Allegheny Bancshares 10-Q 2010 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended June 30, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.000-50151

Allegheny Bancshares, Inc.

(Exact name of registrant as specified in its charter)

West Virginia	22-3888163
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

300 North Main Street
P. O. Box 487
Franklin, West Virginia 26807
(Address of principal executive offices, including zip code)

(304) 358-2311

(Registrant’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

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

Large accelerated filero Accelerated Filero Non-accelerated filero Smaller reporting companyþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of August 2, 2010 there were 867,459 shares of common stock outstanding at a par value of $1.00 each.

ALLEGHENY BANCSHARES, INC.

PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Financial Statements	2
Unaudited Consolidated Statements of Income — Six Months ended June 30, 2010 and 2009	2
Unaudited Consolidated Statements of Income — Three Months ended June 30, 2010 and 2009	3
Consolidated Balance Sheets — June 30, 2010 (Unaudited) and December 31, 2009 (Audited)	4
Unaudited Consolidated Statements of Changes in Stockholders’ Equity — Six Months Ended June 30, 2010 and 2009	5
Unaudited Consolidated Statements of Cash Flows — Six Months Ended June 30, 2010 and 2009	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4. Controls and Procedures	20
PART II. OTHER INFORMATION	20
Item 1. Legal Proceedings	20
Item 2. Unregulated Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults upon Senior Securities	20
Item 5. Other Information	20
Item 6. Exhibits	21
SIGNATURES	21
Exhibit 31.1
Exhibit 31.2
Exhibit 32

Part I. Financial Information

Item 1. Consolidated Financial Statements

Allegheny Bancshares, Inc.

Consolidated Statements of Income
(In thousands, except for share and per share information)
(Unaudited)

	Six Months Ended
	June 30,
	2010		2009
Interest and Dividend Income:
Loans and fees	$	5,914	$	5,566
Investment securities — taxable		230		213
Investment securities — nontaxable		275		306
Deposits and federal funds sold		56		42
Total Interest and Dividend Income		6,475		6,127
Interest Expense:
Deposits		1,773		1,990
Borrowings		116		145
Total Interest Expense		1,889		2,135
Net Interest Income		4,586		3,992
Provision for loan losses		644		167
Net Interest Income After Provision for Loan Losses		3,942		3,825
Noninterest Income:
Service charges on deposit accounts		513		441
Restricted equity security impairment		—		(604	)
Gain on sale of securities		—		64
Other income		374		320
Total Noninterest Income		887		221
Noninterest Expense:
Salaries and benefits		1,709		1,523
Occupancy expenses		213		198
Equipment expenses		355		307
Other expenses		1,083		1,157
Total Noninterest Expenses		3,360		3,185
Income before Income Taxes		1,469		861
Income Tax Expense		396		356
Net Income	$	1,073	$	505
Earnings Per Share
Net income	$	1.24	$	0.58
Weighted Average Shares Outstanding		867,459		870,869

The accompanying notes are an integral part of these statements.

2

Allegheny Bancshares, Inc.

Consolidated Statements of Income
(In thousands, except for share and per share information)
(Unaudited)

	Three Months Ended
	June 30,
	2010		2009
Interest and Dividend Income:
Loans and fees	$	2,963	$	2,900
Investment securities — taxable		116		110
Investment securities — nontaxable		134		157
Deposits and federal funds sold		29		14
Total Interest and Dividend Income		3,242		3,181
Interest Expense:
Deposits		869		1,045
Borrowings		58		71
Total Interest Expense		927		1,116
Net Interest Income		2,315		2,065
Provision for loan losses		324		90
Net Interest Income After Provision for Loan Losses		1,991		1,975
Noninterest Income:
Service charges on deposit accounts		287		252
Restricted equity security impairment		—		—
Gain on sale of securities		—		74
Other income		183		161
Total Noninterest Income		470		487
Noninterest Expense:
Salaries and benefits		849		778
Occupancy expenses		101		104
Equipment expenses		183		160
Other expenses		543		665
Total Noninterest Expenses		1,676		1,707
Income before Income Taxes		785		755
Income Tax Expense		216		208
Net Income	$	569	$	547
Earnings Per Share
Net income	$	0.66	$	0.63
Weighted Average Shares Outstanding		867,459		870,676

The accompanying notes are an integral part of these statements.

3

Allegheny Bancshares, Inc.

Consolidated Balance Sheets
(In thousands, except for share and per share information)

	June 30, 2010			December 31, 2009
	Unaudited			Audited
ASSETS
Cash and due from banks	$	5,163		$	3,810
Interest bearing deposits in banks		6,332			8,249
Investment securities available for sale		29,717			31,338
Restricted equity securities		748			748
Loans receivable, net of allowance for loan losses of $2,204 and $1,790 respectively		188,545			182,864
Bank premises and equipment, net		6,783			6,958
Interest receivable		1,323			1,436
Goodwill		1,087			1,087
Bank owned life insurance		3,949			3,867
Other assets		2,760			2,530
Total Assets	$	246,407		$	242,887
LIABILITIES
Deposits
Noninterest bearing demand	$	27,930		$	26,689
Interest bearing
Demand		29,444			28,005
Savings		26,948			27,282
Time deposits over $100,000		46,148			42,645
Other time deposits		80,957			84,218
Total Deposits		211,427			208,839
Accrued expenses and other liabilities		839			814
Short-term borrowings		797			931
Long-term debt		4,578			4,695
Total Liabilities		217,641			215,279
STOCKHOLDERS’ EQUITY
Common stock; $1 par value, 2,000,000 shares
Authorized, 900,000 issued, 867,459 outstanding		900			900
Additional paid in capital		900			900
Retained earnings		28,255			27,182
Accumulated other comprehensive income		528			443
Treasury stock (at cost, 32,541 shares in 2010 and 2009)		(1,817	)		(1,817	)
Total Stockholders’ Equity		28,766			27,608
Total Liabilities and Stockholders’ Equity	$	246,407		$	242,887

The accompanying notes are an integral part of these statements.

4

Allegheny Bancshares, Inc.

Consolidated Statements of Changes in Stockholders’ Equity
(In thousands)
(Unaudited)

										Accumulated
										Other
				Common		Additional		Retained		Comprehensive			Treasury
	Total			Stock		Paid In Capital		Earnings		Income			Stock
Balance, December 31, 2009	$	27,608		$	900	$	900	$	27,182	$	443		$	(1,817	)
Comprehensive Income
Net Income		1,073							1,073
Change in unrealized gain on available for sale securities, net of income tax effect of $44		85									85
Total Comprehensive Income		1,158
Balance, June 30, 2010	$	28,766		$	900	$	900	$	28,255	$	528		$	(1,817	)
Balance, December 31, 2008	$	27,160		$	900	$	900	$	26,631	$	320		$	(1,591	)
Comprehensive Income
Net income		505							505
Change in unrealized gain on available for sale securities, net of income tax effect of ($93)		(181	)								(181	)
Total Comprehensive Income		324
Purchase of Treasury Stock		(43	)											(43	)
Balance, June 30, 2009	$	27,441		$	900	$	900	$	27,136	$	139		$	(1,634	)

The accompanying notes are an integral part of these statements.

5

Allegheny Bancshares, Inc.

Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

	Six Months Ended
	June 30,
	2010			2009
Cash Flows from Operating Activities:
Net income	$	1,073		$	505
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		644			167
Depreciation and amortization		250			228
Loss on disposal of fixed assets		1			—
Net amortization (accretion) of securities		(11	)		22
Gain on sale of securities		—			(64	)
Loss on restricted equity other than temporary impairment		—			604
Deferred income tax benefit		(144	)		(134	)
Income from life insurance investment		(82	)		(85	)
Net change in:
Accrued income		113			(87	)
Other assets		(129	)		(439	)
Accrued expense and other liabilities		25			115
Net Cash Provided by Operating Activities		1,740			832
Cash Flows from Investing Activities:
Net change in federal funds sold		—			(430	)
Cash received from the acquisition of branch offices		—			6,497
Net change in interest bearing deposits in banks		1,917			(1,190	)
Proceeds from sales, calls and maturities of available for sale securities		7,510			6,104
Purchase of securities available for sale		(5,750	)		(7,550	)
Net increase in loans		(6,325	)		(4,860	)
Purchase of bank premises and equipment		(76	)		(93	)
Net Cash Used by Investing Activities		(2,724	)		(1,522	)
Cash Flows from Financing Activities:
Net change in:
Demand and savings deposits		2,345			(1,794	)
Time deposits		243			9,195
Short-term borrowings		(134	)		(2,080	)
Curtailments of long-term borrowings		(117	)		(111	)
Purchase of treasury stock		—			(43	)
Net Cash Provided by Financing Activities		2,337			5,167
Cash and due from banks
Net increase in cash and due from banks		1,353			4,477
Cash and due from banks, beginning of period		3,810			2,562
Cash and due from banks, end of period	$	5,163		$	7,039
Supplemental Disclosure of Cash Paid During the Period for:
Interest	$	1,905		$	2,108
Income taxes	$	585		$	336

The accompanying notes are an integral part of these statements.

6

ALLEGHENY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 ACCOUNTING PRINCIPLES:

The consolidated financial statements include the accounts of Allegheny Bancshares Inc. and its subsidiaries (the “Company”). Significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements conform to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 2010, and the results of operations for the periods ended June 30, 2009 and 2010. The notes included herein should be read in conjunction with the notes to the financial statements included in the 2009 Form 10-K included with the annual report to stockholders of Allegheny Bancshares, Inc.

Recent Accounting Pronouncements —Income Tax guidance was amended in April 2010 to reflect an SEC Staff Announcement after the President signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which amended the Patient Protection and Affordable Care Act signed on March 23, 2010. According to the announcement, although the bills were signed on separate dates, regulatory bodies would not object if the two Acts were considered together for accounting purposes. This view is based on the SEC staff’s understanding that the two Acts together represent the current health care reforms as passed by Congress and signed by the President. The amendment had no impact on the financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Subsequent events —In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the financials were issued.

NOTE 2 INVESTMENT SECURITIES:

The amortized costs of investment securities and their approximate fair values are as follows (in thousands of dollars):

			Gross		Gross
	Amortized		Unrealized		Unrealized
June 30, 2010	Cost		Gains		Losses		Fair Value
Securities available for sale:
Mortgaged backed obligations of federal agencies	$	2,569	$	90	$	—	$	2,659
Government sponsored enterprises		10,953		270		—		11,223
Obligations of states and political subdivisions		14,764		412		7		15,169
Corporate obligations		501		35		—		536
Other equities		130		—		—		130
Total	$	28,917	$	807	$	7	$	29,717

			Gross		Gross
	Amortized		Unrealized		Unrealized
December 31, 2009	Cost		Gains		Losses		Fair Value
Securities available for sale:
Mortgaged backed obligations of federal agencies	$	3,401	$	61	$	—	$	3,462
Government sponsored enterprises		9,985		164		—		10,149
Obligations of states and political subdivisions		16,647		470		34		17,083
Corporate obligations		501		12		—		513
Other equities		131		—		—		131
Total	$	30,665	$	707	$	34	$	31,338

7

ALLEGHENY BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consideration is given to current market conditions, historical trends in the individual securities, as well as trends in the overall market. Declines determined to be other than temporary are charged to operations and are shown on the income statement. There were no other-than-temporary impairment charges on investment securities during the first six months of 2009 or 2010, however there were charges on restricted equity securities in 2009, see footnote number 3.

The following table shows the gross unrealized losses and fair value of the Company’s investment securities with unrealized losses that are deemed to be temporarily impaired (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous, unrealized loss position at June 30, 2010 and December 31, 2009. The unrealized losses on the Company’s investment securities were caused by various reasons, but the Company feels that no material impairment of value is due to deteriorating financial condition of the issuers. The S&P credit ratings of these three issues are still AA or better and the contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability and believes it is more likely than not that it will hold those investments until a recovery of fair value, which may be maturity, the Company considers these 3 investments to be temporarily impaired at June 30, 2010. At December 31, 2009 there were 4 investments considered to be temporarily impaired.

	Less than 12 months				12 Months or greater
			Unrealized				Unrealized		Total
June 30, 2010	Fair Value		Losses		Fair Value		Losses		Fair Value
Description of Securities:
Mortgaged backed obligations of federal agencies	$	—	$	—	$	—	$	—	$	—
Government sponsored enterprises		—		—		—		—		—
Obligations of states and political subdivisions		738		5		564		2		1,302
Corporate obligations		—		—		—		—		—
Total	$	738	$	5	$	564	$	2	$	1,302

	Less than 12 months				12 Months or greater
			Unrealized				Unrealized		Total
December 31, 2009	Fair Value		Losses		Fair Value		Losses		Fair Value
Description of Securities:
Mortgaged backed obligations of federal agencies	$	—	$	—	$	—	$	—	$	—
Government sponsored enterprises		—		—		—		—		—
Obligations of states and political subdivisions		1,540		28		560		6		2,100
Corporate obligations		—		—		—		—		—
Total	$	1,540	$	28	$	560	$	6	$	2,100

A maturity schedule of securities in thousands as of June 30, 2010, by contractual maturity is shown below. Actual maturities may differ because borrowers may have the right to call or prepay obligations.

	Amortized
	Cost		Fair Value
Due:
In one year or less	$	3,256	$	3,287
After one year through five years		18,478		19,054
After five years through ten years		6,386		6,568
After ten years through fifteen years		797		808
Total	$	28,917	$	29,717

For the period ended June 30, 2010, proceeds from sales, calls, and maturities of securities available for sale amounted to $7,510,000. No gains or losses were recognized on these transactions. A $64,000 gain was recognized for the same period in 2009.

8

ALLEGHENY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 RESTRICTED EQUITY SECURITIES:

Restricted equity securities are considered restricted due to lack of marketability. It consists of stock in the Federal Home Loan Bank (FHLB) at June 30, 2010 and December 31, 2009. Investment in the FHLB stock is determined by the level of the Bank’s participation with FHLB various products and is collateral against outstanding borrowings from that institution. The FHLB stock is carried at cost. Management evaluates these restricted securities for other-than-temporary impairment on a quarterly basis, and more often when conditions warrant by considering current market conditions, historical trends in the individual securities, as well as trends in the overall market. Declines determined to be other than temporary are charged to operations and are shown on the income statement. In view of the May 1, 2009 closure of an institution in which the Company held stock by the Office of the Comptroller of the Currency, the Company recorded an other than temporary impairment (“OTTI”) non-cash charge against earnings. The carrying value of the Company’s investment in this stock as of December 31, 2008 was approximately $603,515. The OTTI charge as of March 31, 2009 was $603,515, eliminating our carrying value of this stock. No other than temporary impairment charge was recognized in the same period in 2010.

NOTE 4 LOANS RECEIVABLE:

Loans outstanding are summarized as follows (in thousands of dollars):

	June 30,		December 31,
	2010		2009
Real estate loans	$	83,478	$	83,465
Commercial and industrial loans		90,094		83,169
Loans to individuals, primarily collateralized by autos		12,406		12,913
All other loans		4,771		5,107
Total Loans		190,749		184,654
Less allowance for loan losses		2,204		1,790
Net Loans Receivable	$	188,545	$	182,864

NOTE 5 ALLOWANCE FOR LOAN LOSSES:

A summary of transactions in the allowance for loan losses for the six months ended June 30, 2010 and 2009 follows (in thousands):

	Six Months Ended
	June 30,
	2010			2009
Balance, beginning of period	$	1,790		$	1,396
Provision charged to operating expenses		644			168
Recoveries of loans charged off		69			50
Loans charged off		(299	)		(242	)
Balance, end of period	$	2,204		$	1,372

9

ALLEGHENY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 LONG TERM DEBT:

The Company has borrowed money from the Federal Home Loan Bank of Pittsburgh (FHLB). The interest rates on all of the notes payable as of June 30, 2010 were fixed at the time of the advance and fixed rates range from 4.22% to 5.57%. The FHLB notes are secured by FHLB Stock, as well as investment securities and mortgage loans. The weighted average interest rate is 5.01% at June 30, 2010.

NOTE 7 BANK OWNED LIFE INSURANCE:

The Company, in an effort to attract and retain employees, offers a variety of benefits to full time employees. The costs of these benefits continue to grow faster than inflation. In order to offset some of these costs and to offer other benefits the Company has invested in a Bank Owned Life Insurance (BOLI) contract. Earnings on these contracts are tax exempt, and are very attractive in comparison with other long-term investments.

NOTE 8 FAIR VALUE:

FASB ASC 820-10,Fair Value Measurements,provides a definition of fair value for accounting purposes, establishes a framework for measuring fair value and expands related financial disclosures. This statement does not require any new fair value measurements and was initially effective for the Company beginning January 1, 2008. This statement establishes a hierarchy that prioritizes the use of fair value inputs used in valuation methodologies into the following three levels.

Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 — Valuation is based upon significant inputs that reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

At June 30,2010 the Company had no liabilities subject to fair value. The following is a description of valuation methodologies used for assets recorded at fair value.

Investment securities available for sale:Investment securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, when available. If quoted prices are not available, fair values are measured using independent pricing models. Level 1 securities include those traded by dealers or brokers in an active market such as U.S. Treasury securities, and securities issued by government sponsored entities that are traded by dealers, and money market funds. Level 2 securities include mortgage backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include other equities that do not have an active market.

Loans:The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. If a loan is considered impaired an allowance for loan loss is established in accordance with FASB ASC 310-10, by utilizing market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). The fair value of the Company’s impaired loans was determined by the measurement of the fair value of the underlying collateral. Typically the collateral value is determined by applying a discount to an appraisal that was performed at or about the date of the loan. Due to the age of appraisals and the changing market conditions of real estate the Company considers its impaired loans to be level 3 assets and are measured on a nonrecurring basis.

Other Real Estate Owned:Certain assets such as other real estate owned (OREO) are measured at the lower of carrying value or fair value less estimated holding costs and cost to sell. We believe that the fair value component in its valuation follows the provisions of FASB ASC 820-10. Due to age of some appraisals and changing real estate market conditions, the Company considers its OREO to be level 3 assets.

10

ALLEGHENY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the recorded amount of assets measured at fair value as of June 30, 2010 (in thousands of dollars):

June 30, 2010	Level 1		Level 2		Level 3		Total
Assets recorded at fair value on a recurring basis:
Mortgaged backed obligations of federal agencies	$	—	$	2,659	$	—	$	2,659
Government sponsored enterprises		11,223		—		—		11,223
Obligations of states and political subdivisions		—		15,169		—		15,169
Corporate obligations		—		536		—		536
Other equities		—		130		—		130
Total	$	11,223	$	18,494	$	—	$	29,717
Assets recorded at fair value on a non recurring basis:
Impaired Consumer Real Estate Loans	$	—	$	—	$	490	$	490
Impaired Commercial Loans		—		—		3,666		3,666
Other real estate owned		—		—		985		985
Total	$	—	$	—	$	5,141	$	5,141

There were no significant transfers between levels 1, 2, or 3 during the quarter

The following table presents the recorded amount of assets measured at fair value as of December 31, 2009 (in thousands of dollars):

December 31, 2009	Level 1		Level 2		Level 3		Total
Assets recorded at fair value on a recurring basis:
Mortgaged backed obligations of federal agencies	$	—	$	3,462	$	—	$	3,462
Government sponsored enterprises		10,149		—		—		10,149
Obligations of states and political subdivisions		—		17,083		—		17,083
Corporate obligations		—		513		—		513
Other equities		—		131		—		131
Total	$	10,149	$	21,189	$	—	$	31,338
Assets recorded at fair value on a non recurring basis:
Impaired Consumer Real Estate Loans	$	—	$	—	$	670	$	670
Impaired Commercial Loans		—		—		3,634		3,634
Other real estate owned		—		—		800		800
Total	$	—	$	—	$	5,104	$	5,104

NOTE 9 GOODWILL:

The Company follows FASB ASC 350-20Goodwill and Other Intangible Assets,which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. Provisions within this statement discontinue any amortization of goodwill and intangible assets with indefinite lives, and require at least annual impairment review or more often if certain impairment conditions exist. With the purchase of the two branch offices in April 2009, there was a significant amount of goodwill recorded, and no impairments reported. The goodwill recognized on the purchase of the two branch offices totaled $1,086,732.

11

ALLEGHENY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 BENEFIT PLANS:

Executive Performance Driven Plan: On June 4^th, 2008, the Company, approved the Pendleton Community Bank, Inc. Executive Performance Driven Plan. The Performance Plan provides for bonus compensation based on achievement of certain performance goals. The CEO is eligible to receive a bonus based on achievement of the performance criteria.

For the Bank’s Chief Executive Officer, performance compensation will be based on the following individual categories (as reflected in the performance of Allegheny Bancshares, Inc.): Return on Average Equity, Increase in Earnings per Share, Return on Assets, Asset Growth Rate.

The total performance compensation which may be earned by the CEO is between 0% and 11.50% of his base salary. The Company has accrued a liability and incurred a benefit expense of $5,108 for the first six months of 2010 and $5,107 for the same period in 2009.

Supplemental Retirement Agreement: On June 4th, 2008 the Bank entered into a non-qualified Supplemental Retirement Agreement (“SERP”) with the CEO. The SERP provides for the payment of a monthly supplemental executive retirement benefit equal to annual payments of $54,663 for a 15 year period. Such benefit shall be payable for a period of fifteen years, or under certain circumstances, prior to age 65. For each full calendar year the CEO completes with the Bank without separation of service, the CEO shall be credited with 8.33% of this benefit, toward 100% after 12 years. The Company has accrued a liability and incurred a benefit expense of $14,561 for the first six months of 2010 for this plan, and $12,944 for the same period in 2009.

NOTE 11 CAPITAL:

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total risk based capital, Tier 1 capital to risk weighted assets, and Tier 1 capital to average assets. The Company’s total risk based, Tier 1 capital to risk weighted assets and Tier 1 to average assets were 16.65%, 15.40% and 10.94% at June 30, 2010 compared to 16.31%, 15.26% and 10.68% at December 31, 2009, respectively. At June 30, 2010 the Company met all capital adequacy requirements to which it is subject and is considered to be “well capitalized” under regulatory standards.

NOTE 12DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and short-term deposits:For those short-term instruments, which includes interest bearing deposits and fed funds sold the carrying amount is a reasonable estimate of fair value.

Investment securities:For description of fair value measurement see note 8.

Restricted investments:The carrying value of restricted investments is a reasonable estimate of its fair value.

Loans:The fair value of loans is estimated by discounting the future cash flows using the current offering rates for similar loans to borrowers with similar credit ratings and for the same remaining maturities. For description of fair value measurement for impaired loans see note 8.

Bank owned life insurance:The carrying amount reported on the balance sheet approximates the fair value as it represents the cash surrender value of the life insurance contracts.

Deposits:For demand, interest checking, regular savings, money market and any other account payable on demand with no penalty the fair value is the carrying value. The fair value of certificates of deposits is estimated using the rates currently offered for deposits of similar remaining maturities.

12

ALLEGHENY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Short-term borrowings and interest payable or receivable:Due to the short-term nature of these accounts the carrying value is estimated to be the same as the carrying value.

Long-term debt:The fair value of long term debt is estimated using the rates currently offered by the Federal Home Loan Bank for indebtedness with similar maturities.

Off-balance sheet items:Letters of credit, lines of credit, and loan commitments are deemed to be at face value, and did not have a material value as of June 30, 2010 or December 31, 2009.

	June 30, 2010				December 31, 2009
			Carrying				Carrying
(In Thousands)	Fair Value		Value		Fair Value		Value
Cash and due from banks	$	5,163	$	5,163	$	3,810	$	3,810
Interest bearing deposits in banks		6,332		6,332		8,249		8,249
Securities available for sale		29,717		29,717		31,338		31,338
Restricted equity securities		748		748		748		748
Loans		190,676		188,545		184,753		182,864
Interest receivable		1,087		1,087		1,436		1,436
Bank owned life insurance		3,949		3,949		3,867		3,867
Demand deposits		27,930		27,930		26,689		26,689
Interest bearing demand deposit		29,444		29,444		28,005		28,005
Savings deposits		26,948		26,948		27,282		27,282
Time deposits		127,911		127,105		127,599		126,862
Short-term borrowings		797		797		931		931
Accrued interest payable		329		329		344		344
Long-term debt		4,730		4,578		4,927		4,695

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Allegheny Bancshares, Inc. (Company) is a single bank holding company organized under the laws of West Virginia. The Company provides financial services through its wholly owned subsidiary Pendleton Community Bank (Bank).

The Bank is a full service commercial bank offering financial services through five financial centers located in the West Virginia towns of Franklin, Moorefield, Marlinton and Petersburg, and a financial center near Harrisonburg, Virginia. Currently its primary trade areas are these towns and the West Virginia counties of Pendleton, Hardy, Pocahontas, Grant and in Rockingham County, Virginia.

The following discussion and analysis is provided to address information about the Company’s financial condition and results of operations that may not otherwise be apparent from reading the Consolidated Financial Statements and notes. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the related notes to the Consolidated Financial Statements.

Forward Looking Statements

The following discussion contains statements that refer to future expectations, contain projections of the results of operations or of financial condition or state other information that is “forward-looking.” “Forward-looking” statements are easily identified by the use of words such as “could,” “could anticipate,” “estimate,” “believe,” and similar words that refer to the future outlook. There is always a degree of uncertainty associated with “forward-looking” statements. The Company’s management believes that the expectations reflected in such statements are based upon reasonable assumptions and on the facts and circumstances existing at the time of these disclosures. Actual results could differ significantly from those anticipated.

Many factors could cause the Company’s actual results to differ materially from the results contemplated by the forward-looking statements. Some factors, which could negatively affect the results, include:

• General economic conditions, either nationally or within the Company’s markets, could be less favorable than expected;

• Changes in market interest rates could affect interest margins and profitability;

• Competitive pressures could be greater than anticipated; and

• Legal or accounting changes could affect the Company’s results.

Critical Accounting Policy

The financial condition and results of operations as presented in the Consolidated Financial Statements and the Notes to Consolidated Financial Statements are dependent on the accounting policies. The policies selected and applied involve judgments, estimates, and may change from period to period based upon economic conditions. In addition, changes in generally accepted accounting principles could impact the calculations of these estimates, and even though this would not affect the true values, it could affect the timing of recognizing income or expense.

The allowance for loans loss is, in management’s opinion, the most important and critical policy that affects the financial condition and results of operations. This critical policy involves the most difficult and complex judgments about the unknown losses that currently exist in the Company’s largest asset, its loan portfolio.

Allowance for Loan Losses and Provision for Loan Losses

The ALL is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans, industry historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Management’s valuation of the ALL is based upon two principals of accounting: 1) FASB ASC 450-20 Accounting for Contingencies and 2) FASB ASC 310-10, Accounting by Creditors for Impairment of a Loan. The Company utilizes both of these accounting standards by first identifying problem loans above a certain threshold and estimating losses based on the underlying collateral values, and second taking the remainder of the loan portfolio and separating the portfolio into pools of loans based on grade of loans as determined by the Company’s internal grading system. We apply loss percentages based upon our historical loss rates, and make adjustments based on economic conditions. The determination of the ALL is subjective and actual losses may be more or less than the amount of the allowance. However management believes that the allowance is a fair estimate of losses that exist in the loan portfolio as of the balance sheet date.

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Goodwill and Intangibles

ASC 350 “Goodwill and Other Intangible Assets” prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. Provisions within this statement discontinue any amortization of goodwill and intangible assets with indefinite lives, and require at least annual impairment review or more often if certain impairment conditions exist. With the purchase of the two branch offices in April 2009, there was a significant amount of goodwill recorded, and no impairments reported. The goodwill recognized on the purchase of the two branch offices totaled $1,086,732.

Results of Operations Overview

Net income for the second quarter of 2010 was $569,000 or $0.66 per share, this compares with net income of $547,000 or $0.63 per share earned in the second quarter of 2009. This $22,000 increase in income over the same period in 2009 represents a 4% increase in income. Net income was $1,073,000 for the first six months of 2010, as compared to $505,000 for the same period in 2009. This is an increase of $568,000 compared to the same period a year ago. This represents a $1.24 net income per share as compared to $.58 for the same period a year ago. Included in the first six month’s results for 2009 was an other-than-temporary (“OTTI”) non-cash impairment charge of $604 thousand pre-tax, equivalent to $559 thousand after tax or $0.64 per share. The impairment charge relates to certain restricted equity securities which the Company owned for which on May 1, 2009 the Office of the Comptroller of the Currency closed the company and took control of its assets. This OTTI charge represents the complete write off of the carrying value of the equity security. Exclusive of the OTTI charge, net income would have been $1,064,000 in 2009, as compared to $1,073,000 in 2010. Net interest income had a strong increase from 2009 to 2010, but was partially offset by increases in provision for loan loss and an increase in non interest expenses. Consolidated annualized returns on average equity and average assets for the six months ended June 30, 2010 were 7.68% and 0.88%, respectively, compared with returns of 3.71% and 0.47% for the same period in 2009.

Net Interest Income

The Company’s taxable equivalent net interest income increased by 14.26% for the first half of 2010 compared to the same period in 2009. This increase resulted primarily due to the increase in average balances but the percentage yield of tax equivalent interest margin also increased. See the net interest margin analysis in Table I. Average balance of interest bearing liabilities grew by 13.73% while average balance of total earning assets grew by 12.25%. The Company’s tax equivalent yield on earnings assets for first six months of 2010 was 4.31% compared to 4.22% for same period in 2009 as the cost of funds decreased by 57 basis points while the yield on earning assets decreased 38 basis points.

As shown in the interest sensitivity analysis in Table II, the Company is in a liability sensitive position for the next 12 month time frame, meaning our liabilities mature and reprice faster than our assets in a stable rate environment within the next 12 months. Table II shows contractual maturities of assets and liabilities. Actual results can and do differ due to loans being paid off prior to maturity or paid faster than contract terms, investment securities being called prior to final maturity, and many deposit accounts typically are more stable and while they can be withdrawn immediately history shows they tend to be a stable source of funding.

Table I shows the average balances for interest bearing assets and liabilities, the rates earned on earning assets and the rates paid on deposits and borrowed funds.

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TABLE I

Allegheny Bancshares, Inc.
Net Interest Margin Analysis
(On a Fully Taxable Equivalent Basis) (Dollar Amounts in Thousands)

	Six Months Ended							Six Months Ended
	June 30, 2010							June 30, 2009
	Average		Income/					Average		Income/
	Balance		Expense		Rates			Balance		Expense		Rates
Interest Income
Loans1,2,3	$	187,016	$	5,978		6.39	%	$	165,764	$	5,610		6.77	%
Federal funds sold		—		—		—	%		586		1		0.34	%
Interest bearing deposits		6,359		56		1.76	%		5,051		42		1.66	%
Investments
Taxable		15,182		230		3.03	%		11,262		213		3.78	%
Nontaxable2		14,455		416		5.76	%		16,017		463		5.78	%
Total Earning Assets		223,012		6,680		5.99	%		198,680		6,329		6.37	%
Interest Expense
Demand deposits		22,768		130		1.14	%		21,987		105		0.96	%
Savings		33,785		36		.21	%		27,608		39		0.28	%
Time deposits		127,181		1,607		2.53	%		109,010		1,846		3.39	%
Short-term borrowings		1,029		1		0.19	%		1,562		1		0.13	%
Long-term debt		4,645		115		4.95	%		6,372		144		4.52	%
Total Interest Bearing
Liabilities	$	189,408	$	1,889		1.99	%	$	166,539	$	2,135		2.56	%
Net Interest Margin1				4,791							4,194
Net Yield on Interest
Earning Assets						4.30	%						4.22	%

1	Interest on loans includes loan fees
2	An incremental tax rate of 34% was used to calculate the tax equivalent income
3	Nonaccrual loans are included in average loan balance

Noninterest Income

Noninterest income increased $666,000 for the six months ending June 30, 2010, compared to the same period in 2009. As discussed in the “Results of Operations Overview” above, this loss in 2009 was caused by the other-than-temporary-impairment charge on a restricted equity investment of the Company. Other than the effect of this impairment charge, noninterest income has increased by $62,000 from first half of 2009 to first half of 2010. This increase is due primarily to a $71,000 increase in overdraft protection fees and a $47,000 increase in ATM fee income. Noninterest income was boosted in 2009 by a $64,000 gain on sale of securities. In the first half of 2010 no gains or losses were recognized.

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Noninterest Expenses

Total noninterest expense increased $175,000 or 5.49% for the first six months of 2010, as compared to same period in 2009. The main reasons for this increase include $186,000 increase in salaries and benefits, $15,000 increase in occupancy expenses, $48,000 increase in equipment expenses, and a $25,000 increase in FDIC insurance assessment. Salaries and benefits increased by 12.21% due to merit increases, and an increase in the number of employees. With the purchase of the two additional branch offices in April of 2009 and other staff increases, our number of full time equivalent (FTE) employees has increased by over 14 to a total of 80. For the first six months of 2010 our number of full time equivalent employee average increased by 10% over the same period in 2009.

Income Tax Expense

Income tax expense is 26.96% of pretax income for the first six months of 2010 compared to 41.35% for the same period in 2009. The tax expense for first half of 2009 is higher percentage due to the majority of the OTTI charge not being tax deductible. The loss on the OTTI charge for income tax purposes is considered a capital loss and only deductible to the extent that the Company has capital gains. Currently the Company does not have the expectation that it could realistically generate enough capital gains to fully offset the capital losses that have arisen from the OTTI charges on the restricted stock. To that extent, it must consider excess losses as non tax deductible and not derive any tax benefit from the excess capital losses over realistically expected capital gains. At this point it appears that $484,000 of the OTTI charge will not be tax deductible.

Loans and Provision for Loan Loss

Total loans were $190,749,000 at June 30, 2010, compared to $184,655,000 at December 31, 2009, representing a $6.1 million increase. A schedule of loans by type is shown in Note 4 to the financial statements. Approximately 87% of the loan portfolio is secured by real estate at June 30, 2010. The provision for loan losses was $644,000 for the first 6 months of 2010 compared to $167,000 for the same period in 2009. Loan loss provision was increased due to a deteriorating economic outlook and increase in delinquencies during the second half of 2009 and continuing into 2010. The Company has a couple of commercial borrowers in particular, that have deteriorating operational projections. These borrowers loans are generally collateralized by real estate. The allowance for loan losses (“ALL”) was $2,204,000 (1.16% of loans) at June 30, 2010 compared with $1,790,000 (.97% of loans) at December 31, 2009. The percentage increase in ALL was caused by the increase in the provision for loan losses. The Company continues to monitor the loan portfolio for signs of weakness or developing credit problems. Loan loss provision for each period is determined after evaluating the loan portfolio and determining the level of reserves necessary to absorb current charge-offs and maintain the reserve at adequate levels. See Note 5 for more detail.

The Company monitors the portfolio particularly closely in this current economic environment. Real estate sales are currently slow in the Company’s market area, but this area has not seen the same increase in foreclosures or extent of dropping collateral values as has been the case for many areas. Most of the Company’s market area is fairly rural and the majority of employment in these areas is not in economically sensitive industries. The Company is not immune to the current economic downturn and it has exposure to the slowing economic situation particularly as it relates to the timber industry and the housing industry as the Company has made real estate development loans to a limited extent within our markets. The Company’s loans that are past due as a percentage of total loans and loans designated as nonperforming have been higher in 2009 and 2010 than previous years. With the slow real estate market and deteriorating economic environment, the Company does realize there is an increase in credit risk in its loan portfolio and has made adjustments to the calculation of the allowance for loan loss, which has caused increases to the amount of the provision for loan losses.

Loan Portfolio Risk Factors

Nonperforming loans include nonaccrual loans, loans over 90 days past due and restructured loans. Nonaccrual loans are loans in which interest accruals have been discontinued. Loans are placed in a nonaccrual status when management has information that indicates that principal or interest may not be collectible. Restructured loans are loans for which a borrower has been granted a concession on the interest rate or original repayment terms because of financial difficulties.

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The following table summarizes the Company’s nonperforming loans at June 30, 2010 and December 31, 2009 (in thousands of dollars):

	June 30, 2010			December 31, 2009
Nonaccrual loans	$	3,387		$	104
Restructured loans		139			133
Loans delinquent 90 days or more		985			5,290
Total Nonperforming Loans	$	4,511			5,527
Nonperforming loans as a percentage of total loans		2.36	%		2.99	%
Allowance for loan losses as a percentage of nonperforming loans		48.86	%		32.39	%

The primary reason for the increase in nonaccrual loans is due to one large commercial borrower whose loan was over 90 days delinquent as of December 31^st, 2009, has now been classified as non-accrual due to deteriorating financial condition.

Deposits

The Company’s primary funding source is deposits from individuals, businesses and government entities located within its trade area. The Company’s deposits increased $2,588,000 or 1.24% during the first six months of 2010. A schedule of deposits by type is shown in the balance sheets. Loan to deposit ratio at June 30, 2010 is at 90.22% which is higher than the 88.42% at December 31, 2009. Deposit growth in 2009 far exceeded loan growth, and this liquidity has given the Company the chance to be less aggressive on deposit pricing. This over time should help increase the net interest margin. Much of the deposit growth during 2009 was felt to be as a result of “flight to quality” as customers sought safe investments due to turmoil in the equity markets. As a result the Company realizes these deposits may decrease as customers seek higher yields as the financial turmoil passes. Time deposits of $100,000 or more were 21.83% and 20.42% of total deposits at June 30, 2010 and December 31, 2009, respectively.

Borrowings

The Company borrows funds from the Federal Home Loan Bank (FHLB) to provide liquidity and to reduce interest rate risk. As competition for deposits have increased during periods of loan growth, FHLB borrowings have been utilized to help fund the loan growth. These borrowings have a fixed rate of interest and are amortized over a period of 2 to 20 years. Interest rates on these obligations range from 4.22% to 5.57%. There has been no borrowing from FHLB during 2009 or 2010 due to the Bank’s strong deposit growth and slower loan growth.

Capital

The Company continues to maintain a strong capital position to support future growth. Capital as a percentage of total assets was 11.67% at June 30, 2010 and was 11.37% at December 31, 2009, and significantly exceeded regulatory requirements. The Company is considered to be well capitalized under the regulatory framework for prompt corrective actions.

Uncertainties and Trends

Management is not aware of any known trends, events or uncertainties that will have or that are reasonably likely to have a material effect on liquidity, capital resources or operations. Additionally, management is not aware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have such an effect.

Liquidity and Interest Sensitivity

Liquidity reflects our ability to ensure that funds are available to meet present and future obligations. At June 30, 2010, the Company had liquid assets of approximately $5.16 million in the form of cash and due from banks. Management believes that the Company’s liquid assets are adequate at June 30, 2010. Additional liquidity may be provided by the growth in deposit accounts and loan repayments. In the event the Company would need additional funds, it has the ability to purchase federal funds and borrow under established lines of credit of $96.2 million.

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At June 30, 2010, the Company had a negative cumulative Gap Rate Sensitivity Ratio of 29.68% for the one year repricing period. This rate reflects a very conservative estimate since we show an immediate runoff of accounts without a specific maturity date, and does not reflect the historical movement of funds during varying interest rate environments. Adjusted for historical repricing trends in response to interest rate changes, the adjusted Gap Ratio is -15.56%. This indicates that the Company is liability sensitive. But this negative gap ratio is within guidelines set by the Company and the Company expects interest income would remain stable in both a declining and increasing interest rate environment. Management constantly monitors the Company’s interest rate risk and has decided that the current position is an acceptable risk for a community bank operating in a rural environment. Table II shows the Company’s interest sensitivity.

TABLE II

Allegheny Bancshares, Inc.
Interest Sensitivity Analysis
June 30, 2010
(In Thousands of Dollars)

	0-3			4-12			1-5			Over 5
	Months			Months			Years			Years			Total
Uses of Funds:
Loans	$	22,069		$	29,464		$	45,426		$	93,790		$	190,749
Interest bearing deposits		293			3,001			3,038			—			6,332
Investment securities		1,017			2,270			17,095			9,335			29,717
Restricted Investments		—			—			—			748			748
Total		23,379			34,735			65,559			103,873			227,546
Sources of Funds:
Deposits:
Interest bearing demand		29,444			—			—			—			29,444
Savings		26,948			—			—			—			26,948
Time deposits over $100,000		8,761			13,119			17,484			6,784			46,148
Other time deposits		21,210			24,148			28,498			7,101			80,957
Short-term borrowings		797			—			—			—			797
Long-term debt		60			1,155			593			2,770			4,578
Total	$	87,220		$	38,422		$	46,575		$	16,655		$	188,872
Discrete Gap	$	(63,841	)	$	(3,687	)	$	18,984		$	87,218		$
Cumulative Gap	$	(63,841	)	$	(67,528	)	$	(48,544	)	$	38,674		$
Ratio of Cumulative Gap To Total Earning Assets		-28.05	%		-29.68	%		-21.33	%		17.00	%

Table II reflects the earlier of the maturity or repricing dates for various assets and liabilities at June 30, 2010. In preparing the above table, no assumptions are made with respect to loan prepayments. Loan principal payments are included in the earliest period in which the loan matures or can be repriced. Principal payments on installment loans scheduled prior to maturity are included in the period of maturity or repricing. A loan with a floating rate, such as the majority of our residential loan portfolio, that has reached a contractual floor or ceiling level is being treated as a fixed rate loan until the rate is again free to float. In the current rate environment, this has the effect of causing the table II to model our adjustable rate loans as fixed rate loans. However in a rising interest rate environment when these loans would be repriced at rates above the contractual floor, and are once again free to float, many of our loans would move from the over 5 year timeframe to a more current timeframe.

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Existence of Securities and Exchange Commission Web Site

The Securities and Exchange Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including Allegheny Bancshares, Inc. and the address is http: //www.sec.gov.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As a result of the enactment of the Sarbanes-Oxley Act of 2002, issuers that file periodic reports under the Securities Exchange Act of 1934 (the “Act”) are now required to include in those reports certain information concerning the issuer’s controls and procedures for complying with the disclosure requirements of the federal securities laws. Under rules adopted by the Securities and Exchange Commission effective August 29, 2002, these disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports it files or submits under the Act, is communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.

We have established disclosure controls and procedures to ensure that material information related to Allegheny Bancshares, Inc. and its subsidiary is made known to our principal executive officer and principal financial officer on a regular basis, in particular during the periods in which our quarterly and annual reports are being prepared. These disclosure controls and procedures consist principally of communications between and among the Chief Executive Officer and the Chief Financial Officer to identify any new transactions, events, trends, contingencies or other matters that may be material to the Company’s operations. As required, we have evaluated the effectiveness of these disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, the Company’s management, including the Chief Financial Officer, concluded that such disclosure controls and procedures were operating effectively as designed as of the date of such evaluation.

Changes in Internal Controls

During the period reported upon, there were no significant changes in the Company’s internal controls pertaining to its financial reporting and control of its assets or in other factors that could significantly affect these controls.

Part II. Other Information

Item 1. Legal Proceedings —Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds —Not Applicable

Item 3. Defaults Upon Senior Securities —Not Applicable

Item 5. Other Information —Not Applicable

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Item 6. Exhibits

The following Exhibits are filed as part of this Form 10-Q

No.		Description
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith).
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith).
	32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

The following exhibit is incorporated by reference to the Exhibits to Allegheny Bancshares, Inc. Form 10-KSB filed March 30, 2003.

No.	Description	Exhibit Number
3.1	Articles of Incorporation — Allegheny Bancshares, Inc.	E2

The following exhibit is incorporated by reference to the Exhibits to Allegheny Bancshares, Inc. Form 10-K filed March 31, 2006.

No.	Description	Exhibit Number
3.3	Bylaws of Allegheny Bancshares, Inc.	3.3

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant causes this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

ALLEGHENY BANCSHARES, INC.
By:	/s/ William A. Loving, Jr.
	Name:	William A. Loving, Jr.
	Title:	Executive Vice President and Chief Executive Officer

By:	/s/ L. Kirk Billingsley
	Name:	L. Kirk Billingsley
	Title:	Senior Vice President and Chief Financial Officer

Date: August 6, 2010

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