UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 ss.240.14a-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:
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(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):
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(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, 2006
Dear Shareholder:
You are cordially invited to attend the 2006 Annual Meeting of
Shareholders (the "Meeting") of Wake Forest Bancshares, Inc. (the "Company"),
which will be held on February 21, 2006 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 2006 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, 2006, 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 2006 ANNUAL MEETING OF SHAREHOLDERS
DATE: TUESDAY, FEBRUARY 21, 2006
TIME: 2:00 P.M., LOCAL TIME
PLACE: WAKE FOREST POLICE AND JUSTICE CENTER
401 ELM AVENUE, WAKE FOREST, NORTH CAROLINA 27587
At the 2006 annual meeting, we will ask you to:
o Elect two directors, each of which would serve for a three-year term
expiring at the 2009 annual meeting.
o Anna O. Sumerlin
o Harold R. Washington
o Ratify the appointment of Dixon Hughes PLLC, as independent registered
public accountants for the fiscal year ending September 30, 2006; and
o 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 30, 2005, 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, 2006
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YOU ARE CORDIALLY INVITED TO ATTEND THE 2006 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 2006 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, 2006 to all shareholders
entitled to vote. If you owned shares of the Company's common stock at the close
of business on December 30, 2005, the record date, you are entitled to vote at
the annual meeting. On the record date, there were 1,152,761 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 30, 2005. 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.
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VOTE REQUIRED
PROPOSAL 1: Elect Two The two 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 shares
Appointment of present in person or by proxy at the annual
Independent meeting and entitled to vote on this proposal is
Registered Public required to ratify the appointment of Dixon
Accountants 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:
o PROPOSAL 1: Elect Two 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.
o 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:
o Filing with the Company a letter revoking the proxy;
o Submitting another signed proxy with a later date; or
o 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.
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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:
o mail;
o telephone; or
o 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, 2005, 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
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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 30, 2005. 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 30,
2005. 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.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- ---------------- -------------------- ----------------
Common Stock, Wake Forest Bancorp, M.H.C. 635,000 55.1%
par value $.01 302 S. Brooks Street, P.O. Box 1167
per share Wake Forest, North Carolina 27588-1167
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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 2005 exceeded
$100,000 (the "named executive officers"), and all directors and executive
officers of the Company as a group, as of December 30, 2005. 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
POSITION WITH OF BENEFICIAL COMMON STOCK
NAME THE COMPANY OWNERSHIP (1) OUTSTANDING
----------------------------- ------------------------------- ------------------------ --------------------
Howard L. Brown Director, Chairman of the Board 8,269 0.71%
John D. Lyon Director 28,548 (2) 2.44%
Rodney M. Privette Director 1,262 0.11%
Anna O. Sumerlin Director 14,552 (3) 1.24%
Harold R. Washington Director 4,487 (4) 0.38%
Robert C. White Director, President &
Chief Executive Officer 6,337 (5) 0.54%
R.W. Wilkinson III Director and Vice Chairman 7,767 (6) 0.66%
Leelan A. Woodlief Director 6,269 0.54%
William S. Wooten Director 1,515 (7) 0.13%
All directors and executive officers as a group (11 persons) 84,655 7.24%
(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; and includes options to purchase 2,314 shares of
common stock at $12.75 per share granted under the Option Plan.
(3) Includes options to purchase 8,900 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 2,316
shares of common stock held in Mrs. Sumerlin's individual retirement
account.
(4) Includes options to purchase 2,314 shares of common stock at $12.75 per
share granted under the Option Plan.
(5) 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.
(6) Includes 900 shares as to which Mr. Wilkinson may be deemed to share voting
and investment power; and includes options to purchase 2,314 shares of
common stock at $12.75 per share granted under the Option Plan.
(7) 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 two persons for election as directors at the
annual meeting. Both 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 2009, 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 TERM POSITION(S) HELD WITH THE
NOMINEES AGE (1) SINCE (2) EXPIRES COMPANY
------------------------------ ------------ ------------ ------------ ---------------------------------------------
Anna O. Sumerlin 59 1993 2006 Director
Harold R. Washington 80 1969 2006 Director
CONTINUING DIRECTORS
------------------------------
John D. Lyon 68 1988 2007 Director
Rodney M. Privette 50 1997 2007 Director
Leelan A. Woodlief 79 1988 2007 Director
William S. Wooten 48 1997 2007 Director
Howard L. Brown 78 1986 2008 Director and Chairman of the Board
R.W. Wilkinson III 77 1992 2008 Director and Vice Chairman
Robert C. White 49 2002 2008 President, Chief Executive Officer &
Chief Financial Officer
(1) As of September 30, 2005
(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.
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NOMINEES
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.
CONTINUING DIRECTORS
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 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 is in retail management and is semi-retired from
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 has operated a successful dental practice in Wake
Forest, North Carolina from 1982 to 2003 and in Henderson, North Carolina since
2004. He has been a director of the Association since 1997 and the Company since
its inception in 1999.
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 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.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES
FOR ELECTION AS DIRECTORS.
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------------------------------------------
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, 2006, 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, 2005 and September 30, 2004,
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 2005 2004
--------------- -------------- --------------
Audit $ 28,000 $ 25,165
Audit related fees - -
Tax fees 3,700 3,000
All other fees (reviews of SEC filings) 6,217 5,602
-------------- --------------
Total $ 37,917 $ 33,767
============== ==============
AUDIT COMMITTEE PREAPPROVAL POLICY
Preapproval of Services. The Audit Committee shall preapprove 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 preapproval requirement set forth above, shall not be
applicable with respect to non-audit services if:
o 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 public accountants during the fiscal year in which the services
are provided;
o Such services were not recognized by the Company at the time of the
engagement to be non-audit services; and
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o 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 preapprovals. The
decisions of any member to whom authority is delegated under this paragraph to
preapprove 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, 2006.
================================================================================
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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 two 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, 2005. 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/ The Nominating/Corporate Governance Committee is currently
CORPORATE chaired by Director Wooten, with Director Privette serving
GOVERNANCE as a member. The Committee for fiscal year 2005 was served
COMMITTEE by the same individuals and met once in fiscal year 2005.
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 Wooten and Privette 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. Upon delivery, such
nominations shall be posted in a conspicuous place in each
office of the Company. Ballots bearing the names of
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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.
Both Anna O. Sumerlin and Harold R. Washington were
recommended for election by the non-management directors,
Directors Wooten and Privette, serving on the
Nominating/Corporate Governance Committee. As of December
30, 2005, the Nominating/Corporate Governance Committee had
not received any nominee recommendations from any security
holders for the 2006 elections.
COMPENSATION The Compensation Committee is chaired by Director Woodlief,
COMMITTEE with Directors Brown, Sumerlin and Wilkinson 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, 2005. 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 The Executive Committee is chaired by Director Brown, with
COMMITTEE Directors Sumerlin, Wilkinson and Woodlief 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 4 times and was polled 31 other times during
the fiscal year ended September 30, 2005.
- 12 -
AUDIT The Audit Committee is a separately-designated, standing
COMMITTEE 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 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 certified 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. With the
exception of Director Sumerlin, all members of the Audit
Committee are independent directors as defined under the
Nasdaq Stock Market listing standards. Because Director
Sumerlin worked for the Company, as President, within the
last three years, she is not "independent" as defined by 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 four times in the fiscal year ended September 30, 2005.
- 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, 2005.
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 $700 per meeting attended except for the Chairman, who received $1,000 per
meeting attended during the fiscal year ended September 30, 2005. Directors also
received $100 for each committee meeting attended during the fiscal year ended
September 30, 2005. 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, 2005, was $109,325. Directors are also covered by the Option Plan
and RRP. See "- Benefits - Stock Option Plan," and "- Recognition and Retention
Plan."
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 an annual 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 begin collecting
benefits under the Directors' Retirement Plan at or after attainment of age 50,
but the annual retirement benefits payable to him or her will be reduced
pursuant to the Directors' Retirement Plan's early retirement reduction formula
to reflect the commencement of benefit payments prior to age 65. If elected by
the Director prior to December 31, 2005, benefits may be paid in an immediate
lump sum distribution or paid for a fixed period of 10 years. Upon a change in
control, participants will 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 2005, Mr. Brown received $30,050 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, 2005, 2004, and 2003, to Mr. White. No other executive
officer earned salary plus bonus in excess of $100,000 during the fiscal year
ended September 30, 2005.
- 15 -
Summary Compensation Table
---------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
------------------------------------------------------ --------------------------------------
Awards
------------------------
Other Restricted
Annual Stock All Other
Name and Salary Compensation Awards Options Compensation
Principal Position Year ($) (1) Bonus ($) ($) (2) ($) (#) ($) (3)
------------------------ ---------- ------------- ------------ --------------- ------------ ---------- -------------
Robert C. White, 2005 105,250 40,000 - - - 10,894
President and 2004 101,500 27,000 - - - 9,572
Chief Executive Officer 2003 98,000 26,000 - - - 16,103
(1) Includes amounts, if any, deferred pursuant to Section 401(k) of the Code
under the Company's 401(k) Plan.
(2) For fiscal 2005, 2004, and 2003, 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 $10,894 in employer matching contributions associated with the
Association's 401(k) plan for the 2005 fiscal year.
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, 2005 were
$106,500 and $77,500, 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 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.
- 16 -
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.
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.
- 17 -
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. The outstanding principal
balance of such loans to directors, executive officers and their associates
totaled $16,000 or 0.09% of the Association's total equity at September 30,
2005.
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, 2005,
with the exception of a Form 4 filing for Director Sumerlin reflecting 100
options exercised on March 01, 2005 which was filed a day late on March 4, 2005.
- 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, 2004.
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 2007 Annual Meeting of
Shareholders must be received by the Company by September 22, 2006, 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.
ss. 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:
o You must be a shareholder of record and have given timely notice in
writing to the Secretary of the Company; and
o 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, 2006
- 19 -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE Please
ELECTION OF ALL THE NOMINEES NAMED IN ITEM 1 AND A Mark Here
VOTE "FOR" THE PROPOSAL IN ITEM 2. for Address |_|
Change or
Comments
SEE REVERSE SIDE
1. Election of two Directors (01 Anna O. Sumerlin and
02 Harold R. Washington) for terms of three years each.
FOR Both nominees (except WITHHOLD for both
as otherwise indicated) nominees
|_| |_|
Nominees: 01 Anna O. Sumerlin
02 Harold R. Washington
Instruction: TO WITHHOLD AUTHORITY to vote for either nominee, write
that nominee's name in the space provided:
________________________________________________________________________________
2. Ratification of the appointment of Dixon Hughes PLLC as independent
auditors for the fiscal year ending September 30, 2006.
FOR AGAINST ABSTAIN
|_| |_| |_|
The undersigned hereby acknowledges receipt of the Notice of the 2006 Annual
Meeting of Shareholders and the proxy statement, dated January 19, 2006 for the
Annual Meeting.
Dated:____________________________________________________________________, 2006
________________________________________________________________________________
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.
--------------------------------------------------------------------------------
^ 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 21, 2006.
The undersigned shareholder of Wake Forest Bancshares, Inc. hereby
appoints John D. Lyon and Rodney M. Privette, 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 30, 2005 at the 2006 Annual Meeting of Shareholders (the
"Annual Meeting") to be held at 2:00 p.m. on February 21, 2006, or at any
adjournment or postponement thereof, upon the matters described in the
accompanying Notice of the 2006 Annual Meeting of Shareholders and Proxy
Statement, dated January 19, 2006, 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 BOTH 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.
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
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^ FOLD AND DETACH HERE ^