UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Pinnacle Bankshares Corporation
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
[Logo]
Dear Fellow Shareholders:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
of Pinnacle Bankshares Corporation, the holding company for The First National
Bank of Altavista. The meeting will be held on Tuesday, April 10, 2001, at
11:30 a.m. at the Fellowship Hall of Altavista Presbyterian Church, located at
707 Broad Street, Altavista, Virginia. The accompanying Notice and Proxy
Statement describe the matters to be presented at the meeting. Enclosed is our
2000 Annual Report to Shareholders that will be reviewed at the Annual Meeting.
Please complete, sign, date and return the enclosed proxy card as soon as
possible. Whether or not you will be able to attend the Annual Meeting, it is
important that your shares be represented and your vote recorded. The proxy may
be revoked at any time before it is voted at the Annual Meeting.
We appreciate your continuing loyalty and support of The First National
Bank of Altavista and Pinnacle Bankshares Corporation.
Sincerely,
/s/ Robert H. Gilliam, Jr.
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Robert H. Gilliam, Jr.
President &
Chief Executive Officer
Altavista, Virginia
March 7, 2001
(This page intentionally left blank)
Pinnacle Bankshares Corporation
622 Broad Street
Altavista, Virginia 24517
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NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
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TO BE HELD APRIL 10, 2001
The 2001 Annual Meeting of Shareholders of Pinnacle Bankshares Corporation
will be held at the Fellowship Hall of Altavista Presbyterian Church, located at
707 Broad Street, Altavista, Virginia, on Tuesday, April 10, 2001, at 11:30
a.m. for the following purposes:
1. To elect four Class I directors to serve until the 2004 Annual
Meeting of Shareholders, as described in the Proxy Statement
accompanying this notice.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 23, 2001, are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
/s/ Bryan M. Lemley
----------------------------
Bryan M. Lemley
Secretary
March 7, 2001
IMPORTANT NOTICE
Please complete, sign, date and return the enclosed proxy card in the
accompanying postage paid envelope so that your shares will be represented at
the meeting. Shareholders attending the meeting may personally vote on all
matters which are considered, in which event the signed proxies are revoked.
Pinnacle Bankshares Corporation
622 Broad Street
Altavista, Virginia 24517
PROXY STATEMENT
2001 ANNUAL MEETING OF SHAREHOLDERS
April 10, 2001
GENERAL
The following information is furnished in connection with the solicitation
by and on behalf of the Board of Directors of the enclosed proxy to be used at
the 2001 Annual Meeting of Shareholders (the "Annual Meeting") of Pinnacle
Bankshares Corporation (the "Company") to be held Tuesday, April 10, 2001, at
11:30 a.m. at the Fellowship Hall of Altavista Presbyterian Church, located at
707 Broad Street, Altavista, Virginia. The approximate mailing date of this
Proxy Statement and accompanying proxy is March 7, 2001.
Revocation and Voting of Proxies
Execution of a proxy will not affect a shareholder's right to attend the
Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder may also revoke his proxy at any time before it is
exercised by filing a written notice with the Company or by submitting a proxy
bearing a later date. Proxies will extend to, and will be voted at, any properly
adjourned session of the Annual Meeting. If a shareholder specifies how the
proxy is to be voted with respect to any proposals for which a choice is
provided, the proxy will be voted in accordance with such specifications. If a
shareholder fails to specify with respect to such proposals, the proxy will be
voted FOR proposal 1, as set forth in the accompanying notice and further
described herein.
Voting Rights of Shareholders
Only those shareholders of record at the close of business on February 23,
2001, are entitled to notice of and to vote at the Annual Meeting, or any
adjournments thereof. The number of shares of common stock of the Company
outstanding and entitled to vote at the Annual Meeting is 1,448,014. The Company
has no other class of stock outstanding. A majority of the votes entitled to be
cast, represented in person or by proxy, will constitute a quorum for the
transaction of business. Each share of Company Common Stock entitles the record
holder thereof to one vote upon each matter to be voted upon at the Annual
Meeting.
With regard to the election of directors, votes may be cast in favor or
withheld. If a quorum is present, the nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected directors; therefore, votes
withheld will have no effect. Thus, although abstentions and broker non-votes
(shares held by customers which may not be voted on certain matters because the
broker has not received specific instructions from the customer) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, they are generally not counted for purposes of determining whether
such proposals have been approved and therefore have no effect.
Solicitation of Proxies
The cost of solicitation of proxies will be borne by the Company.
Solicitations will be made only by the use of the mails, except that officers
and regular employees of the Company and The First National Bank of Altavista
(the "Bank") may make solicitations of proxies by telephone, telegram, special
letter, or by special call, acting without compensation other than regular
compensation. It is contemplated that brokerage houses and other nominees,
custodians, and fiduciaries will be requested to forward the proxy soliciting
material to the beneficial owners of the stock held of record by such persons,
and the Company will reimburse them for their charges and expenses in this
connection.
Securities Ownership of Certain Beneficial Owners
To the Company's knowledge, no shareholder of the Company owns 5% or more
of the outstanding common stock. For information regarding securities ownership
by members of the Company's Board of Directors and management, please see
"Election of Directors" below.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Board is divided into three classes (I, II, and III) of
directors. The term of office for Class I directors will expire at the Annual
Meeting. Four persons named below, each of whom currently serves as a director
of the Company, will be nominated to serve as a Class I director. If elected,
the Class I nominees will serve until the 2004 Annual Meeting of Shareholders.
The persons named in the proxy will vote for the election of the nominees named
below unless authority is withheld. The Company's Board believes that the
nominees will be available and able to serve as directors, but if any of these
persons should not be available or able to serve, the proxies may exercise
discretionary authority to vote for a substitute proposed by the Company's
Board.
Certain information concerning the nominees for election at the Annual
Meeting is set forth below, as well as certain information about the Class II
and Class III directors who will continue in office.
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Common
Shares of Ownership as a
Director of Company Percentage of
Name (Age) and Principal Occupation Company Beneficially Common Stock
Address Last Five Years Since (1) Owned (2)(3) Outstanding
------- --------------- --------- ------------ -----------
Class I Directors (Nominees)(Serving until the 2001 Annual Meeting)
A. Willard Arthur (55) Chairman and Secretary 1998 833 *
Rustburg, Virginia Marvin V. Templeton & Sons, Inc.
John P. Erb (57) Assistant Superintendent 1989 4,164(4) *
Altavista, Virginia Campbell County Schools
Robert H. Gilliam, Jr. (55) President & CEO 1979 17,292(5) 1.19%
Lynch Station, Virginia The First National Bank
Of Altavista
R. B. Hancock, Jr. (50) President & Owner 1994 4,071(6) *
Huddleston, Virginia R.B.H., Inc. d/b/a Napa
Auto Parts
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLERS VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
Class II Directors (Serving until the 2002 Annual Meeting)
Alvah P. Bohannon, III (53) President 1985 3,998 *
Altavista, Virginia Altavista Motors
James E. Burton, IV (44) Vice President, Operations 1998 10,131(7) *
Lynchburg, Virginia Marvin V. Templeton & Sons, Inc.
James P. Kent, Jr. (61) Partner 1980 21,051(8) 1.45%
Hurt, Virginia Kent & Kent
Percy O. Moore (67) Retired 1989 3,402(9) *
Altavista, Virginia Customer Service
Supervisor
Class III Directors (Serving until the 2003 Annual Meeting)
Warren G. Lowder (47) Vice President, Secretary & CFO 1999 1200 *
Altavista, Virginia The Lane Company, Inc.
Herman P. Rogers, Jr. (57) Plant Manager 1997 3,248(9) *
Altavista, Virginia BGF Industries, Inc.
Carroll E. Shelton (50) Senior Vice President 1990 11,279(10) *
Hurt, Virginia The First National Bank
of Altavista
John L. Waller (57) Owner & Operator 1989 4,042(11) *
Hurt, Virginia Waller Farms, Inc.
-3-
Common
Shares of Ownership as a
Director of Company Percentage of
Name (Age) and Principal Occupation Company Beneficially Common Stock
Address Last Five Years Since (1) Owned (2)(3) Outstanding
------- --------------- --------- ------------ -----------
All directors and executive 89,097 6.15%
officers as a group (12 persons)
__________________
* Less than 1.0%; based on total outstanding shares of 1,448,014 shares as of
the date of this Proxy Statement.
(1) Reflects year that director initially served on the Board of the Bank, the
Company's sole subsidiary. Effective May 1, 1997, the Company became the
holding company for the Bank.
(2) For purposes of this table, beneficial ownership has been determined in
accordance with the provision of Rule 13d-3 of the Securities Exchange Act
of 1934 under which, in general, a person is deemed to be the beneficial
owner of a security if he has or shares the power to vote or direct the
voting of the security or the power to dispose of or direct the disposition
of the security, or if he has the right to acquire beneficial ownership of
the security within sixty days.
(3) Includes shares held by affiliated corporations, close relatives, and
children, and shares held jointly with spouses or as custodians or trustees
for children.
(4) 4,144 of the reported shares held jointly with spouse and 20 of the
reported shares held in name of majority child living at home.
(5) Includes 7,200 shares which represents shares that Mr. Gilliam has the
option to purchase as of May 1, 2000 under the 1997 Incentive Stock Option.
(6) 3,488 of the reported shares held jointly with spouse and 583 of the
reported shares held in name of majority child living at home.
(7) 656 of the reported shares held solely in spouse's name and 6,754 shares
held as custodian for minor children.
(8) 1,906 of the reported shares held solely in spouse's name.
(9) Shares held jointly with spouse.
(10) 6,479 shares are held jointly with spouse; and includes 4,800 shares which
represents shares that Mr. Shelton has the option to purchase as of May 1,
2000 under the 1997 Incentive Stock Option.
(11) 562 of the reported shares held in name of majority children living at
home.
Meetings and Committees of the Board of Directors
The Board of Directors conducts its business through meetings of the
Company's Board and through committees of the Bank's Board, certain of which are
set forth below. The Company became the holding company for the Bank in May
1997, and currently, the Bank's committees make recommendations to the Company's
Board regarding the audit, personnel and nominating functions. During calendar
year 2000, the Company's Board of Directors held 7 meetings and the Bank's Board
of Directors held 16 meetings. No director attended fewer than 75 percent of the
total meetings of the Company's and the Bank's Boards of Directors and the Bank
committees on which he or she served during this period.
-4-
Audit Committee. The Bank's Audit Committee meets to review reports of the
Bank's internal auditor who reports directly to the Audit Committee and reviews
the annual report of the Company's independent auditors. Members of the Audit
Committee are Messrs. Bohannon, Lowder, Hancock, Moore, Burton and Waller, and
they met 4 times in 2000.
Personnel Committee. The Bank's Personnel Committee reviews officer and
employee compensation and employee benefit plans and makes recommendations to
the Board concerning such matters. The Personnel Committee makes recommendations
as to the employment of officers of the Bank. Members of the Personnel Committee
are Messrs. Erb, Hancock, Rogers, Arthur, Lowder, and Gilliam, and they met 4
times in 2000.
Nominating Committee. The Nominating Committee's duties include
consideration of candidates for board election. The Nominating Committee makes a
recommendation to the Board concerning candidates for any vacancy that may occur
and the entire Board then determines which candidate(s) should be nominated for
the shareholders' approval. Members of the Nominating Committee are Messrs. Erb,
Burton, Kent, and Gilliam, and they met 2 times in 2000. While the Board of
Directors will consider nominees recommended by shareholders, it has not
actively solicited recommendations from the Bank's shareholders for nominees,
nor has it established any procedures for this purpose.
Transactions with Management
Directors and officers of the Bank and persons with whom they are
associated have had, and expect to have in the future, banking transactions with
the Bank in the ordinary course of their businesses. In the opinion of
management of the Bank, all such loans and commitments for loans were made on
substantially the same terms, including interest rates, collateral and repayment
terms as those prevailing at the same time for comparable transactions with
other persons, were made in the ordinary course of business, and do not involve
more than a normal risk of collectibility or present other unfavorable features.
Directors' Fees
All directors of the Company received an annual retainer of $1,000 in 2000.
Directors of the Bank received an annual retainer of $4,000 in 2000 and, in
addition, the outside directors received $200 for each committee meeting
attended.
Interest of Management in Certain Transactions
As of December 31, 2000, borrowing by all policy-making officers,
directors, principal shareholders and their associates amounted to $2,255,000,
or 13% of total capital. The maximum aggregate amount of such indebtedness
during 2000 was $3,177,000, or 18% of total year-end capital. These loans were
made in the ordinary course of the Bank's business, on the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with others, and do not involve more than the normal
risks of collectibility or present other unfavorable features. The Bank expects
to have in the future similar banking transactions with officers, directors,
principal shareholders and their associates.
-5-
EXECUTIVE COMPENSATION
The following table provides information concerning Mr. Gilliam, President
and CEO, the only executive officer of the Company whose compensation exceeded
$100,000 for any year in the three-year period ended December 31, 2000. All
compensation, other than director fees for members of the Company's Board of
Directors, was paid by the Bank, the Company's wholly-owned subsidiary.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Name and Principal Options All Other
- ------------------
Position Year Salary($)(1) Bonus($) Granted (#) Compensation ($)(2)
-------- ---- ------------ -------- ----------- -------------------
Robert H. Gilliam, Jr. 2000 131,250 11,813 - 2,945
President & Chief 1999 129,500 11,250 - 1,364
Executive Officer 1998 124,250 12,000 - 2,087
___________________________
(1) Includes a Board retainer of $5,000 in 2000, $4,500 in 1999, and $4,250 in
1998.
(2) Cost (based on IRS uniform cost table) of more than $50,000 of group-term
life insurance provided by employer.
Stock Options
No options were granted to Mr. Gilliam during 2000, 1999, or 1998.
The following table reflects certain information regarding the exercise of
stock options during the year ended December 31, 2000, as well as information
with respect to unexercised options held at such date by Mr. Gilliam.
Year-End Option Values
----------------------
Options Exercised Number of Value of Unexercised
-----------------
Unexercised Options "In the Money"
Shares at Year End(#) Options at Year
Acquired on Value Exercisable/ End($)(1) Exercisable/
Name Exercised(#) Realized($) Unexercisable Unexercisable
---- ------------ ----------- ------------- -------------
Robert H. Gilliam, Jr. 0 0 7,200/4,800 63,000/42,000
________________
(1) Calculated as the difference between the current market value and the
exercise price of the options. Assumes a current market value of $18.75 per
share, as of December 31, 2000.
-6-
Employee Benefit Plans
Retirement Plan. The Bank maintains a Non-Contributory Defined Benefit
Retirement Plan (the "Retirement Plan") covering substantially all employees who
have reached the age of 21 and have been fully employed for at least one year.
The Retirement Plan, sponsored by the Virginia Bankers Association, provides
participants with retirement benefits related to salary and years of credited
service. Employees become vested after five plan years of service, and the
normal retirement date is the plan anniversary date nearest the employee's 65th
birthday. The Retirement Plan does not cover directors who are not active
officers. The amount expensed for the Retirement Plan during the year ended
December 31, 2000, was $99,050.
The following table shows the estimated annual retirement benefits payable
to employees in the average annual salary and years of service classifications
set forth below assuming retirement at the normal retirement age of 65.
ANNUAL RETIREMENT BENEFIT: First National Bank of Altavista
Five-Year
Average Salary YEARS OF SERVICE
-------------- ----------------
10 15 20 25 30 35
-- -- -- -- -- --
25,000 3,750 5,625 7,500 9,375 11,250 12,188
40,000 6,525 9,788 13,050 16,313 19,575 21,338
55,000 9,900 14,850 19,800 24,750 29,700 32,588
75,000 14,400 21,600 28,800 36,000 43,200 47,588
100,000 20,025 30,038 40,050 50,063 60,075 66,338
125,000 25,650 38,475 51,300 64,125 76,950 85,088
150,000 31,275 46,913 62,550 78,188 93,835 103,838
175,000 36,900 55,350 73,800 92,250 110,700 122,588
200,000 42,525 63,788 85,050 106,313 127,575 141,338
Benefits under the Retirement Plan are based on a straight life annuity
assuming full benefit at age 65, no offsets, and covered compensation of $33,000
for a person age 65 in 2000. Compensation for 2000 was limited to $160,000 by
the Internal Revenue Code. The estimated annual benefit payable under the
Retirement Plan upon retirement is $72,191 for Mr. Gilliam, credited with 40
years of service. Benefits are estimated on the basis that he will continue to
receive, until age 65, covered salary in the same amount paid in 2000.
Profit Sharing/401(k) Plan. The Bank adopted a Defined Contribution Profit
Sharing Thrift Plan (the "Thrift Plan") effective January 1, 1997. The Thrift
Plan, sponsored by the Virginia Bankers Association, includes a 401(k) savings
provision which authorizes a maximum voluntary salary deferral of up to 15% of
compensation, subject to statutory limitations. All full-time employees who have
reached the age of 21 with at least six months of service are eligible to
participate. Contributions and earnings, which are tax-deferred, may be invested
in various investment vehicles offered through the Virginia Bankers Association.
The profit sharing arrangement allows for employer contributions in such amount,
if any, which the Board of Directors shall determine. Employees become 100%
vested in any employer contributions which may be made after five plan years of
service. The Bank made no contributions to the Thrift Plan for the year ended
December 31, 2000.
-7-
Incentive Stock Option Plan. The Company adopted the 1997 Incentive Stock
Plan (the "Incentive Plan") effective May 1, 1997. The Incentive Plan makes
available up to 50,000 shares of common stock for awards to key employees of the
Company and its subsidiaries in the form of stock options, stock appreciation
rights, and restricted stock (collectively, "Awards"). The purpose of the
Incentive Plan is to promote the success of the Company and its subsidiaries by
providing incentives to key employees that will promote the identification of
their personal interests with the long-term financial success of the Company and
with growth in shareholder value. The Incentive Plan is designed to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of key employees upon whose judgment, interest, and special effort the
successful conduct of its operation is largely dependent.
Under the terms of the Incentive Plan, the non-employee directors of the
Personnel Committee of the Board of Directors of the Bank (the "Committee") will
administer the plan. No director may serve as a member of the Committee if he is
eligible to participate in the Incentive Plan or was at any time within one year
prior to his appointment to the Committee eligible to participate in the
Incentive Plan. The Committee will have the power to determine the key employees
to whom Awards shall be made.
Each Award under the Incentive Plan will be made pursuant to a written
agreement between the Company and the recipient of the Award (the "Agreement").
In administering the Incentive Plan, the Committee will have the authority,
subject to approval, amendment and modification by the Board of Directors of the
Company, to determine the terms and conditions upon which Awards may be made and
exercised, to determine terms and provisions of each Agreement, to construe and
interpret the Incentive Plan and the Agreements, to establish, amend, or waive
rules or regulations for the Incentive Plan's administration, to accelerate the
exercisability of any Award, the end of any performance period, or termination
of any period of restriction, and to make all other determinations and take all
other actions necessary or advisable for the administration of the Incentive
Plan.
The Board may terminate, amend, or modify the Incentive Plan from time to
time in any respect without shareholder approval, unless the particular
amendment or modification requires shareholder approval under the Internal
Revenue Code of 1986, as amended (the "Code"), the rules and regulations under
Section 16 of the Securities Exchange Act of 1934 or pursuant to any other
applicable laws, rules, or regulations.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors, executive officers
and 10% beneficial owners of the Company's Common Stock to file reports
concerning their ownership of Common Stock. The Company believes that its
officers and directors complied with all filing requirements under Section 16(a)
of the Securities Exchange Act of 1934 during 2000.
-8-
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP, served as the Company's independent public accountants for the
year ended December 31, 2000. No accountants have been selected by the Board to
act as the Company's independent public accountants for the year ending December
31, 2001. The Board will make that selection later in the year. A representative
of KPMG LLP will be present at the Annual Meeting and will be given the
opportunity to make a statement and respond to appropriate questions from the
shareholders.
The following table sets forth the amount of audit fees, financial
information systems design and implementation fees, and all other fees billed or
expected to be billed by KPMG LLP, the Company's principal accountant, for the
year ended December 31, 2000:
Amount
--------
Audit fees (1) $45,900
Financial information systems design and
implementation fees (2) -
All other fees (3) 5,800
--------
Total fees $51,700
========
____________________
(1) includes annual financial statement audit and limited quarterly review
services
(2) no such services were provided by KPMG LLP for the most recent fiscal year
(3) primarily represents income tax services other than those directly related
to the audit of the income tax accrual
The Audit Committee of the Board of Directors has considered whether the
provision of financial information systems design and implementation and other
non-audit services is compatible with maintaining KPMG LLP's independence.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors, which consists entirely of
directors who meet the independence requirements of the National Association of
Securities Dealers' listing standards, has furnished the following report:
The Audit Committee (the "Committee") reviews the Company's financial
reporting process on behalf of the Board. The role and responsibilities of the
Audit Committee are set forth in a written Charter adopted by the Board, which
is attached as an Addendum to this Proxy Statement. Management has the primary
responsibility for the financial statements and the reporting process, including
the system of internal controls. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with accounting principles generally accepted in the
United States of America and to issue a report thereon. The Committee monitors
these processes.
In this context, the Committee met and held discussions with management and
the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, and
the Committee reviewed and discussed the consolidated financial statements with
management and the independent auditors. The Committee also discussed with the
independent auditors
-9-
the matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
In addition, the Committee discussed with the independent auditors the
auditors' independence from the Company and its management, and the independent
auditors provided to the Committee the written disclosures and letter required
by the Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees).
The Committee also discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
met with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000, for filing
with the Securities and Exchange Commission.
Audit Committee Members
A.P. Bohannon, III - Chair
James E. Burton, IV
R.B. Hancock, Jr.
Warren G. Lowder
Percy O. Moore
John L. Waller
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any matters to be presented for consideration at the Annual Meeting
other than those referred to above. If any other matters properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
such proxy, to the extent entitled, in accordance with their best judgment.
-10-
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 2002 Annual
Meeting must be received by the Company no later than November 5, 2001. Under
applicable law, the Board of Directors need not include an otherwise appropriate
shareholder proposal (including any shareholder nominations for director
candidates) in its proxy statement or form of proxy for that meeting unless the
proposal is received by the Company's Secretary, at the Company's principal
office in Altavista, Virginia, on or before the date set forth above.
By Order of the Board of Directors
/s/ Bryan M. Lemley
--------------------------------------
Bryan M. Lemley
Secretary
Altavista, Virginia
March 7, 2001
A copy of the Company's Annual Report on Form 10-KSB Report (including
exhibits) as filed with the Securities and Exchange Commission for the year
ended December 31, 2000, will be furnished without charge to shareholders upon
written request directed to the Company's Secretary as set forth on the first
page of this Proxy Statement.
-11-
ADDENDUM TO PROXY STATEMENT
The First National Bank of Altavista
Charter of the Audit Committee of the Board of Directors
Audit Committee Purpose
- -----------------------
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibility. The Audit Committee's
primary duties and responsibilities are to:
. Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, and legal compliance.
. Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
. Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of
Directors.
. Review areas of potential significant financial risk to the Company.
. Report to the Board of Directors any significant areas of risk or
recommendations to improve the policies, procedures, and practices of
the Company.
The Audit Committee has the authority to conduct an investigation
appropriate to fulfilling its responsibilities, and it has direct access
to the independent auditors as well as anyone in the organization. The
Audit Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it deems
necessary in the performance of its duties.
Audit Committee Composition and Meetings
- ----------------------------------------
Audit Committee members shall meet the requirements of the Securities and
Exchange Commission (SEC). The Audit Committee shall be comprised of
three or more directors as determined by the Board of Directors, each of
whom shall be independent non-executive directors, free from any
relationship that would interfere with the exercise of his or her
independent judgment. The SEC has established 3 criteria for assessing
independence of non-executive directors:
. Former employees. Must be a minimum of three years since he/she
was an employee.
. Family members of former employees. Must be a minimum of three
years since the relative was an employee.
. An Audit Committee member's compensation cannot be impacted by an
employee of the Company.
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All members of the Committee shall have a basic understanding of finance
and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have
accounting or related financial management expertise and knowledge of the
regulatory requirements of the Banking Industry.
Audit Committee members shall by appointed by the Board of Directors. If an
audit committee Chair is not designated or present, the members of the Committee
may designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the
director of the internal auditing department, the independent auditors,
and as a committee to discuss any matters that the Committee or each of
these groups believe should be discussed. In addition, the Committee, or
at least its Chair, should communicate with management quarterly and the
independent auditors at least annually to review the Company's financial
statements and significant findings based upon the auditor's limited
quarterly review procedures.
Audit Committee Responsibilities and Duties
- -------------------------------------------
Review Procedures
Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and
have the document published at least every three years in
accordance with SEC regulations.
Review the Company's annual audited consolidated financial statements
prior to filing or distribution. Review should include discussion
with management and independent auditors of significant issues
regarding accounting principals, practices, and judgments.
In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's
financial reporting processes and controls. Discuss significant
financial risk exposures and the steps management has taken to
monitor, control, and report such exposures. Review significant
findings prepared by the independent auditors and the internal
auditing department together with management's responses.
Review with financial management the Company's quarterly financial
results prior to the release of earnings and/or the Company's
quarterly financial statements prior to filing or distribution.
Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The
Chair of the Committee may represent the entire Audit Committee
for purposes of this review.
Independent Auditors
The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall
review the independence and performance of
-13-
the auditors and annually recommend to the Board of Directors the
appointment of the independent auditors or approve any discharge
of auditors when circumstances warrant.
Approve the fees and other significant compensation to be paid to the
independent auditors.
On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with
the Company that could impair the auditors' independence.
(Independence Standards Board (ISB) Statement No. 1)
Review the independent auditors audit plan and engagement letter -
discuss scope, staffing, locations, reliance upon management, and
internal audit, and general audit approach.
Prior to filing the annual report on Form 10-KSB, discuss the results
of the audit with the independent auditors. Discuss certain
matters required to be communicated to audit committees in
accordance with AICPA SAS 61. Items to be communicated include:
The auditors' responsibility under Generally Accepted
Auditing Standards (GAAS).
Significant accounting policies.
Management judgments and accounting estimates
Audit adjustments.
Other information in documents containing audited financial
statements.
Disagreements with management - including accounting
principles, scope of audit, disclosures.
Consultation with other accountants by management.
Consider the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
Internal Audit Department and Legal Compliance
Review the budget, plan, changes in plan, activities,
organizational structure, and qualifications of the internal
audit department, as needed.
Review the appointment, performance, and replacement of the
senior internal auditor.
Review significant reports prepared by the internal audit
department together with management's response and follow-up to
these reports.
On at least an annual basis, review with the Company's counsel,
any legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance
with all applicable laws and regulations, and inquiries received
from regulators or governmental agencies.
Review all reports concerning any significant fraud or regulatory
noncompliance that occurs at the Company. This review should
include consideration of the internal controls that should be
strengthened to reduce the risk of a similar event in the future.
-14-
Other Audit Committee Responsibilities
Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's annual proxy statement. The report should state whether
the Audit Committee has:
. Reviewed and discussed the audited consolidated financial
statements with management.
. Discussed with the independent auditors the matters required to
be discussed by SAS 61.
. Received certain disclosures from the auditors regarding their
independence as required by the ISB 1 and then include a
statement based on this review if the Audit Committee recommended
to the Board of Directors to include the audited consolidated
financial statements in the annual report on Form 10-KSB filed
with the SEC.
Consider whether the provision of financial information systems design
and implementation and other non-audit services by the Company's
external auditors is compatible with maintaining the external
auditors' independence. This consideration should be included in the
Company's annual proxy statement.
Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
The Board of Directors originally approved the Audit Committee Charter
November 14, 2000, upon recommendation of the Audit Committee, and
approved revisions to the Audit Committee Charter February 13, 2001.
-15-
REVOCABLE PROXY
Pinnacle Bankshares Corporation
PLEASE MARK VOTES
AS IN THIS EXAMPLE
X
Annual Meeting of Stockholders
April 10, 2001
The undersigned shareholder of Pinnacle Bankshares Corporation (the
"Corporation") hereby appoints Gil Cothran, E.H. Frazier, Jr. and Henry S.
Pittard as proxies, such persons being duly appointed by the Board of Directors
with the power to appoint an appropriate substitute, to cast all votes that the
undersigned shareholder is entitled to cast at the annual meeting of
shareholders (the "Annual Meeting") to be held at 11:30 a.m. Eastern Time, on
Tuesday, April 10, 2001, at the Fellowship Hall of Altavista Presbyterian
Church, located at 707 Broad Street, Altavista, Virginia and at any adjournments
thereof, upon the following matters. The undersigned shareholder hereby revokes
any proxy or proxies heretofore given.
Please be sure to sign and date
this Proxy in the box below.
Stockholder sign above
Co-holder (if any) sign above
Date
1. To elect four Class I directors for three-year terms (Proposal 1):
Nominees:
A. Willard Arthur, John P. Erb, Robert H. Gilliam, Jr. and R.B. Hancock, Jr.
With- For All
[ ] For [ ] hold [ ] Except
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"For All Except" and write the name of the nominee(s) in the space provided
below.
____________________________________________________________________________
2. The Proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting or any adjournments of the meeting in accordance
with the determination of a majority of the Corporation's Board of Directors.
Please check box if you plan to attend the April 10, 2001 Annual Stockholders
Meeting [ ]
Number Attending ___
The proxy will be voted as directed by the undersigned shareholder. Unless
contrary direction is given, this proxy will be voted FOR the election of the
nominees listed in Proposal 1, and in accordance with the determination of a
majority of the Board of Directors as to any other matters. The undersigned
shareholder may revoke this proxy at any time before it is voted by delivering
to the Secretary of the Corporation either a written revocation of the proxy or
a duly executed proxy bearing a later date, or by appearing at the Annual
Meeting and voting in person. The undersigned shareholder hereby acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement.
Detach above card, sign, date and mail in postage paid envelope provided.
Pinnacle Bankshares Corporation
Please date and sign exactly as your name(s) appear(s) hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and any other fiduciary
should sign and indicate his or her full title. When stock has been issued in
the name of two or more persons, all should sign.
PLEASE ACT PROMPTLY
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