U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
Commission File Number: 333-20399
PINNACLE BANKSHARES CORPORATION
(Exact name of small business issuer as specified in its charter)
VIRGINIA 54-1832714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 29
Altavista, Virginia 24517
(Address of principal executive offices)
(804) 369-3000
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--------- ---------
At July 8, 1997, 719,025 shares of Pinnacle Bankshares Corporation's common
stock, $3 par value, were outstanding.
Transitional small business disclosure format: Yes No x .
--- ---
<PAGE>
PINNACLE BANKSHARES CORPORATION
FORM 10-QSB
June 30, 1997
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 3
Consolidated Statements of Income for the three
month periods ended June 30, 1997 and 1996 4
Consolidated Statements of Income for the six
month periods ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows for the
periods ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis or Plan
of Operations 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES
2
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
PINNACLE BANKSHARES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands of dollars)
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
Assets June 30, 1997 December 31, 1996
Cash and cash equivalents: (note 2)
Cash and due from banks $3,355 $3,159
Federal funds sold -- 2,585
-------- --------
Total cash and cash equivalents 3,355 5,744
Securities (note 3):
Available-for-sale, at fair value 22,686 23,861
Held-to-maturity, at amortized cost 11,333 11,905
Federal Reserve Bank stock, at cost 75 75
Federal Home Loan Bank Stock, at cost 409 403
Loans, net (note 4) 83,692 79,842
Bank premises and equipment, net 1,590 1,216
Other real estate owned 150 156
Accrued income receivable 1,034 1,066
Other assets 725 683
-------- --------
Total assets $125,049 $124,951
=====================================================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Demand 9,568 9,830
Savings and NOW accounts 36,522 36,322
Time 63,993 65,052
-------- --------
Total deposits 110,083 111,204
Accrued interest payable 502 537
Federal funds purchased 644 --
Other liabilities 534 553
-------- --------
Total liabilities 111,763 112,294
-------- --------
Stockholders' equity:
Common stock, $3 par value. Authorized 3,000,000 shares,
issued and outstanding 719,025 shares in 1997 and 1996 2,157 2,157
Capital surplus 338 338
Retained earnings 10,772 10,174
Unrealized gains(losses) on available-for-sale securities,
net of deferred tax expense (benefit) 19 (12)
-------- --------
Total stockholders' equity 13,286 12,657
Total liabilities and stockholders' equity $125,049 $124,951
=====================================================================================================================
See accompanying notes to financial statements.
3
<PAGE>
PINNACLE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands of dollars, except for per share amounts)
<CAPTION>
====================================================================================================================
For the Period For the Period
April 1, 1997 April 1, 1996
Through Through
June 30, 1997 June 30, 1996
------------- -------------
Interest Income:
Interest and fees on loans $1,931 $1,733
Interest on securities:
U.S. Treasury 64 58
U.S. Government agencies 286 321
Corporate 43 42
States and political subdivisions (tax exempt) 130 139
Other 20 2
Interest on federal funds sold 16 59
--------- ---------
Total interest income 2,490 2,354
--------- ---------
Interest expense:
Interest on deposits:
Savings and NOW accounts 279 282
Time - other 780 765
Time - $100,000 and over 122 137
Interest on federal funds purchased 5 --
--------- ---------
Total interest expense 1,186 1,184
--------- ---------
Net interest income 1,304 1,170
Provision for loan losses 150 45
--------- ---------
Net interest income after provision for loan losses 1,154 1,125
Noninterest income:
Service charges on deposit accounts 63 59
Net gain(loss) on calls and sales of securities -- --
Other operating income 38 25
--------- ---------
Total noninterest income 101 84
--------- ---------
Noninterest expense:
Salaries and employee benefits 407 388
Occupancy expense 24 23
Furniture and equipment 79 75
FDIC assessment 6 10
Other operating expenses 198 159
--------- ---------
Total noninterest expense 714 655
--------- ---------
Income before income tax expense 541 554
Income tax expense 149 149
--------- ---------
Net income $392 $405
===================================================================================================================
Net income per share (note 5) $0.55 $0.56
===================================================================================================================
See accompanying notes to financial statements.
4
<PAGE>
PINNACLE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands of dollars, except for per share amounts)
<CAPTION>
====================================================================================================================
For the Period For the Period
January 1, 1997 January 1, 1996
Through Through
June 30, 1997 June 30, 1996
------------- -------------
Interest Income:
Interest and fees on loans $3,802 $3,480
Interest on securities:
U.S. Treasury 129 105
U.S. Government agencies 582 643
Corporate 86 81
States and political subdivisions (tax exempt) 266 278
Other 32 2
Interest on federal funds sold 46 109
--------- ---------
Total interest income 4,943 4,698
--------- ---------
Interest expense:
Interest on deposits:
Savings and NOW accounts 555 562
Time - other 1,554 1,529
Time - $100,000 and over 260 286
Interest on federal funds purchased 5 --
--------- ---------
Total interest expense 2,374 2,377
--------- ---------
Net interest income 2,569 2,321
Provision for loan losses 210 90
--------- ---------
Net interest income after provision for loan losses 2,359 2,231
Noninterest income:
Service charges on deposit accounts 124 117
Net gain(loss) on calls and sales of securities 4 12
Other operating income 85 57
--------- ---------
Total noninterest income 213 186
--------- ---------
Noninterest expense:
Salaries and employee benefits 815 767
Occupancy expense 48 47
Furniture and equipment 158 146
FDIC assessment 11 20
Other operating expenses 388 336
--------- ---------
Total noninterest expense 1,420 1,316
--------- ---------
Income before income tax expense 1,152 1,101
Income tax expense 318 296
--------- ---------
Net income $834 $805
==================================================================================================================
Net income per share (note 5) $1.16 $1.12
==================================================================================================================
See accompanying notes to financial statements.
5
<PAGE>
PINNACLE BANKSHARES CORPORATION
CONSOLIDATED STATEMENTS ON CASH FLOWS
(Unaudited)
(Amounts in thousands of dollars)
==================================================================================================================
<CAPTION>
For the Period For the Period
January 1, 1997 January 1, 1996
Through Through
June 30, 1997 June 30, 1996
------------- -------------
Cash flows from operating activities:
Net income $834 $805
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of bank premises and equipment 106 99
Amortization of core deposit premium 8 9
Amortization of organization costs 1 ---
Amortization of net unearned fees (50) (48)
Net amortization (accretion) of premiums and
discounts on securities 3 (10)
Provision for loan losses 210 90
Provision for deferred income taxes 52 (21)
Net (gain) loss on calls and sales of securities (4) (10)
Net (increase) decrease in:
Accrued income receivable 32 (81)
Other assets (174) 21
Net increase (decrease) in:
Accrued interest payable (35) (3)
Other liabilities (18) 48
--------- ---------
Net cash provided by operating activities 965 899
==================================================================================================================
Cash flows from investing activities:
Purchases of held-to-maturity securities --- (1,531)
Purchases of available-for-sale securities (217) (5,460)
Proceeds from maturities and calls of held-to-maturity securities 573 1,403
Proceeds from sale, maturities and calls of available-for-sale
securities 1,440 3,878
Purchase of Federal Home Loan Bank stock (6) ---
Net increase in loans (4,038) (801)
Recoveries on loans charged off 81 87
Increase in federal funds purchased 644 ---
Purchases of bank premises and equipment (480) (99)
Rent payments on other real estate owned 6 1
--------- ---------
Net cash used in investing activities (1,997) (2,522)
==================================================================================================================
Cash flows from financing activites:
Net increase (decrease) in demand, savings and NOW deposits (62) 866
Net increase (decrease) in time deposits (1,059) 306
Dividends paid (236) (206)
--------- ---------
Net cash provided by financing activities (1,357) 966
==================================================================================================================
Net increase in cash and cash equivalents (2,389) (657)
Cash and cash equivalents, beginning of year 5,744 6,165
--------- ---------
Cash and cash equivalents, end of year $3,355 $5,508
==================================================================================================================
See accompanying notes to financial statements.
</TABLE>
6
<PAGE>
PINNACLE BANKSHARES CORPORATION
Notes to Consolidated Financial Statements
June 30, 1997
(Unaudited)
(In thousands, except for share data)
(1) General
The consolidated financial statements include the accounts of Pinnacle
Bankshares Corporation (the "Company") and its wholly-owned subsidiary, The
First National Bank of Altavista ("FNBA"). All material intercompany accounts
and transactions have been eliminated. The financial statements conform to
generally accepted accounting principles and to general banking industry
practices. In the opinion of the company's management, the accompanying
unaudited consolidated financial statements contain all adjustments of a normal
recurring nature, necessary to present fairly the financial position as of June
30, 1997, the results of operations for the three-month and six-month periods
ended June 30, 1997 and 1996, and cash flows for the six-month periods ended
June 30, 1997 and 1996.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in The
First National Bank of Altavista's Annual Report for the year ended December 31,
1996.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year ending December 31,
1997.
(2) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks (with original maturities of three months
or less), and federal funds sold.
(3) Securities
The amortized costs, gross unrealized gains, gross unrealized losses,
and fair values for securities at June 30, 1997, are shown in the table below.
As of June 30, 1997, securities with amortized costs of $3,150 and fair values
of $3,165 were pledged as collateral for public deposits.
7
<PAGE>
(3) (Continued)
<TABLE>
<CAPTION>
<S> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Available-for-Sale: Costs Gains Losses Values
------------------------------------------------------------------------------------------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 11,339 43 ( 81) 11,301
Obligations of states and
political subdivisions 3,749 92 ( 7) 3,834
Mortgage-backed securities-
Government 6,693 48 ( 77) 6,664
Other securities 107 - - 107
Corporate securities 768 12 - 780
------------------------------------------------------------------------------------------------
Totals $ 22,656 195 (165) 22,686
------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Held-to-Maturity: Costs Gains Losses Values
------------------------------------------------------------------------------------------------
U.S. Treasury securities
and obligations of U.S.
Government corporations
and agencies $ 3,638 11 ( 10) 3,639
Obligations of states and
political subdivisions 7,681 106 ( 23) 7,764
Mortgage-backed securities-
Private 14 - - 14
------------------------------------------------------------------------------------------------
Totals $ 11,333 117 ( 33) 11,417
------------------------------------------------------------------------------------------------
</TABLE>
(4) Allowance for Loan Losses
Changes in the allowance for loan losses are as follows:
Balance at January 1, 1997 $674
Provision for loan losses 210
Loans charged off (264)
Recoveries 81
----
Balance at June 30, 1997 $701
====
(5) Net Income Per Share
Net income per share is based upon the weighted average number of
common stock shares outstanding during the period. Shares outstanding for all
periods presented were 719,025.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS(Amounts in 000's)
The following discussion supplements and provides information about the
major components of the results of operations and financial condition, liquidity
and capital resources of Pinnacle Bankshares Corporation (the "Company"). This
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements, and supplemental financial data.
OVERVIEW
Total assets at June 30, 1997 were $125,049, up .07% from $124,951 at
December 31, 1996. The principal components of the Company's assets at the end
of the period were $34,019 in securities and $83,692 in net loans. During the
six month period, gross loans increased 4.73% or $3,830. The Company's lending
activities are a principal source of income. The Company's premises and
equipment grew 26.87%, basically due to contracts-in-progress related to
construction of an addition to the main office facility.
Total liabilities at June 30, 1997 were $111,763, down from $112,294 at
December 31, 1996, with the decrease reflective of a decline in deposits of
1,121 or 1.01%. Non-interest bearing demand deposits decreased $262 or 2.67% and
represented 8.69% of total deposits. The Company's deposits are provided by
individuals and businesses located within the communities served. The growth in
loans and decrease in deposits resulted in federal funds being purchased as of
June 30, 1997.
Total shareholders' equity at June 30, 1997 was $13,286. At December
31, 1996, total shareholder's equity was $12,657.
The Company had net income of $834 for the six months ended June 30,
1997, compared with net income of $805 for the comparable period in 1996, an
increase of 3.60%. The results of operations for the six month periods ended
June 30, 1997 and 1996 are not necessarily indicative of the results to be
expected for the full year.
Profitability as measured by the Company's return on average assets
(ROA) was 1.34% for the second quarter of 1997, up from 1.33% for the same
period of 1996. Another key indicator of performance, the return on average
equity (ROE) for June 30, 1997 was 13.29%, compared to 14.09% for June 30, 1996.
NET INTEREST INCOME
Net interest income represents the principal source of earnings for the
Company. Net interest income equals the amount by which interest income exceeds
interest expense. Changes in the volume and mix of earning assets and
9
<PAGE>
interest-bearing liabilities, as well as their respective yields and rates, have
a significant impact on the level of net interest income. Changes in the
interest rate environment and the Company's cost of funds also affected net
interest income.
The net interest margin increased from 4.28% for the six months ending
June 30, 1996, to 4.55% for the six months ending June 30, 1997. Net interest
income was $2,569 for the six months ended June 30, 1997 and is attributable to
interest income from loans and securities exceeding the cost associated with
interest paid on deposits. The Company benefitted from lower interest expense
due to certain deposits repricing at lower rates.
Net interest income for the three months ended June 30, 1997 was
$1,304, up $134, or 11.45% from $1,170 for the same three months of 1996.
NON-INTEREST INCOME
The Company's principal sources of non-interest income are service
charges and fees on deposits accounts, particularly transaction accounts, and
fees from loans. Non-interest income increased $27 or 14.52% for the six month
period ending June 30, 1997 over the same period of 1996. Non-interest income
increased $17, or 20.24% when comparing the three months ended June 30, 1997 to
the same period of 1996. The majority of this increase is attributed to income
generated from loan fees and commissions on credit insurance.
NON-INTEREST EXPENSE
Non-interest expense increased $104 or 7.90%, for the six months period
ending June 30, 1997 over the same period of 1996. The increase in non-interest
expense when comparing the two periods is attributed to overall growth of the
Company and expenses connected with repossessed vehicles. An increase of 9.01%
is reflected when comparing the three month period ended June 30, 1997 to the
same period of 1996.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
A provision for loan losses of $210 was made for the first six months
of 1997 in recognition of management's estimate of risks inherent with lending
activities. Among other factors, management considers the Company's historical
loss experience, the size and composition of the loan portfolio, the value and
adequacy of collateral and guarantors, non-performing credits, and current and
anticipated economic conditions. There are additional risks of future loan
losses which cannot be precisely quantified or attributed to particular loans or
classes of loans. Since those risks include general economic trends as well as
conditions affecting individual borrowers, the allowance for loan losses is an
10
<PAGE>
estimate. The allowance is also subject to regulatory examinations and
determination as to adequacy, which may take into account such factors as the
methodology used to calculate the allowance. The allowance for loan losses was
$701 as of June 30, 1997, and represents approximately .83% of gross loans
outstanding. Management believes the allowance was adequate as of June 30, 1997.
Management evaluates the reasonableness of the allowance for loan losses on a
quarterly basis and adjusts the provision as deemed necessary.
NON-PERFORMING ASSETS
Total nonperforming assets, which consist of nonaccrual loans, were $80
at June 30, 1997 and December 31, 1996. Management believes losses, if any, will
be minimal. Loans are generally placed in nonaccrual status when the collection
of principal and interest is 90 days or more past due, unless the obligation is
both well-secured and in the process of collection.
LIQUIDITY
Liquidity measures the ability of the Company to meet its maturing
obligations and existing commitments, to withstand fluctuations in deposit
levels, to fund its operations, and to provide for customers' credit needs.
Liquidity represents an institution's ability to meet present and future
financial obligations through either the sale or maturity of existing assets or
the acquisition of additional funds from alternative funding sources. Liquid
assets include cash, interest bearing deposits with banks, federal funds sold,
and investments and loans maturing within one year. As a result of the Company's
management of liquid assets and the ability to generate liquidity through
alternative funding sources, management believes that the bank maintains overall
liquidity which is sufficient to satisfy its depositors' requirements and to
meet customers' credit needs. At June 30, 1997, cash, securities classified as
available for sale and federal funds sold were 21.82% of total earning assets
compared to 24.71% at December 31,1996. Liquidity is also provided by managing
the investment maturities. Additional sources of liquidity available to the
Company include its capacity to borrow additional funds through correspondent
banks.
CAPITAL
The Company's financial position at June 30, 1997 reflects liquidity
and capital levels currently adequate to fund anticipated future business
expansion. Capital ratios are well in excess of required regulatory minimums for
a well-capitalized institution. The assessment of capital adequacy depends on a
number of factors such as asset quality, liquidity, earnings performance, and
changing competitive conditions and economic forces. The adequacy
11
<PAGE>
of the Company's capital is reviewed by management on an ongoing basis.
Management seeks to maintain a capital structure that will assure an adequate
level of capital to support anticipated asset growth and to absorb potential
losses.
Shareholders' equity reached $13,286 at the end of the second quarter
of 1997 compared to $12,657 at December 31, 1996. The leverage ratio consists of
Tier I capital divided by quarterly average assets. At June 30, 1997, the
Company's leverage ratio was 10.54% compared to 10.14% at December 31, 1996.
Each of these exceeds the required minimum leverage ratio of 3%.
EFFECTS OF INFLATION
The effect of changing prices on financial institutions is typically
different from other industries as the Bank's assets and liabilities are
monetary in nature. Interest rates are significantly impacted by inflation, but
neither the timing nor the magnitude of the changes are directly related to
price level indices. Impacts of inflation on interest rates, loan demand, and
deposits are reflected in the financial statements.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Bank is a
party or of which the property of the Bank is subject.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The consummation of the formation of Pinnacle Bankshares
Corporation (the "Registrant") as the holding company of The First National Bank
of Altavista (the "Bank") became effective on May 1, 1997, as reported under
Item 5 of the Registrant's Form 10-QSB filed with the Securities and Exchange
Commission on May 9, 1997. The information relating to the meeting of
shareholders of the Bank held on April 8, 1997, contained in Item 5 of the
previously filed Form 10-QSB is hereby incorporated by reference into the Form
10- QSB filed herewith.
(b) The April 8, 1997, annual meeting of the shareholders of the Bank
involved the election of directors. The names of each director elected to the
Board of the Bank at the meeting are as follows:
Alvah P. Bohannon, III John P. Erb Herman P. Rogers, Jr.
Robert L. Finch Percy O. Moore Carroll E. Shelton
Robert H. Gilliam, Jr. John L. Waller Kenneth S. Tyler, Jr.
James P. Kent, Jr. R.B. Hancock, Jr.
(c) The votes cast for, against or withheld for the Reorganization of
the Bank into a holding company structure were as follows:
(1) To approve the Agreement and Plan of Reorganization,
including the designation of the individuals listed above in item (b) into Class
I, Class II and Class III directors, respectively, as follows:
Class I Class II Class III
------- -------- ---------
John P. Erb Alvah P. Bohannon, III Herman P. Rogers, Jr.
Robert L. Finch James P. Kent, Jr. Carroll E. Shelton
Robert H. Gilliam, Jr. Percy O. Moore Kenneth S. Tyler, Jr.
R.B. Hancock, Jr. John L. Waller
For Against Abstentions
--- ------- -----------
184,000 985 203
13
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(2) Election of Directors of the Bank.
Name For Against Abstain
---- --- ------- -------
John P. Erb 213,689 0 0
Robert L. Finch 213,689 0 0
Robert H. Gilliam, Jr. 213,689 0 0
R.B. Hancock, Jr. 213,689 0 0
Alvah P. Bohannon, III 213,689 0 0
James P. Kent, Jr. 213,689 0 0
Percy O. Moore 213,689 0 0
Herman P. Rogers, Jr. 213,689 0 0
Carroll E. Shelton 213,689 0 0
Kenneth S. Tyler, Jr. 213,689 0 0
John L. Waller 213,689 0 0
(d) None
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10-Pinnacle Bankshares Corporation 1997
Incentive Stock Plan. The Plan was adopted
by the Board of Directors of the Company on
April 8, 1997.
Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K
None.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PINNACLE BANKSHARES CORPORATION
AUGUST 5, 1997 /s/ Robert H. Gilliam Jr.
- -------------------- -------------------------------------
Date Robert H. Gilliam Jr., President and
Chief Executive Officer
AUGUST 5, 1997 /s/ Dawn P. Crusinberry
- -------------------- -------------------------------------
Date Dawn P. Crusinberry, Secretary,
Treasurer and Chief Financial Officer
15
EXHIBIT 10
PINNACLE BANKSHARES CORPORATION
1997 INCENTIVE STOCK PLAN
ARTICLE I
Establishment, Purpose, and Duration
1.1 Establishment of the Plan. Pinnacle Bankshares Corporation, a
Virginia corporation (the "Company"), hereby establishes an incentive
compensation plan for the Company and its subsidiaries to be known as the "1997
Incentive Stock Plan", as set forth in this document. Unless otherwise defined
herein, all capitalized terms shall have the meanings set forth in Section 2.1
herein. The Plan permits the grant of Incentive Stock Options, Non-qualified
Stock Options, Stock Appreciation Rights and Restricted Stock.
The Plan was adopted by the Board of Directors of the Company on April
8, 1997, and shall become effective on May 1, 1997 (the "Effective Date"),
subject to the approval by vote of shareholders of the Company in accordance
with applicable laws.
1.2 Purpose of the Plan. The purpose of the 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 interest with
the long-term financial success of the Company and with growth in shareholder
value. The Plan is designed to provide flexibility to the Company including its
subsidiaries, 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.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant
to Article XI herein, until April 31, 2007, at which time it shall terminate
except with respect to Awards made prior to, and outstanding on, that date which
shall remain valid in accordance with their terms.
ARTICLE II
Definitions
2.1 Definitions. Except as otherwise defined in the Plan, the following
terms shall have the meanings set forth below:
(a) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Agreement" means a written agreement implementing the
grant of each Award signed by an authorized officer of the Company and
by the Participant.
(c) "Award" means, individually or collectively, a grant under
this Plan of Incentive Stock Options, Non-qualified Stock Options,
Stock Appreciation Rights, and Restricted Stock.
(d) "Award Date" or "Grant Date" means the date on which an
Award is made by the Committee under this Plan.
(e) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act.
(f) "Board" or "Board of Directors" means the Board of
Directors of the Company, unless otherwise indicated.
(g) "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall
have been satisfied:
(i) any Person (other than the Company, any
Subsidiary, a trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or its
Subsidiaries), who or which, together with all Affiliates and
Associates of such Person, is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) if, at any time after the Effective Date, the
composition of the Board of Directors of the Company shall
change such that a majority of the Board of the \Company shall
no longer consist of Continuing Directors; or
(iii) if at any time, (1) the Company shall consolidate
with, or merge with, any other Person and the Company shall
not be the continuing or surviving corporation, (2) any Person
shall consolidate with or merge with the Company, and the
Company shall be the continuing or surviving corporation and,
in connection therewith, all or part of the outstanding Stock
shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property,
(3) the Company shall be a party to a statutory share exchange
with any other Person after which the Company is a subsidiary
of any other Person, or (4) the Company shall sell or
otherwise transfer 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(i) "Committee" means the committee of the Board of Directors
of the Company or its banking subsidiary to administer the Plan
pursuant to Article III herein, all of the members of which shall be
"non-employee directors" as defined in Rule 16b-3, as amended, under
the Exchange Act or any similar or successor rule. There shall be no
fewer than three, nor more than 7, members on the Committee. The
Committee may consult with the Personnel Committee of The First
National Bank of Altavista with respect to its decisions, but shall not
be obligated to do so unless specifically required by the Board of
Directors of the Company. Unless otherwise determined by the Board of
Directors of the Company, the non-employee directors of the Personnel
Committee of The First National Bank of Altavista, the wholly-owned
subsidiary of the Company, shall constitute the Committee.
(j) "Company" means Pinnacle Bankshares Corporation, or any
successor thereto as provided in Article XIII herein.
(k) "Continuing Director" means an individual who was a member
of the Board of Directors of the Company on the Effective Date or whose
subsequent nomination for election or re-election to the Board of
Directors of the Company was recommended or approved by the affirmative
vote of two-thirds of the Continuing Directors then in office.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Fair Market Value" of a Share means the fair market value
as determined pursuant to a reasonable method adopted by the Committee
in good faith for such purpose.
(n) "Incentive Stock Option" or "ISO" means an option to
purchase Stock, granted under Article VI herein, which is designated as
an incentive stock option and is intended to meet the requirements of
Section 422A of the Code.
(o) "Key Employee" means an officer or other key employee of
the Company or its Subsidiaries, who, in the opinion of the Committee,
can contribute significantly to the growth and profitability of, or
perform services of major importance to, the Company and its
Subsidiaries.
(p) "Non-qualified Stock Option" or "NQSO" means an option to
purchase Stock, granted under Article VI herein, which is not intended
to be an Incentive Stock Option.
(q) "Option" means an Incentive Stock Option or a
Non-qualified Stock Option.
(r) "Participant" means a Key Employee who is granted an Award
under the Plan.
(s) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is restricted, pursuant to
Article VIII herein.
(t) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d).
(u) "Plan" means the Pinnacle Bankshares Corporation 1997
Incentive Stock Plan, as described and as hereafter from time to time
amended.
(v) "Related Option" means an Option with respect to which a
Stock Appreciation Right has been granted.
(w) "Restricted Stock" means an Award of Stock granted to a
Participant pursuant to Article VIII herein.
(x) "Stock" or "Shares" means the common stock of the Company.
(y) "Stock Appreciation Right" or "SAR" means an Award,
designated as a stock appreciation right, granted to a Participant
pursuant to Article VII herein.
(z) "Subsidiary" shall mean a corporation at least 50% of the
total combined voting power of all classes of stock of which is owned
by the Company, either directly or through one or more of its
Subsidiaries.
ARTICLE III
Administration
3.1 The Committee. Except as otherwise reserved for consideration and
approval by the Board of Directors, the Plan shall be administered by the
Committee which shall have all powers necessary or desirable for such
administration.
(a) Subject to the provisions of the Plan, the Committee shall
have the following plenary powers: (i) to establish, amend or waive rules or
regulations for the Plan's administration; (ii) except in those instances in
which a dispute arises, to construe and interpret the Agreements and the Plan;
and (iii) to make all other determinations and take all other actions necessary
or advisable for the administration of the Plan.
(b)(1) Subject to the provisions of the Plan, the Committee
shall have the following qualified powers that shall be subject to approval,
amendment and modification by the Board of Directors: (i) to determine the terms
and conditions upon which the Awards may be made and exercised; (ii) to
determine all terms and provisions of each Agreement, which need not be
identical; (iii) to construe and interpret the Agreements and the Plan in the
event of a dispute between the Participant and the Committee; and (iv) to
accelerate the exercisability of any Award or the termination of any Period of
Restriction.
(2) In approving the Committee's determinations or other
recommendations under (b)(1), the Board of Directors may make such amendments,
modifications or qualifications as it deems in the best interest of the Company,
and the Board shall provide specific instructions to the Committee for
implementation of the same.
(3) In its sole discretion, the Board of Directors may waive
by resolution one or more of its approval rights under (b)(1) and authorize the
Committee to proceed without seeking further approvals either on a case by case
basis or permanently until further notice from the Board. Such waiver shall be
communicated in writing to the Committee which shall maintain a permanent record
of such waiver(s).
(c) The express grant in this Plan of any specific power to
the Committee shall not be construed as limiting any power or authority of the
Committee, except as otherwise stated in paragraph 3.1(b).
3.2 Selection of Participants. The Committee shall have the authority
to grant Awards under the Plan, from time to time, to such Key Employees as may
be selected by it. Each Award shall be evidenced by an Agreement.
3.3 Decisions Binding. All determinations and decisions made by the
Board or the Committee pursuant to the provisions of the Plan shall be final,
conclusive and binding.
3.4 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Board or the Committee may impose such conditions on any Award, and
amend the Plan in any such respects, as may be required to satisfy the
requirements of Rule 16b-3, as amended (or any successor or similar rule), under
the Exchange Act.
3.5 Indemnification of Committee. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Award granted or made hereunder, and against all amounts reasonably
paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, if such members acted in good faith and
in a manner which they believed to be in, and not opposed to, the best interests
of the Company and its Subsidiaries.
3.6 Certain Determinations. In connection with the Committee's good
faith determination of "Fair Market Value" as required herein, the Committee
may, as guidance, take into consideration the book value of the Common Stock of
the Company, the relationship between the traded price and book value of shares
for financial institutions of similar size and similar operating results to the
Company and its subsidiary bank, any reasonably recent trades of the Common
Stock of the Company brought to the attention of the Committee and such
additional relevant information as the Committee in its judgment deems
necessary. In its sole discretion, the Committee may, but is not obligated to,
consult with and/or engage an investment banker or other appropriate advisor to
advise the Committee in connection with its good faith determination of "Fair
Market Value" herein.
ARTICLE IV
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 25,000. No more than one-third of
the aggregate number of such Shares shall be issued in connection with
Restricted Stock Awards. Except as provided in Sections 4.2 herein, the issuance
of Shares in connection with the exercise of, or as other payment for Awards,
under the Plan shall reduce the number of Shares available for future Awards
under the Plan.
4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this
Plan (for which no material benefits of ownership have been received, including
dividends) terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, or if Shares issued pursuant to Awards (for which no
material benefits of ownership have been received, including dividends) are
forfeited, any Stock subject to such Award again shall be available for the
grant of an Award under the Plan, subject to Section 7.2.
4.3 Capital Adjustments. The number and class of Shares subject to each
outstanding Award, the Option Price and the aggregate number and class of Shares
for which Awards thereafter may be made shall be subject to such adjustment, if
any, as the Committee in its sole discretion deems appropriate to reflect such
events as stock dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Company.
ARTICLE V
Eligibility
Persons eligible to participate in the Plan include all employees of
the Company and its Subsidiaries who, in the opinion of the Committee, are Key
Employees. Key Employees may not include directors of the Company who are not
employees of the Company or its Subsidiaries.
ARTICLE VI
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Participant, provided, however, that the aggregate Fair Market Value
(determined at the time the Award is made) of Shares with respect to which any
Participant may first exercise ISOs granted under the Plan during any calendar
year may not exceed $100,000 or such amount as shall be specified in Section
422A of the Code and rules and regulation thereunder.
6.2 Option Agreement. Each Option grant shall be evidenced by an
Agreement that shall specify the type of Option granted, the Option Price (as
hereinafter defined), the duration of the Option, the number of Shares to which
the Option pertains, any conditions imposed upon the exercisability of Options
in the event of retirement, death, disability or other termination of
employment, and such other provisions as the Committee shall determine. The
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option within the meaning of Section 422A of the Code, or Nonqualified Stock
Option not intended to be within the provisions of Section 422A of the Code.
6.3 Option Price. The exercise price per share of Stock covered by an
Option ("Option Price") shall be determined by the Committee subject to the
following limitations. The Option Price shall not be less than 100% of the Fair
Market Value of such Stock on the Grant Date. An ISO granted to an employee who,
at the time of grant, owns (within the meaning of Section 425(d) of the Code)
Stock possessing more than 10% of the total combined voting power of all classes
of Stock of the Company, shall have an Option Price which is at least equal to
110% of the Fair Market Value of the Stock.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant provided, however, that no ISO
shall be exercisable later than the tenth (10th) anniversary date of its Award
Date.
6.5 Exercisability. Options granted under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall determine, which need not be the same for all Participants. No
Option, however, shall be exercisable until the expiration of at least six
months after the Award Date, except that such limitation shall not apply in the
case of death or disability of the Participant.
6.6 Method of Exercise. Options shall be exercised by the delivery of a
written notice to the Company in the form prescribed by the Committee setting
forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price shall be payable to
the Company in full either in cash, by delivery of Shares of Stock valued at
Fair Market Value at the time of exercise, delivery of a promissory note (in the
Committee's discretion) or by a combination of the foregoing. As soon as
practicable, after receipt of written notice and payment, the Company shall
deliver to the Participant, stock certificates in an appropriate amount based
upon the number of Options exercised, issued in the Participant's name. No
Participant who is awarded Options shall have rights as a shareholder until the
date of exercise of the Options.
6.7 Restrictions on Stock Transferability. The Committee shall impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under the applicable Federal securities law, under the requirements
of the National Association of Securities Dealers, Inc. or any stock exchange
upon which such Shares are then listed and under any blue sky or state
securities laws applicable to such Shares.
6.8 Nontransferability of Options. No Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution. Further, all
Options granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or legal representative.
ARTICLE VII
Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and
conditions of the Plan, Stock Appreciation Rights may be granted to
Participants, at the discretion of the Committee in connection with the grant,
and exercisable in lieu of Options ("Tandem SARs").
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect
to all or part of the Shares subject to the Related Option. The exercise of
Tandem SARs shall cause a reduction in the number of Shares subject to the
Related Option equal to the number of Shares with respect to which the Tandem
SAR is exercised. Conversely, the exercise, in whole or in part, of a Related
Option, shall cause a reduction in the number of Shares subject to the Related
Option equal to the number of Shares with respect to which the Related Option is
exercised. Shares with respect to which the Tandem SAR shall have been exercised
may not be subject again to an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, a
Tandem SAR shall expire no later than the expiration of the Related Option,
shall be transferable only when and under the same conditions as the Related
Option and shall be exercisable only when the Related Option is eligible to be
exercised. In addition, if the Related Option is an ISO, a Tandem SAR shall be
exercised for no more than 100% of the difference between the Option Price of
the Related Option and the Fair Market Value of Shares subject to the Related
Option at the time the Tandem SAR is exercised.
7.3 Other Conditions Applicable to Tandem SARs. No Tandem SAR granted
under the Plan shall be exercisable until the expiration of at least six months
after the Grant Date, except that such limitation shall not apply in the case of
the death or disability of the Participant. In no event shall the term of any
Tandem SAR granted under the Plan exceed ten years from the Grant Date. A Tandem
SAR may be exercised only when the Fair Market Value of a Share exceeds the
Option Price of the Related Option. A Tandem SAR shall be exercised by delivery
to the Committee of a notice of exercise in the form prescribed by the
Committee.
7.4 Payment Upon Exercise of Tandem SARs. Subject to the provisions of
the Agreement, upon the exercise of a Tandem SAR, the Participant is entitled to
receive, without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of Shares
with respect to which the Tandem SAR is exercised by (ii) an amount equal to the
excess of (A) the Fair Market Value per Share on the date of exercise of the
Tandem SAR over (B) the Option Price of the Related Option.
Payment to the Participant shall be made in Shares, valued at the Fair
Market Value of the date of exercise, in cash if the Participant has so elected
in his written notice of exercise and Committee has consented thereto, or a
combination thereof. To the extent required to satisfy the conditions of Rule
16b-3(e) under the Exchange Act, or any successor or similar rule, or as
otherwise provided in the Agreement, the Committee shall have the sole
discretion to consent to or disapprove the election of any Participant to
receive cash in full or partial settlement of a Tandem SAR. In cases where an
election of settlement in cash must be consented to by the Committee, the
Committee may consent to, or disapprove, such election at any time after such
election, or within such period for taking action as is specified in the
election, and failure to give consent shall be disapproval. Consent may be given
in whole or as to a portion of the Tandem SAR surrendered by the Participant. If
the election to receive cash is disapproved in whole or in part, the Tandem SAR
shall be deemed to have been exercised for Shares, or, if so specified in the
notice of exercise and election, not to have been exercised to the extent the
election to receive cash is disapproved.
7.5 Nontransferability of Tandem SARs. No Tandem SAR granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution.
Further, all Tandem SARs granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant or his guardian or
legal representative.
ARTICLE VIII
Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under the Plan to such Participants and in such amounts as it
shall determine. Participants receiving Restricted Stock Awards are not required
to pay the Company therefor (except for applicable tax withholding) other than
the rendering of services.
8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by an Agreement that shall specify the Period of Restriction, the
number of Restricted Stock Shares granted, and such other provisions as the
Committee shall determine.
8.3 Transferability. Except as provided in this Article VIII and
subject to the limitation in the next sentence, the Shares of Restricted Stock
granted hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the termination of the applicable Period of
Restriction or upon earlier satisfaction of other conditions as specified by the
Committee in its sole discretion and set forth in the Agreement. No shares of
Restricted Stock shall be sold until the expiration of at least six months after
the Award Date, except that such limitation shall not apply in the case of death
or disability of the Participant. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or legal representative.
8.4 Other Restrictions. The Committee shall impose such other
restrictions on any Shares of Restricted Stock granted pursuant to the Plan as
it may deem advisable including, without limitation, restrictions under
applicable Federal or state securities laws, and may legend the certificates
representing Restricted Stock to give appropriate notice of such restrictions.
8.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 8.4 herein, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:
The sale or other transfer of the Shares of Stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the 1997
Incentive Stock Plan of Pinnacle Bankshares Corporation, in the rules
and administrative procedures adopted pursuant to such Plan, and in an
Agreement dated ____________. A copy of the Plan, such rules and
procedures, and such Restricted Stock Agreement may be obtained from
the Secretary of Pinnacle Bankshares Corporation.
8.6 Removal of Restrictions. Except as otherwise provided in this
Article, Shares of Restricted Stock covered by each Restricted Stock Award made
under the Plan shall become freely transferable by the Participant after the
last day of the Period of Restriction. Once the Shares are released from the
restrictions, the Participant shall be entitled to have the legend required by
Section 8.5 herein removed from his Stock certificate.
8.7 Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
8.8 Dividends and Other Distributions. During the Period of
Restriction, Participants holding shares of Restricted Stock granted hereunder
shall be entitled to receive all dividends and other distributions paid with
respect to those shares while they are so held. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability as the Shares of Restricted Stock with respect
to which they were distributed.
8.9 Termination of Employment Due to Retirement. Unless otherwise
provided in the Agreement, in the event that a Participant terminates his
employment with the Company or one of its Subsidiaries because of normal
retirement (as defined in the rules of the Company in effect at the time), any
remaining Period of Restriction applicable to the Restricted Stock Shares
pursuant to Section 8.3 herein shall automatically terminate and, except as
otherwise provided in Section 8.4 herein the Shares of Restricted Stock shall
thereby be free of restrictions and freely transferable. Unless otherwise
provided in the Agreement, in the event that a Participant terminates his
employment with the Company because of early retirement (as defined in the rules
of the Company in effect at the time), the Committee, in its sole discretion,
may waive the restrictions remaining on any or all Shares of Restricted Stock
pursuant to Section 8.3 herein and add such new restrictions to those Shares of
Restricted Stock as it deems appropriate.
8.10 Termination of Employment Due to Death or Disability. In the event
a Participant's employment is terminated because of death or disability during
the Period of Restriction, any remaining Period of Restriction applicable to the
Restricted Stock pursuant to Section 8.3 herein shall automatically terminate
and, except as otherwise provided in Section 8.4 herein the shares of Restricted
Stock shall thereby be free of restrictions and fully transferable.
8.11 Termination of Employment for Other Reasons. Unless otherwise
provided in the Agreement, in the event that a Participant terminates his
employment with the Company for any reason other than for death, disability, or
retirement, as set forth in Sections 8.9 and 8.10 herein, during the Period of
Restriction, then any shares of Restricted Stock still subject to restrictions
as of the date of such termination shall automatically be forfeited and returned
to the Company.
ARTICLE IX
Change in Control
In the event of a Change in Control of the Company, the Committee, as
constituted before such Change in Control, in its sole discretion may, as to any
outstanding Award, either at the time the Award is made or any time thereafter,
take any one or more of the following actions: (i) provide for the acceleration
of any time periods relating to the exercise or realization of any such Award so
that such Award may be exercised or realized in full on or before a date
initially fixed by the Committee; (ii) provide for the purchase or settlement of
any such Award by the Company, upon a Participant's request, for an amount of
cash equal to the amount which could have been obtained upon the exercise of
such Award or realization of such Participant's rights had such Award been
currently exercisable or payable; (iii) make such adjustment to any such Award
then outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in such
Change in Control.
ARTICLE X
Modification, Extension and Renewals of Awards
Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to the
extent not yet exercised) granted under the Plan and authorize the granting of
new Awards pursuant to the Plan in substitution therefor, and the substituted
Awards may specify a lower exercise price than the surrendered Awards, a longer
term than the surrendered Awards or may contain any other provisions that are
authorized by the Plan. The Committee may also modify the terms of any
outstanding Agreement. Notwithstanding the foregoing, however, no modification
of an Award, shall, without the consent of the Participant, adversely affect the
rights or obligations of the Participant.
ARTICLE XI
Amendment, Modification and Termination of the Plan
11.1 Amendment, Modification and Termination. At any time and from time
to time, the Board may terminate, amend, or modify the Plan. Such amendment or
modification may be without shareholder approval except to the extent that such
approval is required by the Code, pursuant to the rules under Section 16 of the
Exchange Act, by any national securities exchange or system on which the Stock
is then listed or reported, by any regulatory body having jurisdiction with
respect thereto or under any other applicable laws, rules or regulations.
11.2 Awards Previously Granted. No termination, amendment or
modification of the Plan other than pursuant to Section 4.3 herein shall in any
manner adversely affect any Award theretofore granted under the Plan, without
the written consent of the Participant.
ARTICLE XII
Withholding
12.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan.
12.2 Stock Withholding. With respect to withholding required upon the
exercise of Nonqualified Stock Options, or upon the lapse of restrictions on
Restricted Stock, or upon the occurrence of any other similar taxable event,
participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares of Stock having a Fair Market Value equal to the amount required to be
withheld. The value of the Shares to be withheld shall be based on Fair Market
Value of the Shares on the date that the amount of tax to be withheld is to be
determined. All elections shall be irrevocable and be made in writing, signed by
the Participant on forms approved by the Committee in advance of the day that
the transaction becomes taxable.
ARTICLE XIII
Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE XIV
General
14.1 Requirements of Law. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or self
regulatory organizations (i.e. exchanges) as may be required.
14.2 Effect of Plan. The establishment of the Plan shall not confer
upon any Key Employee any legal or equitable right against the Company, a
Subsidiary or the Committee, except as expressly provided in the Plan. The Plan
does not constitute an inducement or consideration for the employment of any Key
Employee, nor is it a contract between the Company or any of its Subsidiaries
and any Key Employee. Participation in the Plan shall not give any Key Employee
any right to be retained in the service of the Company or any of its
Subsidiaries.
14.3 Creditors. The interests of any Participant under the Plan or any
Agreement are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered.
14.4 Governing Law. The Plan, and all Agreements hereunder, shall be
governed, construed and administered in accordance with and governed by the laws
of the Commonwealth of Virginia and the intention of the Company is that ISOs
granted under the Plan qualify as such under Section 422A of the Code.
14.5 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
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