SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of 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 Rule 14a-11(c) or Rule 14a-12
Cortland First Financial Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(i)(ii), or 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $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 transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
CORTLAND FIRST FINANCIAL CORPORATION
65 Main Street
Cortland, New York 13045
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 28, 1997
To the Shareholders of Cortland First Financial Corporation:
NOTICE IS HEREBY GIVEN that the ANNUAL MEETING OF SHAREHOLDERS
of CORTLAND FIRST FINANCIAL CORPORATION, the parent company of
First National Bank of Cortland, will be held at the office of the
Company at 65 Main Street, in the City of Cortland, Cortland
County, New York, on March 31, 1997, at 1:00 p.m., for the purpose
of considering and voting upon the following matters:
1. The election of three (3) Directors (Class II) to serve
for a term of three (3) years or until their respective
successors are duly elected and qualified.
2. The transaction of such other business as may properly
come before the meeting, or any adjournment thereof.
Only those shareholders of record at the close of business on
February 14, 1997 shall be entitled to notice of the meeting and to
vote at the meeting.
By Order of the Board of Directors
DONALD S. AMES
Secretary
YOUR VOTE IS IMPORTANT. YOU ARE THEREFORE REQUESTED TO SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, EVEN IF YOU
EXPECT TO BE PRESENT AT THE MEETING. YOU MAY WITHDRAW YOUR PROXY AT
ANY TIME PRIOR TO THE MEETING, OR IF YOU DO ATTEND THE MEETING, YOU
MAY WITHDRAW YOUR PROXY AT THAT TIME AND VOTE IN PERSON IF YOU WISH.
<PAGE>
CORTLAND FIRST FINANCIAL CORPORATION
65 Main Street
Cortland, New York 13045
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, MARCH 31, 1997
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
Cortland First Financial Corporation (the "Company"), the holding
company for First National Bank of Cortland (the "Bank"), for use at
the Annual Meeting of Shareholders to be held at the office of the
Company at 65 Main Street, in the City of Cortland, Cortland County,
New York, on March 31, 1997, at 1:00 p.m. This Proxy Statement and
the accompanying Proxy are first being mailed to shareholders on or
about February 28, 1997.
If the enclosed Proxy is properly executed and returned, all
shares represented thereby will be voted according to the instructions
set forth thereon. If no such instructions are specified, the Proxy
will be voted FOR the election of the nominees named below. As to any
other business which may properly come before the meeting, the persons
named on the Proxy are granted discretionary authority to vote
according to their best judgment.
Any proxy given by a shareholder may be revoked at any time
before it is voted by: (i) the shareholder attending the meeting and
voting the shares of stock in person; (ii) the execution and delivery
of a later dated proxy; or (iii) the execution and delivery of a
written notice of revocation to Donald S. Ames, Secretary, Cortland
First Financial Corporation, No. 65 Main Street, Cortland, New York
13045. If not revoked, the Proxy will be voted in accordance with its
terms.
The cost of solicitation of proxies will be borne by the Company.
In addition to the use of the mails, some of the officers, directors
and regular employees of the Company may solicit proxies in person and
by telephone and telegraph, and may solicit brokers and other persons
holding shares beneficially owned by others to procure from the
beneficial owners consents to the execution of proxies. The Company
will reimburse such brokers and other persons for their expenses
incurred in sending proxy forms and other material to their
principals.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on February 14, 1997, the record date
for the determination of shareholders entitled to vote at the meeting,
there were outstanding and entitled to vote 2,016,000 shares of the
Company's common stock. Each share of common stock entitles the
holder to one (1) vote with respect to each item to come before the
meeting. There will be no cumulative voting of shares for any matters
voted upon at the meeting. No individual or group of individuals owns
of record or is known to the Company to own beneficially more than 5%
of the common stock of the Company.<PAGE>
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three (3)
classes as nearly equal in number as possible. The members of each
class are elected for a term of three (3) years and until their
successors are elected and qualified. One class of Directors is
elected annually. At the meeting, a total of three (3) Directors
(Class II) are to be elected to serve for a term to expire at the
annual meeting of the Company's shareholders in the year 2000. The
nominees receiving a plurality of the votes represented in person or
by proxy at the meeting will be elected. The shares represented by
the enclosed Proxy will be voted FOR the election of the three (3)
nominees named below (unless otherwise specified), each of whom is at
present a Director of the Company. If any nominee becomes unavailable
for any reason before the election (which is not anticipated), the
Proxy may be voted for such other person as may be determined by the
Board of Directors of the Company.
INFORMATION CONCERNING NOMINEES FOR DIRECTORS AND OTHER DIRECTORS
Shares
Beneficially % of Total
Business Experience Director Owned as of Common
Name and Age and Directorships Since* 2/14/97 (1) Stock
NOMINEES FOR ELECTION (CLASS II)
Robert M. Lovell Director of Company; 1988 1,578 (2) .08
(50) Consultant - Health-
care; President -
Cortland Memorial
Hospital (4/86 to
6/96).
Richard J. Shay Director of Company; 1988 1,530 .08
(64) District Attorney -
Cortland County,
Cortland, New York.
Charles H. Director of Company; 1993 3,100 (3) .15
Spaulding (48) Vice President -
George B. Bailey
Agency, Inc., Cortland,
New York (insurance
agency).
OTHER DIRECTORS**
David R. Alvord President and Director 1979 5,407 .27
(56) of Company; President,
Chief Executive Officer
and Director - First
National Bank of Cortland.
Harry D. Newcomb Director of Company; 1979 12,150 (4) .60
(68) President - Newcomb
Motors, Inc., Cortland,
New York (automobile
dealer).
Donald S. Ames Director of Company; 1986 74,400 3.69
(54) President - Cortland
Laundry, Inc., Cortland,
New York (commercial
laundry).
Stuart E. Young Director of Company; 1991 615 .03
(47) Partner - Spruce-Eden
Farms (dairy farm);
President - Cortland
Bulk Milk Producers
Cooperative, Inc.
David J. Taylor Director of Company; 1993 4,500 .22
(53) President - Prosco
Products, Inc.,
Cortland, New York
(manufacturer's
representative/
distributor).
Mary Alice Director of Company; 1994 308 .02
Bellardini Mayor - Village of
(63) Homer (4/87 to present);
Director - Blue Cross
and Blue Shield of
Central New York, Inc.
(health and hospitaliza-
tion insurance) (1984 to
1994); Director - HMO-
CNY, Inc. (health main-
tenance organization
(1995).
John H. Buck Director of Company; 1994 2,280 .11
(51) President - Buck
Environmental Laboratories,
Inc. (testing facility
for air, water, soil,
and waste).
All Directors and
Officers as a Group 106,176 5.27
(11 in Group)
* Year in which the Director was first elected to the Board of
Directors of the Company or the Bank.
** Messrs. Newcomb, Young, and Buck, and Ms. Bellardini are members
of Class III with terms expiring in 1998; Messrs. Alvord, Ames,
and Taylor are members of Class I with terms expiring in 1999.
(1) Includes shares owned by family members residing in the same
household as to which certain Directors disclaim beneficial
ownership. Except as otherwise indicated the named Director has
sole voting and sole investment power with respect to all of the
indicated shares. Share amounts are rounded to the nearest
whole number.
(2) Includes 402 shares owned by Mr. Lovell's daughter, Adrienne,
pursuant to the Uniform Gift to Minors Act, of which Mr. Lovell
has sole voting and investment power.
(3) Includes 2,792 shares owned by Mr. Spaulding's wife, Elizabeth,
of which Mr. Spaulding disclaims any beneficial ownership.
(4) Includes 6,870 shares owned by Mr. Newcomb's wife, Muriel, of
which Mr. Newcomb disclaims any beneficial ownership.
ORGANIZATION AND COMPENSATION OF THE BOARD OF DIRECTORS
Each Director of the Company is also a Director of the Bank.
During 1996 there were six (6) regularly scheduled meetings and two
(2) special meetings of the Company's Board of Directors. There were
twelve (12) regularly scheduled meetings of the Bank's Board of
Directors. Each of the incumbent Directors of the Company attended
at least seventy-five percent (75%) of the aggregate of all of the
meetings of the Board of Directors and any committees on which the
Director was a member.
The Company's full Board of Directors nominates individuals for
election to the Board. The Board will consider written
recommendations from shareholders for nominees to be elected to the
Board of Directors that are sent to the Secretary of the Company at
the Company's address.
Section 202 of the Company's Bylaws provides that nominations for
Directors to be elected at an annual meeting of the Company's
shareholders, except those made by the Board, must be submitted in
writing to the Secretary of the Company not later than the close of
business on the ninetieth (90th) day immediately preceding the date
of the meeting. The notice must contain (i) the name and address of
each proposed nominee; (ii) the principal occupation of each proposed
nominee; (iii) the total number of shares that will be voted for each
proposed nominee; (iv) the name and residence address of the notifying
shareholder; and (v) the number of shares owned by the notifying
shareholder. Nominations not made in accordance with this procedure
may be disregarded by the presiding officer at the annual meeting, in
his or her discretion.
The Company's Executive Committee, which consists of Messrs.
Alvord, Ames, Newcomb, and Shay, has the power to exercise all of the
executive and supervisory powers of the entire Board of Directors in
the interim between meetings of the Board of Directors. This
Committee did not meet in 1996. The Company does not have any
nominating, compensation, or audit committee. The Bank, however, does
have a Trust Audit Committee, an Audit Committee, an Executive
Committee, and a Compensation Committee. The Bank also has a Trust
Committee, which met forty-one (41) times during 1996. A description
of the Bank's Trust Audit, Audit, and Executive Committees follows.
A description of the Bank's Compensation Committee is set forth on
pages 7-8.
Trust Audit Committee
The Bank's Trust Audit Committee met one (1) time in 1996. The
function of the committee is to review the audit of the Bank's Trust
Department to determine whether income and expense is properly
recorded, whether adequate internal controls and safeguards are
maintained, and if any funds held in a fiduciary capacity remain
uninvested or undistributed any longer than necessary.
The Committee consists of the following Directors appointed by
the President and approved by the Board of Directors: Charles H.
Spaulding, Stuart E. Young, and Mary Alice Bellardini.
Audit Committee
The Bank's Audit Committee, which met ten (10) times in 1996,
supervises the internal audit activities of the Bank and supervises
and directs the Bank's auditors. The function of the Committee is to
ensure that the Bank's activities are being conducted in accordance
with law and the banking rules and regulations established by the
Comptroller of the Currency, other regulatory and supervisory
authorities, and in conformance with established policy. In addition,
the Audit Committee recommends to the Board the services of a
reputable certified public accounting firm. The Board of Directors
then appoints the certified public accounting firm at the annual
reorganization meeting of the Directors. The Committee receives and
reviews the reports of the certified public accounting firm and
presents them to the Board of Directors with comments and
recommendations.
The Committee consists of the following Directors appointed by
the President and approved by the Board of Directors: Richard J.
Shay, Donald S. Ames, and Harry D. Newcomb.
Executive Committee
The Bank's Executive Committee possesses and may exercise all the
executive and supervisory powers of the entire Board of Directors of
the Bank between meetings of the Board, subject to such restrictions
and instructions as may from time to time be given to the Committee
by the Board of Directors and except as the bylaws otherwise provide.
The Committee met fifty (50) times in 1996.
The Committee consists of the following Directors appointed by
the President and approved by the Board of Directors: David R.
Alvord, Donald S. Ames, Harry D. Newcomb, and Richard J. Shay. The
remaining Directors serve on a rotating basis.
Board of Directors Fees
The Directors of the Company receive no compensation for serving
in such capacity. Each Director of the Company is also a Director of
the Bank. For the year 1996, members of the Bank's Board of Directors
were compensated at the rate of $350.00 per meeting attended; members
of the Bank's Executive Committee were compensated $75.00 per
committee meeting attended; and members of the Bank's Compensation
Committee were compensated $200.00 per meeting attended. For the year
1997, members of the Bank's Board of Directors are being compensated
at the rate of $350.00 per meeting attended; members of the Bank's
Executive Committee, other than Mr. Alvord, are being compensated
$100.00 per meeting attended; and members of the Bank's Compensation
Committee are being compensated $200.00 per meeting attended. In
addition, beginning in 1997, Directors' compensation will be increased
by $1,000, in the form of an annual retainer fee. This retainer fee
shall not apply to Mr. Alvord.
Deferred Compensation Agreement
Effective December 31, 1991, the Bank adopted a Deferred
Compensation Agreement with its Directors. The purpose of the
Agreement is to provide Directors with the option to defer the receipt
of all or a portion of their director's fees. The election must be
made on or before December 31st of the year preceding the year in
which the fees are to be paid. Once made, the election will remain
in effect until revoked by the individual Director. All amounts
deferred pursuant to the Agreement will be credited with interest each
month at the rate being paid on one (1) year U.S. Treasury Notes as
of January 1st of the particular year.
Upon a Director no longer being a member of the Bank's Board, all
amounts deferred by the Director plus any earnings thereon shall be
paid, at the Director's election, over a period of ten (10) years or
in a lump sum. A Director may elect to defer commencement of any
installment payments for up to five (5) years following his or her
termination as a member of the Board.
During 1996, two (2) Directors participated in the deferred
compensation arrangement. These Directors deferred a total of $14,900
in director's fees.
EXECUTIVE COMPENSATION
The following table sets forth information concerning
compensation paid by the Bank to the Chief Executive Officer and the
other most highly compensated executive officers whose salary and
bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Payouts
Name and All Other
Principal LTIP Compensation
Position Year Salary($) Bonus($)(1) Payouts($)(2) ($)(3)
David R.Alvord 1996 153,000 16,830 - 77,247
President & 1995 150,000 15,000 20,000 105,220
Chief Executive 1994 141,000 21,150 - 90,906
Officer
(1) Paid to Mr. Alvord under the one (1) year Executive Incentive
Compensation Plan described on pages 10-11.
(2) Paid to Mr. Alvord under the three (3) year Executive Incentive
Compensation Plan described on pages 10-11.
(3) Includes the following amounts for Mr. Alvord for 1996: $7,500
for the 1996 contribution to the Employee Salary Savings Plan -
401K; $6,000 for the 1996 contribution to the pension plan;
$59,547 for the 1996 contribution to the Excess Benefit Plan
described on pages 9-10; and $4,200 for Director meeting fees
during 1996.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Bank meets semi-annually to
conduct a comprehensive performance review of all Bank officers and
to recommend the annual base remuneration for the Bank's officers to
the Board of Directors. The Committee considers each officer's
performance as measured against that individual's job description.
In recommending the base annual salary for the chief executive
officer, the Committee considers overall asset quality, earnings,
capital adequacy, peer group and industry comparisons, general
economic trends and total return to the Company's shareholders. The
Committee believes that Mr. Alvord has performed exceptionally well
in each of the above measurable categories, and that the Company's
(and the Bank's) success is due, in large part, to his efforts. Mr.
Alvord does not participate in the determination of his annual
compensation.
The Committee meets separately to consider award payments under
the Bank's Executive Incentive Compensation Plan. Under this plan
certain designated officers are considered for annual and three (3)
year incentive payments based on prior goals established by the Board
of Directors for return on assets. A description of this plan is
found on pages 10-11.
The Compensation Committee is appointed by the President and is
approved by the Board of Directors. Its members presently consist of:
Donald S. Ames
Robert M. Lovell
David J. Taylor
Harry D. Newcomb
John H. Buck
Stock Performance Graph
The following graph compares cumulative total returns (assuming
reinvestment of dividends) on the Company's common stock against the
Standard & Poor's Composite 500 Stock Index (S&P 500) and the National
Association of Securities Dealers Automated Quote System (NASDAQ) bank
stocks for the five-year period ended December 31, 1996.
Comparison of Five Year Cumulative Total
Return of CFFC, S&P 500 & NASDAQ Banks
[Graph inserted Here]
1991 1992 1993 1994 1995 1996
NASDAQ Banks 100 146 166 165 246 326
CFFC 100 109 183 271 269 320
S&P 500 100 108 118 120 165 203
Employment Agreement
Effective January 1, 1994, the Company and the Bank entered into
an agreement with Mr. Alvord providing for his continued services
through December 31, 2000, at a minimum base salary of $133,000 per
year. The agreement provides that it may be terminated by Mr. Alvord
at any time during the first six (6) months following a "Change in
Control" of the Company or the Bank. A Change in Control is defined
as (i) the sale, exchange or other disposition by either the Company
or the Bank of all or substantially all of its assets either to a
single purchaser or to a group of affiliated purchasers in one
transaction or a series of related transactions pursuant to a common
plan; (ii) the sale, exchange or other disposition in one transaction
or in a series of related transactions pursuant to a common plan by
either the Company or the Bank of at least twenty-five percent (25%)
of its issued and outstanding shares; or (iii) the merger,
consolidation or other combination of either the Company or the Bank,
where the existing shareholders receive less than fifty-one percent
(51%) of the outstanding voting stock of the new or continuing entity.
In the event of such a termination, Mr. Alvord will be entitled to
receive an amount equal to three (3) times his then base salary, plus
the amount of any taxes or other charges which may be imposed upon Mr.
Alvord pursuant to the Internal Revenue Code as a result of any
"excess parachute payments."
Pension Benefits
The Bank has a non-contributory pension plan, in which an
employee is eligible to participate upon attaining age twenty-one (21)
and completion of twelve (12) months consecutive service during which
the employee worked 1,000 or more hours of service. The Bank's
contribution is determined according to a formula based on years of
service with the Bank. The Bank's contribution to the Plan in 1996
and 1995 totaled $109,295 and $128,129, respectively. Contributions
to the plan in 1996 were $6,000 for Mr. Alvord.
Excess Benefit Plan
Effective January 1, 1991, the Board of Directors of the Bank
approved the adoption of an Excess Benefit Plan for David R. Alvord
(the "Excess Plan"). Its purpose is to provide Mr. Alvord with
retirement benefits in addition to those benefits provided pursuant
to the Bank's pension plan.
Under the terms of the Excess Plan, Mr. Alvord is entitled to
receive, upon retirement at age sixty-five (65), an amount equal to
eighty percent (80%) of his then Average Base Compensation increased
by the amount of the Accumulated Fund expressed as a straight life
annuity and reduced by the sum of: (a) the annual benefit to be
provided Mr. Alvord pursuant to the Bank's pension plan expressed as
a straight life annuity; (b) the annual benefit to be provided from
the vested portion of the Bank's contributions to Mr. Alvord's account
balance in the Bank's 401-K Plan as if such balance were to be paid in
the straight life annuity; and (c) an amount equal to Mr. Alvord's
primary social security benefit expressed in the form of a straight
life annuity. The Accumulated Fund is the amount that would have been
contributed to the Bank's pension plan on Mr. Alvord's behalf, but for
the limitation imposed by Section 401(a)(4) of the Internal Revenue
Code. The Accumulated Fund is deemed to have earned interest each
year at the same rate of return actually earned for such year by the
Bank's pension plan.
Under the original terms of the Excess Plan, the amount of the
benefit to be paid to Mr. Alvord was to be reduced in the event he
retired before age sixty-five (65). The amount of the reduction was
based on a fraction, the numerator of which was the number of years
remaining until Mr. Alvord reaches age sixty-five (65), and the
denominator of which was the total number of years of service Mr.
Alvord would have had if he had continued to work until such age. In
addition, certain actuarial reductions were to be applied to reflect
the early commencement of payments. Effective January 1, 1994, the
Excess Plan was amended to provide that no reduction will be made,
whether to reflect remaining years of service to age sixty-five (65)
or to reflect the early commencement of payments, in the event such
retirement is the result of Mr. Alvord's retirement on or after the
expiration of his Employment Agreement (presently December 31, 2000),
Mr. Alvord's disability, a termination of Mr. Alvord's employment by
the Bank without cause, the occurrence of an event which gives Mr.
Alvord the right to terminate his employment under the Employment
Agreement (e.g., a Change in Control or a material reduction in Mr.
Alvord's authority), or Mr. Alvord's death. If Mr. Alvord retires
before age sixty (60), no benefits are payable under the Excess Plan
unless such retirement is the result of a Change in Control, a
material reduction in Mr. Alvord's authority, Mr. Alvord's disability,
or a termination by the Bank of Mr. Alvord's employment without cause.
For purposes of the Excess Plan, the term "Change in Control"
means a sale by the Company or the Bank of all or substantially all
of its assets, or any individual or entity acquiring at least twenty-five
percent (25%) of those securities of the Bank entitled to vote
for the election of directors. "Average Base Compensation" is
generally defined as Mr. Alvord's average salary for the thirty-six
(36) month period immediately preceding his retirement, including any
elective contributions to the 401-K Plan and annual bonus, but
excluding any bonuses paid pursuant to the Bank's Executive Incentive
Compensation Plans and the value of any employee benefits paid on Mr.
Alvord's behalf.
In order to fund its liability under the Excess Plan, effective
January 1, 1995, the Bank established the "First National Bank of
Cortland Excess Benefit Trust for the Benefit of David R. Alvord."
Each year the Bank will contribute such amount to the Trust so that
the balance of the Trust will equal the actuarial value of the
estimated benefit payable to Mr. Alvord pursuant to the Excess Plan.
The initial contribution to the Trust was $118,000. The contribution
for 1996 was $59,547.
Employee 401K Savings Plan
The Bank has an Employee Salary Savings Plan - 401K. The Bank's
contributions to the 401K Plan are made according to a schedule of
matching employee contributions and are made as accrued. The Bank's
contributions to the Plan for 1996 and 1995 were $98,072 and $94,752,
respectively. Contributions to the plan in 1996 were $7,500 for Mr.
Alvord.
Executive Incentive Compensation Plan
In 1987, the Board of Directors of the Bank approved the adoption
of an Executive Incentive Compensation Plan (the "Plan"). Its purpose
is to enhance the Bank's performance and to further its long-term
objectives by providing certain key employees with financial
incentives. The Plan was implemented beginning in calendar year 1989.
Under the terms of the Plan, at the beginning of each year the
Board of Directors establishes target performance goals for the Bank
for both the current year and for the next three (3) years. If, in
the opinion of the Board, the one (1) year goal is met, eligible
employees could be entitled to receive such awards as are determined
by the Board of Directors. The annual award fund for distribution to
plan participants may not exceed fifteen percent (15%) of
participating base payroll, exclusive of any overtime pay, bonuses or
fringe benefits. Similarly, if the three (3) year goal is met,
participants could be entitled to an additional award payment as
determined by the Board of Directors. Such award fund may not exceed
fifteen percent (15%) of the average base salaries during the three
(3) year performance period.
Participation in the Plan is designed to include the Bank's
President, Chief Executive Officer, Function Managers, and those other
employees who, in the opinion of the Board, contribute significantly
to the profitability of the Bank. Plan awards are paid either in cash
at the end of the applicable one (1) year or three (3) year
performance period or, at the election of the participating employee,
may be deferred until a later specified date.
The target performance objective for 1996 was a return on
average assets of 1.35%. The target performance objective for the
three (3) year award was previously established at 1.35%. A second
criterion for the three (3) year award requires that the Company's
average return on average assets equal or exceed a selected peer group
average return on average assets.
A total of $62,280 was accrued for the year 1996 in connection
with the one (1) year goal for all executive officers as a group. Of
this amount, a total of $16,830 was earned by Mr. Alvord. The total
accrual in connection with the Plan for both the one (1) and three (3)
year goals was $108,990 for 1996 and $60,030 for 1995.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In April 1996, the Company learned that certain reports required
by Section 16(a) of the Securities Exchange Act of 1934 had
inadvertently not been filed with the United States Securities and
Exchange Commission (the "Commission") - specifically Form 3 (Initial
Statement of Beneficial Ownership of Securities), Form 4 (Statement
of Changes in Beneficial Ownership), and Form 5 (Annual Statement of
Beneficial Ownership of Securities). These reports are required to
be filed by the directors and certain officers of a public company
upon their initially becoming a director or officer (as applicable),
and upon any changes in their beneficial ownership of the public
company's stock. In addition, the failure to file these reports was
not properly documented in several of the Company's Annual Reports on
Forms 10-K and Definitive Proxy Statements, as filed with the
Commission.
Shortly after the discovery, the Company notified the Commission
of these oversights and arranged for the required filings to be made.
In December 1996, the Company and Mr. Ames and Frederick G. Compagni
(a former director) each executed Offers of Settlement with the
Commission. The Offers of Settlement essentially provide that the
Company and Messrs. Ames and Compagni will comply with its and their
respective filing requirements in the future. The Offers of
Settlement were accepted by the Commission in January 1997. The
Company believes that all Section 16(a) reports required by its
directors and executive officers since April 1996 have been filed on
a timely basis.
The following table sets forth the total number of late Section
16(a) reports, the number of transactions that were not reported on
a timely basis, and any known failure to file a required Form for each
person who was a director or officer required to file reports under
Section 16(a) or beneficial owner of more than 10% of the Company's
common stock during the past fiscal year:
Number of Forms Filed Late
No. of
Transactions
Reported No. of Forms
Form 3 Form 4 Untimely Not Filed (1)
Robert M. Lovell 1 3 6 2
Richard J. Shay 1 5 8 3
Charles H.
Spaulding (2) 1 4 8 0
David R. Alvord 1 16 19 3
Harry D. Newcomb (3) 1 2 12 2
Donald S. Ames 1 23 28 5
Stuart E. Young 1 2 5 1
David J. Taylor 1 4 5 2
Mary Alice
Bellardini 1 3 4 0
John H. Buck 1 3 4 1
Bob Derksen 1 3 6 2
(1) In each case, the Form involved was a Form 5 - Annual Statement
of Beneficial Ownership of Securities. The information required
to be included on the Forms 5 was included on the late Forms 4
for each of the above individuals.
(2) Includes transactions of Mr. Spaulding's wife, Elizabeth. Mr.
Spaulding disclaims any beneficial ownership of Elizabeth
Spaulding's shares.
(3) Includes transactions of Mr. Newcomb's wife, Muriel. Mr. Newcomb
disclaims any beneficial ownership of Muriel Newcomb's shares.
TRANSACTIONS WITH MANAGEMENT
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with many of its
Directors, officers and their associates. The maximum aggregate
extensions of credit to Directors and executive officers and their
related interests since the beginning of 1996 was $4,315,133, or
17.19% of the Bank's total equity capital. As of December 31, 1996,
such indebtedness totaled $4,182,612, or 15.7% of the Bank's equity
capital. All extensions of credit to such persons have been 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 in the
opinion of the management of the Bank, do not involve more than a
normal risk of collectibility or present other unfavorable features.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
At its last organizational meeting the Board reappointed Coopers
& Lybrand L.L.P. as the Company's independent auditors for the year
ending December 31, 1996. This appointment was based upon the
recommendation of the Audit Committee. An independent auditor has not
yet been selected for the Company's current year.
A representative of Coopers & Lybrand L.L.P. is not expected to
be present at the Annual Meeting of Shareholders. In the event a
representative does attend, such representative will have an
opportunity to make a statement if so desired, and to respond to
appropriate questions.
ANNUAL REPORT
The Annual Report of the Company, including financial statements
for the year 1996, is being sent to shareholders with this Proxy
Statement. Copies of the Annual Report will be furnished to any
shareholder upon written request to Donald S. Ames, Secretary,
Cortland First Financial Corporation, No. 65 Main Street, Cortland,
New York 13045.
SUBMISSION OF PROPOSALS BY SHAREHOLDERS
If shareholder proposals are to be considered by the Company for
inclusion in a proxy statement for a future meeting of the Company's
shareholders, such proposals must be submitted on a timely basis and
must meet the requirements established by the Securities and Exchange
Commission for shareholder proposals. Shareholder proposals for the
Company's 1998 Annual Meeting of Shareholders will not be deemed to be
timely submitted unless they are received by the Company at its
principal executive offices by October 31, 1997. Such shareholder
proposals, together with any supporting statements, should be directed
to the Secretary of the Company. Shareholders submitting proposals are
urged to submit their proposals by certified mail, return receipt
requested.
OTHER MATTERS
The Board of Directors is not aware of any matters other than
those indicated above that will be presented for action at the
meeting. The enclosed Proxy gives discretionary authority, however,
in the event any other matter may properly come before the meeting.
By Order of the Board of Directors
Donald S. Ames
Secretary
Dated: February 28, 1997
<PAGE>
PROXY
CORTLAND FIRST FINANCIAL CORPORATION
THIS PROXY IS SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS, MARCH 31, 1997
The undersigned hereby appoints David R. Alvord, Donald S. Ames,
and Harry D. Newcomb, and each of them, as proxies, with power of
substitution, to represent the undersigned at the Annual Meeting of
Shareholders of Cortland First Financial Corporation (the "Company")
to be held at the office of the Company at 65 Main Street, in the City
of Cortland, Cortland County, New York, on the 31st of March 1997, at
1:00 p.m. and at any adjournment or adjournments thereof, and to vote
all shares of stock as designated on the reverse side, which the
undersigned may be entitled to vote at such Meeting, and with all
other powers which the undersigned would possess if personally
present.
CONTINUED, AND TO BE MARKED, DATED AND SIGNED ON THE REVERSE SIDE
<PAGE>
[x] Please mark your votes as indicated in this example.
(1) ELECTION OF DIRECTORS
FOR all nominees WITHHOLD AUTHORITY Nominees:
listed at right to vote for all Robert M. Lovell
(except as withheld nomineese at right Richard J. Shay
in the space below) Charles H. Spaulding
[ ] [ ]
(Instructions: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
______________________________________________
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
This Proxy will be voted as directed but, if no direction is
indicated, it will be voted FOR the election of Directors.
PLEASE SIGN AND DATE BELOW, AND RETURN
Signature(s) of Shareholder(s)___________________________________
Date:______________, 1997
NOTE: Please sign exactly as name appears above and where shares are
held jointly each holder should sign. When signing as attorney,
administrator, executor, trustee, guardian, or other fiduciary, please
give your full title. If signing for a corporation, please indicate
your office.
