SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
(Amendment No. )
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[ ] 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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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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COMMUNITY FIRST BANCORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
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 28, 2009, 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.
You are only entitled to notice of and to vote at the meeting if you
were a shareholder of record at the close of business on March 2, 2009. 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.
Our 2009 Proxy Statement and 2008 Annual Report to Shareholders are
enclosed with this notice.
By Order of the Board of Directors
March 31, 2009 Frederick D. Shepherd, Jr.
President
COMMUNITY FIRST BANCORPORATION
449 Highway 123 ByPass
Seneca, South Carolina 29678
(864) 886-0206
PROXY STATEMENT
We are providing this proxy statement in connection with the
solicitation of proxies by the Board of Directors of Community First
Bancorporation for use at our Annual Meeting of Shareholders to be held at 1:30
p.m. on Tuesday, April 28, 2009 in Community First Bank's Seneca Office, 449
Highway 123 Bypass, Seneca, South Carolina. Throughout this Proxy Statement, we
use terms such as "we," "us," "our" and "our Company" to refer to Community
First Bancorporation, and terms such as "you" and "your" to refer to our
shareholders.
A Notice of Annual Meeting is attached to this Proxy Statement, and a
form of proxy is enclosed. We first began mailing this proxy statement to our
shareholders on or about March 31, 2009. We are paying the costs of this
solicitation. The only method of solicitation we plan to use, other than this
proxy statement, is personal contact, including contact by telephone or other
electronic means, by our directors and regular employees, who will not be
specially compensated for their services.
ANNUAL REPORT
The Annual Report to Shareholders covering our fiscal year ended
December 31, 2008, including financial statements, is enclosed with this proxy
statement. The Annual Report to Shareholders does not form any part of the
material for the solicitation of proxies.
VOTING PROCEDURES
Voting
If you hold your shares of record in your own name, you can vote your
shares by marking the enclosed proxy form, dating it, signing it, and returning
it to us in the enclosed postage-paid envelope. If you are a shareholder of
record, you can also attend the Annual Meeting and vote in person.
If you hold your shares in street name with a broker or other nominee,
you can direct your vote by submitting voting instructions to your broker or
nominee in accordance with the procedure on the voting card provided by your
broker or nominee. If you hold your shares in street name, you may attend the
Annual Meeting, but you may not vote in person without a proxy appointment from
a shareholder of record.
Revocation of Proxy
If you are a record shareholder and execute and deliver a proxy, you have
the right to revoke it at any time before it is voted by delivering to Frederick
D. Shepherd, Jr., President, Community First Bancorporation, 449 Highway 123
Bypass, Seneca, South Carolina 29678, or by mailing to Mr. Shepherd at Post
Office Box 459, Seneca, South Carolina 29679, an instrument which by its terms
revokes the proxy. If you are a record shareholder, you may also revoke your
proxy by delivering to us a duly executed proxy bearing a later date. Written
notice of your revocation of a proxy or delivery of a later dated proxy will be
effective when we receive it. Your attendance at the Annual Meeting will not in
itself constitute revocation of a proxy. However, if you are a record
shareholder and desire to do so, you may attend the meeting and vote in person
in which case the proxy will not be used.
If you hold your shares in street name with a broker or other nominee,
you may change or revoke your proxy instructions by submitting new voting
instructions to the broker or other nominee.
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Quorum and Method of Counting Votes
At the close of business on March 2, 2009, there were outstanding
3,751,757 shares of our common stock (no par value). Each share outstanding will
be entitled to one vote upon each matter submitted at the meeting. You are only
entitled to notice of and to vote at the meeting if you were a stockholder of
record at the close of business on March 2, 2009 (the "Record Date").
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, we will not give any notice of the reconvened
meeting other than an announcement at the adjourned meeting. If the meeting is
to be adjourned for thirty days or more, we will give notice of the reconvened
meeting 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 were more nominees than
positions to be filled, the individuals who received the largest number of votes
cast for the positions to be filled would be elected as directors. Because the
number of nominees for election at the 2009 Annual Meeting is the same as the
number of positions to be filled, it is expected that all nominees will be
elected. 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 our common stock voted in favor of the matter exceeds the number of
shares of our common stock voted against the matter.
Actions to be Taken by the Proxies
Our Board of Directors selected the persons named as proxies. When the
form of proxy enclosed is properly executed and returned, the shares that it
represents will be voted at the meeting. Unless you otherwise specify therein,
your proxy 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 you have appropriately specified how the proxy is
to be voted, it will be voted in accordance with your specifications. Our Board
of Directors is not aware of any other matters that may be presented for action
at the Annual Meeting of Shareholders, but if other matters do properly come
before the meeting, the persons named in the proxy intend to vote on such
matters in accordance with their best judgment.
SHAREHOLDER PROPOSALS
If you wish to submit proposals for the consideration of the shareholders
at the 2010 Annual Meeting, you may do so by mailing them in writing to
Frederick D. Shepherd, Jr., President, Community First Bancorporation, Post
Office Box 459, Seneca, South Carolina 29679, or by delivering them in writing
to Mr. Shepherd at our main office, 449 Highway 123 Bypass, Seneca, South
Carolina 29678. You must send or deliver such written proposals in time for us
to receive them prior to December 1, 2009, if you want us to include them, if
otherwise appropriate, in our proxy statement and form of proxy relating to that
meeting. If we do not receive notice of a shareholder proposal prior to February
14, 2010, the persons named as proxies in the proxy materials relating to that
meeting will use their discretion in voting the proxies when the proposal is
raised at the meeting.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table below shows information as of March 2, 2009 about our common
stock owned by directors and executive officers. Other than as shown in the
table below, no persons are known to us to be beneficial owners of 5% or more of
our common stock. Except as otherwise indicated in the footnotes to the table,
to the knowledge of management, all shares are owned directly with sole voting
power.
Name and Amount and Nature
Address of 5% owners of Beneficial Ownership % of Class
-------------------- ----------------------- ----------
Larry S. Bowman, M.D. ............. 107,860(1) 3.00%
William M. Brown .................. 103,404(2) 2.88%
Robert H. Edwards ................. 128,071(3) 3.57%
Blake L. Griffith ................. 171,623(4) 4.78%
John R. Hamrick ................... 116,933(5) 3.26%
James E. McCoy .................... 125,716(6) 3.50%
Frederick D. Shepherd, Jr. ........ 303,541(7) 8.45%
449 Highway 123 Bypass
Seneca, S.C. 29678
Gary V. Thrift .................... 89,735(8) 2.50%
James E. Turner ................... 224,471(9) 6.25%
P. O. Box 367
Seneca, S.C. 29679
Charles L. Winchester ............. 155,675(10) 4.34%
All Directors, nominees ........... 1,512,423 42.12%
and executive officers
as a group (10 persons)
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(1) Includes 39,033 shares jointly owned with Mary M. Bowman, Dr. Bowman's
wife; 24,355 shares owned by Mrs. Bowman; 12,755 shares held as trustee for
Dr. Bowman's children; and 24,197 shares subject to currently exercisable
options.
(2) Includes 3,979 shares owned by Annie B. Brown, Mr. Brown's wife; and 20,452
shares subject to currently exercisable options.
(3) Includes 30,191 shares jointly owned with Ruth D. Edwards, Mr. Edward's
wife; 7,386 shares owned by Mrs. Edwards; 11,783 shares owned by Robert H.
Edwards LLC; and 24,197 shares subject to currently exercisable options.
(4) Includes 20,450 shares owned by Susan P. Griffith, Mr. Griffith's wife;
119,303 shares jointly owned with Mrs. Griffith; and 24,197 shares subject
to currently exercisable options.
(5) Includes 35,224 shares jointly owned with Frances R. Hamrick, Mr. Hamrick's
wife; 50,023 shares owned by Mrs. Hamrick; and 4,735 shares subject to
currently exercisable options.
(6) Includes 90,284 shares jointly owned with Charlotte B. McCoy, Mr. McCoy's
wife; and 20,452 shares subject to currently exercisable options. Of the
total shares beneficially owned by Mr. McCoy, 67,330 have been pledged as
security.
(7) Includes 63,545 shares subject to currently exercisable options.
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(8) Includes 20,452 shares subject to currently exercisable options.
(9) Includes 22,563 shares owned by Patricia S. Turner, Mr. Turner's wife; and
24,197 shares subject to currently exercisable options.
(10) Includes 48,975 shares jointly owned with Joan O. Winchester, Mr.
Winchester's wife; 3,633 shares owned by Mrs. Winchester; 2,000 shares held
as custodian for Mr. Winchester's grandchildren; and 24,197 shares subject
to currently exercisable options.
(11) Includes 250,621 shares subject to currently exercisable options.
ELECTION OF DIRECTORS
At the Annual Meeting, four directors are to be elected to hold office
for the next three years. Pursuant to our bylaws, our Board of Directors acts as
a nominating committee. Our 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 with their terms expiring at the annual meeting of shareholders in
2012. Directors serve until their successors are elected and qualified to serve.
The nominees are currently serving as our directors. 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 "GOVERNANCE MATTERS - Director
Nomination Process."
The persons named in the enclosed form of proxy intend to vote for the
election of Messrs. Bowman, Brown, Hamrick and Shepherd as directors. Unless you
indicate a contrary specification, your proxy will be voted FOR each such
nominee. In the event that a nominee is not available by reason of any
unforeseen contingency, the persons acting under the proxy intend to vote for
the election, in his stead, of such other person as our Board of Directors may
recommend. Our Board of Directors has no reason to believe that any nominee will
be unable or unwilling to serve if elected.
MANAGEMENT OF THE COMPANY
Directors
The table below shows as to each of our directors and director nominees
his name, positions he holds with us, the period during which he has served as
our director, and his business experience for the past five years. Terms shown
include service as a director of Community First Bank prior to our acquiring it
in 1997. Our directors serve until the annual meeting for the year indicated or
until their successors are elected and qualified to serve.
Positions with Director Business Experience
Name (and age) the Company Since for the Past Five Years
-------------- ----------- ----- -----------------------
Nominees for re-election to our Board of Directors for terms of office to
continue until the Annual Meeting of Shareholders in 2012 are:
Larry S. Bowman, M.D. (60) Vice Chairman of our 1989 Orthopedic surgeon with Blue Ridge Orthopedic
Seneca, S.C. Board of Directors Association, P.A.
William M. Brown (63) Director and 1989 President and Chief Executive Officer of
Salem, S.C. Secretary Lindsay Oil Company, Inc.
John R. Hamrick (61) Director 1989 President of Lake Keowee Real Estate, Inc.;
Seneca, S.C. President of John Hamrick Real Estate.
Frederick D. Shepherd, Jr. (68) Director, President, 1989 President, Chief Executive Officer, Chief
Seneca, S.C. Chief Executive Financial Officer and Treasurer of Community
Officer, Chief First Bank since 1989; President, Chief
Financial Officer Executive Officer, Chief Financial Officer and
and Treasurer Treasurer of the Company since May, 1997.
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Members of our Board of Directors whose terms of office will continue until the
Annual Meeting of Shareholders in 2011 are:
James E. McCoy (71) Chairman of our Board 1989 Plant Manager of Timken Company.
Walhalla, S.C. of Directors
James E. Turner (72) Director 1989 Chairman of the Board of Turner's
Seneca, S.C. Jewelers, Inc.
Charles L. Winchester (68) Director 1989 President, Winchester Lumber Company, Inc. of
Sunset, S.C. Salem, South Carolina; Vice President, Boones
Lumber Company.
Members of our Board of Directors whose terms of office will continue until the
Annual Meeting of Shareholders in 2010 are:
Robert H. Edwards (78) Director 1989 President of Edwards Auto Sales.
Walhalla, S.C.
Blake L. Griffith (73) Director 1995* President of Griffith Properties, LLC.
Walhalla, S.C.
Gary V. Thrift (48) Director 1995* * President, Thrift Development Corporation
Seneca, S.C. (general contractor), since February 1996; Vice
President, Thrift Group, Inc. (building
supplies), since July, 2001.
*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.
Neither our principal executive officer nor any of our directors are
related by blood, marriage or adoption in the degree of first cousin or closer.
Executive Officer
Frederick D. Shepherd, Jr., our Chief Executive Officer and Chief
Financial Officer, is our only executive officer. Information about Mr. Shepherd
is set forth above under the caption "--Directors."
GOVERNANCE MATTERS
Director Independence
Our Board of Directors has determined that none of Messrs. Bowman,
Brown, Edwards, Griffith, Hamrick, McCoy, Thrift, Turner, or Winchester has a
relationship which, in the opinion of our Board of Directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director, and that each such director is independent as defined in The
Nasdaq Stock Market, Inc. Marketplace Rules, as modified or supplemented (the
"Nasdaq Rules"). As disclosed under "Certain Relationships and Related
Transactions" our independent directors and some of their affiliates from time
to time have loan and deposit relationships with our Bank. These relationships
are not considered by our Board to compromise their independence.
Meetings of the Board of Directors and Director Attendance at the Annual Meeting
of Shareholders
During the last full fiscal year, ending December 31, 2008, our Board
of Directors met 12 times, including regular and special meetings. Each director
attended at least 75% of the total number of meetings of our Board of Directors
and committees of which he was a member.
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We encourage, but do not require, our directors to attend annual
meetings of shareholders. Last year, all of our directors attended the annual
meeting of shareholders.
Nominating Committee
Our Board of Directors does not have a separate nominating committee.
Rather, our entire Board of Directors acts as nominating committee. Based on our
size, the small geographic area in which we do business and the desirability of
directors being a part of the communities we serve and familiar with our
customers, our Board of Directors does not believe we would derive any
significant benefit from a separate nominating committee. Mr. Shepherd is the
only member of our Board of Directors who is not independent as defined in the
Nasdaq Rules. We do not have a Nominating Committee charter.
Audit Committee
We have an Audit Committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee is
responsible for seeing that audits of our financial statements are conducted
annually. An independent registered public accounting firm is employed for that
purpose by our 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. Our Audit Committee is
comprised of Messrs. Edwards, Hamrick, Thrift and Winchester, each of whom is
independent as defined in the Nasdaq Rules. The Audit Committee met four times
in 2008. The Audit Committee does not have a written charter.
Compensation Committee
We have a Compensation Committee that makes recommendations to our
Board of Directors concerning director compensation and compensation of Mr.
Shepherd, our Chief Executive and Chief Financial Officer and the Chief
Executive Officer and Chief Financial Officer of our Bank. The final decisions
as to Mr. Shepherd's compensation are made by the full Board of Directors. Mr.
Shepherd negotiates his compensation with the Compensation Committee on a
regular basis, and makes recommendations relating thereto. The Committee may
take these recommendations into consideration in setting his compensation. Mr.
Shepherd does not, however, meet with the full Board of Directors to discuss his
compensation. The Compensation Committee does not delegate its authority to any
other persons. However, the Committee does delegate responsibility for
administering parts of our compensation programs to our Human Resources
Department.
The Compensation Committee consults with Calvert & Associates, a
compensation consulting firm, with respect to Mr. Shepherd's compensation.
Calvert & Associates is engaged by management, but also advises the Board and
meets with the Board and the Compensation Committee without Mr. Shepherd being
present.
The Compensation Committee is comprised of Messrs. McCoy (chair),
Brown, Bowman and Winchester, each of whom is independent as defined in the
Nasdaq Rules. The Compensation Committee met once in 2008. The Compensation
Committee does not have a written charter.
Director Nomination Process
In recommending director candidates, our Board takes into consideration
such factors as it deems appropriate based on our 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 our 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.
Our Board will consider for nomination by the Board director candidates
recommended by shareholders if the shareholders comply with the following
requirements. If you wish to recommend a director candidate to our Board for
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consideration as a Board of Directors' nominee, you must submit in writing to
our 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 our Chairman of the Board at our address and we
must receive it no later than January 15 in any year for a person to be
considered as a potential Board of Directors' nominee at the Annual Meeting of
Shareholders for that year. Our Board may request further information if it
determines a potential candidate may be an appropriate nominee. Our Board will
give director candidates recommended by shareholders that comply with these
requirements the same consideration that our Board's candidates receive.
Our Board will not consider director candidates recommended by
shareholders as potential Board of Directors' nominees if we receive the
shareholder recommendations later than January 15 in any year. However,
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
our common stock 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
our common stock owned by the notifying shareholder. The presiding officer of
the meeting may disregard nominations not made in accordance with these
requirements, and upon his instructions, the vote tellers will disregard all
votes cast for each such nominee.
Shareholder Communications with the Board of Directors
If you wish to send communications to our Board of Directors, you
should mail them addressed to the intended recipient by name or position in care
of: Corporate Secretary, Community First Bancorporation, 449 Highway 123 Bypass,
Seneca South Carolina 29678. Upon receipt of any such communications, our
Corporate Secretary will determine the identity of the intended recipient and
whether the communication is an appropriate shareholder communication. Our
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, our
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, our Corporate Secretary will send appropriate
shareholder communications to the Chairman of our Audit Committee. In the case
of communications addressed to committees of the board, our Corporate Secretary
will send appropriate shareholder communications to the Chairman of such
committee if a committee exists, or to the Chairman of the Board if no committee
exists.
MANAGEMENT COMPENSATION
Overview of Executive Officer Compensation
Mr. Shepherd is our only executive officer. The sections below discuss
Mr. Shepherd's 2008 compensation arrangements and factors considered by our
Compensation Committee in setting his 2008 compensation, as well as changes that
have been made to his compensation arrangements for 2009.
Our Board of Directors has historically set Mr. Shepherd's compensation
based on recommendations of our Compensation Committee, which negotiates
regularly with Mr. Shepherd. See "GOVERNANCE MATTERS - Committees of our Board
of Directors - Compensation Committee" for information about processes and
procedures followed by our Compensation Committee. We have historically followed
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an informal policy of providing Mr. Shepherd with a total compensation package
consisting of salary, insurance and other benefits, and opportunities for
bonuses, incentive compensation and stock options. The Committee's objectives in
setting Mr. Shepherd's compensation are:
o to set salary and benefits and, historically, to award options,
at competitive levels designed to encourage Mr. Shepherd to
perform at his highest level in order to increase earnings and
value to shareholders;
o where appropriate, to award bonuses and/or incentive
compensation, and increase salary to reward Mr. Shepherd for
performance; and
o to retain Mr. Shepherd as our Chief Executive Officer.
Compensation is designed to reward Mr. Shepherd both for his personal
performance and for performance of our Company with respect to growth in assets
and earnings, expansion and increases in shareholder value. The Committee makes
its decisions about allocations between long-term and current compensation,
allocations between cash and non-cash compensation, and allocations among
various forms of compensation, in its discretion based on its subjective
assessment of how these allocations will best meet our overall compensation
goals outlined above.
Factors Considered in Setting Compensation
Use of Market Surveys and Peer Group Data
To remain competitive in the executive workforce marketplace, we
believe it is important to consider comparative market information about
compensation paid to executive officers of other financial institutions in our
market area. We want to be able to retain Mr. Shepherd as our chief executive
officer and, to do so, we believe we must be able to compensate him at a level
that is competitive with compensation offered by other companies in our business
and geographic marketplace that seek similarly skilled and talented executives.
Accordingly, we have historically taken into consideration publicly available
information about compensation paid to executive officers at other financial
institutions in our market area as one factor in making our decisions about Mr.
Shepherd's compensation. Nonetheless, prior to 2007, we did not attempt to
maintain a certain target percentile within a peer group to determine Mr.
Shepherd's compensation. In 2007, however, we entered into an Employment
Agreement with Mr. Shepherd that changed this practice. See "--Base Salary and
Short-term Incentive Compensation."
Other Factors Considered
In addition to considering compensation paid to executive officers of
other financial institutions in our market area, in negotiating compensation
arrangements with Mr. Shepherd, we have considered Mr. Shepherd's knowledge,
skills, scope of authority and responsibilities, job performance and tenure with
us as an executive officer, and his long history in the banking industry. Mr.
Shepherd has over 40 years of experience as a banker. He was an original
organizer of our Bank and our holding company, and has served as Chief Executive
Officer and Chief Financial Officer of each since its organization. The
Committee believes that Mr. Shepherd has demonstrated that he has been to a
large extent personally responsible for our growth and success to date, and that
it is appropriate to compensate him accordingly. The Committee has also
considered recommendations from Mr. Shepherd in setting his compensation.
We have historically reviewed our compensation program and levels of
compensation paid to Mr. Shepherd annually and made adjustments based on the
foregoing factors as well as other subjective factors.
2008 Components of Executive Compensation
During 2008, Mr. Shepherd's compensation consisted primarily of two key
components: base salary and an opportunity for short-term incentive
compensation. We also provide various additional benefits to Mr. Shepherd,
including health, life and disability insurance, an automobile allowance, and
perquisites. For 2008, base salary comprised approximately 90% Mr. Shepherd's
total compensation, and perquisites and other benefits not provided to other
employees comprised approximately 10% Mr. Shepherd's compensation. As further
discussed below under the caption "--Base Salary and Short-term Incentive
8
Compensation," Mr. Shepherd did not receive a bonus or any short-term incentive
compensation for 2008. The Committee bases its decisions as to allocation of Mr.
Shepherd's compensation on negotiations with Mr. Shepherd, and the Committee's
subjective assessment of how such allocation would meet our goals of remaining
competitive and of linking compensation to our corporate performance and his
individual performance.
Base Salary and Short-term Incentive Compensation
We believe it is appropriate to set Mr. Shepherd's base salary at a
reasonable level that will provide him with a predictable income base on which
to structure his personal budget. Prior to 2008, the Committee took a subjective
approach to setting Mr. Shepherd's compensation, taking into consideration
publicly available market data about salaries paid to executives of other
financial institutions in our market areas, the overall condition of our
Company, its level of success in recent years and its goals and budget for the
current year, and Mr. Shepherd's personal performance in furthering our goals.
Using this approach, Mr. Shepherd's base salary has historically fallen at
approximately the midpoint of the market survey data.
For 2008 base salary, however, pursuant to the Employment Agreement we
entered into with Mr. Shepherd in 2007, our Board was required to undertake a
more formal market review. The Agreement requires our Board to review Mr.
Shepherd's salary annually by reference to a peer group of banks and bank
holding companies that are headquartered in South Carolina and North Carolina,
have total assets between $250 million and $1 billion, have been existence for
five or more years, and have equity securities registered under the Securities
Exchange Act of 1934. The peer group criteria may be modified no more frequently
than annually to eliminate financial institutions that operate in markets the
Board or Compensation Committee considers to be sufficiently different from our
market such that a comparison would produce distorted results. We believe the
financial institutions we have included in the peer group are an appropriate
group to use for compensation comparisons because they align well with our asset
levels, the nature of our business and workforce, and the talent and skills
required for successful operations.
The Compensation Committee is required by the employment agreement to
determine annually from reports filed with the Securities and Exchange
Commission the return on average assets ("ROAA"), return on average equity
("ROAE"), and efficiency ratio of each institution in the peer group for the
preceding year, and to set Mr. Shepherd's salary for the following year at not
less than the average salary for chief executive officers within our percentile
rank in the peer group.
Pursuant to the Employment Agreement, a new short term incentive
arrangement was also effective for Mr. Shepherd beginning in 2007. Under the
Agreement, Mr. Shepherd is entitled to an annual cash incentive award for each
year we achieve ROAA of 1.0% or more. The award will be equal to 15% of Mr.
Shepherd's base salary plus a percentage of his base salary equal to the
difference between our ROAA and 1.0%. Additionally, for each year in which we
achieve ROAE of 10.0% or more, Mr. Shepherd will be entitled to a cash award
equal to 15% of his base salary plus a percentage of his base salary equal to
the difference between our ROAE and 10.0%. In calculating our ROAA and ROAE, the
Board or the Compensation Committee may exclude the impact of extraordinary and
non-recurring items. The Committee believes that this incentive compensation
arrangement is appropriate in that it continues to align Mr. Shepherd's
compensation with our successful operations. We did not meet these ROAA or ROAE
targets for 2008, and, accordingly, Mr. Shepherd did not receive any short-term
incentive compensation for 2008.
The other terms of the Employment Agreement with Mr. Shepherd are
further discussed under the caption "--Employment Agreement."
Stock Options
Historically, the Committee has set stock option awards at levels
believed appropriate to advancing our goal of retaining Mr. Shepherd, as well as
levels believed to appropriately align Mr. Shepherd's interests with the
interests of our shareholders. Options have been granted with exercise prices
set at fair market value of our common stock on the date of grant, so Mr.
Shepherd can only benefit from the options if the price of our stock increases.
The Committee has not awarded options to Mr. Shepherd every year, and did not do
9
so in 2007 or 2008. Mr. Shepherd currently holds a significant number of
exercisable options.
Other Benefits
We provide Mr. Shepherd with insurance benefits provided to all other
employees and make contributions to our 401(k) plan on his behalf on the same
basis as contributions are made for all other employees. In addition, we pay Mr.
Shepherd director's fees for his service on our Board. We also pay country club
dues for Mr. Shepherd, and provide him with an automobile for business and
personal use. The Committee has determined that these benefits play an important
role in Mr. Shepherd's business development activities on our behalf. All of the
foregoing other elements of compensation awarded to Mr. Shepherd were set at
levels believed to be competitive with other financial institutions of similar
size in South Carolina.
Noncompetition, Severance and Employment Agreement, Salary Continuation
Agreement and Split-dollar Life Insurance
In 2007, we entered into an employment agreement and salary
continuation agreement with Mr. Shepherd. These agreements are described under
the captions "- Employment Agreement" and "Salary Continuation Agreement." As
discussed in those sections, the agreements provide, among other things, for
payments to Mr. Shepherd upon (i) our termination of his employment other than
for cause, or (ii) his voluntary termination of his employment for good reason
as defined in the agreements. The events set forth as triggering events for the
payments were selected because they are events similar to those provided for in
many employment agreements for executive officers of financial institutions
throughout South Carolina. It has become increasingly common for community
financial institutions to provide for such payments under such conditions in
order to retain key personnel.
Tax and Accounting Considerations
We expense salary, bonus and incentive compensation and benefit costs
as they are incurred for tax and accounting purposes. Salary, bonus and
incentive compensation, and some benefit payments are taxable to the recipient
as ordinary income. The tax and accounting treatment of the various elements of
compensation is not a major factor in our decision making with respect to
compensation.
Timing of Executive Compensation Decisions
Annual salary reviews and adjustments, bonus and short-term incentive
compensation awards, and option awards are routinely made each year at the first
regularly scheduled Board meeting. The Committee does not time any form of
compensation award, including equity-based awards, to coincide with the release
of material non-public information.
Security Ownership Guidelines and Hedging
We do not have any formal security ownership guidelines for Mr.
Shepherd or our directors, but they all own a significant number of shares, and
are among our largest shareholders. We do not have any policies regarding our
executive officer's or directors' hedging the economic risk of ownership of our
shares.
Financial Restatement
The Board of Directors does not have a policy with respect to adjusting
retroactively any cash or equity based incentive compensation paid to our
executive officer where payment was conditioned on achievement of certain
financial results that were subsequently restated or otherwise adjusted in a
manner that would reduce the size of an award or payment, or with respect to
recovery of any amount determined to have been inappropriately received by an
individual executive. If such a restatement were ever to occur, the Board would
expect to address such matters on a case-by-case basis in light of all of the
relevant circumstances.
10
Summary Compensation Table
The following table provides information about compensation awarded to,
earned by or paid to Frederick D. Shepherd, Jr., our Chief Executive Officer and
Chief Financial Officer, for his services during 2008 and 2007. Mr. Shepherd is
our only executive officer. We did not award a bonus or any options or other
equity compensation to Mr. Shepherd in 2008 or 2007.
Name and Principal Position Year Salary Non-Equity All Other Total
($) Incentive Plan Compensation ($)
Compensation ($)(1)
($)
---- ------ ---------- --------- -----
Frederick D. Shepherd, Jr. 2008 $323,000 $34,411 $357,411
President, Chief 2007 $293,000 $52,167 $345,167
Executive Officer and
Chief Financial Officer
(1) Includes our 2008 contributions to the Bank's 401(k) Plan, premiums for
medical insurance, disability insurance and life insurance (including split
dollar life, which we no longer provide), directors' fees, automobile
allowance and other benefits in the amounts shown:
Gross up
Insurance for Taxes
--------- Director's on Life
401(k) Medical Disability Life Fees Automobile Club Insurance
------ ------- ---------- ---- ---------- ---------- ---- ---------
$7,500 $3,960 $1,331 $2,732 $10,700 $2,576 $5,612 -0-
Employment Agreement
Term and Compensation. We have entered into an Employment Agreement
with Mr. Shepherd. The agreement is for an initial term of three years.
Beginning on the first anniversary, and on each subsequent annual anniversary,
the agreement is automatically extended for an additional year unless the Bank's
board of directors determines that the term should not be extended and prompt
notice to that effect is given to Mr. Shepherd. The agreement provides for a
base salary; eligibility for bonuses and participation in incentive compensation
plans as determined by the Board; benefits such as club dues, use of an
automobile, disability and long-term care insurance, reimbursement of employment
related expenses, vacation and participation in other benefits generally
provided to Company employees. In addition, Mr. Shepherd's agreement provides
for an annual cash incentive award in the event we reach certain financial goals
outlined in the agreement. All of these elements of compensation are discussed
above under "--Base Salary and Short-term Incentive Compensation." The agreement
also provides for the payment of benefits after termination of Mr. Shepherd's
employment under the circumstances discussed below.
Death, Disability or Termination for Cause. The agreement provides that
if we terminate Mr. Shepherd's employment as a result of disability or if he
dies while employed by us, we will have no obligation to make any payments to
him except with respect to vested rights or benefits, and, in the case of
disability, certain insurance benefits. The agreement also provides that, if we
may terminate Mr. Shepherd's employment for cause (as defined in the agreement)
following the procedures set forth in the agreement, we will have no obligation
to make any payments to him except with respect to vested rights or benefits,
unless we terminate his employment for cause after a change of control.
Termination in the Absence of a Change of Control. If we terminate Mr.
Shepherd's employment in the absence of a change of control, and such
termination is not for cause or as a result of disability or his death, Mr.
Shepherd will be entitled to receive for the unexpired term of the agreement the
base salary in effect at termination of his employment and an annual bonus equal
to the bonus Mr. Shepherd earned the year prior to termination. Mr. Shepherd
will not be entitled to continued participation in any of our retirement or
stock-based benefit plans.
11
Change of Control. If a change of control occurs during the term of the
agreement, we will be required to pay Mr. Shepherd a lump-sum payment in an
amount equal to the compensation and benefits discussed above under " - Term and
Compensation" that would otherwise be payable over the three years subsequent to
his termination. We will also cause Mr. Shepherd to become fully vested in any
non-qualified plans that do not address the change of control. If we terminate
Mr. Shepherd's employment without cause following the announcement of a change
of control but before the change of control occurs, we will be required to pay
him the compensation outlined above on the later of the date of the change of
control or the first day of the seventh month in which his employment
terminates, in either case with interest but less any amounts otherwise paid to
him in connection with termination pursuant to this agreement. If Mr. Shepherd
receives the lump sum payment under this section in the event of a change in
control and acceleration of any benefits under any other benefit plans and such
payment and benefits are subject to the excise tax, we will pay him an amount
equal to the excise tax he would be required to pay on the benefits and the
amount necessary to pay the excise tax net of all income, payroll and excise
taxes.
The agreement defines "change of control" as any of the following: (a)
accumulation by any one person or group of our stock constituting more than 50%
of the total fair market value or total voting power of our stock; (b)
acquisition by any one person or group within a 12-month period of ownership of
our stock constituting 30% or more of the total voting power of our stock; (c)
replacement of a majority of our Board during any 12-month period by directors
whose appointment or election is not endorsed in advance by a majority of our
directors; (d) acquisition by any one person or group in a 12-month period of
our assets having a total gross fair market value equal to or exceeding 40% of
the total gross fair market value of all of our assets immediately before the
acquisition
Termination of Employment by Mr. Shepherd without Good Reason. If Mr.
Shepherd terminates his employment without good reason, we will have no
obligation to make any payments to him except with respect to vested rights or
benefits.
Voluntary Termination by Mr. Shepherd with Good Reason. If Mr. Shepherd
terminates his employment for good reason, Mr. Shepherd will be entitled to
receive for the unexpired term of the agreement, the base salary in effect at
termination of his employment and an annual bonus equal to the bonus Mr.
Shepherd earned the year prior to termination. Mr. Shepherd will not be entitled
to continued participation in any of our retirement or stock-based benefit
plans.
The agreement provides that a voluntary termination will be considered
for good reason if the following conditions are satisfied: (a) the occurrence
without Mr. Shepherd's written consent of (i) a material diminution in salary,
(ii) a material diminution in authority, duty or responsibilities, (iii) a
material diminution in the authority, duty or responsibilities of Mr. Shepherd's
supervisor, including a requirement that Mr. Shepherd report to a corporation
officer or employee instead of our Board, (iv) a material diminution in the
budget over which Mr. Shepherd has authority, (v) a material change in the
geographic location at which Mr. Shepherd must perform his services, or (vi) any
other action or inaction that constitutes a material breach by us of the
agreement; and (b) Mr. Shepherd has given us notice of the existence of one or
more of the conditions set forth in clause (a) above within 90 days of the
initial existence of the conditions and has provided us with 30 days to remedy
the conditions. In addition, Mr. Shepherd's voluntary termination for one of the
conditions listed in clause (a) above must occur within 24 months of the initial
existence of the condition.
Insurance coverage following termination of employment. If we terminate
Mr. Shepherd's employment, other than for cause, or if Mr. Shepherd terminates
his employment for good reason, or if Mr. Shepherd's employment terminates
because of disability, we will, at our expense, continue or cause to be
continued, Mr. Shepherd's medical insurance benefits, long-term care insurance
benefit and disability insurance benefit as outlined in the agreement, in
accordance with the schedule prevailing in the two years preceding termination.
The medical and insurance benefits shall continue until the first to occur of
(i) Mr. Shepherd's return to employment with us or another employer, (ii) Mr.
Shepherd's reaching the age of 70, (iii) Mr. Shepherd's death, or (iv) the end
of the remaining term of the agreement. The long-term care benefit shall
continue until the policy is fully paid and if such benefits constitute taxable
income to Mr. Shepherd, we will reimburse him for taxes attributable to
maintenance of the long-term coverage.
12
Confidentiality and non-competition. The agreement requires Mr.
Shepherd to maintain the confidentiality of our confidential business
information during the term of his employment with us or the Bank. The agreement
provides that Mr. Shepherd may not, for one year following termination of his
employment, solicit the services of any officer or employee of the Bank or
engage directly or indirectly in certain competitive activities, including: (i)
providing financial products or services on behalf of any financial institution
within a 15 mile radius of any of our offices; (ii) assisting any financial
institution in providing financial products or services to any person residing
within a 15 mile radius of any of our offices; or (iii) inducing or attempting
to induce any person who was our customer at the time of termination of Mr.
Shepherd's employment to seek financial products or services from another
financial institution.
The foregoing is merely a summary of certain provisions of the
Employment Agreement, and is qualified in its entirety by reference to such
Agreement, which has been filed with the Securities and Exchange Commission as
an Exhibit to our Form 8-K filed August 6, 2007. This summary does not create
any rights in any person.
Salary Continuation Agreement
We have also entered into a Salary Continuation Agreement with Mr.
Shepherd. The agreement provides for payments of benefits to him upon
termination of his employment with us.
Normal Retirement Benefit. Unless Mr. Shepherd's employment is
terminated prior to his reaching the age of 71 and unless Mr. Shepherd receives
a benefit after a change in control, when Mr. Shepherd reaches the age of 71, he
will receive an annual benefit of $210,000. The benefit is payable in monthly
installments beginning in the month after his reaching 71 and continuing for 239
additional months (a total of 240 months). If Mr. Shepherd's employment is
thereafter terminated for cause or the agreement is terminated in accordance
with its terms no further benefits will be paid.
Early Retirement Benefit. In the event Mr. Shepherd's employment is
terminated prior to his reaching the age of 71 for any reason other than cause,
death or disability or a change in control, the agreement provides for an early
termination retirement benefit in the amount that fully amortizes the accrual
balance existing at the end of the month immediately before the month in which
termination occurs, amortizing the accrual balance over 20 years and taking into
account interest at the discount rate. The benefit is payable in monthly
installments beginning in the later of (i) the seventh month after the month in
which termination occurs or (ii) the month immediately after the month in which
Mr. Shepherd reaches 71, and continuing for 239 additional months (a total of
240 months).
Disability Benefit. In the event Mr. Shepherd's employment is
terminated because of disability prior to his reaching the age of 71, except
after a change of control, the agreement provides for a retirement benefit in
the amount that fully amortizes the accrual balance existing at the end of the
month immediately before the month in which termination occurs, amortizing the
accrual balance over 20 years and taking into account interest at the discount
rate. The benefit is payable in monthly installments beginning in the later of
(i) the seventh month after the month in which termination occurs or (ii) the
month immediately after the month in which Mr. Shepherd reaches 71, and
continuing for 239 additional months (a total of 240 months).
Change in Control Benefit. In the event a change in control occurs
prior to Mr. Shepherd's reaching the age of 71, and before termination of his
employment, the agreement provides for a benefit in the amount of the accrual
balance that would be required in the event Mr. Shepherd had reached the age of
71. The benefit is payable in a lump sum three days after the change in control.
In the event of involuntary termination of Mr. Shepherd's employment without
cause after a change in control is announced but before the change in control
occurs, Mr. Shepherd will be entitled to the benefit described in this paragraph
in lieu of any other benefit described in the agreement. The benefit is payable
in a lump sum on the later of (i) the first day of the seventh month after the
month in which the termination actually occurs or (ii) the day of the change in
control.
Upon occurrence of the change of control, if Mr. Shepherd is receiving
the normal retirement age benefit, we are required to pay the remaining benefits
to him in a lump sum on the date of the change in control. If Mr. Shepherd is
13
receiving or is entitled to receive the early retirement benefit or disability
benefit at the time of the change in control, we are required to pay the
remaining benefits to him in a lump sum on the later of (i) the date of the
change in control or (ii) the first day of the seventh month after the month in
which termination occurs.
The definition of "change in control" under the Salary Continuation
Agreement is the same definition used in Mr. Shepherd's employment agreement
discussed above.
If Mr. Shepherd receives acceleration of any benefits under the Salary
Continuation Agreement or under any other benefit plans as a result of a change
in control and such payment and benefits are subject to the excise tax, we will
pay Mr. Shepherd a payment equal to the excise tax payable by Mr. Shepherd on
the benefits and a payment equal to the amount necessary to pay the excise tax
net of all income, payroll and excise taxes.
Death Benefits. In the event Mr. Shepherd dies before termination of
his employment, at his death, his designated beneficiary shall be entitled to an
amount in cash equal to the accrual balance existing at his death, unless
benefits have been paid in the event of a change in control. The benefit is
payable in a lump sum 90 days after Mr. Shepherd's death. In the event Mr.
Shepherd dies after termination of his employment and termination was not for
cause, at his death, his designated beneficiary shall be entitled to an amount
in cash equal to the accrual balance existing at his death, unless benefits have
been paid in the event of a change in control. The benefit is payable in a lump
sum 90 days after Mr. Shepherd's death.
Termination for Cause. The agreement provides that we will not be
required to pay Mr. Shepherd any benefits if his employment is terminated for
cause (as defined in the agreement) pursuant to the procedures set forth in the
agreement.
The foregoing is merely a summary of certain provisions of the Salary
Continuation Agreement, and is qualified in its entirety by reference to such
Agreement, which has been filed with the Securities and Exchange Commission as
an Exhibit to our Form 8-K filed August 6, 2007. This summary does not create
any rights in any person.
Outstanding Equity Awards At 2008 Fiscal Year-End
The following table provides information, on an award-by-award basis,
about options to purchase shares of our common stock Mr. Shepherd held at the
end of 2008. We have not granted any other equity based awards to Mr. Shepherd.
All of these options have vested.
Option Awards
-------------
Name Number Option Option Expiration
of Exercise Date
Securities Price
Underlying ($)
Unexercised
Options
(#)
Exercisable
-------------------------- ------------ ------------ -----------------
Frederick D. Shepherd, Jr. 3,405 $10.57 10/16/10
8,107 11.10 01/01/11
3,243 10.18 12/20/11
7,721 10.68 01/01/12
3,088 10.68 11/21/12
8,824 11.53 04/10/14
8,404 12.14 04/28/14
7,640 14.92 04/26/15
14
1998 Stock Option Plan
The 1998 Stock Option Plan ("1998 Plan"), which was approved by our
shareholders, reserved 713,467 shares of our common stock for issuance to our
eligible employees and directors upon exercise of options. Under the 1998 Plan,
our Board of Directors or a committee appointed by our Board of Directors,
determined the persons to whom options would be granted and set the terms of the
options within the parameters of the plan. The 1998 Plan had a ten year term and
has, therefore, terminated, and no further options may be awarded under the
plan. Options outstanding under the plan continue to be exercisable until the
earlier of the termination date set forth in individual award agreements or ten
years from the date of grant. At December 31, 2008, options to purchase 390,755
shares of common stock were outstanding under the 1998 Plan, all of which were
exercisable, with an average exercise price of $12.21 per share. The foregoing
numbers of shares and average exercise price have been adjusted to reflect stock
dividends and stock splits effective through December 31, 2008.
COMPENSATION OF DIRECTORS
We pay our directors fees of $700 for each meeting of the Board of
Directors attended. All of our directors are also directors of our Bank, and the
Bank pays its directors $600 for each monthly meeting of the Bank's board of
directors attended. We do not pay, and the Bank does not pay, retainer fees or
committee fees. In previous years, all non-employee directors also received an
annual grant under the 1998 Stock Option Plan of options to purchase shares of
the Company's common stock at an exercise price equal to the market value at the
date of grant, but no options were granted in 2008.
The table below provides information about compensation we paid to each
of our directors for their service to the Company and the Bank in 2008.
Information about director's fees we paid to Mr. Shepherd is provided in the
Summary Compensation Table.
2008 Director Compensation
Name Fees Option Total
Earned Awards ($)
or ($)(1)
Paid in
Cash
($)
--------------------- ------- ----- ------
Larry S. Bowman, M.D. .... $10,700 0 10,700
William M. Brown ......... 10,700 0 10,700
Robert H. Edwards ........ 10,700 0 10,700
Blake L. Griffith ........ 10,700 0 10,700
John R. Hamrick .......... 10,700 0 10,700
James E. McCoy ........... 10,700 0 10,700
Gary V. Thrift ........... 10,700 0 10,700
James E. Turner .......... 10,700 0 10,700
Charles L. Winchester .... 10,700 0 10,700
(1) Information about options outstanding for each director is included in the
notes to the "Security Ownership of Certain Beneficial Owners and
Management" table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Bank, in the ordinary course of its business, makes loans to,
accepts deposits from, and provides other banking services to our 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
15
involve more than the normal risk of collectibility or present other unfavorable
features. Rates paid on deposits and fees charged for other banking services,
and other terms of these transactions, are also the same as those prevailing at
the time for comparable transactions with other persons. Our Bank expects to
continue to enter into transactions in the ordinary course of business on
similar terms with our directors, officers, principal stockholders, and their
associates. The aggregate dollar amount of loans outstanding to such persons at
December 31, 2008 was $9,272,390 and at December 31, 2007, was $7,885,064.
During 2008 and 2007, respectively, $2,422,122 and $691,347 of new loans were
made and repayments totaled $1,034,796 and $1,572,922. None of such loans have
been on non-accrual status, 90 days or more past due, or restructured at any
time.
The Board of Directors of our Bank has established formal procedures
for approval of the types of loan transactions described above pursuant to which
the Board approves all loans to insiders at each meeting. We generally do not
enter into other non-banking types of business transactions or arrangements for
services with our directors, officers, principal shareholders or their
associates.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, our
directors, executive officers and certain individuals are required to report
periodically their ownership of our common stock and any changes in ownership to
the Securities and Exchange Commission. Based on a review of Section 16(a)
reports available to us and written representations of the persons subject to
Section 16(a), it appears that all Section 16 reports were timely filed in 2008.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Board has again selected J. W. Hunt and Company, LLP, Certified
Public Accountants with offices in Columbia, South Carolina, to serve as our
independent registered public accounting firm for 2009. We expect 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.
Fees Paid to Independent Auditors
Set forth below is information about fees billed by our independent
auditors for audit services rendered in connection with our consolidated
financial statements and reports for the years ended December 31, 2008 and 2007,
and for other services rendered during such years, on our behalf and on behalf
of our Bank, as well as all out-of-pocket expenses incurred in connection with
these services, which have been billed to us.
Audit Fees
Audit fees include fees billed for professional services rendered for
the audit of our consolidated financial statements and review of our interim
condensed consolidated financial statements included in our quarterly reports,
and services that are normally provided by our independent auditors 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, 2008 and 2007, respectively, J. W. Hunt and Company, LLP
billed us an aggregate of $51,850 and $48,575 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 our 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, 2008 and 2007, respectively, J. W. Hunt and Company, LLP billed us
$1,275 and $1,175 for audit-related fees.
16
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. For the years ended December 31, 2008 and 2007, respectively, J. W.
Hunt and Company, LLP, billed us an aggregate of $7,275 and $7,375 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, 2008 and 2007, J. W. Hunt and
Company, LLP, did not bill us for any other fees.
In making its decision to recommend appointment of J. W. Hunt and
Company, LLP as our independent auditors for the fiscal year ending December 31,
2009, our 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
Our Audit Committee pre-approves all audit and permitted non-audit
services (including the fees and terms thereof) provided by our 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.
General pre-approval of certain audit, audit-related and tax services
is granted by our Audit Committee. The Committee subsequently reviews fees paid.
Specific pre-approval is required for all other services. During 2008, all audit
and permitted non-audit services were pre-approved by the Committee.
AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors has reviewed and
discussed with our management our audited financial statements for the year
ended December 31, 2008. Our Audit Committee has discussed with our independent
auditors, J. W. Hunt and Company, LLP, the matters required to be discussed by
Statement on Accounting Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1 AU section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T. Our Audit Committee has also received the written
disclosures and the letter from J. W. Hunt and Company, LLP, required by
applicable requirements of the Public Company Accounting Oversight Board
regarding J. W. Hunt and Company, LLP's communications with the Committee
concerning independence, and has discussed with J. W. Hunt and Company, LLP,
their independence. Based on the review and discussions referred to above, our
Audit Committee recommended to our Board of Directors that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2008 for filing with the Securities and Exchange Commission.
Robert H. Edwards Gary V. Thrift
John R. Hamrick Charles L. Winchester
OTHER MATTERS
Our 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, the persons named in the enclosed form of
proxy intend to vote at such meeting in accordance with their best judgment on
such matters.
17
INCORPORATION BY REFERENCE
The Audit Committee Report shall not be deemed to be filed with the
Securities and Exchange Commission, nor deemed incorporated by reference into
any of our prior or future filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, except to the extent we
specifically incorporate such information by reference.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS
FOR THE SHAREHOLDERS MEETING TO BE HELD ON TUESDAY, APRIL 28, 2009
The Company's 2008 Annual Report and 2009 Proxy Statement are available
via the Internet at: http://www.c1stbank.com.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
You may obtain copies of our Annual Report on Form 10-K required to be
filed with the Securities and Exchange Commission for the year ended December
31, 2008, free of charge by requesting such form in writing from Frederick D.
Shepherd, Jr., President, Community First Bancorporation, Post Office Box 459,
Seneca, South Carolina 29679. You may also download copies from the Securities
and Exchange Commission website at http://www.sec.gov.
18
PROXY
COMMUNITY FIRST BANCORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - TUESDAY, APRIL 28, 2009
Frederick D. Shepherd, Jr., 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 28, 2009, 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.
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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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