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 Pursuant to ss. 240.14a-12
COMMUNITY FIRST BANCORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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 transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid
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[ ] 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:
COMMUNITY FIRST BANCORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of the Shareholders of Community
First Bancorporation will be held at the Seneca Office of Community First Bank,
449 Highway 123 Bypass, Seneca, South Carolina, on Tuesday, April 25, 2006, at
1:30 p.m., for the following purposes:
(1) To elect four directors to each serve a three-year term; and
(2) To act upon other such matters as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 1, 2006,
are entitled to notice of and to vote at the meeting. In order that the meeting
can be held, and a maximum number of shares can be voted, whether or not you
plan to be present at the meeting in person, please fill in, date, sign and
promptly return the enclosed form of proxy. The Company's Board of Directors
unanimously recommends a vote FOR approval of all of the proposals presented.
Returning the signed proxy will not prevent a record owner of shares
from voting in person at the meeting.
Included herewith is the Company's 2006 Proxy Statement. Also included
is the Company's 2005 Annual Report to Shareholders.
By Order of the Board of Directors
March 31, 2006 Frederick D. Shepherd, Jr.
President
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PROXY STATEMENT
COMMUNITY FIRST BANCORPORATION
3685 Blue Ridge Boulevard
Walhalla, South Carolina 29691
(864) 638-2105
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Community First Bancorporation (the
"Company") for use at the Annual Meeting of Shareholders to be held at 1:30 p.m.
on Tuesday, April 25, 2006 in Community First Bank's Seneca Office, 449 Highway
123 Bypass, Seneca, South Carolina. A Notice of Annual Meeting is attached
hereto, and a form of proxy is enclosed. This statement was first mailed to
shareholders on or about March 31, 2006, in connection with the solicitation.
The cost of this solicitation is being paid by the Company. The only method of
solicitation to be employed, other than use of the proxy statement, is personal
contact, including contact by telephone or other electronic means, by directors
and regular employees of the Company.
ANNUAL REPORT
The Annual Report to Shareholders covering the Company's fiscal year
ended December 31, 2005, including financial statements, is enclosed herewith.
Such Annual Report to Shareholders does not form any part of the material for
the solicitation of proxies.
VOTING PROCEDURES
Voting
Shareholders who hold their shares of record in their own names can
vote their shares by marking the enclosed proxy form, dating it, signing it, and
returning it to the Company in the enclosed postage-paid envelope. Shareholders
of record can also attend the Annual Meeting and vote in person. Shareholders
who hold their shares in street name with a broker or other nominee can direct
their vote by submitting voting instructions to the broker or nominee in
accordance with the procedure on the voting card provided by the broker or
nominee. Shareholders who hold their shares in street name may attend the Annual
Meeting, but may not vote in person without a proxy appointment from a
shareholder of record.
Revocation of Proxy
Any record shareholder who executes and delivers a proxy has the right
to revoke it at any time before it is voted. The proxy may be revoked by a
record shareholder by delivering to Frederick D. Shepherd, Jr., President,
Community First Bancorporation, 3685 Blue Ridge Boulevard, Walhalla, South
Carolina 29691, or by mailing to Mr. Shepherd at Post Office Box 1097, Walhalla,
South Carolina 29691, an instrument which by its terms revokes the proxy. The
proxy may also be revoked by a record shareholder by delivery to the Company of
a duly executed proxy bearing a later date. Written notice of revocation of a
proxy or delivery of a later dated proxy will be effective upon receipt thereof
by the Company. Attendance at the Annual Meeting will not in itself constitute
revocation of a proxy. However, any record shareholder who desires to do so may
attend the meeting and vote in person in which case the proxy will not be used.
Shareholders who hold their shares in street name with a broker or other nominee
may change or revoke their proxy instructions by submitting new voting
instructions to the broker or other nominee.
Quorum and Method of Counting Votes
At the close of business on March 1, 2006, there were outstanding
2,798,409 shares of the Company's common stock (no par value). Each share
outstanding will be entitled to one vote upon each matter submitted at the
meeting. Only shareholders of record at the close of business on March 1, 2006
(the "Record Date"), shall be entitled to notice of and to vote at the meeting.
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A majority of the shares entitled to be voted at the annual meeting
constitutes a quorum. If a share is represented for any purpose at the annual
meeting by the presence of the registered owner or a person holding a valid
proxy for the registered owner, it is deemed to be present for purposes of
establishing a quorum. Therefore, valid proxies which are marked "Abstain" or
"Withhold" and shares that are not voted, including proxies submitted by brokers
that are the record owners of shares (so-called "broker non-votes"), will be
included in determining the number of votes present or represented at the annual
meeting. If a quorum is not present or represented at the meeting, the
shareholders entitled to vote, present in person or represented by proxy, have
the power to adjourn the meeting from time to time. If the meeting is to be
reconvened within thirty days, no notice of the reconvened meeting will be given
other than an announcement at the adjourned meeting. If the meeting is to be
adjourned for thirty days or more, notice of the reconvened meeting will be
given as provided in the Bylaws. At any reconvened meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally noticed.
If a quorum is present at the Annual Meeting, directors will be elected
by a plurality of the votes cast by shares present and entitled to vote at the
annual meeting. "Plurality" means that if there are more nominees than positions
to be filled, the individuals who receive the largest number of votes cast for
the positions to be filled will be elected as directors. Cumulative voting is
not permitted. Votes that are withheld or that are not voted in the election of
directors will have no effect on the outcome of election of directors. If a
quorum is present, all other matters that may be considered and acted upon at
the Annual Meeting will be approved if the number of shares of Common Stock
voted in favor of the matter exceeds the number of shares of Common Stock voted
against the matter.
Actions to be Taken by the Proxies
The persons named as proxies were selected by the Board of Directors of
the Company. When the form of proxy enclosed is properly executed and returned,
the shares that it represents will be voted at the meeting. Each proxy, unless
the shareholder otherwise specifies therein, will be voted "FOR" the election of
the persons named in this Proxy Statement as the Board of Directors' nominees
for election to the Board of Directors. In each case where the shareholder has
appropriately specified how the proxy is to be voted, it will be voted in
accordance with his specifications. As to any other matter of business which may
be brought before the Annual Meeting, a vote may be cast pursuant to the
accompanying proxy in accordance with the best judgment of the persons voting
the same, but the Board of Directors does not know of any such other business.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit proposals for the consideration of
the shareholders at the 2007 Annual Meeting may do so by mailing them in writing
to Frederick D. Shepherd, Jr., President, Community First Bancorporation, Post
Office Box 1097, Walhalla, South Carolina 29691, or by delivering them in
writing to Mr. Shepherd at the Company's main office, 3685 Blue Ridge Boulevard,
Walhalla, South Carolina 29691. Such written proposals must be received prior to
December 1, 2006, for inclusion, if otherwise appropriate, in the Company's 2007
Proxy Statement and form of Proxy relating to that meeting. With respect to any
shareholder proposal not received by the Company prior to February 14, 2007,
proxies solicited by management of the Company will be voted on the proposal in
the discretion of the designated proxy agents.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
Set forth below is information as of March 1, 2006 about persons who
are currently beneficial owners of 5% or more of the Company's common stock.
Name and Number of Shares % of outstanding
Address Beneficially owned common stock
Frederick D. Shepherd, Jr. 236,222(1) 8.1%
P. O. Box 1097
Walhalla, S.C. 29691
James E. Turner 185,558(2) 6.5%
P. O. Box 367
Seneca, S.C. 29679
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(1) Includes presently exercisable options to purchase 77,703 shares.
(2) Includes presently exercisable options to purchase 19,099 shares.
The number of shares owned, and the percentage of outstanding common
stock such number represents, for all directors, nominees and officers of the
Company is set forth below under "MANAGEMENT OF THE COMPANY."
ELECTION OF DIRECTORS
At the Annual Meeting, four directors are to be elected to hold office
for the next three years, their terms expiring at the 2009 Annual Meeting of
Shareholders, or until their successors are duly elected and qualified. Pursuant
to the bylaws of the Company, the Board of Directors acts as a nominating
committee. The Board has nominated Larry S. Bowman, M.D., William M. Brown, John
R. Hamrick and Frederick D. Shepherd, Jr. each to serve a three year term. Any
other nominations must be made in writing and delivered to the President of the
Company in accordance with the procedures set forth below under "MANAGEMENT OF
THE COMPANY - Committees of the Board of Directors - Nominating Committee."
It is the intention of the persons named in the enclosed form of proxy
to vote for the election as directors of Messrs. Bowman, Brown, Hamrick and
Shepherd. Unless a contrary specification is indicated, the enclosed form of
proxy will be voted FOR such nominees. In the event that any such nominee is not
available to serve, the persons acting under the proxy intend to vote for the
election, in his stead, of such other person as the Board of Directors of the
Company may recommend. The Board of Directors has no reason to believe that any
of the nominees will be unable or unwilling to serve if elected.
MANAGEMENT OF THE COMPANY
Management Security Ownership, Positions with the Company and Terms of Office
The table below shows as to each director and nominee his name and
positions held with the Company, the period during which he has served as a
director of the Company, and the number of shares of the Company's common stock
owned by him at March 1, 2006. Directors of the Company serve until the annual
meeting for the year indicated or until their successors are elected and
qualified.
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NUMBER OF % OF SHARES POSITIONS WITH DIRECTOR
AGE SHARES(1) OUTSTANDING THE COMPANY SINCE*
--- --------- ----------- ----------- ------
Nominees for re-election to the Board of Directors for terms of office
to continue until the Annual Meeting of Shareholders in 2009 are:
Larry S. Bowman, M.D. 57 82,336(2) 2.9% Vice Chairman 1989
Seneca, S.C. and Director
William M. Brown 60 93,363(3) 3.3% Director and 1989
Salem, S.C. Secretary
John R. Hamrick 58 89,420 (4) 3.2% Director 1989
Seneca, S.C.
Frederick D. Shepherd, Jr. 65 236,222 (5) 8.1% Director, President, 1989
Walhalla, S.C. Chief Executive Officer
and Treasurer
Members of the Board of Directors whose terms of office will continue
until the Annual Meeting of Shareholders in 2008 are:
James E. McCoy 68 109,765 (6) 3.8% Chairman and 1989
Walhalla, S.C. Director
James E. Turner 69 185,558 (7) 6.5% Director 1989
Seneca, S.C.
Charles L. Winchester 65 123,482 (8) 4.3% Director 1989
Sunset, S.C.
Members of the Board of Directors whose terms of office will continue
until the Annual Meeting of Shareholders in 2007 are:
Robert H. Edwards 75 101,810(9) 3.6% Director 1989
Walhalla, S.C.
Blake L. Griffith 70 134,490(10) 4.7% Director 1995**
Walhalla, S.C.
Gary V. Thrift 45 89,190(11) 3.1% Director 1995***
Seneca, S.C.
All Directors, nominees
and executive officers
as a group (10 persons) 1,245,636(12) 40.6%
Except as otherwise indicated, to the knowledge of management, all shares are
owned directly with sole voting power.
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*Includes service as a director of Community First Bank prior to its acquisition
by the Company in 1997.
**Mr. Griffith previously served on the Board of Directors from 1989 to 1993.
***Mr. Thrift previously served on the Board of Directors from 1989 to 1992.
(1) Includes for each non-employee director 19,099 shares subject to currently
exercisable options.
(2) Includes 36,103 shares jointly owned with Mary M. Bowman, Dr. Bowman's
wife; 14,484 shares owned by Mary M. Bowman; 1,541 shares owned by Dr.
Bowman's daughter; and 10,685 shares held as trustee for Dr. Bowman's
children.
(3) Includes 3,282 shares owned by Annie B. Brown, Mr. Brown's wife.
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(4) Includes 2,318 shares jointly owned with Frances R. Hamrick, Mr. Hamrick's
wife; 5,166 shares owned by Mr. Hamrick's Defined Benefit Plan; 987 shares
held as trustee for Mr. Hamrick's daughters; 5,922 shares owned by Mrs.
Hamrick's Defined Benefit Plan; and 2,510 shares owned by Mr. Hamrick's
daughters.
(5) Includes presently exercisable options to purchase 77,703 shares.
(6) Includes 90,666 shares over which Mr. McCoy shares voting control with his
wife, Charlotte B. McCoy.
(7) Includes 20,553 shares owned by Patricia S. Turner, Mr. Turner's wife.
(8) Includes 40,384 shares jointly owned with Joan O. Winchester, Mr.
Winchester's wife; 2,997 shares owned by Joan O. Winchester; and 1,785
shares held as custodian for Mr. Winchester's grandchildren.
(9) Includes 26,022 shares jointly owned with Ruth D. Edwards, Mr. Edward's
wife; 6,441 shares owned by Ruth D. Edwards; and 9,717 shares owned by
Robert H. Edwards LLC.
(10) Includes 16,864 shares owned by Susan P. Griffith, Mr. Griffith's wife; and
98,375 shares jointly owned with Susan P. Griffith.
(11) Includes 19,229 shares held as guardian for Mr. Thrift's children; 383
shares owned by Catherine Thrift, Mr. Thrift's wife; and 768 shares owned
jointly with Catherine Thrift.
(12) Includes presently exercisable options to purchase 249,509 shares.
Directors' Business Experience For The Past Five Years
Larry S. Bowman, M.D. Orthopedic surgeon with Blue Ridge
Orthopedic Association, P.A.
William M. Brown President and Chief Executive Officer of
Lindsay Oil Company, Inc.
Robert H. Edwards President of Edwards Auto Sales.
Blake L. Griffith President of Griffith Properties, LLC since
September 1998; formerly President and Chief
Executive Officer of Next Day Apparel, Inc.
John R. Hamrick President of Lake Keowee Real Estate, Inc.;
President of John Hamrick Real Estate.
James E. McCoy Plant Manager of Timken Company.
Frederick D. Shepherd, Jr. President, Chief Executive Officer and
Treasurer of Community First Bank since
1989; President, Chief Executive Officer and
Treasurer of the Company since May, 1997.
Gary V. Thrift President, Thrift Development Corporation
(general contractor), since February 1996;
Vice President, Thrift Group, Inc. (building
supplies), since July, 2001.
James E. Turner Chairman of the Board of Turner's Jewelers,
Inc.
Charles L. Winchester President, Winchester Lumber Company, Inc.
of Salem, South Carolina; Vice President,
Boones Lumber Company.
Neither the principal executive officer nor any directors are related
by blood, marriage or adoption in the degree of first cousin or closer.
Meetings of the Board of Directors and Director Attendance at the Annual Meeting
of Shareholders
During the last full fiscal year, ending December 31, 2005, the Board
of Directors of the Company met four times, including regular and special
meetings. Each director attended at least 75% of the total number of meetings of
the Board of Directors and committees of which he was a member.
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The Company encourages, but does not require, its directors to attend
annual meetings of shareholders. Last year, all of the Company's directors
attended the annual meeting of shareholders.
Committees of the Board of Directors
Nominating Committee
The Board of Directors does not have a separate nominating committee.
Rather, the entire Board of Directors acts as nominating committee. Based on the
Company's size, the small geographic area in which it does business and the
desirability of directors being a part of the communities served by the Company
and familiar with the Company's customers, the Board of Directors does not
believe the Company would derive any significant benefit from a separate
nominating committee. The members of the Board of Directors are not all
independent as defined in The Nasdaq Stock Market, Inc. Marketplace Rules, as
modified or supplemented. The Company does not have a Nominating Committee
charter.
In recommending director candidates, the Board takes into consideration
such factors as it deems appropriate based on the Company's current needs. These
factors may include diversity, age, skills such as understanding of banking and
general finance, decision-making ability, inter-personal skills, experience with
businesses and other organizations of comparable size, community activities and
relationships, and the interrelationship between the candidate's experience and
business background, and other Board members' experience and business
background, as well as the candidate's ability to devote the required time and
effort to serve on the Board.
The Board will consider for nomination by the Board director candidates
recommended by shareholders if the shareholders comply with the following
requirements. If a shareholder wishes to recommend a director candidate to the
Board for consideration as a Board of Directors' nominee, such shareholder must
submit in writing to the Board the recommended candidate's name, a brief resume
setting forth the recommended candidate's business and educational background
and qualifications for service, and a notarized consent signed by the
recommended candidate stating the recommended candidate's willingness to be
nominated and to serve. This information must be delivered to the Chairman of
the Company at the Company's address and must be received no later than January
15 in any year to be considered as a potential Board of Directors' nominee at
the Annual Meeting of Shareholders for that year. The Board may request further
information if it determines a potential candidate may be an appropriate
nominee. Director candidates recommended by shareholders that comply with these
requirements will receive the same consideration that the committee's candidates
receive.
Director candidates recommended by shareholders will not be considered
for recommendation by the Board as potential Board of Directors' nominees if the
shareholder recommendations are received later than January 15 in any year.
Shareholders may also nominate director candidates as shareholder nominees for
election at the annual meeting, but no person who is not already a director may
be elected at an annual meeting of shareholders unless that person is nominated
in writing not less than 14 days nor more than 50 days prior to the meeting.
Such nominations, other than those made by or on behalf of the existing
management of the Company, must be made in writing and must be delivered or
mailed to the President of the Company, not less than 14 days prior to any
meeting of Shareholders called for the election of Directors. Such notification
must contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the total number of shares of
capital stock of the Company that will be voted for each proposed nominee; (d)
the name and residence address of the notifying shareholder; and (e) the number
of shares of capital stock of the Company owned by the notifying shareholder.
Nominations not made in accordance with these requirements may be disregarded by
the presiding officer of the meeting, and upon his instructions, the vote
tellers shall disregard all votes cast for each such nominee.
Audit Committee
The Company has an Audit Committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee
8
is responsible for seeing that audits of the Company are conducted annually. A
firm of certified public accountants is employed for that purpose by the Board
of Directors upon recommendation of the Audit Committee. Reports on these audits
are reviewed by the Committee upon receipt and a report thereon is made to the
Board at its next meeting. The Audit Committee is comprised of Messrs. Edwards,
Hamrick, Thrift and Winchester. Each member of the Audit Committee is
independent as defined in The Nasdaq Stock Market, Inc. Marketplace Rules, as
modified or supplemented. The Audit Committee met four times in 2005. The Audit
Committee does not have a written charter.
Compensation Committee
Although the Company does not have a standing compensation committee of
the Board of Directors or a committee serving similar functions, Community First
Bank has a compensation committee that makes recommendations to the Board of
Directors of the Bank concerning compensation of the Chief Executive Officer of
the Bank and the Company. The members of the Bank's Compensation Committee are
Messrs. McCoy (chair), Brown, Bowman and Winchester. This committee met once in
2005.
Shareholder Communications with the Board of Directors
Any shareholder who wishes to send communications to the Board of
Directors should mail them addressed to the intended recipient by name or
position in care of: Corporate Secretary, Community First Bancorporation, 3685
Blue Ridge Boulevard, Walhalla, South Carolina 29691. Upon receipt of any such
communications, the Corporate Secretary will determine the identity of the
intended recipient and whether the communication is an appropriate shareholder
communication. The Corporate Secretary will send all appropriate shareholder
communications to the intended recipient. An "appropriate shareholder
communication" is a communication from a person claiming to be a shareholder in
the communication the subject of which relates solely to the sender's interest
as a shareholder and not to any other personal or business interest.
In the case of communications addressed to the Board of Directors, the
Corporate Secretary will send appropriate shareholder communications to the
Chairman of the Board. In the case of communications addressed to the
independent or outside directors, the Corporate Secretary will send appropriate
shareholder communications to the Chairman of the Audit Committee. In the case
of communications addressed to committees of the board, the Corporate Secretary
will send appropriate shareholder communications to the Chairman of such
committee.
MANAGEMENT COMPENSATION
Executive Officer Compensation
The following table sets forth information about the Chief Executive
Officer's compensation. No other executive officers earned $100,000 or more
during the year ended December 31, 2005.
Summary Compensation Table
Long Term
Compensation
Annual Compensation(1) Awards
Number of
Securities
Underlying All Other
Options Compen-
Name and Principal Position Year Salary(2) Bonus Awarded(3) sation(4)
--------------------------- ---- --------- ----- -------------- ---------
Frederick D. Shepherd, Jr. 2005 $274,108 $62,937 6,300 $34,199
President, Chief Executive 2004 $274,789 $54,081 13,530 $34,378
Officer and Treasurer 2003 $262,387 $44,721 -0- $34,093
---------------
(1) The Company pays club dues for Mr. Shepherd, provides him with the use of a
Company car for business and personal use and pays attorneys' fees for
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estate planning services. The total of such benefits paid for Mr. Shepherd
was less than 10% of his annual salary and bonus payments. Mr. Shepherd
participates in broad-based life and medical insurance plans that are
available generally to all employees on the same terms generally available
to all employees.
(2) Includes $9,300 of director's fees in 2005; $10,700 in 2004, and $10,000 in
2003.
(3) Adjusted for a 5% stock dividend effective November 28, 2003, a 10% stock
dividend effective November 30, 2004 and a 5% stock dividend effective
November 30, 2005.
(4) In 2005, includes $7,000 of matching contributions paid by the Company
pursuant to the 401(k) plan; term life insurance premiums of $3,643; and
split dollar life insurance premiums of $23,556.
Option Grants in Last Fiscal Year
The following table sets forth information about options granted to the
Chief Executive Officer in 2005. The amounts in the table have been adjusted to
reflect the 5% stock dividend effected in 2005.
Individual Grants
-----------------
Number of % of Total
Securities Options Potential Realizable Value at
Underlying Granted to Exercise Assumed Annual Rates of Stock
Options Employees Price Expiration Price Appreciation for 10-Year
Name Granted(1) in 2005 (per share) Date Option Term(2)
---- ---------- ------- ----------- ---- --------------
5% 10%
------ -------
Frederick D. Shepherd, Jr. 6,300 39.7% $18.10 4/26/2015 $71,713 $181,734
--------------------
(1) The options were awarded on April 26, 2005 and became/become exercisable in
1,260 share increments on April 26, 2005, 2006, 2007, 2008, and 2009.
(2) The amounts in these columns are the result of calculations based on the
assumption that the market price of the Common Stock will appreciate in
value from the date of grant to the end of the ten-year option term at
rates of 5% and 10% per year. The 5% and 10% annual appreciation
assumptions are required by the Securities and Exchange Commission; they
are not intended to forecast possible future appreciation, if any, of the
Company's stock price.
Option Exercises in Last Fiscal Year and Fiscal Year End
Options Outstanding and Values
The following table presents information about options held by Mr.
Shepherd at December 31, 2005. This information has been adjusted to reflect
stock dividends and splits effected in 2005 and earlier.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Value Options 12/31/05 Options 12/31/05(1)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
Frederick D.
Shepherd, Jr. - - 77,702 14,075 $730,656 $41,840
(1) Based on a price of $18.32 per share, the weighted average price at which
the Company's Common Stock has traded during the past year, and exercise
prices ranging from $5.91 to $18.10 per share. The weighted average price
has been adjusted to reflect the 5% stock dividend effected in 2005. The
Common Stock is not, however, widely traded and such price may not be
indicative of market value.
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1989 Stock Option Plan and 1998 Stock Option Plan
The Company has adopted two stock option plans, both of which have been
approved by the shareholders. The 1989 Stock Option Plan reserved 431,735 shares
of the Company's Common Stock for issuance to eligible employees upon exercise
of options. The 1998 Stock Option Plan reserved 617,720 shares of the Company's
Common Stock for issuance to eligible employees and directors upon exercise of
options. Under both plans, the Board of Directors or a committee appointed by
the Board of Directors, determines the persons to whom options will be granted
and sets the terms of the options within the parameters of the plans. At
December 31, 2005, under the 1989 Plan, options to purchase 61,420 shares of
Common Stock were outstanding, all of which were exercisable. The exercisable
options have an average exercise price of $5.13 per share. The 1989 Plan had a
ten year term and has, therefore, terminated. Although options may still be
exercised under the 1989 Plan, no further options may be granted under the 1989
Plan. At December 31, 2005, under the 1998 Plan, options to purchase 366,859
shares of Common Stock were outstanding, 193,914 shares were available for grant
pursuant to options, and options to purchase 288,270 shares were exercisable.
The exercisable options have an average exercise price of $12.48 per share.
The numbers of shares and average prices in this section have been
retroactively adjusted to reflect stock dividends and splits effective through
December 31, 2005.
Shareholder Return Performance Graph
The Company is required to provide its shareholders with a line graph
comparing the Company's cumulative total shareholder return with a performance
indicator of the overall stock market and either a published industry index or a
Company-determined peer comparison. Shareholder return (measured through
increases in stock price and payment of dividends) is often a benchmark used in
assessing corporate performance and the reasonableness of compensation paid to
executive officers.
The performance graph below compares the Company's cumulative total
return over the most recent five year period with the Russell 2000 Index
(reflecting overall stock market performance for small cap stocks) and the SNL
100-500 OTC BB and Pink Banks Index (reflecting changes in overall stock market
performance for a national group of 382 banking companies with asset sizes
ranging from $100 - $500 million, the trades of which are reported either on the
OTC Bulletin Board or in the Pink Sheets). Returns are shown on a total return
basis, assuming the reinvestment of dividends and a beginning stock index price
of $100 per share. Values presented for the Company's common stock are based on
information compiled by SNL Financial, LC, which prepared the performance graph,
and are based on limited transactions.
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Community First Bancorporation
Period Ending
--------------------------------------------------------------------------
Index 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
----------------------------------- ------------ ----------- ----------- ------------ ----------- ------------
Community First Bancorporation 100.00 117.33 113.81 133.31 157.86 168.56
Russell 2000 100.00 102.49 81.49 120.00 142.00 148.46
SNL $100M-$500M OTC-BB and Pink Banks
Index 100.00 115.19 138.18 187.69 226.86 251.93
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Compensation Committee Report on Executive Compensation
The Compensation Committee follows a policy of providing Mr. Shepherd
with a total compensation package consisting of salary, bonuses, insurance and
other benefits and stock options. The Committee used the services of Calvert
Consulting, a compensation consulting firm, to assist it in setting Mr.
Shepherd's 2005 compensation. The consultant evaluates executive performance
based on a national peer group of all commercial banks with assets between $300
million and $1 billion. The Compensation Committee used this peer group
information for comparison to the Company in setting Mr. Shepherd's 2005 salary.
Based on these criteria, Mr. Shepherd's salary for 2005 was set at approximately
the same level as the 2004 level.
In determining bonuses to be awarded to Mr. Shepherd, the Committee
takes into account the Company's overall success as measured by increases in its
net income relative to the prior year and increases in market share as evidenced
by growth in total assets. The bonus awarded to Mr. Shepherd in 2005 reflected
the Company's increased net income and growth in assets for 2005 as compared to
2004. Stock options awarded to Mr. Shepherd in 2005 were for his service on the
board of directors and were set at a level believed by the Committee to be
appropriate to keeping his interests aligned with those of the shareholders.
Insurance and other benefits are set by the Committee at levels believed to be
competitive with other employers and to advance the Committee's goal of
retaining Mr. Shepherd.
James E. McCoy (Chair) Larry S. Bowman William M. Brown Charles L. Winchester
Compensation of Directors
Directors receive compensation of $700 for each regular meeting of the
Board of Directors of the Company attended and $600 for each regular meeting of
the Board of Directors of the Bank attended. All non-employee directors also
receive an annual grant of options to purchase 2,000 shares of the Company's
common stock at an exercise price equal to the market value at the date of
grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Community First Bank, in the ordinary course of its business, makes
loans to and has other transactions with directors, officers, principal
shareholders, and their associates. Loans are made on substantially the same
terms, including rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features. The Bank
expects to continue to enter into transactions in the ordinary course of
business on similar terms with directors, officers, principal stockholders, and
their associates. The aggregate dollar amount of such loans outstanding at
December 31, 2005 was $7,839,433. During 2005, $2,944,527 of new loans were made
and repayments totaled $3,985,703.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, its executive officers and certain individuals are required
to report periodically their ownership of the Company's Common Stock and any
changes in ownership to the Securities and Exchange Commission. Based on a
review of Section 16(a) reports available to the Company and written
representations of the persons subject to Section 16(a), it appears that each
director failed to timely file one Form 4 with respect to a grant of stock
options in 2005.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected J. W. Hunt and Company, LLP, Certified Public
Accountants with offices in Columbia, South Carolina, to serve as the Company's
independent certified public accountants for 2006. It is expected that
representatives from this firm will be present and available to answer
appropriate questions at the annual meeting, and will have the opportunity to
make a statement if they desire to do so.
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Fees Paid to Independent Auditors
Set forth below is information about fees billed by the Company's
independent auditors for audit services rendered in connection with the
consolidated financial statements and reports for the years ended December 31,
2005 and 2004, and for other services rendered during such years, on behalf of
the Company and the Bank, as well as all out-of-pocket expenses incurred in
connection with these services, which have been billed to the Company.
Audit Fees
Audit fees include fees billed for professional services rendered for
the audit of the Company's consolidated financial statements and review of the
interim condensed consolidated financial statements included in quarterly
reports, and services that are normally provided by the Company's independent
auditor in connection with statutory and regulatory filings or engagements, and
attest services, except those not required by statute or regulation. For the
years ended December 31, 2004 and 2005, respectively, J. W. Hunt and Company,
LLP billed the Company an aggregate of $41,250 and $43,050 for audit fees.
Audit-Related Fees
Audit-related fees include fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees". These services would include employee benefit plan audits, attest
services that are not required by statute or regulation, and consultations
concerning financial accounting and reporting standards. For the years ended
December 31, 2004 and 2005, respectively, J. W. Hunt and Company, LLP did not
bill the Company for any audit-related fees.
Tax Fees
Tax fees include fees for tax compliance/preparation and other tax
services. Tax compliance/preparation fees include fees billed for professional
services related to federal and state tax compliance. Fees for other tax
services include fees billed for other miscellaneous tax consulting and planning
and for individual income tax preparation. For the years ended December 31, 2004
and 2005, respectively, J. W. Hunt and Company, LLP, billed the Company an
aggregate of $6,750 and $7,250 for tax fees.
All Other Fees
All other fees would include fees for all services other than those
reported above. For the years ended December 31, 2004 and 2005, J. W. Hunt and
Company, LLP, did not bill the Company for any other fees.
In making its decision to recommend appointment of J. W. Hunt and
Company, LLP as the Company's independent auditors for the fiscal year ending
December 31, 2006, the Audit Committee considered whether services other than
audit and audit-related services provided by that firm are compatible with
maintaining the independence of J. W. Hunt and Company, LLP.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit Committee pre-approves all audit and permitted non-audit
services (including the fees and terms thereof) provided by the independent
auditors, subject to limited exceptions for non-audit services described in
Section 10A of the Securities Exchange Act of 1934, which are approved by the
Audit Committee prior to completion of the audit. The Committee may delegate to
one or more designated members of the Committee the authority to pre-approve
audit and permissible non-audit services, provided such pre-approval decision is
presented to the full Committee at its next scheduled meeting.
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General pre-approval of certain audit, audit-related and tax services
is granted by the Committee. The Committee subsequently reviews fees paid.
Specific pre-approval is required for all other services. During 2005, all audit
and permitted non-audit services were pre-approved by the Committee.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has reviewed and
discussed with management the Company's audited financial statements for the
year ended December 31, 2005. The Audit Committee has discussed with the
Company's independent auditors, J. W. Hunt and Company, LLP, the matters
required to be discussed by SAS 61, as modified or supplemented. The Audit
Committee has also received the written disclosures and the letter from J. W.
Hunt and Company, LLP, required by Independence Standards Board Standard No. 1,
as modified or supplemented, and has discussed with J. W. Hunt and Company, LLP,
their independence. Based on the review and discussions referred to above, the
Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2005 for filing with the Securities and Exchange
Commission.
Robert H. Edwards Gary V. Thrift
John R. Hamrick Charles L. Winchester
OTHER MATTERS
The Board of Directors knows of no other business to be presented at
the meeting of shareholders. If matters other than those described herein should
properly come before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote at such meeting in accordance with their best
judgment on such matters.
INCORPORATION BY REFERENCE
The "Compensation Committee Report on Executive Compensation," the
"Audit Committee Report" and the information set forth under the caption
"Shareholder Return Performance Graph" are not deemed to be filed with the
Securities and Exchange Commission and shall not be deemed incorporated by
reference into any prior or future filings made by the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates such
information by reference.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
Shareholders may obtain copies of the Company's Annual Report on Form
10-KSB required to be filed with the Securities and Exchange Commission for the
year ended December 31, 2005, free of charge by requesting such form in writing
from Frederick D. Shepherd, Jr., President, Community First Bancorporation, Post
Office Box 1097, Walhalla, South Carolina 29691. Copies may also be downloaded
from the Securities and Exchange Commission website at http://www.sec.gov.
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PROXY
COMMUNITY FIRST BANCORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - TUESDAY, APRIL 25, 2006
Gary V. Thrift or Benjamin L. Hiott, or either of them, with full power
of substitution, are hereby appointed as agent(s) of the undersigned to vote as
proxies for the undersigned at the Annual Meeting of Shareholders to be held on
April 25, 2006, and at any adjournment thereof, as follows:
1. ELECTION OF [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
DIRECTORS TO below (except any I have to vote for all nominees
HOLD OFFICE written below) below
FOR THREE
YEAR TERMS
Larry S. Bowman, M.D., William M. Brown, John R. Hamrick and Frederick D.
Shepherd, Jr.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL(S) WRITE THE
NOMINEE'S(S') NAME(S) ON THE LINE BELOW.
--------------------------------------------------------------------------------
2. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be
brought before the meeting.)
THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.
Please sign exactly as name appears below. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If more than one
trustee, all should sign. All joint owners must sign.
Dated: ------------------ ----------------------------------------
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