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
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Community First Banking Company
(Name of Registrant as Specified in Its Charter)
Community First Banking Company
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
COMMUNITY FIRST BANKING COMPANY
110 DIXIE STREET
CARROLLTON, GEORGIA 30117
(770) 834-1071
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, APRIL 29, 1999
To the Shareholders of Community First Banking Company:
The Annual Meeting of Shareholders of Community First Banking Company (the
"Company") will be held on Thursday, April 29, 1999 at 2:00 p.m. at Community
First Bank, 110 Dixie Street, Carrollton, Georgia 30117, for the following
purposes:
(1) To elect three Class II directors to serve a three-year term expiring
at the 2002 Annual Meeting of Shareholders and upon the election and
qualification of their successors;
(2) To ratify the appointment of Porter Keadle Moore, LLP as our
independent public accountants for fiscal 1999; and
(3) To transact any other business that may properly come before the
meeting or any adjournment.
The close of business on March 11, 1999 is the record date for determining
the shareholders entitled to notice of and to vote at the meeting.
Please mark, date, sign and return the enclosed proxy card as soon as
possible. If you attend the meeting and wish to vote your shares in person, you
may do so at any time before you exercise your proxy.
By Order of the Board of Directors,
/S/ Gary D. Dorminey
Gary D. Dorminey
President and Chief Executive Officer
March 25, 1999
<PAGE>
COMMUNITY FIRST BANKING COMPANY
110 DIXIE STREET
CARROLLTON, GEORGIA 30117
PROXY STATEMENT
-----------------------------------
INTRODUCTION
TIME AND PLACE OF THE MEETING
The Company's Board of Directors is furnishing this Proxy Statement to
solicit proxies for use at the Annual Meeting of Shareholders to be held on
Thursday, April 29, 1999, at 2:00 p.m., at Community First Bank, 110 Dixie
Street, Carrollton, Georgia 30117, and at any adjournment of the meeting.
RECORD DATE AND MAILING DATE
The close of business on March 11, 1999 is the Record Date for the
determination of shareholders entitled to notice of and to vote at the meeting.
We first mailed this Proxy Statement and accompanying proxy card to shareholders
on or about March 25, 1999.
VOTING AT THE ANNUAL MEETING
SHARES OUTSTANDING AND HELD BY DIRECTORS AND EXECUTIVE OFFICERS
As of the close of business on the Record Date, the Company had 10,000,000
shares of common stock, $.01 par value ("Common Stock"), authorized. Of these
shares, 2,815,398 were issued and entitled to vote on the proposals presented in
this Proxy Statement, including 254,743 unallocated shares issued to the
Company's Employee Stock Ownership Plan ("ESOP") that will be voted by the ESOP
trustees and 134,344 shares held in participant accounts in the Company's 401(k)
Plan that will be voted by the 401(k) Plan trustees. As of the Record Date, the
Company's directors and executive officers collectively beneficially owned
998,800 shares of Common Stock, which includes 123,048 shares subject to options
that are exercisable within 60 days after the Record Date. Assuming they do not
exercise these options, the Company's directors and executive officers will have
the authority to vote 875,753 shares of Common Stock, or approximately 31.1
percent of the shares eligible to vote, which includes the 389,087 shares held
in the ESOP and the 401(k) Plan, as certain directors and executive officers
share voting authority with respect to those shares. Participants in the 401(k)
Plan retain the ability to dispose of their shares held in that Plan. We
anticipate that all directors and executive officers will vote all of their
shares in favor of the proposals presented in this Proxy Statement. Each share
is entitled to one vote on all matters to be presented at the meeting.
PROCEDURES FOR VOTING BY PROXY
If you properly sign, return and do not revoke your proxy, the persons
named as proxies will vote your shares according to the instructions you have
specified on the proxy card. If you sign and return your proxy card but do not
specify how the persons appointed as proxies are to vote your shares, your proxy
will be voted FOR the election of the nominated directors, FOR the ratification
of Porter Keadle Moore, LLP as our independent public accountants for fiscal
1999 and in accordance with the best judgment of the persons appointed as
proxies as to all other matters properly brought before the meeting. You can
revoke your proxy by delivering to the Secretary of the Company, at the
Company's address as listed above, either a written revocation of your proxy or
a duly executed proxy bearing a later date or by attending the meeting and
voting in person.
REQUIREMENTS FOR SHAREHOLDER APPROVAL
A quorum will be present if a majority of the votes entitled to be cast are
present in person or by valid proxy. We will count abstentions and broker
non-votes, which are described below, in determining whether a quorum exists. To
be elected, a director must receive more votes than any other nominee for the
same seat on the Board of Directors. As a result, if you withhold your vote as
to one or more directors, it will have no effect on the outcome of the election
unless you cast that vote for a competing nominee. If any nominee for election
to the Board of Directors named in this Proxy Statement becomes unavailable for
election for any reason, the proxy will be voted for a substitute nominee
selected by the Board of Directors. To ratify the appointment of Porter Keadle
Moore, LLP and to approve any other matter presented for shareholder approval,
the number of shares voted in favor of the proposal must exceed the number of
shares voted against the proposal, provided a quorum is present.
EFFECT OF ABSTENTIONS
A shareholder who is present in person or by proxy at the Annual Meeting
and who abstains from voting on any or all proposals will be included in the
number of shareholders present at the Annual Meeting for the purpose of
determining the presence of a quorum. Abstentions do not count as votes in favor
of or against a given matter.
EFFECT OF BROKER NON-VOTES
Brokers who hold shares for the accounts of their clients may vote these
shares either as directed by their clients or in their own discretion if
permitted by the exchange or other organization of which they are members.
Companies listing their securities on the New York Stock Exchange are permitted
to vote their clients' proxies in their own discretion as to the election of
directors and the ratification of independent accountants. Proxies that brokers
do not vote on one or more proposals but that they do vote on others are
referred to as "broker non-votes" with respect to the proposal(s) not voted
upon. Broker non-votes are included in determining the presence of a quorum. A
broker non-vote, however, does not count as a vote in favor of or against a
particular proposal for which the broker has no discretionary voting authority.
STOCK OWNED BY MANAGEMENT
The following table lists, as of the Record Date, the number and percentage
ownership of the shares of Common Stock beneficially owned by each director of
the Company, each executive officer named in the Summary Compensation Table, any
known beneficial owner of more than five percent of the outstanding Common Stock
and all current directors and executive officers as a group. Unless otherwise
indicated, each person is the record owner of his or her shares and has the sole
right to vote and dispose of those shares. The trustees of the ESOP and of the
401(k) Plan vote the shares held in participant accounts in those plans. As a
result, the shares owned beneficially by Ms. Berry and Dr. Reeve include 254,743
shares not yet allocated to ESOP participant accounts, as to which they share
voting authority as two of the ESOP trustees, and the shares owned beneficially
by Messrs. Dorminey, Silvey, Bullock and Steed include 134,344 shares held in
the 401(k) Plan, as to which they share voting authority as co-trustees of the
401(k) Plan.
<TABLE>
<CAPTION>
No. of Percentage
Name Position Shares Ownership(1)
<S> <C> <C> <C>
T. Aubrey Silvey Chairman of the Board 196,224 (2) 7.0%
Gary D. Dorminey Chief Executive Officer, President and 7.8
Director 223,130 (3)
Anna L. Berry Director 268,173 (4) 9.5
Gary M. Bullock Director 161,524 (5) 5.7
Jerry L. Clayton Director 61,900 (6) 2.2
Thomas E. Reeve, Jr. Director 297,913 (7) 10.6
Michael P. Steed Director 188,044 (8) 6.7
Dean B. Talley Director 53,700 (9) 1.9
Thomas S. Upchurch Director 53,700 (10) 1.9
D. Lane Poston Executive Vice President and Chief
Operating Officer 88,688 (11) 3.1
Anyce C. Fox Senior Vice President 26,188 (12) *
C. Lynn Gable Senior Vice President and CFO 37,392 (13) 1.3
All Directors and Executive
Officers as a Group (12
persons) 998,801 (14) 34.0
</TABLE>
(*) Indicates less than one percent of the outstanding shares of Common Stock.
(1) Calculated based on 2,815,398 shares entitled to vote, which includes
254,743 shares that will be voted by the ESOP trustees and 134,344 shares
that will be voted by the 401(k) Plan Trustees. The number of issued and
outstanding shares used to calculate the percentage of total ownership
includes any shares covered by options issued to the individual or to
members of the group, as applicable, identified in the table.
(2) Includes 5,430 shares subject to options vesting on or before May 10, 1999
and 134,344 shares held in participant accounts in the 401(k) Plan, as to
which he shares voting authority as a co-trustee.
(3) Includes 2,058 shares held in an IRA, 4,312 shares allocated to his ESOP
account, 36,204 shares subject to options vesting on or before May 10, 1999
and 134,344 shares held in participant accounts in the 401(k) Plan (which
includes 6,700 shares allocated to his account), as to which he shares
voting authority as a co-trustee.
(4) Includes 5,430 shares subject to options vesting on or before May 10, 1999
and 254,743 shares not yet allocated to participant accounts in the ESOP,
as to which she shares voting authority as a co-trustee.
(5) Includes an aggregate of 1,750 shares held in two self-employed pension
plans, 5,430 shares subject to options vesting on or before May 10, 1999
and 134,344 shares held in participant accounts in the 401(k) Plan, as to
which he shares voting authority as a co-trustee.
(6) Includes 5,000 shares held by Mr. Clayton's spouse, 3,200 shares held by a
corporation that may be deemed to be controlled by Mr. Clayton and 5,430
shares subject to options vesting on or before May 10, 1999.
(7) Includes 30,000 shares held in an IRA, 7,740 shares held by Dr. Reeve's
spouse, 5,430 shares subject to options vesting on or before May 10, 1999
and 254,743 shares not yet allocated to participant accounts in the ESOP,
as to which he shares voting authority as a co-trustee.
(8) Includes 15,000 shares held by Mr. Steed's spouse, 13,490 shares held in an
IRA, 4,500 shares held in his spouse's IRA, 5,430 shares subject to options
vesting on or before May 10, 1999 and 134,344 shares held in participant
accounts in the 401(k) Plan, as to which he shares voting authority as a
co-trustee.
(9) Includes 10,428 shares held in an IRA, 2,000 shares held in a family
limited partnership that may be deemed to be controlled by Mr. Talley and
5,430 shares subject to options vesting on or before May 10, 1999.
(10) Includes 5,430 shares subject to options vesting on or before May 10, 1999.
(11) Includes 19,652 shares held by Mr. Poston's spouse, 17,256 shares held in
an IRA, 5,908 shares held in his 401(k) plan account (as to which he has
dispositive, but not voting, authority), 454 shares held in his spouse's
IRA, 4,214 shares allocated to his ESOP account and 36,204 shares subject
to options vesting on or before May 10, 1999. (12) Includes 8,944 shares
held in Ms. Fox's 401(k) plan account (as to which she has dispositive, but
not voting, authority), 3,644 shares allocated to her ESOP account and
3,600 shares subject to options vesting on or before May 19,1999.
(12) Includes 8,944 shares held in Ms. Fox's 401(k) plan account (as to which
she has dispositive, but not voting, authority), 3,644 shares allocated to
her ESOP account and 3,600 shares subject to options vesting on or before
May 19, 1999.
(13) Includes 3,792 shares allocated to Mr. Gable's ESOP account and 3,600
shares subject to options vesting on or before May 10, 1999.
(14) Includes 254,743 shares that will be voted by the ESOP trustees, 134,344
shares that will be voted by the 401(k) Plan trustees and 123,048 shares
subject to options vesting on or before May 10, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's reporting officers and directors and persons who own more than 10%
of the Company's Common Stock to file reports of ownership and changes in
ownership on Forms 3, 4, and 5 with the Securities and Exchange Commission and
the Company. Based solely on our review of the forms filed with the Commission
and furnished to the Company, we believe that our executive officers and
directors complied with all filing requirements applicable to them during the
fiscal year ended December 31, 1998.
PROPOSAL ONE
ELECTION OF DIRECTORS
Our Board of Directors consists of nine members divided into three classes.
Dr. Reeve and Messrs. Steed and Upchurch are Class II directors serving an
initial term expiring at the 1999 Annual Meeting of Shareholders and are being
nominated for re-election for a three-year term commencing at this Annual
Meeting. Messrs. Bullock and Clayton and Dr. Talley are Class I directors
serving a term expiring at the 2001 Annual Meeting of Shareholders, and Ms.
Berry and Messrs. Silvey and Dorminey are Class III directors serving an initial
term expiring at 2000 Annual Meeting of Shareholders. Members of each class
serve until their successors are elected and qualified and are elected for
three-year terms upon the expiration of their initial term. All of the directors
listed below have served as directors of the Company since March 1997.
The following table sets forth the name, age, position(s) with the Company
and its wholly owned subsidiary, Community First Bank (the "Bank"), business
experience for the past five years and current term of service for each of the
members of the Company's Board of Directors.
<TABLE>
<CAPTION>
Age as of
Name and December 31, Principal Employment for the Past Five Term
Position(s) 1998 Years Expires
----------- ---- ----- -------
<S> <C> <C> <C>
T. Aubrey Silvey 61 Chairman and Chief Executive Officer of 2000
Chairman of the Board Aubrey Silvey Enterprises, an electrical
substation contractor
Gary D. Dorminey 52 Chief Executive Officer, President and 2000
Chief Executive Officer, Director of the Company and the Bank
President and Director
Anna L. Berry 49 Treasurer of Southwire Company, a major 2000
Director manufacturer of wire products
Gary M. Bullock 56 President and Chief Executive Officer of 2001
Vice Chairman of the Board Carroll Electric Membership Corp.
Jerry L. Clayton 56 Owner of Clayton Pharmacy 2001
Director
Thomas E. Reeve 78 Retired Physician 1999
Director
Michael P. Steed 54 President and Owner of Steed Company, a 1999
Director manufacturer of fabric labels
Dean B. Talley 56 Physician 2001
Director
Thomas S. Upchurch 59 President of the Georgia Partnership for 1999
Director Excellence in Education
</TABLE>
The Board of Directors recommends that you vote FOR the election of Dr.
Reeve and Messrs. Steed and Upchurch as Class II directors to serve a three-year
term as described in this Proxy Statement.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met 13 times during fiscal 1998. All
directors attended at least 75% of the Board and applicable committee meetings
held during 1998.
The Board of Directors has established a Compensation Committee, which
establishes compensation levels for our officers, reviews management
organization and development, reviews significant employee benefit programs and
establishes and administers executive compensation programs. The Compensation
Committee consists of Messrs. Bullock, Clayton and Upchurch and it met 3 times
during 1998.
The Board of Directors has also established an Audit Committee, which
recommends to the Board of Directors the independent public accountants to be
selected to audit the Company's annual financial statements and approves any
special assignments given to the accountants. The Audit Committee also reviews
the planned scope of the annual audit, any changes in accounting principles and
the effectiveness and efficiency of the Company's internal accounting staff. The
Audit Committee consists of Drs. Reeve and Talley, Mr. Upchurch and Mr. Silvey
and it met 4 times during 1998.
The Executive Committee of the Board of Directors has the authority to act
on behalf of the Board on important matters between scheduled director meetings
unless specific Board action is required or unless otherwise restricted by the
Company's Articles of Incorporation or Bylaws or by action of its Board of
Directors. The Executive Committee consists of Messrs. Silvey, Dorminey, Bullock
and Steed, and it met 20 times during 1998.
The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company. The Board of Directors
does not have a nominating committee.
COMPENSATION AND COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Bullock, Clayton and
Upchurch. None of the members of the Compensation Committee has served as a
executive officer of the Company and no executive officer of the Company has
served as a director or member of the Compensation Committee of any other entity
of which Messrs. Bullock, Clayton or Upchurch has served as an executive
officer. See "-Director Compensation" below for the terms of stock options,
preferred stock and related bonuses granted to Messrs. Bullock, Clayton,
Upchurch and the other non-employee directors of the Company.
DIRECTOR COMPENSATION
Each of the directors of the Company is also a director of the Bank. We pay
each member of the Bank's Board of Directors a fee of $575 per Board meeting
attended, $750 per month for Executive Committee members other than the Chairman
($1,000 per month in the case of the Chairman of the committee) and $200 per
meeting for all other committees. Directors of the Company do not receive
compensation solely for their services as directors of the Company.
On January 8, 1998, each non-employee director of the Company received
3,620 shares of Series A Convertible Preferred Stock ("Preferred Stock") under
the Company's Management Recognition Plan. The shares automatically convert into
Common Stock in a one-to-one ratio (which was adjusted to a ratio of two shares
of Common Stock for each share of Preferred Stock as a result of our February
16, 1999 100% stock dividend) on the five-year anniversary of the date of grant
or upon a change of control of the Company, whichever is earlier; receive no
dividends; have no liquidation preference and are not entitled to vote on any
matters prior to their conversion into Common Stock. Directors who were also
employees received shares of Preferred Stock as described in "Certain
Transactions." As a reimbursement for tax liability resulting from their receipt
of the Preferred Stock, each non-employee director received a $65,930 bonus in
1998.
In December 1995, the Bank initiated a defined contribution post-retirement
benefit plan to provide retirement benefits to its directors and to provide
death benefits for the designated beneficiary. In connection with the plan's
establishment, the Bank purchased a whole life insurance contract on the life of
each director and entered into a split dollar arrangement with each director.
The increase in cash surrender value of the contract, less the Bank's cost of
funds, determines each director's annual benefit. In the event the insurance
contract fails to produce positive returns, the Bank has no separate obligation
to contribute to the Plan. At December 31, 1998, the cash surrender value of the
insurance contract was approximately $1,179,000.
EXECUTIVE OFFICERS
The following table contains certain information about the Company's
executive officers. All references to positions with the Company also refer to
the Bank and its predecessor.
<TABLE>
<CAPTION>
Age as of Principal Employment
Name and Positions(s) December 31, 1998 for the Past Five Years
--------------------- ----------------- -----------------------
<S> <C> <C>
Gary D. Dorminey 52 President and Chief Executive
President and Chief Executive Officer Officer of the Company
D. Lane Poston 49 Executive Vice President and Chief
Executive Vice President and Operating Officer of the Company
Chief Operating Officer
C. Lynn Gable 46 Senior Vice President and
Senior Vice President and Chief Financial Officer of the
Chief Financial Officer Company since February 1997; prior
thereto, President of Gable
Financial Group, Inc.
Anyce C. Fox 52 Senior Vice President of the Company
Senior Vice President since 1990
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation that the Company and the
Bank paid for services rendered in all capacities during the fiscal years ended
December 31, 1998, 1997 and 1996 to the Company's chief executive officer and
the three other executive officers whose total salary and bonus during such year
exceeded $100,000. See "Certain Transactions" for a description of the terms of
Preferred Stock awards granted to the named executive officers in 1998.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------- Awards
Securities All
Name and Principal Other Annual Underlying Other
Position Year Salary Bonus Compensation(1) Options Compensation(2)
- -------- ---- ------ ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gary D. Dorminey 1998 $165,000 $ 30,000 $ 0 0 $ 29,947
President and Chief 1997 165,000 466,295(3) 0 60,340 15,709
Executive Officer 1996 139,000 31,650 0 0 4,326
D. Lane Poston 1998 $ 115,000 $ 28,750 $ 0 0 $ 29,947
Executive Vice 1997 115,000 468,311(3) 0 60,340 13,859
President and Chief 1996 105,000 24,182 0 0 3,875
Operating Officer
C. Lynn Gable 1998 $ 93,600 $ 15,000 $ 0 0 $ 29,947
Senior Vice President 1997 80,135 176,983(3) 0 6,000 7,678
and Chief Financial
Officer
Anyce C. Fox 1998 $ 85,600 $ 15,000 $ 0 0 $ 29,947
Senior Vice President 1997 65,600 204,461(3) 0 6,000 7,093
1996 62,940 8,182 0 0 1,802
- -----------
</TABLE>
(1) Does not include amounts attributable to miscellaneous benefits including
automobiles that the Company or the Bank own and permit the executive to
use. The cost of providing these benefits to any individual executive
officer during any of the years reported did not exceed the lesser of
$50,000 or 10% of the individual's total annual salary and bonus.
(2) Reflects the value of Company matching contributions to the indicated
person's 401(k) plan and ESOP accounts as follows:
1998 1997 1996
---- ---- ----
Mr. Dorminey
401(k) Plan 0 $ 3,011 $4,326
ESOP $29,947 $12,698 0
Mr. Poston
401(k) Plan 0 $ 2,099 $3,875
ESOP $29,947 $11,760 0
Mr. Gable
401(k) Plan 0 0 0
ESOP $29,947 $ 7,678 0
Ms. Fox
401(k) Plan 0 $ 845 $1,802
ESOP $29,947 $ 6,248 0
(3) Includes a bonus in the amount listed below accrued in 1997 and paid in
1998 and 1999 to reimburse the indicated person for tax liability
relating to the preferred stock awards described in "Certain Transactions
- Preferred Stock Awards."
Mr. Dorminey: $439,561
Mr. Poston: $439,561
Mr. Gable: $160,380
Ms. Fox: $191,341
The Company did not award any stock options or stock appreciation rights
("SARs") to any of the executives named in the Summary Compensation Table during
fiscal 1998.
The following table contains information concerning the options held at
December 31, 1998 by the executives named in the Summary Compensation Table.
None of these executives exercised any options during fiscal 1998.
Fiscal 1998 Year-End Option Holdings and Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at December 31, 1998 Options at December 31, 1998(1)
---------------------------- -------------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dorminey 0 $ 0 30,170 90,510 $3,771 $11,314
Mr. Poston 0 $ 0 30,170 90,510 3,771 11,314
Mr. Gable 0 $ 0 3,000 9,000 375 1,125
Ms. Fox 0 $ 0 3,000 9,000 375 1,125
</TABLE>
(1) Calculated by subtracting the exercise price ($19.8125 per share) from
$19.9375 per share, the closing price of the Company's Common Stock as reported
by the Nasdaq Stock Market on December 31, 1998, and multiplying the difference
by the number of shares underlying each option.
RETIREMENT PLAN
The Bank has a defined benefit pension plan (the "Retirement Plan" ) for
all employees who have attained the age of 21 years and have completed one year
of service with the Bank. In general, the Retirement Plan provides for annual
benefits payable monthly upon retirement at age 65 in an amount equal to
approximately one percent of the average of the employee's compensation for the
five successive calendar years within the final five calendar years of service
affording the highest average, excluding bonuses, overtime pay and other special
compensation, for each year of service, not in excess of 40 years. Under the
Retirement Plan, an employee's benefits are fully vested after five years of
qualifying service. A year of service is any year in which an employee works a
minimum of 1,000 hours. The Retirement Plan provides for an early retirement
option with reduced benefits for participants who are 55.
The following table illustrates annual pension benefits for retirement at
age 65 under various levels of compensation and years of service. The figures in
the table assume that the Retirement Plan continues in its present form and that
the participants elect a straight life annuity form of benefit.
<TABLE>
<CAPTION>
5 Year Average 10 Years of 15 Years of 20 Years of 25 Years of 30 Years of 35 Years of
Compensation Service Service Service Service Service Service
<S> <C> <C> <C> <C> <C> <C>
$ 40,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 $ 14,000
50,000 5,000 7,500 10,000 12,500 15,000 17,500
60,000 6,000 9,000 12,000 15,000 18,000 21,000
70,000 7,000 10,500 14,000 17,500 21,000 24,500
80,000 8,000 12,000 16,000 20,000 24,000 28,000
90,000 9,000 13,500 18,000 22,500 27,000 31,500
100,000 10,000 15,000 20,000 25,000 30,000 35,000
110,000 11,000 16,500 22,000 27,500 33,000 38,500
120,000 12,000 18,000 24,000 30,000 36,000 42,000
130,000 13,000 19,500 26,000 32,500 39,000 45,500
140,000 14,000 21,000 28,000 35,000 42,000 49,000
150,000 15,000 22,500 30,000 37,500 45,000 52,500
160,000 16,000 24,000 32,000 40,000 48,000 56,000
</TABLE>
The Bank did not contribute to the Retirement Plan for fiscal 1998. At
December 31, 1998, Mr. Dorminey had 7.67 years of credited service under the
Retirement Plan and total accrued funds in the Retirement Plan of $10,822, Mr.
Poston had 7.58 years of credited service under the Retirement Plan and total
accrued funds in the Retirement Plan of $8,038, Ms. Fox had 7.50 years of
credited service under the Retirement Plan and total accrued funds in the
Retirement Plan of $5,011, and Mr. Gable had .83 years of credited service in
the Retirement Plan and total accrued funds in the Retirement Plan of $780.
EMPLOYMENT AGREEMENTS
Under the employment agreement executed by Mr. Dorminey, the Bank and the
Company (the Bank and the Company are hereinafter collectively referred to as
the "Employer") on December 29, 1997, Mr. Dorminey will receive (a) an annual
salary of $165,000, which is subject to discretionary annual increases by the
Bank's Board of Directors; (b) an incentive bonus determined each year by the
Compensation Committee of the Bank's Board of Directors based upon the
achievement of certain performance criteria to be determined annually by the
Board of Directors; (c) benefits under such other programs as are maintained for
employees of the Bank or the Company generally; (d) reimbursement for reasonable
business expenses, club dues and business-related costs of club membership; (e)
use of an automobile; and (f) such other medical, dental and other health care
benefits as are extended to other management personnel. The agreement has an
initial term of three years and will automatically renew on each day after its
effective date so that the term remains a three-year term. Either Mr. Dorminey
or the Employer may terminate automatic renewal by giving written notice to the
other party of the termination, in which event the term will end on the third
anniversary of the thirtieth day following the date the written notice is
received. If the Employer terminates the agreement for cause, as defined in the
agreement or Mr. Dorminey terminates the agreement without good reason, as
defined in the agreement, Mr. Dorminey will receive only the salary and bonus
amounts that are due and owed to him on the effective date of the termination.
If he is terminated without cause or upon permanent disability, or if he
terminates his employment with good reason, 60 days' prior written notice of
intent to terminate is required and Mr. Dorminey will receive a termination
payment equal to his Average Monthly Compensation, as defined below, for the
remaining term of the agreement. Average Monthly Compensation means the quotient
determined by dividing (a) the greater of (1) Mr. Dorminey's then current base
salary, or (2) the average of his base salary and incentive bonus for the most
recent three consecutive 12-month periods during which he was employed by the
Employer immediately prior to the effective date of the termination that
produced the highest average, by (b) twelve (12). This payment may decrease if
necessary to comply with the Internal Revenue Code. In addition, Mr. Dorminey
has agreed not to engage in the community banking business within a 20-mile
radius of any office or facility of the Employer for a period of 36 months
following his termination by the Employer for cause or by Mr. Dorminey for good
reason or following a change in control of the Employer as defined in the
agreement, and not to solicit the Employer's customers or employees within the
same geographic area for the same period of time.
Messrs. Poston and Gable and Ms. Fox also entered into employment
agreements with the Employer that contain essentially identical terms and
conditions, except that the base salaries set forth in such agreements are
$115,000, $90,000 and $65,600, respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report discusses the compensation objectives and policies applicable
to the Company's executive officers and the Company's policy generally with
respect to the compensation of all executive officers as a group for fiscal 1998
and specifically reviews the compensation established for the Company's Chief
Executive Officer during fiscal 1998 as reported in the Summary Compensation
Table. The Compensation Committee makes recommendations to the Board for the
compensation of the Company's Chief Executive Officer. The Chief Executive
Officer does not participate in the Compensation Committee's discussion or
recommendations. The Board must approve all compensation actions pertaining to
the Chief Executive Officer.
COMPENSATION PHILOSOPHY
The Company's executive compensation program has three main objectives: (1)
to align the interests of the executive officers with the interests of the
Company's shareholders (2) to attract and retain highly talented and productive
executives, and (3) to provide incentives to those executive officers for
superior corporate performance measured by the Company's strategic achievements
and overall financial performance. To achieve these objectives, the Company's
executive compensation program consists of base salary, short-term incentive
compensation in the form of a bonus, and long-term incentive compensation in the
form of stock options and shares of Preferred Stock. These compensation elements
are in addition to the general benefit programs that are offered to all of the
Company's employees.
In determining the amount of compensation to be awarded to executive
officers, the Committee studies the compensation packages for executives of a
peer group of the Company's most direct competitors for executive talent,
assesses the competitiveness of the Company's executive compensation program and
reviews the Company's financial performance for the previous fiscal year and its
anticipated financial performance for the current year. The Committee also
gauges the success of the compensation program in achieving its objectives in
the previous year and considers the Company's overall performance objectives.
The Company's executive compensation program includes three basic types of
compensation: base salary, incentive compensation, and long-term incentive
compensation, each of which is described more fully below.
BASE SALARY
In addition to the factors listed in the foregoing section that support the
Company's executive compensation program generally, each executive officer's
base salary is based on his or her individual area of responsibility and
accountability within the Company. Base salary does not depend upon or relate to
the achievement of any predetermined performance targets.
INCENTIVE COMPENSATION
Bonuses for executive officers are intended to motivate the individual to
work hard to achieve the Company's financial and operational performance goals
or to otherwise motivate the individual to aim for a high level of achievement
on behalf of the Company in the coming year.
Bonuses are determined based on a combination of factors including the
Company's historic and recent financial performance, the individual's
contribution to that performance, the individual's performance on non-financial
goals such as ethical business conduct, client satisfaction and the general
perception of the Company and the Bank by financial leaders and customers, and
other contributions to the Company's success. We evaluate each of these factors
subjectively and give them relatively equal weight without applying a rigorous
formula.
LONG-TERM INCENTIVE COMPENSATION
We believe that stock ownership further aligns the interests of the
executive officers with the interests of the Company's shareholders. The
Company's long-term incentive compensation for its executive officers is based
upon the Company's 1997 Stock Option Plan and its Management Recognition Plan.
We believe that placing a portion of the executives' total compensation in the
form of long-term compensation will retain and provide incentives to top
management. In determining the number and terms of options and the number of
shares of Preferred Stock to grant an executive, we primarily consider
subjectively the same criteria as we consider in awarding bonuses, as well as
the degree to which an incentive for long-term performance would benefit the
Company. We believe that these stock grants and options should include vesting
conditions that further encourage the executive officers to remain with the
Company for some time before the full benefit can be realized.
BENEFITS
We believe the Company must offer a competitive benefits program to attract
and retain key executives. The Company provides the same medical and other
benefits to its executive officers that are generally available to its other
employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of the Company's Chief Executive Officer is prescribed in
his employment agreement, which is described under "Executive Compensation -
Employment Agreements." We use data from banks in the Southeast of similar asset
size published in SNL Executive Compensation Review to determine and adjust his
base salary. The goal for base salary is to be within five percent (5%) of the
median for the surveyed group. The Chief Executive Officer's bonus and long-term
compensation have been and will continue to be determined based on similar
elements and measures of performance as is the compensation for the Company's
other executive officers. We may also employ certain broader criteria more
specific to the responsibilities of the Chief Executive Officer.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is our responsibility to address the issues raised by Section 162(m) of
the Internal Revenue Code, as amended (the "Code"). The revisions of this Code
section made certain non-performance based compensation in excess of $1,000,000
to executives of public companies non-deductible to the companies beginning in
1994. We have reviewed these issues and have determined that no portion of
compensation payable to any executive officer for fiscal 1998 is non-deductible.
The Company's 1997 Stock Option Plan limits to 200,000 the number of options
that may be awarded to any individual in a single year under that plan.
Submitted by: THE COMPENSATION COMMITTEE
Gary M. Bullock
Jerry L. Clayton
Thomas S. Upchurch
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
the cumulative total return on the Nasdaq Stock Market (U.S.) index and the
Nasdaq Bank Stocks Index from July 1, 1997, the date the Company's Common Stock
began trading on the Nasdaq Stock Market, to December 31, 1998. The Performance
Graph assumes reinvestment of dividends, where applicable. The base amount for
the Company's Common Stock is $15.9375 per share, which was the closing price of
the initial day of trading on July 1, 1997. The initial offering price for the
Company's Stock was $10.00 per share.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
July 1, December 31, December 31,
1997 1997 1998
---- ---- ----
<S> <C> <C> <C>
Community First Banking Company $100.000 $138.039 $125.098
The Nasdaq Stock Market (U.S.) $100.000 $109.625 $154.105
Nasdaq Bank Stocks $100.000 $133.847 $132.576
</TABLE>
CERTAIN TRANSACTIONS
ESOP LOAN
The Company has established an Employee Stock Ownership Plan for employees
age 21 or older who have at least one year of credited service with the Bank or
any affiliate (including years of service with the mutual predecessor of the
Bank). The Bank administers the ESOP and Lisa Lawson, Thomas E. Reeve, Jr.,
Steve McCord and Anna L. Berry act as trustees of the related trust. The ESOP is
currently funded by the Company, although the Bank and any other adopting
affiliate may fund the ESOP. Contributions may be made in cash (which primarily
will be invested in Common Stock) or Common Stock. Benefits may be paid either
in shares of Common Stock or in cash.
On June 27, 1997, the ESOP obtained a loan from the Company in the
principal amount of $3,861,700 and used the proceeds to purchase 386,170 shares
of Common Stock issued in the Company's subscription offering for its Common
Stock. The interest rate on the loan is equal to the prime rate, which was 7.75%
at March 25, 1999. Shares purchased by the ESOP with the proceeds of the loan
are held in a loan suspense account and released on a pro rata basis as debt
service payments are made. The Company is required to make cash contributions to
the ESOP sufficient to amortize the principal and interest on the loan, which
has a maturity of five years. In any plan year, the Company may make additional
discretionary contributions for the benefit of plan participants in either cash
or shares of Common Stock, which the ESOP may acquire through the purchase of
outstanding shares in the market or from individual shareholders, upon the
Company's original issuance of additional shares or upon the Company's sale of
treasury shares. These purchases, if made, would be funded through additional
borrowings by the ESOP or additional contributions. Various factors, including
prevailing regulatory policies, the requirements of applicable laws and
regulations and market conditions, will affect the timing, amount and manner of
future contributions to the ESOP.
PREFERRED STOCK AWARDS
On January 8, 1998, directors and executive officers of the Company were
awarded the following numbers of shares of Preferred Stock under the Management
Recognition Plan: Mr. Dorminey: 24,135 shares; Mr. Poston: 24,135 shares; Mr.
Gable: 8,806 shares; Ms. Fox: 10,506 shares; each non-employee director of the
Company: 3,620 shares. The shares convert automatically to Common Stock in a
ratio of two shares of Common Stock for each share of Preferred Stock as a
result of the February 16, 1999 100% stock dividend. This conversion occurs upon
the earlier of January 8, 2003 or a change of control of the Company. Prior to
such conversion, the shares have no voting or dividend rights and no liquidation
preference. See "Proposal One - Election of Directors - Director Compensation"
and "Executive Compensation - Summary Compensation Table" for information
regarding the tax reimbursement bonuses paid on behalf of each of the recipients
of the Preferred Stock.
OTHER TRANSACTIONS
Some of our directors, officers, principal shareholders and their
associates were customers of, or had transactions with, the Company or the Bank
in the ordinary course of business during 1998. Some of our directors are
directors, officers, trustees or principal securities holders of corporations or
other organizations that also were customers of, or had transactions with, the
Company or the Bank in the ordinary course of business during 1998.
All outstanding loans and other transactions with our directors, officers
and principal shareholders were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and, when
made, did not involve more than the normal risk of collectability or present
other unfavorable features. In addition to banking and financial transactions,
we may have had additional transactions with, or used products or services of,
various organizations with which our directors were associated. The amounts
involved in these non-credit transactions have not been material in relation to
our business or to that of such other organizations. We expect to continue to
have similar transactions in the ordinary course of business with such
individuals and their associates in the future.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise directed by the shareholders, the persons appointed as
proxies will vote for ratification of the appointment by the Board of Directors,
upon the recommendation of the Audit Committee, of Porter Keadle Moore, LLP as
the Company's independent accountants for fiscal 1999. If the shareholders do
not ratify the appointment of Porter Keadle Moore, LLP, the Audit Committee will
reconsider its recommendation. We have been informed that no member of Porter
Keadle Moore, LLP has any direct or material indirect financial interest in the
Company or the Bank. A representative of Porter Keadle Moore, LLP will be
present at the Annual Meeting to answer appropriate questions and to make a
statement if he or she desires.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of Porter Keadle Moore, LLP as the Company's independent accountants
for fiscal 1999.
EXPENSES AND SOLICITATION OF PROXIES
The Company will pay the expenses of the solicitation of proxies for the
1999 Annual Meeting. In addition to solicitation by mail, certain directors,
officers and regular employees of the Company and its subsidiaries may solicit
proxies by telephone, telegram or personal interview, for which they will
receive no compensation in addition to their regular salaries. The Company will
request brokerage houses and custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the shares of Common Stock held
of record by these institutions, and, upon request, will reimburse them for
their reasonable out-of-pocket expenses in connection therewith.
SHAREHOLDER PROPOSALS
If you wish to submit a proposal for action at the next Annual Meeting of
Shareholders and would like to have it included in the proxy statement for that
meeting, you must send a written copy of the proposal to the Secretary of the
Company at the address listed on the first page of this proxy statement on or
before November 24, 1999. The proposal must comply with the rules and
regulations of the Securities and Exchange Commission.
OTHER MATTERS
We know of no other matters that may be brought before the meeting. If,
however, any matter other than the proposals addressed in this Proxy Statement
or matters incident to these matters come before the meeting, the persons
appointed as proxies will vote on these matters in accordance with their best
judgment.
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--- PLEASE MARK VOTES REVOCABLE PROXY
X AS IN THIS EXAMPLE COMMUNITY FIRST BANKING COMPANY
---
ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1999
The undersigned hereby appoints Gary D. Dorminey and C. Lynn Gable, or
either or them, with full power of substitution, to act as attorneys and proxies
for the undersigned, and to vote all shares of Common Stock of Community First
Banking Company (the "Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders (the "Meeting") to be held on April 29, 1999 at
Community First Bank, 110 Dixie Street, Carrollton, Georgia 30117 at 2:00 p.m.,
local time, and at any and all adjournments thereof, as follows:
Please be sure to sign and date ---------------------------
this Proxy in the box below. Date
- -------------------------------------------------------------
- ---Stockholder sign above ----Co-Holder (if any) sign above--
For With- For All
hold Except
I. To elect Dr. Reeve and Messers Steed [_] [_] [_]
and Upchurch as Class II directors to
serve a three-year term (except as
Marked to the contrary below):
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
- ------------------------------------ ----------------------------------------
For Against Abstain
II. To ratify the appointment of [_] [_] [_]
Porter Keadle Moore LLP as the
Company's independent accountants
for fiscal 1999.
In their descretion, the proxies are authorized to vote on any such matters as
may properly come before the Meeting or any adjournments or postponements
thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS PRESENTED
AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
The Board of Directors Recommends a Vote "FOR" the Listed Proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The above signed acknowledges receipt from the Company, prior to the execution
of this Proxy, of a Notice of Annual Meeting and a Proxy Statement dated March
25, 1999.
Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder may sign.
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Detach above card, sign, date and mail in postage paid envelope provided.
COMMUNITY FIRST BANKING COMPANY
- --------------------------------------------------------------------------------
Should the undersigned be present and elect to vote at the Meeting or at any
adjournments or postponements thereof, and after notification to the Secretary
of the company at the Meeting of the shareholder's decision to terminate this
Proxy, then the power of such attorneys and proxies shall be deemed terminated
and of no further force and effect.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
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