- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] 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 under sec.240.14a-12
</Table>
Allegheny Bancshares, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ALLEGHENY BANCSHARES, INC.
300 NORTH MAIN STREET
P.O. BOX 487
FRANKLIN, WEST VIRGINIA 26807
(304) 358-2311
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 16, 2007
The Annual Meeting of Shareholders of Allegheny Bancshares, Inc.
("Allegheny") will be held on Monday, April 16, 2007, at the Community Center,
Franklin, West Virginia, at 12:00 p.m., local time (lunch will be provided), for
the following purposes:
1. To elect three directors to serve terms of three years each;
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Shareholders who are holders of record on March 16, 2007 may vote at the
meeting.
By Order of the Board of Directors,
----------------------------------------
William A. Loving, Jr., CLBB
Executive Vice President and Chief
Executive Officer
Franklin, West Virginia
March 27, 2007
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED,
SELF-ADDRESSED ENVELOPE AS PROMPTLY AS POSSIBLE, EVEN IF YOU PLAN TO ATTEND THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN
THOUGH YOU HAVE PREVIOUSLY SIGNED AND RETURNED YOUR PROXY. YOU MAY REVOKE YOUR
PROXY BEFORE IT IS VOTED AT THE MEETING.
i
TABLE OF CONTENTS
PAGE NO.
--------
VOTING PROCEDURES AND REVOKING YOUR PROXY.......................... 1
VOTING FOR DIRECTORS............................................ 2
REVOKING YOUR PROXY............................................. 2
* ELECTION OF DIRECTORS (ITEM 1 ON PROXY CARD)....................... 2
MEMBERS OF THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND
MANAGEMENT NOMINEES TO ALLEGHENY'S BOARD........................ 3
BOARD INFORMATION............................................... 4
Attendance at Meetings....................................... 4
Number of Meetings........................................... 4
Board Committees............................................. 5
Certain Transactions With Directors and Officers and Their
Associates................................................... 9
Compensation Committee....................................... 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE......... 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION.................... 10
Compensation Discussion and Analysis......................... 10
Summary of Compensation...................................... 12
Employment and Change in Control Agreements.................. 13
Director Compensation........................................ 14
Security Ownership of Certain Beneficial Owners and
Management................................................... 15
AUDITORS........................................................... 16
ANNUAL REPORT ON FORM 10K.......................................... 17
SHAREHOLDER COMMUNICATION WITH THE BOARD........................... 17
OTHER INFORMATION.................................................. 17
SHAREHOLDER PROPOSALS FOR 2008..................................... 18
* MATTERS TO BE VOTED UPON.
ALLEGHENY BANCSHARES, INC.
300 NORTH MAIN STREET
P.O. BOX 487
FRANKLIN, WEST VIRGINIA 26807
(304) 358-2311
PROXY STATEMENT
Allegheny Bancshares, Inc.'s ("Allegheny") board of directors is soliciting
proxies to vote Allegheny's shares at the 2007 Annual Meeting of Shareholders.
Shareholders will meet at 12:00 p.m. on Monday, April 16, 2007, for the purposes
stated in the accompanying Notice of Annual Meeting. On or about March 27, 2007,
Allegheny began mailing this proxy statement to shareholders of record as of
March 16, 2007. Shareholders as of March 16, 2007, may vote at the meeting.
Please read this proxy statement carefully. You will find more information
about Allegheny and Pendleton Community Bank ("the bank") in our enclosed 2006
Annual Report to Shareholders and in the public documents we file with the
Securities and Exchange Commission.
Allegheny will pay for the cost of preparing, assembling, printing and
mailing of the proxy material and for the board of directors' solicitation of
proxies, and employees of the bank may follow up on this written solicitation by
telephone or other methods of communication. Directors, officers and employees
of the bank may solicit proxies personally, by telephone, telegraph and
telecopier. We will arrange with custodians, nominees and fiduciaries to forward
proxy material to the beneficial owners of stock, and upon request, Allegheny
will reimburse them for reasonable forwarding expenses.
As of February 1, 2007, the company had 2,000,000 authorized shares of
common stock with 884,711 shares issued and outstanding.
VOTING PROCEDURES AND REVOKING YOUR PROXY
If you complete, sign and return the enclosed proxy card, the persons named
in the proxy card will vote your shares as you direct. If you sign and return
the proxy card without indicating how you want to vote, the proxies will vote
your shares "FOR" the election of the three nominees as directors. A quorum for
the meeting is present if at least a majority of the outstanding shares is
present in person or by proxy. Votes withheld and abstentions will count in
determining the presence of a quorum for the particular matter. Those who fail
to return a proxy or attend the meeting will not count towards determining a
quorum.
-1-
VOTING FOR DIRECTORS
Allegheny's articles of incorporation provide for a classified board of
directors. There are three classes with each being elected for a three-year
term. There are presently 9 directors on the board, three of whom are nominees
for election at the 2007 Annual Meeting. Two of the nominees are non-employee
directors.
Directors are elected by a plurality of the shares voted. As required by
West Virginia law, each share is entitled to one vote per nominee, unless a
shareholder requests cumulative voting for directors at least 48 hours before
the meeting. If a shareholder properly requests cumulative voting for directors,
then each shareholder will have the right to vote the number of shares owned by
that shareholder for as many persons as there are directors to be elected, or to
cumulate such shares and give one candidate as many votes as the number of
directors multiplied by the number of shares owned shall equal, or to distribute
them on the same principle among as many candidates as the shareholder sees fit.
If any shares are voted cumulatively for the election of directors, the proxies,
unless otherwise directed, shall have full discretion and authority to cumulate
their votes and vote for less than all such nominees. For all other purposes,
each share is entitled to one vote.
The table on pages 3 and 4 of this proxy statement contains background
information on each director nominee.
REVOKING YOUR PROXY
You may revoke your proxy before it is voted at the Annual Meeting by:
- Notifying the bank in person;
- Giving written notice to the bank;
- Submitting to the bank a subsequently dated proxy; or
- Attending the meeting and withdrawing the proxy before it is
voted.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Allegheny's bylaws provide that the board of directors can set the number
of directors but also provide that the board of directors must have no less than
three nor more than 25 directors. The board of directors has set the number of
directors to serve in 2007 at nine, which means that three directors will be
elected at the 2007 Annual Meeting and will serve a term expiring at the 2010
Annual Meeting or until a successor is selected.
-2-
MEMBERS OF THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND MANAGEMENT NOMINEES TO
ALLEGHENY'S BOARD
TERM PRINCIPAL OCCUPATION
NAME AGE POSITION WITH ALLEGHENY EXPIRES FOR PAST FIVE YEARS
- ---- --- --------------------------- ------- -------------------------
Thomas J. Bowman 82 Director of Allegheny Since 2009 Owner of Earnest Bowman &
2002; Director of Pendleton Brother and Self-Employed
Community Bank Since 1969 Farmer
Roger D. Champ 61 Director of Allegheny Since 2008 Self-Employed Contractor
2002; Director of Pendleton
Community Bank Since 1994
John E. Glover 64 Director of Allegheny Since 2009 Self-Employed Dentist
2002; Director of Pendleton
Community Bank Since 1999
Carole H. Hartman 60 Director of Allegheny Since 2008 Owner of Pendleton County
2002; Director of Pendleton Insurance Agency,
Community Bank Since 1990; Self-Employed Farmer
Secretary of the Bank Board
**John D. Heavner 70 Director of Allegheny Since Self-Employed Farmer
2002; Director of Pendleton
Community Bank Since 1972
*Richard W. Homan 84 Director of Allegheny since 2007 Banker
2002; Director of Pendleton
Community Bank Since 1952;
President of Bank and CEO
Prior to October 16, 2000
William A. Loving, Jr. 51 Director of Allegheny Since 2008 Banker
2002; Executive Vice
President and CEO of
Pendleton Community Bank
Since 2000; Executive Vice
President and CEO of
Allegheny Since 2002
***William McCoy, Jr. 85 Director of Allegheny Since Owner of Pendleton Times,
2002; Director of Pendleton Attorney
Community Bank Since 1954
* Management Nominee
** Appointed Director Emeritus on February 2, 2006.
*** Appointed Director Emeritus on April 10, 2006.
-3-
TERM PRINCIPAL OCCUPATION
NAME AGE POSITION WITH ALLEGHENY EXPIRES FOR PAST FIVE YEARS
- ---- --- --------------------------- ------- -------------------------
*Jerry D. Moore 54 Director of Allegheny Since 2007 Prosecuting Attorney
2002; Director of Pendleton
Community Bank Since 1987
Richard C. Phares 78 Director of Allegheny Since 2009 Owner of R.C. Phares
2002; Director of Pendleton Store, Self-Employed Farmer
Community Bank Since 1969
*Dolan Irvine 59 Director of Allegheny Since 2007 Assessor, Appraiser
2003; Director of Pendleton Pocahontas County
Community Bank Since 2003 Self-Employed Farmer
L. Kirk Billingsley 46 Chief Financial Officer of -- Branch Manager, Chief
Pendleton Community Bank Financial Officer
and Allegheny Blue Grass Valley Bank
* Management Nominee
BOARD INFORMATION
While there is no such requirement, the board of directors of Pendleton
Community Bank and Allegheny are, and have at all times been, identical.
The directors that meet the NASDAQ Director Independence standards are:
Thomas J. Bowman, Roger D. Champ, John E. Glover, Carole H. Hartman, John D.
Heavner, William McCoy, Jr, Jerry D. Moore, Richard C. Phares, and Dolan Irvine.
ATTENDANCE AT MEETINGS
In order to fulfill their primary responsibilities, directors of the
company are expected to attend the annual meeting of shareholders and all Board
meetings and all meetings on committees on which they serve. During 2006, all of
the directors, except for those designated as Director Emeritus, attended at
least 75% of all meetings of the boards of Allegheny and the bank and all
committees of the boards on which they served. All of the directors of the
company attended the 2006 annual meeting of shareholders except John Heavner,
Director Emeritus.
NUMBER OF MEETINGS
The board of directors of Allegheny met 15 times in 2006. The board of
directors of the bank met for 51 regular weekly meetings in 2006. Special
meetings are held from time to time as required. During 2007, the bank board has
held five regular meetings.
-4-
BOARD COMMITTEES
NOMINATING COMMITTEE - The board of directors has not established formal
nominating or compensation committees as the entire board serves in these
capacities. The board of directors of Allegheny does not maintain a separate
nominating committee, nor does it have a nominating committee charter, because
the board of directors is relatively small and vacancies are rare. Because the
full board of directors serves the function of the nominating committee, not all
directors are independent.
The board of directors believes that candidates for director should have
certain minimum qualifications, including:
- Directors should be of the highest ethical character.
- Directors should have excellent personal and professional
reputations in Allegheny's market area.
- Directors should be accomplished in their professions or careers.
- Directors should be able to read and understand financial
statements and either have knowledge of, or the ability and
willingness to learn, financial institution law.
- Directors should have relevant experience and expertise to
evaluate financial data and provide direction and advice to the
chief executive officer and the ability to exercise sound
business judgment.
- Directors must be willing and able to expend the time to attend
meetings of the board of directors of Allegheny and the bank and
to serve on board committees.
- The board of directors will consider whether a nominee is
independent, as legally defined. In addition, directors should
avoid the appearance of any conflict and should be independent of
any particular constituency and be able to serve all shareholders
of Allegheny.
- Because the directors of Allegheny also serve as directors of the
bank, a majority of directors must be residents of West Virginia,
as required by state banking law.
- Directors must be acceptable to Allegheny's and the bank's
regulatory agencies, including the Federal Reserve Board, the
Federal Deposit Insurance Corporation and the West Virginia
Division of Banking and must not be under any legal disability
which prevents them from serving on the board of directors or
participating in the affairs of a financial institution.
- Directors must own or acquire sufficient capital stock to satisfy
the requirements of West Virginia law and the bylaws of the bank.
- Directors must be at least 21 years of age.
The board of directors of Allegheny reserves the right to modify these
minimum qualifications from time to time, except where the qualifications are
required by the laws relating to financial institutions.
-5-
The process of the board of directors for identifying and evaluating
nominees is as follows: In the case of incumbent directors whose terms are set
to expire, the board of directors considers the directors' overall service to
Allegheny during their term, including such factors as the number of meetings
attended, the level of participation, quality of performance and any
transactions between such directors and Allegheny and the bank. The board of
directors also reviews the payment history of loans, if any, made to such
directors by the bank to ensure that the directors are not chronically
delinquent and in default. The board considers whether any transactions between
the directors and the bank have been criticized by any banking regulatory agency
or the bank's external auditors and whether corrective action, if required, has
been taken and was sufficient. The board of directors also confirms that such
directors remain eligible to serve on the board of directors of a financial
institution under federal and state law. For new director candidates, the board
of directors uses its network of contacts in Allegheny's market area to compile
a list of potential candidates. The board of directors then meets to discuss
each candidate and whether he or she meets the criteria set forth above. The
board of directors then discusses each candidate's qualifications and chooses a
candidate by majority vote.
The board of directors will consider director candidates recommended by
stockholders, provided that the recommendations are received at least 120 days
before the next annual meeting of shareholders. In addition, the procedures set
forth below are followed by stockholders for submitting nominations. The board
of directors does not intend to alter the manner in which it evaluates
candidates, regardless of whether or not the candidate was recommended or
nominated by a shareholder.
Allegheny's bylaws provide that nominations for election to the board of
directors, other than those made by or on behalf of Allegheny's existing
management, must be made by a shareholder in writing delivered or mailed to the
CEO not less than 14 days nor more than 50 days prior to the meeting called for
the election of directors; provided, however, that if less than 21 days' notice
of the meeting is given to shareholders, the nominations must be mailed or
delivered to the CEO not later than the close of business on the seventh day
following the day on which the notice of meeting was mailed. The notice of
nomination must contain the following information, to the extent known:
- Name and address of proposed nominee(s);
- Principal occupation of nominee(s);
- Total shares to be voted for each nominee;
- Name and address of notifying shareholder; and
- Number of shares owned by notifying shareholder.
Nominations not made in accordance with these requirements may be
disregarded by the chairman of the meeting and in such case the votes cast for
each such nominee will likewise be disregarded. All nominees for election at the
meeting are incumbent directors. No shareholder recommendations or nominations
have been made.
-6-
AUDIT COMMITTEE - The joint audit committee of Allegheny and the bank was
formed in January, 2002, and is composed of the following non-management
directors: Dr. John Glover, Roger Champ, and T.J. Bowman. Members of this
committee are independent. The functions performed by the committee are set
forth in the "Report of the Audit Committee," included in this proxy statement.
The audit committee of the bank is governed by a written charter approved by the
board of directors of the bank and by Allegheny in April 2006.
It is difficult for a community bank to find a single individual that has
every one of the Securities and Exchange Commission's qualifications of an audit
committee financial expert; Allegheny believes that having only one individual
with financial expertise designation would cause the remaining members to
believe that their oversight responsibility had been diminished. Allegheny
believes that each member of the audit committee has sufficient knowledge in
financial and auditing matters to serve on the committee. As such, the board
does not believe that it is necessary to actively search for an outside person
to serve on the board to qualify as an audit committee financial expert. The
committee has authority to engage legal counsel, other experts or consultants as
it deems appropriate to carry out its responsibilities. The audit committee is
responsible for the appointment, replacement, compensation and oversight of the
independent auditor engaged to prepare or issue audit reports on our financial
statements. As a result, Allegheny has not designated one individual as an
"audit committee financial expert."
REPORT OF THE AUDIT COMMITTEE - The audit committee oversees the financial
reporting process of Allegheny and the bank on behalf of the board of directors.
The audit committee relies on the expertise and knowledge of management, its
internal auditors and the independent auditors in carrying out its oversight
responsibilities. The specific responsibilities in carrying out the audit
committee's oversight role are set forth in the company's audit committee
charter. This charter is reviewed annually and as may be required due to changes
in industry accounting practices or the promulgation of new rules or guidance
documents. In fulfilling its oversight responsibilities, the committee reviewed
the audited financial statements in the annual report with management, including
a discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity and
disclosures in the financial statements.
The committee reviewed with Elliott Davis, LLC, the independent auditors,
who are responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the bank's
accounting principles and such other matters as are required to be discussed
with the committee under generally accepted auditing standards. In addition, the
committee has discussed with the independent auditors the auditors' independence
from management, Allegheny and the bank, including the matters in the written
disclosures required by the independent standards board and considered the
compatibility of non-audit services with the auditors' independence.
The audit committee has discussed with Elliott Davis, LLC, the matters
required to be discussed by Statement of Auditing Standards No. 61 (Codification
of Statements on Accounting Standards), as amended. The audit committee has also
received the written disclosures and the
-7-
letter from Elliott Davis, LLC relating to the independence of that firm as
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with Elliott Davis, LLC,
that firm's independence from the company. The audit committee has also
considered whether the provision of non-audit related services by Elliott Davis,
LLC, is compatible with maintaining that firm's independence and determined that
the independence of Elliott Davis, LLC, has not been impaired.
The committee discussed with Allegheny'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, and
discussed the results of their examinations, their evaluation of the company's
internal controls, and the overall quality of the company's financial reporting.
The committee held seven meetings in 2006.
In reliance on the reviews and discussions referred to above, the committee
recommended to the board of directors (and the board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2006, for filing with the Securities and Exchange
Commission.
Based upon the review and discussions referred to above, the board of
directors recommends that the audited financial statements for the year ended
December 31, 2006, be included in the bank's Annual Report on Form 10-K and
filed with the Securities and Exchange Commission.
Respectfully Submitted,
February 22, 2007 Dr. John Glover
Roger Champ
T.J. Bowman
This report shall not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, unless the bank specifically incorporates this report
by reference. They will not otherwise be filed under such Acts.
-8-
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS AND THEIR ASSOCIATES
The bank has had and intends to continue to have banking and financial
transactions in the ordinary course of business with directors and executive
officers of Allegheny and the bank and their associates. Total loans outstanding
from the bank at December 31, 2006, to the bank's and Allegheny's officers and
directors as a group and members of their immediate families and companies in
which they had an ownership interest of 10% or more totaled $478,243, or
approximately 1.87% of the bank's total equity capital. These extensions of
credit are made at the same terms and conditions of other non-director
borrowings. They do not involve more than the normal risk of collectibility or
present other unfavorable features.
The bank purchases property insurance coverage from Pendleton County
Insurance Agency of which Director Hartman is an owner. The terms of and
premiums for this insurance are as favorable to the bank as they would have been
with third parties not otherwise affiliated with the bank.
COMPENSATION COMMITTEE
The full board of directors serves as the compensation committee to
establish compensation policies, plans and programs. The compensation committee
meets at least annually, and otherwise when necessary, with the chief executive
officer to review and approve the compensation programs for executives. CEO
Loving does not participate in discussions or determinations concerning his
compensation. In determining the salary budget for 2007, and in fixing levels of
executive compensation, the committee considered:
- The bank's performance relative to its long-range goals and its
peers; and
- The relative individual performances of each executive.
The compensation committee has determined that the bank's compensation is
competitive with peer banks in its geographical area.
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the Compensation
Discussion and Analysis with management and based on the review, the
compensation committee recommended that the Compensation Discussion and Analysis
be included in the company's Annual Report on Form 10-K and proxy statement.
Thomas J. Bowman Dolan Irvine
Roger D. Champ Jerry D. Moore
John E. Glover Richard C. Phares
Carole H. Hartman William A. Loving, Jr.
Richard W. Homan
-9-
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Allegheny's
directors and executive officers, and persons who own more than 10% of the
registered class of the bank's equity securities, to make stock ownership and
transaction filings with the Securities and Exchange Commission and to provide
copies to Allegheny. Based solely on a review of the reports furnished to
Allegheny and written statements that no other reports were required, all
Section 16(a) filing requirements applicable to its officers and directors were
met. Allegheny is required to report late filings.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS
The company's compensation program was established to accomplish three main
objectives:
- To hire and motivate highly capable and well-qualified
executives;
- To focus executives' efforts on increasing long-term shareholder
value; and
- To reward executives at levels which are competitive with the
marketplace for similar positions and consistent with the
performance of each executive and of Allegheny.
Executive compensation consists of a salary and a non-equity incentive
compensation plan (formerly reported as the bonus plan).
Salaries are based on the Committee's evaluation of individual job
performance and an assessment of the salaries and incentive compensation mix
paid by the Company's Peer group to executive officers holding equivalent
positions. Salary surveys from the West Virginia Bankers Association, the
Independent Community Bankers Association, and the American Bankers Association,
and bank's in the same geographical area and with asset sizes ranging from $100
million to $499 million were used to compile the Company's Peer group
information. Based on 2005 data, the Peer Group total salaries and incentive
compensation for Chief Executive Officers ranged from an average low of $129,000
to an average high of $255,000 and the compensation for Chief Financial Officers
ranged from an average low of $76,000 to an average high of $122,000. For 2006,
the total salaries and incentive compensation of the Chief Executive Officer and
Chief Financial Officer fell within the median range of total compensation paid
by the Peer Group.
The purpose of the Company's non-equity incentive compensation plan is to
motivate and reward employees for their contributions to the company's
performance. The Committee adopts the plan annually to set the performance
levels based primarily on the annual financial plan. Each employee's non-equity
compensation is calculated using a formula based on company financial
performance factors and their annual performance evaluation and based on the
position held by the employee and their annual salary.
The non-equity incentive plan compensation for the Chief Executive Officer
is calculated
-10-
using a formula established by Allegheny and the bank, based on the weighted
average of nine factors. The factors include earnings per share, return on
equity, return on assets, loan growth, deposit growth, efficiency ratio, loan
delinquency ratio, and the rate of net charge-offs of loans and the performance
evaluation of the board of directors. Various weights rating from 5 percent to
30 percent are assigned to these factors in determining the incentive
compensation. Of these various weights, a minimum, mid, and maximum range for
each factor was set with the mid range equaling the annual financial budget. The
incentive compensation template for the Chief Executive Officer for 2006 can be
illustrated in the following chart.
WEIGHTING MINIMUM MID MAXIMUM
--------- ------------ ------- -------
Earnings Per Share 30% 2.55 2.70 2.75
Return on Equity (%) 20% 8.90% 9.27% 9.55%
Return on Assets (%) 10% 1.29% 1.34% 1.39%
Loan Growth 10% 9.40% 10.09% 10.70%
Deposit Growth 10% 5.50% 7.13% 8.50%
Efficiency Ratio 5% 58.71% 58.21% 57.71%
Deliquency Ratio 5% 3.50% 2.50% 2.00%
Net Charge Off Rate 5% 0.12% 0.10% 0.08%
Board Evaluation 5% Satisfactory Average Above
--- Average
100%
===
MINIMUM MID MAXIMUM
------------ ------- -------
Earnings Per Share 30% 33% 66% 100%
Return on Equity (%) 20% 33% 66% 100%
Return on Assets (%) 10% 33% 66% 100%
Loan Growth 10% 33% 66% 100%
Deposit Growth 10% 33% 66% 100%
Efficiency Ratio 5% 33% 66% 100%
Deliquency Ratio 5% 33% 66% 100%
Net Charge Off Rate 5% 33% 66% 100%
Board Evaluation 5% 33% 66% 100%
--- ----- ----- -----
TOTAL 100% 33% 66% 100%
=== ===== ===== =====
The incentive compensation range for the Chief Executive Officer for fiscal
year ended 2006 was zero to 20 percent of his base salary of $172,500. The
compensation committee, after considering and applying the foregoing formula,
determined Mr. Loving's non-equity incentive compensation to be $20,545 which is
11.91%. CEO Loving does not participate in discussions or determinations
concerning his compensation.
The factors used to calculate the Chief Financial Officer's non-equity
incentive plan compensation includes earnings per share, return on assets,
efficiency ratio, loan growth, deposit growth and the performance evaluation of
the Chief Executive Officer. Various weights rating from 10 percent to 30
percent are assigned to these factors in determining the incentive compensation.
-11-
WEIGHTING MINIMUM MID MAXIMUM
--------- ------------ ------- -------
Earnings Per Share 30% 2.55 2.7 2.75
Return on Assets (%) 10% 1.29% 1.34% 1.39%
Efficiency Ratio 15% 58.71% 58.21% 57.71%
Loan Growth 10% 9.40% 10.09% 10.70%
Deposit Growth 10% 5.50% 7.13% 8.50%
Annual Evaluation 25% Satisfactory Average Above
100% Average
MINIMUM MID MAXIMUM
------------ ------- -------
Earnings Per Share 30% 33% 66% 100%
Return on Assets (%) 10% 33% 66% 100%
Efficiency Ratio 15% 33% 66% 100%
Loan Growth-Branch 10% 33% 66% 100%
Deposit Growth 10% 33% 66% 100%
Annual Evaluation 25% 33% 66% 100%
TOTAL 100% 33% 66% 100%
The incentive compensation range for the Chief Financial Officer for fiscal
year ended 2006 was zero to 15 percent of his base salary of $78,300. The
compensation committee, after considering and applying the foregoing formula,
determined Mr. Billingsley's non-equity incentive compensation to be $7,006
which is 8.95%.
The Company also maintains a 401(k) plan that generally covers all
employees who have completed one year of service. Company contributions to the
plan include a matching contribution and a nonelective safe harbor contribution.
All contributions are fully vested. The payment of benefits to participants is
made at death, disability, termination or retirement.
The Company does not maintain any form of stock option, stock appreciation
rights, or other long-term compensation plans.
SUMMARY OF COMPENSATION
Allegheny's officers did not receive compensation as such during 2006. The
table below reflects information concerning the annual compensation for services
in all capacities to the bank for the Chief Executive Officer and the Chief
Financial Officer. The total annual compensation for all other employees is less
than $100,000 and therefore not reported.
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SUMMARY COMPENSATION TABLE
NON-EQUITY
INCENTIVE PLAN ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION(1) COMPENSATION TOTAL
--------------------------- ---- -------- --------------- ------------ --------
William A. Loving, Jr.,
Executive Vice President
and Chief Executive Officer 2006 $172,500 $20,545 $36,926(2) $229,971
L. Kirk Billingsley, Chief
Financial Officer 2006 $ 78,300 $ 7,006 $ 2,612(3) $ 87,918
(1) Paid in 2007, formerly reported as bonus.
(2) Includes services as a member of the board of directors of $20,545, company
contributions to 401k plan of $11,709, the cost of group-term life
insurance coverage over $50,000 totaling $552, and the personal use of an
automobile valued at $2,585.
(3) Includes company contributions to 401k plan of $2,349 and the cost of
group-term life insurance coverage over $50,000 totaling $263.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The bank entered into a three-year employment agreement with William A.
Loving, Jr. effective September 30, 2003, in which Mr. Loving agreed to serve as
the bank's chief executive officer. This agreement is automatically renewable
for additional three-year terms, unless terminated earlier or unless one of the
parties elects not to renew the agreement at least 90 days prior to the end of
the term. Under the employment agreement, the bank may terminate Mr. Loving's
employment prior to the expiration of the term of employment with or without
cause; provided, however, in the event the bank terminates his employment
without cause (as defined in the employment agreement), he will be entitled to
severance equal to the sum of his base annual compensation for the greater of
(i) the remainder of the term of the employment agreement (had it not been
terminated) or (ii) 12 months. Under the employment agreement, Mr. Loving is
entitled to annual compensation of $125,000, which may be adjusted upward by the
board of directors of the bank, plus any bonus resulting from any subsequently
adopted bonus plan. The employment agreement also contains a provision regarding
non-competition, which effectively restricts Mr. Loving's ability to work in a
similar capacity within the Counties of Pendleton, Grant and Hardy, West
Virginia, for a period of two years following termination of employment with the
bank.
At the same time as the execution of the employment agreement by the bank
and Mr. Loving, the parties also entered into an executive severance agreement
effective for a period ending on December 31, 2003 (but subject to annual
renewals thereafter unless either party
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objects). This agreement provides that upon a change in control (as defined in
the agreement) and for a period of two years thereafter, if Mr. Loving's
employment is terminated involuntarily by the bank (or its successor) without
cause, Mr. Loving shall be entitled to a severance payment in the amount equal
to 2 1/2 times his annual base salary (in effect at termination of employment or
change in control, whichever is greater), plus benefits. In addition, the bank,
or its successor, shall be obligated to provide Mr. Loving health insurance
coverage comparable to that received immediately prior to termination of
employment.
DIRECTOR COMPENSATION
In 2006 each director received an annual retainer fee of $3,600 with the
exception of the secretary of the board, who received $4,000, and Mr. Heavner,
Director Emeritus, who received $1,800. Directors received $350 for each board
meeting, $250 for each board committee meeting, and $40 for each appraisal
committee meeting of the bank that they attended. Directors do not receive fees
for meetings of Allegheny's board.
DIRECTOR COMPENSATION TABLE
NAME FEES EARNED OR PAID IN CASH TOTAL
- ---- --------------------------- -----
Thomas J. Bowman $19,390 $19,390
Roger D. Champ $21,660 $21,660
John E. Glover $21,520 $21,520
Carole E. Hartman $25,640 $25,640
John D. Heavner $ 2,400 $ 2,400
Richard W. Homan $16,450 $16,450
William McCoy, Jr. $ 3,950 $ 3,950
Jerry D. Moore $17,530 $17,530
Richard C. Phares $17,000 $17,000
Dolan Irvine $16,690 $16,690
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 1, 2006, relating
to the beneficial ownership of the common stock by (a) each person or group
known by the company to own beneficially more than 5% of the outstanding common
stock; (b) each of the directors of the company; and (c) all directors and
executive officers of the company as a group. Ownership includes direct and
indirect (beneficial) ownership as defined by SEC rules. Share totals include
500 directors' qualifying shares, which the bank's bylaws require each director
to own.
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AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP (1)(2) PERCENT OF CLASS
---------------- --------------------------- ----------------
T.J. Bowman 1,783 Direct 1.51%
11,555 Indirect
Roger Champ 4,384 Direct *
480 Indirect
John E. Glover 5,919 Direct 1.55%
7,787 Indirect
Carole H. Hartman 2,605 Direct *
John D. Heavner 2,400 Direct
1,200 Indirect *
Richard Homan 600 Direct 7.97%
P.O. Box 550 69,900 Indirect (3)
Franklin, WV 26807-0550
William McCoy, Jr. 14,006 Direct 2.92%
11,855 Indirect
Jerry Moore 10,277 Direct 1.16%
27 Indirect
Richard C. Phares 18,071 Direct 2.04%
William A. Loving, Jr. 764 Direct *
280 Indirect
Dolan Irvine 1,282 Direct *
All Directors and Executive Officers
As a Group 165,175 18.67%
(1) For purposes of this table, beneficial ownership has been determined in
accordance with the provisions 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 60 days. Shares of common stock which are subject to
stock options are deemed to be outstanding for the purpose of computing the
percentage of outstanding common stock owned by such person or group but
not deemed outstanding for the purpose of computing the percentage of
common stock owned by any other person or group.
(2) Includes qualifying shares of 500 as required by the company's bylaws.
(3) Consists of 33,400 held in the Richard Homan Trust and the Jean Ann Homan
Trust of which Mr. Homan is Trustee. Also includes 36,500 shares owned by
Captaur Limited Liability Company in
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which Mr. Homan owns a 50% interest and serves as Member/Manager.
(4) (*) Less than 1%.
AUDITORS
S.B. Hoover & Company, LLP was the auditor for 2005 and had declined to
stand for reappointment after the completion of the audit of Allegheny's
financial statements for the year ended December 31, 2005. S.B. Hoover &
Company, LLP, after completion of all 2005 engagements, ceased being a
registered independent public accounting firm pursuant to rules adopted by the
Public Company Accounting Oversight Board ("PCAOB"). Accordingly, Allegheny
engaged Elliott Davis, LLC as the Company's independent registered public
accounting firm for the fiscal year ending December 31, 2006. This action was
recommended and approved by the Audit Committee of Allegheny's Board of
Directors.
The following fees were paid by Allegheny and the bank to S.B. Hoover, LLP:
2005
-------
Audit Fees $27,700
All Other Fees $ 4,779
Elliott Davis, LLC, advised Allegheny that no member of that accounting
firm has any direct or indirect material interest in Allegheny. A representative
of Elliott Davis, LLC, will be present at the Annual Meeting, will have the
opportunity to make a statement and will respond to appropriate questions.
The following fees were rendered by Elliott Davis, LLC to perform an audit
of the Company's annual financial statements for the year ended December 31,
2006, and fees for other services rendered by Elliott Davis, LLC during the
period:
2006
-------
Audit Fees $30,000
Audit Related Fees 7,500
Tax Fees 1,500
The audit committee has considered whether Elliott Davis, LLC, has
maintained its independence during the fiscal year ended December 31, 2006. The
audit committee charter requires that the audit committee pre-approve all audit
and non-audit services to be provided to the company by the independent
accountants; provided, however, that the audit committee may specifically
authorize its chairman to pre-approve the provision of any non-audit service to
the company. Further, the foregoing pre-approval policies may be waived, with
respect to the provision of any non-audit services, consistent with the
exceptions for federal securities laws. All of the services described above for
which Elliott Davis, LLC, billed the company for the fiscal year ended December
31, 2006, were pre-approved by the company's audit committee. For the fiscal
year ended December 31, 2006, the company's audit committee did not waive the
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pre-approval requirement of any non-audit services to be provided to Allegheny
by Elliott Davis, LLC.
ANNUAL REPORT ON FORM 10-K
You may obtain a copy of the Annual Report on Form 10-K, as filed by the
bank with the Securities and Exchange Commission, by contacting William A.
Loving, Jr., Executive Vice President and Chief Executive Officer, Allegheny
Bancshares, Inc., 300 North Main Street, P.O. Box 487, Franklin, West Virginia
26807, (304) 358-2311.
SHAREHOLDER COMMUNICATION WITH THE BOARD
Any shareholder desiring to contact the Board of Directors or any
individual director serving on the Board may do so by written communication
mailed to: Board of Directors (Attention: (name of director(s), as applicable),
care of the Corporate Secretary, Allegheny Bancshares, Inc., P.O. Box 487,
Franklin, WV 26807. Any proper communication so received will be processed by
the Corporate Secretary as agent for the Board. Unless, in the judgment of the
Corporate Secretary, the matter is not intended or appropriate for the Board
(and subject to any applicable regulatory requirements), the Corporate Secretary
will prepare a summary of the communication for prompt delivery to each member
of the Board or, as appropriate, to the member(s) of the Board named in the
communication. Any director may request the Corporate Secretary to produce for
his or her review the original of the shareholder communication.
OTHER INFORMATION
If any of the nominees for election as directors is unable to serve due to
death or other unexpected occurrence, your proxies will be voted for a
substitute nominee or nominees designated by the board of the company, or the
board of directors may adopt a resolution to reduce the number of directors to
be elected. The board of directors is unaware of any other matters to be
considered at the Annual Meeting. If any other matters properly come before the
meeting, persons named in the accompanying proxy will vote your shares in
accordance with the direction of the board of directors.
-17-
SHAREHOLDER PROPOSALS FOR 2008
Any shareholder who wishes to have a proposal placed before the 2008 Annual
Meeting of Shareholders must submit the proposal to the secretary of the bank,
at its executive offices, no later than December 15, 2007 (which is 120 days
prior to the 2008Annual Meeting) to have it considered for inclusion in the
proxy statement of that Annual Meeting.
----------------------------------------
William A. Loving, Jr.
Executive Vice President and
Chief Executive Officer
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ALLEGHENY BANCSHARES, INC.
300 NORTH MAIN STREET
P.O. BOX 487
FRANKLIN, WEST VIRGINIA 26807
(304) 358-2311
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, APRIL 16, 2007
Roger D. Champ, John E. Glover, and Thomas J. Bowman, or any one of them,
with full power to act alone and with full power of substitution, are hereby
authorized to represent and to vote stock of the undersigned in Allegheny
Bancshares, Inc., at the Annual Meeting of Shareholders to be held April 16,
2007, and any adjournment thereof.
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT*
--- -------- -------
(Except Nominee(s)
Written Below)
1. Election of directors for the terms
specified in the proxy statement: [ ] [ ] [ ]
Richard W. Homan
Jerry D. Moore
Dolan Irvine
____________________________________
* (Except Nominee(s) written above.)
FOR AGAINST ABSTAIN
--- -------- -------
2. To transact such other business as
may properly come before the
meeting or any adjournments thereof: [ ] [ ] [ ]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL DIRECTOR NOMINEES. EACH
SHARE IS ENTITLED TO ONE VOTE PER NOMINEE, UNLESS A SHAREHOLDER REQUESTS
CUMULATIVE VOTING FOR DIRECTORS AT LEAST 48 HOURS BEFORE THE MEETING. IF
CUMULATIVE VOTING FOR THE ELECTION OF DIRECTORS IS REQUESTED, THE PROXIES,
UNLESS OTHERWISE DIRECTED, SHALL HAVE FULL DISCRETION AND AUTHORITY TO CUMULATE
THEIR VOTES AND VOTE FOR LESS THAN ALL SUCH NOMINEES. IF ANY OTHER BUSINESS IS
PRESENTED AT THE
ANNUAL MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION
OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSALS.
Date: , 2007
----------
Number of Persons Who Will Attend the
Luncheon and Annual Meeting on Monday,
April 16, starting at noon:
------------
----------------------------------------
(Signature of Shareholder)
----------------------------------------
(Signature of Shareholder)
When signing as attorney, executor,
administrator, trustee or guardian,
please sign full title.
If more than one trustee, all should
sign. ALL JOINT OWNERS MUST SIGN as
printed on label to your left.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.