
2008
|
|||||||
Balance
January 1
|
$ | (1,232 | ) | $ | (285 | ) | ||
Unrealized
holding gains on available for sale securities net of income taxes of
$59,000 for 2009 and $31,000 for 2008
|
93 | 162 | ||||||
Less
classification adjustment for (gains) losses realized in net
income
|
7 | (110 | ) | |||||
Accrued
pension obligation net of income taxes of $69,000 for 2009 and $587,000
for 2008
|
117 | (999 | ) | |||||
Net
change for the year
|
217 | (947 | ) | |||||
Balance
December 31
|
$ | (1,015 | ) | $ | (1,232 | ) |
|
·
|
Level One:
Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
|
·
|
Level Two:
Inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
|
·
|
Level Three:
Inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
2009
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
Fair Value Measurements
|
|||||||||||||
Securities
available for sale
|
$ | 0 | $ | 26,936 | $ | 0 | $ | 26,936 | ||||||||
Total
|
$ | 0 | $ | 26,936 | $ | 0 | $ | 26,936 |
2008
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
Fair Value Measurements
|
|||||||||||||
Securities
available for sale
|
$ | 0 | $ | 21,692 | $ | 0 | $ | 21,692 | ||||||||
Total
|
$ | 0 | $ | 21,692 | $ | 0 | $ | 21,692 |
2009
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
Fair Value Measurements
|
|||||||||||||
Other
real estate owned
|
$ | 0 | $ | 3,223 | $ | 0 | $ | 3,223 | ||||||||
Impaired
Loans
|
$ | 0 | 602 | 2,161 | 2,763 | |||||||||||
Total
|
$ | 0 | $ | 3,825 | $ | 2,161 | $ | 5,986 |
2008
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
Fair Value Measurements
|
|||||||||||||
Other
real estate owned
|
$ | 0 | $ | 1,359 | $ | 0 | $ | 1,359 | ||||||||
Impaired
Loans
|
$ | 0 | 3,569 | 0 | 3,569 | |||||||||||
Total
|
$ | 0 | $ | 4,928 | $ | 0 | $ | 4,928 |
2009
|
2008
|
|||||||||||||||
Carrying
Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
|||||||||||||
Financial
Assets:
|
||||||||||||||||
Cash
and due from banks
|
$ | 7,062 | $ | 7,062 | $ | 7,589 | $ | 7,589 | ||||||||
Interest
bearing deposits
|
1,880 | 1,880 | 502 | 502 | ||||||||||||
Federal
funds sold
|
8,936 | 8,936 | 160 | 160 | ||||||||||||
Securities
available for sale
|
26,936 | 26,936 | 21,692 | 21,692 | ||||||||||||
Restricted
investments
|
2,185 | 2,185 | 2,177 | 2,177 | ||||||||||||
Loans,
net
|
331,462 | 332,999 | 322,087 | 323,788 | ||||||||||||
Interest
receivable
|
1,908 | 1,908 | 2,164 | 2,164 | ||||||||||||
Life
insurance contracts
|
6,755 | 6,755 | 6,499 | 6,499 | ||||||||||||
Financial
Liabilities:
|
||||||||||||||||
Demand
and savings deposits
|
125,431 | 125,431 | 118,214 | 118,214 | ||||||||||||
Time
deposits
|
224,446 | 226,057 | 198,073 | 200,970 | ||||||||||||
Overnight
and other short-term debt instruments
|
0 | 0 | 4,800 | 4,800 | ||||||||||||
Long-term
debt instruments
|
10,866 | 11,733 | 11,317 | 11,930 | ||||||||||||
Interest
payable
|
656 | 656 | 848 | 848 |
2009
|
2008
|
|||||||
Balance,
beginning of period
|
$ | 6,499 | $ | 6,300 | ||||
Increases
in value of policies
|
256 | 252 | ||||||
Settlement
payout
|
(0 | ) | (53 | ) | ||||
Balance,
end of period
|
$ | 6,755 | $ | 6,499 |
December
31, 2009
|
||||||||||||||||||||||||
Regulatory
Requirements
|
||||||||||||||||||||||||
Actual
|
Adequately
Capitalized
|
Well
Capitalized
|
||||||||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||||||||
Total Risk Based Capital
Ratio
|
||||||||||||||||||||||||
Highlands
Bankshares
|
$ | 43,697 | 14.33 | % | $ | 24,401 | 8.00 | % | ||||||||||||||||
Capon
Valley Bank
|
14,925 | 12.86 | % | 9,285 | 8.00 | % | $ | 11,606 | 10.00 | % | ||||||||||||||
The
Grant County Bank
|
26,630 | 14.12 | % | 15,090 | 8.00 | % | 18,862 | 10.00 | % | |||||||||||||||
Tier 1 Leverage Ratio
|
||||||||||||||||||||||||
Highlands
Bankshares
|
39,882 | 9.81 | % | 16,263 | 4.00 | % | ||||||||||||||||||
Capon
Valley Bank
|
13,466 | 8.38 | % | 6,428 | 4.00 | % | 8,035 | 5.00 | % | |||||||||||||||
The
Grant County Bank
|
24,309 | 9.91 | % | 9,814 | 4.00 | % | 12,267 | 5.00 | % | |||||||||||||||
Tier 1 Risk Based Capital
Ratio
|
||||||||||||||||||||||||
Highlands
Bankshares
|
39,882 | 13.08 | % | 12,200 | 4.00 | % | ||||||||||||||||||
Capon
Valley Bank
|
13,466 | 11.60 | % | 4,642 | 4.00 | % | 6,964 | 6.00 | % | |||||||||||||||
The
Grant County Bank
|
24,309 | 12.89 | % | 7,545 | 4.00 | % | 11,317 | 6.00 | % |
December
31, 2008
|
||||||||||||||||||||||||
Regulatory
Requirements
|
||||||||||||||||||||||||
Actual
|
Adequately
Capitalized
|
Well
Capitalized
|
||||||||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||||||||
Total Risk Based Capital
Ratio
|
||||||||||||||||||||||||
Highlands
Bankshares
|
$ | 41,440 | 14.20 | % | $ | 23,342 | 8.00 | % |
|
|||||||||||||||
Capon
Valley Bank
|
14,588 | 12.77 | % | 9,136 | 8.00 | % | $ | 11,421 | 10.00 | % | ||||||||||||||
The
Grant County Bank
|
24,799 | 13.99 | % | 14,180 | 8.00 | % | 17,725 | 10.00 | % | |||||||||||||||
Tier 1 Leverage Ratio
|
||||||||||||||||||||||||
Highlands
Bankshares
|
37,882 | 10.18 | % | 14,891 | 4.00 | % | ||||||||||||||||||
Capon
Valley Bank
|
13,159 | 9.11 | % | 5,775 | 4.00 | % | 7,219 | 5.00 | % | |||||||||||||||
The
Grant County Bank
|
22,663 | 10.00 | % | 9,066 | 4.00 | % | 11,333 | 5.00 | % | |||||||||||||||
Tier 1 Risk Based Capital
Ratio
|
||||||||||||||||||||||||
Highlands
Bankshares
|
37,882 | 12.98 | % | 11,671 | 4.00 | % | ||||||||||||||||||
Capon
Valley Bank
|
13,159 | 11.52 | % | 4,568 | 4.00 | % | 6,852 | 6.00 | % | |||||||||||||||
The
Grant County Bank
|
22,663 | 12.79 | % | 7,090 | 4.00 | % | 10,635 | 6.00 | % |
2009
|
2008
|
|||||||
Balance
beginning of period
|
$ | 2,749 | $ | 3,106 | ||||
Amortization
of intangible assets
|
(195 | ) | (182 | ) | ||||
Purchase
of naming rights contract
|
0 | 75 | ||||||
Cancellation
of naming rights contract
|
(0 | ) | (250 | ) | ||||
Balance
end of period
|
$ | 2,554 | $ | 2,749 |
Year
|
Expected Expense
|
|||
2010
|
$ | 190 | ||
2011
|
184 | |||
2012
|
178 | |||
2013
|
165 | |||
2014
|
165 | |||
thereafter
|
138 | |||
Total
|
$ | 1,020 |
December
31,
|
||||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Cash
|
$ | 314 | $ | 182 | ||||
Investment
in subsidiaries
|
40,590 | 38,994 | ||||||
Income
taxes receivable
|
459 | 261 | ||||||
Fixed
assets, net of accumulated depreciation
|
60 | 0 | ||||||
Other
assets
|
6 | 34 | ||||||
Total
Assets
|
$ | 41,429 | $ | 39,471 | ||||
Liabilities
|
||||||||
Accrued
expenses
|
$ | 7 | $ | 72 | ||||
Other
liabilities
|
0 | 0 | ||||||
Total
Liabilities
|
7 | 72 | ||||||
Stockholders’
Equity
|
||||||||
Common
stock, par value $5 per share, 3,000,000 shares authorized, 1,436,874
issued
|
7,184 | 7,184 | ||||||
Surplus
|
1,662 | 1,662 | ||||||
Treasury
stock, at cost, 100,001 shares
|
(3,372 | ) | (3,372 | ) | ||||
Retained
earnings
|
36,963 | 35,157 | ||||||
Other
accumulated comprehensive income
|
(1,015 | ) | (1,232 | ) | ||||
Total
Stockholders’ Equity
|
41,422 | 39,399 | ||||||
Total
Liabilities and Stockholders’ Equity
|
$ | 41,429 | $ | 39,471 |
Years ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Income
|
||||||||
Dividends
from subsidiaries
|
$ | 2,061 | $ | 5,142 | ||||
Management
fees from subsidiaries
|
218 | 212 | ||||||
Other
income
|
0 | 25 | ||||||
Total
Income
|
2,279 | 5,379 | ||||||
Expenses
|
||||||||
Salary
and benefits expense
|
409 | 361 | ||||||
Professional
fees
|
192 | 137 | ||||||
Directors
fees
|
88 | 79 | ||||||
Other
expenses
|
125 | 165 | ||||||
Total
Expenses
|
814 | 742 | ||||||
Net
income before income tax benefit and undistributed subsidiary net
income
|
1,465 | 4,637 | ||||||
Income
tax benefit
|
228 | 198 | ||||||
Income
before undistributed subsidiary net income
|
1,693 | 4,835 | ||||||
Undistributed
subsidiary net income
|
1,663 | 135 | ||||||
Net
Income
|
$ | 3,356 | $ | 4,970 | ||||
Retained
earnings, beginning of period
|
$ | 35,157 | $ | 32,032 | ||||
Cumulative
effect adjustment to retained earnings for change in accounting
principle
|
(0 | ) | (348 | ) | ||||
Dividends
paid in cash
|
(1,550 | ) | (1,497 | ) | ||||
Net
income
|
3,356 | 4,970 | ||||||
Retained
earnings, end of period
|
$ | 36,963 | $ | 35,157 |
Years
Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
Flows From Operating Activities
|
||||||||
Net
Income
|
$ | 3,356 | $ | 4,970 | ||||
Adjustments
to net income
|
||||||||
Depreciation
|
2 | 0 | ||||||
Undistributed
subsidiary income
|
(1,663 | ) | (135 | ) | ||||
Gain
on sale of fixed assets
|
(0 | ) | (25 | ) | ||||
Deferred
tax benefit
|
2 | (3 | ) | |||||
Increase
(decrease) in payables
|
(65 | ) | 72 | |||||
(Increase)
decrease in receivables
|
(198 | ) | 15 | |||||
(Increase)
decrease in other assets
|
26 | 10 | ||||||
Net
Cash Provided by Operating Activities
|
1,460 | 4,904 | ||||||
Cash
Flows From Investing Activities
|
||||||||
Net
advances from (payments to) subsidiaries
|
284 | (11 | ) | |||||
Proceeds
from sale of fixed assets
|
0 | 46 | ||||||
Purchase
of fixed assets
|
(62 | ) | 0 | |||||
Net
Cash Provided by Investing Activities
|
222 | 35 | ||||||
Cash
Flows From Financing Activities
|
||||||||
Purchase
of treasury stock
|
0 | (3,372 | ) | |||||
Dividends
paid in cash
|
(1,550 | ) | (1,497 | ) | ||||
Net
Cash Used in Financing Activities
|
(1,550 | ) | (4,869 | ) | ||||
Net
Increase in Cash
|
132 | 70 | ||||||
Cash,
beginning of year
|
182 | 112 | ||||||
Cash,
end of year
|
$ | 314 | $ | 182 |
/s/
SMITH ELLIOTT KEARNS & COMPANY,
LLC
|
Item 9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
Item 9A(T).
|
Controls
and Procedures
|
Item 9B.
|
Other
Information
|
Item 10.
|
Directors,
Executive Officers and Corporate
Governance
|
|
·
|
“Compliance
with Section 16(a) of the Securities Exchange
Act”
|
|
·
|
“ELECTION
OF DIRECTORS”
|
|
·
|
“INFORMATION
CONCERNING DIRECTORS AND NOMINEES”
|
|
·
|
“REPORT
OF THE AUDIT COMMITTEE”
|
Item 11.
|
Executive
Compensation
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
Item 14.
|
Principal
Accounting Fees and Services
|
Item 15.
|
Exhibits,
Financial Statements and Schedules
|
(a)(1)
|
Financial
Statements:
|
(a)(2)
|
Financial
Statement Schedules: These schedules are omitted as the required
information is inapplicable or the information is presented in the
consolidated financial statements or related
notes
|
(a)(3)
|
Exhibits.
The exhibits listed in the “Exhibits Index” on Page 65 of this Annual
Report on Form 10-K included herein are filed herewith or are incorporated
by reference from previous filings.
|
(b)
|
See
(a)(3) above
|
(c)
|
See
(a)(1) and (a)(2) above
|
/s/ C.E. Porter
|
/s/ Alan Brill
|
|
C.E.
Porter
|
Alan
Brill
|
|
President
& Chief Executive Officer
|
Interim
Principal Financial Officer
|
|
Date: March
29, 2010
|
Date:
March 29, 2010
|
Name
|
Signature
|
Title
|
Date
|
Leslie
A. Barr
|
/s/
Leslie A. Barr
|
Director
|
March
29, 2010
|
Alan
L. Brill
|
/s/
Alan L. Brill
|
Director;
Secretary
|
March
29, 2010
|
Jack
H. Walters
|
/s/
Jack H. Walters
|
Director
|
March
29, 2010
|
Gerald
W. Smith
|
/s/
Gerald W. Smith
|
Director
|
March
29, 2010
|
Morris
M. Homan
|
/s/
Morris M. Homan
|
Director
|
March
29, 2010
|
Kathy
G. Kimble
|
/s/
Kathy G. Kimble
|
Director
|
March
29, 2010
|
Steven
C. Judy
|
/s/
Steven C. Judy
|
Director
|
March
29, 2010
|
C.E.
Porter
|
/s/
C.E. Porter
|
Director;
President
& Chief Executive Officer
|
March
29, 2010
|
John
G. Van Meter
|
/s/
John G. Van Meter
|
Director;
Chairman
of The Board of Directors
|
March
29, 2010
|
L.
Keith Wolfe
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/s/
L. Keith Wolfe
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Director
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March
29, 2010
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EXHIBIT
INDEX
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Exhibit
Number
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Description
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3(i)
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Articles
of Incorporation of Highlands Bankshares, Inc., as restated, are hereby
incorporated by reference to Exhibit 3(i) to Highlands Bankshares Inc.’s
Form 10-Q filed November 13, 2007 .
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3(ii)
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Amended
Bylaws of Highlands Bankshares, Inc. are incorporated by reference to
Exhibit 3(ii) to Highlands Bankshares Inc.’s Report on Form 8-K filed
January 9, 2008
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14
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Code
of Ethics. The HIGHLANDS
BANKSHARES, INC. CODE OF BUSINESS CONDUCT AND ETHICS is hereby
incorporated by reference filed as Exhibit 14.1 with Highlands Bankshares
Inc.’s Report on Form 8-K filed January 14, 2008
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Subsidiaries
of the Registrant (filed herewith)
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Certification
of Chief Executive Officer Pursuant to section 302 of the Sarbanes-Oxley
Act of 2002 Chapter 63, Title 18 USC Section 1350 (A) and
(B).
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Certification
of Chief Financial Officer Pursuant to section 302 of the
Sarbanes-Oxley Act of 2002 Chapter 63, Title 18 USC Section 1350 (A) and
(B).
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Statement
of Chief Executive Officer Pursuant to 18 U.S.C.
§1350.
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Statement
of Chief Financial Officer Pursuant to 18 U.S.C.
§1350.
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