March 19, 1999
Dear Shareholders:
You are cordially invited to attend our annual meeting of the shareholders
of Highlands Bankshares, Inc. on Tuesday, April 13, 1999, at 3:00 p.m., at The
Grant County Bank, 1 North Main Street (the "Old Bank Building"), Petersburg,
West Virginia.
Enclosed in this mailing you will find formal notice of the meeting, a
proxy and a Proxy Statement detailing the matters upon which the shareholders
will act at the annual meeting. Our Company's Annual Report for 1998 is also
enclosed.
We urge you to complete, date and sign the proxy, and return it as soon as
possible in the enclosed postage prepaid envelope, even if you intend to attend
the meeting. You may revoke your proxy at any time prior to its exercise.
Sincerely,
John G. VanMeter
Chairman of the Board
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Highlands Bankshares, Inc.
The annual meeting of shareholders of Highlands Bankshares, Inc. will be
held on Tuesday, April 13, 1999, at 3:00 p.m., at The Grant County Bank, 1 North
Main Street (the "Old Bank Building"), Petersburg, West Virginia, for the
following purposes:
1. Election of two directors to serve until the annual meeting of
shareholders in 2002.
2. Ratification of the appointment of S. B. Hoover and
Company, L.L.P. as independent public accountants for
1999.
3. Transaction of other business as may properly come before the
meeting.
Only shareholders of record at the close of business on March 1, 1999 are
entitled to notice of and to vote at the annual meeting or any adjournments
thereof.
To assure that your shares are represented at the annual meeting, please
complete, date and sign the enclosed proxy, and return it as soon as possible in
the enclosed postage prepaid envelope. You may revoke your proxy at any time
prior to its exercise.
By Order of the Board of Directors
Clarence E. Porter
Corporate Secretary
March 19, 1999
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HIGHLANDS BANKSHARES INC.
P.O. Box 929
Petersburg, West Virginia 26847
(304) 257-4111
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the annual meeting of shareholders of Highlands Bankshares,
Inc. (Highlands or the Company) to be held Tuesday, April 13, 1999, at 3:00
p.m., at The Grant County Bank, 1 North Main Street (the "Old Bank Building"),
Petersburg, West Virginia, and at any adjournments thereof (Annual Meeting). The
accompanying proxy is solicited by the Board of Directors of the Company (the
Board). The principal executive offices of the Company are located at 3 North
Main Street, Petersburg, West Virginia 26847. The approximate mailing date of
the Proxy Statement and the accompanying proxy is March 19, 1999.
The cost of the solicitation of proxies will be borne by the Company.
Solicitations will be made only by the use of the mail, except that, if
necessary, officers, directors and regular employees of the Company, or its
affiliates, may make solicitations of proxies by telephone, telegraph or by
personal calls. Brokerage houses and nominees may be requested to forward the
proxy solicitation material to the beneficial owners of the stock held of record
by such persons, and the Company may reimburse them for their charges and
expenses in this regard.
All properly executed proxies delivered pursuant to this solicitation will
be voted at the Annual Meeting in accordance with any instructions thereon. Any
person signing and mailing the enclosed proxy may, nevertheless, revoke the
proxy at any time prior to the actual voting thereof.
The 1998 Annual Report to shareholders, including current financial
statements, is being mailed to the Company's shareholders concurrently with this
Proxy Statement but should not be considered proxy solicitation material.
Interested shareholders may obtain without charge a copy of the Company's
Form 10-KSB, as filed with the Securities and Exchange Commission, upon written
request to Clarence E. Porter, Corporate Secretary, Highlands Bankshares, Inc.,
P.O. Box 929, Petersburg, West Virginia 26847.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on March 1, 1999,
will be entitled to vote at the Annual Meeting. As of such date, the Company had
outstanding 501,898 shares of its common stock, $5 par value (Common Stock),
each of which is entitled to one vote at the Annual Meeting. Cumulative voting
rights are available for the election of directors, as further described in this
Proxy Statement.
<PAGE> 3
Any number of shareholders holding together a majority of the stock
outstanding, who are either present in person or represented by proxy at the
Annual Meeting, shall constitute a quorum. If a share is represented for any
purpose at the Annual Meeting, it is deemed to be present for purposes of
establishing a quorum. Abstentions and shares held of record by a broker or its
nominee (Broker Shares) which are voted on any matter are included in
determining the number of votes present or represented at the Annual Meeting.
Conversely, Broker Shares that are not voted on any matter will not be included
in determining whether a quorum is present.
If a quorum is established, directors will be elected by a plurality of
the votes cast by shareholders in person or by proxy at the Annual Meeting, and
the appointment of the independent public accountants will be approved if the
votes cast in favor exceed the votes cast opposing. Votes that are withheld and
Broker Shares that are not voted will not be included in determining the number
of votes cast.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the name and address of, and number and
percentage of shares of Common Stock held as of March 1, 1999 by, each of the
Company's directors and executive officers and all of the Company's directors
and executive officers as a group. To the best of the Company's knowledge, no
person is the beneficial owner of more than 5% of the Company's common stock.
Amount Beneficially Percent of
Name of Owner Owned Class
Leslie A. Barr, Director and President 1,838 1 *
Thomas B. McNeil, Sr., Director 5,341 2 1.1%
George B. Moomau, Director 7,740 3 1.5%
Clarence E. Porter, Director and
Secretary/Treasurer 112 4 *
Courtney R. Tusing, Director 816 5 *
John G. VanMeter, Director 21,100 6 4.2%
Jack H. Walters, Director 3,608 7 *
L. Keith Wolfe, Director 2,860 8 *
All of the eight directors and each of
the two executive officers of the
Company, as a group 43,415 8.7%
* Denotes less than 1% of class
1 Includes 940 shares owned directly and 898 shares owned jointly with
his wife.
<PAGE> 4
2 Includes 3,072 shares owned directly, and 2,269 shares held by his wife
over which he holds no voting or dispositive powers.
3 Includes 100 shares owned directly and 7,640 shares held by his wife
over which he holds no voting or dispositive powers.
4 Includes 100 shares owned directly and 12 shares held by his wife over
which he holds no voting or dispositive powers.
5 Includes 816 shares owned directly.
6 Includes 11,100 shares owned directly and 10,000 shares owned by his
wife over which he holds no voting or dispositive powers.
7 Includes 3,508 shares owned directly and 50 shares held as co-guardian
for each of his two minor children.
8 Includes 2,610 shares owned directly, 100 shares held jointly with each
of his two minor children, and 50 shares held by his wife over which he
holds no voting or dispositive powers.
PROPOSAL ONE ELECTION OF DIRECTORS
The term of office for the current Class A directors expires at the Annual
Meeting. The Board of Directors has nominated such directors, namely, John G.
VanMeter and Courtney R. Tusing for election, for a three year term, by the
shareholders at the Annual Meeting.
In the election of directors, the Company's shareholders shall have as
many votes as the number of shares they own, multiplied by the number of
directors to be elected. When voting by proxy or in person at the Annual
Meeting, shareholders may do one of the following:
1. A shareholder may vote FOR all of the director nominees. If the
shareholder wishes to withhold authority as to certain nominees, however, he may
do so by writing the name of the person or persons for whom he does not want to
vote in a space provided on the proxy.
2. A shareholder may WITHHOLD AUTHORITY to vote for all of the director
nominees, in which case none of the nominees receives any of the shareholder's
vote.
<PAGE> 5
3. A shareholder may CUMULATE all of his votes for one director nominee or
distribute them among as many nominees as he chooses. For example, the election
of two directors entitles a shareholder who owns 100 shares of stock to 200
votes. The shareholder may vote all 200 votes for one director nominee, or may
allocate his votes among two or more of the nominees. Shareholders wishing to
cumulate their vote on the enclosed proxy should direct that their votes be
cumulated on behalf of the directors for whom they vote by writing the name of
the director or directors in the space provided on the proxy and indicating the
number of votes to be cast for each such director.
It is the intention of the persons named as proxies in the accompanying
form of proxy, unless instructed otherwise, to vote for the election of all of
the nominees for directors set forth below. If any nominee should become
unavailable to serve, the proxy may be voted for the election of a substitute
nominee designated by the Board. The Board has no reason to believe any of the
nominees will be unable to serve if elected.
The Board recommends election of each of the nominees set forth below.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following information, including the principal occupation during the
past five years, is given with respect to the two director nominees and the six
directors continuing in office.
Name and Position Director Principal Occupation
with the Company Age Since During the Last Five Years
DIRECTOR NOMINEES
Class A Directors
(to serve until the 2002 annual meeting of shareholders)
John G. VanMeter 61 5/85 Attorney at Law; Partner, VanMeter &
Chairman of the Board VanMeter
Courtney R. Tusing 73 8/95 Retired; President and Chairman of
the Board of First United National Bank
& Trust and First United Corp.
<PAGE> 6
Name and Position Director Principal Occupation
with the Company Age Since During the Last Five Years
DIRECTORS CONTINUING IN OFFICE
Class B Directors
(to serve until the 2000 annual meeting of shareholders)
Thomas B. McNeil, Sr. 72 4/97 Chairman of the Board of Capon Valley
Bank since July 1995; Retired
Insurance Agent
L. Keith Wolfe 72 5/85 Owner of Petersburg Motor Company
Clarence E. Porter 50 4/92 President and Chief Executive Officer
Secretary/Treasurer of The Grant County Bank since August
1991; Vice President of The Grant
County Bank from August 1988 until
August 1991
Class C Directors
(to serve until the 2001 annual meeting of shareholders)
Jack H. Walters 51 7/87 Attorney at Law; Partner, Walters &
Krauskopf
Leslie A. Barr 61 7/87 President and Chief Executive Officer
President of Capon Valley Bank since August 1985
George B. Moomau 78 5/85 Chairman of the Board of The Grant
County Bank since October 1988; prior
thereto, President of The Grant
County Bank
<PAGE> 7
Board Meetings and Compensation
The Board met 12 times during 1998. Each director attended at least 75% of
the aggregate of (i) the total number of meetings held by the Board and (ii) the
total number of meetings held by the committee on which the director served.
Directors received $250.00 for attending Board meetings, and $100.00 for
attending committee meetings not held in conjunction with Board meetings. For
1998, the Company had a Compensation Committee which consisted of John G.
VanMeter, L. Keith Wolfe and Courtney R. Tusing, and which met one time during
1998. The Compensation Committee reviews and recommends to the Board salaries
for the executive officers of the subsidiary banks for the upcoming year. The
Company did not have a standing audit or nominating committee.
Compliance with Section 16(a) of the Securities Exchange Act
To the Company's knowledge, all statements of beneficial ownership
required to be filed during 1998 were timely filed.
Certain Related Transactions
Loans made by the Grant County Bank and Capon Valley Bank to directors,
director nominees and their affiliates were made in the ordinary course of
business, were made 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 the normal risk of collectibility
or present other unfavorable features.
<PAGE> 8
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth the compensation of the
Chief Executive Officer of The Grant County Bank and Capon Valley Bank, the
Company's two wholly-owned bank subsidiaries, for the last three years. No other
executive officers received cash compensation in excess of $100,000 in 1998.
Summary Compensation Table
Other
Name and Annual Compensation Compensation 2
Principal Position Year Salary ($)1 Bonus ($) ($)
Clarence E. Porter 1998 $98,800 $ 0 $ 3,757
Secretary/Treasurer of Company; 1997 93,425 0 0
President and Chief Executive 1996 88,833 0 5,328
Officer of The Grant County Bank
Leslie A. Barr 1998 $96,550 $ 0 $14,967
President of Company; 1997 92,025 0 12,655
President and Chief Executive 1996 79,706 6,467 12,040
Officer of Capon Valley Bank
1 Includes base salary and director fees. For the last fiscal year, Mr.
Porter received a base salary of $87,150 from Grant County Bank, and Mr.
Barr received $87,150 from Capon Valley Bank. Mr. Porter earned director
fees of $2,950 from the Company and $8,700 from Grant County Bank; Mr.
Barr earned director fees of $2,950 from the Company and $6,450 from
Capon Valley Bank.
2 Includes contributions by Grant County Bank and Capon Valley Bank to
their Profit Sharing 401(k) Plans on behalf of Messrs. Porter and Barr,
respectively.
PROPOSAL TWO APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
S. B. Hoover and Company, L.L.P. of Harrisonburg, Virginia, were auditors
for 1998 and are being recommended to the Company's shareholders for appointment
as auditors for 1999. A representative of S. B. Hoover and Company is expected
to attend the Annual Meeting with the opportunity to make a statement or to
respond to appropriate questions from shareholders.
The Board recommends that shareholders vote "FOR" Proposal Two.
<PAGE> 9
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 2000
Annual Meeting must be received by the Secretary of the Company, at its
principal executive offices, 3 North Main Street, Petersburg, West Virginia
26847, for inclusion in its Proxy Statement relating to the meeting, by
November 19, 1999.
By Order of the Board of Directors
Clarence E. Porter
Corporate Secretary
March 19, 1999
