SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
WAKE FOREST BANCSHARES, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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WAKE FOREST BANCSHARES, INC.
January 19, 2007
Dear Shareholder:
You are cordially invited to attend the 2007 Annual Meeting of Shareholders
(the "Meeting") of Wake Forest Bancshares, Inc. (the "Company"), which will be
held on February 20, 2007 at 2:00 p.m., local time, at the Wake Forest Police
and Justice Center, 401 Elm Avenue, Wake Forest, North Carolina.
The attached Notice of the 2007 Annual Meeting of Shareholders and proxy
statement describe the formal business to be transacted at the Meeting.
Directors and officers of the Company, as well as a representative of Dixon
Hughes PLLC, the accounting firm appointed by the Board of Directors to be the
Company's independent registered public accountants for the fiscal year ending
September 30, 2007, will be present at the Meeting to respond to questions.
The Board of Directors of the Company has determined that an affirmative
vote on each matter to be considered at the Meeting is in the best interests of
the Company and its shareholders and unanimously recommends a vote "FOR" each of
these matters.
Please complete, sign and return the enclosed proxy card promptly whether
or not you plan to attend the Meeting. YOUR VOTE IS IMPORTANT REGARDLESS OF THE
NUMBER OF SHARES YOU OWN. VOTING BY PROXY WILL NOT PREVENT YOU FROM VOTING IN
PERSON AT THE MEETING, BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE
UNABLE TO ATTEND. IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
ATTEND AND TO VOTE PERSONALLY AT THE MEETING. EXAMPLES OF SUCH DOCUMENTATION
INCLUDE A BROKER'S STATEMENT, LETTER OR OTHER DOCUMENT CONFIRMING YOUR OWNERSHIP
OF SHARES OF THE COMPANY.
On behalf of the Board of Directors and the employees of Wake Forest
Bancshares, Inc., we thank you for your interest.
Sincerely yours,
/s/ Robert C. White
-------------------------------------
Robert C. White
President and Chief Executive Officer
WAKE FOREST BANCSHARES, INC.
302 S. BROOKS STREET, P.O. BOX 1167
WAKE FOREST, NORTH CAROLINA 27588-1167
(919) 556-5146
NOTICE OF THE 2007 ANNUAL MEETING OF SHAREHOLDERS
Date: Tuesday, February 20, 2007
Time: 2:00 p.m., local time
Place: Wake Forest Police and Justice Center
401 Elm Avenue, Wake Forest, North Carolina 27587
At the 2007 annual meeting, we will ask you to:
- Elect four directors, each of which would serve for a three-year term
expiring at the 2010 annual meeting.
- John D. Lyon
- Rodney M. Privette
- Leelan A. Woodlief
- William S. Wooten
- Ratify the appointment of Dixon Hughes PLLC, as independent registered
public accountants for the fiscal year ending September 30, 2007; and
- Transact any other business as may properly come before the annual
meeting.
You may vote at the annual meeting and at any adjournment or postponement
thereof if you were a shareholder of Wake Forest Bancshares, Inc. at the close
of business on December 29, 2006, the record date.
By Order of the Board of Directors,
/s/ Billy B. Faulkner
----------------------------------------
Billy B. Faulkner
Corporate Secretary
Wake Forest, North Carolina
January 19, 2007
YOU ARE CORDIALLY INVITED TO ATTEND THE 2007 ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF SHARES YOU OWN. THE
BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND MARK THE ENCLOSED PROXY CARD
PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE. RETURNING THE PROXY CARD WILL
NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
GENERAL INFORMATION
GENERAL
We have sent to the shareholders of Wake Forest Bancshares, Inc. (the
"Company") this proxy statement and enclosed proxy card because the Board of
Directors of the Company is soliciting your proxy to vote at the 2007 annual
meeting. You do not need to attend the annual meeting to vote your shares. You
may simply complete, sign and return the enclosed proxy card, and your votes
will be cast for you at the annual meeting.
We began mailing this proxy statement, the Notice of Annual Meeting and the
enclosed proxy card on or about January 19, 2007 to all shareholders entitled to
vote. If you owned shares of the Company's common stock at the close of business
on December 29, 2006, the record date, you are entitled to vote at the annual
meeting. On the record date, there were 1,158,003 shares of common stock issued
and outstanding.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. The
presence, in person or by proxy, of holders of at least a majority of the total
number of votes eligible to be cast in election of directors generally by the
holders of the outstanding shares entitled to vote at the annual meeting is
necessary to constitute a quorum.
VOTING RIGHTS
You are entitled to one vote at the annual meeting for each share of the
Company's common stock that you owned of record at the close of business on
December 29, 2006. The number of shares you own (and may vote) is listed at the
top of the back of the proxy card.
You may vote your shares at the annual meeting in person or by proxy. To
vote in person, you must attend the annual meeting, and obtain and submit a
ballot, which we will provide to you at the annual meeting. To vote by proxy,
you must complete, sign and return the enclosed proxy card. If you properly
complete your proxy card and send it to us in time to vote, your "proxy" (one of
the individuals named on your proxy card) will vote your shares as you have
directed. IF YOU SIGN THE PROXY CARD BUT DO NOT SPECIFY HOW YOU WANT TO VOTE
YOUR SHARES, YOUR PROXY WILL VOTE YOUR SHARES FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR AND FOR THE RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
If any other matter is presented, your proxy will vote the shares
represented by all properly executed proxies on such matters as a majority of
the Board of Directors determines. As of the date of this proxy statement, we
know of no other matters that may be presented at the annual meeting, other than
those listed in this proxy statement.
-1-
VOTE REQUIRED
PROPOSAL 1: Elect Four The four nominees for director who receive the
Directors most votes will be elected. If you do not vote
for a nominee, or you indicate "withhold
authority" for any nominee on your proxy card,
your vote will not count "for" or "against" the
nominee. You may not vote your shares
cumulatively for the election of directors.
PROPOSAL 2: Ratify the The affirmative vote of a majority of the
Appointment of Independent shares present in person or by proxy at the
Registered Public Accountants annual meeting and entitled to vote on this
proposal is required to ratify the appointment
of Dixon Hughes PLLC as the Company's
independent registered public accountants. So,
if you "abstain" from voting, it has the same
effect as if you voted "against" this proposal.
EFFECT OF BROKER NON-VOTES
If your broker holds shares that you own in "street name," the broker may
vote your shares on Proposals 1 and 2 listed above even if the broker does not
receive instructions from you. If your broker does not vote on a proposal, this
will constitute a "broker non-vote." The effect of a "broker non-vote" with
respect to each proposal set forth below:
- PROPOSAL 1: Elect Four Directors. A broker non-vote would have no effect on
the outcome of this proposal because only a plurality of votes cast is
required to elect a director.
- PROPOSAL 2: Ratify the Appointment of Independent Registered Public
Accountants. A broker non-vote would have no effect on the outcome of this
proposal.
CONFIDENTIAL VOTING POLICY
The Company maintains a policy of keeping stockholder votes confidential.
We only let our Inspectors of Election and our tabulating agent examine the
voting materials. We will not disclose your vote to management unless it is
necessary to meet legal requirements. We will, however, forward any written
comments that you may have to management.
REVOKING YOUR PROXY
You may revoke your proxy at any time before it is exercised by:
- Filing with the Company a letter revoking the proxy;
- Submitting another signed proxy with a later date; or
- Attending the annual meeting and voting in person, if you file a written
revocation with the secretary of the annual meeting prior to the voting of
the proxy.
IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
APPROPRIATE DOCUMENTATION FROM YOUR STOCKHOLDER OF RECORD TO VOTE PERSONALLY AT
THE ANNUAL MEETING. Examples of such documentation include a valid proxy from
the registered holder of your shares confirming your ownership of shares of the
Company.
-2-
SOLICITATION OF PROXIES
The Company will pay the costs of soliciting proxies from its shareholders.
Directors, officers or employees of the Company and Wake Forest Federal Savings
& Loan Association (the "Association") may solicit proxies by:
- mail;
- telephone; or
- other forms of communication.
We will reimburse banks, brokers, nominees and other fiduciaries for the
expenses they incur in forwarding the proxy materials to you.
OBTAINING AN ANNUAL REPORT ON FORM 10-KSB
If you would like a copy of our Annual Report on Form 10-KSB for the year
ended September 30, 2006, which has been filed with the Securities and Exchange
Commission ("SEC"), we will send you one (without exhibits) free of charge.
Please write to:
Billy B. Faulkner
Corporate Secretary
Wake Forest Bancshares, Inc.
302 S. Brooks Street
Wake Forest, North Carolina 27587
-3-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table contains common stock ownership information for persons
known to the Company to "beneficially own" 5% or more of the Company's common
stock as of December 29, 2006. In general, beneficial ownership includes those
shares that a person has the power to vote, sell, or otherwise dispose.
Beneficial ownership also includes that number of shares which an individual has
the right to acquire within 60 days (such as stock options) after December 29,
2006. Two or more persons may be considered the beneficial owner of the same
shares. We obtained the information provided in the following table from filings
with the SEC and with the Company. In this proxy statement, "voting power" is
the power to vote or direct the voting of shares, and "investment power"
includes the power to dispose or direct the disposition of shares.
AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- -------------------------------------- -------------------- ----------------
Common Stock, par value Wake Forest Bancorp, M.H.C. 635,000 54.8%
$.01 per share 302 S. Brooks Street, P.O. Box 1167
Wake Forest, North Carolina 27588-1167
-4-
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of the Company's common
stock beneficially owned by each director and each executive officer of the
Company and the Association, whose annual salary and bonus for 2006 exceeded
$100,000 (the "named executive officers"), and all directors and executive
officers of the Company as a group, as of December 29, 2006. Except as otherwise
indicated, each person and each group shown in the table has sole voting and
investment power with respect to the shares of common stock listed next to their
name.
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME POSITION WITH THE COMPANY OWNERSHIP (1) OUTSTANDING
---- ------------------------------- ----------------- ------------
Howard L. Brown Director, Chairman of the Board 8,269 0.71%
John D. Lyon Director 28,548(2) 2.46%
Rodney M. Privette Director 1,262 0.11%
Anna O. Sumerlin Director 10,152(3) 0.87%
Harold R. Washington Director 4,487 0.39%
Robert C. White Director, President &
Chief Executive Officer 6,337(4) 0.55%
R.W. Wilkinson III Director and Vice Chairman 7,767(5) 0.67%
Leelan A. Woodlief Director 6,269 0.54%
William S. Wooten Director 1,515(6) 0.13%
All directors and executive officers as a
group (11 persons) 80,255 6.90%
(1) See "Principal Shareholders of the Company" for a definition of "beneficial
ownership." All persons in the table have sole voting and investment power,
except as otherwise indicated.
(2) Includes 19,695 shares as to which Mr. Lyon may be deemed to share voting
and investment power.
(3) Includes options to purchase 4,500 shares of common stock at $12.75 per
share option plan granted under the Wake Forest Federal Savings & Loan
Association 1997 Stock Option Plan (the "Option Plan"); and includes 2,266
shares of common stock held in Mrs. Sumerlin's individual retirement
account..
(4) Includes 4,237 shares of common stock allocated to Mr. White under the ESOP
as to which he has voting power, but no investment power except in limited
circumstances.
(5) Includes 900 shares as to which Mr. Wilkinson may be deemed to share voting
and investment power.
(6) Includes 675 shares as to which Mr. Wooten may be deemed to share voting
and investment power.
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PROPOSAL 1
ELECTION OF DIRECTORS
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GENERAL
The Board has nominated four persons for election as directors at the
annual meeting. All nominees are currently serving on the Company's Board of
Directors. If you elect the nominees, they will hold office until the annual
meeting in 2010, or until their successors have been elected.
We know of no reason why any nominee may be unable to serve as a director.
If any nominee is unable to serve, your proxy may vote for another nominee
proposed by the Board. If for any reason these nominees prove unable or
unwilling to stand for election, the Board will nominate alternates or reduce
the size of the Board of Directors to eliminate the vacancy. The Board has no
reason to believe that its nominees would prove unable to serve if elected.
DIRECTOR
NOMINEES AGE (1) SINCE (2) TERM EXPIRES POSITION(S) HELD WITH THE COMPANY
-------- ------- --------- ------------ ------------------------------------
John D. Lyon 69 1988 2007 Director
Rodney M. Privette 51 1997 2007 Director
Leelan A. Woodlief 80 1988 2007 Director
William S. Wooten 49 1997 2007 Director
CONTINUING DIRECTORS
Anna O. Sumerlin 60 1993 2009 Director
Harold R. Washington 81 1969 2009 Director
Howard L. Brown 79 1986 2008 Director and Chairman of the Board
R.W. Wilkinson III 78 1992 2008 Director and Vice Chairman
Robert C. White 50 2002 2008 President, Chief Executive Officer &
Chief Financial Officer
(1) As of September 30, 2006.
(2) Includes service on the Board of Directors of the Association.
The principal occupation and business experience of each nominee for
election as director and each continuing director are set forth below. Unless
otherwise indicated, each of the following persons has held his or her present
position for the last five years.
BIOGRAPHICAL INFORMATION
The following information relates to the directors and executive officers
of the Company and the Association. Unless otherwise indicated, each director
and executive officer has held his or her current occupation for the last five
years.
-6-
NOMINEES
JOHN D. LYON has owned an independent state-certified appraisal company for
the past ten years although he currently does not perform appraisal services. He
also has owned and managed a real estate investment portfolio for over 30 years.
Mr. Lyon also has close to 33 years of retail management experience. He has
served as a director of the Association since 1988 and the Company since its
inception in 1999.
RODNEY M. PRIVETTE is President and a general agent of Privette Insurance
Company in Rolesville, North Carolina. Mr. Privette specializes in life
insurance, retirement planning, property and casualty insurance and has over 25
years experience in his field. Mr. Privette has served on the Rolesville Fire
Department since 1975 and as Fire Chief since 1992. Since 1997, he has served as
a director of the Association and the Company since its inception in 1999.
LEELAN A. WOODLIEF has spent the greater part of his professional career in
retail management and is the retired owner of Woodlief Supply Company, a farming
supply store. He has over 50 years experience in the agriculture and insurance
businesses. Mr. Woodlief has served as a director of the Association since 1988
and the Company since its inception in 1999.
WILLIAM S. WOOTEN operated a successful dental practice in Wake Forest,
North Carolina from 1982 to 2003 and currently operates a dental practice in
Henderson, North Carolina since 2004. He has been a director of the Association
since 1997 and the Company since its inception in 1999.
CONTINUING DIRECTORS
ANNA O. SUMERLIN previously served as the Association's President and Chief
Executive Officer from 1995 to March of 2002 and the Company's President and
Chief Executive Officer from its inception in 1999 to March of 2002. Mrs.
Sumerlin also served as the Managing Officer, Executive Vice President,
Corporate Secretary and Treasurer from 1988 to 1995 and as the Assistant Manager
and Assistant Secretary-Treasurer beginning in 1979. She was elected to the
Board of Directors of the Association in 1993 and the Company since its
inception in 1999.
HAROLD R. WASHINGTON has served as a director of the Association since 1969
and the Company since its inception in 1999. He is the former owner of an
automobile distributorship and retired in 1980.
HOWARD L. BROWN has served as Chairman of the Board of Directors of the
Association since 1996 and the Company since 1999. He has been a director of the
Association since 1986 and the Company since its inception in 1999. He served as
Vice Chairman of the Board of Directors of the Association from 1992 to 1996.
Mr. Brown is the former owner of an oil distribution company and has been
retired since 1988.
ROBERT C. WHITE has served as President and Chief Executive Officer of the
Company and the Association since April of 2002 and was appointed to the Board
of Directors of the Company in September of 2002. Mr. White has served as Chief
Financial Officer of the Association since December 1998 and of the Company
since its inception in 1999. Prior to that, Mr. White had served as Vice
President of the Company since 1999 and the Association since December 1998.
Prior to that, Mr. White served as Chief Financial Officer and Senior Vice
President of United Federal Savings Bank in Rocky Mount, North Carolina from
April 1997 to September 1998. In September of 1998, United Federal was acquired
in a merger transaction. Prior to his appointment with United Federal, Mr. White
was a partner in the CPA firm of McGladrey & Pullen, LLP in Raleigh, North
Carolina. He was with the CPA firm for nineteen years and was in charge of the
local office's financial institutions practice.
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R.W. WILKINSON, III has served as a director of the Association since 1992
and the Company since 1999. From 1979 to 1988, Mr. Wilkinson served as Managing
Officer, Executive Vice President and Corporate Secretary-Treasurer of the
Association. From 1963 to 1979, Mr. Wilkinson served as Assistant Manager of the
Association. Mr. Wilkinson was elected Vice-Chairman of the Board of Directors
of the Association in 1997 and the Company since its inception in 1999.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
BILLY B. FAULKNER, age 57, has served as Secretary and Treasurer of the
Company and the Association since March 2002. He has served as a Vice President
of the Company and the Association since his employment with the Association on
October 1, 2000. Mr. Faulkner is the Association's Chief Lending Officer,
primarily responsible for construction and commercial lending. Prior to joining
the Association, Mr. Faulkner was a Senior Vice President, Credit
Administration, with Triangle Bank from 1998 to 2000. Prior to that, Mr.
Faulkner was a Vice President with United Federal Savings Bank from 1982 to
1997, responsible for various lending activities.
SUSAN S. CARTER, age 52, has served as Vice President of the Company and
the Association since February 2004. Ms. Carter previously served as Assistant
Vice President and Assistant Secretary from February 2003 until February 2004.
Ms. Carter is the Association's operations manager, primary residential lending
officer, and also serves as the Association's information technology officer.
Ms. Carter has been employed by the Association since 1983 in a variety of
different capacities.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES
FOR ELECTION AS DIRECTORS.
-8-
----------
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
----------
GENERAL
The Board of Directors has appointed the firm of Dixon Hughes PLLC, to act
as independent registered public accountants for the Company for the fiscal year
ending September 30, 2007, and we are asking shareholders to ratify the
appointment. Representatives of Dixon Hughes PLLC are expected to attend the
annual meeting. The representatives will have the opportunity to make a
statement if they desire to do so. It is expected that the representatives will
be available to respond to appropriate questions.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the fiscal years ended September 30, 2006 and September 30, 2005,
respectively, we retained and paid Dixon Hughes PLLC to provide audit and other
services as follows:
FOR THE FISCAL
YEAR ENDED
SEPTEMBER 30,
-----------------
Accounting Fees 2006 2005
--------------- ------- -------
Audit $42,000 $28,000
Audit related fees -- --
Tax fees 4,500 3,700
All other fees (reviews of SEC filings) 6,570 6,217
------- -------
Total $53,070 $37,917
======= =======
AUDIT COMMITTEE PRE-APPROVAL POLICY
Pre-approval of Services. The Audit Committee shall pre-approve all auditing
services and permitted non-audit services (including the fees and terms) to be
performed for the Company by its independent registered public accountants,
subject to the de minimis exception for non-audit services described below,
which are approved by the Committee prior to completion of the audit.
Exception. The pre-approval requirement set forth above, shall not be applicable
with respect to non-audit services if:
- The aggregate amount of all such services provided constitutes no more
than five percent of the total amount of revenues paid by the Company
to its independent registered public accountants during the fiscal
year in which the services are provided;
- Such services were not recognized by the Company at the time of the
engagement to be non-audit services; and
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- Such services are promptly brought to the attention of the Audit
Committee and approved prior to the completion of the audit by the
Committee or by one or more members of the Committee who are members
of the Board of Directors to whom authority to grant such approvals
has been delegated by the Committee.
Delegation. The Audit Committee may delegate to one or more designated members
of the Committee the authority to grant required pre-approvals. The decisions of
any member to whom authority is delegated under this paragraph to pre-approve
activities under this subsection shall be presented to the full Committee at its
next scheduled meeting.
The Audit Committee approved all services performed by Dixon Hughes PLLC
pursuant to the policies outlined above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF DIXON HUGHES PLLC AS INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007.
-10-
INFORMATION ABOUT BOARD OF DIRECTORS AND MANAGEMENT
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY
The Company's Board of Directors currently consists of nine members. The
Company's federal stock charter and bylaws provide that the Board of Directors
shall be divided into three classes, as nearly equal in number as possible. The
terms of four directors expire at the annual meeting.
The Board of Directors oversees the Company's business and monitors the
performance of the Company's management. In accordance with our corporate
governance procedures, the Board of Directors does not involve itself in the
day-to-day operations of the Company. The Company's executive officers and
management oversee the day-to-day operations of the Company. Our directors
fulfill their duties and responsibilities by attending regular meetings of the
Board which are held on a monthly basis. Our directors also discuss business and
other matters with the Chairman and the President, other key executives, and our
principal external advisers (legal counsel, public accountants, financial
advisors and other consultants).
The Board of Directors of the Company held 12 regular meetings during the
fiscal year ended September 30, 2006. Each incumbent director attended at least
75% of the meetings of the Board of Directors plus committee meetings on which
that particular director served during this period.
COMMITTEES OF THE BOARD
The Board of Directors of the Company has established the following
standing committees:
NOMINATING/ CORPORATE The Nominating/Corporate Governance Committee
GOVERNANCE COMMITTEE is currently chaired by Director Sumerlin, with
Director Wilkinson serving as a member. The
Committee for fiscal year 2006 was chaired by
the Director Wooten with Director Privette also
serving as a member. The Committee met once in
fiscal year 2006. The Nominating/Corporate
Governance Committee formulates our corporate
governance guidelines and determines the
qualification and independence of directors and
committee members. The Committee is responsible
for nominating persons for election to the
Board of Directors and also reviews if any
shareholder nominations comply with the notice
procedures set forth in the Company's bylaws
and summarized below. The Committee will
consider nominees recommended by shareholders.
The Board of Directors of the Company has not
adopted a written charter for the
Nominating/Corporate Governance Committee.
Directors Sumerlin and Wilkinson are
independent as defined under the Nasdaq Stock
Market listing standards.
The Company's bylaws set forth a procedure for
shareholders to nominate directors by
delivering written notification to the
Secretary of the Company at the Company's
principal executive offices at least five days
prior to the date of the annual meeting. The
notice must set forth shall set forth (a) as to
each person whom the shareholder proposes to
nominate for election or reelection as a
director, (i) the name, age, business address
and residence address of such person, (ii) the
principal occupation or employment of such
person, and (iii) such person's written consent
to serve as a director, if elected; and (b) as
to the shareholder giving the notice, (i) the
name and address of such shareholder and (ii)
the class and number of shares of the Company
which are owned of record by such shareholder.
-11-
Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the
Company. Ballots bearing the names of all the
persons nominated by the Nominating/Corporate
Governance Committee and by shareholders shall
be provided for use at the annual meeting.
However, if the Nominating/Corporate Governance
Committee shall fail or refuse to act at least
20 days prior to the annual meeting,
nominations for directors may be made at the
annual meeting by any shareholder entitled to
vote and shall be voted upon.
The Nominating/Corporate Governance Committee
believes that a nominee for the Company's Board
of Directors must possess the following minimum
qualifications: reside, be employed, or
maintain real estate holdings in Wake Forest or
the immediate surrounding communities and hold
more than 100 shares of the Company's stock.
The Committee also believes that individuals
who possess strong analytical skills, business
experience, and the ability to assist the
Company in generating new business
opportunities would have qualities considered
advantageous.
John D. Lyon, Rodney M. Privette, Leelan A.
Woodlief, and William S. Wooten were
recommended for election by the non-management
directors, Directors Sumerlin and Wilkinson,
serving on the Nominating/Corporate Governance
Committee. As of December 29, 2006, the
Nominating/Corporate Governance Committee had
not received any nominee recommendations from
any security holders for the 2007 elections.
COMPENSATION COMMITTEE The Compensation Committee is chaired by
Director Woodlief, with Directors Brown,
Sumerlin and Wilkinson serving as members. The
Compensation Committee establishes the
compensation of the Chief Executive Officer,
approves the compensation of other officers and
determines compensation and benefits to be paid
to employees of the Company and the
Association. It also sets directors' fees. The
Committee met twice in the fiscal year ended
September 30, 2006. The Compensation Committee
also acts as the ESOP Committee, and meets to
review the Company's ESOP. The Compensation
Committee is currently acting as the "Option
Plan Committee" and the "RRP Committee" in
administering the Option Plan and RRP,
respectively.
EXECUTIVE COMMITTEE The Executive Committee is chaired by Director
Brown, with Directors Sumerlin, Wilkinson and
Woodlief serving as members. The Executive
Committee meets as requested by management, and
pursuant to the bylaws of the Company, may act
on behalf of the Board except for such matters
as declaration of dividends, changes to the
Company's charter or bylaws, or other material
issues as defined in the bylaws. All actions of
this Committee are reviewed by the entire Board
of Directors at its next regular meeting. The
Executive Committee met 5 times and was polled
26 other times during the fiscal year ended
September 30, 2006.
-12-
AUDIT COMMITTEE The Audit Committee is a separately-designated,
standing committee established in accordance
with section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended. The Audit
Committee is chaired by Director Lyon, with
Directors Privette, Sumerlin and Wooten serving
as members. The Audit Committee oversees and
monitors our financial reporting process and
internal control system, reviews and evaluates
the audit performed by our outside public
accountants and reports any substantive issues
found during the audit to the Board. The Audit
Committee is directly responsible for the
appointment, compensation and oversight of the
work of our independent registered public
accountants. The committee will also review and
approve all transactions with affiliated
parties. The Board of Directors of the Company
has adopted a written charter for the Audit
Committee, which was attached as Appendix A to
the Company's proxy statement on Schedule 14A
filed with the SEC on January 18, 2005. All
members of the Audit Committee are independent
directors as defined under the Nasdaq Stock
Market listing standards. The Board does not
believe any of its audit committee members
qualify as an "audit committee financial
expert," as that term is defined by applicable
SEC rules. The Company has been unable to
secure an individual to serve on the Audit
Committee who meets the SEC's strict definition
of a financial expert. While not independent,
Director White is a certified public accountant
and advises the Audit Committee members on
accounting and financial reporting matters. The
Committee met six times in the fiscal year
ended September 30, 2006.
-13-
AUDIT COMMITTEE REPORT
WAKE FOREST BANCSHARES, INC. AUDIT COMMITTEE REPORT
The following Audit Committee Report is provided in accordance with the
rules and regulations of the SEC. Pursuant to such rules and regulations, this
report shall not be deemed "soliciting materials," filed with the SEC, subject
to Regulation 14A or 14C of the SEC or subject to the liabilities of section 18
of the Securities Exchange Act of 1934, as amended.
The Audit Committee has reviewed and discussed the audited financial
statements with management. The Committee has also reviewed and discussed with
Dixon Hughes PLLC ("Dixon Hughes"), their independent registered public
accountants, the matters required to be discussed by SAS 61, as may be modified
or supplemented.
The Audit Committee also has received the written disclosures and the
letter from the independent registered public accountants required by
Independence Standards Board Standard No. 1 (Independence Standards Board
Standard No.1, Independence Discussions with Audit Committee), as may be
modified or supplemented, and has discussed with Dixon Hughes its independence.
Based on the foregoing discussions, the Audit Committee recommended to the
Board of Directors of Wake Forest Bancshares, Inc. that the audited financial
statements be included in Wake Forest Bancshares, Inc.'s Annual Report on Form
10-KSB for the year ended September 30, 2006.
AUDIT COMMITTEE OF WAKE FOREST BANCSHARES, INC.
John D. Lyon, Chairman
Rodney M. Privette
Anna O. Sumerlin
William S. Wooten
-14-
DIRECTOR'S COMPENSATION
Fee Arrangements. Each non-employee director of the Company received a fee
of $800 per meeting attended except for the Chairman, who received $1,200 per
meeting attended during the fiscal year ended September 30, 2006. Directors also
received $100 for each committee meeting attended during the fiscal year ended
September 30, 2006. In addition, each non-employee director who has attended a
minimum of 75% of the aggregate number of the Board and committee meetings of
which he or she is a member called during the respective calendar year will
receive an annual retainer fee of $3,700, payable in December. The aggregate
amount of fees paid to such directors by the Company for the fiscal year ended
September 30, 2006, was $119,800. Directors are also covered by the Option Plan
and RRP. See "- Benefits - Stock Option Plan," and "- Recognition and Retention
Plan," below.
Directors' Retirement Plan. The Company has adopted a nonqualified
Retirement Plan for Board Members of the Company (the "Directors' Retirement
Plan"), which provides benefits to each eligible director commencing on his or
her termination of Board service at or after age 65. Each director who serves or
has agreed to serve as a director automatically becomes a participant in the
Directors' Retirement Plan. An eligible director retiring at or after age 65
will be paid a retirement benefit equal to the lesser of the amount of the
aggregate compensation for services as a director (excluding stock compensation)
paid to him or her for the 12-month period immediately prior to his or her
termination of Board service or $5,000, multiplied by a fraction, the numerator
of which is the number of his or her years of service as a director (including
service as a director or trustee of the Company or any predecessor) and the
denominator of which is 10. An individual who terminates Board service after
having served as a director for 10 years may elect to collect benefits under the
Directors' Retirement Plan at or after attainment of age 50, but the retirement
benefit payable to him or her will be reduced pursuant to the Directors'
Retirement Plan's early retirement reduction formula to reflect the commencement
of a benefit payment prior to age 65. The benefit is payable to eligible
directors in an immediate lump sum distribution based upon the discounted
present value of the fixed payments over a period of 10 years. Upon a change in
control, participants will also receive an immediate lump sum distribution of
their benefit.
Other Arrangements. Director Brown performs inspections on collateral
associated with construction loans that are originated by the Association. In
fiscal year 2006, Mr. Brown received $25,400 for such inspection fees.
EXECUTIVE COMPENSATION
Cash Compensation. The following table sets forth the cash compensation
paid by the Company for services rendered in all capacities during the fiscal
years ended September 30, 2006, 2005, and 2004, to Mr. White and Mr. Faulkner.
No other executive officer earned salary plus bonus in excess of $100,000 during
the fiscal year ended September 30, 2006.
-15-
Summary Compensation Table
Annual Compensation Long Term Compensation Awards
----------------------------------------- ---------------------------------------
Other Restricted
Annual Stock All Other
Salary Compensation Awards Compensation
Name and Principal Position Year ($)(1) Bonus ($) ($)(2) ($) Options (#) ($)(3)
--------------------------- ---- ------- --------- ------------ ---------- ----------- ------------
Robert C. White, 2006 112,125 55,000 -- -- -- 12,534
President and 2005 105,250 40,000 -- -- -- 10,894
Chief Executive Officer 2004 101,500 27,000 -- -- -- 9,572
Billy B. Faulkner, 2006 81,625 27,000 -- -- -- 8,147
Vice President, Secretary, 2005 76,500 20,000 -- -- -- 7,237
and Treasurer 2004 72,625 12,000 -- -- -- 6,347
(1) Includes amounts, if any, deferred pursuant to Section 401(k) of the Code
under the Company's 401(k) Plan.
(2) For fiscal 2006, 2005, and 2004, there were no: (a) perquisites with an
aggregate value for any named individual in excess of the lesser of $50,000
or 10% of the total of the individual's salary and bonus for the year; (b)
payments of above-market preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior to
settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(3) Includes $12,534 and $8,147 in employer matching contributions associated
with the Association's 401(k) plan for the 2006 fiscal year for Mr. White
and Mr. Faulkner, respectively.
EMPLOYMENT AGREEMENTS
The Company, through the Association, is a party to an employment agreement
with both Mr. White and Mr. Faulkner (each, a "Senior Executive"). These
employment agreements establish the respective duties and compensation of the
Senior Executives and are intended to ensure that the Company will be able to
maintain a stable and competent management base. The continued success of the
Company depends to a significant degree on the skills and competence of the
Senior Executives.
The employment agreements provide for three-year terms. They provide that,
commencing on the first anniversary date of the employment agreements and
continuing each anniversary date thereafter, the Board of Directors may, with
the Senior Executive's concurrence, extend the employment agreements for an
additional year, so that the remaining terms shall be three years, after
conducting a performance evaluation of the Senior Executive. The employment
agreements provide that the Senior Executive's base salary will be reviewed
annually by the Compensation Committee of the Board. The employment agreements
provide that each of the Senior Executive's base salary may be increased on the
basis of his job performance and the overall performance of the Company. The
base salaries for Mr. White and Mr. Faulkner as of September 30, 2006 were
$114,000 and $83,000, respectively. Each Senior Executive may receive a bonus
based upon achievement of prescribed performance criteria. In addition to base
salary, the employment agreements provide for, among other things, entitlement
to participation in stock, retirement and welfare benefit plans and eligibility
for fringe benefits applicable to executive personnel such as fees for club and
organization memberships deemed appropriate by the Company and the Senior
Executive. The employment agreements provide for termination by the Company at
any time for cause as defined in the employment agreements. In the event the
Company chooses to terminate the Senior Executive's employment for reasons other
than for cause, or in the event of the Senior Executive's resignation from the
Company upon: (i) failure to re-appoint, elect or re-elect the Senior Executive
to his current offices; (ii) a material change in the Senior Executive's
functions, duties or responsibilities; (iii) a relocation of the Senior
Executive's principal place of employment outside Wake County without the Senior
Executive's consent; (iv) liquidation or dissolution of the Company; (v) a
change of control of the Company; or (vi) a breach of the employment agreement
by the Company, the Senior Executive or, in the
-16-
event of death, his beneficiary, is entitled to a lump sum cash payment in an
amount equal to three times the Senior Executive's highest rate of annual
salary, including bonuses and stock awards included as W-2 wages achieved during
the employment period, and the additional contributions or benefits under any
employee benefit plans of the Company or the Association that the Senior
Executive would have earned assuming such executive was fully vested in the
plans. The Company would also continue the Senior Executive's life, health and
disability insurance coverage for three years.
The employment agreements restrict the dollar amount of compensation and
benefits payable to a Senior Executive in the event of termination following a
"change in control" to three times the Senior Executive's average annual
compensation for the previous five calendar years. In general, for purposes of
the employment agreements and the plans maintained by the Company, a "change in
control" will generally be deemed to occur when a person or group of persons
acting in concert acquires beneficial ownership of 25% or more of any class of
equity security, such as common stock of the Company, or in the event of a
tender offer, exchange offer, merger or other form of business combination, sale
of assets or contested election of directors which results in a change in
control of the majority of the Board of Directors of the Company. The Senior
Executives are entitled to reimbursement of certain costs incurred in
negotiating, interpreting or enforcing the employment agreements. Each
employment agreement also provides for the Company to indemnify the Senior
Executive to the fullest extent allowable under federal law.
Cash and benefits paid to a Senior Executive under the employment
agreements together with payments under other benefit plans following a "change
in control" of the Company may constitute an "excess parachute" payment under
Section 280G of the Internal Revenue Code of 1986, as amended, resulting in the
imposition of a 20% excise tax on the recipient and the denial of the deduction
for such excess amounts to the Company. Compensation payable to the Senior
Executive shall be reduced if such reduction would avoid the assessment of the
excise tax.
BENEFITS
Employee Stock Ownership Plan and Trust. This plan is a tax-qualified plan
that covers substantially all salaried employees of the Association. All
contributions by the Association to the ESOP are discretionary. Shares are
allocated among the accounts of participants in the ESOP on the basis of the
participant's compensation for the year of allocation. Currently, the ESOP has
no additional unallocated shares to distribute to plan participants.
The ESOP Committee, which is currently comprised of members of the
Compensation Committee, may instruct the trustee regarding investment of funds
contributed to the ESOP. The ESOP trustee, subject to its fiduciary duty, must
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Under the ESOP, any unallocated shares will be
voted in a manner calculated to most accurately reflect the instructions it has
received from participants regarding the allocated stock as long as such vote is
in accordance with the provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The ESOP may purchase additional shares of common
stock in the future.
Stock Option Plan. The Company has an Option Plan in effect, which was
approved by shareholders at the 1997 annual meeting of shareholders. The Company
reserved 54,000 shares of common stock for issuance upon the exercise of options
granted under the Option Plan. The members of the Board's Compensation Committee
who are disinterested directors administer the Option Plan. The Option Plan is
not subject to ERISA and is not a tax-qualified plan.
-17-
Recognition and Retention Plan. The RRP was adopted by the Company and
approved by its shareholders at the 1997 annual meeting of shareholders. The
Company established a trust ("RRP Trust") which purchased 22,248 shares of the
Company's common stock which was used for awards granted under the RRP. The RRP
currently has 530 remaining shares which have not been granted to plan
participants.
Any employee of the Company or any affiliate approved by the Board of
Directors who is selected by the Board's Compensation Committee (who are
disinterested directors) is eligible to participate in the RRP as an "eligible
individual." Members of the Board of Directors of the Company or any affiliate
approved by the Board of Directors who are not employees or officers of the
Company or such affiliate are eligible to participate as an "eligible director."
Stock subject to awards is held in trust pursuant to the RRP until vested.
An individual to whom an award is granted is credited with cash dividends with
respect to stock subject to awards granted to him or her whether or not vested.
Awards generally vest at a rate of 20% over a five year period. However, any
shares covered by the award will become 100% vested as of the date of the
recipient's death, disability, retirement or on a change of control of the
Association. If an individual covered by an award ceases to be an employee, a
director, an advisory director or director emeritus for reasons other than
death, disability retirement or after a change of control of the Association,
the individual forfeits all rights to his or her unvested shares remaining in
the RRP Trust. Individuals may designate a beneficiary to receive distributions
on account of death. The RRP Committee will exercise voting rights with respect
to shares in the RRP Trust in a manner that reflects the votes or responses of
all other shareholders and will respond to any tender offer, exchange offer or
other offer made to shareholders.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Association has made loans or extended credit to executive officers and
directors and also to certain persons related to executive officers and
directors. All such loans were made by the Association in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with the
general public, such loans did not involve more than the normal risk of
collectibility or present other unfavorable features. There were no outstanding
principal balances of such loans to directors, executive officers or their
associates at September 30, 2006.
The Company intends that all transactions in the future between the Company
and its executive officers, directors, holders of 10% or more of the shares of
any class of its common stock and affiliates thereof, will contain terms no less
favorable to the Company than could have been obtained by it in arm's-length
negotiations with unaffiliated persons and will be approved by a majority of
independent outside directors of the Company not having any interest in the
transaction.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of common stock to file with
the SEC reports of ownership and changes of ownership. Officers, directors and
greater than 10% shareholders are required by the regulations to furnish the
Company with copies of all Section 16(a) forms they file. The Company knows of
no other person other than Wake Forest Bancorp, M.H.C. that owns 10% or more of
the Company's common stock. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons,
the Company believes that all filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners were complied with,
as of September 30, 2006.
-18-
CODE OF ETHICS
We have adopted the Wake Forest Federal Ethics Policy (the "Ethics
Policy"), which applies to all employees, officers and directors of the Company,
the MHC and the Association. The Ethics Policy meets the requirement of a "code
of ethics" as defined by Item 406 of Regulation S-B, and applies to our Chief
Executive Officer (who is our principal executive and accounting officer). The
Ethics Code was filed with the SEC as an Exhibit to our annual report on Form
10-KSB for the fiscal year ended September 30, 2006.
ADDITIONAL INFORMATION
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders may communicate in writing with the Board of Directors or any
individual director(s) by sending such written communication to the following
address:
Billy B. Faulkner
Corporate Secretary
Wake Forest Bancshares, Inc.
302 S. Brooks Street
Wake Forest, North Carolina 27587
Any written communications received by Mr. Faulkner will be forwarded to
the Board or the appropriate director(s).
INFORMATION ABOUT SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's proxy
statement and proxy card relating to the Company's 2008 Annual Meeting of
Shareholders must be received by the Company by September 22, 2007, pursuant to
the proxy soliciting regulations of the SEC. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy card
for such meeting any shareholder proposal which does not meet the requirements
of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R.
Section 240.14a-8 of the Rules and Regulations promulgated by the SEC under the
Exchange Act. In addition, under the Company's bylaws, if you wish to nominate a
director or bring other business before an annual meeting:
- You must be a shareholder of record and have given timely notice in
writing to the Secretary of the Company; and
- Your notice must contain specific information required in our bylaws.
By Order of the Board of Directors,
/s/ Billy B. Faulkner
----------------------------------------
Billy B. Faulkner
Corporate Secretary
Wake Forest, North Carolina
January 19, 2007
-19-
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL THE NOMINEES NAMED IN ITEM 1 AND A VOTE "FOR" Please [ ]
THE PROPOSAL IN ITEM 2. Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
FOR AGAINST ABSTAIN
1. Election of four Directors (01 John D. Lyon, 02 Rodney 2. Ratification of the appointment of Dixon [ ] [ ] [ ]
M. Privette, 03 Leelan A. Woodlief and 04 William S. Hughes PLLC as independent auditors for
Wooten) for terms of three years each. the fiscal year ending September 30, 2007.
FOR All nominees (except WITHHOLD for all The undersigned hereby acknowledges receipt of the
as otherwise indicated) nominees Notice of the 2007 Annual Meeting of Shareholders and
[ ] [ ] the proxy statement, dated January 19, 2007 for the
Annual Meeting.
Nominees: 01 John D. Lyon
02 Rodney M. Privette
03 Leelan A. Woodlief
04 William S. Wooten
Instruction: TO WITHHOLD AUTHORITY to vote for a nominee,
write that nominees name in the space provided:
--------------------------------------------------------- Dated: ,2007
------------------------------
------------------------------------------
Signature
------------------------------------------
Signature if held jointly
Please sign exactly as your name appears
on this proxy. Joint owners should each
sign personally. If signing as attorney,
executor, administrator, trustee or
guardian, please include your full title.
Corporate or partnership proxies should be
signed by an authorized officer.
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FOLD AND DETACH HERE
REVOCABLE PROXY
WAKE FOREST BANCSHARES, INC.
302 SOUTH BROOKS STREET
WAKE FOREST, NORTH CAROLINA 27587
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WAKE FOREST BANCSHARES, INC. FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 20, 2007.
The undersigned shareholder of Wake Forest Bancshares, Inc. hereby appoints Anna O. Sumerlin and R. W. Wilkinson III or any of
them, with full powers of substitution, to represent and to vote as proxy, as designated, all shares of common stock of Wake Forest
Bancshares, Inc. held of record by the undersigned on December 29, 2006 at the 2007 Annual Meeting of Shareholders (the "Annual
Meeting") to be held at 2:00 p.m. on February 20, 2007, or at any adjournment or postponement thereof, upon the matters described in
the accompanying Notice of the 2007 Annual Meeting of Shareholders and Proxy Statement, dated January 19, 2007, and upon such other
matters as may properly come before the Annual Meeting. The undersigned hereby revokes all prior proxies.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN ITEM 1 AND FOR THE PROPOSAL LISTED IN ITEM 2.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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FOLD AND DETACH HERE