UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2005 Commission File No. 000-29640
COMMUNITY FIRST BANCORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 58-2322486
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
3685 Blue Ridge Boulevard, Walhalla, South Carolina 29691
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, Including Area Code: (864) 638-2105
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (no par value)
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No
There is no active market for the Registrant's voting common equity. The
Registrant has no non-voting common equity outstanding. The aggregate market
value of the voting common equity held by non-affiliates on June 30, 2005, which
was the last day of the Registrant's most recently completed second fiscal
quarter, was approximately $31,467,932. As of March 1, 2006, there were
2,798,409 shares of the Registrant's Common Stock, no par value, outstanding.
For purposes of the foregoing calculation only, all directors and executive
officers of the Registrant have been deemed affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 2005 - Parts I and II
(2) Portions of the Registrant's Proxy Statement for the 2006 Annual Meeting of
Shareholders - Part III
10-K CROSS REFERENCE INDEX
Part I Page
Item 1 Business ....................................................... 2
Item 1A Risk Factors ................................................... 9
Item 1B Unresolved Staff Comments ...................................... 13
Item 2 Properties ..................................................... 13
Item 3 Legal Proceedings .............................................. 13
Item 4 Submission of Matters to a Vote of Security Holders ............ 13
Part II
Item 5 Market for Registrant's Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities ........... 14
Item 6 Selected Financial Data ........................................ *
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... *
Item 7A Quantitative and Qualitative Disclosures about
Market Risk .................................................. *
Item 8 Financial Statements and Supplementary Data .................... *
Item 9 Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure ....................... 14
Item 9A Controls and Procedures ........................................ 14
Item 9B Other Information .............................................. 15
Part III
Item 10 Directors and Executive Officers of the Registrant ............. 15
Item 11 Executive Compensation ......................................... **
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters ................................ 15
Item 13 Certain Relationships and Related Transactions ................. **
Item 14 Principal Accountant Fees and Services ......................... **
Item 15 Exhibits, Financial Statement Schedules ........................ 17
*Incorporated by reference to the Registrant's Annual Report to Shareholders for
the year ended December 31, 2005.
**Incorporated by reference to the Registrant's Proxy Statement for the 2006
Annual Meeting of Shareholders
FORWARD LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of
the securities laws. All statements that are not historical facts are
"forward-looking statements." You can identify these forward-looking statements
through the use of words such as "may," "will," "expect," "anticipate,"
"believe," "intend," "estimate," "project, " "continue," or other similar words.
Forward-looking statements include, but are not limited to, statements regarding
the Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, income, business operations and proposed
services.
These forward-looking statements are based on current expectations,
estimates and projections about the banking industry, management's beliefs, and
assumptions made by management. Such information includes, without limitation,
discussions as to estimates, expectations, beliefs, plans, strategies, and
objectives concerning future financial and operating performance. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
results may differ materially from those expressed or forecasted in such
forward-looking statements. The risks and uncertainties include, but are not
limited to:
o the Company's growth and its ability to maintain growth;
o governmental monetary and fiscal policies, as well as legislative and
regulatory changes;
o the effect of interest rate changes on the level and composition of
deposits, loan demand and the value of loan collateral and securities;
o the effects of competition from other financial institutions operating
in the Company's market area and elsewhere, including institutions
operating locally, regionally, nationally and internationally,
together with competitors that offer banking products and services by
mail, telephone and computer and/or the Internet;
o failure of borrowers to repay loans;
o failure of assumptions underlying the establishment of the allowance
for loan losses, including the value of collateral securing loans; and
o loss of consumer confidence and economic disruptions resulting from
terrorist activities.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties, and assumptions,
the forward-looking events discussed in this report might not occur.
PART I
Item 1. Business
FORM OF ORGANIZATION
Community First Bancorporation (the "Company") is a South Carolina
corporation and a bank holding company incorporated on May 23, 1997. The Company
commenced operations on October 16, 1997, upon effectiveness of the acquisition
of Community First Bank (the "Bank") as a wholly owned subsidiary. The principal
business of the Company is ownership and operation of the Bank.
BUSINESS OF BANKING
General
The Bank is a South Carolina state bank which was incorporated in
December, 1988, and commenced operations as a commercial bank in March, 1990.
The Bank operates from its offices in Walhalla, Seneca, Anderson, Westminster
and Williamston, South Carolina. The main office is located at 3685 Blue Ridge
Boulevard, in Walhalla, South Carolina; the Seneca office is located at 1600
Sandifer Boulevard in Seneca, South Carolina; the Anderson office is located at
4002 Clemson Boulevard in Anderson, South Carolina; the Williamston office is
located at 208 East Main Street in Williamston, South Carolina; and the
Westminster office is located at 1101 East Main Street, Westminster, South
Carolina 29693.
Services and Products Offered
The Bank offers a full array of commercial bank services. Deposit
services include business and personal checking accounts, NOW accounts, savings
accounts, money market accounts, various term certificates of deposit, IRA
accounts, and other deposit services. Most of the Bank's deposits are attracted
from individuals and small businesses. The Bank does not offer trust services,
and does not accept brokered deposits.
The Bank offers secured and unsecured, short-to-intermediate term
loans, with floating and fixed interest rates for commercial and consumer
purposes. Consumer loans include generally car loans, home equity improvement
loans (secured by first and second mortgages), personal expenditure loans,
education loans, and overdraft lines of credit. Commercial loans include
generally short term unsecured loans, short and intermediate term real estate
mortgage loans, loans secured by listed stocks, loans secured by equipment,
inventory, and accounts receivable. Management believes that the credit staff
possesses knowledge of the community and lending skills sufficient to enable the
Bank to maintain a sufficient volume of high quality loans.
Management of the Bank believes that the loan portfolio is adequately
diversified. There are no significant concentrations of loans in any particular
individuals, industries or groups of related individuals or industries and the
Bank has no foreign loans. The loan portfolio consists primarily of extensions
of credit to businesses and individuals in its service areas within Oconee and
Anderson Counties of South Carolina. The economy of this area is diversified and
does not depend on any one industry or group of related industries. Management
has established loan policies and practices that include set limitations on
loan-to-collateral value for different types of collateral, requirements for
appraisals, obtaining and maintaining current credit and financial information
on borrowers, and credit approvals.
Other services offered by the Bank include residential mortgage loan
origination services, safe deposit boxes, night depository service, VISA and
MasterCard charge cards, tax deposits, sale of U.S. Treasury bonds, notes and
bills and other U.S. government securities (through a correspondent), travelers
checks, and twenty-four hour automated teller service. The ATM is part of the
Cirrus network.
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As of December 31, 2005, local governmental deposits comprised
approximately 13% of the Bank's total deposits. These deposits are concentrated
among a few local governmental entities and are somewhat volatile. Management of
the Bank has, however, taken steps that it believes are sufficient to minimize
to the greatest extent possible the impact of such volatibility on the Bank's
liquidity position, including maintaining membership in the Federal Home Loan
Bank of Atlanta in order to gain access to its credit programs.
Employees
At December 31, 2005, the Company employed 76 people.
Competition
The banking laws of South Carolina allow statewide branching, and,
therefore, commercial banking in the state is highly competitive. South Carolina
law also permits bank holding companies in other states with reciprocal laws to
acquire depository institutions in South Carolina, and most of the other
financial institutions in the Oconee and Anderson County areas are branch
offices of large, regional banks. Further, Congress has enacted the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994, which has increased the
ability of bank holding companies and banks to operate across state lines.
Banks generally compete with other financial institutions through the
banking services and products offered, the pricing of services, the level of
service provided, the convenience and availability of services, and the degree
of expertise and personal concern with which services are offered. The Bank
encounters strong competition from most of the financial institutions in the
Bank's market areas, which generally encompass Oconee County and the immediately
surrounding area and Anderson County and the immediately surrounding area. The
Bank's primary competitors in its Oconee County market area are 20 other banks
and branches of banks and one savings and loan association and branch and two
credit union branches. The Bank's primary competitors in its Anderson County
market area are 60 banks and branches of banks, and six credit union branches.
Additionally, in the conduct of certain banking business, the Bank also competes
with consumer finance companies, insurance companies, money market mutual funds,
and other financial institutions, some of which are not subject to the same
degree of regulation and restrictions imposed upon the Bank. Many of these
competitors have substantially greater resources and lending limits than the
Bank and offer certain services, such as international banking and trust
services, that the Bank does not provide. The Bank believes, however, that its
relatively small size permits it to offer more personalized services than many
of its competitors. The Bank attempts to compensate for its lower lending limits
by participating larger loans with other institutions.
EFFECT OF GOVERNMENT REGULATION
Bank holding companies and banks are extensively regulated under
federal and state law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to such statutes and regulations. Any change in applicable law or
regulation may have a material effect on the business of the Holding Company and
the Bank.
General
As a bank holding company registered under the Bank Holding Company Act
("BHCA"), the Company is subject to supervision, and to regular inspection by
the Federal Reserve. The Company is also subject to regulation by the State
Board. The Bank is a state bank subject to regulation by the South Carolina
State Board of Financial Institutions ("State Board") and the FDIC. The
following discussion summarizes certain aspects of those laws and regulations
that affect the Company and the Bank. Proposals to change the laws and
regulations governing the banking industry are frequently raised in Congress,
the state legislature and before the various bank regulatory agencies. The
likelihood and timing of any changes and the impact such changes might have on
the Company and the Bank are difficult to determine.
3
As discussed below under the caption "Gramm-Leach-Bliley Act", Congress
has adopted extensive changes in the laws governing the financial services
industry. Among the changes adopted are creation of the financial holding
company, a type of bank holding company with powers that greatly exceed those of
standard holding companies, and creation of the financial subsidiary, a
subsidiary that can be used by national banks to engage in many, though not all,
of the same activities in which a financial holding company may engage. The
legislation also establishes the concept of functional regulation whereby the
various financial activities in which financial institutions engage are overseen
by the regulator with the relevant regulatory experience. Neither the Company
nor the Bank has yet made a decision as to how to adapt this legislation to its
use. Accordingly, the following discussion relates to the supervisory and
regulatory provisions that apply to the Company and the Bank as they currently
operate.
Under the BHCA, the Company's activities and those of its subsidiaries
are limited to banking, managing or controlling banks, furnishing services to or
performing services for its subsidiaries or engaging in any other activity which
the Federal Reserve determines to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. The BHCA prohibits the
Company from acquiring direct or indirect control of more than 5% of the
outstanding voting stock or substantially all of the assets of any bank or from
merging or consolidating with another bank holding company without prior
approval of the Federal Reserve. In making such determinations, the Federal
Reserve is required to consider whether the performance of such activities by a
bank holding company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased competition or
gains in efficiency that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices.
Additionally, the BHCA prohibits the Company from engaging in, or from
acquiring ownership or control of more than 5% of the outstanding voting stock
of any company engaged in, a non-banking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
properly incident thereto.
As discussed below under "Gramm-Leach-Bliley Act", a bank holding
company that meets certain requirements may now qualify as a financial holding
company and thereby significantly increase the variety of services it may
provide and the investments it may make.
In addition to regulation by the Federal Reserve under the BHCA, the
Company is also subject to supervision and regulation by the State Board. The
Company must provide the State Board with information with respect to its
financial condition, operations, management, and inter-company relationships of
the Company and its subsidiaries. The State Board may also require such other
information as is necessary to keep itself informed about whether the provisions
of South Carolina law and the regulations and orders issued thereunder by the
State Board have been complied with, and the State Board may make examinations
of the Company and its subsidiaries.
Obligations of the Company to its Subsidiary Bank
A number of obligations and restrictions are imposed on bank holding
companies and their depository institution subsidiaries by Federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance funds in
the event the depository institution is in danger of becoming insolvent or is
insolvent. For example, under the policy of the Federal Reserve with respect to
bank holding company operations, a bank holding company is required to serve as
a source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so absent such policy. In addition, the "cross-guarantee" provisions of
the Federal Deposit Insurance Act, as amended ("FDIA"), require insured
depository institutions under common control to reimburse the FDIC for any loss
suffered or reasonably anticipated by either the Savings Association Insurance
4
Fund ("SAIF") or the Bank Insurance Fund ("BIF") of the FDIC as a result of the
default of a commonly controlled insured depository institution or for any
assistance provided by the FDIC to a commonly controlled insured depository
institution in danger of default. The FDIC may decline to enforce the
cross-guarantee provisions if it determines that a waiver is in the best
interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institutions.
The FDIA also provides that amounts received from the liquidation or
other resolution of any insured depository institution by any receiver must be
distributed (after payment of secured claims) to pay the deposit liabilities of
the institution prior to payment of any other general or unsecured senior
liability, subordinated liability, general creditor or stockholder. This
provision gives depositors a preference over general and subordinated creditors
and stockholders in the event a receiver is appointed to distribute the assets
of the Bank.
Any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Capital Adequacy Guidelines for Bank Holding Companies and State Banks
The various federal bank regulators, including the Federal Reserve and
the FDIC, have adopted risk-based capital requirements for assessing bank
holding company and bank capital adequacy. These standards define what qualifies
as capital and establish minimum capital standards in relation to assets and
off-balance sheet exposures, as adjusted for credit risks.
The Company's and the Bank's December 31, 2005 ratios are set forth in
the Annual Report to Shareholders for the year ended December 31, 2005 under the
caption "Management's Discussion and Analysis -- Capital Resources."
Failure to meet capital guidelines could subject the Bank to a variety
of enforcement remedies, including termination of deposit insurance by the FDIC.
The risk-based capital standards of both the Federal Reserve Board and
the FDIC explicitly identify concentrations of credit risk and the risk arising
from non-traditional activities, as well as an institution's ability to manage
these risks, as important factors to be taken into account by the agency in
assessing an institution's overall capital adequacy. The capital guidelines also
provide that an institution's exposure to a decline in the economic value of its
capital due to changes in interest rates be considered by the agency as a factor
in evaluating a bank's capital adequacy. The Federal Reserve Board also has
issued additional capital guidelines for bank holding companies that engage in
certain trading activities.
Payment of Dividends
The Company is a legal entity separate and distinct from its bank
subsidiary. Most of the revenues of the Company are expected to result from
dividends paid to the Company by the Bank. There are statutory and regulatory
requirements applicable to the payment of dividends by subsidiary banks as well
as by the Company to its stockholders. It is not anticipated that the Company
will pay cash dividends in the near future.
Certain Transactions by the Company with its Affiliates
Federal law regulates transactions between the Company and its
affiliates, including the amount of the Bank's loans to or investments in
5
nonbank affiliates and the amount of advances to third parties collateralized by
securities of an affiliate. Further, a bank holding company and its subsidiaries
are prohibited from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of property or furnishing of services.
FDIC Insurance Assessments
Because the Bank's deposits are insured by the BIF, the Bank is subject
to insurance assessments imposed by the FDIC. Since January 1, 1997, the
assessments imposed on all FDIC deposits for deposit insurance have an effective
rate ranging from 0 to 27 basis points per $100 of insured deposits, depending
on the institution's capital position and other supervisory factors. Legislation
enacted in 1996 also requires that both SAIF-insured and BIF-insured deposits
pay a pro rata portion of the interest due on the obligations issued by the
Financing Corporation ("FICO"). The FICO assessment is based on deposit balances
and is adjusted quarterly to reflect changes in the assessment bases of the
respective funds based on quarterly Call Report and Thrift Financial Report
submissions. The Federal Deposit Insurance Reform Act of 2005 will change the
manner and amount of insurance assessments beginning in 2006. The changes are
not expected to have a material effect on the Bank in 2006.
Regulation of the Bank
The Bank is also subject to regulation and examination by the South
Carolina state bank examiners. In addition, the Bank is subject to various other
state and federal laws and regulations, including state usury laws, laws
relating to fiduciaries, consumer credit laws and laws relating to branch
banking. The Bank's loan operations are also subject to certain federal consumer
credit laws and regulations promulgated thereunder, including, but not limited
to: the federal Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers; the Home Mortgage Disclosure Act, requiring financial
institutions to provide certain information concerning their mortgage lending;
the Equal Credit Opportunity Act and the Fair Housing Act, prohibiting
discrimination on the basis of certain prohibited factors in extending credit;
and the Fair Debt Collection Act, governing the manner in which consumer debts
may be collected by collection agencies. The deposit operations of the Bank are
also subject to the Truth in Savings Act, requiring certain disclosures about
rates paid on savings accounts; the Expedited Funds Availability Act, which
deals with disclosure of the availability of funds deposited in accounts and the
collection and return of checks by banks; the Right to Financial Privacy Act,
which imposes a duty to maintain certain confidentiality of consumer financial
records and the Electronic Funds Transfer Act and regulations promulgated
thereunder, which govern automatic deposits to and withdrawals from deposit
accounts and customers' rights and liabilities arising from the use of automated
teller machines and other electronic banking services. The Bank is also subject
to the Bank Secrecy Act, dealing with, among other things, the reporting of
certain currency transactions; the Fair Credit Reporting Act, governing the use
and provision of information to credit reporting agencies; and the USA Patriot
Act, dealing with, among other things, requiring the establishment of anti-money
laundering programs, including standards for verifying customer information at
account opening.
The Bank is also subject to the requirements of the Community
Reinvestment Act (the "CRA"). The CRA imposes on financial institutions an
affirmative and ongoing obligation to meet the credit needs of their local
communities, including low- and moderate-income neighborhoods, consistent with
the safe and sound operation of those institutions. Each financial institution's
actual performance in meeting community credit needs is evaluated as part of the
examination process, and also is considered in evaluating mergers, acquisitions
and applications to open a branch or facility.
Other Safety and Soundness Regulations
Prompt Corrective Action. The federal banking agencies have broad
powers under current federal law to take prompt corrective action to resolve
problems of insured depository institutions. The extent of these powers depends
6
upon whether the institutions in question are "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized."
A bank that is "undercapitalized" becomes subject to provisions of the
FDIA restricting payment of capital distributions and management fees; requiring
FDIC to monitor the condition of the bank; requiring submission by the bank of a
capital restoration plan; prohibiting the acceptance of employee benefit plan
deposits; restricting the growth of the bank's assets and requiring prior
approval of certain expansion proposals. A bank that is "significantly
undercapitalized" is also subject to restrictions on compensation paid to senior
management of the bank, and a bank that is "critically undercapitalized" is
further subject to restrictions on the activities of the bank and restrictions
on payments of subordinated debt of the bank. The purpose of these provisions is
to require banks with less than adequate capital to act quickly to restore their
capital and to have the FDIC move promptly to take over banks that are unwilling
or unable to take such steps.
Brokered Deposits. Under current FDIC regulations, "well capitalized"
banks may accept brokered deposits without restriction, "adequately capitalized"
banks may accept brokered deposits with a waiver from the FDIC (subject to
certain restrictions on payment of rates), while "undercapitalized" banks may
not accept brokered deposits. The regulations provide that the definitions of
"well capitalized", "adequately capitalized" and "undercapitalized" are the same
as the definitions adopted by the agencies to implement the prompt corrective
action provisions described in the previous paragraph.
Interstate Banking
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 the Company and any other adequately capitalized bank holding company
located in South Carolina can acquire a bank located in any other state, and a
bank holding company located outside South Carolina can acquire any South
Carolina-based bank, in either case subject to certain deposit percentage and
other restrictions. The legislation also provides that, in any state that has
not previously elected to prohibit out-of-state banks from operating interstate
branches within its territory, adequately capitalized and managed bank holding
companies can consolidate their multistate bank operations into a single bank
subsidiary and branch interstate through acquisitions. De novo branching by an
out-of-state bank is permitted only if it is expressly permitted by the laws of
the host state. The authority of a bank to establish and operate branches within
a state will continue to be subject to applicable state branching laws. South
Carolina law was amended, effective July 1, 1996, to permit such interstate
branching but not de novo branching by an out-of-state bank.
The Riegle-Neal Act, together with legislation adopted in South
Carolina, resulted in a number of South Carolina banks being acquired by large
out-of-state bank holding companies. Size gives the larger banks certain
advantages in competing for business from larger corporations. These advantages
include higher lending limits and the ability to offer services in other areas
of South Carolina and the region. As a result, the Company does not generally
attempt to compete for the banking relationships of large corporations, but
concentrates its efforts on small to medium-sized businesses and on individuals.
The Company believes it has competed effectively in this market segment by
offering quality, personal service.
Gramm-Leach-Bliley Act
The Gramm-Leach-Bliley Act, which makes it easier for affiliations
between banks, securities firms and insurance companies to take place, became
effective in March 2000. The Act removes Depression-era barriers that had
separated banks and securities firms, and seeks to protect the privacy of
consumers' financial information.
Under provisions of the new legislation and regulations adopted by the
appropriate regulators, banks, securities firms and insurance companies are able
to structure new affiliations through a holding company structure or through a
7
financial subsidiary. The legislation creates a new type of bank holding company
called a "financial holding company" which has powers much more extensive than
those of standard holding companies. These expanded powers include authority to
engage in "financial activities," which are activities that are (1) financial in
nature; (2) incidental to activities that are financial in nature; or (3)
complementary to a financial activity and that do not impose a safety and
soundness risk. Significantly, the permitted financial activities for financial
holding companies include authority to engage in merchant banking and insurance
activities, including insurance portfolio investing. A bank holding company can
qualify as a financial holding company and expand the services it offers only if
all of its subsidiary depository institutions are well-managed, well-capitalized
and have received a rating of "satisfactory" on their last Community
Reinvestment Act examination.
The legislation also creates another new type of entity called a
"financial subsidiary." A financial subsidiary may be used by a national bank or
a group of national banks to engage in many of the same activities permitted for
a financial holding company, though several of these activities, including real
estate development or investment, insurance or annuity underwriting, insurance
portfolio investing and merchant banking, are reserved for financial holding
companies. A bank's investment in a financial subsidiary affects the way in
which the bank calculates its regulatory capital, and the assets and liabilities
of financial subsidiaries may not be consolidated with those of the bank. The
bank must also be certain that its risk management procedures are adequate to
protect it from financial and operational risks created both by itself and by
any financial subsidiary. Further, the bank must establish policies to maintain
the separate corporate identities of the bank and its financial subsidiary and
to prevent each from becoming liable for the obligations of the other.
The Act also establishes the concept of "functional supervision,"
meaning that similar activities should be regulated by the same regulator.
Accordingly, the Act spells out the regulatory authority of the bank regulatory
agencies, the Securities and Exchange Commission and state insurance regulators
so that each type of activity is supervised by a regulator with corresponding
expertise. The Federal Reserve Board is intended to be an umbrella supervisor
with the authority to require a bank holding company or financial holding
company or any subsidiary of either to file reports as to its financial
condition, risk management systems, transactions with depository institution
subsidiaries and affiliates, and compliance with any federal law that it has
authority to enforce.
Although the Act reaffirms that states are the regulators for insurance
activities of all persons, including federally-chartered banks, the Act
prohibits states from preventing depository institutions and their affiliates
from conducting insurance activities.
The Act also establishes a minimum federal standard of privacy to
protect the confidentiality of a consumer's personal financial information and
gives the consumer the power to choose how personal financial information may be
used by financial institutions.
The Act and the regulations adopted pursuant to the Act create new
opportunities for the Company to offer expanded services to customers in the
future, though the Company has not yet determined what the nature of the
expanded services might be or when the Company might find it feasible to offer
them. The Act has increased competition from larger financial institutions that
are currently more capable than the Company of taking advantage of the
opportunity to provide a broader range of services. However, the Company
continues to believe that its commitment to providing high quality, personalized
service to customers will permit it to remain competitive in its market area.
8
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act became effective in 2002, and mandated extensive
reforms and requirements for public companies. The SEC has adopted extensive new
regulations pursuant to the requirements of the Sarbanes-Oxley Act. The
Sarbanes-Oxley Act and the SEC's new regulations have increased the Company's
cost of doing business, particularly its fees for internal and external audit
services and legal services, and the law and regulations are expected to
continue to do so. However, the Company does not believe that it will be
affected by Sarbanes-Oxley and the new SEC regulations in ways that are
materially different or more onerous than those of other public companies of
similar size and in similar businesses.
Legislative Proposals
Proposed legislation which could significantly affect the business of
banking is introduced in Congress from time to time. Management of the Bank
cannot predict the future course of such legislative proposals or their impact
on the Company and the Bank should they be adopted.
Fiscal and Monetary Policy
Banking is a business which depends to a large extent on interest rate
differentials. In general, the difference between the interest paid by a bank on
its deposits and its other borrowings and the interest received by a bank on its
loans and securities holdings constitutes the major portion of a bank's
earnings. Thus, the earnings and growth of the Company and the Bank are subject
to the influence of economic conditions generally, both domestic and foreign,
and also to the monetary and fiscal policies of the United States and its
agencies, particularly the Federal Reserve. The Federal Reserve regulates the
supply of money through various means, including open-market dealings in United
States government securities, the discount rate at which banks may borrow from
the Federal Reserve, and the reserve requirements on deposits. The nature and
timing of any changes in such policies and their impact on the Company and the
Bank cannot be predicted.
Further Information
Further information about the business of the Company and the Bank is
set forth in this Form 10-K under Item 7 -"Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Item 1A. Risk Factors
RISK FACTORS
Risks Related to Our Business
Our growth strategy will require future increases in capital that we
may not be able to accomplish.
We are required by banking regulators to maintain various ratios of
capital to assets. As our assets grow we expect our capital ratios to decline
unless we can increase our earnings or raise sufficient new capital to keep pace
with asset growth. Our ability to raise additional capital, if needed, will
depend, among other things, on conditions in the capital markets at that time,
which are outside our control, and on our financial condition and performance.
If we are unable to limit a capital ratio decline by increasing our capital, we
will have to restrict our asset growth as we approach the minimum required
capital to asset ratios.
We may be unable to successfully manage our sustained growth.
Our future profitability will depend in part on our ability to manage
growth successfully. Our ability to manage growth successfully will depend on
our ability to maintain cost controls and asset quality while attracting
additional loans and deposits, as well as on factors beyond our control, such as
economic conditions and interest rate trends. If we grow too quickly and are not
able to control costs and maintain asset quality, growth could materially
adversely affect our financial performance.
9
We depend on the services of a number of key personnel, and a loss of
any of those personnel could disrupt our operations and result in reduced
revenues.
We are a relationship-driven organization. Our growth and development
to date have depended in large part on the efforts of our senior management
team. These senior officers have primary contact with our customers and are
extremely important in maintaining personalized relationships with our customer
base, which are key aspects of our business strategy, and in increasing our
market presence. The unexpected loss of services of one or more of these key
employees could have a material adverse effect on our operations and possibly
result in reduced revenues if we were unable to find suitable replacements
promptly.
If our loan customers do not pay us as they have contracted to, we may
experience losses.
Our principal revenue producing business is making loans. If our
customers do not repay the loans, we will suffer losses. Even though we maintain
an allowance for loan losses, the amount of the allowance may not be adequate to
cover the losses we experience. We attempt to mitigate this risk by a thorough
review of the creditworthiness of loan customers. Nevertheless, there is risk
that our credit evaluations will prove to be inaccurate due to changed
circumstances or otherwise.
Our business is concentrated in the Upstate area of South Carolina, and
a downturn in the economy of the area, a decline in area real estate values or
other events in our market area may adversely affect our business.
Substantially all of our business is located in the Upstate area of
South Carolina. As a result, our financial condition and results of operations
may be affected by changes in the Upstate economy. A prolonged period of
economic recession, a general decline in real estate values in our market area
or other adverse economic conditions in the Upstate and South Carolina may
result in decreases in demand for our services, increases in nonpayment of loans
and decreases in the value of collateral securing loans, which could have a
material adverse effect on our business, future prospects, financial condition
or results of operations.
10
We face strong competition from larger, more established competitors
which may adversely affect our ability to operate profitably.
We encounter strong competition from financial institutions operating
in the Upstate area of South Carolina. In the conduct of our business, we also
compete with credit unions, insurance companies, money market mutual funds and
other financial institutions, some of which are not subject to the same degree
of regulation as we are. Many of these competitors have substantially greater
resources and lending abilities than we have and offer services, such as
investment banking, trust and international banking services that we do not
provide. We believe that we have been able to, and will continue to be able to,
compete effectively with these institutions because of our experienced bankers
and personalized service, as well as through loan participations and other
strategies and techniques. However, we cannot promise that we are correct in our
belief. If we are wrong, our ability to operate profitably may be negatively
affected.
Technological changes affect our business, and we may have fewer
resources than many of our competitors to invest in technological improvements.
The financial services industry continues to undergo rapid
technological changes with frequent introductions of new technology-driven
products and services. In addition to enabling financial institutions to serve
clients better, the effective use of technology may increase efficiency and may
enable financial institutions to reduce costs. Our future success may depend, in
part, upon our ability to use technology to provide products and services that
provide convenience to customers and to create additional efficiencies in our
operations. We may need to make significant additional capital investments in
technology in the future, and we may not be able to effectively implement new
technology-driven products and services. Many of our competitors have
substantially greater resources to invest in technological improvements.
Our profitability and liquidity may be affected by changes in interest
rates and economic conditions.
Our profitability depends upon our net interest income, which is the
difference between interest earned on our interest-bearing assets, such as loans
and investment securities, and interest expense on interest-bearing liabilities,
such as deposits and borrowings. Our net interest income will be adversely
affected if market interest rates change such that the interest we pay on
deposits and borrowings increases faster than the interest earned on loans and
investments. Interest rates, and consequently our results of operations, are
affected by general economic conditions (domestic and foreign) and fiscal and
monetary policies. Monetary and fiscal policies may materially affect the level
and direction of interest rates. Beginning in June 2004 through January 2006,
the Federal Reserve has raised rates fourteen times for a total increase of
3.50%. Increases in interest rates generally decrease the market values of
interest-bearing investments and loans held and therefore may adversely affect
our liquidity and earnings. Increased interest rates also generally affect the
volume of mortgage loan originations, the resale value of mortgage loans
originated for resale, and the ability of borrowers to perform under existing
loans of all types.
11
Risks Related to Our Common Stock
Our common stock has a limited trading market, which may make the
prompt execution of sale transactions difficult.
Although our common stock may be traded from time to time on an
individual basis, no active trading market has developed and none may develop in
the foreseeable future. Our common stock is not traded on any exchange or on the
Nasdaq National Market System. Accordingly, if you wish to sell shares you may
experience a delay or have to sell them at a lower price in order to sell them
promptly, if at all.
We may issue additional securities, which could affect the market price
of our common stock and dilute your ownership.
We may issue additional securities to raise additional capital, to
support growth, or to make acquisitions. Sales of a substantial number of shares
of our common stock, or the perception by the market that those sales could
occur, could cause the market price of our common stock to decline or could make
it more difficult for us to raise capital through the sale of common stock or to
use our common stock in future acquisitions.
We do not plan to pay cash dividends in the foreseeable future.
We have never paid cash dividends and do not plan to pay cash dividends
in the foreseeable future. We plan to use the funds that might otherwise be
available to pay dividends to expand our business.
Declaration and payment of dividends are within the discretion of our
board of directors. Our bank will be our most likely source of funds with which
to pay cash dividends. Our bank's declaration and payment of future dividends to
us are within the discretion of the bank's board of directors, and are dependent
upon its earnings, financial condition, its need to retain earnings for use in
the business and any other pertinent factors. The bank's payment of dividends is
also subject to various regulatory requirements.
Provisions in our articles of incorporation and South Carolina law may
discourage or prevent takeover attempts, and these provisions may have the
effect of reducing the market price for our stock.
Our articles of incorporation include several provisions that may have
the effect of discouraging or preventing hostile takeover attempts, and
therefore of making the removal of incumbent management difficult. The
provisions include staggered terms for our board of directors and requirements
that make it difficult to remove our directors. In addition, South Carolina law
contains several provisions that may make it more difficult for a third party to
acquire control of us without the approval of our board of directors, and may
make it more difficult or expensive for a third party to acquire a majority of
our outstanding common stock. To the extent that these provisions are effective
in discouraging or preventing takeover attempts, they may tend to reduce the
market price for our stock.
Our directors have significant voting power.
Our present directors beneficially own over 40% of our stock. Because
they own over 33 1/3%, if they vote together, they will be able to prevent any
merger, consolidation, share exchange, sale of substantial assets, dissolution,
removal of directors or amendment to the articles of incorporation they do not
want.
Our common stock is not insured, so you could lose your total
investment.
Our common stock is not a deposit or savings account, and is not
insured by the Federal Deposit Insurance Corporation or any other government
agency. Should our business fail you could lose your total investment.
12
Risks Related to Our Industry
We are subject to governmental regulation which could change and
increase our cost of doing business or have an adverse affect on our business.
We operate in a highly regulated industry and are subject to
examination, supervision and comprehensive regulation by various federal and
state agencies. Our compliance with the requirements of these agencies is costly
and may limit our growth and restrict certain of our activities, including
payment of dividends, mergers and acquisitions, investments, loans and interest
rates charged, and locations of offices. We are also subject to capitalization
guidelines established by federal authorities and our failure to meet those
guidelines could result, in an extreme case, in our bank's being placed in
receivership. We have also recently been subjected to some of the extensive and
expensive requirements imposed on public companies by the Sarbanes-Oxley Act of
2002 and related regulations.
The laws and regulations applicable to the banking industry could
change at any time, and we cannot predict the impact of these changes on our
business or profitability. Because government regulation greatly affects the
business and financial results of all commercial banks and bank holding
companies, our cost of compliance could adversely affect our ability to operate
profitably.
We are susceptible to changes in monetary policy and other economic
factors which may adversely affect our ability to operate profitably.
Changes in governmental, economic and monetary policies may affect the
ability of our bank to attract deposits and make loans. The rates of interest
payable on deposits and chargeable on loans are affected by governmental
regulation and fiscal policy as well as by national, state and local economic
conditions. All of these matters are outside of our control and affect our
ability to operate profitably.
Item 1B. Unresolved Staff Comments.
Not Applicable.
Item 2. Properties
The Bank owns in fee simple with no major encumbrances, the real
property where its corporate offices and banking offices are located at 3685
Blue Ridge Boulevard, Walhalla, South Carolina; 1600 Sandifer Boulevard in
Seneca, South Carolina; 4002 Clemson Boulevard in Anderson, South Carolina; 208
East Main Street in Williamston, South Carolina; and 1101 East Main Street in
Westminster, South Carolina. The Westminster branch is currently operating in a
modular facility. The Bank also owns the property at 449 Highway 123 Bypass in
Seneca, where it plans to open a new corporate office building in the second
quarter of 2006. Management of the Bank believes the Bank's facilities are
suitable and adequate for the Company's needs.
Item 3. Legal Proceedings
The Bank is from time to time a party to various legal proceedings
arising in the ordinary course of business, but management of the Bank is not
aware of any pending or threatened litigation or unasserted claims or
assessments that are expected to result in losses, if any, that would be
material to the Bank's business and operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted for a vote of the security holders during the
fourth quarter of 2005.
13
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
The information set forth under the caption "Market for Common Stock
and Dividends" and in Note I to the Company's Consolidated Financial Statements
under the caption "Restrictions on Subsidiary Dividends, Loans or Advances" in
the Annual Report to Shareholders for the year ended December 31, 2005 (the
"2005 Annual Report") is incorporated herein by reference. The information set
forth in Part I, Item 1 of this Form 10-K under the caption "Effect of
Government Regulation -- Payment of Dividends" is also incorporated herein by
reference.
The information required by Item 201(d) of Regulation S-K is set forth
in Item 11 of this Form 10-K.
The Company did not sell any equity securities during the period
covered by this report that were not registered under the Securities Act of
1933.
Neither the Company nor any "affiliated purchaser" as defined in 17
C.F.R. 240.10b-18(a)(3) purchased any shares or units of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934 during the fourth quarter of 2005. Accordingly,
no disclosure is required pursuant to 17 C.F.R. Section 229.703.
Item 6. Selected Financial Data
The information set forth under the caption "Financial Summary" in the
2005 Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operatons" in the 2005 Annual
Report is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The information set forth under the caption "Qualitative and
Quantitative Disclosures about Market Risk" in the 2005 Annual Report is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements, including Notes thereto, set
forth in the 2005 Annual Report are incorporated herein by reference.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures.
Based on the evaluation required by 17 C.F.R. Section 240.13a-15(b) or
240.15d-15(b) of the Company's disclosure controls and procedures (as defined in
17 C.F.R. Sections 240.13a-15(e) or 240.15d-15(e)), the Company's chief
executive officer and chief financial officer concluded that such controls and
procedures, as of the end of the period covered by this annual report, were
effective.
No disclosure is required under 17 C.F.R. Section 229.308 (a) or (b).
There has been no change in the Company's internal control over financial
reporting during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
14
Item 9B. Other Information.
No information was required to be disclosed in a Form 8-K during the
fourth quarter of 2005 that was not so disclosed.
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The information relating to the names, ages, positions with the Company
and terms of office set forth under the caption "Management of the Company -
Management Security Ownership, Positions with the Company and Terms of Office"
and the information set forth under the captions "Management - Directors'
Business Experience for the Past Five Years" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement to be used in conjunction
with the 2006 Annual Meeting of Shareholders (the "Proxy Statement"), which will
be filed within 120 days of the Corporation's fiscal year end, is incorporated
herein by reference.
Audit Committee Financial Expert
The Company's board of directors has determined that the Company does
not have an "audit committee financial expert," as that term is defined by Item
401(e) of Regulation S-K promulgated by the Securities and Exchange Commission,
serving on its audit committee. The Company's audit committee is a committee of
directors who are independent of the Company and its management. After reviewing
the experience and training of all of the Company's independent directors, the
board of directors has concluded that no independent director meets the SEC's
very demanding definition. Therefore, it would be necessary to find a qualified
individual willing to serve as both a director and member of the audit committee
and have that person elected by the shareholders in order to have an "audit
committee financial expert" serving on the Company's audit committee. The
Company's audit committee is, however, authorized to use consultants to provide
financial accounting expertise in any instance where members of the committee
believe such assistance would be useful. Accordingly, the Company does not
believe that it needs to have an "audit committee financial expert" on its audit
committee.
Code of Ethics
The Company has adopted a code of ethics (as defined by 17 C.F.R.
229.406) that applies to its principal executive officer and principal financial
officer. The Company will provide a copy of the code of ethics, free of charge,
to any person upon written request to Benjamin L. Hiott, Senior Vice President,
Community First Bancorporation, 3685 Blue Ridge Boulevard, Walhalla, South
Carolina 29691.
Item 11. Executive Compensation
The information set forth under the caption "Management Compensation"
in the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners" and the information as of March 1, 2006 under the
columns "Number of Shares" and "% of Shares Outstanding" and the accompanying
footnotes under the caption "Management of the Company -- Management Security
Ownership, Positions with the Company and Terms of Office" in the Proxy
Statement is incorporated herein by reference.
15
Equity Compensation Plan Information
The following table sets forth aggregated information as of December
31, 2005 about all of the Company's compensation plans (including individual
compensation arrangements) under which equity securities of the Company are
authorized for issuance:
Plan category Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding options, for future issuance
outstanding options, warrants and rights under equity
warrants and rights compensation plans
(excluding securities
reflected in column(a))
(a) (b) (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation
plans approved by
security holders 428,280 $11.43 193,914
Equity compensation
plans not approved
by security holders - - -
------- -------
Total 428,280 $11.43 193,914
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
PART IV
Item 14. Principal Accountant Fees and Services
The information set forth under the caption "Independent Public
Accountants - Fees Paid to Independent Auditors" and "-- Audit Committee
Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Auditors" in the Proxy Statement is incorporated herein by reference.
16
Item 15. Exhibits, Financial Statement Schedules
(a) Exhibit No.(from Description
item 601 of
Regulation S-K)
3.1 Articles of Incorporation, as amended
(Incorporated by reference to the Annual
Report on Form 10-KSB for the year ended
December 31, 1998)
3.2 By-laws (Incorporated by reference to the
Annual Report on Form 10-KSB for the year
ended December 31, 1997 (the "1997 10-KSB"))
4 Specimen Stock certificate (Incorporated by
reference to the 1997 10-KSB)
10.1 Community First Bank 1989 Incentive
Stock Option Plan (Incorporated by reference
to the 1997 10-KSB)
10.2 Community First Bank Incentive Stock
Agreement with Frederick D.Shepherd, Jr.
(Incorporated by reference to the 1997 10-KSB)
10.3 Community First Bancorporation 1998 Stock
Option Plan (Incorporated by reference to
Proxy Statement filed in connection with the
1998 Annual Meeting of Shareholders)
10.4 Split-Dollar Insurance Agreement between
Community Fist Bank and Frederick D. Shepherd,
Jr. (Incorporated by reference to the Annual
Report on Form 10-KSB for the year ended
December 31, 2001)
10.5 Construction Contract, dated April 27, 2005,
between the Company and Trehel Corporation
(incorporated by reference to Form 8-K filed
August 12, 2005).
13 Portions of the Annual Report to Shareholders
for the Year Ended December 31, 2005
21 Subsidiaries of the registrant
23 Consent of J. W. Hunt & Company, L.L.P.
31 Rule 13a-14(a)/15d-14(a) Certifications
32 18 U.S.C. Section 1350 Certifications
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMMUNITY FIRST BANCORPORATION
s/Frederick D. Shepherd, Jr.
Date: March 30, 2006 By:-------------------------------------------
Frederick D. Shepherd, Jr.
Its President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
------------------------------- Vice Chairman and Director March __, 2006
(Larry S. Bowman)
s/William M. Brown
------------------------------- Director and Secretary March 30, 2006
(William M. Brown)
s/Robert H. Edwards
------------------------------- Director March 30, 2006
(Robert H. Edwards)
------------------------------- Director March __, 2006
(Blake L. Griffith)
s/John R. Hamrick
------------------------------- Director March 30, 2006
(John R. Hamrick)
------------------------------- Chairman and Director March __, 2006
(James E. McCoy)
s/Frederick D. Shepherd, Jr.
------------------------------- Director, President, Chief March 30, 2006
(Frederick D. Shepherd, Jr.) Executive Officer, Treasurer and
Principal Financial Officer
s/Gary V. Thrift
------------------------------- Director March 30, 2006
(Gary V. Thrift)
------------------------------- Director March __, 2006
(James E. Turner)
s/Charles L. Winchester
------------------------------- Director March 30, 2006
(Charles L. Winchester)
18
EXHIBIT INDEX
3.1 Articles of Incorporation, as amended
(Incorporated by reference to the Annual
Report on Form 10-KSB for the year ended
December 31, 1998)
3.2 By-laws (Incorporated by reference to the
Annual Report on Form 10-KSB for the year
ended December 31, 1997 (the "1997 10-KSB"))
4 Specimen Stock certificate (Incorporated by
reference to the 1997 10-KSB)
10.1 Community First Bank 1989 Incentive
Stock Option Plan (Incorporated by reference
to the 1997 10-KSB)
10.2 Community First Bank Incentive Stock
Agreement with Frederick D.Shepherd, Jr.
(Incorporated by reference to the 1997 10-KSB)
10.3 Community First Bancorporation 1998 Stock
Option Plan (Incorporated by reference to
Proxy Statement filed in connection with the
1998 Annual Meeting of Shareholders)
10.4 Split-Dollar Insurance Agreement between
Community Fist Bank and Frederick D. Shepherd,
Jr. (Incorporated by reference to the Annual
Report on Form 10-KSB for the year ended
December 31, 2001)
10.5 Construction Contract, dated April 27, 2005,
between the Company and Trehel Corporation
(incorporated by reference to Form 8-K filed
August 12, 2005).
13 Portions of the Annual Report to Shareholders
for the Year Ended December 31, 2005
21 Subsidiaries of the registrant
23 Consent of J. W. Hunt & Company, L.L.P.
31 Rule 13a-14(a)/15d-14(a) Certifications
32 18 U.S.C. Section 1350 Certifications
19