[LOGO]
C&F Financial Corporation
Eighth and Main Streets
P.O. Box 391
West Point, Virginia 23181
Dear Fellow Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of C&F Financial Corporation, the holding company for Citizens and
Farmers Bank. The meeting will be held on Tuesday, April 21, 1998, at 3:30 p.m.
at the van den Boogaard Center, 3510 King William Avenue, West Point, Virginia.
The accompanying Notice and Proxy Statement describe the matters to be presented
at the meeting. Enclosed is our Annual Report to Shareholders that will be
reviewed at the Annual Meeting.
Please complete, sign, date and return the enclosed proxy card as
soon as possible. Whether or not you will be able to attend the Annual Meeting,
it is important that your shares be represented and your vote recorded.
The proxy may be revoked at any time before it is voted at the Annual Meeting.
We appreciate your continuing loyalty and support of Citizens and
Farmers Bank and C&F Financial Corporation.
Sincerely,
/s/ Larry G. Dillon
Larry G. Dillon
President & Chief Executive Officer
West Point, Virginia
March 12, 1998
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C&F FINANCIAL CORPORATION
Eighth and Main Streets
P. O. Box 391
West Point, Virginia 23181
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
The 1998 Annual Meeting of Shareholders of C&F Financial Corporation
(the "Company") will be held at the van den Boogaard Center, 3510 King William
Avenue, West Point, Virginia, on Tuesday, April 21, 1998, at 3:30 p.m. for the
following purposes:
1. To elect one Class I director to serve until the 2000
Annual Meeting of Shareholders and
two Class II directors to the Board of Directors of the
Company to serve until the 2001 Annual Meeting of
Shareholders, as described in the Proxy Statement
accompanying this notice.
2. To ratify the Board of Directors' appointment of Yount,
Hyde & Barbour, P.C., as the Company's independent public
accountants for 1998.
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on February 20, 1998,
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
/s/ Gari B. Sullivan
Gari B. Sullivan
Secretary
March 12, 1998
IMPORTANT NOTICE
Please complete, sign, date and return the enclosed proxy card in the
accompanying postage paid envelope so that your shares will be represented at
the meeting. Shareholders attending the meeting may personally vote on all
matters which are considered, in which event the signed proxies are revoked.
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C&F FINANCIAL CORPORATION
Eighth and Main Streets
P. O. Box 391
West Point, Virginia 23181
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
April 21, 1998
GENERAL
The following information is furnished in connection with the
solicitation by and on behalf of the Board of Directors of the enclosed proxy to
be used at the 1998 Annual Meeting of Shareholders (the "Annual Meeting") of C&F
Financial Corporation (the "Company") to be held Tuesday, April 21, 1998, at
3:30 p.m. at the van den Boogaard Center, 3510 King William Avenue, West Point,
Virginia. The approximate mailing date of this Proxy Statement and accompanying
proxy is March 12, 1998.
Revocation and Voting of Proxies
Execution of a proxy will not affect a shareholder's right to attend
the Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder may also revoke his proxy at any time before it is
exercised by filing a written notice with the Company or by submitting a proxy
bearing a later date. Proxies will extend to, and will be voted at, any properly
adjourned session of the Annual Meeting. If a shareholder specifies how the
proxy is to be voted with respect to any proposals for which a choice is
provided, the proxy will be voted in accordance with such specifications. If a
shareholder fails to specify with respect to such proposals, the proxy will be
voted FOR proposals 1 and 2, as set forth in the accompanying notice and further
described herein.
Voting Rights of Shareholders
Only those shareholders of record at the close of business on
February 20, 1998, are entitled to notice of and to vote at the Annual Meeting,
or any adjournments thereof. The number of shares of common stock of the Company
outstanding and entitled to vote at the Annual Meeting is 1,924,755. The Company
has no other class of stock outstanding. A majority of the votes entitled to be
cast, represented in person or by proxy, will constitute a quorum for the
transaction of business. Each share of Company common stock entitles the record
holder thereof to one vote upon each matter to be voted upon at the Annual
Meeting.
With regard to the election of directors, votes may be cast in favor
or withheld. If a quorum is present, the nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected directors; therefore, votes
withheld will have no effect. The ratification of Yount, Hyde & Barbour, P.C.,
as the Company's independent public accountants requires the affirmative vote of
a majority of the shares cast on the matter. Thus, although abstentions and
broker non-votes (shares held by customers which may not be voted on certain
matters because the broker has not received specific instructions from the
customer) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, they are generally not counted for
purposes of determining whether such proposals have been approved and therefore
have no effect.
Solicitation of Proxies
The cost of solicitation of proxies will be borne by the Company.
Solicitations will be made only by the use of the mails, except that officers
and regular employees of the Company and Citizens and Farmers Bank (the "Bank")
may make solicitations of proxies by telephone, telegram, special letter, or by
special call, acting without compensation other than regular compensation. It is
contemplated that brokerage houses and other nominees, custodians, and
fiduciaries will be requested to forward the proxy soliciting material to the
beneficial owners of the stock held of record by such persons, and the Company
will reimburse them for their charges and expenses in this connection.
Principal Holders of Capital Stock
The following table shows the share ownership as of February 20,
1998, of the shareholders known to the Company to be the beneficial owners of
more than 5% of the Company's common stock, par value $1.00 per share, which are
0the only voting securities outstanding.
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership(1) of Class
- - ------------------- ------------ --------
Sture G. Olsson 142,824(2) 7.4%
P. O. Box 311
West Point, VA 23181
W. T. Robinson 106,258(2) 5.5%
P. O. Box 391
West Point, VA 23181
(1) For purposes of this table, beneficial ownership has been determined
in accordance with the provision of Rule 13d-3 of the Securities
Exchange Act of 1934 under which, in general, a person is deemed to
be the beneficial owner of a security if he or she has or shares the
power to vote or direct the voting of the security or the power to
dispose of or direct the disposition of the security, or if he has
the right to acquire beneficial ownership of the security within
sixty days.
(2) Includes shares held by affiliated corporations, close relatives, and
children, and shares held jointly with spouses or as custodians or
trustees for children, as follows: Mr. Olsson, 134,536 shares (held
in a trust of which Crestar Bank and Mr. Olsson are co-trustees); Mr.
Robinson, 53,129 shares owned by spouse.
As of February 20, 1998, the directors and officers of the Company
and its subsidiary bank beneficially owned as a group 345,738 shares (or
approximately 17.8%) of Company common stock (including shares for which they
hold presently exercisable stock options).
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Board is divided into three classes (I, II, and III) of
directors. The term of office for Class II directors will expire at the Annual
Meeting. One person named below, who currently serves as a director of the
Company, will be nominated to serve as a Class I director and two persons named
below, each of whom currently serves as a director of the Company, will be
nominated to serve as Class II directors. If elected, the Class I nominee will
serve until the 2000 Annual Meeting of Shareholders and the Class II nominees
will serve until the 2001 Annual Meeting of Shareholders. The persons named in
the proxy will
vote for the election of the nominees named below unless authority is withheld.
The Company's Board believes that the nominees will be available and able to
serve as directors, but if any of these persons should not be available or able
to serve, the proxies may exercise discretionary authority to vote for a
substitute proposed by the Company's Board.
Certain information concerning the nominees for election at the
Annual Meeting as Class I and Class II directors is set forth below, as well as
certain information about the other Class I director and Class III directors,
who will continue in office until the 2000 and 1999 Annual Meeting of
Shareholders, respectively.
Number of Shares
Principal Beneficially Owned
Served as Occupation During as of February 20, 1998
Name (Age) Since(1) Past Five Years (Percent of Class)(2)
- - ---------- -------- --------------- ---------------------
Class I Directors (Serving Until the 2000 Annual Meeting)
Larry G. Dillon (44) 1989 Chairman, President and 20,601(3)
Chief Executive Officer of the (1.1%)
Company and the Bank
James H. Hudson, III (49) 1997 (4) Attorney-at-Law 920
(Nominee) Hudson & Bondurant, P.C. *
Class II Directors (Nominees) (Serving Until the 2001 Annual Meeting)
Sture G. Olsson (77) 1952 Retired; previously Chairman of 142,824(5)
the Board, Chesapeake Corporation (7.4%)
W. T. Robinson (85) 1948 Retired; previously Chairman of 106,258(5)
the Board of the Company and the Bank (5.5%)
Class III Directors (Serving Until the 1999 Annual Meeting)
J. P. Causey Jr. (54) 1984 Senior Vice President, Secretary & 17,244
General Counsel of Chesapeake *
Corporation
William E. O'Connell, Jr. (60) 1994 Chessie Professor of Business, 1,000
The College of William and Mary *
All Directors and Executive 345,738
Officers as a group (13 persons) (17.8%)
* Represents less than 1% of the total outstanding shares of the
Company's common stock.
(1) Refers to the year in which the director was first elected to the Board
of Directors of the Bank.
(2) See footnote 1 of table above "Principal Holders of Capital Stock" for
description of how beneficial ownership has been determined for
purposes of this table.
(3) Includes 6,734 shares as to which Mr. Dillon holds presently
exercisable options. A description of such options is set forth below
in greater detail in "Employee Benefit Plans - Incentive Stock Option
Plan".
(4) Pursuant to the Bylaws of the Company and the Bank, Mr. Hudson was
elected to the respective Boards as a Director of the Company and the
Bank on July 15, 1997, to fill the vacancy created by the resignation
of D. N. Sutton, Jr. on that date.
(5) Includes shares held by affiliated corporations, close relatives,
children, and shares held jointly with spouses or as custodians or
trustees for children, as follows: Messrs. Olsson and W. T. Robinson,
see discussion above under "Principal Holders of Capital Stock."
The Board of Directors of the Bank consists of the six members of the
Company's Board listed above as well as P. L. Harrell, Joshua H. Lawson, Paul C.
Robinson, and Thomas B. Whitmore, Jr.
The Board of Directors is not aware of any family relationship
between any director or person nominated by the Company to become director; nor
is the Board of Directors aware of any involvement in legal proceedings which
are material to any impairment of the ability or integrity of any director or
person nominated to become a director. Unless authority for the nominees is
withheld, the shares represented by the enclosed proxy card, if executed and
returned, will be voted FOR the election of the nominees proposed by the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTOR NOMINATED TO SERVE
AS A CLASS I DIRECTOR AND THE DIRECTORS NOMINATED TO SERVE AS CLASS II
DIRECTORS.
Board Committees and Attendance
During 1997, there were 10 meetings of the Board of Directors of the
Company and 15 meetings of the Board of Directors of the Bank. With the
exception of Mr. Olsson, each director attended at least 75% of all meetings of
the boards and committees on which he served. The Board of Directors of the
Company has a Capital Plan Committee and the Board of Directors of the Bank has
Executive, Compensation, and Audit Committees.
Members of the Capital Plan Committee are Messrs. Causey, Dillon,
Hudson, O'Connell, and W. T. Robinson. The Capital Plan Committee reviews
capital related matters and submits proposals or recommendations to the Board
of Directors. The Capital Plan Committee met three times during 1997.
Members of the Executive Committee are Messrs. Causey, Dillon,
Hudson, O'Connell, Olsson, and W. T. Robinson. The Executive Committee
reviews various matters and submits proposals or recommendations to the Board
of Directors. The Executive Committee did not meet during 1997.
Members of the Compensation Committee are Messrs. Causey, Harrell,
Hudson, and Whitmore. The Compensation Committee recommends the level of
compensation of each officer of the Bank, the granting of stock options and
other employee remuneration plans to the Board of Directors. The Compensation
Committee met three times during 1997.
Members of the Audit Committee are Messrs. Causey, Lawson, and P.
Robinson. The Audit Committee reviews and approves various audit functions
including the year-end audit performed by the Company's independent public
accountants. The Audit Committee met three times during 1997.
The Board has no separate nominating committee. The entire Board
reviews, on an as-needed basis, the qualifications of candidates for membership
to the Board.
Directors' Fees
Each of the directors of the Company is also a director of the Bank.
Effective January 1, 1997, non-employee members of the Board of Directors of the
Bank receive an annual retainer of $2,500, payable quarterly, with a base
meeting fee of $300 per day for Company or Bank meetings and a fee of $100 for
each secondary meeting of the Company, Bank or any committees thereof held on
the same day as a meeting for which the base meeting fee is paid.
Interest of Management in Certain Transactions
As of December 31, 1997, the total maximum extensions of credit
(including used and unused lines of credit) to policy-making officers,
directors, principal shareholders and their associates amounted to $2,790,251,
or 8.8%, of total capital. The maximum aggregate amount of such indebtedness
during 1997 was $2,151,434, or 6.8%, of total year-end capital. These loans were
made in the ordinary course of the Bank's business, on the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with others, and do not involve more than the normal
risks of collectibility or present other unfavorable features. The Bank expects
to have in the future similar banking transactions with officers, directors,
principal shareholders and their associates.
The firm of Thrift Insurance Corporation serves as the local agent
for the Fidelity and Deposit Company of Maryland. Mr. Lawson, a director of the
Bank, is the majority owner of Thrift Insurance Corporation. The Bank maintains
its various insurance policies including its blanket bond coverage, directors
and officers liability coverage, and building and equipment coverage through
Fidelity and Deposit Company of Maryland. All premiums are negotiated directly
with representatives of Fidelity and Deposit Company of Maryland. During 1997,
the Bank paid premiums totaling $39,399 to Thrift Insurance Corporation, as
agent, for the insurance coverage maintained by the Bank.
During 1997 the Company and the Bank and its subsidiaries utilized
the legal services of the law firm of Hudson and Bondurant P.C., of which James
H. Hudson, III is a partner. The amount of fees paid to Hudson and Bondurant,
P.C. did not exceed 5% of the firm's gross revenue.
Executive Compensation
Summary of Cash and Certain Other Compensations. The following table
shows the cash compensation paid to Mr. Dillon, President and Chief Executive
Officer of the Company, during 1997, 1996, and 1995. During 1997, no other
executive officer of the Company received compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
All
Name and Other Annual Other
Principal Position Year Salary Bonus(1) Compensation(2) Options(3) Compensation(4)
- - ------------------ ---- ------ -------- --------------- ---------- ---------------
Larry G. Dillon 1997 $120,000 $40,000 - 1,600 $19,118
President/Chief 1996 102,500 20,000 - 1,600 17,126
Executive Officer 1995 92,500 15,000 - 1,500 16,322
(1) All bonuses were paid under the Management Incentive Bonus Plan, which
is described below in "Employee Benefit Plans".
(2) The amount of compensation in the form of perquisites or other personal
benefits properly categorized in this column according to the
disclosure rules adopted by the Commission did not exceed the lesser of
either $50,000, or 10% of the total annual salary and bonus reported in
each of the three years reported for Mr. Dillon, and therefore, is not
required to be reported.
(3) 1997 options were granted at an exercise price of $25.00 per share;
1996 options were granted at an exercise price of $18.75 per share;
1995 options were granted at an exercise price of $20.50 per share.
(4) $6,966, $11,711, and $10,908, were paid under the Bank's Profit-Sharing
Plan for 1997, 1996, and 1995, respectively, and $5,383, $5,415, and
$5,414, were paid under the Bank's Split-Dollar Insurance Program for
1997, 1996, and 1995, respectively, which are described below under
"Employee Benefit Plans". $6,769 was paid under the Bank's 401(k) Plan
for 1997, which is described below in "Employee Benefit Plans".
Stock Options and SAR. The following table shows all grants of options
to Mr. Dillon in 1997:
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
----------------- ---------------
% of Total
Options Granted Exercise or
Options to Employees in Base Price Expiration 5% 10%
Name Granted (#)(1) Fiscal Year ($/Sh) Date ($) ($)
- - ---- -------------- ----------- ------ ---- --- ---
Larry G. Dillon 1,600 9.8% 25.00 12/16/07 25,156 63,750
(1) Vesting is as follows: One-third by December 16, 1998;
two-thirds by December 16, 1999; and 100% by December 16, 2000.
Option/SAR Exercises and Holdings. The following table shows stock
options exercised by Mr. Dillon in 1997:
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Options/SAR Values
Value of Unexercised
Number of Unexercised In-the-Money
Options at Options at
Shares December 31, 1997 (#) December 31, 1997 ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- - ---- ------------ ------------ ------------- -------------
Larry G. Dillon 2,800 38,500 8,734/ 70,571/
3,166 12,078
Change in Control Arrangements
The Company has entered into a "change in control agreement" with Mr.
Dillon. The agreement provides certain payments to and benefits for Mr. Dillon
in the event of a termination of his employment by the Company without "cause,"
or by Mr. Dillon for "good reason," during the period beginning on the
occurrence of a "change in control" (as defined) of the Company and ending
sixty-one days after the second anniversary of the change in control date. In
such event, Mr. Dillon would be entitled (i) to receive in 12 consecutive
quarterly installments, or in a lump sum, two and one-half times the sum of his
highest aggregate annual base salary during the 24 month period preceding the
change in control date and his highest aggregate annual bonus for the three
fiscal years preceding the change in control date; (ii) for a period of three
years following termination, to receive continuing health insurance, life
insurance, split dollar insurance and similar benefits under the Company's
welfare benefit plans and to have the three year period credited as service
towards completion of any service requirement for retiree coverage under the
Company's welfare benefit plans; and (iii) if Mr. Dillon requests within one
year after his termination, to have the Company acquire his residence for its
appraised fair market value. During the term of the agreement following a change
in control, Mr. Dillon may voluntarily terminate his employment and become
entitled to these payment and benefits under certain circumstances. These
circumstances include, but are not limited to, a material adverse change in his
position, authority or responsibilities or a reduction in his rate of annual
base salary, benefits (including incentives, bonuses, stock compensation, and
retirement and welfare plan coverage) or other perquisites as in effect
immediately prior to the change in control date.
Payments and benefits provided under the agreement will be reduced, if
and to the extent necessary, so that Mr. Dillon will not be subject to a federal
excise tax on, and the Company will not be denied an income tax deduction on
account of having made excess parachute payments.
Employee Benefit Plans
Management Incentive Bonus Plan. The Bank adopted a Management
Incentive Bonus Plan (the "Bonus Plan") effective January 1, 1987. The Bonus
Plan is offered to selected members of management. The bonus is derived from a
pool of funds determined by the Bank's total performance relative to (1)
prescribed growth rates of assets and deposits, (2) return on average assets,
and (3) absolute level of net income. Attainment, in whole or in part, of these
goals dictates the amount set aside in the pool of funds. Evaluation of
attainment and approval of the pool amount is done by the Board of Directors of
the Bank. Payment of the bonus is based on individual performance and paid in
cash as a percentage of the respective individual's base salary. Expense is
accrued in the year of the specified bonus performance.
Other than the Bonus Plan (above), the Incentive Stock Option Plan
(detailed below), and the Split-Dollar Insurance Program (detailed below), there
are no personal benefits provided to principal officers and directors which are
not provided to all other full-time employees.
Profit-Sharing/401(k) Plan. The Bank maintains a Defined Contribution
"Profit-Sharing" Plan sponsored by the Virginia Bankers Association. The plan
was amended effective January 1, 1997, to include a 401(k) savings provision,
which authorizes a maximum voluntary salary deferral of up to 15% of
compensation (with a partial company match), subject to statutory limitations.
The profit-sharing arrangement provides for an annual discretionary contribution
to the account of each eligible employee based in part on the Bank's
profitability for a given year, and on each participant's yearly earnings. All
full-time employees with at least six months of service are eligible to
participate. Contributions and earnings may be invested in various investment
vehicles offered through the Virginia Bankers Association. Contributions and
earnings are tax-deferred. An employee is 40% vested after four years of
service, 60% after five years, 80% after six years, and fully vested after seven
years.
Retirement Plan. The Bank has a Non-Contributory Defined Benefit
Retirement Plan (the "Retirement Plan") covering substantially all employees who
have reached the age of 21 and have been fully employed for at least one year.
The Retirement Plan provides participants with retirement benefits related to
salary and years of credited service. Employees become vested after five plan
years of service, and the normal retirement date is the plan anniversary date
nearest the employee's 65th birthday. The Retirement Plan does not cover
directors who are not active officers. The amount expensed for the Retirement
Plan during the year ended December 31, 1997, was $93,258.
The following table shows the estimated annual retirement benefits
payable to employees in the average annual salary and years of service
classifications set forth below assuming retirement at the normal retirement age
of 65.
Consecutive Five-Year Years of Credited Service
Average Salary 15 20 25 30 35
- - -------------------------- ----------- ----------- ----------- ----------- ---------
$ 25,000 $ 4,688 $ 6,250 $ 7,813 $ 8,750 $ 9,688
40,000 8,693 11,590 14,488 16,385 18,283
55,000 13,193 17,590 21,988 25,010 28,033
75,000 19,193 25,590 31,988 36,510 41,033
100,000 26,693 35,590 44,488 50,885 57,283
125,000 34,193 45,590 56,988 65,260 73,533
150,000 41,693 55,590 69,488 79,635 89,783
Benefits under the Retirement Plan are based on a straight life
annuity assuming full benefit at age 65, no offsets, and covered compensation of
$29,400 for a person age 65 in 1997. Compensation is currently limited to
$160,000 by Internal Revenue Code. The estimated annual benefit payable under
the Retirement Plan upon retirement is $73,680 for Mr. Dillon, credited with 40
years of service. Benefits are estimated on the basis that he will continue to
receive, until age 65, covered salary in the same amount paid in 1997.
Split-Dollar Insurance Plan. In addition to a group life insurance
plan that is available to all full-time employees, the Bank offers a
Split-Dollar Insurance Program to selected members of management. The insurance
benefit under this program is equal to five times an officer's annual salary in
effect at the time the officer is enrolled in the program. While the Bank
advances a portion of the annual premium expense, each participant is obligated
to reimburse, without interest, the aggregate amount advanced on his behalf
during his participation in the program. Citizens and Farmers Bank recovers its
cost from each participant at retirement or from the proceeds of the policy if
the participant dies before reaching retirement age.
Incentive Stock Option Plan. The Company adopted the 1994 Incentive
Stock Plan (the "Incentive Plan") effective May 1, 1994. The Incentive Plan
makes available up to 100,000 shares of common stock for awards to key employees
of the Company and its subsidiaries in the form of stock options, stock
appreciation rights, and restricted stock (collectively, "Awards"). The purpose
of the Incentive Plan is to promote the success of the Company and its
subsidiaries by providing incentives to key employees that will promote the
identification of their personal interests with the long-term financial success
of the Company and with growth in shareholder value. The Incentive Plan is
designed to provide flexibility to the Company in its ability to motivate,
attract, and retain the services of key employees upon whose judgment, interest,
and special effort the successful conduct of its operation is largely dependent.
Under the terms of the Incentive Plan, the Compensation Committee of
the Board of Directors of the Bank (the "Committee") administers the plan. The
Committee will have the power to determine the key employees to whom Awards
shall be made.
Each Award under the Incentive Plan will be made pursuant to a
written agreement between the Company and the recipient of the Award (the
"Agreement"). In administering the Incentive Plan, the
Committee will have the authority to determine the terms and conditions upon
which Awards may be made and exercised, to determine terms and provisions of
each Agreement, to construe and interpret the Incentive Plan and the Agreements,
to establish, amend, or waive rules or regulations for the Incentive Plan's
administration, to accelerate the exercisability of any Award, the end of any
performance period, or termination of any period of restriction, and to make all
other determinations and take all other actions necessary or advisable for the
administration of the Incentive Plan.
The Board may terminate, amend, or modify the Incentive Plan from
time to time in any respect without shareholder approval, unless the particular
amendment or modification requires shareholder approval under the Internal
Revenue Code of 1986, as amended (the "Code"), the rules and regulations under
Section 16 of the Securities Exchange Act of 1934 or pursuant to any other
applicable laws, rules, or regulations.
Compensation Committee Report on Executive Compensation.
The Compensation Committee (the "Committee"), which is composed of
non-employee Directors of the Company and the Bank listed below, recommends to
the Board of Directors of the Bank (the "Board") the annual salary levels and
any bonuses to be paid to the Bank's executive officers. The Committee also
makes recommendations to the Board regarding the issuance of stock options and
all other compensation related matters.
Currently, the individuals serving as Chief Executive Officer and
executive officers of the Company also serve in the same capacities,
respectively, for the Bank. These officers are presently compensated for
services rendered by them to the Bank, but not for services rendered by them to
the Company.
The primary objective of the Bank's executive compensation program is
to attract and retain highly skilled and motivated executive officers who will
manage the Bank in a manner to promote its growth and profitability and advance
the interest of the Company's stockholders. As such, the compensation program is
designed to provide levels of compensation which are reflective of both the
individual's and the organization's performance in achieving the organization's
goals and objectives, both financial and non-financial, and in helping to build
value for the Company's stockholders. Based on its evaluation of these factors,
the Committee believes that the executive officers are dedicated to achieving
significant improvements in long-term financial performance and that the
compensation plans the Committee has implemented and administered have
contributed to achieving this management focus.
The principal elements of the Bank's compensation program include base
annual salary, short-term incentive compensation under the Bank's Management
Incentive Bonus Plan, and long-term incentive through the grants of stock
options under the 1994 Incentive Stock Plan.
In considering compensation for the Chief Executive Officer and the
other executive officers, the Committee relied on compensation surveys and an
evaluation of the officers' level of responsibility and performance. In 1997,
the Committee used the following compensation surveys to assist in developing
its recommendation on compensation: the SNL Executive Compensation Review; the
Sheshunoff Bank Executive and Director Compensation Survey; and the Virginia
Bankers Association's Salary Survey of Virginia Banks. The Committee believes
that these are relevant and appropriate indicators of compensation paid by the
Bank's competitors. The Committee received an evaluation by the Chief Executive
Officer of the performance of the executive officers (other than the Chief
Executive Officer) during 1997. The Committee evaluated the performance of the
Chief Executive Officer based on the financial performance of the Company and
the Bank, achievements in implementing the Bank's long-term strategy, and the
personal observations of the Chief Executive Officer's performance by the
members of the Committee. No particular weight was given to any particular
aspects of the performance of the Chief Executive Officer, but his performance
in 1997 was evaluated
as outstanding, with the Company and the Bank achieving record earnings and
significant progress being made on the Bank's long-term strategy.
Based on the salary surveys and the performance evaluations, the
Committee generally set base annual salaries for the Chief Executive Officer and
the other executive officers in the median range of salaries contained in the
various surveys for comparable positions. Adjustments to base annual salary for
1998 ranged from a base salary increase of 3.6% to 16.7% for the Bank's
executive officers, with the Chief Executive Officer receiving a 16.7% increase.
The Committee also reviewed each executive officer's performance and
responsibility to assess the payment of short-term incentive compensation. The
Committee uses the compensation surveys and takes into consideration the
performance of the Bank relative to its peer group, taking into consideration
profit growth, asset growth, return on equity, and return on assets. No
particular weight is given to each of these elements. For 1997, the Committee
recommended the payment of cash bonuses to all the executive officers ranging
from 14% to 33% of base salary, with the Chief Executive Officer receiving a
cash bonus of 33% of base salary. The cash bonuses were given based upon the
role of such officers in the growth and profitability of the Bank in 1997.
Each year, the Committee also considers the desirability of granting
long-term incentive awards under the Company's 1994 Incentive Stock Option Plan.
The Committee believes that grants of options focus the Bank's senior management
on building profitability and shareholder value. The Committee notes in
particular its view that stock option grants afford a desirable long-term
compensation method because they closely ally the interests of management with
shareholder value. In fixing the grants of stock options with the senior
management group, other than the Chief Executive Officer, the Committee reviewed
with the Chief Executive Officer recommended individual awards, taking into
account the respective scope of accountability and contributions of each member
of the senior management group. The award to the Chief Executive Officer was
fixed separately and was based, among other things, on a review of competitive
compensation data from selected peer companies and information on his total
compensation as well as the Committee's perception of his past and expected
future contributions to the Company's achievement of its long-term goals.
Compensation Committee
J. P. Causey Jr. - Chairman
P. Loy Harrell
James H. Hudson, III
Thomas B. Whitmore, Jr.
Compensation Committee Interlocks and Insider Participation
During 1997 and up to the present time, there were transactions between
the Company's banking subsidiary and certain members of the Compensation
Committee, or their associates, all consisting of extensions of credit by the
Bank in the ordinary course of business. Each transaction was made on
substantially the same terms, including interest rates, collateral and repayment
terms, as those prevailing at the time for comparable transactions with the
general public. In the opinion of management, none of the transactions involve
more than the normal risk of collectibility or present other unfavorable
features.
None of the members of the Compensation Committee has served as an
officer or employee of the Company or any of its affiliates. No director may
serve as a member of the Committee if he is eligible to participate in the
Incentive Plan or was at any time within one year prior to his appointment to
the Committee eligible to participate in the Incentive Plan.
Performance Graph
The following graph compares the yearly cumulative total shareholder
return on the Company's common stock with (1) the yearly cumulative total
shareholder return on stocks included in the NASDAQ stock index and (2) the
yearly cumulative total shareholder return on stocks included in the Independent
Bank Index prepared by the Carson Medlin Company. The Independent Bank Index is
the compilation of the total return to shareholders over the past 5 years of a
group of twenty-three independent community banks located in the southeastern
states of Florida, Georgia, North Carolina, South Carolina, Tennessee, and
Virginia.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
below.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
[GRAPH]
C&F FINANCIAL CORPORATION
Five Year Performance Index
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
C&F FINANCIAL CORPORATION 100 101 122 126 119 170
INDEPENDENT BANK INDEX 100 125 153 208 248 358
NAXDAQ INDEX 100 115 112 159 195 240
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors, executive
officers and 10% beneficial owners of the Company's common stock to file reports
concerning their ownership of common stock. The Company believes that its
officers and directors complied with all filing requirements under Section 16(a)
of the Securities Exchange Act of 1934 during 1997.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, subject to ratification by the shareholders,
has appointed Yount, Hyde & Barbour, P.C. as independent public accountants for
the current fiscal year ending December 31, 1998.
A representative of Yount, Hyde & Barbour, P.C. will be present at
the Annual Meeting and will be given the opportunity to make a statement and
respond to appropriate questions from the shareholders. Unless marked to the
contrary, the shares represented by the enclosed proxy card, if executed and
returned, will be voted FOR the ratification of the appointment of Yount, Hyde &
Barbour, P.C. as the independent public accountants of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF YOUNT, HYDE & BARBOUR, P.C. AS INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company has
no knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If any other matters properly come
before the Annual Meeting, the persons named in the accompanying proxy intend to
vote such proxy, to the extent entitled, in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting must be received by the Company no later than November 20, 1998. Under
applicable law, the Board of Directors need not include an otherwise appropriate
shareholder proposal (including any shareholder nominations for director
candidates) in its proxy statement or form of proxy for that meeting unless the
proposal is received by the Company's Secretary, at the Company's principal
office in West Point, Virginia, on or before the date set forth above.
By Order of the Board of Directors
/s/ Gari B. Sullivan
Gari B. Sullivan
Secretary
West Point, Virginia
March 12, 1998
A copy of the Company's Annual Report on Form 10-K Report (including, exhibits)
as filed with the Securities and Exchange Commission for the year ended
December 31, 1997, will be furnished without charge to shareholders upon
written request directed to the Company's Secretary as set forth on
the first page of this Proxy Statement.