SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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-11(c) or ss. 240.14a-12
SFB Bancorp, Inc.
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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. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[SFB Bancorp, Inc. Letterhead]
March 31, 1999
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of SFB Bancorp,
Inc., (the "Company"), I cordially invite you to attend the Annual Meeting of
Stockholders to be held at the offices of the Company, 632 East Elk Avenue,
Elizabethton, Tennessee, on April 29, 1999, at 2:00 p.m. The attached Notice of
Annual Meeting and Proxy Statement describe the formal business to be transacted
at the Annual Meeting. During the Annual Meeting, I will report on the
operations of the Company. Directors and officers of the Company, as well as a
representative of Crisp Hughes Evans LLP, certified public accountants, will be
present to respond to any questions you may have.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This will not prevent you from voting
in person at the Annual Meeting, but will assure that your vote is counted if
you are unable to attend the Annual Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/ Peter W. Hampton
--------------------------------
Peter W. Hampton
President
<PAGE>
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SFB BANCORP, INC.
632 EAST ELK AVENUE
ELIZABETHTON, TENNESSEE 37643
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1999
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of SFB Bancorp, Inc. (the "Company"), will be held at the offices of the
Company, 632 East Elk Avenue, Elizabethton, Tennessee, on April 29, 1999, at
2:00 p.m. for the following purposes:
1. To elect two directors of the Company; and
2. To ratify the appointment of Crisp Hughes Evans LLP, as independent
auditors of the Company for the fiscal year ending December 31, 1999;
all as set forth in this Proxy Statement accompanying this Notice, and to
transact such other business as may properly come before the Meeting and any
adjournments. The Board of Directors is not aware of any other business to come
before the Meeting. Stockholders of record at the close of business on March 15,
1999 are the stockholders entitled to vote at the Meeting and any adjournments
thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. ANY SIGNED PROXY GIVEN BY YOU MAY BE REVOKED BY FILING WITH THE
SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A
LATER DATE. IF YOU ARE PRESENT AT THE MEETING, YOU MAY REVOKE YOUR PROXY AND
VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE MEETING. HOWEVER, IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE PERSONALLY AT THE
MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peter W. Hampton, Jr.
----------------------------------
Peter W. Hampton, Jr.
Secretary
Elizabethton, Tennessee
March 31, 1999
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
SFB BANCORP, INC.
632 EAST ELK AVENUE
ELIZABETHTON, TENNESSEE 37643
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ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1999
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of SFB Bancorp, Inc. (the "Company") to be
used at the Annual Meeting of Stockholders of the Company which will be held at
the offices of the Company, 632 East Elk Avenue, Elizabethton, Tennessee, on
April 29, 1999, 2:00 p.m. local time (the "Meeting"). The accompanying Notice of
Annual Meeting of Stockholders and this Proxy Statement are being first mailed
to stockholders on or about March 31, 1999. The Company acquired all of the
outstanding stock of Security Federal Bank (the "Bank") issued in connection
with the completion of the Bank's mutual-to-stock conversion on May 29, 1997
(the "Conversion").
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VOTING AND REVOCABILITY OF PROXIES
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If the enclosed proxy card is properly signed and returned, your shares
will be voted on all matters that properly come before the Meeting for a vote.
If instructions are specified in your signed proxy card with respect to the
matters being voted upon, your shares will be voted in accordance with your
instructions. If no instructions are specified in your signed proxy card, your
shares will be voted (a) FOR the election of directors named in the Proposal 1,
(b) FOR Proposal 2 (ratification of independent auditors), and (c) in the
discretion of the proxy holders, as to any other matters that may properly come
before the Meeting (including any adjournment). Your proxy may be revoked at any
time prior to being voted by: (i) filing with the secretary of the Company (the
"Secretary") written notice of such revocation, (ii) submitting a duly executed
proxy card bearing a later date, or (iii) attending the Meeting and giving the
Secretary notice of your intention to vote in person.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on March 15, 1999
(the "Record Date"), are entitled to one vote for each share of common stock of
the Company (the "Common Stock") then held. As of the Record Date, the Company
had 692,217 shares of Common Stock issued and outstanding.
The charter of the Company ("Charter") provides that in no event shall
any record owner of any outstanding Common Stock which is beneficially owned,
directly or indirectly, by a person who beneficially owns in excess of 10% of
the then outstanding shares of Common Stock (the "Limit") be entitled or
permitted to any vote with respect to the shares held in excess of the Limit.
Beneficial ownership is determined pursuant to the definition in the Charter and
includes shares beneficially owned by such person or any of his or her
affiliates (as such terms are defined in the Charter), or which such person or
any of his or her affiliates has the right to acquire upon the exercise of
conversion rights or options and shares as to which such person or any of his or
her affiliates or associates have or share investment or voting power, but
neither any employee stock ownership or similar plan of the Company or any
subsidiary, nor any trustee with respect thereto or any affiliate of such
trustee (solely by reason
<PAGE>
of such capacity of such trustee), shall be deemed, for purposes of the Charter,
to beneficially own any Common Stock held under any such plan.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. In the event there are not sufficient votes for a quorum or to ratify
any proposals at the time of the Meeting, the Meeting may be adjourned in order
to permit the further solicitation of proxies.
As to the election of directors, as set forth in Proposal 1, the proxy
being provided by the Board enables a stockholder to vote for the election of
the nominees proposed by the Board, or to withhold authority to vote for the
nominees being proposed. Directors are elected by a plurality of votes of the
shares present in person or represented by proxy at a meeting and entitled to
vote in the election of directors.
As to the ratification of independent auditors as set forth in Proposal
2, by checking the appropriate box, a stockholder may: vote "FOR" the item, (ii)
vote "AGAINST" the item, or (iii) vote to "ABSTAIN" on such item. Unless
otherwise required by law, Proposal 2 and any other matters shall be determined
by a majority of votes cast affirmatively or negatively without regard to (a)
Broker Non- Votes or (b) proxies marked "ABSTAIN" as to that matter.
Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth, as of the Record Date, persons or groups who own more than 5%
of the Common Stock and the ownership of all executive officers and directors of
the Company as a group. Other than as noted below, management knows of no person
or group that owns more than 5% of the outstanding shares of Common Stock at
that date.
-2-
<PAGE>
Percent of Shares
Amount and Nature of of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------------------ -------------------- -----------
Security Federal Bank
Employee Stock Ownership Plan ("ESOP")
632 East Elk Avenue
Elizabethton, Tennessee 37643 61,360(1) 8.9%
Malta Hedge Fund II, L.P.
Malta Hedge Fund, L.P.
Malta Partners II, L.P.
Malta Partners, L.P.
Sandler O'Neill Asset Management LLC
SOAM Holdings, LLC
Mr. Terry Maltese
712 Fifth Avenue, 22nd Floor
New York, New York 10019 69,000(2) 9.9%
Mr. Jeffrey L. Gendell
Tontine Management, L.L.C.
Tontine Financial Partners, L.P.
31 West 52nd Street, 17th Floor
New York, New York 10019 45,400(3) 6.6%
All directors and executive officers of the
Company as a group (7 persons) 78,156(4) 11.1%
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(1) The ESOP purchased such shares for the exclusive benefit of plan
participants with funds borrowed from the Company. These shares are
held in a suspense account and will be allocated among ESOP
participants annually on the basis of compensation as the ESOP debt is
repaid. The Board of Directors has appointed a committee consisting of
non-employee directors Donald W. Tetrick, John R. Crockett, Jr. and
Julian T. Caudill to serve as the ESOP administrative committee ("ESOP
Committee") and to serve as the ESOP trustees ("ESOP Trustee"). The
ESOP Committee or the Board instructs the ESOP Trustee regarding
investment of ESOP plan assets. The ESOP Trustee must vote all shares
allocated to participant accounts under the ESOP as directed by
participants. Unallocated shares and shares for which no timely voting
direction is received, will be voted by the ESOP Trustee as directed by
the ESOP Committee. As of the Voting Record Date, 13,376 shares have
been allocated under the ESOP to participant accounts.
(2) The information as to Malta Hedge Fund II, L.P. ("MHF II"), Malta Hedge
Fund, L.P. ("MHF), Malta Partners II, L.P. ("MP II"), Malta Partners,
L.P. ("MPLP"), Sandler O'Neill Asset Management, LLC ("Sandler
O'Neill"), SOAM Holdings, LLC ("SOAM"), and Terry Maltese ("Maltese")
is derived from an amended Schedule 13D, dated January 11, 1999, which
states that as of December 1, 1998, MHF II, MHF, MP II, MPLP, Sandler
O'Neill, SOAM, and Maltese had shared voting and shared dispositive
power with respect to 6,120 shares, 19,380 shares, 9,760 shares, 33,740
shares, 69,000 shares, 69,000 shares, and 69,000 shares respectively.
The amended Schedule 13D also states that MHF II, MHF, MP II, and MHLP,
each have the power to dispose of and to vote the stock beneficially
owned by it, which power may be exercised by
-3-
<PAGE>
its general partner, Holdings. Holdings is a party to a management
agreement with SOAM pursuant to which SOAM shares the power to dispose
of and to vote the shares of common stock beneficially owned by
Holdings. Mr. Maltese, as President and Managing member of Holdings and
SOAM, shares the power to dispose of and to vote the shares of Common
Stock beneficially owned by Holdings and SOAM. Holdings, SOAM and
Maltese disclaims direct ownership of the Common Stock.
(3) The information as to Jeffrey L. Gendell, Tontine Management, L.L.C.,
Tontine Financial Partners, L.P., (the "Reporting Group") is derived
from a Schedule 13D filed on June 18, 1998, filed by the Reporting
Group, which states that as of March 17, 1998, that the Reporting Group
each had shared voting and shared dispositive power with respect to
45,400 shares.
(4) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which
shares the individuals effectively exercise sole voting and investment
power, unless otherwise indicated. Includes options to purchase 12,347
shares of Common Stock that may be exercised within 60 days of the
Record Date to purchase shares of Common Stock under the 1998 Stock
Option Plan (the "1998 Stock Option Plan"). Excludes 19,760 shares of
Common Stock previously awarded under the Bank's Restricted Stock Plan
("RSP") which are subject to forfeiture and for which the individuals
in the group exercise no voting control. Excludes 56,982 shares held by
the ESOP (61,360 shares minus 4,378 shares allocated to executive
officers) and 19,760 RSP shares (except for Messrs. Hampton and
Hampton, Jr.) over which certain directors, by their position as either
a member of the ESOP Committee, ESOP trust or RSP trust, exercise
shared voting and investment power. As RSP trustees, Messrs. Hampton
and Hampton, Jr. exclude 12,396 and 13,869 RSP shares, respectively.
Such individuals serving as a member of the ESOP Committee, ESOP trust,
or RSP trust disclaim beneficial ownership with respect to such shares.
See Proposal 1 - Information with Respect to Nominees for Director;
Directors Whose Terms Continue; and Executive Officers.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the 1934 Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock, on Forms
3, 4 and 5, with the Securities and Exchange Commission ("SEC") and to provide
copies of those Forms 3, 4 and 5 to the Company. The Company is not aware of any
beneficial owner of more than ten percent of its Common Stock. Based upon a
review of the copies of the forms furnished to the Company, or written
representations from certain reporting persons that no Forms 5 were required,
the Company believes that all Section 16(a) filing requirements applicable to
its officers and directors were complied with during the 1998 fiscal year.
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PROPOSAL 1 - INFORMATION WITH RESPECT TO NOMINEES
FOR DIRECTOR, DIRECTORS CONTINUING IN OFFICE, AND EXECUTIVE OFFICERS
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Election of Directors
The Charter requires that the Board of Directors (or "the Board") be
divided into three classes, each of which contains approximately one-third of
the members of the Board. The directors are elected by the stockholders of the
Company for staggered three-year terms, or until their successors are elected
and qualified. The Board currently consists of six members. Two directors will
be elected at the Meeting to serve for a three-year term or until their
successors have been elected and qualified.
-4-
<PAGE>
Michael L. McKinney has been nominated by the Board of Directors to
serve as a Director for a three year term to expire in 2001. Mr. Michael L.
McKinney was elected by the Board on March 17, 1999 to fill the vacancy created
by the death of Estill L. Candill, Jr. on March 1, 1999. Peter W. Hampton has
been nominated by the Board of Directors to serve as a director for a three-year
term to expire in 2001. Mr. Hampton is currently a member of the Board. It is
intended that the persons named in the proxies solicited by the Board will vote
for the election of the named nominees. If the nominees are unable to serve, the
shares represented by all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend or the size of the Board may
be reduced to eliminate the vacancy. At this time, the Board knows of no reason
why the nominees might be unavailable to serve.
The following table sets forth information with respect to the
nominees, their name, age, the year they first became a director of the Company
or the Bank, the expiration date of their current term as a director, and the
number and percentage of shares of the Common Stock beneficially owned. Each
director of the Company is also a member of the Board of Directors of the Bank.
Beneficial ownership of executive officers and directors of the Company, as a
group, is shown under "Voting Securities and Principal Holders Thereof."
Shares of
Common Stock
Current Beneficially
Year First Term Owned as of
Elected or to March 15, Percent
Name and Title Age(1) Appointed(2) Expire 1999 (3) Owned
- -------------- ------ ------------ ------- ------------ -------
BOARD NOMINEES FOR TERM TO EXPIRE IN 2001
Michael L. McKinney
Director 40 1999 1999 500 --%(5)
Peter W. Hampton
President and Director 79 1963 1998 39,297(4) 5.7%
DIRECTORS CONTINUING IN OFFICE
Peter W. Hampton, Jr.
Secretary and Director 48 1994 1999 17,912(4) 2.6%
Donald W. Tetrick
Director 81 1963 1999 4,705(4) --%(5)
John R. Crockett, Jr.
Treasurer and Director 78 1963 2000 1,710(4) --%(5)
Julian T. Caudill
Director 80 1963 2000 6,610(4) 1.0%
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(1) At December 31, 1998
(2) Refers to the year the individual first became a director of the Company or
the Bank.
(3) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust, and other indirect ownership, over which shares
the individuals effectively exercise sole or shared voting and investment
power, unless otherwise indicated. The share amounts listed include shares
of Common Stock that the following persons have the right to acquire within
60 days of the Record Date: Peter W. Hampton,
(footnotes continue on next page)
-5-
<PAGE>
4,295, Peter W. Hampton, Jr. 3,988, Donald W. Tetrick 1,150, John R.
Crockett, Jr. 1,150, and Julian T. Caudill 1,150. For Messrs. Tetrick,
Crockett, and Caudill, respectively, each excludes 1,841 restricted shares
granted to each such individuals pursuant to RSP which remain subject to
forfeiture and for which each such individual does not exercise voting
control. Similarly, for Messrs. Hampton, and Hampton, Jr., excludes 7,364
and 5,891 restricted shares, respectively. See "Director and Executive
Officer Compensation."
(4) Excludes 56,982 shares of Common Stock under the ESOP and 19,760 RSP shares
(except for Messrs. Hampton and Hampton, Jr.) for which such individual
serves as a member of the ESOP Committee, ESOP trust and RSP trust. Messrs.
Hampton and Hampton, Jr. exclude 12,396 and 13,869 RSP shares,
respectively. Additionally, such individuals neither serve as a member of
the ESOP Committee nor the ESOP trust. See "Voting Securities and Principal
Holders Thereof."
(5) Less than 1.0% of Common Stock outstanding.
Executive Officers of the Company
The following individuals hold the executive offices in the Company set
forth below opposite their names.
Age as of
Name December 31, 1998 Positions Held With the Company
- ---- ----------------- -------------------------------
Peter W. Hampton 79 President and Director
Peter W. Hampton, Jr. 48 Secretary and Director
John R. Crockett, Jr. 78 Treasurer and Director
Bobby K.S. Hyatt 30 Principal Accounting Officer
Biographical Information
Set forth below is certain information with respect to the directors,
including director nominees and executive officers of the Company. Except as
noted, all directors of the Bank in March, 1997 became directors of the Company
at that time. Executive Officers receive compensation from the Bank. See "--
Director and Executive Officer Compensation." All directors and executive
officers have held their present positions for five years unless otherwise
stated.
Julian T. Caudill has been a member of the Board of Directors of the
Bank since 1963. Mr. Caudill is a retired pharmacist. He is a member of the
Elizabethton Rotary Club and the American Cancer Society.
John R. Crockett, Jr. has been a member of the Board of Directors and
Treasurer and Secretary of the Bank since 1963. Mr. Crockett is a retired
realtor.
Peter W. Hampton has been the President and a member of the Board of
Directors of the Bank since 1963. Mr. Hampton is a member of the
Elizabethton/Carter County Economic Development Commission and the Carter County
Chamber of Commerce. Mr. Hampton is the father of Peter W. Hampton, Jr.
Peter W. Hampton, Jr. has been a member of the Board of Directors of
the Bank since 1994 and has served as Vice Chairman of the Board of the Bank
since December 1996. Since 1977, Mr.
-6-
<PAGE>
Hampton has been an attorney in the law firm of Hampton & Street and has been
employed as our General Counsel since 1994. Mr. Hampton, Jr. is the son of Peter
W. Hampton.
Michael L. McKinney was appointed to the Board of the Directors of the
Bank and the Company on March 17, 1999. Since 1983, Mr. McKinney has been a self
employed general contractor in Elizabethton.
Donald W. Tetrick has been Chairman of the Bank's Board of Directors
since 1963. Mr. Tetrick is a member of the Elizabethton Kiwanis Club, the Carter
County Chamber of Commerce and a member of the Board of Directors of First
United Methodist Church. Mr. Tetrick is also a retired funeral home director.
Executive Officer who is not a Director
Bobby K.S. Hyatt has been the Principal Accounting Officer of the
Company since 1997 and an Assistant Vice President of the Bank since 1995. Prior
to that he was an accountant with the firm of T. Alan Walls, C.P.A., P.C. and
prior to that he was employed by the Bank. He received his certified public
accountant designation in 1993. Mr. Hyatt is a member of the board of directors
of the Elizabethton Kiwanis Club.
Meetings and Committees of the Board of Directors
The Board of Directors conducts its business through meetings of the
Board and through activities of its committees. During the year ended December
31, 1998, the Board of Directors held a total of 15 meetings. No director
attended fewer than 75% of the total meetings of the Board of Directors and
committees on which such director served during the year ended December 31,
1998. In addition to other committees, as of December 31, 1998, the Board had a
Nominating Committee, a Compensation and Benefits Committee, and an Audit
Committee.
The Nominating Committee consists of the Board of Directors of the
Company. Nominations to the Board of Directors made by stockholders must be made
in writing to the Secretary and received by the Company not less than 60 days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders of the Company. Notice to the Company of such nominations must
include certain information required pursuant to the Company's bylaws. The
Nominating Committee, which is not a standing committee, met once during the
1998 fiscal year.
The Compensation and Benefits Committee is comprised of the entire
Board of Directors. This standing committee establishes the Bank's salary
budget, director and committee member fees, and employee benefits provided by
the Bank for approval by the Board of Directors. The Committee met two times
during the 1998 fiscal year.
The Audit Committee is comprised of Directors Donald W. Tetrick, Peter
W. Hampton, Jr. and Julian T. Caudill. This standing committee is responsible
for developing and maintaining the Bank's audit program. The Committee also
meets with the Bank's outside auditors to discuss the results of the annual
audit and any related matters. The Audit Committee met five times during the
1998 fiscal year.
-7-
<PAGE>
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
Each of the directors is paid a monthly fee of $600. Additionally, each
director is also a member of the Executive/Loan Committee and receives a fee of
$35 per meeting attended. Total aggregate fees paid to the current directors for
the year ended December 31, 1998 were $51,025.
Under the 1998 Stock Option Plan, each outside director was granted,
effective June 1, 1998 (the "effective date of grant"), options to purchase
5,752 shares of Common Stock at an exercise price of $16.69. Messrs. Hampton and
Hampton, Jr. received options to purchase 21,476 and 19,942 shares of Common
Stock, respectively, at an exercise price of $16.69. Of the options granted, 20%
were exercisable immediately and the remaining options are exercisable
immediately and the remaining options are exercisable at the rate 20% per year
commencing from the effective date of grant. The options granted to each
director shall become immediately exercisable in the event of death, disability
or retirement of a director, change in control of the Company or Bank.
Under the RSP, each outside director was awarded, effective June 1,
1998 (the "effective date of grant"), 2,301 shares of Common Stock. Messrs.
Hampton and Hampton, Jr. were awarded 9,204 and 7,363 shares of Common Stock,
respectively. All directors will earn shares awarded to them at the rate of 20%
per year, commencing from the effective date of grant. Awards of restricted
stock to each director shall be immediately non-forfeitable in the event of
death, disability or retirement of a director, or change in control of the
Company or Bank. In accordance with the RSP, dividends are paid on shares
awarded or held in the RSP.
Executive Officer Compensation
The Company has no full time employees, but relies on the employees of
the Bank for the limited services required by the Company. All compensation paid
to officers and employees is paid by the Bank.
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the chief executive officer. No
other executive officer of either the Bank or the Company had a salary and bonus
during the two years then ended that exceeded $100,000 for services rendered in
all capacities to the Bank or the Company.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
---------------------------------- -----------------------
#Securities
Restricted Underlying All
Name and Fiscal Other Annual Stock Options/ Other
Principal Position Year Salary($) Bonus($) Compensation(1) Award(s) (2) SARs (3) Compensation($)
- ------------------- ---- --------- -------- --------------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter W. Hampton 1998 80,000 22,000 10,307 $153,615 21,476 14,940(4)
President 1997 77,295 24,000 10,238 -- -- 13,542(4)
1996 73,614 24,500 9,280 -- -- 9,811(5)
</TABLE>
(footnotes on next page)
-8-
<PAGE>
- --------------------------
(1) Consists of director and committee fees of $8,880, and $1,427 for health,
life and disability insurance premiums paid on behalf of the named
executive officer in 1998, and $8,715 and $1,523 for these fees and
premiums in 1997. In 1996, consists of director and committee fees of
$8,715 and $1,523 respectively, for health, life and disability insurance.
(2) Represents the award of 9,204 shares of Common Stock under the RSP as of
June 1, 1998 on which date the market price of such stock was $16.69 per
share. Such stock awards become non-forfeitable at the rate of 20% shares
per year commencing on June 1, 1998. Dividend rights associated with such
stock are accrued and held in arrears to be paid at the time that such
stock becomes non-forfeitable. As of December 31, 1998, based upon a market
price of $11.75 per share, such award of 9,204 shares had an aggregate
value of $108,147.
(3) Such awards under the 1998 Stock Option Plan are first exercisable at the
rate of 20% per year commencing on June 1, 1998. The exercise price equals
the market value of the Common Stock on the date of grant of $16.69.
(4) At December 31, 1998 and 1997, consists of 1,494 shares ($14,940) and 1,354
shares ($13,542) of stock allocated under the ESOP. Such shares had a
market value of $17,555 and $20,483, at December 31, 1998 and 1997,
respectively.
(5) Consists of payments made on behalf of the individual in regard to the
Bank's savings and retirement plan.
OPTION/SAR GRANTS TABLE
Option/SAR Grants in Last Fiscal Year (1)
-----------------------------------------
Individual Grants
- --------------------------------------------------------------------------------
% of Total
# of Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
--------------- --------------- ------------ ----------- ----------
Peter W. Hampton 21,476 42% $16.69 June 1, 2008
- -----------------
(1) No Stock Appreciation Rights (SARs) are authorized under the plan.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year,and FY-End Option/SAR Values
--------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at Options/SARs
Shares Acquired FY-End (#) at FY-End ($)
Name on Exercise (#)Value Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ----------------------------------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Peter W. Hampton 0 0 4,295 / 17,181 $ 0 / $0
</TABLE>
- ------------------
(1) Based upon an exercise price of $16.69 per share and estimated price of
$11.75 at December 31, 1998.
Employment Agreement. The Bank entered into an employment agreement
with Peter W. Hampton, President of the Bank ("Agreement"). Mr. Hampton's base
salary under the Agreement is $73,614. The Agreement has a term of three years
and may be terminated by the Bank for "just cause" as defined in the Agreement.
If the Bank terminates Mr. Hampton without just cause, Mr. Hampton will be
entitled to a continuation of his salary from the date of termination through
the remaining term of the Agreement. The Agreement contains a provision stating
that in the event of the termination of employment in connection with a change
in control of the Bank, Mr. Hampton will be paid a lump sum amount equal to 2.99
times his five year average annual taxable compensation. If such payments had
been made under the Agreement as of December 31, 1998, such payments would have
equaled approximately $299,000. The Agreement may be renewed annually by the
Bank's Board of Directors upon a determination of satisfactory performance
within the Board's sole discretion. If Mr. Hampton shall
-9-
<PAGE>
become disabled during the term of the Agreement, he shall continue to receive
payment of 100% of the base salary for a period of 12 months and 60% of such
base salary for the remaining term of such Agreement. Such payments shall be
reduced by any other benefit payments made under other disability programs in
effect for the Bank's employees.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
Certain Related Transactions
The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the Bank's other customers, and do not involve
more than the normal risk of collectibility, or present other unfavorable
features.
Peter W. Hampton, Jr., is a partner of the law firm of Hampton & Street
in Elizabethton, Tennessee. The Bank retains the services of Mr. Hampton's firm,
and the firm performs certain legal work for the Bank. Fees paid to the law firm
by the Bank's borrowers for services performed on the Bank's behalf were $67,560
and $68,535 for the 1998 and 1997 fiscal year.
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PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
Crisp Hughes Evans LLP, was the Company's independent public accountant
for the 1998 fiscal year. The Board of Directors of the Company presently
intends to renew the Company's arrangement with Crisp Hughes Evans LLP to be its
auditors for the fiscal year ended December 31, 1999. A representative of Crisp
Hughes Evans LLP is expected to be present at the meeting to respond to
stockholders' questions and will have the opportunity to make a statement if the
representative so desires.
Ratification of the appointment of the auditors requires the approval
of a majority of the votes cast by the stockholders of the Company at the
Meeting. The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of Crisp Hughes Evans LLP, as the Company's
auditors for the fiscal year ending December 31, 1999.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors does not know of any other matters that are
likely to be brought before the Meeting. If any other matters, not now known,
properly come before the meeting or any adjournments, the persons named in the
enclosed proxy card, or their substitutes, will vote the proxy in accordance
with their judgment on such matters. Under the Company's bylaws, no new business
or proposals submitted by stockholders shall be acted upon at the Meeting unless
such business or proposal is stated in writing and filed with the Secretary by
April 2, 1999.
-10-
<PAGE>
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Company's Annual Report to Stockholders for the year ended December
31, 1998, including financial statements, will be mailed to all stockholders of
record as of the close of business on the Record Date. Any stockholder who has
not received a copy of such Annual Report may obtain a copy by writing to the
Secretary. Such Annual Report is not to be treated as a part of the proxy
solicitation material or as having been incorporated herein by reference.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be considered for inclusion in the Company's proxy
statement for the annual meeting of stockholders to be held in 2000, all
stockholder proposals must be submitted to the Secretary at its offices at 632
East Elk Avenue, Elizabethton, Tennessee, 37643, on or before December 2, 1999.
Under the Company's bylaws, in order to be considered for possible action by
stockholders at the 1999 annual meeting of stockholders, stockholder nominations
for director and stockholder proposals not included in the Company's 1999 proxy
statement must be submitted to the Secretary, at the address set forth above, by
February 28, 2000. In addition, stockholder nominations and stockholder
proposals must meet other applicable criteria set forth in the Company's bylaws
in order to be considered at the Company's 1999 annual meeting of stockholders.
- --------------------------------------------------------------------------------
FORM 10-KSB
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, SFB BANCORP, INC., 632 EAST
ELK AVENUE, ELIZABETHTON, TENNESSEE 37643.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peter W. Hampton, Jr.
----------------------------------
Peter W. Hampton, Jr.
Secretary
Elizabethton, Tennessee
March 31, 1999
-11-
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
SFB BANCORP, INC.
632 EAST ELK AVENUE
ELIZABETHTON, TENNESSEE 37643
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1999
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of SFB Bancorp,
Inc. (the "Company"), or its designee, with full powers of substitution, to act
as attorneys and proxies for the undersigned, to vote all shares of Common Stock
of the Company which the undersigned is entitled to vote at the Annual Meeting
of Stockholders (the "Meeting"), to be held at the offices of the Company, 632
East Elk Avenue, Elizabethton, Tennessee, on April 29, 1999, at 2:00 p.m. and at
any and all adjournments thereof, in the following manner:
FOR WITHHELD
1. To elect as directors the nominees
listed below (except as marked to the |_| |_|
contrary below):
Peter W. Hampton
Michael L. McKinney
(Instruction: To withhold authority to vote
for any individual nominee, write that nominee's name
on the space provided below)
FOR AGAINST ABSTAIN
2. To ratify the appointment of
Crisp Hughes Evans LLP as independent
auditors of SFB Bancorp, Inc. for the
fiscal year ending December 31, 1999. |_| |_| |_|
In their discretion, such attorneys and proxies are authorized to vote on any
other business that may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" the above listed
propositions.
- --------------------------------------------------------------------------------
THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY
OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated March 31, 1999 and the 1998 Annual Report.
Dated: , 1999
-----------------------------
- ------------------------------------- ----------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ------------------------------------- ----------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
