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 ss.240.14a-11(c) or ss.240.14a-12
CARDINAL BANKSHARES CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N.A.
----
(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.
Not Applicable.
[ ] 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.
Not Applicable.
CARDINAL BANKSHARES CORPORATION
101 Jacksonville Circle
P.O. Box 215
Floyd, Virginia 24091
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Cardinal Bankshares Corporation:
NOTICE is hereby given that the 2001 Annual Meeting of Stockholders of
Cardinal Bankshares Corporation will be held at The Bank of Floyd Conference
Room, Floyd, Virginia, on April 25, 2001, at 2:00 p.m. for the following
purposes:
(1) Electing Directors for the ensuing year.
(2) Approving appointment of the Corporation's independent auditor
for the year 2001.
(3) Transacting such other business as may properly come before
the meeting, or any adjournments thereof.
Only stockholders of record at the close of business on March 20, 2001,
are entitled to notice of and to vote at such meeting, or any adjournments
thereof.
Your attention is directed to the Proxy Statement accompanying this
notice for a more complete statement regarding matters proposed to be acted upon
at the meeting.
To ensure that your shares are represented at the meeting, please fill
in, date, sign, and mail promptly the enclosed proxy, for which a return
envelope is provided. Your proxy is revocable at any time prior to its exercise.
By Order of the Board of Directors
March 23, 2001
March 23, 2001
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Cardinal Bankshares Corporation. The meeting will begin at 2:00 p.m. on
Wednesday, April 25, 2001, in the Bank of Floyd Conference Room located adjacent
to the Bank in, Floyd, Virginia.
Please sign and date the enclosed proxy and mail it in the envelope provided at
your earliest convenience.
You are also invited to remain after the meeting for light refreshments and
visiting. If you plan to attend, please include the enclosed card with your
proxy.
Very truly yours,
Leon Moore
Chairman of the Board
And President
CARDINAL BANKSHARES CORPORATION
101 Jacksonville Circle
P.O. Box 215
Floyd, Virginia 24091
PROXY STATEMENT
FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
APRIL 25, 2001
The Board of Directors of Cardinal Bankshares Corporation (the
Corporation") solicits the enclosed proxy to be used at the 2001 Annual Meeting
of Stockholders to be held at The Bank of Floyd Conference Room, 101
Jacksonville Circle, Floyd, Virginia, on Wednesday, April 25, 2001, at 2:00
p.m., and at any adjournment thereof.
The cost of solicitation of proxies will be borne by the Corporation.
Solicitations will be made only by mail, except that, if necessary, officers and
regular employees of the Corporation and The Bank of Floyd may make
solicitations of proxies by telegram, telephone or personal calls. Brokerage
houses and other nominees may request that copies of the proxy soliciting
material be furnished to them for mailing to the beneficial owners of the stock
held of record by such brokerage houses and nominees. The Corporation may
reimburse them for their reasonable expenses in this connection.
All properly executed proxies delivered pursuant to this solicitation
will be voted at the meeting in accordance with the instructions therein
contained, if any. Any person signing and mailing the enclosed proxy may,
nevertheless, revoke the proxy at any time prior to the actual voting thereof.
Directors are elected by a plurality of votes properly cast, assuming a quorum
is present. All matters coming before the meeting will be approved if the votes
favoring such matter exceed those opposing it. Abstentions and broker non-votes
will have no direct effect on the election of directors or any other matter
which may be considered.
An Annual Report to Stockholders, including the Corporation's financial
statements for the year ended December 31, 2000, accompanies this proxy
statement. This proxy statement and the accompanying proxy are first being sent
or delivered to stockholders of the Corporation on or about March 26, 2001.
As of February 28, 2001, the Corporation had outstanding 511,911 shares
of its common stock, each of which is entitled to one vote at the Annual
Meeting. Only stockholders of record at the close of business on March 20, 2001,
will be entitled to vote at the meeting, or any adjournment thereof.
ITEM 1: ELECTION OF DIRECTORS
------- ---------------------
At the meeting, six Directors will be elected, to serve until the 2002
Annual Meeting of Stockholders, or if sooner, until their retirement dates under
the director retirement policy adopted by the Board of Directors.
In the event that any nominee becomes unavailable for election, any
proxy voted in his favor will be voted for a substitute nominee. However, the
Board of Directors does not anticipate that any nominee will be unavailable for
election, and all have consented to be named and to serve if elected. Each
nominee hereinafter named has been recommended for election by the Board of
Directors.
INFORMATION CONCERNING NOMINEES
-------------------------------
Principal Occupation and
Principal Business Conducted
Director Past Five Years
Name Age Since ---------------
---- --- -----
K. Venson Bolt 75 3/12/96 Vice Chairman, The Bank of Floyd;
Farmer
William R. Gardner, Jr. 58 3/12/96 Director of Pupil Personnel, Floyd
County Public Schools
C.W. Harman 77 3/12/96 Retired Farmer and Merchant
Kevin D. Mitchell 62 3/12/96 Dairy Farmer
Ronald Leon Moore 59 3/12/96 Chairman, President and Chief
Executive Officer of the Corporation
and The Bank of Floyd
Dorsey H. Thompson 71 3/12/96 Farmer
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EXECUTIVE COMPENSATION
----------------------
The following table sets forth the compensation of the Corporation's
Chief Executive Officer for the fiscal year ended December 31, 2000, 1999 and
1998. No other officer received in excess of $100,000 for the current year.
Summary Compensation Table
--------------------------
Name and Capacity All Other
in Which Served Year Salary Compensation(1)
Ronald Leon Moore, 2000 $125,000.00 $3,500.00
President and Chief 1999 $115,000.00 $3,500.00
Executive Officer 1998 $110,000.00 $3,500.00
(1) Employer contribution to the Corporation's pension plan for the years
indicated.
DIRECTORS MEETINGS, COMMITTEES AND FEES
---------------------------------------
Directors of the Corporation currently receive a fee of $275 for each
board meeting attended and $75 for each committee meeting attended. The Board of
Directors held 12 meetings during the last fiscal year. All incumbent directors
attended at least 75 percent of the aggregate number of meetings held by the
Board and meetings of committees on which they served.
The Board of Directors has appointed an Audit Committee consisting of
the following nonemployee directors: K. Venson Bolt, William R. Gardner, Jr.,
Kevin D. Mitchell and Dorsey H. Thompson. The Audit Committee, which met four
times during 2000, reviews the financial records and reports of the Corporation
and each of its affiliates.
The Board of Directors has appointed a Nominating Committee, consisting
of Kevin D. Mitchell, C. W. Harman and William R. Gardner, Jr., to consider
nominees to stand for election to the Board of Directors. This committee met one
time during 2000. The Nominating Committee has no formal procedure for
considering nominees proposed by the shareholders. The Board of Directors acts
as the Compensation Committee for the Corporation.
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OWNERSHIP OF COMMON STOCK
-------------------------
The following stockholder beneficially owned in excess of five percent
of the outstanding common stock of the Corporation as of February 28, 2001.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
Joseph H. Conduff 51,137 (1) 9.9
P.O. Box 113
Floyd, VA 24091
(1) Includes 5,280 shares owned by his wife.
The following table sets forth the beneficial ownership of the Common Stock of
the Corporation as of February 28, 2001, by each director currently serving
(including the Chief Executive Officer), each nominee, and all directors and
executive officers as a group.
Name of Beneficial Amount and Nature of
Owner Beneficial Ownership(1) Percent of Class
K. Venson Bolt 2,956 (3) (2)
Joseph H. Conduff 51,137 (4) 9.9
William R. Gardner, Jr. 440 (2)
C. W. Harman 2,034 (5) (2)
Kevin D. Mitchell 6,970 (6) 1.4
Ronald Leon Moore 2,252 (7) (2)
Dorsey H. Thompson 2,909 (8) (2)
All directors and executive
officers as a group (7 persons) 68,698 13.4
(1) Includes shares which may be deemed beneficially owned by virtue of
family relationships, joint ownership, voting power or investment
power.
(2) Less than 1 percent.
(3) Includes 176 shares owned with his wife.
(4) Retired effective December 31, 2000. Includes 5,280 shares owned by
his wife.
(5) Includes 1,586 shares owned with his wife.
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(6) Includes 546 shares owned jointly with his wife, and 220 shares owned
as custodian for his son.
(7) Includes 1,100 shares owned by his wife, and 433 shares owned jointly
with his wife.
(8) Includes 946 shares owned jointly with his wife.
AUDIT COMMITTEE REPORT
----------------------
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Corporation's accounting functions and internal
controls. The Audit Committee is composed of independent directors, and acts
under a written charter adopted and approved by the Board of Directors. Each of
the members of the Audit Committee is independent as defined by corporate policy
and by Rule 4200(a)(14) of the National Association of Securities Dealers
listing standards. A copy of the Audit Committee Charter is attached to this
proxy statement as Appendix A.
The responsibilities of the Audit Committee include recommending to the Board an
accounting firm to be engaged as the Corporation's independent accountants.
Additionally, and as appropriate, the Audit Committee reviews and evaluates, and
discusses and consults with the Corporation's management, the Corporation's
internal audit personnel and the independent accountants regarding the
following:
o the plan for, and independent accountants' report on, each audit of the
Corporation's financial statements
o the Corporation's financial disclosure documents, including all
financial statements and reports filed with the Federal Reserve Board
and the Virginia Bureau of Financial Institutions or sent to
shareholders
o changes in the Corporation's accounting practices, principles, controls
or methodologies, or in the Corporation's financial statements
o significant developments in accounting rules
o the adequacy of the Corporation's internal accounting controls, and
accounting, financial and auditing personnel
o the establishment and maintenance of an environment at the Corporation
that promotes ethical behavior
The Audit Committee is responsible for recommending to the Board that the
Corporation's financial statements be included in the Corporation's annual
report. The Committee took a number of steps in making this recommendation for
2000. First, the Audit Committee discussed with the Corporation's independent
accountants for 2000, those matters they communicated to and discussed with the
Audit Committee under applicable auditing standards, including information
regarding the scope and results of the audit. These communications and
discussions are intended to assist the Audit Committee in overseeing the
financial reporting and disclosure process. Second, the Audit Committee
discussed its independent accountants' independence with that firm and received
a letter from its independent accountants concerning independence as required
under applicable independence standards for auditors of public companies. This
discussion and disclosure informed the Audit Committee of its independent
accountants' independence, and assisted the Audit Committee in evaluating such
independence. Finally, the
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Audit Committee reviewed and discussed, with the Corporation's management and
Larrowe & Company, PLC, the Corporation's audited consolidated balance sheets at
December 31, 2000 and 1999, and consolidated statements of income, cash flows
and stockholders' equity for the three years ended December 31, 2000. Based on
the discussions with its independent accountants concerning the audit, the
independence discussions, and the financial statement review, and such other
matters deemed relevant and appropriate by the Audit Committee, the Audit
Committee recommended to the Board that these financial statements be included
in the Corporation's 2000 Annual Report on Form 10-KSB.
K. Venson Bolt,
William R. Gardner, Jr.,
Kevin D. Mitchell
Dorsey H. Thompson
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Based on a review of the forms submitted to the Corporation during or
with respect to its fiscal year ended December 31, 2000, no person required to
file reports pursuant to Section 16 of the Securities Exchange Act of 1934
failed to file any such report on a timely basis during that year.
CERTAIN TRANSACTIONS
--------------------
Some of the directors and officers of the Corporation and their
families are at present, as in the past, customers of the Corporation, and have
had and expect to have transactions with the Corporation in the ordinary course
of business. In addition, some of the directors and officers of the Corporation
are at present, as in the past, also directors and officers of corporations
which are customers of the Corporation and which have had and expect to have
transactions with the Corporation in the ordinary course of business. Such
transactions were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and did not involve more
than normal risk of collectibility or present other unfavorable features.
ITEM 2: APPOINTMENT OF INDEPENDENT AUDITOR
------- ----------------------------------
Larrowe & Company, PLC is being recommended to the stockholders of the
Corporation for appointment as independent auditor for the year ending December
31, 2001. Representatives of this firm are expected to attend the meeting and
have the opportunity to make a statement and respond to appropriate questions
from stockholders.
6
Services and Fees During 2000
- -----------------------------
As the Company's independent accountants for 2000, Larrowe & Company,
PLC provided various audit and non-audit services for which the Company was
billed for fees as further described below. None of the hours expended on
Larrowe & Company, PLC's audit of the Company's financial statements were
attributed to work performed by persons other than the principal accountant's
full-time, permanent employees. The Company's Audit Committee has considered
whether Larrowe & Company, PLC's provision of non-audit services is compatible
with maintaining its independence.
Audit Fees. Larrowe & Company, PLC audited the Company's annual
financial statements included in its 2000 Annual Report on Form 10-KSB and,
during 2000, reviewed the financial statements included in the Company's
Quarterly Reports on Form 10-QSB. The aggregate amount of fees billed to the
Company for those services was $41,432.
Financial Information Systems Design and Implementation Fees. During
2000, Larrowe & Company, PLC provided no services related to financial
information systems design and implementation.
All Other Fees. In addition to the services listed above, during 2000,
Larrowe & Company, PLC, provided a number of other services to the Company for
which the aggregate amount of fees billed to the Company was $20,569.
STOCKHOLDER PROPOSALS FOR 2002
------------------------------
If any eligible stockholder intends to present a proposal at the 2002
Annual Meeting of Stockholders, such proposal must be received by the
Corporation at its principal executive office, 101 Jacksonville Circle, P.O. Box
215, Floyd, Virginia, on or before November 28, 2001. Otherwise, such proposal
will not be considered for inclusion in the Corporation's proxy statement for
such meeting.
MISCELLANEOUS
-------------
All properly executed proxies received by the Corporation will be voted
at the meeting in accordance with the instructions contained therein.
The Board of Directors knows of no matter not identified herein which
may properly come before the meeting for action. However, if any other matter
does properly come before the meeting, the person or persons named in the proxy
form enclosed will vote in accordance with their judgment upon such matter.
You are urged to execute and return promptly the enclosed form of
proxy.
7
APPENDIX A
CARDINAL BANKSHARES CORPORATION
THE BANK OF FLOYD
AND SUBSIDIARIES
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
January 1, 2000
Board Approved February 21, 2001
I. PURPOSE
- ----------------
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing:
o The financial reports and other financial information provided by the
Bank to any governmental body or the public,
o The Bank's systems of internal controls regarding finance, accounting,
legal compliance that management and the Board have established,
o The Bank's auditing, accounting and financial reporting processes.
Consistent with this function, the Audit Committee should encourage continuous
improvement of, and should foster adherence to the Bank's policies, procedures
and practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
o Serve as an independent and objective party to monitor the Bank's
financial reporting process and internal control system.
o Review and appraise the audit efforts of the Bank's independent
accountants and internal auditing department.
o Provide an open avenue of communication among the independent accounts,
and executive management, the internal auditing department, and the
Board of Directors.
II. COMPOSITION
- --------------------
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. All
members of the Committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise. No member of the Committee
shall be employed or otherwise affiliated with the Bank's independent
accountants.
In the event that a Committee member faces a potential or actual conflict of
interest with respect to a matter before the Committee, the Committee member
shall be responsible for alerting the committee Chair, and in the case where the
Committee Chair faces a potential or actual conflict of interest, the Committee
Chair shall advise the Chairman of the Board of Directors. In the event that the
Committee Chair, or the Chairman of the Board of Directors, concurs that a
potential or actual conflict of interest exists, an independent substitute
Director shall be
1
appointed as a Committee member until the matter posing the potential or actual
conflict or interest, is resolved.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.
III. MEETINGS
- -----------------
The Committee shall meet at least four times annually or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with executive management, the director
of the internal auditing department and the independent accountants to discuss
any matters that the Committee or any of these groups believe should be
discussed privately. Meetings shall be scheduled at the direction of the
Committee Chair. Except in emergency situations, notice of the meetings shall be
provided at least five days in advance. The Committee may ask members of
management or others to attend the meeting and provide pertinent information as
necessary. The Committee will keep minutes of its meetings and will make such
minutes available to the full Board for its review.
IV. RESPONSIBILITIES AND DUTIES
- ------------------------------------
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the Bank's annual financial statements, and any reports or other
financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review
rendered by the independent accountants.
3. Review the regular internal reports to management prepared by the
internal auditing department and management's response.
4. Review with financial management and the independent accountants the
10-Q prior to its filing or prior to the release of earnings. The Chair
of the Committee may represent the entire Committee for purposes of
this review.
Independent Accountants
1. Recommend to the Board of Directors the selection of the independent
accountants, which shall be ultimately accountable to the Board and the
Committee, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
On an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Bank to determine the accountants' independence.
2. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
3. Periodically consult with the independent accountants about internal
controls and the fullness and accuracy of the Bank's financial
statements.
Financial Reporting Processes
2
1. Review the integrity of the Bank's financial reporting processes, both
internal and external.
2. Discuss with the independent accountants and audit the quality and
appropriateness of the Bank's accounting principals as applied in its
financial reporting.
3. Consider and approve, if appropriate, major changes to the Bank's
auditing and accounting principles and practices as suggested by the
independent accountants, management or the internal auditing
department.
Process Improvement
1. Establish systems of reporting to the Audit Committee by each of
management, the independent accountants and the internal auditors
regarding any significant judgments made in management's preparation of
the financial statements and the view of each as to appropriateness of
such judgments.
2. Following completion of the annual audit, review any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
3. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
4. Review with the independent accountants, the internal auditing
department and management the extent to which changes or improvements
in financial or accounting practices have been implemented.
5. Review activities, organizational structure, and qualifications of the
internal audit department.
The Committee shall report to the shareholders in the Bank's proxy statement for
its annual meeting whether the Committee has satisfied its responsibilities
under this charter.
The Committee's function is one of oversight and review, and it is not expected
to audit the Bank, to define the scope of the audit, to control the Bank's
accounting practices, or to define the standards to be used in preparation of
the Bank's financial statements.
Perform any other activities consistent with this Charter, the Bank's By-laws
and governing law, as the Board deems necessary or appropriate.
3
CARDINAL BANKSHARES CORPORATION
101 Jacksonville Circle
P.O. Box 215
Floyd, Virginia 24091
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Eugene E. Derryberry, Dorsey H.
Thompson, Ronald Leon Moore and William R. Gardner, Jr. or any one or more of
them, as proxies, with full power of substitution, to vote all common stock of
the undersigned at the Annual Meeting of Stockholders of the Corporation, to be
held on April 25, 2001, at 2:00 p.m., and at any adjournment thereof, as
follows:
(1) To vote FOR election to the Board of Directors of all nominees listed
below as a group, unless you insert the word "NO" in the blank at the
end of this paragraph. If you insert the word "NO", you will cause your
shares not to be voted in favor of anyone in the group.
_________________.
YOU MAY INSTRUCT THE ABOVE PERSONS NOT TO VOTE FOR A PARTICULAR INDIVIDUAL
NOMINEE BY DRAWING A LINE THROUGH THE NOMINEE'S NAME BELOW. Your shares will
then be voted for those nominees which you have not so marked.
Nominees for Directors to serve until the 2002 Annual Meeting of Stockholders
and until their successors are elected and have qualified, (or if sooner, until
their retirement dates under the director retirement policy adopted by the Board
of Directors) are:
K. Venson Bolt Kevin D. Mitchell
William R. Gardner, Jr. Ronald Leon Moore
C. W. Harman Dorsey H. Thompson
(2) To vote for appointment of Larrowe & Company, PLC, as independent
auditor of the Corporation for the year 2001, unless one of the
following two alternatives is chosen: AGAINST ( ); ABSTAIN ( ).
(3) To vote upon such other business as may be properly brought before the
meeting.
THE STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED.
IF AUTHORITY TO VOTE IS NOT WITHHELD, OR IF NO CHOICE IS SPECIFIED, THE STOCK
REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL NOMINEES NAMED ABOVE TO BE
ELECTED TO THE BOARD OF DIRECTORS AND FOR APPOINTMENT OF LARROWE & COMPANY, PLC
AS INDEPENDENT AUDITOR FOR THE CORPORATION FOR 2001.
Please sign your name(s) exactly as shown imprinted hereon. If acting as
executor or trustee or otherwise in a fiduciary capacity, please sign as such
fiduciary.
Date: _________________ _____________________________________
Signature of Stockholder
_____________________________________
Signature of Stockholder