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):
[X] $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
March 18, 1998
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 April 27, 1998, at 1:00 p.m., for the purpose
of considering and voting upon the following matters:
1. The election of four directors to Class III of the Board
of Directors, one director to Class I of the Board of
Directors, and one director to Class II of the Board of
Directors, all of which will serve for the respective
term of their class or until their 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
March 13, 1998 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.
CORTLAND FIRST FINANCIAL CORPORATION
65 Main Street
Cortland, New York 13045
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 27, 1998
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 April 27, 1998, at 1:00 p.m. This Proxy
Statement and the accompanying Proxy are first being mailed to
shareholders on or about March 18, 1998.
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 March 13, 1998, the record date
for the determination of shareholders entitled to vote at the
meeting, there were outstanding and entitled to vote 1,969,776
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.
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 staggered terms of three (3) years or until
their successors are elected and qualified. One class of Directors
is elected annually. Information concerning nominees to the Board
of Directors is set forth below. The nominees receiving a
plurality of the votes represented in person or by proxy at the
Meeting will be elected to the stated positions. 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. The
shares represented by the enclosed Proxy will be voted FOR the
election of the six (6) nominees named below unless otherwise
specified.
The four directors in Class III have been nominated to serve
for a term to expire at the annual meeting of the Company's
shareholders in the year 2001. In addition, the Board of Directors
has nominated Garrison A. Marsted to serve as a director in Class I
which term will expire at the annual meeting in 1999 and Charles E.
Shafer to serve as director in Class II which term will expire at
the annual meeting in 2000.
INFORMATION CONCERNING NOMINEES FOR DIRECTORS AND OTHER DIRECTORS
Shares
Beneficially
Owned
Business Experience Director as of % of Total
Name and Age and Directorships Since* 3/13/98(1) Common Stock
NOMINEES FOR ELECTION (CLASS III)
Harry D. Newcomb Director of Company; 1979 5,672(2) .29
(69) President - Newcomb
Motors, Inc., Cortland,
New York, (automobile
dealer)
Stuart E. Young Director of Company; 1991 645 .03
(48) Partner - Spruce-Eden
Farms (dairy farm);
President - Cortland
Bulk Milk Producers
Cooperative, Inc.
Mary Alice Director of Company; 1994 322 .02
Bellardini Mayor - Village of
(64) Homer (4/87 to present);
Director - Blue Cross
and Blue Shield of Central
New York, Inc. (health
and hospitalization
insurance) (1984 to 1994);
Director - HMO-CNY, Inc.
(health maintenance
organization) (1995).
John H. Buck Director of Company; 1994 2,389 .12
(52) President - Buck
Environmental Laboratories,
Inc. (testing facility for
air, water, soil, and waste).
NOMINEES FOR ELECTION (CLASS I)
Garrison A. Chairman of the Board, 67,400(3) 3.40
Marsted Treasurer and Principal
(57) Owner - Overhead Door
Company of Cortland, Inc.
(1997-Present); President,
CEO, Treasurer and Principal
Owner - Overhead Door
Company, Inc. (1992-1997).
NOMINEES FOR ELECTION (CLASS II)
Charles E. Shafer Partner - Riehlman, Shafer 11,026(4) .56
(48) & Shafer (attorneys at law).
OTHER DIRECTORS**
David R. Alvord President, Chief Executive 1979 5,440 .28
(57) Officer and Director of
Company; President, Chief
Executive Officer and
Director - First National
Bank of Cortland.
Donald S. Ames Director of Company; 1986 74,400 3.78
(55) President - Cortland Laundry
Inc., Cortland, New York
(commercial laundry).
David J. Taylor Director of Company; 1993 4,500 .23
(54) President - Prosco Products,
Inc., Cortland, New York
(manufacturer's
representative/ distributor).
Robert M. Lovell Director of Company; 1988 1,653(5) .08
(51) Consultant - Healthcare;
President - Cortland Memorial
Hospital (4/86 to 6/96).
Richard J. Shay Director of Company; 1988 1,603 .08
(65) Administrative Law Judge;
District Attorney - Cortland
County, Cortland, New York
(1/1/80 to 6/14/97).
Charles H. Director of Company; Vice 1993 3,247(6) .16
Spaulding President - George B. Bailey
(49) Agency, Inc., Cortland, New
York (insurance agency).
All Directors and Officers as a Group (13 in Group) 178,619 9.10
* Year in which the Director was first elected to the Board of
Directors of the Company or the Bank.
** Messrs. Alvord, Ames, and Taylor are members of Class I with
terms expiring in 1999; Messrs. Lovell, Shay, and Spaulding
are members of Class II with terms expiring in 2000.
(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 2,646 shares owned by Mr. Newcomb's wife,
Muriel, of which Mr. Newcomb disclaims any beneficial
ownership.
(3) Includes 1,200 shares owned by Mr. Marsted's wife, Katia,
of which Mr. Marsted disclaims any beneficial ownership,
and 14,985 shares held by the Estate of Mary Ellen G.
Marsted, for which Mr. Marsted serves as personal
representative of which Mr. Marsted disclaims any
beneficial ownership. Also included are 24,815 shares
held in various trusts for which Mr. Marsted serves as
co-trustee and of which Mr. Marsted disclaims any
beneficial ownership.
(4) Includes 3,339 shares owned by Mr. Shafer's wife, Judith,
of which Mr. Shafer dislaims any beneficial ownership,
and 900 shares owned by each of Mr. Shafer's two sons,
Kurt and Erich, of which Mr. Shafer disclaims any
beneficial ownership.
(5) Includes 426 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.
(6) Includes 2,925 shares owned by Mr. Spaulding's wife,
Elizabeth, of which Mr. Spaulding 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 1997 there were six (6) regularly scheduled meetings and
four (4) special meetings of the Company's Board of Directors.
There were twelve (12) regularly scheduled meetings of the Bank's
Board of Directors. All but one 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. Mr. Lovell has
attended seventy-one percent (71%) of the aggregate of all of the
meetings.
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 met two (2) times in 1997. 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 thirty-three (33)
times during 1997. 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 page 8.
Trust Audit Committee
The Bank's Trust Audit Committee met one (1) time in 1997.
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 eight (8) times in 1997,
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: Donald S.
Ames, John H. Buck, 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 forty-one (41) times
in 1997.
The Committee consists of the following Directors appointed by
the President and approved by the Board of Directors: David R.
Alvord, Donald S. Ames, John H. Buck, and Harry D. Newcomb. 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 1997, 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 $100.00 per committee meeting attended; and members of
the Bank's Compensation Committee were compensated $200.00 per
meeting attended. For the year 1998, 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 was increased by $1,000,
in the form of an annual retainer fee. This retainer fee does 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 1997, three (3) Directors participated in the deferred
compensation arrangement. These Directors deferred a total of
$20,700 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 $100,000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Payouts
All Other
Name and Principal LTIP Compensation
Position Year Salary($) Bonus($)(1) Payouts($)(2) ($)(3)
David R. Alvord 1997 165,000 16,500 93,084
President & 1996 153,000 16,830 77,247
Chief Executive 1995 150,000 15,000 20,000 105,220
Officer
(1) Paid to Mr. Alvord under the one (1) year Executive Incentive
Compensation Plan described on pages 11-12.
(2) Paid to Mr. Alvord under the three (3) year Executive
Incentive Compensation Plan described on pages 11-12.
(3) Includes the following amounts for Mr. Alvord for 1997:
$8,000 for the 1997 contribution to the Employee Salary
Savings Plan - 401K; $6,400 for the 1997 contribution to the
pension plan; $74,484 for the 1997 contribution to the Excess
Benefit Plan described on pages 10-11; and $4,200 for Director
meeting fees during 1997.
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 11-12.
The Compensation Committee is appointed by the President and
is approved by the Board of Directors. Its members presently
consist of:
Donald S. Ames
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, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL
RETURN OF CFFC, S&P 500 & NASDAQ BANKS
1992 1993 1994 1995 1996 1997
NASDAQ Banks 100 114 114 169 223 377
S&P 500 100 110 111 153 189 252
CFFC 100 168 248 250 298 408
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 1997
and 1996 totaled $123,273 and $109,295, respectively. Contributions
to the plan in 1997 were $6,400 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 1997 was $74,484.
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 1997 and 1996 were $106,309 and $98,072,
respectively. Contributions to the plan in 1997 were $8,000 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.
A total of $65,530 was accrued for the year 1997 in connection
with the one (1) year goal for all executive officers as a group. Of
this amount, a total of $16,500 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.
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 1997 was $4,181,378 or 15.69%
of the Bank's total equity capital. As of December 31, 1997, such
indebtedness totaled $2,578,836 or 9.85% 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, 1997. 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 1997, 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 1999 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, 1998. 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: March 18, 1998
PROXY
CORTLAND FIRST FINANCIAL CORPORATION
THIS PROXY IS SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS, APRIL 27, 1998
The undersigned hereby appoints David R. Alvord,Donald S. Ames,and David
J. Taylor, 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 27th of April, 1998, 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
[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 (Class I)
(except as withheld nominees at right Garrison A. Marsted
in the space below) (Class II)
Charles E. Shafer
[ ] [ ] (Class III)
Harry D. Newcomb
Stuart E. Young
(Instructions: To withhold authority to vote for any Mary Alice Bellardini
individual nominee, write that nominee's name in the John H. Buck
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:_____________, 1998
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.