##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For Quarterly Period Ended March 31, 2009
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 000-50151
 Allegheny Bancshares, Inc.
  West Virginia
    
    22-3888163(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
 (304) 358-2311
 þ o
 o o
  Large accelerated filer o
Accelerated Filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



PAGEPART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    2Unaudited Consolidated Statements of Income  Three Months ended March 31, 2009 and 2008
    
    
    2Consolidated Balance Sheets  March 31, 2009 (Unaudited) and
December 31, 2008 (Audited)
    
    
    3Unaudited Consolidated Statements of Changes in Stockholders Equity 
Three Months Ended March 31, 2009 and 2008
    
    
    4Unaudited Consolidated Statements of Cash Flows  Three Months
Ended March 31, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    16Item 4T.
    
    Controls and Procedures
    
    
    16PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    16Item 2.
    
    Changes in Securities
    
    
    17Item 3.
    
    Defaults upon Senior Securities
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17Item 5.
    
    Other Information
    
    
    17Item 6.
    
    Exhibits
    
    
    17SIGNATURES
    
    
    18CERTIFICATIONS
    
    
    18EX-31.1EX-31.2EX-32




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Consolidated Financial Statements
 
 Allegheny Bancshares, Inc.
Consolidated Statements of Income  (In thousands, except for share and per share information)
 Three Months EndedMarch 31,2009
    
    
    2008Interest and Dividend Income:Loans and fees
    
    $
    2,666
    
    
    $
    2,880Investment securities  taxable
    
    
    103
    
    
    
    145Investment securities  nontaxable
    
    
    149
    
    
    
    177Deposits and federal funds sold
    
    
    28
    
    
    
    59Total Interest and Dividend Income
    
    
    2,946
    
    
    
    3,261Interest Expense:Deposits
    
    
    945
    
    
    
    1,248Borrowings
    
    
    74
    
    
    
    107Total Interest Expense
    
    
    1,019
    
    
    
    1,355Net Interest Income
    
    
    1,927
    
    
    
    1,906Provision for loan losses
    
    
    77
    
    
    
    61Net Interest Income After Provision
for Loan Losses
    
    
    1,850
    
    
    
    1,845Noninterest Income:Service charges on deposit accounts
    
    
    189
    
    
    
    186Restricted equity security impairment
    
    
    (604
    )Loss on sale of securities
    
    
    (10
    )Other income
    
    
    159
    
    
    
    152Total Noninterest Income
    
    
    (266
    )
    
    
    338Noninterest Expense:Salaries and benefits
    
    
    745
    
    
    
    728Occupancy expenses
    
    
    94
    
    
    
    90Equipment expenses
    
    
    147
    
    
    
    153Other expenses
    
    
    492
    
    
    
    386Total Noninterest Expenses
    
    
    1,478
    
    
    
    1,357Income before Income Taxes
    
    
    106
    
    
    
    826Income Tax Expense
    
    
    148
    
    
    
    225Net Income (Loss)
    
    $
    (42
    )
    
    $
    601Earnings Per ShareNet income
    
    $
    (.05
    )
    
    $
    .68Weighted Average Shares Outstanding
    
    
    871,064
    
    
    
    880,212




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##### Table of Contents



Allegheny Bancshares, Inc.
Consolidated Balance Sheets  (In thousands, except for share and per share information)
 March 31, 2009
    
    
    December 31, 2008Unaudited
    
    
    AuditedASSETSCash and due from banks
    
    $
    5,811
    
    
    $
    2,562Federal funds sold
    
    
    0
    
    
    
    1,570Interest bearing deposits in banks
    
    
    4,020
    
    
    
    4,637Investment securities available for sale
    
    
    24,921
    
    
    
    25,685Restricted equity securities
    
    
    747
    
    
    
    1,351Loans receivable, net of allowance for loan
losses of $1,304 and $1,396 respectively
    
    
    158,446
    
    
    
    156,982Bank premises and equipment, net
    
    
    6,177
    
    
    
    6,249Interest receivable
    
    
    1,246
    
    
    
    1,276Bank owned life insurance
    
    
    3,735
    
    
    
    3,693Other assets
    
    
    1,349
    
    
    
    725Total Assets
    
    $
    206,452
    
    
    $
    204,730LIABILITIESDepositsNoninterest bearing demand
    
    $
    20,110
    
    
    $
    20,197Interest bearingDemand
    
    
    19,535
    
    
    
    18,985Savings
    
    
    26,982
    
    
    
    28,567Time deposits over $100,000
    
    
    30,794
    
    
    
    28,211Other time deposits
    
    
    73,960
    
    
    
    71,280Total Deposits
    
    
    171,381
    
    
    
    167,240Accrued expenses and other liabilities
    
    
    824
    
    
    
    841Short-term borrowings
    
    
    1,379
    
    
    
    3,569Long-term debt
    
    
    5,865
    
    
    
    5,920Total Liabilities
    
    
    179,449
    
    
    
    177,570STOCKHOLDERS EQUITYCommon stock; $1 par value, 2,000,000 shares
Authorized, 900,000 issued
    
    
    900
    
    
    
    900Additional paid in capital
    
    
    900
    
    
    
    900Retained earnings
    
    
    26,589
    
    
    
    26,631Accumulated other comprehensive income
    
    
    233
    
    
    
    320Treasury stock (at cost, 29,277 shares in 2009 and
28,767 shares in 2008)
    
    
    (1,619
    )
    
    
    (1,591
    )Total Stockholders Equity
    
    
    27,003
    
    
    
    27,160Total Liabilities and Stockholders Equity
    
    $
    206,452
    
    
    $
    204,730




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Allegheny Bancshares, Inc.
Consolidated Statements of Changes in Stockholders Equity  (In thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Paid In
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryTotal
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    StockBalance, December 31,
2008
    
    $
    27,160
    
    
    $
    900
    
    
    $
    900
    
    
    $
    26,631
    
    
    $
    320
    
    
    $
    (1,591
    )Comprehensive IncomeNet (Loss)
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    (42
    )Change in unrealized
gain on
available for sale
securities, net of
income tax effect of
$(45)
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87
    )Total Comprehensive
Loss
    
    
    (129
    )Purchase of Treasury
Stock
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28
    )Balance, March 31,
2009
    
    $
    27,003
    
    
    $
    900
    
    
    $
    900
    
    
    $
    26,589
    
    
    $
    233
    
    
    $
    (1,619
    )Balance, December 31,
2007
    
    $
    26,731
    
    
    $
    900
    
    
    $
    900
    
    
    $
    25,836
    
    
    $
    154
    
    
    $
    (1,059
    )Comprehensive IncomeNet income
    
    
    601
    
    
    
    
    
    
    
    
    
    
    
    601Change in unrealized
gain on
available for sale
securities, net of
income tax effect of
$110
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213Total Comprehensive
Income
    
    
    814Purchase of Treasury
Stock
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Balance, March 31,
2008
    
    $
    27,530
    
    
    $
    900
    
    
    $
    900
    
    
    $
    26,437
    
    
    $
    367
    
    
    $
    (1,074
    )




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Page 5 
 Allegheny Bancshares, Inc.
Consolidated Statements of Cash Flows  (In thousands)
 Three Months EndedMarch 31,2009
    
    
    2008Cash Flows from Operating Activities:Net (loss) income
    
    $
    (42
    )
    
    $
    601Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    77
    
    
    
    61Depreciation and amortization
    
    
    111
    
    
    
    114Net amortization of securities
    
    
    10
    
    
    
    Loss on sale of securities
    
    
    10Loss on restricted equity other than temporary impairment
    
    
    604Deferred income tax benefit
    
    
    (63
    )
    
    
    69Income from life insurance investment
    
    
    (42
    )
    
    
    (43
    )Net change in:Accrued income
    
    
    30
    
    
    
    (25
    )Other assets
    
    
    (274
    )
    
    
    (55
    )Accrued expense and other liabilities
    
    
    (260
    )
    
    
    257Net Cash Provided by Operating Activities
    
    
    161
    
    
    
    979Cash Flows from Investing Activities:Net change in federal funds sold
    
    
    1,570
    
    
    
    (982
    )Net change in interest bearing deposits in banks
    
    
    617
    
    
    
    (7,072
    )Proceeds from sales, calls and maturities
of available for sale securities
    
    
    611
    
    
    
    4,159Proceeds from maturity of held to maturity securities
    
    
    
    
    
    
    500Purchase of securities available for sale
    
    
    
    
    
    
    (1,047
    )Net increase in restricted investments
    
    
    
    
    
    
    (14
    )Net increase in loans
    
    
    (1,541
    )
    
    
    (2,030
    )Purchase of bank premises and equipment
    
    
    (38
    )
    
    
    (14
    )Net Cash Used in Investing Activities
    
    
    1,219
    
    
    
    (6,500
    )Cash Flows from Financing Activities:Net change in:Demand and savings deposits
    
    
    (1,121
    )
    
    
    1,692Time deposits
    
    
    5,263
    
    
    
    6,849Short-term borrowings
    
    
    (2,190
    )
    
    
    (26
    )Curtailments of long-term borrowings
    
    
    (55
    )
    
    
    (1,825
    )Purchase of treasury stock
    
    
    (28
    )
    
    
    (15
    )Net Cash Provided by Financing Activities
    
    
    1,869
    
    
    
    6,675Cash and due from banksNet increase (decrease) in cash and due from banks
    
    
    3,249
    
    
    
    1,154Cash and due from banks, beginning of period
    
    
    2,562
    
    
    
    2,846Cash and due from banks, end of period
    
    $
    5,811
    
    
    $
    4,000Supplemental Disclosure of Cash Paid During the Period for:Interest
    
    $
    1,019
    
    
    $
    1,218Income taxes
    
    $
    275
    
    
    $
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Page 6 
 
  NOTE 1 ACCOUNTING PRINCIPLES:
   NOTE 2 INVESTMENT SECURITIES:
  March 31, 2009
    
    
    December 31, 2008Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueSecurities available for sale:Mortgaged backed obligations
of federal agencies
    
    $
    2,676
    
    
    $
    2,725
    
    
    $
    2,905
    
    
    $
    2,935Government sponsored
enterprises
    
    
    5,980
    
    
    
    6,135
    
    
    
    6,008
    
    
    
    6,177Obligations of states and
political subdivisions
    
    
    15,278
    
    
    
    15,502
    
    
    
    15,652
    
    
    
    15,991Corporate obligations
    
    
    501
    
    
    
    428
    
    
    
    501
    
    
    
    451Other equities
    
    
    131
    
    
    
    131
    
    
    
    131
    
    
    
    131Total
    
    $
    24,566
    
    
    $
    24,921
    
    
    $
    25,197
    
    
    $
    25,685
  NOTE 3 RESTRICTED EQUITY SECURITIES:




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Page 7 
 NOTE 3 RESTRICTED EQUITY SECURITIES (CONTINUED):
  NOTE 4 LOANS RECEIVABLE:
  March 31,
    
    
    December 31,2009
    
    
    2008Real estate loans
    
    $
    73,003
    
    
    $
    72,291Commercial and industrial loans
    
    
    71,571
    
    
    
    70,680Loans to individuals, primarily
collateralized by autos
    
    
    11,611
    
    
    
    11,779All other loans
    
    
    3,565
    
    
    
    3,628Total Loans
    
    
    159,750
    
    
    
    158,378Less allowance for loan losses
    
    
    1,304
    
    
    
    1,396Net Loans Receivable
    
    $
    158,446
    
    
    $
    156,982
 NOTE 5 ALLOWANCE FOR LOAN LOSSES:
  Three Months EndedMarch 31,2009
    
    
    2008Balance, beginning of period
    
    $
    1,396
    
    
    $
    1,186Provision charged to operating expenses
    
    
    77
    
    
    
    61Recoveries of loans charged off
    
    
    34
    
    
    
    40Loans charged off
    
    
    (203
    )
    
    
    (28
    )Balance, end of period
    
    $
    1,304
    
    
    $
    1,259
 NOTE 6 LONG TERM DEBT:




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Page 8 
 NOTE 7 BANK OWNED LIFE INSURANCE:
  NOTE 8 FAIR VALUE:
 Fair
Value Measurements,
     Investment securities available for sale:
 Restricted equity securities:
 Loans: Accounting by Creditors for Impairment of a Loan




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Page 9 
 NOTE 8 FAIR VALUE (CONTINUED):
  Other Real Estate Owned:
 NOTE 9 SUBSEQUENT EVENT  PURCHASE OF TWO BRANCH OFFICES:
 th
 NOTE 10 BENEFIT PLANS:
 Executive Performance Driven Plan th
   Supplemental Retirement Agreement SERP




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Page 10 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    Forward Looking Statements
   
    
    General economic conditions, either nationally or within the Companys markets,
could be less favorable than expected;
    
    Changes in market interest rates could affect interest margins and profitability;
    
    Competitive pressures could be greater than anticipated; and
    
    Legal or accounting changes could affect the Companys results.
 Critical Accounting Policy




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Page 11 Allowance for Loan Losses and Provision for Loan Losses
   Results of Operations Overview
  Net Interest Income




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Allegheny Bancshares, Inc.
Net Interest Margin Analysis  (On a Fully Taxable Equivalent Basis)(Dollar Amounts in Thousands)
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Average
    
    
    Income/
    
    
    
    
    
    
    Average
    
    
    Income/Balance
    
    
    Expense
    
    
    Rates
    
    
    Balance
    
    
    Expense
    
    
    RatesInterest IncomeLoans 1,2
    
    $
    158,921
    
    
    $
    2,688
    
    
    
    6.77
    %
    
    $
    147,747
    
    
    $
    2,866
    
    
    
    7.76
    %Federal funds sold
    
    
    90
    
    
    
    0
    
    
    
    0.00
    %
    
    
    1,654
    
    
    
    15
    
    
    
    3.63
    %Interest bearing deposits
    
    
    3,845
    
    
    
    28
    
    
    
    2.91
    %
    
    
    4,446
    
    
    
    41
    
    
    
    3.68
    %InvestmentsTaxable
    
    
    10,789
    
    
    
    103
    
    
    
    3.82
    %
    
    
    13,031
    
    
    
    148
    
    
    
    4.54
    %Nontaxable 2
    
    
    15,591
    
    
    
    226
    
    
    
    5.80
    %
    
    
    18,280
    
    
    
    268
    
    
    
    5.86
    %Total Earning Assets
    
    
    189,236
    
    
    
    3,045
    
    
    
    6.44
    %
    
    
    185,158
    
    
    
    3,338
    
    
    
    7.21
    %Interest ExpenseDemand deposits
    
    
    18,531
    
    
    
    41
    
    
    
    0.89
    %
    
    
    18,280
    
    
    
    47
    
    
    
    1.03
    %Savings
    
    
    27,499
    
    
    
    21
    
    
    
    0.31
    %
    
    
    32,537
    
    
    
    125
    
    
    
    1.54
    %Time deposits
    
    
    101,985
    
    
    
    883
    
    
    
    3.46
    %
    
    
    94,540
    
    
    
    1,076
    
    
    
    4.55
    %Short-term borrowings
    
    
    1,690
    
    
    
    1
    
    
    
    0.24
    %
    
    
    1,397
    
    
    
    8
    
    
    
    2.29
    %Long-term debt
    
    
    6,905
    
    
    
    73
    
    
    
    4.23
    %
    
    
    7,940
    
    
    
    98
    
    
    
    4.94
    %Total Interest BearingLiabilities
    
    $
    156,610
    
    
    $
    1,019
    
    
    
    2.60
    %
    
    $
    154,694
    
    
    $
    1,354
    
    
    
    3.50
    %Net Interest Margin 1
    
    
    
    
    
    
    2,026
    
    
    
    
    
    
    
    
    
    
    
    1,984Net Yield on InterestEarning Assets
    
    
    
    
    
    
    
    
    
    
    4.28
    %
    
    
    
    
    
    
    
    
    
    
    4.29
    %
 
 1
    
    Interest on loans includes loan fees2
    
    An incremental tax rate of 34% was used to calculate the tax equivalent income




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Noninterest Income
  Noninterest Expenses
   Income Tax Expense
  Loans and Provision for Loan Loss
  Loan Portfolio Risk Factors




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##### Table of Contents



March 31,
    
    
    December 31,2009
    
    
    2008Nonaccrual loans
    
    $
    55
    
    
    $
    659Restructured loans
    
    
    137
    
    
    
    139Loans delinquent 90 days or more
    
    
    408
    
    
    
    1,034Total Nonperforming Loans
    
    $
    600
    
    
    $
    1,832
 Deposits
  Borrowings
  Capital
  Uncertainties and Trends
  Liquidity and Interest Sensitivity




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Page 15   Allegheny Bancshares, Inc.  Interest Sensitivity Analysis  March 31, 2009
 0-3
    
    4-12
    
    1-5
    
    Over 5Months
    
    Months
    
    Years
    
    Years
    
    TotalUses of Funds:Loans
    
    
    18,171
    
    
    
    22,336
    
    
    
    58,066
    
    
    
    61,177
    
    
    
    159,750Federal funds soldInterest bearing deposits
    
    
    3,511
    
    
    
    
    
    
    
    509
    
    
    
    
    
    
    
    4,020Investment securities
    
    
    503
    
    
    
    1,665
    
    
    
    14,724
    
    
    
    8,029
    
    
    
    24,921Restricted Investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    747
    
    
    
    747Total
    
    
    22,185
    
    
    
    24,001
    
    
    
    73,299
    
    
    
    69,953
    
    
    
    189,438Sources of Funds:Deposits:Interest bearing demand
    
    
    19,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,535Savings
    
    
    26,982
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,982Time deposits over $100,000
    
    
    2,517
    
    
    
    16,262
    
    
    
    9,388
    
    
    
    2,627
    
    
    
    30,794Other time deposits
    
    
    10,728
    
    
    
    30,619
    
    
    
    23,013
    
    
    
    9,600
    
    
    
    73,960Short-term borrowings
    
    
    1,379
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,379Long-term debt
    
    
    56
    
    
    
    1,172
    
    
    
    1,668
    
    
    
    2,969
    
    
    
    5,865Total
    
    
    61,197
    
    
    
    48,053
    
    
    
    34,069
    
    
    
    15,196
    
    
    
    158,515Discrete Gap
    
    
    (39,012
    )
    
    
    (24,052
    )
    
    
    39,230
    
    
    
    54,757Cumulative Gap
    
    
    (39,012
    )
    
    
    (63,064
    )
    
    
    (23,834
    )
    
    
    30,923Ratio of Cumulative Gap
To Total Earning Assets
    
    
    -20.53
    %
    
    
    -33.18
    %
    
    
    -12.54
    %
    
    
    16.32
    %




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Page 16  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
  
 Part II. Other Information
 
 Item 1. Legal Proceedings 




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Page 17 
 Item 2. Changes in Securities 
  Total Number
    
    AverageOf shares
    
    Price perDate
    
    Purchased
    
    ShareMarch 03, 2009
    
    
    500
    
    
    $
    60.00March 11, 2009
    
    
    500
    
    
    $
    60.00
 
 Item 3. Defaults Upon Senior Securities 
  
 Item 4. Submission of Matters to a Vote of Security Holders 
  
 Item 5. Other Information 
  
 Item 6. Exhibits
  No.
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith).32
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
  No.
    
    Description
    
    Exhibit Number3.1
    
    Articles of Incorporation  Allegheny Bancshares, Inc.
    
    E2
  No.
    
    Description
    
    Exhibit Number3.3
    
    Bylaws of Allegheny Bancshares, Inc.
    
    3.3




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##### Table of Contents



Page 18 
 SIGNATURE
  ALLEGHENY BANCSHARES, INC.By:
    /s/ WILLIAM A. LOVINGWilliam A. Loving, Jr.Executive Vice President and
Chief Executive OfficerBy:
    /s/ L. KIRK BILLINGSLEYL. Kirk BillingsleyChief Financial Officer