SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934.
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-12
CNB CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid_________________
2) Form, Schedule or Registration Statement No.:_________________
3) Filing Party:__________________
4) Date Filed:_________________
STATE OF ARKANSAS )
) AFFIDAVIT OF BRUCE JOHANSON
COUNTY OF WASHINGTON )
PERSONALLY APPEARED BEFORE ME, Bruce Johanson, who, being duly sworn,
deposes and says that:
1. I am a principal in the firm of Johanson Consulting, Inc., located
in Fayetteville, Arkansas. This firm conducts compensation surveys and
compensation analyses for a variety of corporate clients, including banks. We
have been doing this sort of work for The Conway National Bank since the early
1990's.
2. Each year we collect data from The Conway National Bank regarding
what they pay each employee. We also collect data from a variety of other
sources - such as the South Carolina Banker's Association, other banks, online
surveys, and industry data - to establish what the market pay is for these same
positions. Then we compare what The Conway National Bank is paying for each
position against the market pay for that position. We put this information in
the form of a report every year, called the JESAP Update, and show this
information in both numerical and graph formats. In the 2005 JESAP Update which
was prepared in fall of 2004, for example, Exhibit 5 is a graph showing the
"market lines" for pay and the line for what the Bank was paying. The line for
the Bank's pay is below most of the market pay lines. In addition, Jennings
Duncan requested that certain market comparison numbers were too high in this
report and to eliminate them, thus helping to improve the gap between the
Bank's pay and the market pay, though the true larger gap still existed. In
this report and previous past updates, our firm typically eliminates any
position's salary that 50% or higher than the Bank's comparable salary level.
The elimination of additional numbers when we present our findings is not a
common practice.
3. When doing this kind of compensation analysis for other banks, we
would typically present our findings to the entire Board of Directors. Neither
Willis Duncan nor Jennings Duncan ever asked us to present our findings to the
entire Board of Directors of The Conway National Bank, and we never did so.
4. Beginning two or three years ago, our data started to show that pay
at The Conway National Bank was starting to fall behind. I discussed this with
Jennings Duncan, and recall mentioning the point that the Bank would eventually
see an increased amount of employee turnover. The 2005 JESAP Update showed, at
Exhibit 6, that the Bank's full time employees were approximately 2.88% below
the market, (As noted, the true variance was actually larger, closer to 4.62%).
This is not a severe shortfall and can be corrected - but a business has to be
willing to correct it, and my impression was that this Bank was not willing to
correct it.
5. There was a substantial pay gap at the teller level. For example,
the 2005 JESAP Update shows that some tellers were as much as 20% to 25% below
market. The gap at the Head Teller level reached as high as 35%. When I
discussed the market pay scale for tellers, Jennings told me that the Bank
could not afford to pay that much.
6. There was also a pay gap at the loan supervisor and loan officer
levels. Some of the gaps were 40%, 28%, 19%, and 12%. And this is after the
variance between the bank line and market line was lowered.
7. There was an anomaly at the upper levels of executive compensation.
The 2005 JESAP Update shows Jennings Duncan, the Bank's President/CEO, being
paid at a rate of $183,360 in base salary, which our data showed was roughly
15.89% below the market. I discussed this with him, and he told me that he was
essentially "splitting" his salary with his father, Willis Duncan, who was
classified as "Chairman of the Board." The report shows Willis Duncan's base
salary rate at $77,640.00. In effect, therefore, Jennings Duncan was
"splitting" a salary of 261,000.00 with his father.
8. By depressing his own salary in order to "split" with his father,
Jennings Duncan was creating an unrealistic ceiling of executive pay in his
position and those below him. As long as he was "splitting" his salary with his
father, the executives below him were going to be paid under market. This is
not a healthy situation in terms of maintaining the Bank's competitiveness.
9. Our data shows that a typical President for a bank like The Conway
National Bank would have a base salary in the range of $300,000. I understand
that the Bank's current President, Phil Hucks, has a base salary of
$230,000.00. This is well within the market range for that position, and in
fact is still a bit low, In fact, it is $31,000 less than the "split" salary
for Jennings Duncan and Willis Duncan in the 2005 JESAP Update. The $190,000
base salary for Paul Dusenbury, the Executive Vice-President, is closer to the
market. I am familiar with executive compensation levels for area Banks in
South Carolina and the Southeast region, and would not consider either the
Hucks or Dusenbury salaries to be excessive or unreasonable.
s/Bruce Johanson
---------------------------------
Bruce Johanson
SWORN and subscribed to before me this 21 day of March, 2006.
s/Jennifer Doughty (L. S.)
- ----------------------------------
Jennifer Doughty
Notary Public of Arkansas
My Commission # 12346253
Expires: February 2, 2016
Washington County
Dear _______________________
You should have recently received a Proxy Statement from CNB Corporation urging
you to elect Blue Ribbon Directors to help lead CNB into a new era of growth and
profitability. This election is about the future of CNB Corporation and The
Conway National Bank, and I want you to know that I am personally committed to
making sure you have all of the information you reasonably need to make an
informed decision.
Please support the CNB Board of Directors' candidates for the Board of Directors
- - Billy Benson, Paul Dusenbury, George Heyward Goldfinch and Russell Holliday,
all of whom are outstanding individuals with strong ties to the communities we
serve. Each of them has outstanding business and professional talents that will
help The Conway National Bank grow stronger in this very competitive market.
If you look at the track record of CNB over the last several years, it may
appear that your stock has been a good investment. It has, but according to The
Carson Medlin Company's Independent Bank Index, a $100 investment in CNB in 2000
would have been worth $111 in 2001 and $199 in 2005. (Please see the
"Performance Graphs" section in the Board's Proxy Statement for more information
about this index.)
Here is the problem - that same $100 investment in an average independent
community bank in the index would have grown to $124 by 2001 and $252 by 2005.
This is what bank analysts call a performance gap. That performance gap was $13
in 2001, and the gap has grown to $53 in 2005 (See Comparative Graphs attached).
Not only have we been out performed by these other community banks by an average
of $53 over the past five years, this comparison only assumes an average
performance. More specifically, see our performance comparison with Coastal
Federal, our major market competition, during the Duncan era at the bank. This
performance was not acceptable to the majority of the Board of Directors, nor do
we believe it is acceptable to you, the shareholder.
Almost a year ago, our Board of Directors instituted a change in management that
resulted from years of frustration in dealing with management's resistance to
accountability; adequate compensation for employees; and reluctance to institute
competitive banking policies. The removal of our Chairman and President was
compelled by their failure to cooperate with the Directors for governance
reform. As you know, SC law and the Comptroller of the Currency make it
absolutely clear that the ultimate responsibility for the company's management
rests with the Directors.
Improvement in assets, total loans, deposits and net income are already
apparent. Please help us continue this momentum by re-electing Billy Benson and
Paul R. Dusenbury, Bank stalwarts over the past 20+ years, and electing George
Heyward Goldfinch and Russell Holliday as new energetic Board members who will
bring additional community perspective as outside directors to help
re-invigorate this corporation, and move us forward.
Let me put to rest a rumor that is circulating. No sitting director or any
candidate on CNB Corporation's slate of prospective directors has, or ever had,
any intention to sell The Conway National Bank. Furthermore, CNB Corporation
cannot be sold without the approval of at least two-thirds of the outstanding
shares, and in some cases, approval of 80% of the shares would be required.
I want the bank to grow and prosper while we maintain our commitment to
community values. With your help, we can do it. When you review this Blue Ribbon
slate, I feel sure you will agree that this is the team we need to lead CNB
Corporation and The Conway National Bank into the future.
You will soon be receiving a call to make sure you have all of the information
you reasonably need to cast your vote. In the meantime, please call me at my
office or at my home if I can respond to any concerns.
Sincerely,
Net Income Conway National and Coastal Federal
[Bar Graph showing the following data.]
(Thousands of Dollars) 1990Y 1991Y 1992Y 1993Y 1994Y 1995Y 1996Y 1997Y 1998Y 1999Y 2000Y
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Income Conway National ................. 2,277 2,465 2,905 3,324 3,520 3,779 4,106 4,842 5,546 6,143 6,349
Net Income Coastal Federal ................. 1,671 2,182 2,849 4,279 3,290 3,776 3,808 5,977 6,754 7,841 8,590
(Thousands of Dollars) 2001Y 2002Y 2003Y 2004Y 2005Y
----- ----- ----- ----- -----
Net Income Conway National ................ 6,489 7,236 7,719 8,337 9,538
Net Income Coastal Federal ................ 9,359 10,321 11,950 16,203 18,476
SNL Financial LC of Charlottsville Virginia - SNL compiles financial data from
call reports and SEC filings on banks and thrifts
CNB CORPORATION
Five Year Performance Index
[Line Graph displaying the data in the table below]
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
CNB Corporation ......... 100 111 124 155 166 199
Independent Bank Index .. 100 124 154 210 249 252
The Carson Medlin Company