UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨ | Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material under §240.14a-12 |
CARDINAL BANKSHARES CORPORATION
(Name of registrant as specified in its
charter)
(Name of person(s) filing proxy statement, if other than the registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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CARDINAL BANKSHARES CORPORATION
101 Jacksonville Circle
P. O. Box 215
Floyd, Virginia 24091
Phone 540-745-4191
Fax 540-745-4133
Dear Shareholders:
The Directors of Cardinal Bankshares Corporation invites you to attend our 2011 Annual Meeting of Shareholders to be held in the Bank of Floyd Conference Room (located adjacent to the Bank of Floyd) at 101 Jacksonville Circle, Floyd, Virginia on Wednesday, April 27, 2011, at 2:00 p.m.
The attached Notice of the 2011 Annual Meeting and Proxy Statement describe the formal business to be transacted at the Meeting. At the Meeting, Shareholders will vote to elect seven directors of Cardinal Bankshares Corporation.
Whether or not you plan to attend in person, it is important that your shares be represented at the Meeting. Please complete, sign, date and return promptly the enclosed proxy. A postage-paid envelope is enclosed for your convenience. If you later decide to attend the Meeting and vote in person, or if you wish to revoke your proxy for any reason prior to the vote at the Meeting, you may do so and your proxy will have no further effect.
After the Annual Meeting, shareholders are invited to remain for light refreshments and visiting.
The Board of Directors and management of Cardinal Bankshares Corporation appreciate your continued support and look forward to seeing you at the Annual Meeting.
Sincerely, |
/s/ Leon Moore |
Leon Moore |
Chairman of the Board, President and CEO |
Floyd, Virginia
March 25, 2011
CARDINAL BANKSHARES CORPORATION
101 Jacksonville Circle
P. O. Box 215
Floyd, Virginia 24091
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the holders of shares of common stock of Cardinal Bankshares Corporation will be held on Wednesday, April 27, 2011, at 2:00 p.m., in the Bank of Floyd Conference Room (located adjacent to the Bank of Floyd) at 101 Jacksonville Circle, Floyd, Virginia, for the following purposes:
1. | The election of seven directors until the 2012 Annual Meeting of shareholders or in the case of each director, until his/her successor is duly elected and qualifies; and |
2. | To transact such other business as may properly be brought before the Meeting or any adjournment thereof. |
The Board of Directors has fixed the close of business on March 11, 2011 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors |
/s/ Leon Moore |
Leon Moore |
Chairman of the Board, President and CEO |
Floyd, Virginia
March 25, 2011
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED.
CARDINAL BANKSHARES CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2011
GENERAL INFORMATION
This proxy statement is furnished to holders of common stock of Cardinal Bankshares Corporation (Cardinal) in connection with the solicitation by and on behalf of the Board of Directors of Cardinal of the enclosed proxy to be used at the 2011 Annual Meeting of Shareholders of Cardinal to be held in the Bank of Floyd Conference Room (located adjacent to the Bank of Floyd) at 101 Jacksonville Circle, Floyd, Virginia, on Wednesday, April 27, 2011, at 2:00 p.m., and at any adjournment thereof. The principal executive offices of Cardinal are located at 101 Jacksonville Circle, P. O. Box 215, Floyd, Virginia 24091. The approximate mailing date of this Proxy Statement, the accompanying proxy and the Annual Report to Shareholders (which is not part of Cardinals soliciting materials) is March 25, 2011.
Important Notice Regarding the Availability of Proxy Material for the Shareholder Meeting to Be Held on April 27, 2011: The Notice of the 2011 Annual Meeting of Shareholders, this Proxy Statement and the 2010 Annual Report to Shareholders are available on the internet at the following website:
www.bankoffloyd.com/2011proxy
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by Cardinal. Such costs include charges by brokers, fiduciaries and custodians for forwarding proxy materials to beneficial owners of Cardinal stock held in their names. Solicitations will be made only by use of the mails, except that if necessary, officers, directors and employees of Cardinal may without additional compensation solicit proxies by telephone, personal contact, telegraph, facsimile or other electronic means.
VOTING OF PROXIES
The proxy solicited hereby, if properly signed and returned to Cardinal and not revoked prior to its use, will be voted in accordance with the instructions contained thereon. If no choice is specified and/or no contrary instructions are given on an executed and returned proxy, the proxy will be voted for the nominees listed in Item 1 of the proxy, and in the discretion of the proxies on any other matter which may properly come before the Meeting and all adjournments or postponements of the Meeting. Any shareholder giving a proxy has the power to revoke it at any time before it is exercised by (i) filing written notice thereof with Cardinal at Cardinal Bankshares Corporation, 101 Jacksonville Circle, P. O. Box 215, Floyd, Virginia 24091, Attention: Ronald Leon Moore; (ii) submitting a duly executed proxy bearing a later date to Cardinal at Cardinal Bankshares Corporation, 101 Jacksonville Circle, P. O. Box 215, Floyd, Virginia 24091, Attention: Ronald Leon Moore; or (iii) appearing at the Annual Meeting or at any adjournment thereof and giving the designated official at such Meeting notice of his or her intention to vote in person. Presence at the Annual Meeting does not of itself revoke the proxy. Proxies solicited hereby may be exercised only at the Annual Meeting and at any adjournment thereof and will not be used for any other meeting.
DIRECTIONS TO ANNUAL MEETING
To obtain directions to attend the Annual Meeting and vote in person, please contact the Secretary of the Corporation at (540)-745-4191.
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VOTING SHARES AND VOTING RIGHTS
Only holders of record of common stock at the close of business on March 11, 2011 (the Record Date) are entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. As of March 11, 2011, Cardinal had 1,535,733 shares of common stock outstanding. A majority of the outstanding shares of common stock must be represented at the Annual Meeting in person or by proxy in order to constitute a quorum for the transaction of business. Each share of common stock is entitled to one vote at the Annual Meeting. For the purpose of determining the presence of a quorum, shares represented on any matter will be counted as present and represented on all matters to be acted upon, including any matter with respect to which the holder of such shares abstains from voting (abstentions). Broker non-votes (in which brokers do not vote shares on behalf of the beneficial owners thereof) will not be treated as present or represented at the Meeting, and will not be included in determining whether a quorum is present.
Election of Directors. Directors are elected by a plurality of the votes of the shares represented in person or by proxy at the Annual Meeting. Plurality means that the individuals who receive the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the Meeting. Only shares that are voted in favor of a nominee will be counted toward that nominees achievement of a plurality. Abstentions and broker non-votes will not be counted toward a nominees achievement of a plurality. Broker shares no longer may be voted in an uncontested Board election such as this one unless the beneficial owner has provided voting instructions.
Other Matters. Approval of any other matter that properly comes before the Meeting will require the affirmative vote of a majority of the shares represented at the Meeting and entitled to vote on the particular matter. In tabulating votes cast on any such other matter, abstentions will be considered votes cast, and accordingly will have the same effect as a negative vote. Broker non-votes, on the other hand, will not be counted as shares entitled to be voted on the particular matter, and therefore will have no impact on the outcome of the vote.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 11, 2011 certain information regarding those persons (including any group as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) who Cardinal knows were the beneficial owners of 5% or more of the outstanding shares of Cardinals common stock:
Title of Class |
Name and Address Of Beneficial Owner |
Amount and Nature Of Beneficial Ownership |
Percent of Class |
|||||||
Common Stock |
Joseph H. Conduff, Jr. P.O. Box 113 Floyd, VA 24091 |
96,853 | (1) | 6.31 | ||||||
Common Stock |
Schaller Equity Partners 324 Indera Mills Court Winston-Salem, NC 27101 |
128,000 | 8.34 |
(1) | Includes 10,074 shares owned with his wife and children. |
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SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of March 11, 2011 the beneficial ownership of Cardinals common stock by all (1) directors, (2) named executive officers and (3) directors and named executive officers as a group. Unless otherwise indicated, based on information furnished by such shareholders, management believes that each person has sole voting and investment power with respect to all shares beneficially owned by such person and the address of each shareholder is the same as Cardinals address.
Title of Class |
Name of Beneficial Owner |
Amount and Nature Of Beneficial Ownership |
Percent of Class |
|||||||
Common Stock |
Dr. Joseph Howard Conduff, Jr. | 96,853 | (2) | 6.31 | ||||||
Common Stock |
J. Alan Dickerson | 40 | (6) | (1) | ||||||
Common Stock |
William R. Gardner, Jr. | 1,420 | (3) | (1) | ||||||
Common Stock |
Henry A. Logue | 255 | (7) | (1) | ||||||
Common Stock |
Kevin D. Mitchell | 22,017 | (4) | 1.43 | ||||||
Common Stock |
Ronald Leon Moore | 7,815 | (5) | (1) | ||||||
Common Stock |
Dr. A. Carole Pratt | 820 | (1) | |||||||
Common Stock |
George Harris Warner, Jr. | 320 | (1) | |||||||
Common Stock |
All directors and named executive officers as a group (seven persons) | 129,540 | 8.44 |
(1) | Less than 1 percent. |
(2) | Includes 10,074 shares owned with his wife and children. |
(3) | Includes 100 shares owned by his wife. |
(4) | Includes 4,620 shares owned by his wife, 2,720 shares owned jointly with his wife, 660 shares owned as custodian for his son and 25 shares owned as custodian for his granddaughter. |
(5) | Mr. Moore is a director and named executive officer and his beneficial ownership includes 3,210 shares owned by his wife, and 1,519 shares owned jointly with his wife. |
(6) | Mr. Dickerson is a named executive officer. |
(7) | Mr. Logue is a director and named executive officer |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that Cardinals directors and executive officers, and persons who own more than 10% of a registered class of Cardinals equity securities, file with the Securities and Exchange Commission initial reports of ownership and reports of change in ownership of common stock and other equity securities of Cardinal. The same persons are also required by Securities and Exchange Commission regulation to furnish Cardinal with copies of all Section 16(a) forms that they file. To Cardinals knowledge, based solely on Cardinals review of the copies of such reports furnished to it or written representations from certain reporting persons that all such reports were filed with the Commission on a timely basis during the year ended December 31, 2010, Cardinal believes all Section 16(a) filing requirements applicable to officers, directors and more than 10% shareholders were complied with in a timely manner.
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ITEM 1 ELECTION OF DIRECTORS
At the Annual Meeting, seven directors are to be elected to hold office. If elected, Dr. Joseph Howard Conduff, Jr., William R. Gardner, Jr., Henry A. Logue, Kevin D. Mitchell, Ronald Leon Moore, Dr. A. Carole Pratt, and G. Harris Warner, Jr. shall hold office until the 2012 Annual Meeting of Shareholders, or until their respective successors are duly elected and qualify. It is the intention of the named proxies, unless otherwise directed, to vote in favor of the election of the seven nominees for director named in this paragraph for a one-year term.
Other than Ronald Leon Moore and Henry A. Logue, no directors employer or business is an affiliate of Cardinal Bankshares Corporation. G. Harris Warner, Jr., a director, is partner with Warner & Renick, PLC, a firm which provides general legal services to the bank related to usual banking activities. All nominees for director are independent as defined in the NASDAQ Stock Market Listing Rules, except Messrs. Moore and Logue.
Each nominee has agreed to serve if elected. In the event any named nominee shall unexpectedly be unable to serve, proxies will be voted for the remaining named nominees and such other person or persons as may be designated by the Board of Directors.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION.
INFORMATION CONCERNING NOMINEES AND EXECUTIVE OFFICERS
The following information, including the principal occupation during the past five years, is given with respect to the nominees for election to the Board at the Annual Meeting and for all executive officers. All of the nominees for election as directors currently serve as directors of Cardinal and of Bank of Floyd, Cardinals wholly owned subsidiary. No director or nominee serves as a director of any other company which has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or is subject to the requirements of Section 15(d) of the Exchange Act or of any company registered as an investment company under the Investment Company Act of 1934.
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NOMINEES FOR DIRECTOR
Director (Age) |
Position with Cardinal, Principal Occupation and Other Business Experience |
Director Since |
||||
Dr. Joseph Howard Conduff, Jr. |
Dentist in private practice, Floyd, Virginia. Qualified to serve on the Board as a major shareholder and community leader; serves on numerous civic boards; significant experience on Cardinals Board (Chairman of Cardinals Audit Committee) | 4/24/02 | ||||
William R. Gardner, Jr. |
Semi-Retired Educator, Floyd County Public Schools. Member of Floyd County Board of Supervisors Willis, Virginia. Qualified to serve on the Board by virtue of his experience as a successful agricultural businessman and active community service leader. Agribusiness represents a significant customer sector (Vice Chairman of Board of Directors, Chairman of Cardinals Asset/Liability Committee and Nominating Committee) | 3/12/96 | ||||
Henry A. Logue |
Executive Vice President of Cardinal and CEO & President of the Bank of Floyd Floyd, Virginia. Qualified to serve on the Board because of his status as CEO and significant prior experience in banking. Former Chairman, CEO & President of Madison County Bank, former CEO & President of First Republic Bank and graduate of LSU School of Banking and LSU Master School of Banking. | 5/12/10 | ||||
Kevin D. Mitchell |
Successful agriculture businessman Floyd, Virginia. Qualified to serve on the Board because this business experience represents a significant customer sector in the rural areas served by the bank. In addition, Mr. Mitchell has substantial experience on Cardinals Board, which is beneficial to the Company. | 3/12/96 |
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NOMINEES FOR DIRECTOR, continued
Director (Age) |
Position with Cardinal, Principal Occupation and Other Business Experience |
Director Since |
||||
Ronald Leon Moore |
Chairman, President & CEO of Cardinal and Chairman of the Bank of Floyd Floyd, Virginia. Qualified to serve on the Board because of his status as Chairman and significant prior experience in banking. Former SVP for Central Fidelity Bank, former president of National Bank of Chilhowie and graduate of LSU School of Banking. | 3/12/96 | ||||
Dr. A. Carole Pratt |
General Dentist - Drs. Pratt and Mansell, D.D.S. Pulaski, Virginia. Qualified to serve on the Board because of small business experience and service as a former board member of another community banker and local political experience. | 3/10/04 | ||||
G. Harris Warner, Jr. |
Attorney-at-Law Roanoke, Virginia. Qualified to serve on the Board because of legal background and former banking background with extensive knowledge of finance and bankruptcy law. | 2/18/04 |
THE BOARD OF DIRECTORS OF CARDINAL RECOMMENDS A VOTE FOR THE
NOMINEES FOR DIRECTOR NAMED ABOVE.
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EXECUTIVE OFFICERS
Ronald Leon Moore, 69 Chairman, Chief Executive Officer & President of Cardinal and Chairman of Bank of Floyd.
Mr. Moore joined Bank of Floyd in 1988 as a Senior Vice President. In 1990 he became President and Chief Executive Officer at Bank of Floyd. Since Cardinals formation in 1996, he has served as President and Chief Executive Officer of Cardinal. He has served in the capacity of Chairman of Cardinal and of Bank of Floyd since 2000. Mr. Moore has served as a director of Bank of Floyd since 1989 and of Cardinal since 1996.
Henry A. Logue, 57 Executive Vice President of Cardinal and Chief Executive Officer & President of Bank of Floyd.
Mr. Logue joined Cardinal on April 3, 2010 as Executive Vice President and President and Chief Operating Officer of Bank of Floyd. Mr. Logue was named a director of Cardinal and Bank of Floyd on May 12, 2010. Mr. Logue was appointed to Chief Executive Officer of Bank of Floyd on November 15, 2010. Mr. Logue has over thirty years experience in banking having previously held the positions of Chairman, CEO & President of Madison County Bank, Madison, Mississippi and CEO & President of First Republic Bank, Monroe, Louisiana.
J. Alan Dickerson, 49 Vice President and Chief Financial Officer of Cardinal and Vice President and Cashier of Bank of Floyd.
Mr. Dickerson joined Cardinal on June 18, 2007 as Vice President and Chief Financial Officer and was named Vice President and Cashier of Bank of Floyd. Mr. Dickerson has over twenty-four years experience in private industry as an internal auditor, controller and chief financial officer. Prior to joining Cardinal, Mr. Dickerson served as Chief Financial Officer, Secretary and Treasurer for Independence Lumber, Inc. and its affiliate companies overseeing all aspects of finance, accounting and administration.
DESIGNATION OF INDEPENDENT AUDITORS
The Companys Audit Committee approved the engagement of Hess Stewart & Campbell, PLLC, to serve as the Companys independent accounts for the fiscal year ended December 31, 2010. The Audit Committee intends to conduct a review to select its independent accounts for engagement for the fiscal year ending December 31, 2011 and expects to complete the review by mid 2011. A representative of Hess Stewart & Campbell, PLLC will be present at the Annual Meeting, have an opportunity to make a statement if so desired and will be available to answer questions.
BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
The Board of Directors does not have a lead independent Director.
Cardinal Bankshares Corporation is a small bank in a rural community, which does not engage in complex transactions and find the current Board and Senior Management structure effective in addressing day-to-day issues while keeping the Board informed.
Risk oversight is addressed through the following four areas: 1) a series of policies which place limitations and provides guidelines with regard to acceptable risk; 2) the interaction between the Chairman, CEO & President with the Board which includes regular reporting on the activities of the Company which are policy exceptions or which are viewed as creating new material risks; and 3) a risk committee chaired by the Compliance Officer which includes three Board members and which provides explicit Board involvement in overall risk oversight; and 4) internal audit which reports directly to the Audit Committee.
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BOARD OF DIRECTORS MEETINGS, COMMITTEES,
COMMUNICATIONS WITH DIRECTORS AND ANNUAL MEETING ATTENDANCE
During 2010 the Board of Directors held thirteen meetings, the Audit Committee of the Board met ten times, the Asset Liability Management Committee met four times, the Compensation Committee met two times, the Nominating Committee met one time and the Executive Committee held no meetings. During 2010, each director attended more than 75% of the aggregate of (i) the total number of meetings of the Board held during the period for which the director was on the Board and (ii) the total number of meetings of the Board Committees on which he served.
Committees of the Board
The Board of Directors has standing Audit, Executive and Asset Liability Management Committees. The Board of Directors also appoints a Nominating Committee specifically for each of Cardinals annual shareholders meeting. It is not a standing committee.
The Compensation Committee is appointed annually, is not a standing committee and does not have a charter. All of the members of the compensation committee are independent as defined in the NASDAQ Stock Market Listing Rules. The Compensation Committee makes recommendations to the Board regarding Mr. Moores compensation. The Board (without Mr. Moores participation) and using the Compensation Committees recommendations as a guideline, reviews the performance and determines the compensation of the Chief Executive Officer. The Board has delegated to the Chief Executive Officer to determine other executive officer compensation within a Board approved budget. Cardinal uses no compensation consultants in determining executive and director compensation.
The Board of Directors itself is responsible for overseeing the compensation and benefits structure of Cardinal and administers any executive compensation plans and reviews management succession plans. Mr. Moore does not participate in Board discussions or decisions involving his own performance or compensation.
Audit Committee
The Audit Committee assists the Board of Directors in fulfilling its fiduciary responsibilities relating to Cardinals corporate accounting and financial reporting practices and internal controls. The Audit Committee is also responsible for investigating concerns regarding accounting and financial reporting matters from employees and others. The Audit Committee recommends to the Board of Directors for approval the firm to be employed as its independent accountants to audit Cardinals consolidated financial statements; reviews and approves the scope, purpose and type of audit services to be performed by the internal and external auditors; reviews the activities and findings of the internal and external auditors to determine the effectiveness of the audit function; reviews procedures for ensuring compliance with Cardinals policies on conflict of interest; ensures that standards of ethical behavior and proper compliance programs are established and maintained throughout Cardinal and renders regular reports to the Board of Directors on its activities and findings.
The Audit Committee consists of four members. They are: Dr. J. Howard Conduff, Jr. (Chairman), William R. Gardner, Jr., Kevin D. Mitchell and A. Carole Pratt. The Board of Directors has determined that each of the four members is independent as defined in the NASDAQ Stock Market Listing Rules. The Board has adopted for the Audit Committee a written charter, which is reviewed and reassessed periodically for adequacy. For more information related to the Audit Committee, please see the Report of the Audit Committee elsewhere in this Proxy Statement.
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Executive Committee
The Executive Committee exercises all the powers of the Board that may be lawfully delegated when the Board of Directors is not in session.
The Executive Committee consists of Ronald Leon Moore (Chairman), Joseph Howard Conduff, Jr., William R. Gardner, Jr., A. Carole Pratt and G. Harris Warner, Jr.
Asset Liability Management Committee
The Asset Liability Management Committee is responsible for maintaining and ensuring adherence to Cardinals Risk/Asset Liability Policy, managing interest rate risk, capital risk, earnings risk and reports to the Board. The Asset Liability Management Committee consists of William R. Gardner, Jr. (Chairman), Henry A. Logue, Kevin D. Mitchell and Ronald Leon Moore.
Nominating Committee
The Nominating Committee is responsible for finding, evaluating, considering and proposing nominees to stand for election to the Board of Directors. The Nominating Committee does not have a Charter. The Nominating Committee is specifically appointed by the Board of Directors each year to evaluate, consider and propose to the Board of Directors nominees for election to Cardinals Board of Directors at the annual shareholders meeting next following the Committees appointment. The Board does not believe that it needs a separate standing Nominating Committee, because the full Board is comprised predominantly of independent directors and is able to perform the function of reviewing recommended board nominees in accordance with Cardinals Articles of Incorporation and Bylaws. Cardinal is a community banking institution located in a rural, thinly populated market and believes that the directors are well positioned in the community to evaluate the nominees proposed by the Nominating Committee.
Generally, candidates should be highly qualified by business, professional or comparable experience, affirmatively desirous of serving on the Board, able to develop meaningful new customer relationships, knowledgeable about the business markets served by Cardinal, and able to represent the interests of all shareholders in a balanced way and not merely those of any special interest group. Candidates should be able to work well with others and free of any conflict of interest that would violate any law or interfere with the proper performance of a directors duties. The candidate must be able and willing to devote sufficient time to the business of the Board to be an effective director, and he or she must have agreed in writing to be a director of Cardinal.
The Nominating Committee will consider director candidates properly recommended by shareholders. Shareholders wishing to suggest candidate(s) for consideration at the 2012 Annual Meeting of Shareholders should submit their proposed candidates in accordance with the timeframe and procedures set forth in the paragraph entitled SUBMISSION OF SHAREHOLDER PROPOSALS in this Proxy Statement. These candidates must have the qualifications, described above, applicable to all candidates. In addition to candidates properly recommended by shareholders, the Committee considers candidates recommended by other directors, management, employees and community leaders. The Committee also considers and evaluates current directors for renomination. In evaluating current directors, in addition to the factors set forth above, the Committee considers the directors performance and participation as a director and the value of the directors length of service and experience with Cardinal. The Nominating Committee does not have a policy to consider diversity in identifying director nominees, but rather focuses on director nominees qualifications and how they can best serve the Board.
The Nominating Committee meets at least once before the upcoming annual shareholders meeting to consider the renomination of the existing directors and to consider any other candidates brought to the Committees attention properly by outside shareholders or other non-shareholder sources.
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The Nominating Committee does not utilize the services of a third party search firm. This process includes reviewing and evaluating the credentials of all candidates in respect to the nominee positions to be filled under the criteria described above. The Nominating Committee compares the experience, expertise and personal qualities of potential candidates with the experience, expertise and personal qualities that are identified as being desirable for the Board of Directors at any given time.
The Nominating Committee for the 2011 Annual meeting consists of William R. Gardner, Jr. (Chairman), Joseph Howard Conduff, Jr. and A. Carole Pratt.
The Board of Directors has determined that all Nominating Committee members are independent as defined in the NASDAQ Stock Market Listing Rules.
Communications with Directors
The Board of Directors has a process for shareholders to communicate with it. Shareholders are encouraged to communicate with the full Board or with individual directors. Shareholders may send their written communication in writing to Board of Directors, c/o Corporate Secretary, P.O. Box 215, Floyd, Virginia, 24091 indicating whether it is intended for the Board as a whole, for the Chairman of a Committee of the Board or for one or more named individual directors. All such communications will be forwarded to the appropriate director(s) for whom they appear intended as soon as practicable.
Board Member Attendance at Annual Meetings
The Board of Directors recognizes that attendance by directors at annual meetings of the shareholders benefits Cardinal by giving directors an opportunity to meet, talk with and hear the suggestions or concerns of shareholders and by giving shareholders access to directors that they may not otherwise have. The Board also recognizes that directors have their own business and personal interests and are not employees. Their attendance at annual shareholder meetings is not mandatory. However, it is the policy of the Board of Directors that directors be strongly encouraged to attend each annual shareholders meeting. At the 2010 annual meeting of shareholders, all of the directors were present.
COMPENSATION AND OTHER MATTERS
Compensation Of Directors
Members of the Board of Directors are paid $400 per month retainer and $150 for each committee meeting. Effective 2010, Directors were paid $150 for each called board meeting over one, $150 for each conference call meeting and $400 for any all day meetings.
Name |
Fees Earned or Paid in Cash ($) |
Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total Compensation ($) |
||||||||||||
J. Howard Conduff, Jr |
5,950 | | | 5,950 | ||||||||||||
William R. Gardner, Jr |
6,700 | | 102 | (1) | 6,802 | |||||||||||
Kevin D. Mitchell |
6,100 | 8,482 | (2) | 427 | (1) | 15,009 | ||||||||||
A. Carole Pratt |
5,800 | | | 5,800 | ||||||||||||
G. Harris Warner, Jr. |
5,500 | | | 5,500 |
(1) | Reportable economic value benefit of insurance coverage provided by a bank owned split dollar life insurance plan. |
(2) | Mr. Mitchell has accrued deferred retirement compensation payable through April 1, 2013. This is the amount of deferred compensation that he withdrew in 2010. |
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Narrative Disclosure to Summary Compensation Table
General Philosophy
The Companys primary goal in its compensation program is to retain and properly reward qualified management in respect to the Companys performance both during the past year and over the longer term. In order to do this, the Company provides salary and a supplemental retirement program for management. It is the intention of the Company, from time to time, to review executive compensation in light of performance, but there is no regular period for review.
Major Elements of Compensation and Compensation Process
The Company has two primary components of executive compensation. The first component is base salary. It is the Boards responsibility to set the compensation for the Chief Executive Officer. The Board last reviewed and adjusted the salary of the Chief Executive Officer in 2007, which had not been adjusted since 2005.
The Compensation Committee makes recommendations for the Board of Directors to consider based on the historical and current performance of the company and the contribution of the Chief Executive Officer to that performance. The Compensation Committee may not delegate its authority. The Board of Directors, without the Chief Executive Officer participating, sets the compensation for the Chief Executive Officer after evaluating the recommendation of the Compensation Committee based on the Board familiarity with the Companys performance and the Chief Executive Officers contribution to it. The Chief Executive Officer does not participate in the Boards deliberations in respect to his own compensation.
The Company deems it appropriate not to have a standing Compensation Committee and to have the entire Board act upon the Compensation Committees recommendations, without the input of the Chief Executive Officer, due to the small size of the board, their independence and their familiarity with the company, its business and performance, as well as, the performance of the Chief Executive Officer.
The Board of Directors consults Mr. Moore and sets a lump sum for the total compensation budget for other employees. The Board delegates to the Chief Executive Officer the responsibility of apportioning that total budget amongst all employees, including the Chief Financial Officer. The Chief Executive Officer sets that salary after reviewing the Virginia Bankers Association summary survey of salary and benefits for the prior year for banks of similar size in the western region of Virginia. In addition, the Chief Executive Officer reviews the accuracy and timing of the financial reports, comments from Board members and regulatory officials, and the general attitude of the Chief Financial Officer in terms of his work. The Chief Executive Officer does not review Bank performance in determining this number.
Mr. Moore participates in a Supplemental Executive Retirement Plan established by the Board in 2002. This plan was fully vested by the end of 2006, but no additional funding for this plan was required in 2010. Under this plan, Mr. Moore is eligible to receive monthly payments of $3,750 for 20 years after his retirement.
Mr. Moore also participates in an Endorsement Split Dollar Life Insurance Plan, along with other employees and directors Gardner and Mitchell. This plan was fully funded in 2001, and no contributions were made to this plan on behalf of Mr. Moore in 2010.
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Other Benefit Plans
The Company provides both Messrs. Moore and Logue with an automobile and Mr. Moore with a membership in the local country club, solely to facilitate their work in managing the Banks branches and attracting business for the Bank. The Company also provides a partially self-directed 401(k) plan for all its employees. The Board makes a decision to contribute to that plan on behalf of employees each year, depending on earnings. When the Company decides to contribute, it does so on a dollar-for-dollar basis up to the lesser of either the maximum percentage contribution determined by the Board or the maximum contribution made by that employee. In addition, the Company provides all eligible employees health, life and dental insurance. All such benefits provided to the named executives are consistent with those provided to all employees.
The Company does not provide executive officers bonuses or any stock options. The Board has a longstanding policy of not offering stock options to its management, because it does not want to affect the ownership percentage of current shareholders.
SUMMARY COMPENSATION TABLE
Name and |
Year | Salary ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) |
All
Other Compensation ($) |
Total ($) | |||||||||||||||
Ronald Leon Moore |
2010 | 202,480 | (1) | (53,000 | ) | 18,542 | (2) | 168,021 | ||||||||||||
2009 | 204,273 | 95,000 | 18,633 | (2) | 317,906 | |||||||||||||||
Henry A. Logue |
2010 | 139,233 | (3) | | 3,775 | 143,008 | ||||||||||||||
J. Alan Dickerson |
2010 | 111,839 | (4) | 13,000 | 311 | 125,150 | ||||||||||||||
2009 | 111,50 | 10,000 | 13,682 | 134,872 |
(1) | Mr. Moores current base salary is $210,000, which became effective May 1, 2007. $40,438 of Mr. Moores 2010 salary was deferred compensation. |
(2) | No other compensation items were over $10,000. Employer contributions to Bank of Floyds pension plan on behalf of Mr. Moore were made in the amount of $0.00 and $0.00 for 2010 and 2009, respectively. Mr. Moores Directors fees were $5,650 and $6,700 for 2010 and 2009, respectively. |
(3) | Mr. Logues employment began April 3, 2010. Mr. Logues current base salary is $200,000, which became effective December 1, 2010. Due to Mr. Logues employment start date, he is not eligible to be part of the pension plan. |
(4) | Mr. Dickersons current base salary is $113,800, which became effective January 1, 2010. |
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Employment Agreement
Ronald Leon Moore serves as Chairman, President and Chief Executive Officer of Cardinal and Chairman of Bank of Floyd pursuant to an employment agreement entered into during February 2001 for a term of five years and later extended to 2007, subsequently extended to 2011. The agreement, as amended during May 2007, provides for base salary of $225,000 per year (subject to annual review) of which Mr. Moore accepts only $210,000.00 per year, participation in all incentive compensation, retirement and other employee benefit plans provided by Cardinal and Bank of Floyd to their employees, and participation in Bank of Floyds Supplemental Executive Retirement Plan further described below. Additionally, under a deferred compensation arrangement between Cardinal and Mr. Moore, he may elect annually to defer receipt of all or a portion of his compensation. The deferral is a portion of Mr. Moores current salary and is not additional compensation. In 2010, 2009 and 2008, $40,438, $40,438 and $41,993 of his annual salary was deferred, respectively. The deferred compensation is invested for his benefit by a trustee and distributed to him later under some circumstances. Effective December 31, 2008, the Board of Directors of Cardinal Bankshares Corporation, Parent Company of the Bank of Floyd, amended the Employment Agreement, the Non-qualified Deferred Compensation Plan and the Supplemental Executive Retirement Plan with Mr. Moore to comply with Internal Revenue Code Section 409A. The amendments did not result in substantive changes to the existing agreements. A Form 8-K was filed with the Security and Exchange Commission on January 6, 2009 regarding this matter.
Pursuant to Mr. Moores employment agreement, should he leave with good reason or be terminated without cause, Mr. Moore will be entitled to receive his full salary remaining through the end of his employment agreement in addition to insurance benefits and SERP benefits. Mr. Moore will also have the option of purchasing the company car at book value. Had either event occurred at December 31, 2010, Mr. Moore would have been entitled to salary of $225,000 per year through the end of his employment agreement in 2011 in addition to health benefits premiums of $6,516 per year.
Henry A. Logue serves as President and Chief Executive Officer of Bank of Floyd pursuant to an employment agreement entered into during March 2010 for a term of three years. The agreement provides for base salary of $190,000 per year, subject to increases of $10,000 each on December 1, 2010 and May 1, 2011. Mr. Logue participates in all incentive compensation, retirement and other employee benefit plans provided by Cardinal and Bank of Floyd to their employees.
Pursuant to Mr. Logues employment agreement, should he leave with good reason or be terminated without cause, Mr. Logue will be entitled to receive his full salary remaining through the end of his employment agreement in addition to insurance benefits. Mr. Logue will also have the option of purchasing the company car at book value. Had either event occurred at December 31, 2010, Mr. Logue would have been entitled to salary of $200,000 per year through the end of his employment agreement in 2013 in addition to health benefits premiums of $8,940 per year.
Supplemental Executive Retirement Plan
Cardinals Chief Executive Officer, Ronald Leon Moore, participates in a Supplemental Executive Retirement Plan (the SERP) established by Bank of Floyd during 2002. Under the SERP, Mr. Moore is eligible to receive monthly payments of $3,750 for a period of 20 years following retirement from his employment with Bank of Floyd after his normal retirement date of January 1, 2007. The SERP is fully funded, and Mr. Moore has chosen not to receive the monthly payments until such time as he decides to retire. The retirement benefit under the SERP becomes vested at the rate of 20% per year, but immediately becomes 100% vested if Mr. Moore dies or becomes disabled prior to his normal retirement date or if there is a change in control of Cardinal Bankshares and Bank of Floyd. At the end of 2006, Mr. Moore was 100% vested in the SERP. Upon Mr. Moores death before retirement or after he has begun receiving payments, his benefits will be paid to his estate or designated beneficiary.
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AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed with management the audited financial statements. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standard No. 61 (Communication with Audit Committee). In addition, the Audit Committee has received from the independent auditors the written disclosures and letter required by Independent Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and discussed with the independent auditors their independence from Cardinal and its management.
Based on the reviews and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Cardinals Annual Report on Form 10-K for the fiscal year ended December 31, 2010, for filing with the Securities and Exchange Commission.
Fees Paid to Independent Auditor
The following fees were paid to Hess Stewart & Campbell, PLLC and Elliott Davis, LLC, for services provided to Cardinal for the fiscal years ended December 31, 2010 and 2009, respectively.
Hess Stewart & Campbell, PLLC 2010 |
Elliott Davis, LLC 2010 |
Elliott Davis, LLC 2009 |
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Audit Fees |
$ | 25,00 | $ | 4,000 | $ | 72,700 | ||||||
Audit-Related Fees |
$ | | $ | 755 | $ | 809 | ||||||
Tax Fees |
$ | | $ | | $ | 4,500 | ||||||
Other Fees |
$ | | $ | | $ | |
The Audit Fees are for professional services rendered for the audit of Cardinals annual consolidated financial statements and for the reviews of the consolidated financial statements included in Cardinals quarterly reports on Form 10Q. During the years ended December 31, 2010 and 2009, Hess Stewart & Campbell, PLLC and Elliott Davis, LLC did not render any professional services to Cardinal in connection with the design and implementation of financial information systems. The Audit-Related Fees are for services rendered related to accounting and disclosures related to various regulatory issues. Tax fees were for tax compliance, consulting and preparation services. The Audit Committee approved the non-audit and audit related services provided by Hess Stewart & Campbell, PLLC and Elliott Davis, LLC, and believes that the independent auditors provision of these services to Cardinal is compatible with the maintenance of the auditors independence in the conduct of its auditing functions. The Audit Committee intends to conduct a review to select its independent accounts for engagement for the fiscal year ending December 31, 2011 and expects to complete the review by mid 2011.
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Financial Expert
We do not have a financial expert (as defined in the Sarbanes-Oxley Act of 2002) on the Audit Committee. Cardinal is a small bank holding company located in a rural community. Cardinal is also highly regulated and frequently examined by federal and state banking authorities. Current board members either are business owners, have business backgrounds, or previous financial institution board experience and each has had experience as a Director monitoring financial and regulatory matter. We believe this knowledge and experience adds value to the Audit Committee and obviates the need to have a financial expert. We believe this adds value to the Audit Committee.
Submitted by the members of the Audit Committee:
J. Howard Conduff, Jr. (Chairman) | Kevin D. Mitchell | |
William R. Gardner, Jr | A. Carole Pratt |
APPROVAL OF INDEPENDENT AUDITOR SERVICES AND FEES
All audit related services, tax services and non-audit services are pre-approved as the need for such services arises by the Audit Committee, which concluded that the provision of such services by Hess Stewart & Campbell, PLLC and Elliott Davis, LLC did not impair that firms independence in the conduct of its auditing functions. The Audit Committee approves, consistent with the requirements of the federal securities laws, all auditing services and non-audit services provided to Cardinal by its independent auditors other than certain non-audit services prohibited by law to be performed by the primary independent auditors. The Audit Committee does not delegate to management its responsibilities to pre-approve services performed by the independent auditor.
CODE OF ETHICS
Cardinal has in place a written Code of Ethics for the Chief Executive Officer and Chief Financial Officer. A written Code of Ethics is also in place for the board members and for senior management. A copy is incorporated herein by reference to Exhibit 14 of the Companys 2010 10-K filed on March 10, 2011. Any shareholder desiring a copy of the Code also may receive one without charge by writing Annette Battle, Executive Secretary, P.O. Box 215, Floyd, Virginia, 24091.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cardinals officers, directors and Principal Shareholders, and other corporations, business organizations, and persons, with which some of Cardinals officers, directors and Principal Shareholders are associated, customarily have banking transactions with the Bank of Floyd. All such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and security for loans, as those prevailing at the time in comparable transactions with others and did not involve more than the normal risk of collectibility or present other unfavorable features.
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SHAREHOLDER PROPOSALS
Submission of Shareholder Proposals for Inclusion in Cardinal Proxy Statement
and Form of Proxy for 2012 Annual Meeting
Proposals of shareholders intended to be presented at the 2012 Annual Meeting of Shareholders of Cardinal must be received by Cardinal not later than November 25, 2011 and comply with all the requirements of Rule 14a-8 of the Securities Exchange Act of 1934 and otherwise comply with Cardianls Bylaws in effect for such meeting, in order to be included in the proxy statement and form of proxy relating to such Annual Meeting. Such proposals, including shareholder nominations of candidates for election as Cardinal directors, should be sent to Cardinals principal office at 101 Jacksonville Circle, P.O. Box 215, Floyd, Virginia 24091, Attn: Ronald Leon Moore by certified mail, return receipt requested. Any proposal that is received by Cardinal after November 25, 2011, will be considered untimely for inclusion in the proxy statement and form of proxy for the 2012 Annual Meeting.
Generally, shareholder proposals and nominations for the Board of Directors to be considered at an annual meeting of shareholders must meet the requirements set forth in Cardinals Bylaws as in effect for such meeting.
Submission of Shareholder Proposals or Nominations for Director
Cardinals Bylaws provide that no business may be transacted at a shareholders meeting except such business as shall be (a) specified in the meeting notice; (b) brought before the meeting at the Boards direction; or (3) brought before the meeting by a shareholder of record entitled to vote at the meeting in compliance with Rule 14a-8 of the Securities Exchange Commission. A shareholder must mail to Cardinals principal office at 101 Jacksonville Circle, P.O. Box 215, Floyd, Virginia 24091, Attn: Ronald Leon Moore, notice of the shareholders proposal no less than 120 days prior to the mailing date of the proxy statement for the previous years annual shareholder meeting. The notice of action a shareholder proposes to bring before an annual meeting must include (a) a brief description of the business and the reasons for bringing the business before the meeting; (b) the shareholders name and address as they appear on Cardinals books; (c) the classes and number of shares of Cardinal owned of record or beneficially by such shareholder; and (d) any material interest of the shareholder in such business, other than his interest as a shareholder of Cardinal.
Similarly, Cardinals Bylaws currently provide that any shareholder desiring to nominate one or more persons for election at an annual meeting must submit the name of the proposed nominee(s) in writing, together with a statement signed by each proposed nomineee agreeing to serve, if elected, and a confirmation from the applicable regulatory agencies that each such nominee is qualified to serve. This submission must be submitted to Cardinal at 101 Jacksonville Circle, P.O. Box 215, Floyd, Virginia 24091, Attn: Ronald Leon Moore not less than 30 days prior to the date set for the annual shareholders meeting.
2010 ANNUAL REPORT
Cardinals 2010 Annual Report, which includes audited consolidated balance sheets as of December 31, 2010 and 2009, consolidated statements of income, stockholders equity and cash flows for the years ended December 31, 2010 and 2009, along with the related footnotes, is being mailed with this Proxy Statement to shareholders of record as of the close of business on March 11, 2011.
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OTHER BUSINESS
The Board of Directors does not know of any matters to be presented for consideration at the Meeting other than those specifically set forth in the Notice of Annual Meeting. However, in the event that any other matters are properly presented for action at the Meeting or any adjournment thereof, it is the intention of the proxy holders named in the enclosed Proxy to take such action as shall be in accordance with their best judgment with respect to such matters.
Shareholders are urged to complete, sign, date and return promptly the enclosed proxy. Your prompt response and cooperation is appreciated.
By Order of the Board of Directors |
/s/ Leon Moore |
Leon Moore |
Chairman of the Board |
President and CEO |
Dated: March 25, 2011
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CARDINAL BANKSHARES CORPORATION 101 Jacksonville Circle P.O. Box 215 Floyd, Virginia 24091
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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The undersigned hereby appoints Douglas W. Densmore, Ronald Leon Moore and William R. Gardner, Jr. each of whom may act, as proxies, with full power of substitution, to vote all the shares of Common Stock of Cardinal Bankshares Corporation held of record by the undersigned as of 2:00 pm on March 11, 2011, at the Annual Meeting of Shareholders, to be held on April 27, 2011, at 2:00 p.m., and at any adjournment thereof, as follows:
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1. | Election of seven directors to serve until the 2012 Annual Meeting of Shareholders. | |||||||||||
¨ |
FOR all nominees listed below (except as marked to the contrary below) |
¨ |
AGAINST all nominees listed below |
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(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominees name in the list below.)
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Dr. Joseph Howard Conduff, Jr. | Ronald Leon Moore | |||||||||||
William R. Gardner, Jr. | Dr. A. Carole Pratt | |||||||||||
Kevin D. Mitchell | G. Harris Warner, Jr. | |||||||||||
Henry A. Logue | ||||||||||||
2. |
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. |
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THE STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THE PROXY WILL BE VOTED FOR PROPOSAL NO. 1
The undersigned hereby acknowledges receipt of the Notice and Proxy Statement dated March 25, 2011 with respect to the 2011 Annual Meeting.
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(Signature of Shareholder) (Date) | (Signature of Shareholder) (Date) | |||||||||||
NOTE: When signing as attorney, trustee, administrator, executive or guardian, please give your full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by an authorized person. In the case of joint tenants, each joint owner must sign.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
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