PNBI Pioneer Bankshares Inc (PK)

 

 

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

 

(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.

 

(1)

Title of each class of securities to which the transaction applies:

          

 

(2)

Aggregate number of securities to which the transaction applies:

          

 

(3)

Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

          

 

(4)

Proposed maximum aggregate value of the transaction:

          

 

(5)

Total fee paid:

          

 

 

¨	Fee paid previously with preliminary materials.

 

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

          

 

(2)

Form, Schedule or Registration Statement No.:

          

 

(3)

Filing Party:

          

 

(4)

Date Filed:

          

 

 

 

 

---

April 12, 2010

Dear Fellow Stockholders:

We invite you to attend the 2010 Annual Meeting of Stockholders of Pioneer Bankshares, Inc. to be held in the Meeting Room of Pioneer Bank, 252 East Main Street, Stanley, Virginia, at 10:00 a.m. on Wednesday, May 12, 2010. A formal notice of meeting is enclosed.

At the meeting, we will elect three directors, each to serve a three-year term. Whether you plan to attend or not, please complete, sign, date and return your proxy in the enclosed postage-paid envelope. Your vote is important, and the prompt return of your proxy is appreciated.

We also cordially invite you to attend the Annual Social Gathering of the Stockholders, Directors and Officers of Pioneer Bankshares, Inc. to be held at the Stanley Fire Hall, Stanley, Virginia, at 6:30 p.m. on Wednesday, May 12, 2010, for an evening of fine food and good fellowship.

I look forward to seeing you on the 12th of May.

Thomas R. Rosazza

President and Chief Executive Officer

---

PIONEER BANKSHARES, INC.

(Parent Company of Pioneer Bank)

263 East Main Street

Stanley, Virginia 22851

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

(To be held May 12, 2010)

To the Stockholders of

Pioneer Bankshares, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Pioneer Bankshares, Inc. (the “Company”) will be held at the Main Office of Pioneer Bank, 252 East Main Street, Stanley, Virginia, at 10:00 a.m. on Wednesday, May 12, 2010, for the following purposes:

 

1.

To elect three (3) individuals to serve as directors, each to serve a three-year term.

 

2.

To transact such other business as may properly come before the meeting or any adjournment thereof.

The close of business on April 1, 2010 has been fixed by the Board of Directors as the record date for determination of stockholders entitled to notice of, and to vote at the Annual Meeting, and any adjournment thereof.

 

April 12, 2010

PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY AS SOON AS POSSIBLE REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO IT BEING EXERCISED.

---

PIONEER BANKSHARES, INC.

263 East Main Street

Stanley, Virginia 22851

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

May 12, 2010

GENERAL

The Board of Directors and management of Pioneer Bankshares, Inc. (the “Company”) solicit your proxy for the Annual Meeting of Stockholders of Pioneer Bankshares, Inc., the parent of Pioneer Bank, Stanley, Virginia (the “Bank”), to be held at the main office of Pioneer Bank, 252 East Main Street, Stanley, Virginia, at 10:00 a.m. on Wednesday, May 12, 2010. The approximate mailing date of this Proxy Statement and the accompanying proxy form is April 12, 2010.

Revocation and Voting of Proxies

Execution of a proxy will not affect a stockholder’s right to attend the Annual Meeting and to vote in person. Any stockholder who has executed and returned a proxy may revoke it by attending the Annual Meeting and requesting to vote in person. A stockholder may also revoke his proxy at any time before it is exercised by filing a written notice with the Company 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.

Voting Rights and Solicitation

Only stockholders of record at the close of business on April 1, 2010 are entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. As of the close of business on April 1, 2010, there were 1,029,466 shares of the Company’s common stock outstanding and entitled to vote at the Annual Meeting. The Company has no other class of stock outstanding. A majority of the shares entitled to vote, represented in person or by proxy, will constitute a quorum for the transaction of business.

Each share of common stock entitles the record holder thereof to one vote upon each matter to be voted upon at the Annual Meeting. Shares for which the holder has elected to abstain or to withhold the proxies’ authority to vote on a matter will count toward a quorum, but will not be included in determining the number of votes cast with respect to such matter.

In past annual meetings, with respect to shares of common stock held in “street” name (meaning through a broker or other custodian), brokers had discretionary authority to vote such shares in the election of directors as it was considered a “routine” matter. Recent regulatory changes determining that director elections are no longer routine matters may now prevent brokers from voting uninstructed shares in director elections unless permitted by the exchange or other organization of which they are members. If you hold shares in street name, please instruct your broker how to vote your shares in connection with the election of directors so that your shares will be voted.

The cost of solicitation of proxies will be borne by the Company. Solicitation is being made in person, by telephone, fax, e-mail, or special letter by officers, directors, and employees of the Company, acting without additional compensation other than regular compensation.

Your Board of Directors and management urge you to complete, sign, date and mail your proxy to make certain that your shares will be voted at the meeting.

---

PROPOSAL ONE — ELECTION OF DIRECTORS

The Board of Directors currently consists of nine members, eight of which are independent directors, as defined under NASDAQ listing standards, and one is a member of management. In accordance with the Company’s Articles of Incorporation, directors are divided into three classes, each of which is composed of approximately one-third of the total number of directors. At the Annual Meeting, three directors will be elected for terms of three years expiring on the date of the Annual Meeting of Stockholders in 2013. Each director elected will continue in office until a successor has been elected or until his resignation or removal in the manner prescribed by the Articles of Incorporation of the Company.

With regard to the election of directors, votes may be cast in favor of or withheld. If a quorum is present, the nominees receiving a plurality of the votes cast at the Annual Meeting will be elected directors; therefore, votes withheld will have no effect. Although abstentions are counted for purposes of determining the presence or absence of a quorum for the transaction of business, they are not counted for purposes of determining whether a proposal has been approved and, therefore, have no effect.

The Board of Directors has recommended three nominees, each of which is currently serving as a director. Any nominations other than those made by the Board of Directors shall be in accordance with the Bylaws of the Company. The Board of Directors has no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable or unwilling for good cause to serve for any reason, proxies may be voted for another person nominated as a substitute by the Board of Directors, or the Board of Directors may reduce the number of directors.

 

Name (Age)		Director Since (1)		Principal Occupation During Past Five Years
Nominees (For a term expiring in 2013):
Harry F. Louderback (69)		1998		Farmer/Retired from the FBI.
Thomas R. Rosazza (68)		1973		President/CEO of Pioneer Bankshares, Inc. and Pioneer Bank.
David N. Slye (57)		1996		Insurance Agent/Owner, The Slye Agency.
Other Directors Not Standing For Election At This Time:
Term expiring in 2011:
Louis L. Bosley (78)		1976		Business Owner, Stanley Auto Service.
E. Powell Markowitz (58)		1999		Secretary & Treasurer, F.T. Reuter Enterprises, Inc.
Mark N. Reed (52)		1994		Attorney at Law, Reed & Reed, P.C.
Term expiring in 2012:
Patricia G. Baker (67)		1989		Chair of the Board of Pioneer Bankshares, Inc., Retired Bank Officer.
Robert E. Long (79)		1989		Retired Merchant/Realtor.
Kyle L. Miller (75)		1986		Retired Virginia State Police Investigator.

 

(1)	Includes service as a director of the Bank.

THE BOARD OF DIRECTORS RECOMMENDS THE NOMINEES, AS SET FORTH ABOVE, FOR

ELECTION. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “ FOR ” EACH NOMINEE.

 

2

---

Director Qualifications and Experience

(Nominees for a term expiring in 2013)

Harry F. Louderback has served as a director of the Company and Bank since 1998. He is retired from the FBI and brings to the Board approximately 35 years of experience in telecommunications and system security administration. He currently owns three farming operations, which enables him to bring additional expertise when dealing with agricultural production and farm loan requests. Mr. Louderback is a graduate of Dunsmore Business College and also attended the Columbia Technical Institute and Grantham School of Electronics. Mr. Louderback also brings leadership abilities, as he is actively involved in the local community. He serves on the Page County Water Board, is a member of the Page County Broadband Authority and the Page County Farmer’s Association.

Thomas R. Rosazza has served as a director of the Company and Bank since 1973. He is retired from the Page County School Board and brings to the Company approximately 31 years of management and administrative experience. Additionally, Mr. Rosazza brings valuable insight and knowledge to the Board due to his service as a bank director for 37 years and his service as the President and Chief Executive Officer of the Company and its subsidiaries for the past 11 years. Mr. Rosazza holds a bachelor’s degree in Economics and Business Administration from Bridgewater College and a master’s degree in Education from the University of Virginia. He is also a graduate of the Virginia Banker’s School of Bank Management at the University of Virginia. He has previously served as President of the Page Memorial Hospital Association and currently serves on the Board of Visitors for Lord Fairfax Community College, which have added to his ability to contribute in a leadership capacity. Mr. Rosazza also serves as treasurer for a local non-profit organization.

David N. Slye has served as a director of the Company and Bank since 1996. He is the owner of the Slye Agency, an independent insurance agency in Luray, Virginia. He brings to the Board more than 30 years of experience in insurance coverage, sales, service and claims. He holds a designation in the Life Underwriter Training Council (LUTC) and Accredited Advisor in Insurance (AAI) from the Insurance Institute of America. Additionally, Mr. Slye holds a bachelor’s degree in Business Administration from Elon University. Mr. Slye brings additional leadership abilities, as he is actively involved in the local community and serves on the Luray Downtown Initiative, which oversees grant funding for various community renovation projects.

(Directors with terms expiring in 2011)

Louis L. Bosley has served as a director of the Company and Bank since 1976. He is retired from the U.S. Postal Service. He has 59 years of entrepreneurial experience as the owner and operator of a local auto service business and brings valuable business management and operational knowledge to the Board. Mr. Bosley owns and manages numerous rental properties for low to moderate income residents, as well as a poultry operation, which enables him to bring additional expertise when dealing with rental housing and agricultural loan requests. Additionally, Mr. Bosley served on the Stanley Town Council for approximately 37 years, which gives valuable insight into meeting the immediate needs of consumers within the community and Bank service area.

E. Powell Markowitz has served as a director of the Company and Bank since 1999. Mr. Markowitz brings to the Board over 31 years of business and financial management experience. He is an accountant and fine arts dealer for F. T. Reuter Enterprises, Inc., which operates a hotel and restaurant in Middleburg, Virginia, and trades worldwide, in antique fine art. Mr. Markowitz was previously with the accounting firm of Yount, Hyde, & Company, as a staff accountant. His financial management knowledge and expertise is specifically advantageous in his role as the chair of the Company’s Audit Committee. He holds a bachelor’s degree in Business Administration from Madison College, in Harrisonburg, Virginia.

Mark N. Reed has served as a director of the Company and Bank since 1994. Mr. Reed is an attorney, owner and partner in the law firm of Reed & Reed, P.C. in Luray, Virginia, where he specializes in real estate law, business law, as well as personal wills and estate law. He also serves as the attorney for the Page County School Board and the Page County Economic Development Authority. Mr. Reed has over 26 years of experience practicing law and brings to the Board his valuable legal expertise, as well as business management and investment knowledge. Mr. Reed serves as the designated legal counsel for both the Company and the Bank. Additionally, Mr. Reed’s strong legal and business background enables him to bring expertise relating to regulatory requirements, strategic planning and future business development initiatives. Mr. Reed holds a bachelor’s degree in Economics and History and a Juris Doctorate degree in Law from the College of William and Mary.

 

3

---

(Directors with terms expiring in 2012)

Patricia G. Baker has served as a director of the Company and Bank since 1989 and currently serves as the Board chair. She is a retired Bank officer and brings to the Board more than 49 years of banking experience, with knowledge and skills in the areas of branch operations, lending, and executive management. Mrs. Baker is a graduate of the Virginia Banker’s School of Bank Management at the University of Virginia. Mrs. Baker also brings to the Board strong leadership abilities, as she is actively involved in local community organizations. She has served on the Boards of the Page County Chamber of Commerce, Page County Council on Domestic Violence, and Page County United Way.

Robert E. Long has served as a director of the Company and Bank since 1989. He is a retired merchant and is also a licensed realtor. He brings to the Board more than 21 years of entrepreneurial business management experience, as well as more than 20 years of real estate experience. Mr. Long provides expertise and valuable knowledge relating to the local real estate market and appropriate property valuations, which enables him to greatly contribute to the credit risk management practices of the institution.

Kyle L. Miller has served as a director of the Company and Bank since 1986. He is a retired Virginia State Police Investigator and Special Agent. He previously served as an Assistant Special Agent In-Charge of the Bureau of Criminal Investigation Field Office in Culpeper, Virginia. Mr. Miller has had over 17 years of experience investigating a variety of white collar crimes and performing other investigative duties. During his service with the Virginia State Police, Mr. Miller attended numerous schools and educational programs with specialized training in fraud and embezzlement prevention. Therefore, he brings to the Board his expertise, knowledge and skills in these areas, which enables him to contribute to the consumer protection and risk management practices of the institution. Additionally, Mr. Miller has owned and operated various local business establishments and manages a farming operation. His farm management experience also enables him to bring additional expertise when dealing with agricultural production and farm loan requests.

Board and Committee Information

Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of the director’s duties, including the attendance at Board and committee meetings. During 2009, the Board of Directors of the Company held 6 meetings and the Board of Directors of the Bank held 12 meetings. All incumbent directors attended at least 75% of the aggregate total number of meetings of the Board of Directors and its committees on which he or she served in 2009. Directors are encouraged to attend stockholders meetings, and all directors attended the 2009 Annual Meeting of Stockholders.

There are no immediate family relationships among any of the directors or among any directors and any officer. No director serves as a director of any other company with a class of securities registered under Section 12 of the Securities Exchange Act of 1934.

The Company’s committee structure is as follows:

Compensation Committee . The Compensation Committee consists of Kyle. L. Miller, Robert E. Long and David N. Slye. The members of the Compensation Committee meet the requirements for independence as set forth in NASDAQ’s definition of “independent director,” and meet the definition of “independent” as set forth in Rule 10A-3 of the Securities Exchange Act of 1934. The primary functions of this committee are to recommend the compensation of the Chief Executive Officer and the Chief Financial Officer to the full Board of Directors, and periodically review the compensation of other employees of the Company. This committee has a formal charter, which outlines the committee’s specific duties and responsibilities and is available upon request to the Company’s corporate secretary as noted under the Corporate Governance section of this Proxy Statement. This charter can also be obtained electronically through the Company’s proxy disclosure website at http://www.cfpproxy.com/4609 . The Compensation Committee met 4 times during 2009.

 

4

---

Audit Committee . The Audit Committee consists of E. Powell Markowitz, Patricia G. Baker and Harry F. Louderback. The members of the Audit Committee meet the requirements for independence as set forth in NASDAQ’s definition of “independent director,” and meet the definition of “independent” as set forth in Rule 10A-3 of the Securities Exchange Act of 1934. In addition, no member of the committee has participated in the preparation of the financial statements of the Company or any subsidiary of the Company at any time during the past three years.

Mr. Markowitz chairs the Audit Committee. For the past 31 years, Mr. Markowitz has been the Secretary and Treasurer of F. T. Reuter Enterprises, Inc., which operates a hotel and restaurant in Middleburg, Virginia, and trades worldwide, in antique fine art. Prior to becoming affiliated with F. T. Reuter Enterprises, Inc., Mr. Markowitz was a staff accountant for five years with Yount, Hyde & Company, certified public accountants. Mr. Markowitz earned a Bachelor of Business Administration from Madison College, Harrisonburg, Virginia in 1974 and brings a diversity of financial knowledge and expertise to the Audit Committee. Mr. Markowitz was duly re-appointed as chairman of the Audit Committee in 2009, and serves as the “financial expert” for the Audit Committee of Pioneer Bankshares, Inc.

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent accounting firm. Accordingly, the independent accounting firm reports directly to the Audit Committee of the Company. The Audit Committee is responsible for the selection of the Company’s independent accountants, approval of the scope of the independent accountants’ audit, review of the reports of examination by the regulatory agencies, the independent accountants and the internal auditor, and for issuing its report to the Board of Directors of the Company. The Audit Committee met 5 times during 2009.

The charter of the Audit Committee is included in this Proxy Statement as Appendix A and is also available upon request to the Company’s corporate secretary as noted under the Corporate Governance section of this Proxy Statement. This charter can also be obtained electronically through the Company’s proxy disclosure website at http://www.cfpproxy.com/4609 .

Corporate Governance Committee . Directors serving on this committee are Patricia G. Baker, Mark N. Reed and Thomas R. Rosazza. This committee has a formal charter and meets as necessary outside the Board meetings to review corporate governance issues including, but not limited to, director service and assessment, nominations and continuing education.

Strategic Planning Committee . Directors serving on this committee are Kyle L. Miller, Mark N. Reed and Thomas R. Rosazza. This committee has a formal charter, which outlines its specific duties and responsibilities. The committee meets as necessary outside the Board meetings to review and establish the long-term goals of the Company. The Strategic Planning Committee met 2 times in 2009.

Investment Committee . Directors serving on this committee are Patricia G. Baker, E. Powell Markowitz, Mark N. Reed and Thomas R. Rosazza. This committee has the primary responsibility of managing the Company’s equity securities and investment portfolio. This committee met 2 times in 2009.

Other Committees

The Board of Directors of the Bank has, among others, the following additional committees:

Asset/Liability Funds Management Committee . Directors serving on this committee are Louis L. Bosley, Kyle L. Miller and Robert E. Long. This committee has the primary responsibility of managing the Bank’s assets and liabilities, maintaining adequate liquidity and capital positions, and monitoring interest rate sensitivity within the loan and deposit portfolios. This committee met 4 times in 2009.

Electronic Data Processing/IT Steering Committee . Directors serving on this committee are Harry F. Louderback, Louis L. Bosley and David N. Slye. This committee has the primary responsibility of monitoring the data processing functions of the Bank and making recommendations for system enhancements and computer upgrades. This committee met 4 times in 2009.

 

5

---

Corporate Governance

The Company’s Code of Ethics applies to all directors, officers and employees, including the Company’s principal executive officer and principal financial officer. A copy of the Code of Ethics, as well as any committee charter, is available upon written request to Pioneer Bankshares, Inc., Attn: Judy L. Painter, Corporate Secretary, at 263 East Main Street, Stanley, Virginia 22851.

Nomination Procedures

The Company’s independent directors perform the functions of a nominating committee based on recommendations from the Corporate Governance Committee. The Board believes it does not need a separate nominating committee because a majority of the directors are independent and stockholders are best served by having such directors participate in the selection of Board nominees. In their capacity as the nominating committee, the independent members of the Board of Directors will accept for consideration stockholder nominations for directors if made in writing in accordance with the Company’s Bylaws. The following is a summary of the stockholder nomination procedures as contained in the Company’s Bylaws and is qualified in its entirety by reference to the Bylaws.

The Company’s Bylaws state, in general, that for any nomination of a director to be properly brought before an annual meeting by a stockholder, the stockholder must provide timely notice of the nomination in writing to the Secretary of the Company. For a notice to be considered timely, the Secretary of the Company must have received the notice no less than 60 days nor more than 90 days before the first anniversary of the preceding year’s annual meeting. The notice must set forth as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

The Company’s Corporate Governance charter addresses and establishes certain procedures for director nominations and recommendations. The Company does not have any specific minimum qualifications that must be met by a nominee and does not distinguish between nominees recommended by Board members or by stockholders. Qualifications for consideration as a director nominee may vary according to the particular areas of expertise that may be desired in order to complement the qualifications that already exist among the Board. Among the factors that the directors consider when evaluating proposed nominees are their independence, financial literacy, business experience, character, judgment and strategic vision. Other considerations would be their knowledge of issues affecting the business, their leadership experience and their time available for meetings and consultation on Company matters. Although the Board of Directors has not established a formal written policy with regard to diversity, the Company generally strives to retain a diverse group of candidates who possess the background skills and expertise to make a significant contribution to the Board, the Company and its stockholders.

The above procedures are in addition to the procedures regarding inclusion of stockholder proposals in proxy materials set forth in “Stockholder Proposals” in this Proxy Statement.

Board Leadership Structure

The Board of Directors is committed to maintaining an independent Board, and therefore the majority of the Board is comprised of outside independent directors. It is the Company’s current practice to separate the duties of the Board Chair and the Chief Executive Officer in an effort to maintain good corporate governance practices and eliminate inherent conflicts of interest that could arise when the roles are combined.

 

6

---

Risk Management Oversight

The members of the Board of Directors take an active role as a whole and at various committee levels in the ongoing oversight of the risk management practices of the Company and Bank. The Board has established a formal risk management policy and appointed a formal risk management committee, consisting of senior and executive officers, as well as other management personnel within the Bank. Additionally, Board members actively participate in risk management functions of the organization through its appointed committee structure. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks. The Board, or a committee of the Board, also receives specific periodic reports from management on credit risk, liquidity risk, interest rate risk, capital risk, operational risk, strategic risk, reputational risk, fraud risk, and other economic risks.

The Corporate Governance Committee manages risks that are deemed to be associated with the independence of the Board of Directors and potential conflicts. The Compensation Committee is responsible for overseeing the management of risks relating to the Bank’s compensation practices and plans. The Company’s financial and operational risks are managed through the Audit Committee, the Asset/Liability Committee, and the Investment Committee. The Audit Committee also oversees specific financial accounting and reporting risks, as well as internal control risks. The Bank’s internal audit function and the independent registered public accounting firm report directly to the Audit Committee.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of Pioneer Bankshares, Inc. has the responsibility, under delegated authority from the Board of Directors, for providing independent, objective oversight of the Company’s accounting functions and internal controls. The Audit Committee is elected by the Board of Directors of the Company. All members are independent of management. In addition, the Audit Committee operates under a written charter adopted by the Board of Directors. While management has the primary responsibility for the quality and integrity of the Company’s financial statements and reporting processes, the Audit Committee provides assistance to management in fulfilling this responsibility, as necessary. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 with management and the independent auditors, and discussed the quality and acceptability of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosure in the financial statements.

In addition, the committee obtained from the independent auditors a formal written statement discussing any disclosed relationship or service which may impact the objectivity and independence of the independent auditors, as required by Independence Standards Board Standard No. 1 “Independence Discussions with Audit Committees.” The committee also discussed with the independent auditors all communications required by Public Company Accounting Oversight Board Standard AU Section 380 and rule 2-07 of Regulation S-X, as amended, and other professional and regulatory standards. The Audit Committee also monitored the internal audit functions of the Company including the independence and authority of its reporting obligation, the proposed audit plan for the coming year, and the adequacy of management response to internal audit findings and recommendations.

In reliance on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2009 for filing with the Securities and Exchange Commission. The Company’s Audit Committee has approved the selection of the Company’s independent auditors.

 

 

7

---

ACCOUNTING FIRM FEES

Yount, Hyde and Barbour, P.C. audited the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The following table presents aggregate fees paid or to be paid by the Company for professional services rendered by Yount, Hyde and Barbour, P.C. for the audit of the Company’s annual financial statements for fiscal 2009 and 2008. This table also includes fees billed for audit-related services, tax services and all other services rendered by the audit firm during fiscal years 2009 and 2008.

 

		Fiscal 2009			Fiscal 2008
Audit Fees		$	65,300		$	60,250
Audit-related Fees			2,705			4,045
Tax Fees			6,608			3,780
All Other Fees			—			—
		$	74,613		$	68,075

All non-audit services provided by the above named audit firm were approved by the Audit Committee, which concluded that the provision of such services is compatible with maintaining the firms’ independence. The fees listed above as tax fees are for the preparation of the annual consolidated federal and state income tax returns.

The Audit 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 exceeds the pre-established thresholds must be reported by management at the Audit Committee meeting immediately following the initiation of such an engagement.

DIRECTORS’ COMPENSATION

Non-employee director compensation is reviewed on an annual basis. Any adjustments made to non-employee director fees are based primarily on information obtained through the Virginia Bankers Association Salary and Compensation Survey and other outside sources, which provide comparative data for director compensation with other similarly sized institutions across Virginia. Other factors considered in determining non-employee director compensation are the time commitments involved and the individual risk exposure based on the size of the institution.

The Company’s 1998 Stock Incentive Plan (the “Plan”) was adopted by the Board of Directors on June 11, 1998 and approved by the shareholders on June 11, 1999. This ten year Plan expired in June of 2008 with respect to the issuance of new option grants. However, grants previously issued under this Plan may still be exercised within the original terms. There were 800 stock option shares exercised by non-employee directors during 2009 at an exercise price of $12.75 per share.

A Director’s Deferred Compensation Plan was established by the Company in August of 1987. All directors were given the option of deferring their fee compensation for a period of five years in return for a defined benefit payout beginning at age 65. Not all directors chose to participate in this plan. The participating directors who received benefit payments during 2009 under this plan were Kyle L. Miller, and President and CEO Thomas R. Rosazza, who also serves as a director. There are no additional deferral options available to directors under this plan.

 

8

---

Non-employee directors of the Company received an annual retainer of $2,095 each for their service in 2009. The 2009 retainer was distributed to each non-employee director in the form of a stock award consisting of 133 shares of the Company’s common stock at a fair market value of $15.75 per share as of December 31, 2009. Non-employee directors of Pioneer Bank received additional stock awards during 2009 in lieu of their monthly director’s fee of $1,085 per month for their service as a Bank Board member. The stock awards for the 2009 director’s fees were distributed in two separate stock issuances, the first being an issuance of 423 shares of the Company’s common stock at a fair market value of $15.38 per share as of June 30, 2009 and the second being an issuance of 413 shares of the Company’s common stock at a fair market value of $15.75 per share as of December 31, 2009.

Directors also received $200 for each Board committee meeting they attended in 2009. Director Patricia Baker served as the Chair of the Board during 2009 and received chair fees in the amount of $800 per Board meeting, in addition to the fees paid for her service as director. Director E. Powell Markowitz served as the Chair of the Audit Committee during 2009 and received an additional $100 per meeting for his service.

The following table presents the total compensation paid to non-employee directors for their service during 2009:

Director Compensation Table

 

Name (1)		Fees Earned or Paid in  Cash ( 2 )			Stock Awards ( 2 )			Total
Patricia G. Baker		$	9,600		$	15,105		$	24,705
Louis L. Bosley			1,200			15,105			16,305
Robert E. Long			1,600			15,105			16,705
Harry F. Louderback			1,600			15,105			16,705
E. Powell Markowitz			1,200			15,105			16,305
Kyle L. Miller			1,600			15,105			16,705
Mark N. Reed			600			15,105			15,705
David N. Slye			1,200			15,105			16,305

 

(1)

The Company’s President and CEO, Thomas R. Rosazza, is not included in this table as he is an executive officer of the Company and receives no compensation for his services as a director. The President and CEO’s compensation is shown in the Summary Compensation Table included in this proxy statement.

(2)	Each Company director also serves on the Bank’s Board of directors, therefore the amounts reported in this table reflect compensation for Board services paid by the Company and the Bank.

 

9

---

EXECUTIVE COMPENSATION

No officer receives compensation from the Company. All compensation is paid directly through the Bank. The following table presents compensation information on the President and Chief Executive Officer of the Company for the years indicated. No other executive officer of the Company earned over $100,000 in salary and bonus in 2009.

Summary Compensation Table

 

Name and Principal Position		Year		Salary			Bonus			All Other Compensation (1)			Total
Thomas R. Rosazza		2009		$	147,939		—			$	2,910		$	150,849
President and CEO		2008			147,377		—				2,910			150,287
		2007			147,944		45,000	(2)			3,849			196,793

 

(1)	Represents employer contributions to the Bank’s 401(k) profit sharing plan for each year.

(2)	Represents bonus compensation expense for 2007, which was subsequently distributed in 2008 in the form of a stock award of 873 common shares of the Company’s stock at a fair market value of $25.75 per share, with the remainder of the bonus paid as cash compensation of $22,520.

Executive Compensation Discussion

The Company’s executive compensation program is designed to (i) attract and retain key executives critical to the success of the Company; (ii) integrate performance and compensation with the short and long-term strategic plans of the Company; (iii) reward performance with respect to achieving the Company’s goals; and (iv) align the interests of the executives with the long-term interests of the stockholders. The compensation program of the Company for its executive officers is generally administered at the direction of the Compensation Committee and reviewed annually.

In determining executive compensation, the Compensation Committee reviews the elements of each executive officer’s compensation and considers both objective and subjective criteria. With respect to the objective portion of the performance evaluation, the committee specifically considers certain financial performance measures of the Company which may include, but are not limited to, net income, return on equity, non-interest income, net interest margin and efficiency ratio. Additionally, the Compensation Committee reviews the results of the Virginia Bankers Association compensation survey, and compares the Company’s executive compensation with other similarly sized banks across Virginia. The committee also takes into account the performance of the Company’s stock and shareholders’ return. As to the subjective component, the Compensation Committee considers the executive’s level of responsibility and performance, and the individual’s contribution in achieving the Company’s long-term mission.

The Compensation Committee considers input from the President and Chief Executive Officer with respect to executive officers that report to him and makes appropriate recommendations to the Board of Directors. In determining the compensation of the President and CEO, the CFO and other executive officers, the committee uses the same objective and subjective measures as previously discussed, and their subjective assessment of the particular officer’s contribution to the overall success of the Company.

Employment Contracts and Termination and Change in Control Arrangements

No employment contracts or change in control agreements have been entered into by the Company with any of its officers and none are contemplated at this time.

 

10

---

Stock Option Information

The Company’s 1998 Stock Incentive Plan, which expired in June of 2008, previously provided for the granting of stock options to executive officers and employees of the Company and its subsidiaries. No stock options were granted to the President and CEO or any other executive officer under the Plan.

Benefit Plans

Equity Compensation Plan Information. The Company’s 1998 Stock Incentive Plan was adopted by the Board of Directors on June 11, 1998 and approved by the shareholders on June 11, 1999. This ten year Plan expired in June of 2008 with respect to the issuance of new option grants. However, grants previously issued under this Plan may still be exercised within the original terms. Generally, the Plan provided for the grants of incentive stock options and non-qualified stock options. The exercise price of an Option could not be less than 100% of the fair market value of the common stock (or if greater, the book value) on the date of the grant. The option terms applicable to each grant were determined at the grant date, but no Option could be exercisable in any event, after ten years from its grant date. As of April 1, 2010, there were 6,400 exercisable options outstanding for non-employee directors under this plan.

401(k) Plan . The Bank has a 401(k) Profit Sharing Plan covering full-time employees who have completed 180 days of service and are at least 21 years of age. Employees may contribute compensation subject to certain limits based on federal tax laws. The Bank makes discretionary matching contributions of up to 3 percent of an employee’s annual compensation contributed to the Profit Sharing Plan. Additional amounts may be contributed, at the option of the Bank’s Board of Directors. Employer contributions vest to the employee over a six-year period, and employees become 100% vested in his/her seventh year of full-time employment. For the years ended December 31, 2009, 2008 and 2007, total expense attributable to this 401(k) plan amounted to approximately $35,000, $36,000 and $30,000, respectively.

Equity Awards.  The Board of Directors adopted formal resolutions in February 2008, authorizing the granting of stock awards to certain Company and Bank employees and non-employee directors of the Company. With respect to the employees, awards are generally made in recognition of employee performance and their contribution to the Company’s overall performance. The awards for directors are generally made in lieu of director and retainer fees. Stock awards paid to directors during 2009 are disclosed within the Directors’ Compensation section of this Proxy Statement. There were no stock awards issued to executive officers or other employees during 2009.

INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS

Some of the Company’s directors, executive officers, and members of their immediate families, and corporations, partnerships and other entities, of which such persons are officers, directors, partners, trustees, executors or beneficiaries, are customers of the Bank. As of December 31, 2009, total borrowings for executive officers, directors, their immediate families, and affiliated companies and other entities were approximately $658,000. All loans and loan commitments to them were made in the ordinary course of business, upon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or present other unfavorable features. It is the policy of the Bank to provide loans to officers who are not executive officers and to employees at more favorable rates than those prevailing at the time for comparable transactions with other persons. These loans do not involve more than the normal risk of collectibility or present other unfavorable features.

The law firm of Reed & Reed, P.C. serves as legal counsel to the Company and the Bank. Director Mark N. Reed is a senior partner in this firm. Total fees paid to the firm of Reed & Reed, P.C. from the Company and Bank were approximately $31,000, $53,000 and $35,000 for fiscal years 2009, 2008, and 2007 respectively.

 

11

---

OWNERSHIP OF COMPANY COMMON STOCK

The following table provides as of April 1, 2010, certain information with respect to the beneficial ownership of the Company’s common stock for (i) each stockholder known by the Company to own beneficially more than 5% of the Company’s common stock, (ii) the directors and director nominees of the Company, (iii) the executive officer named in the Summary Compensation Table in this Proxy Statement, and (iv) all directors, director nominees and executive officers of the Company as a group.

 

Name		Amount and Nature of Beneficial  Ownership  (1)			Percent of Class
Directors and Officers:
Patricia G. Baker		20,261	(2)(3)		1.97	%
Louis L. Bosley		25,704	(2)(3)		2.49	%
Robert E. Long		20,299	(3)		1.97	%
Harry F. Louderback		21,014	(2)(3)		2.04	%
E. Powell Markowitz		4,684	(3)		*
Kyle L. Miller		15,804	(2)(3)		1.53	%
Mark N. Reed		8,814	(2)(3)		*
Thomas R. Rosazza		17,067	(2)		1.66	%
David N. Slye		5,299	(3)		*
Executive officers who are not directors (as a group)		1,022			*
All directors and executive officers as a group		139,968	(4)		13.51	%
Principal Stockholder:
Richard T. Spurzem		103,456	(5)		10.05	% (6)
P.O. Box Drawer R
Charlottesville, Virginia 22903

 

*	Indicates less than 1% beneficial ownership.

(1)

For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 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 sixty days. Shares of common stock which are subject to stock options are deemed to be outstanding for the purpose of computing the percentage of outstanding common stock owned by such person or group but not deemed outstanding for the purpose of computing the percentage of common stock owned by any other person or group.

(2)	Includes shares held by close relatives and children, and shares held jointly with spouses or as custodians or trustees, as follows: Mrs. Baker, 9,905 shares; Mr. Bosley, 11,820 shares; Mr. Louderback, 650 shares; Mr. Miller, 5,590 shares; Mr. Reed, 4,960; and Mr. Rosazza, 9,182.

(3)	Includes shares of unexercised stock options directly owned as follows: Mrs. Baker, 800 shares; Mr. Bosley, 800 shares; Mr. Long, 800 shares; Mr. Louderback, 800 shares; Mr. Markowitz, 800 shares; Mr. Miller, 800 shares; Mr. Reed, 800 shares; and Mr. Slye, 800 shares.

(4)	Includes 6,400 shares of unexercised stock options directly owned; 42,107 shares held by close relatives and children; and shares held jointly with spouses or as custodians or trustees.

(5)	Based on the most recent information available as derived from a Form 4 filed with the Securities and Exchange Commission on June 2, 2009.

(6)	Percentage ownership of the principal stockholder is calculated based on the total number of outstanding shares of common stock as of the record date.

 

12

---

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, directors and executive officers of the Company are required to file reports with the Securities and Exchange Commission indicating their holdings of and transactions in Company common stock. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, insiders of the Company complied with all filing requirements during 2009.

OTHER MATTERS

Management knows of no other business to be brought before the Annual Meeting. Should any other business be properly presented for action at the meeting, the shares represented by the enclosed proxy shall be voted by the persons named therein in accordance with their best judgment and in the best interests of the Company.

STOCKHOLDER PROPOSALS

To be considered for inclusion in the Company’s proxy materials relating to the 2011 Annual Meeting of Stockholders pursuant to applicable Securities and Exchange Commission rules, the Secretary of the Company must receive stockholder proposals no later than December 13, 2010. Stockholder proposals should be addressed to Pioneer Bankshares, Inc., Attn: Judy L. Painter, Corporate Secretary, at 263 East Main Street, P.O. Box 10, Stanley, Virginia 22851.

The 2011 Annual Meeting of Stockholders is tentatively scheduled for Wednesday, May 18, 2011.

STOCKHOLDER COMMUNICATIONS

Pioneer Bankshares, Inc. has a process whereby stockholders can contact the Company’s directorship. A stockholder or other party interested in communicating directly with a director of the Company or the entire Board may do so by writing to that director or the Board, Attn: Judy L. Painter, Corporate Secretary, at 263 East Main Street, P.O. Box 10, Stanley, Virginia 22851.

AVAILABILITY OF PROXY MATERIALS AND ANNUAL REPORT ON FORM 10-K

The Company’s 2010 Proxy Materials and Annual Report on Form 10-K for the year ended December 31, 2009, excluding exhibits, as filed with the Securities and Exchange Commission, are available to the public in electronic format and can be accessed free of charge at http://www.cfpproxy.com/4609 . Copies of the 2010 Proxy Materials and the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, excluding exhibits, as filed with the Securities and Exchange Commission can also be obtained without charge by writing to Pioneer Bankshares, Inc., Attn: Thomas R. Rosazza, President and Chief Executive Officer, at 263 East Main Street, P.O. Box 10, Stanley, Virginia 22851. This information may also be accessed, without charge, by visiting the Securities and Exchange Commission’s Electronic Data Gathering and Retrieval Service EDGAR website at www.sec.gov .

 

13

---

Appendix A

Pioneer Bank - Pioneer Bankshares

Audit Committee of the Board of Directors Charter

PURPOSE

The Audit Committee (the “Committee”) is appointed by the Board of Directors of Pioneer Bank-Pioneer Bankshares (the “Company”) to assist the Board of Directors in fulfilling its oversight responsibilities for the Company’s accounting and financial reporting processes and audits of the financial statements of the Company. The purpose of the Committee is to monitor (1) the integrity of the Company’s financial statements, (2) the independence and qualifications of its external auditor, (3) the Company’s compliance with legal and regulatory requirements, (4) the performance of the Company’s internal audit function, (5) the performance of the Company’s external auditors and (6) the Company’s system of internal controls. The Committee will also prepare the report required by the SEC’s proxy rules to be included in the Company’s annual proxy statement.

AUTHORITY

The Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to (1) appoint, compensate, retain and directly oversee the work of the Company’s external auditor, (2) resolve any disagreements between management and the auditor regarding financial reporting, (3) pre-approve all audit services and permitted non-audit services performed by the Company’s external audit firm, (4) retain independent counsel, accountants, or others to advise the Committee or assist in the conduct of an investigation, (5) seek any information it requires from employees – all of whom are directed to cooperate with the Committee’s requests – or external parties, (6) meet with Company officers, external auditors, or outside counsel, as necessary, and (7) form and delegate authority to subcommittees, including the authority to pre-approve all auditing and permitted non-audit services, provided that such decisions are presented to the full Committee at its next scheduled meeting.

The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to any registered public accounting firm engaged for the purpose of rendering or issuing an audit report or related work or performing other audit, review or attest services for the Company and to any advisors employed by the Committee.

COMPOSITION

The Committee will consist of at least three members of the Board of Directors. All Committee members will be independent directors, free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. All members of the Committee shall have a familiarity with basic financial and accounting practices. Committee members may enhance their familiarity with finance and accounting practices by participating in educational programs approved by the Board of Directors. At least one Committee member shall satisfy the definition of, and be designated as, a “financial expert” as defined by applicable legislation and regulation.

Members of the Committee shall be elected by the Board of Directors at the annual organizational meeting of the Board. Committee vacancies that may occur in interim periods between organizational meetings will also be filled by Board of Director election. Unless a Committee Chairman is elected by the Board of Directors, the members of the Committee may designate a Chairman by majority vote of the full Committee membership.

No Committee member shall simultaneously serve on the Audit Committees of more than two other public companies.

 

A-1

---

MEETINGS

The Committee will meet at least four (4) times per year, with authority to convene additional meetings, as circumstances require. All Committee members are expected to attend each meeting, in person or via tele-conference or video-conference. The Committee will invite members of Company management, external auditors, internal auditors, or others to attend meetings and provide pertinent information as necessary. The Committee will periodically meet separately with Company management, external auditors and internal auditors.

Each regular Audit Committee meeting will include an executive session.

Meeting agendas will be prepared and provided in advance to members along with appropriate briefing materials. Minutes of the meetings will be kept by a member of the Committee or a person designated by the Committee.

RESPONSIBILITIES

The Committee will carry out the following responsibilities:

External/Independent Auditors

Assume sole responsibility for the appointment, compensation, retention and evaluation of the work of any external/independent accounting firm engaged to audit or review the Company’s financial reports, audit the Company’s report on internal control, and perform any allowable non-audit service. The external auditors will report directly to the Committee.

At least annually, obtain and review a report by the Company’s external/independent auditor that describes: (1) the auditor’s internal quality control procedures, (2) any material issues raised by the most recent internal quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years, and any steps taken to deal with any such issues, and (3) all relationships between the external auditor and the Company.

Obtain from the external auditors information regarding the auditors’ compliance with applicable independence requirements, including auditor rotation rules, scope of service rules, and audit partner compensation rules. Based on information received in these reports, and on other information obtained by the Committee, including discussions with the external auditor, Company management, and the Company’s internal auditors, the Committee will evaluate the auditor’s qualifications, performance and independence. The Committee’s conclusions in this regard will be reported to the full Board of Directors of the Company.

Pre-approve non-audit services to be performed by the external auditors. The Committee may delegate to one or more Committee members the responsibility to approve such services, provided that timely reports are made to the full Committee. In addition, the Committee may establish pre-approved categories of services.

Review with the external auditors any audit problems or difficulties and Company management’s response. The Committee is responsible for resolving any differences between management and the external auditors regarding accounting and auditing issues.

Receive reports directly from the external/independent auditors. At least annually, these reports will include: (1) audit staffing and supervision, and scope of audit, (2) critical accounting policies and practices, alternative accounting treatments, the reasons for selecting such policies, and their impact on the fairness of the Company’s financial statements, (3) significant estimates made by management in the preparation of financial reports, (4) the nature and content of communications between auditors and Company management, (5) off-balance sheet transactions, joint ventures, contingent liabilities, or derivative transactions, and their impact on the fairness of financial statements, (6) auditor proposed adjustments, both those recorded by Company management and those not recorded by Company management, (7) difficulties encountered with Company management during the audit, (8) disagreements with Company management regarding accounting and reporting issues, (9) material legal matters that may impact the financial statements, and (10) the external auditor’s opinion on the overall fairness of the financial statements.

 

A-2

---

Keep a written record of all communications with the external auditors. The Committee may request that the auditors put their comments in writing. The Committee will receive a complete report from the auditors on the above noted matters prior to the completion of the annual audit. In addition, the Committee will maintain regular communications with the auditors on these topics in connection with quarterly reports, and other financial reports issued by the Company.

Establish policies concerning the Company’s hiring of employees or former employees of the external auditor, as required by law and applicable listing standards.

On a regular basis, discuss with the external auditor the need to meet separately to review any matters that the Committee or auditor believes should be discussed privately.

Financial Statements/Reports

Discuss the annual audited financial statements and quarterly financial statements, and any off-balance sheet structures, with Company management and the external auditors, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Review analysis prepared by Company management and/or the external auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analysis of the effects of alternative GAAP methods on the financial statements and any complex or unusual transactions.

Review significant accounting and reporting issues and understand their impact on the financial statements, including the effect of regulatory and accounting initiatives and any significant changes in the Company’s selection or application of accounting principles.

Review with Company management and the external auditors the results of the independent audit, including any difficulties encountered, any restrictions on the scope of the external auditor’s activities or access to requested information, and any significant disagreements with management.

Review disclosures made by the CEO and CFO during the Forms 10-K and 10-Q certification process about significant deficiencies in the design or operation of internal controls or any fraud that involves company management or other employees who have a significant role in the Company’s internal controls.

Review with Company management and the external auditor all matters required to be communicated to the Committee under generally accepted auditing standards, including matters required to be discussed by Statement on Auditing Standards No. 61 relating to conduct of the audit.

Discuss with Company management the Company’s earnings press releases, including the use of “proforma” or “adjusted” non-GAAP information, and financial information and earnings guidance provided to analysts and rating agencies.

Internal Audit

Act as the direct reporting entity for the Company’s internal auditors from a functional perspective.

Review and approve the organization, staffing, and budget of the internal audit function and hire and appoint the internal audit supervisor.

Discuss with Company management and the internal audit supervisor the budget, charter, plans, scope, activities, staffing and organizational structure of the internal audit function.

Review and approve reports prepared by the internal auditors, including recommendations made by the internal auditors to Company management.

 

A-3

---

Insure that there are no unjustified restrictions or limitations placed by Company management upon the internal auditor(s)’ scope of activities or access to information.

Review the effectiveness of the internal audit function and the internal audit staff qualifications, and will recommend any changes thereto.

On a regular basis, meet separately with the internal audit supervisor to discuss any matters that the Committee or internal auditor believes should be discussed privately.

Internal Controls and Risk Management

Consider the effectiveness of the Company’s internal control systems, including information technology security and control.

Gain an understanding of the scope of internal and external auditors’ reviews of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with Company management’s responses.

Meet with Company management to review the Company’s major financial risk exposures and the steps that Company management has taken to monitor and control such exposures, including any Company risk assessment and risk management programs.

Compliance

Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of Company management’s follow-up and correction of any instances of non-compliance.

Establish procedures for receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

Review the findings of any examinations by regulatory agencies and any auditor observations.

Review the process for communicating the Code of Ethical Conduct to Company personnel and for monitoring compliance to the Code.

Obtain regular updates from management and Company legal counsel regarding compliance matters and legal matters that may have a significant impact on the financial statements or the Company’s compliance policies.

Reporting Responsibilities

Regularly report to the Board of Directors regarding Committee activities and issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditors, and the performance of the internal audit function.

Provide an open avenue of communication between internal audit, the external auditors, and the Board of Directors.

Report annually to the Company’s shareholders, describing the Committee’s composition, responsibilities and how they were discharged, and any other information required by law or rule, including approval of non-audit services.

Review any other reports the Company issues that relate to Committee responsibilities

 

A-4

---

Other Responsibilities

Perform other activities related to this Charter as requested by the Board of Directors.

Institute and oversee special investigations as needed.

Review and assess the adequacy of the Audit Committee Charter annually, requesting Board of Directors approval for proposed changes, and insure appropriate disclosure as may be required by law or regulation.

Confirm annually that all responsibilities outlined in this Charter have been adhered to and completed.

Evaluate the Committee’s and individual member’s performance at least annually.

 

A-5

---

z						{
x		PLEASE MARK VOTES AS IN THIS EXAMPLE		REVOCABLE PROXY PIONEER BANKSHARES, INC.

 

x

y

 

_¿   Detach above card, sign, date and mail in postage paid envelope provided.   _¿

PIONEER BANKSHARES, INC. (Parent Company of Pioneer Bank, Stanley, Virginia)

PLEASE ACT PROMPTLY COMPLETE, SIGN, DATE & MAIL YOUR PROXY CARD TODAY

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

 

PROXY MATERIALS ARE AVAILABLE ON-LINE AT:

http://www.cfpproxy.com/4609

4609