American
National Bankshares Inc.
628
Main
Street
Danville,
Virginia 24541
Notice
of
Annual
Meeting,
Proxy
Statement and
2005
Annual Report on Form 10-K
Annual
Meeting of Shareholders
To
Be
Held
April
25, 2006
American
National Bankshares Inc.
628
Main Street
Danville,
Virginia 24541
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
be held April 25, 2006
Notice
is
hereby given that the Annual Meeting of Shareholders of American National
Bankshares Inc. (the “Corporation”) will be held as follows:
Place: The
Wednesday Club
1002
Main Street
Danville,
Virginia 24541
Date: April
25,
2006
Time: 11:30
a.m.
The
Annual Meeting is being held for the following purposes:
| 1. |
To
elect three (3) Directors of the Corporation to
serve for a three-year term as
|
Class
I
Directors; and
| 2. |
To
transact any other business that may properly come before the meeting
or
any
|
adjournment
thereof.
Only
shareholders at the close of business on March 7, 2006 are entitled to notice
of
and to vote at the Annual Meeting.
It
is
important that your shares are represented at the meeting. Accordingly, please
sign, date and mail the enclosed proxy in the enclosed postage-paid envelope,
whether or not you plan to attend the meeting. If you do attend the Annual
Meeting, you may revoke your proxy and vote your shares in person.
By
Order
of the Board of Directors
Neal
A.
Petrovich
Secretary
Danville,
Virginia
March
20,
2006
American
National Bankshares Inc.
_______________
PROXY
STATEMENT
_______________
ANNUAL
MEETING OF SHAREHOLDERS
APRIL
25, 2006
INTRODUCTION
This
Proxy Statement is furnished in conjunction with the solicitation by the Board
of Directors of American National Bankshares Inc. (the “Corporation”) of the
accompanying proxy to be used at the Annual Meeting of Shareholders of the
Corporation (the “Annual Meeting”) and at any adjournments thereof. The meeting
will be held on Tuesday, April 25, 2006, 11:30 a.m., at The Wednesday Club,
1002
Main Street, Danville, Virginia 24541, for the purposes set forth below and
in
the Notice of Annual Meeting of Shareholders. The approximate mailing date
of
this Proxy Statement and the enclosed proxy is March 20, 2006.
Voting
Rights of Shareholders
Only
shareholders of record at the close of business on March 7, 2006 are entitled
to
notice of and to vote at the Annual Meeting or any adjournment thereof. As
of
the close of business on March 7, 2006, there were 5,431,938 shares of the
Corporation’s common stock outstanding and entitled to vote at the Annual
Meeting. The Corporation has no other class of stock outstanding. Each share
of
common stock entitles the record holder thereof to one vote upon each matter
to
be voted upon at the Annual Meeting.
A
majority of the votes entitled to be cast, represented in person or by proxy,
will constitute a quorum for the transaction of business. Shares
for which the holder has elected to abstain or to withhold the proxies’
authority to vote on a matter, and broker non-votes, will count toward a quorum,
but will not be included in determining the number of votes cast with respect
to
such matter.
Revocation
and Voting of Proxies
Execution
of a proxy will not affect a shareholder’s right to attend the Annual Meeting
and to vote in person. Any shareholder who has executed and returned a proxy
may
revoke it by attending the Annual Meeting and requesting to vote in person.
A
shareholder may also revoke his proxy at any time before it is exercised by
filing a written notice with the Corporation or by submitting a proxy bearing
a
later date. Proxies will extend to, and will be voted at, any adjourned session
of the Annual Meeting.
Solicitation
of Proxies
The
cost
of solicitation of proxies will be borne by the Corporation. Solicitation is
being made by mail, and if necessary, may be made in person or by telephone,
or
special letter by officers and employees of the Corporation or its banking
subsidiary, American National Bank & Trust Company (the “Bank”), acting on a
part-time basis and for no additional compensation.
1
PROPOSAL
ONE - ELECTION OF DIRECTORS
The
Corporation’s Board of Directors currently consists of 12 persons. The Board is
divided into three classes (I, II and III), each class to be nearly equal in
number as possible. The term of office for the Class I Directors will expire
at
the Annual Meeting and the nominees to serve as Class I Directors are set forth
below. Each of the Class I nominees currently serves as a director of the
Corporation. If elected, the Class I nominees will serve until the 2009 Annual
Meeting of Shareholders, and until their respective successors are duly elected
and qualified.
Mr.
Richard G. Barkhouser will retire from the Board of Directors pursuant to the
Corporation’s retirement policy for directors. His retirement will be effective
with the 2006 Annual Meeting of Shareholders. Mr. Willie G. Barker, Jr. has
chosen to retire from the Board of Directors effective with the 2006 Annual
Meeting of Shareholders. Mr. Barker is eligible to become Director Emeritus,
and
the Board of Directors, upon recommendation from its Corporate Governance and
Nominating Committee, intends to appoint Mr. Barker as such for the period
April
25, 2006 through April 24, 2007. The number of directors in Class I will be
reduced to three; thus, reducing the size of the Board from twelve to ten
persons.
Pursuant
to the Agreement and Plan of Reorganization, dated as of October 18, 2005,
by
and between the Corporation and Community First Financial Corporation
(“Community First”), one member of the Board of Directors for Community First
will be named to the Corporation’s Board of Directors within a reasonable period
of time following the merger. Pending required approvals, the merger is expected
to occur in April 2006. After consummation of the merger, the Corporation’s
Board will increase in size to eleven persons and Dr. Frank C. Crist, Jr. is
expected to be named as a director. Dr. Crist is President of Brady & Crist
Dentists, Inc., and is presently the Chairman and Interim Chief Executive
Officer of Community First. It is currently anticipated that this appointment
will take place following the Corporation’s 2006 Annual Meeting.
The
persons named in the accompanying proxy will vote for the election of the
nominees named below unless authority is withheld. If for any reason the persons
named as nominees below should become unavailable to serve, an event that
management does not anticipate, proxies will be voted for such other persons
as
the Board of Directors may designate.
The
Board of Directors recommends the nominees, as set forth below, for election.
The Board of Directors recommends that shareholders vote FOR these
nominees.
The
election of each nominee requires the affirmative vote of a plurality of the
shares of the Corporation’s common stock cast in the election of
Directors.
2
The
names
of the nominees for election and the other continuing members of the Board
of
Directors, their principal occupations, their age as of December 31, 2005,
and
certain other information with respect to such persons are as
follows:
|
Name
|
Principal
Occupation
|
Age
|
Director
Since
|
|
Nominees
for Directors of Class I to continue in office until
2009
|
|||
|
Ben
J. Davenport, Jr.
|
Chairman,
First Piedmont Corporation,
Chatham,
VA, waste management; Chairman, Davenport Energy, Chatham, VA, fuel
oil
distributor
|
63
|
1992
|
|
Michael
P. Haley
|
Retired
Chairman, MW Manufacturers, Inc., Rocky Mount, VA, window manufacturer,
since June, 2005; prior thereto, Chairman from January 2005 to June
2005;
prior thereto, President and Chief Executive Officer from June 2001
to
January 2005; prior thereto, President, American of Martinsville,
Martinsville, VA, furniture manufacturer
|
55
|
2002
|
|
Franklin
W. Maddux, M.D.
|
Physician;
Chairman and Chief Executive Officer, Gamewood, Inc., Danville, VA,
information technology service; President and Chairman, Maddux Consulting,
Inc., medical consulting; Former President and Chairman, Danville
Urologic
Clinic, healthcare
|
48
|
2002
|
|
Directors
of Class III to continue in office until 2008
|
|||
|
H.
Dan Davis
|
Retired
Executive Vice President of the Corporation and Senior Vice President
of
the Bank; Retired as Consultant to the Corporation and the Bank in
March
2003
|
68
|
1996
|
|
Lester
A. Hudson, Jr., Ph.D.
|
Professor
and Wayland H. Cato Chair of Leadership, McColl Graduate School of
Business, Queens University of Charlotte, Charlotte, NC, since August,
2003; prior thereto, Professor of Strategy, Clemson University, Clemson,
SC
|
66
|
1984
|
|
Charles
H. Majors *
|
President
and Chief Executive Officer of the Corporation and the
Bank
|
60
|
1981
|
3
|
Name
|
Principal
Occupation
|
Age
|
Director
Since
|
|
Directors
of Class II to continue in office until 2007
|
|||
|
Fred
A. Blair
|
President,
Blair Construction, Inc.,
Gretna,
VA, commercial building contractor
|
59
|
1992
|
|
E.
Budge Kent, Jr. *
|
Senior
Adviser to the Bank since January 2006; prior thereto, Executive
Vice
President of the Corporation and Executive Vice President
|
66
|
1979
|
|
and
Chief Trust and Investment Officer of the Bank
|
|||
|
Fred
B. Leggett, Jr.
|
Retired
Chairman and Chief Executive Officer,
|
68
|
1994
|
|
Leggett
Stores, Danville, VA, retail department stores
|
|||
|
Claude
B. Owen, Jr.
|
Retired
Chairman and Chief Executive Officer,
|
60
|
1984
|
|
DIMON
Incorporated, Danville, VA, leaf tobacco dealer
|
|||
Board
Independence
The
Corporation’s Board of Directors has determined that, except for Messrs. Kent
and Majors, each Director is independent within the Nasdaq director independence
standards, as currently in effect, and within the Corporation’s director
independence standards, as established and monitored by the Corporation’s
Corporate Governance and Nominating Committee. An * next to each name above
indicates those Directors not considered independent.
Board
Members Serving on Other Publicly Traded Company Boards of Directors
Certain
of the Corporation’s Directors are also directors of other publicly traded
companies. Mr. Davenport has been a director of Intertape Polymer Group Inc.
since 1994. Mr. Hudson has been a director of American Electric Power Company,
Inc. since 1987. Mr. Haley has been a director of Stanley Furniture Company,
Inc. since 2003, and LifePoint Hospitals, Inc. since 2005.
Board
of Directors and Committees
Directors
are expected to devote sufficient time, energy and attention to ensure diligent
performance of their duties, including attendance at Board and committee
meetings. The Board of Directors of the Corporation met seven times during
2005.
Executive sessions of non-employee Directors were convened on three occasions
in
2005. The Chairman of the Corporate Governance and Nominating Committee presides
at such sessions. Directors are encouraged to attend shareholders’ meetings, and
ten Directors attended the 2005 Annual Meeting of Shareholders. The Board of
Directors of the Bank, which consists of all members of the Corporation’s Board,
met fourteen times during 2005.
4
The
Boards of Directors of the Corporation and the Bank have established various
committees, including the Audit and Compliance Committee, the Corporate
Governance and Nominating Committee, and
the
Human Resources and Compensation Committee. All incumbent Directors and Director
nominees attended more than 75% of the aggregate total number of meetings of
the
Boards of Directors and committees on which they served in 2005, with the
exception of Michael P. Haley, who attended 68% of the total number of meetings.
Information on the above committees and the committee members is detailed
below:
The
Audit
and Compliance Committee met
four
times in 2005. This committee currently consists of Messrs. Barker, Blair and
Haley. Mr. Blair serves as the Chairman. The committee reviews significant
audit, accounting and compliance principles, policies and practices, is directly
responsible for engaging and monitoring the independent auditors of the
Corporation and the Bank, and provides oversight of the internal auditing and
compliance functions. A more detailed description of the functions of this
committee is contained under the heading “Report of the Audit and Compliance
Committee.” All of the members of this committee are considered independent
within the meaning of Securities and Exchange Commission (“SEC”) regulations,
the listing standards of Nasdaq, and the Corporation’s Corporate Governance
Guidelines. Mr. Haley, a member of the committee, is qualified as an audit
committee financial expert within the meaning of SEC regulations and the Board
has determined that he has accounting and related financial management expertise
within the meaning of the listing standards of Nasdaq.
The
Corporate
Governance and Nominating
Committee met
three
times in 2005. Current members
of the committee are Messrs. Barkhouser, Maddux and Owen. Mr. Barkhouser serves
as the Chairman. The committee is responsible for developing and implementing
policies and practices relating to corporate governance, including reviewing
and
monitoring implementation of the Corporation’s Corporate Governance Guidelines.
In addition, the committee develops and reviews background information on
candidates for the Board and makes recommendations to the Board regarding such
candidates. The committee also supervises the Board’s annual review of Director
independence and oversees the Board’s performance self-evaluation. All the
members of this committee are considered independent within the meaning of
SEC
regulations, the standards of Nasdaq, and the Corporation’s Corporate Governance
Guidelines.
The
Human
Resources and Compensation Committee
met
three times in 2005. This committee currently consists of Messrs. Barkhouser,
Davenport and Hudson. Mr. Hudson serves as the Chairman. The Human Resources
and
Compensation Committee recommends to the independent Directors the compensation
of the Chief Executive Officer and approves all other executive officers’
compensation and recommends to the Board promotions, Directors’ compensation and
related personnel matters. Each Director who served on the Human Resources
and
Compensation Committee during 2005 qualifies as a “non-employee director” as
such term is defined in Rule 16b-3 promulgated under the Securities Exchange
Act
of 1934, as amended (the “Exchange Act”), and is an “independent director” as
such term is defined in Marketplace Rule 4200(a)(15) of the rules of the
National Association of Securities Dealers, Inc. (the “NASD”). A more detailed
description of the functions of this committee is contained under the heading
“Report of the Human Resources and Compensation Committee on Executive
Compensation.”
The
charters of the Audit and Compliance Committee, the Corporate Governance and
Nominating Committee, and the Human Resources and Compensation Committee are
available at the Corporation’s website at www.amnb.com.
For
access to the charters, select the “American National Bankshares Inc.” icon,
then select “Governance Documents.”
5
Board
Compensation
In
2005,
all non-officer Directors received a monthly retainer of $800 for their service
on the Board of Directors of the Corporation and an attendance fee of $400
for
each committee meeting and Bank Board meeting attended. Officer members of
the
Board of Directors are not paid separately for their service on the Board or
its
committees. Non-officer Directors are excluded from the Bank’s retirement plan
and, therefore, do not qualify for pension benefits. Mr. Kent served as an
executive officer of the Corporation and Bank through December 2005, and
therefore, was not entitled to receive the monthly retainer or attendance fee
paid as Board compensation, nor will he be entitled to receive this compensation
in 2006.
Director
Nominations Process
The
Corporation’s Board of Directors has adopted, as a part of its Corporate
Governance Guidelines, a process related to Director nominations (the
“Nominations Process”). The purpose of the Nominations Process is to describe
the manner by which candidates for possible inclusion in the Corporation’s
recommended slate of Director nominees are selected. The Nominations Process
is
administered by the Corporate Governance and Nominating Committee (the
“Governance Committee”) of the Board.
The
Governance Committee considers candidates for Board membership suggested by
its
members and other Board members, as well as management and shareholders. A
shareholder who wishes to recommend a prospective nominee for the Board may,
at
any time, notify the Corporation’s President and Chief Executive Officer or any
member of the Governance Committee in writing with whatever supporting material
the shareholder considers appropriate. The Governance Committee will also
consider whether to recommend to the Board the nomination of any person
nominated by a shareholder pursuant to the provisions of the Corporation’s
bylaws relating to shareholder proposals as described below under “Shareholder
Communications and Proposals.”
Once
the
Governance Committee has identified a candidate, the Committee makes an initial
determination as to whether to conduct a full evaluation of the candidate.
The
initial determination is based on whatever information is provided to the
Committee with the recommendation of the candidate, as well as the Committee
members’ knowledge of the candidate, which may be supplemented by inquiries to
the person making such recommendation or others. The preliminary determination
is based primarily on the need for additional board members to fill vacancies
or
expand the size of the Board and the likelihood that the candidate can satisfy
the evaluation factors described below. The Committee may seek additional
information about the candidate’s background and experience. The Committee then
evaluates the candidate against the criteria in the Corporation’s Corporate
Governance Guidelines, including independence, age, diversity, availability
for
time commitment, skills such as an understanding of the financial services
industry, general business knowledge and experience, all in a context of an
assessment of the perceived needs of the Board at that point in time. In
connection with this evaluation, the Committee determines whether to interview
the candidate, and if warranted, one or more members of the Committee will
conduct such interview. After completing the evaluation, the Committees makes
a
recommendation to the full Board as to the persons who should be nominated
by
the Board, and the Board determines the nominees after considering the
recommendation of the Committee.
6
SECURITY
OWNERSHIP
As
of
March 7, 2006, no shareholder beneficially owned 5% or more of the Corporation’s
common stock other than Ambro and Company, the nominee name which American
National Bank and Trust Company uses to register the securities it holds in
a
fiduciary capacity for customers. Ambro and Company beneficially owned 775,543
shares of the Corporation’s common stock, or 14.28% of the outstanding shares,
as of March 7, 2006. Of this amount, 230,121 shares
may be voted by existing co-fiduciaries. The Bank may not vote the remaining
shares, but co-fiduciaries may be qualified for the sole purpose of voting
all
or a portion of these remaining shares at the Annual Meeting. The address of
Ambro and Company is P.O. Box 191, Danville, Virginia 24543.
The
following table sets forth, as of March 7, 2006, the beneficial ownership of
the
Corporation’s common stock by all Directors and nominees for Director, all named
executive officers of the Corporation (see “Summary Compensation Table”) and all
Directors and executive officers of the Corporation as a group.
|
Name
of Beneficial Owner
|
Shares
of
Common
Stock
Beneficially
Owned (1)
|
Percent
of
Class
|
|
|
Willie
G. Barker, Jr.
|
28,200
|
(2)
|
|
|
Richard
G. Barkhouser
|
188,200
|
(3)
|
3.46%
|
|
Fred
A. Blair
|
5,066
|
(3)
|
(2)
|
|
Ben
J. Davenport, Jr.
|
26,406
|
(2)
|
|
|
H.
Dan Davis
|
129,514
|
(3)
|
2.38%
|
|
R.
Helm Dobbins
|
14,700
|
(4)
|
(2)
|
|
Dabney
T.P. Gilliam, Jr. .
|
175
|
(2)
|
|
|
Jeffrey
V. Haley
|
27,327
|
(3) (4)
|
(2)
|
|
Michael
P. Haley
|
1,063
|
(2)
|
|
|
Lester
A. Hudson, Jr.
|
9,804
|
(2)
|
|
|
E.
Budge Kent, Jr.
|
52,848
|
(3) (4)
|
1.01%
|
|
Fred
B. Leggett, Jr.
|
10,086
|
(3)
|
(2)
|
|
Charles
H. Majors
|
103,971
|
(3) (4)
|
1.89%
|
|
Dr.
Franklin W. Maddux
|
2,400
|
(3)
|
(2)
|
|
Claude
B. Owen, Jr.
|
15,632
|
(3)
|
(2)
|
|
Neal
A. Petrovich
|
11,400
|
(4)
|
(2)
|
|
All
Directors and executive officers
as
a group
|
626,792
|
(4)
|
11.24%
|
(1) For
purposes of this table, beneficial ownership has been determined in accordance
with the provisions of Rule 13d-3 of the Exchange Act under which, in general,
a
person is deemed to be the beneficial owner of a security if he has or shares
the power to vote or direct the voting of the security or the power to dispose
of or direct the disposition of the security, or if he has the right to acquire
beneficial ownership of the security within 60 days.
(2)
Represents
less than one percent ownership.
(3) Includes
shares held by affiliated corporations, close relatives and children, and shares
held jointly
with
spouses or as custodians or trustees, as follows: Mr. Barkhouser, 23,376
shares;
Mr. Blair, 300 shares; Mr. Davis, 40,704 shares; Mr. Jeffrey Haley, 352 shares;
Mr. Kent, 1,485
shares;
Mr. Leggett, 9,268 shares; Mr. Majors, 3,464 shares; Dr. Maddux, 1,100 shares;
and Mr. Owen, 4,200 shares.
(4) Includes
shares that may be acquired pursuant to currently exercisable stock options:
Mr.
Dobbins, 14,000 shares; Mr. Jeffrey Haley 24,200 shares; Mr. Kent, 18,000
shares; Mr. Majors,
78,200
shares;
Mr.
Petrovich, 10,000 shares; all
Directors
and
executive officers as a group, 144,400
shares.
7
REPORT
OF THE HUMAN RESOURCES AND COMPENSATION
COMMITTEE
ON EXECUTIVE COMPENSATION
The
duties, responsibilities, and authority of the Human Resources and Compensation
Committee of the Board of Directors are outlined in the Committee Charter,
which
is on the Corporation’s website. Among its principal duties, it is responsible
for establishing and approving the compensation of executive officers of the
Corporation. Each Director who served on the Human Resources and Compensation
Committee during 2005 qualifies as a “non-employee director” as such term is
defined in Rule 16b-3 promulgated under the Exchange Act, and as an “independent
director” as such term is defined in NASD Rule 4200(a)(15).
This
Committee considers a variety of factors and criteria in arriving at its
decisions and recommendations for compensation. In making its decisions and
recommendations regarding compensation, the Committee attempts to align the
interests of the Corporation’s executive officers with those of the Corporation
and its shareholders. The Committee believes that increases in earnings per
share, dividends, and net equity improve shareholder market value and,
accordingly, compensation should be structured to enhance the profitability
of
the Corporation and the total return to the shareholders.
Executive
officer compensation generally consists of salary, participation in the Bank’s
profit sharing plan, stock options, incentive compensation and benefits. For
2005, eligibility for the profit sharing and incentive compensation plans,
approved by the Board of Directors upon recommendation by the Human Resources
and Compensation Committee, was based upon increases in earnings per share.
Earnings per share reached the minimum threshold set in the plans, so the
executive officers received profit sharing and incentive compensation for 2005.
(See footnote for the Salary Compensation Table under “Executive Compensation”.)
The executive officers may be eligible to receive profit sharing and incentive
compensation if certain performance and profitability goals are attained in
2006. Certain key executive officers were eligible to participate in the
Executive Compensation Continuation Plan described below under “Executive
Compensation”. The Bank, a wholly owned subsidiary of the Corporation, directly
pays all compensation and no officer receives any compensation from the
Corporation.
The
Committee conducts an annual evaluation of the effectiveness of the Chief
Executive Officer. The Committee evaluated the performance of the Chief
Executive Officer based on the financial performance of the Corporation,
achievements in implementing the strategic plan of the Corporation and the
Bank,
and the personal observations of the Chief Executive Officer’s performance by
the members of the Committee. Mr. Major’s performance in 2005 was evaluated as
very positive, including, among the factors considered, the year’s financial
results, the successful opening of the Lynchburg office, and the negotiation
of
the proposed acquisition of Community First Financial Corporation.
In
considering compensation for the Chief Executive Officer and the other executive
officers of the Corporation, the Committee relied on an evaluation of the
officers’ level of responsibility and performance and on comparative
information, including the Virginia Bankers Association’s Salary Survey of
Virginia Banks and the SNL Bank Compensation Review. In considering executive
officer compensation other than the Chief Executive Officer, the Committee
also
receives and takes into account the individual compensation recommendations
from
the Chief Executive Officer.
After
considering the above information and evaluating the performance of the
Corporation’s executive officers during 2005, the Committee recommended the
Chief Executive Officer’s 2006 compensation for approval by the independent
members of the Board of Directors. The Committee also approved the other
executive officers’ 2006 compensation.
8
The
Committee’s policy on the tax deductibility of compensation for the Chief
Executive Officer and other executive officers is to maximize the deductibility,
to the extent possible, while preserving the Corporation’s flexibility to
maintain a competitive compensation program. The Corporation expects all
executive compensation paid or awarded during 2005 to be fully
deductible.
Human
Resources and Compensation Committee
Richard
G. Barkhouser
Ben
J.
Davenport, Jr.
Lester
A.
Hudson, Jr.
Compensation
Committee Interlocks and Insider Participation
No
member
of the Human Resources and Compensation Committee of the Board of Directors
is a
current or former officer or employee of the Corporation. No member of the
Committee or executive officer of the Corporation has a relationship that would
constitute an interlocking relationship with executive officers or directors
of
another entity.
9
COMPARATIVE
STOCK PERFORMANCE
The
following graph compares the Corporation’s cumulative total return to its
shareholders with the returns of two indexes for the five-year period ended
December 31, 2005. The cumulative total return was calculated taking into
consideration changes in stock price, cash dividends, stock dividends and stock
splits since December 31, 2000. The two indexes are the NASDAQ Index, and the
Carson Medlin Company’s Independent Bank Index, consisting of 25 independent
community banks located in Alabama, Florida, Georgia, North Carolina, South
Carolina, Tennessee, Virginia and West Virginia.
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
||||||||||||||
|
American
National Bankshares Inc.
|
$
|
100
|
$
|
134
|
$
|
191
|
$
|
197
|
$
|
189
|
$
|
188
|
|||||||
|
Independent
Bank Index
|
100
|
124
|
154
|
210
|
249
|
252
|
|||||||||||||
|
NASDAQ
Index
|
100
|
79
|
55
|
82
|
89
|
91
|
|||||||||||||
10
EXECUTIVE
COMPENSATION
The
following table provides information on the total compensation paid or accrued
during the years indicated below to the President and Chief Executive Officer
and the five other executive officers of
the
Corporation (the “named executive officers”).
Summary
Compensation Table
|
Long-Term
Compensation
|
|||||
|
Name
and Principal Position
|
Annual
Compensation (1)
|
Securities
Underlying
|
All
Other
|
||
|
at
December 31, 2005
|
Year
|
Salary
($)
|
Bonus
($)(2)
|
Options
(#)(3)
|
Compensation
($)(4)
|
|
Charles
H. Majors
|
2005
|
$
283,315
|
$ 39,879
|
-
|
$
8,777
|
|
President
& Chief Executive Officer
|
2004
|
269,200
|
-
|
25,000
|
8,627
|
|
of
the Corporation and the Bank
|
2003
|
258,077
|
20,952
|
10,000
|
8,477
|
|
E.
Budge Kent, Jr. (5)
|
2005
|
$
146,078
|
$
50,473
|
-
|
$
11,874
|
|
Executive
Vice President of the
|
2004
|
133,252
|
2,568
|
4,000
|
10,632
|
|
Corporation;
Executive Vice President and Chief Trust & Investment Officer of the
Bank
|
2003
|
128,410
|
10,841
|
4,000
|
7,416
|
|
Dabney
T.P. Gilliam, Jr. (6)
|
2005
|
$
123,849
|
$
17,725
|
-
|
$
4,862
|
|
Senior
Vice President of the Corporation;
|
2004
|
112,857
|
2,174
|
5,000
|
4,286
|
|
Senior
Vice President, Chief Banking Officer
|
2003
|
108,692
|
9,387
|
5,000
|
3,927
|
|
and
Senior Loan Officer of the Bank
|
|||||
|
Jeffrey
V. Haley
|
2005
|
$
118,634
|
$
17,214
|
-
|
$
4,160
|
|
Senior
Vice President of the Corporation;
|
2004
|
107,680
|
2,074
|
5,000
|
3,679
|
|
Executive
Vice President & Chief
|
2003
|
103,692
|
8,967
|
5,000
|
3,651
|
|
Operating
Officer of the Bank
|
|||||
|
Neal
A. Petrovich (7)
|
2005
|
$
115,308
|
$
15,870
|
-
|
$
2,476
|
|
Senior
Vice President of the Corporation;
|
2004
|
63,038
|
-
|
10,000
|
15,790
|
|
Executive
Vice President & Chief Financial
|
2003
|
-
|
-
|
-
|
-
|
|
Officer
of the Bank
|
|||||
|
R.
Helm Dobbins (8)
|
2005
|
$
111,077
|
$
15,277
|
-
|
$
4,342
|
|
Senior
Vice President of the Corporation;
|
2004
|
103,538
|
1,077
|
5,000
|
2,557
|
|
Executive
Vice President & Chief Credit
|
2003
|
53,846
|
4,601
|
9,000
|
9,264
|
|
Officer
of the Bank
|
|||||
(1) No
officer received perquisites or other personal benefits in an amount greater
than the lesser of (a) $50,000 or (b) 10% of such officer’s total salary plus
bonus.
(2) Includes
accrued payments of profit sharing (bonus) and incentive compensation. Profit
sharing (bonus) represented payments to full time officers and employees based
on the Corporation achieving certain financial performance goals. Incentive
compensation represented payments to officers based on the Corporation achieving
certain financial performance goals and on the officer meeting stated individual
goals. The total profit sharing and incentive compensation expense for employees
for 2005 amounted to $813,009.
(3) The
Corporation grants options pursuant to the Corporation’s Stock Option Plan,
which was approved by shareholders at the 1997 annual meeting.
(4) Includes
for 2005: (i) $6,300, $4,385, $3,716, $3,559, $2,008 and $3,332 accrued on
behalf of Messrs. Majors, Kent, Gilliam, Haley, Petrovich and Dobbins,
respectively, under the Bank’s 401(k) plan; and (ii) $2,477, $7,407, $1,115,
$601, $468 and $1,010 in taxable compensation for term life insurance over
$50,000 paid by the Bank on
behalf
of Messrs.
Majors, Kent, Gilliam, Haley, Petrovich and Dobbins, respectively.
In 2004,
Mr.
Petrovich received $15,520 in relocation related compensation.
(5) Effective
January 1, 2006, Mr. Kent became Senior Adviser to the Bank.
(6) Mr.
Gilliam resigned his positions with the Corporation and the Bank effective
December 31, 2005 to become Chief Financial Officer for a customer of the Bank.
(7) Mr.
Petrovich became employed by the Corporation and the Bank in May 2004. From
2002
to 2004, he served as Senior Vice President of SouthTrust Bank. Prior thereto,
he served as Executive Vice President and Chief Financial Officer for Bank
of
Tidewater.
(8) Mr.
Dobbins became employed by the Corporation and the Bank in June 2003. From
1998
to 2003, he served as Executive Vice President and Chief Credit Officer of
Citizens Bank and Trust Co., Chillicothe, Missouri.
11
Stock Option Plan
The
Corporation maintains a stock option plan (the “Plan”) that is designed to
attract and retain qualified personnel in key positions, provide employees
with
a proprietary interest in the Corporation as an incentive to contribute to
the
success of the Corporation and the Bank and reward employees for outstanding
performance and the attainment of targeted goals. The Plan provides for the
grant of incentive stock options intended to comply with the requirements of
Section 422 of the Internal Revenue Code of 1986 (“incentive stock options”), as
well as non-qualified stock options.
The
Plan
was approved by shareholders at the April 1997 Annual Meeting, and is
administered by a committee of the Board of Directors of the Corporation
comprised of independent Directors. Unless sooner terminated, the Plan is in
effect until December 31, 2006. Under the Plan, the committee determines which
employees will be granted options, whether such options will be incentive or
non-qualified options, the number of shares subject to each option, whether
such
options may be exercised by delivering other shares of common stock and when
such options become exercisable. In general, the per share exercise price of
an
incentive stock option must be at least equal to the fair market value of a
share of common stock on the date the option is granted.
Stock
options shall become vested and exercisable in the manner specified by the
committee. In general, each stock option or portion thereof shall be exercisable
at any time on or after it vests and is exercisable until ten years after its
date of grant.
Stock
Option Grants in 2005
There
were no stock options granted to the named executive officers during 2005.
12
Stock
Option Exercises in 2005 and Year-End Option Values
The
following table shows certain information with respect to stock option exercises
during 2005 and the number and value of unexercised options held at December
31,
2005 by the named executive officers.
|
Shares
Acquired
on
|
Value
|
Number
of Securities
Underlying
Unexercised
Options
at
December
31, 2005 (#)
|
Value
of Unexercised
In-the-Money
Options
at
December
31, 2005 ($) (2)
|
||||||||||||||||
|
Name
|
Exercise
(#)
|
Realized
($) (1)
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||
|
Charles
H. Majors
|
4,000
|
$
|
40,460
|
78,200
|
-
|
$
|
256,350
|
$
|
-
|
||||||||||
|
E.
Budge Kent, Jr.
|
2,000
|
22,424
|
21,000
|
-
|
85,313
|
-
|
|||||||||||||
|
Dabney
T.P. Gilliam, Jr.
|
7,850
|
53,255
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Jeffrey
V. Haley
|
-
|
-
|
24,200
|
-
|
81,838
|
-
|
|||||||||||||
|
Neal
A. Petrovich
|
-
|
-
|
10,000
|
-
|
9,350
|
-
|
|||||||||||||
|
R.
Helm Dobbins
|
-
|
-
|
14,000
|
-
|
-
|
-
|
|||||||||||||
(1)
The
value realized is calculated by multiplying the number of options exercised
by
the difference between the market price and the exercise price on the date
of
exercise.
(2)
The
value of unexercised in-the-money options is calculated by multiplying the
number of unexercised options at December 31, 2005 by the difference in the
closing price of the Corporation’s common stock reported at the close of
business on December 31, 2005 ($23.25 per share) and the exercise price of
the
unexercised in-the-money options.
Retirement
Plan
The
Bank’s retirement plan is a non-contributory defined benefit pension plan which
covers salaried and regular hourly employees of the Bank who are 21 years of
age
or older and who have had at least one year of service. Advanced funding is
accomplished by using the actuarial cost method known as the collective
aggregate cost method.
As
of
December 31, 2005, the normal retirement benefit formula was 1.3% per year
of
service multiplied by compensation, plus .65% per year of service multiplied
by
compensation in excess of social security covered compensation, with years
of
service limited to 35. At normal retirement, the monthly benefit is calculated
based on any consecutive five-year period that will produce the highest average
rate of basic monthly compensation. Basic monthly compensation includes salary
but excludes incentive and bonus compensation. This is based on a straight
life
annuity assuming full benefit at age 65. Annual compensation at December 31,
2005 was also limited to $210,000 by Internal Revenue Service regulations.
Cash
benefits under the plan generally commence on retirement at age 65, death,
or
termination of employment. Partial vesting of the retirement benefits under
the
plan occurs after three years of service and full vesting occurs after seven
years of service. As of December 31, 2005, the named executive officers have
completed the following years of credited service under the Bank’s retirement
plan: Mr. Majors, 13; Mr. Kent, 36; Mr. Gilliam, 6; Mr. Haley, 9; Mr. Petrovich,
1, and Mr. Dobbins, 2.
13
The
following table illustrates the estimated annual benefits payable to an employee
retiring on December 31, 2005 at normal retirement age in the following
specified compensation and years of service classifications:
|
5
Year
Average
|
||||||||||||||||
|
Years
of Credited Service
|
||||||||||||||||
|
Salary
|
15
|
20
|
25
|
30
|
35
|
|||||||||||
|
$ 50,000
|
$
|
9,877
|
$
|
13,170
|
$
|
16,462
|
$
|
19,754
|
$
|
23,047
|
||||||
|
75,000
|
17,190
|
22,920
|
28,649
|
34,379
|
40,109
|
|||||||||||
|
100,000
|
24,502
|
32,670
|
40,837
|
49,004
|
57,172
|
|||||||||||
|
125,000
|
31,815
|
42,420
|
53,024
|
63,629
|
74,234
|
|||||||||||
|
150,000
|
39,127
|
52,170
|
65,212
|
78,254
|
91,297
|
|||||||||||
|
175,000
|
46,440
|
61,920
|
77,399
|
92,879
|
108,359
|
|||||||||||
|
200,000
|
53,752
|
71,670
|
89,587
|
107,504
|
125,422
|
|||||||||||
|
210,000
|
56,677
|
75,570
|
94,462
|
113,354
|
132,247
|
|||||||||||
Deferred
Compensation Plan
The
Board
of Directors of the Bank adopted the Executive Compensation Continuation Plan,
a
non-contributory deferred compensation plan, in 1982. Under the plan, certain
key executives who, in the opinion of the Board of Directors, are making
substantial contributions to the overall growth and success of the Corporation
and the Bank and who must be retained in order to expand and continue
satisfactory long-term growth are eligible to receive benefits afforded by
the
plan. Under agreements with eligible key executives pursuant to this plan,
if
any such executive dies or retires while employed by the Corporation, such
executive or his designated beneficiary will receive annual payments commencing
at death or retirement and continuing for 10 years. Messrs. Majors and Kent,
respectively, or their designated beneficiaries, will receive an annual benefit
of $50,000 and $25,000 per year for 10 years commencing at each officer’s
retirement or death. Mr. Kent will begin receiving these payments in 2006.
Termination
and Change in Control Arrangements
The
Corporation recognizes that, as a publicly held corporation in the financial
services industry, there exists the possibility of a change in the control
of
the Corporation. In order to minimize such uncertainty among senior management
and to promote continuity in the event of a control change transaction, the
Corporation has entered into agreements with each of the named executive
officers.
The
terms
of the agreements are only effective upon a change of control and for three
years thereafter. A “change of control” is defined with reference to a change in
the composition of the Board of Directors, a change in the ownership of a
majority of the Corporation’s voting stock or a sale of a majority of the
Corporation’s assets. The agreements provide that each executive officer’s base
salary and profit sharing and incentive compensation cannot be reduced during
such three-year period.
The
agreements also provide for the executive officers to receive continued salary
and benefits if their employment is terminated without cause during the term
of
the agreements. If employment is terminated during the first year after a
control change, Mr. Majors will receive continued salary and benefits for
24
months
after such termination and the other executive officers will receive continued
salary and benefits until the second anniversary of the change of control.
If
the termination of employment occurs more than 12 months after the control
change, Mr. Majors will receive continued salary and benefits until the third
anniversary of the control change and the other executive officers will receive
continued salary and benefits until the earlier of the first anniversary of
termination of employment or the third anniversary
14
of
the
control change. Current executive officers covered by such agreements include
Messrs. Haley, Petrovich and Dobbins.
The
agreements also provide for continued salary and benefits if the executive
officer resigns under certain circumstances. Beginning in the fourth month
after
a control change and through the twelfth month after the transaction, each
executive officer may resign for any reason and receive continued salary and
benefits for 24 months (in the case of Mr. Majors) or 12 months (in the case
of
the other executives). After the first anniversary of the control change, an
executive officer may resign and receive continued salary and benefits for
the
same period (but not beyond the third anniversary of the control change) if
his
resignation is on account of a reduction in the executive’s compensation, a
required relocation of his office more than thirty miles from Danville, Virginia
or a reduction in the duties or title assigned to him as of the first
anniversary of the control change.
RELATED
PARTY TRANSACTIONS
Some
of
the Directors and officers of the Corporation and the companies with which
they
are associated were customers of, and had banking transactions with, the Bank
in
the ordinary course of the Bank’s business during 2005. All loans and
commitments to lend included in such transactions 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, in the opinion of
the
management of the Corporation, do not involve more than a normal risk of
collectibility or present other unfavorable features.
REPORT
OF THE AUDIT AND COMPLIANCE COMMITTEE
The
Audit
and Compliance Committee assists the Board of Directors in its oversight of
(1)
the integrity of the Corporation’s financial statements and its financial
reporting and disclosure practices, (2) the appointment, compensation, retention
and oversight of the independent accountants engaged to prepare or issue an
audit report on the financial statements of the Corporation, (3) the soundness
of the Corporation’s systems of internal controls regarding finance and
accounting compliance, (4) the independence and performance of the Corporation’s
internal audit staff, and (5) compliance with significant applicable legal,
ethical, and regulatory requirements. The committee strives to provide an open
avenue of communication between the Board of Directors, management, the internal
auditor, the compliance officer, and the independent accountants.
All
of
the members of this committee are considered independent within the meaning
of
SEC regulations, the listing standards of Nasdaq, and the Corporation’s
Corporate Governance Guidelines. All are considered an “independent director”,
as defined by NASD Rule 4200(a)(15).
Mr.
Michael P. Haley, a member of the committee, is qualified as an audit committee
financial expert within the meaning of SEC regulations and the Board has
determined he has accounting and related financial management expertise within
the meaning of the listing standards of Nasdaq.
The
Audit
and Compliance Committee has reviewed and discussed with management the
Corporation’s audited consolidated financial statements as of and for the year
ended December 31, 2005.
15
The
committee has discussed with Yount, Hyde and Barbour, P.C., the Corporation’s
independent accountants during fiscal year 2005, the matters required to be
discussed by Statement of Auditing Standards No. 61, Communications with
Audit Committees,
as
amended, by the Auditing Standards Board of the American Institute of Certified
Public Accountants. The committee received from Yount, Hyde and Barbour, P.C.
and reviewed the written disclosures and the letter required by Auditing
Standards Board Standard No. 1,
Independence Discussions with Audit Committees,
and has
discussed with Yount, Hyde and Barbour, P.C. the auditing firm’s independence.
Based
on
the reviews and discussions referred to above, the Audit and Compliance
Committee recommended to the Board of Directors that the Corporation’s audited
consolidated financial statements be included in the Corporation’s Annual Report
on Form 10-K for the year ended December 31, 2005 and be filed with the
SEC.
The
Audit
and Compliance Committee pre-approves all audit, audit related, and tax services
on an annual basis, and in addition, authorizes individual engagements that
exceed pre-established thresholds. Any additional engagement that falls below
the pre-established thresholds must be reported by management at the Audit
and
Compliance Committee meeting immediately following the initiation of such an
engagement.
A
copy of
the Audit and Compliance Committee charter is available at the Corporation’s
website at www.amnb.com.
For
access to the charter, select the “American National Bankshares Inc.” icon, then
select “Governance Documents.”
Audit
and Compliance Committee
Willie
G.
Barker, Jr.
Fred
A.
Blair
Michael
P. Haley
INDEPENDENT
PUBLIC ACCOUNTANTS
The
Audit
and Compliance Committee of the Board of Directors of the Corporation annually
considers the selection of the Corporation’s independent public accountants. On
February 24, 2006, the Audit and Compliance Committee selected Yount, Hyde
and
Barbour, P.C. to serve as the Corporation’s independent public accountants for
the fiscal year ending December 31, 2006.
Yount,
Hyde and Barbour, P.C. has served as the Corporation’s independent public
accountants since May 2002.
Representatives
of Yount, Hyde and Barbour, P.C. will be present at the Annual Meeting and
they
will have an opportunity to make a statement if they so desire. The
representatives also will be available to respond to appropriate
questions.
Fees
to Independent Auditors for Fiscal 2005 and 2004
Yount,
Hyde and Barbour, P.C. audited the financial statements included in the
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005;
reviewed the Corporation’s quarterly reports on Form 10-Q; and audited
management’s assessment of internal control over financial reporting as of
December 31, 2005.
16
The
following table presents aggregate
fees paid or to be paid by the Corporation and the Bank for
professional services rendered by Yount, Hyde and Barbour, P.C. for the years
2005 and 2004.
|
2005
|
2004
|
||||||
|
Audit
Fees
|
$
|
106,340
|
$
|
107,814
|
|||
|
Audit-related
Fees
|
4,009
|
4,800
|
|||||
|
Tax
Fees
|
7,250
|
7,000
|
|||||
All
non-audit services provided by Yount, Hyde and Barbour, P.C. described above
were approved by the Audit and Compliance Committee, which concluded that the
provision of such services is compatible with maintaining the independence
of
Yount, Hyde and Barbour, P.C. Audit-related fees for 2005 include discussions
regarding impaired loans, specific reserves and impaired securities.
Audit-related fees for 2004 include the fees to perform agreed upon procedures
related to the annual Housing and Urban Development filing review (not required
for 2005). Tax fees are for the preparation of the annual consolidated federal
and state income tax returns.
CODE
OF CONDUCT
The
Board
of Directors has adopted a Code of Conduct, which applies to all Directors
and
employees of the Corporation and the Bank. A portion of the Code of Conduct
has
special provisions for senior financial officers of the Corporation and the
Bank, which apply to the Corporation’s principal executive officer and principal
financial officer as well as the Bank’s Controller or person performing similar
functions for the Corporation and or the Bank. The Code of Conduct for senior
financial officers meets the requirements of a “code of ethics” as defined by
Item 406 of Regulation S-K. The Code of Conduct is available at the
Corporation’s website at www.amnb.com.
Select
the “American National Bankshares Inc.” icon, then select “Governance
Documents.”
SECTION
16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under
the
federal securities laws, the Corporation’s Directors and executive officers are
required to report their beneficial ownership of Corporation common stock and
any changes in that ownership to the SEC. Specific dates for such reporting
have
been established by the SEC, and the Corporation is required to report in this
Proxy Statement any failure to file by the established dates during 2005. To
the
Company’s knowledge, based solely on a review of the copies of such reports
furnished to the Company, insiders of the Company complied with all filing
requirements during 2005.
SEPARATE
COPIES FOR BENEFICIAL OWNERS
Pursuant
to SEC rules, institutions that hold shares in “street name” for two or more
beneficial owners with the same address are permitted to deliver a single proxy
statement and annual report to that address. Any such beneficial owner can
request a separate copy of the Proxy Statement or Annual Report by writing
the
Corporation at Investor Relations, P.O. Box 191, Danville, Virginia 24543 or
by
telephoning 1-434-773-2220.
17
SHAREHOLDER
COMMUNICATIONS AND PROPOSALS
Shareholders
interested in communicating directly with the Corporate Governance and
Nominating Committee, which is charged with handling all such communication
to
non-management members of the Board of Directors of the Corporation, may do
so
in writing to Corporate Governance and Nominating Committee, P.O. Box 191,
Danville, Virginia, 24543.
The
Corporate Governance Committee has approved a process for handling
correspondence received by the Corporation and addressed to non-management
members of the Board. Under the process, the Assistant Secretary of the
Corporation will forward all mail specifically addressed to a member of the
Board of Directors. If correspondence is specifically addressed only to a
committee, the Assistant Secretary of the Corporation will forward the mail
to
the Chairman of said committee. If any mail is received that is addressed only
to “Board of Directors”, or “Non-Management Member of the Board of Directors”,
said mail will be forwarded by the Assistant Secretary of the Corporation to
the
Chairman of the Corporate Governance and Nominating Committee. Correspondence
relating to accounting, internal controls or auditing matters are brought to
the
attention of the Chairman of the Audit and Compliance Committee with respect
to
such matters.
To
be
considered for inclusion in the Corporation’s proxy statement relating to the
2007 Annual Meeting, shareholder proposals, including recommendations for
Director nominees, must be received by the Corporation at its principal office
in Danville, Virginia no later than November 21, 2006.
In
addition to any other applicable requirements, for business to be properly
brought before next year’s Annual Meeting by a shareholder, even if the proposal
is not to be included in the Corporation’s proxy statement, the Corporation’s
bylaws provide that the shareholder must give notice in writing to the Secretary
of the Corporation no later than January 19, 2007. As to each such matter,
the
notice must contain (i) a brief description of the business desired to be
brought before the annual meeting and the
reasons
for conducting such business at the annual meeting, (ii) the name, record
address of, and number of shares beneficially owned by the shareholder proposing
such business and (iii) any material interest of the shareholder in such
business.
OTHER
BUSINESS
As
of the
date of this Proxy Statement, the Board of Directors knows of no other matters
to be presented at the Annual Meeting other than those referred to above.
However, if any other matters should properly come before the Annual Meeting,
it
is the intention of the persons named in the enclosed form of proxy to vote
such
proxy in accordance with their best judgment on such matters.
By
Order
of the Board of Directors
Charles
H. Majors
President
and Chief Executive Officer
March
20,
2006