UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
Proxy
Statement
Pursuant
to Section
14(a) of the
Securities
Exchange Act of 1934
Filed by
the Registrant
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Filed by
a Party other than the Registrant
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appropriate box:
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Preliminary
Proxy Statement
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Definitive
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to
§240.14a-12
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First
National Bancshares, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
¨
Fee computed on table
below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which the transaction applies:
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Aggregate
number of securities to which the transaction applies:
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(3)
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Per
unit price or other underlying value of the 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)
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Proposed
maximum aggregate value of the transaction:
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o
Fee paid previously with
preliminary materials.
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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
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Form,
Schedule or Registration Statement No.:
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215
N. Pine Street
Spartanburg,
S.C. 29302
Notice
of Annual Meeting of Shareholders
Dear
Fellow Shareholders:
We
cordially invite you to attend the 2009 Annual Meeting of Shareholders of First
National Bancshares, Inc., the holding company for First National Bank of the
South. We hope that you can attend the meeting and look forward to
seeing you there. This letter serves as your official notice that we
will hold the meeting on Tuesday, July 14, 2009, at 10:00 a.m. at the
Spartanburg Marriott at Renaissance Park at 299 North Church Street,
Spartanburg, South Carolina. Your participation in this meeting is
very important for the following purposes:
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1.
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To
elect five members to the board of directors of the
company;
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2.
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To
amend First National Bancshares, Inc.’s Articles of Incorporation to
increase the authorized shares of common stock from 10,000,000 shares to
100,000,000 shares;
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3.
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To
authorize First National Bancshares, Inc.'s board of directors to adjourn
the annual meeting to allow time for further solicitation of
proxies in the event there are insufficient votes present at the annual
meeting, in person or by proxy, to approve the proposed
amendment to First National Bancshares, Inc.’s Articles of Incorporation;
and
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4.
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To
transact any other business that may properly come before the meeting or
any adjournment of the
meeting.
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Only
Shareholders owning our common stock at the close of business on June 5, 2009
are entitled to attend and vote at the meeting. A complete list of
these shareholders will be available at our main office prior to the
meeting.
Your vote
is important. Please use this opportunity to take part in the affairs
of your company by voting on the business to come before this
meeting. No matter your level of ownership in the company, or whether
or not you plan to attend this meeting in person, we encourage you to vote
promptly using the enclosed voting materials.
By order
of the board of directors,
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Jerry
L. Calvert
Vice
Chairman, President and CEO
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C.
Dan Adams
Chairman
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Spartanburg,
South Carolina
June 5,
2009
[THIS PAGE INTENTIONALLY LEFT
BLANK]
FIRST
NATIONAL BANCSHARES, INC.
215
N. Pine Street
Spartanburg,
South Carolina 29302
Proxy
Statement for Annual Meeting of
Shareholders
to be Held on July 14, 2009
Our board
of directors is soliciting proxies for the 2009 Annual Meeting of
Shareholders. This proxy statement contains important information for
you to consider when deciding how to vote on the matters brought before the
meeting. We encourage you to read it carefully.
Voting
Information
The board
of directors has set June 5, 2009, as the record date for the
meeting. Shareholders owning our common stock at the close of
business on that date are entitled to attend and vote at the meeting, with each
share entitled to one vote. There were 6,403,679 shares outstanding
on the record date of June 5, 2009. A majority of the outstanding
shares of common stock represented at the meeting will constitute a
quorum. We will count abstentions and broker non-votes, which are
described below, in determining whether a quorum exists.
Many of
our shareholders hold their shares through a stockbroker, bank, or other nominee
rather than directly in their own name. If you hold your shares in a
stock brokerage account or by a bank or other nominee, you are considered the
beneficial owner
of
shares held in street name, and these materials are being forwarded to you by
your broker or nominee, which is considered the
shareholder of record
with
respect to those shares. As the
beneficial owner
, you have
the right to direct your broker or nominee how to vote and also are invited to
attend the annual meeting. However, since you are not the
shareholder of record
, you
may not vote these shares in person at the meeting unless you obtain a signed
proxy from the
shareholder of
record
giving you the right to vote the shares. Your broker or
nominee has enclosed or provided a voting instruction card for you to use to
direct your broker or nominee how to vote your shares.
When you
sign the proxy card, you appoint Jerry L. Calvert and C. Dan Adams as your
representatives at the meeting. Mr. Calvert and Mr. Adams will
vote your proxy as you have instructed them on the proxy card. If you
submit a proxy but do not specify how you would like it to be voted,
Mr. Calvert and Mr. Adams will vote your proxy for the election to the
board of directors of all nominees listed below under “Election of Directors”;
for approval of the amendment to the Articles of Incorporation to increase the
number of authorized shares of common stock; and to authorize the board to
adjourn the annual meeting for further solicitation of proxies, if necessary to
approve the amendment to the Articles of Incorporation. However, if
any other matters come before the meeting, Mr. Calvert and Mr. Adams will
vote your proxy on such matters in accordance with their judgment.
You may
revoke your proxy and change your vote at any time before the polls close for
the respective method of voting at the meeting. You may do this by
signing and delivering another proxy with a later date by mail by the closing of
business on Friday, July 10, 2009, by entering a new vote by telephone or over
the Internet (following the instructions on the enclosed proxy card) or by
voting in person at the meeting. Brokers who hold shares for the
accounts of their clients may vote these shares either as directed by their
clients or in their own discretion if permitted by the exchange or other
organization of which they are members. Proxies that brokers do not
vote on some proposals but that they do vote on others are referred to as
“broker non-votes” with respect to the proposals not voted upon. A
broker non-vote does not count as a vote in favor of or against a particular
proposal for which the broker has no discretionary voting authority. In
addition, if a shareholder abstains from voting on a particular proposal, the
abstention does not count as a vote in favor of or against the proposal. Except
in regards to the election of directors, when a quorum is present at a meeting,
action on a matter is approved if the votes cast within the voting group
favoring the action exceed the votes cast opposing the action, unless the
express provision of the statutes, Articles or Bylaws require a higher vote, in
which case the express provision shall govern. Directors shall be
elected by a plurality vote of the shareholders.
We are
paying for the costs of preparing and mailing the proxy materials and of
reimbursing brokers and others for their expenses in forwarding copies of the
proxy materials to our shareholders. Upon written or oral request, we
will promptly deliver a separate copy of our annual report, our annual
report on Form 10-K or this proxy statement to our shareholders at a shared
address to which a single copy of the document was delivered. Our
officers and employees may assist in soliciting proxies but will not receive
additional compensation for doing so. We are distributing this proxy
statement on or about June 15, 2009.
Important Notice
of Internet Availability.
The proxy statement and the 2008 Annual Report
on Form 10-K are available to the public for viewing on the Internet in the
investor relations section of our website at
www.fnbwecandothat.com. In addition, the above items and other SEC
filings are also available to the public on the SEC's website on the Internet at
www.sec.gov.
Proposal
No. 1: Election of Directors
The board
of directors is divided into three classes with staggered terms, so that the
terms of approximately one-third of the board members expire at each annual
meeting. The current terms of the Class I directors, whose names
are listed below, will expire at the meeting:
Class I
Jerry L.
Calvert
Mellnee
G. Buchheit
W. Russel
Floyd, Jr.
I.S.
Leevy Johnson
Norman F.
Pulliam
Shareholders
will elect five nominees as Class I directors at the meeting to serve a
three-year term, expiring at the 2012 Annual Meeting of
Shareholders. The directors will be elected by a plurality of the
votes cast at the meeting. This means that the five nominees
receiving the highest number of votes will be elected.
The board
of directors recommends that you elect Jerry L. Calvert, Mellnee G. Buchheit, W.
Russel Floyd, Jr., I.S. Leevy Johnson and Norman F. Pulliam as Class I
directors.
If you
submit a proxy but do not specify how you would like it to be voted,
Mr. Calvert and Mr. Adams will vote your proxy to elect Mr. Calvert, Ms.
Buchheit, Mr. Floyd, Mr. Johnson and Mr. Pulliam. If any of these
nominees is unable or fails to accept nomination or election (which we do not
anticipate), Mr. Calvert and Mr. Adams will vote instead for a replacement
to be recommended by the board of directors, unless you specifically instruct
otherwise in the proxy.
Set forth
below is certain information about the nominees. With the exception of Mr.
Johnson, each of the nominees is also an organizer and director of our company’s
subsidiary, First National Bank of the South, and has served in this capacity
since each company’s inception in 1999. Mr. Johnson joined our board
and the board of our subsidiary bank in February of 2008, following the merger
of Carolina National Corporation (“Carolina National”) with and into First
National.
Mellnee G. Buchheit, 61,
Class I director, has been the president of Buchheit News Management, Inc., a
firm specializing in media investments, since 1993. She also serves
as a director for Wayne Printing Co., Inc. and Hometown News,
Inc. Ms. Buchheit graduated from Winthrop University with a
degree in education in 1969.
Jerry L. Calvert, 60,
Class I
director, is the president and chief executive officer of First National
Bancshares, Inc. and the First National Bank of the South. He is a
native of South Carolina and has over 30 years of banking experience in the
Greenville and Spartanburg markets. Mr. Calvert was the senior vice
president and regional manager for American Federal Bank from 1984 until March
1999, when he resigned to help organize First National Bank of the
South. Mr. Calvert is a retired Lieutenant Colonel in the U.S.
Marine Reserves and a Vietnam veteran. Mr. Calvert graduated
from Wofford College in 1974 with a bachelor of arts degree in
economics.
W. Russel Floyd, Jr., 59,
Class I director, has been the president of W. R. Floyd Services, Inc., a
funeral home, and W. R. Floyd Corporation, a cemetery operation located in
Spartanburg, since 1978. He has also served as the vice president of
Piedmont Crematory since 1980. He also has served as the president of
Business Communications, Inc., a local provider of telephone services and
equipment, since 1984. Mr. Floyd graduated from the University
of North Carolina – Chapel Hill in 1972 with a bachelor of science degree
in business administration, and he received a bachelor of arts degree in
psychology from the University of North Carolina – Charlotte in
1977.
I.S. Leevy Johnson,
6
6
,
Class I director, has
been an attorney with Johnson, Toal & Battiste, P.A. since 1976. Mr.
Johnson is also an owner of Leevy Johnson Funeral Home, Inc.
Norman F. Pulliam, 66
, Class
I director, was founder and formerly chairman of the board of Pulliam Investment
Company, Inc., a real estate development and investment firm located in
Spartanburg. Mr. Pulliam served as board chairman from First
National’s inception until June 2005, and now serves as chairman
emeritus. He is a graduate of Clemson University and Harvard
University School of Business Administration.
Set forth
below is also information about each of our other directors and named executive
officers. The terms of the Class II directors will expire at the
2010 Annual Shareholders Meeting. The terms of the Class III
directors expire at the 2011 Annual Shareholders Meeting. The
other directors who were organizers and original directors of our
subsidiary bank and who have served in this capacity since each company’s
inception in 1999 are as follows: C. Dan Adams, Martha Cloud Chapman,
C. Tyrone Gilmore, Sr., Benjamin R. Hines, Peter E. Weisman, Donald B. Wildman
and Coleman L. Young, Jr. The following directors joined our board
and the board of our subsidiary bank in February of 2008, following the merger
of Carolina National with and into First National: Robert E. Staton,
Sr., Joel A. Smith, III and William H. Stern.
C. Dan Adams, 49
, Class III
director, is the Chairman of our board of directors. Mr. Adams has
been the president and principal owner of The Capital Corporation of America,
Inc., an investment banking company located in Greenville/Spartanburg, since
1991. He is also president and owner of Southeastern Capital
Partners, LLC, a private equity company that is affiliated with The Capital
Corporation and invests in privately held companies. Southeastern currently has
four (4) portfolio companies. Mr. Adams graduated from the University
of South Carolina Upstate in 1983 with a degree in business
administration. He graduated in 1989 from The Banking School of the
South at Louisiana State University and is a Certified Commercial Investment
member.
Martha Cloud Chapman
,
86
, Class III director,
graduated from the University of North Carolina – Greensboro in 1942 with a
degree in art. Ms. Chapman previously was the first female board
member of the Spartanburg County Foundation, the South Carolina Development
Board, and the South Carolina Mining Council, and she served as the chairperson
of Governor Jim Edward’s Inaugural Ball. She has served as a board
member of the Walker Foundation, Charles Lea Center Foundation, Queens College,
Spartanburg Methodist College and the Music Foundation.
Dr. C. Tyrone Gilmore,
Sr.
,
65
,
Class III director, is vice president/customer relations at Compass
Learning, Inc. He graduated from Livingstone College in 1965 with a
bachelor of arts degree. Dr. Gilmore earned his Master’s degree
in 1971 from Converse College and received his Ed. S. in Educational
Administration studies in 1976 from the University of South Carolina –
Upstate.
Benjamin R. Hines
,
52
, Class II director, has
been president of Spencer/Hines Properties, a commercial real estate firm
located in Spartanburg, since 1986. Mr. Hines graduated from Wofford
College in 1978 with a bachelor’s degree in economics.
Joel A. Smith, III,
6
3
,
Class II director, has been
Dean of the Moore School of Business since October of 2000. From
June of 1998 until August of 2000, Mr. Smith was President of the East
Region of Bank of America. Prior to that time, from 1991 through
June of 1998, Mr. Smith was President of NationsBank
Carolinas. Additionally, he serves on the board of directors and the
Audit and Governance Committees of Avanex Corporation, and the board of
directors and on the Executive Committee for NETBANK, Inc., chairing the
Compensation Committee.
Robert E. Staton, Sr.,
6
2
,
Class III
director, has
been Executive Vice President External Relations
for Presbyterian College since January
2007, served as President of the United Way of South Carolina
from May of 2002 until December of 2005 and was
Chairman, President and Chief Executive Officer of Colonial Life
& Accident Insurance company from 1994 until his retirement in July of
2001.
William H. Stern, 52,
Class
II director, has been President of Stern & Stern and Associates, a
commercial real estate development company, since 1984. Mr. Stern currently
serves as Chairman of the South Carolina State Ports Authority.
Peter E. Weisman
,
71
, Class II director, is an
owner and managing member of Peter Weisman/Kinney Hill Associates, LLC, a real
estate development company established in 1989 and located in
Spartanburg. He graduated from the University of Pennsylvania in 1961
with a degree in architecture.
Donald B. Wildman
,
59
, Class II director, is a
managing partner of the law firm of Johnson, Smith, Hibbard, and Wildman,
LLP. Mr. Wildman has been a transactions attorney with the firm
since 1974. He graduated from Wofford College in 1971 with a bachelor
of arts degree and received his juris doctor from the University of South
Carolina School of Law in 1974.
Coleman L. Young, Jr., 52
,
Class III director, has been the president of CLY, Inc., a dry cleaning business
located in Spartanburg, since 1994. Mr. Young also serves as
property manager for Coleman Young Family Limited Partnership, a real estate
development company, and is chairman of Upward Unlimited, a non-profit ministry
headquartered in Spartanburg
.
Mr. Young
graduated from Clemson University in 1979 with a bachelor of science
degree.
Kitty B. Payne, CPA
,
38
, is executive vice
president and chief financial officer of First National Bancshares, Inc. and
First National Bank of the South. She has over 15 years of experience in the
financial services industry, including seven years with KPMG LLP as a senior tax
manager where she worked extensively with community banks in the Carolinas.
Ms. Payne received her bachelor’s degree in financial management and
accounting from Clemson University in 1992.
Roger B. Whaley, 62,
served
as executive vice president of First National Bancshares, Inc. from
February 2008, following the merger of Carolina National Bank Corporation with
and into First National Bancshares, Inc. until his resignation on January 30,
2009. Prior to February 2008, Mr. Whaley served as a director,
president and chief executive officer of Carolina National Corporation. Mr.
Whaley was employed by an investment firm from November of 2000 until
November 2001. From 1971 until his retirement in August of 2000,
Mr. Whaley was with Bank of America, where for the last four years of
employment, he served as President of Bank of America, Oklahoma, and,
in 1999, he also assumed responsibilities as Small Business Banking
Executive for the Midwest (Arkansas, Illinois, Iowa, Kansas, Missouri and
Oklahoma).
David H. Zabriskie, 47,
is
executive vice president and chief lending officer of First National Bank of the
South. He has over 21 years of experience in the financial services
industry, including 15 years in commercial lending. Mr. Zabriskie has also
served as a bank examiner for the OCC and the OTS. Mr. Zabriskie received
his bachelor’s degree in business administration from Furman University in
1984.
Proposal
No. 2: Amendment to Articles of Incorporation to Increase Authorized Shares of
Common Stock from
10,000,000
Shares to 100,000,000 Shares
Description
of the Proposed Amendment
The board
of directors of the company has approved, subject to shareholder approval, an
amendment to the company’s Articles of Incorporation to increase the number of
shares of common stock that the company is authorized to issue from 10,000,000
shares to 100,000,000 shares.
If
approved by the company’s shareholders, the additional shares of authorized
common stock will have rights identical to the shares of common stock currently
authorized by the company’s Articles of Incorporation.
Current
Capitalization of the Company
The
company is a South Carolina bank holding company, which was organized in 1999 to
serve as the holding company for First National Bank of the South, a national
banking association, which opened for business in March of 2000 and currently
operates thirteen full-service branches throughout the state of South
Carolina. The company’s Articles of Incorporation currently authorize
the company to issue up to 10,000,000 shares of common stock, of which 1,200,000
shares were issued when the company was organized. Since
organizing the company in 1999, the board of directors has authorized the
issuance of additional shares of common stock at various times to
support the growth of the company. These shares were authorized
through a number of stock splits, dividends and a secondary public
offering as well as grants of shares pursuant to shareholder-approved
plans, to issue stock options and warrants and to issue shares of
restricted stock to meet the company’s goals of recruitment and retention
of its employee base.
As of
June 5, 2009, a total of 9,150,653 shares of the company’s common stock were
issued and outstanding or reserved for issuance, as detailed below, which
results in 849,347 shares of common stock unreserved and available for future
issuance:
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6,403,679
shares issued and outstanding, including 106,981 shares held in treasury
by the company;
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309,737
shares subject to stock options granted under the company’s 2000 Stock
Incentive Plan;
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561,429
shares subject to stock warrants granted under the company’s Stock Warrant
Agreements;
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527,024
shares reserved for additional grants under the company’s 2000 Stock
Incentive Plan;
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1,028,784
shares reserved for the exchange of the company’s Series A Noncumulative
Convertible Perpetual Preferred Stock; and
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320,000
shares reserved for additional grants under the company’s 2008 Restricted
Stock Plan.
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The
company is not permitted to grant shares in excess of the above amounts under
the company’s 2000 Stock Incentive Plan or 2008 Restricted Stock Plan without
shareholder approval.
Purpose
of the Amendment
The board
of directors believes that it is in the best interests of the company and its
shareholders to increase the authorized shares of common stock of the
company. The additional common shares will give the company the
flexibility to meet its future needs for unreserved common shares without the
expense and delay associated with obtaining shareholder approval to effect an
increase in authorized common shares when needed.
During
2008, adversity within the financial services industry and the economy in
general contributed to an increase in the bank’s nonperforming assets
and eroded our earnings. Based on the recent deterioration in the housing and
real estate markets, including falling real estate prices, increasing
foreclosures, and rising unemployment, and the negative impact these events have
had on the financial services industry and banks’ loan portfolios, we believe
that it is prudent to take all necessary steps to strengthen our capital
position. In response to the decline in the residential housing market, we
have taken what we believe to be an aggressive approach with respect to
determining the probability of losses in our loan portfolio. In order to
concentrate our efforts on the timely resolution and disposition of
nonperforming and foreclosed assets, we have formed a special assets management
group. This group’s objective is the expedient workout/resolution of
assigned loans and assets at the highest present value recovery. To that end, we
have been carefully exploring a variety of capital-raising alternatives
including issuance of additional shares of common stock.
The company
will need to raise additional capital to absorb the potential losses associated
with the disposition of its subsidiary bank’s nonperforming assets and
to increase capital levels to meet the standards set forth by the Office of the
Comptroller of the Currency (“OCC”). Due to the
financial condition of the bank, the OCC has required that our board of
directors sign a consent order with the OCC which conveys specific actions
needed to address certain findings from the OCC’s recent regulatory examination
and to address our current financial condition. We entered into a
consent order with the OCC on April 27, 2009, which contains a list of strict
requirements including a capital directive, which requires the bank to achieve
and maintain minimum regulatory capital levels in excess of the statutory
minimums to be well-capitalized, specifically to achieve and maintain Tier 1
capital at least equal to 11% of risk-weighted assets and at least equal to 9%
of adjusted total assets by August 25, 2009.
Additional common shares may be issued by the company in
connection with equity financing to raise capital, current or future equity
compensation plans for the company’s directors, officers, and employees, and
other corporate purposes.
As of the
date of this proxy statement, the board of directors does not have any
understandings, agreements, or commitments to issue common stock of the company
or to reserve additional common stock for issuance under the company’s current
or future equity compensation plans.
Authority
of the Board of Directors to Issue Additional Shares of Common
Stock
If this
amendment is approved and the company is authorized to issue additional shares
of common stock, the board of directors will determine whether, when, and on
what terms to issue the additional shares of common stock without further action
by the company’s shareholders, unless shareholder approval is required by
applicable law or securities exchange listing requirement in connection with a
particular transaction.
Dilution
to Existing Shareholders
Our
shareholders do not have preemptive rights. Therefore, if we decide to issue
additional shares of common stock, we would have the discretion to determine to
whom we offer these additional shares and would not be obligated to first offer
these shares to our existing shareholders. Except for a stock split or stock
dividend, issuances of common shares will dilute the voting power and ownership
of our existing shareholders and will dilute earnings per share of common stock.
Depending on the price at which the shares are issued, an issuance may reduce
the book value of the company’s common shares.
Vote
Required to Approve the Amendment
For the
amendment to be approved, a quorum must be present at the meeting, in person or
by proxy, and two-thirds of the shares of common stock outstanding on the record
date must be voted in favor of the amendment. Therefore, broker non-votes and
abstentions will have the same impact as votes “against” the amendment. Broker
non-votes and abstentions will count in determining whether a quorum is present
at the meeting, in person or by proxy.
Procedure
for Amending the Articles of Incorporation
If the
amendment is approved by the affirmative vote of two-thirds of the shares of
common stock outstanding on the record date, the amendment will become effective
if, and when, the amendment to the Articles of Incorporation is filed with the
Secretary of State of South Carolina. Approval of the amendment by
the shareholders will not require that the amendment to the Articles of
Incorporation be filed, and our board of directors may decide to abandon the
amendment after shareholder approval if they determine that it is in the best
interest of the company to do so. Shareholders have no dissenters’
rights or rights of appraisal with respect to the vote to approve this
amendment.
The
board of directors recommends that the shareholders vote FOR the amendment to
the company’s Articles of Incorporation to increase the number of shares of
common stock that the company is authorized to issue from 10,000,000
to 100,000,000.
Proposal
No. 3: Authorization to Adjourn
At the
meeting, our shareholders are being asked to consider and vote on a proposal to
authorize the board of directors to adjourn the meeting to allow time for the
further solicitation of proxies if there are insufficient votes present at the
meeting, in person or by proxy, to approve the amendment to the Articles of
Incorporation.
The
board of directors recommends that the shareholders vote FOR the proposal to
authorize the board of directors to adjourn the meeting to allow time for the
further solicitation of proxies to approve the amendment to the Articles of
Incorporation.
Compensation
of Directors and Executive Officers
Summary
of Cash and Certain Other Compensation
The
following table summarizes the compensation paid or earned by each of the named
executive officers for the years ended December 31, 2008 and
2007.
Summary
Compensation Table
Name and Principal Position
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Year
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Salary
(1)
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Bonus
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Stock Awards
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Option
Awards
(2)
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Non-Equity
Incentive Plan
Compensation
(3)
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Nonqualified
Deferred
Compensation
Earnings
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All Other
Compensation
(4)
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Total
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Jerry
L. Calvert
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2008
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$
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286,000
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|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,180
|
|
|
$
|
325,180
|
|
President,
CEO and Director
|
|
2007
|
|
|
266,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,000
|
|
|
|
-
|
|
|
|
39,471
|
|
|
|
375,471
|
|
of
the Company and the Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kitty
B. Payne
|
|
2008
|
|
|
162,616
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,681
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,644
|
|
|
|
180,941
|
|
Executive
Vice President and Chief
|
|
2007
|
|
|
155,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,681
|
|
|
|
29,000
|
|
|
|
-
|
|
|
|
15,944
|
|
|
|
205,625
|
|
Financial
Officer of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
the Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger B. Whaley
(5)
|
|
2008
|
|
|
184,615
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,699
|
|
|
|
376,314
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
H. Zabriskie
|
|
2008
|
|
|
178,460
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,681
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,436
|
|
|
|
199,577
|
|
Executive
Vice President and Chief
|
|
2007
|
|
$
|
169,959
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,681
|
|
|
|
33,000
|
|
|
|
-
|
|
|
|
18,962
|
|
|
$
|
227,602
|
|
Lending
Officer of the Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
minimum base salaries of the named executive officers are specified in the
employment agreements executed by each of the named executive officers,
are subject to review annually by the compensation committee and are
ratified by the company’s board of directors. The base salary
of each of the named executive officers, which is set forth in the Summary
Compensation Table, has not increased subsequent to the execution of the
executives’ employment agreements on December 31, 2008 due to the
reduced profitability of the company. See the “Meetings and
Committees of the Board of Directors” section of this Proxy Statement for
additional information on compensation for the named executive
officers.
|
(2)
|
The
amounts in this column reflect the dollar amount recognized as
compensation expense for financial statement reporting purposes, in
accordance with SFAS No. 123(R) which outlines the accounting
requirements for awards pursuant to the company’s stock option plan and
include amounts from vesting of awards granted prior to
2008. Assumptions used in the calculation of these amounts are
included in footnote 1 to the company’s audited financial statements for
the fiscal year ended December 31, 2008, included in the company’s
Annual Report on
Form 10-K.
|
(3)
|
No
awards were granted under the First National Incentive Plan (“FNIP”) for
the fiscal year ended December 31, 2008 due to the bank’s reduced
profitability. Amounts awarded for the fiscal year ended December 31, 2007
under the FNIP were paid in the subsequent fiscal
year.
|
(4)
|
The
amount attributable to each such perquisite or benefit for each named
executive officer does not exceed the greater of $25,000 or 10% of the
total amount of perquisites received by such named officer. All other
compensation includes the following items: (a) premiums for the
portion of the death benefits shared by the company with the named
executive officers pursuant to bank owned life insurance,
(b) premiums for life, accident and long-term disability insurance
policies, (c) the dollar amount recognized for financial statement
reporting purposes for shares allocated to each named executive officer
under the First National Employee Stock Ownership Plan, (d) company
contributions under the 401k plan, (e) car allowance or value
attributable to personal use of company provided automobiles,
(f) club dues, (g) in the case of Mr. Calvert, premiums for keyman
life insurance and medical and dental insurance coverage, (h) in the case
of Mr. Whaley, premiums for health insurance coverage and (i) in the case
of Mr. Whaley, the conversion of warrants to purchase shares of Carolina
National stock into cash of approximately $155,000 as part of the
acquisition of Carolina National, pursuant to the terms of the merger
agreement approved by the shareholders of First National and Carolina
National to effect the acquisition of Carolina National, effective January
31, 2008.
|
(5)
|
Mr. Whaley
became an executive officer of First National following the acquisition of
Carolina National, effective January 31, 2008.
On January 30, 2009,
Mr. Whaley notified First National of his resignation as Executive Vice
President, effective January 30,
2009.
|
Employment
Agreements
The
company recognizes that the named executive officers’ contributions to the
growth and success of the company are substantial. The company
desires to provide for the continued employment of the named executive officers,
to reinforce and encourage the continued dedication of these individuals to the
company and to promote the best interest of the company and its
shareholders.
On
December 31, 2008, First National Bancshares, Inc., and its wholly-owned
subsidiary, First National Bank of the South, entered into an employment
agreement with Jerry L. Calvert to serve as the President and Chief Executive
Officer of the company and its bank subsidiary. This agreement is for
a term of three years and is extended automatically at the end of each year so
that the remaining term continues to be three years. Under the
agreement, Mr. Calvert receives a base salary of not less than $286,000 per
year, which may be increased from time to time with the approval from the board
of directors. He also receives his medical insurance premium. He is
eligible to receive an annual cash bonus of up to 50% of his base salary based
on the accomplishment of performance goals established by the board of
directors. For the year ended December 31, 2008, no cash bonus was awarded
due to the bank’s reduced profitability. Mr. Calvert
is entitled to a term life insurance policy in the amount of $500,000 payable to
his designated beneficiaries and an accident liability policy totaling
$1,000,000. Mr. Calvert will receive an automobile or an
automobile allowance and is entitled to participate in all retirement, welfare,
and other benefit plans of the company and the bank. During his
employment and for a period of one year thereafter, or during any period that
Mr. Calvert is receiving a severance payment under the agreement, he is
prohibited from (a) competing with the company or the bank within a radius
of 40 miles of the main office or any branch or loan production office;
(b) soliciting the company’s or the bank’s customers for a competing
business; or (c) soliciting the company’s or bank’s employees for a
competing business.
If we
terminate the employee agreement for Mr. Calvert without cause before or
after a change in control, or if Mr. Calvert terminates his agreement for
good reason within the 90-day period beginning on the 30
th
day
after a change in control or within the 90-day period beginning on the one year
anniversary of a change in control, he will be entitled to severance in an
amount equal to his then current monthly base salary multiplied by 36 (24 for a
termination without cause), plus any bonus which may have been earned or accrued
through the date of termination (including any amounts awarded for previous
years but which were not yet vested) and a pro rata share of any bonus with
respect to the current fiscal year which may have been earned as of the date of
termination.
On
December 31, 2008, First National Bancshares, Inc. and its wholly owned
subsidiary, First National Bank of the South, also entered into employment
agreements with Kitty B. Payne and David H. Zabriskie. Pursuant to
the agreements, Ms. Payne serves as an Executive Vice President and the
Chief Financial Officer of the company and the bank and receives a minimum
annual base salary of $164,000 and Mr. Zabriskie serves as an Executive Vice
President and Senior Lending Officer of the bank and receives a minimum annual
base salary of $180,000. Each executive’s annual base salary may be
increased from time to time with the approval of the board of directors, but may
not be decreased.
Each
agreement is for a term of two years and is extended automatically at the end of
each year so that the remaining term continues to be two years; however, the
executive or the employer may at any time fix the term to a finite period of two
years. Each executive is entitled to participate in all employee
benefit plans or programs of the company and its bank subsidiary, as well as
club dues. In addition, the terms of the agreement entitle Mr.
Zabriskie to the use of an automobile owned or leased by the
bank. During each executive’s employment and for a period of one year
thereafter, each executive is prohibited from (a) competing with the
company or the bank within a radius of 30 miles of any office or branch;
(b) soliciting the company’s or bank’s customers for a competing business;
or (c) soliciting the company’s or the bank’s employees for a competing
business. Notwithstanding the foregoing, each executive may serve as
an officer of or consultant to a depository institution or holding company with
offices in the restricted territory, if such employment does not involve the
restricted territory.
If we
terminate the employment agreements for Ms. Payne or Mr. Zabriskie without
cause before or after a change in control, or if Ms. Payne or Mr. Zabriskie
terminate their agreement for good reason within the 90-day period beginning on
the 30
th
day
after a change in control, they will be entitled to severance in an amount equal
to their then current monthly base salary multiplied by 12, plus any bonus which
may have been earned or accrued through the date of termination (including any
amounts awarded for previous years but which were not yet vested) and a pro rata
share of any bonus with respect to the current fiscal year which may have been
earned as of the date of termination.
On
January 31, 2008, First National Bank of the South entered into an employment
agreement with Roger B. Whaley to serve as Executive Vice President for Special
Projects at a salary of $200,000 annually. This agreement was
for a term of one year. During that year, Mr. Whaley was entitled to
participate in all employee benefit plans or programs, as well as club dues,
automobile allowance and health insurance premiums. During his
employment and for a period of one year thereafter, Mr. Whaley is prohibited
from (a) competing with the bank within a radius of 20 miles of any office or
branch of the bank, (b) soliciting the bank’s customers for a competing
business; or (c) soliciting the bank’s employees for a competing business. On
January 30, 2009, Mr. Whaley notified First National of his resignation as
Executive Vice President, effective January 30, 2009.
On
February 1, 2009, First National Bank of the South entered into a consulting
agreement with Mr. Whaley for a term of six months to terminate on July 31,
2009. Mr. Whaley’s compensation for this six-month period is
$100,000 to be paid in a lump sum on February 1, 2009. Should Mr.
Whaley cease to perform the services described in his consulting agreement prior
to the expiration date of the agreement, he will reimburse the bank a pro rata
portion of the compensation for the remaining days.
Outstanding
Equity Awards at Fiscal Year-End
The
following table shows the number of shares covered by both exercisable and
non-exercisable options owned by the individuals named in the Summary
Compensation Table as of December 31, 2008, as well as the related exercise
prices and expiration dates. Options are granted pursuant to the company’s stock
option plan.
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Market
Value of
|
|
|
|
Number
of Securities Underlying
|
|
|
Option
|
|
|
Option
|
|
|
Shares
or Units of
|
|
|
Shares
or Units of
|
|
|
|
Unexercised
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Stock
that
|
|
|
Stock
that Have
|
|
Name
|
|
Exercisable
|
|
|
Non-exercisable
(1)
|
|
|
Price
|
|
|
Date
|
|
|
Have Not Vested
(2)
|
|
|
Not Vested
(2)
|
|
Jerry
L. Calvert
|
|
|
153,117
|
|
|
|
-
|
|
|
$
|
3.92
|
|
|
3/27/2010
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
426
|
|
|
$
|
877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kitty
B. Payne
|
|
|
12,760
|
|
|
|
-
|
|
|
$
|
3.92
|
|
|
3/27/2010
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,552
|
|
|
|
-
|
|
|
$
|
4.23
|
|
|
12/3/2011
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,552
|
|
|
|
1,701
|
|
|
$
|
14.99
|
|
|
1/31/2015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
352
|
|
|
$
|
726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger B.
Whaley
|
|
|
94,968
|
|
|
|
-
|
|
|
$
|
6.81
|
|
|
7/15/2012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,936
|
|
|
|
-
|
|
|
$
|
11.08
|
|
|
7/1/2017
|
|
|
|
-
|
|
|
|
-
|
|
David
H. Zabriskie
|
|
|
25,520
|
|
|
|
-
|
|
|
$
|
3.92
|
|
|
3/27/2010
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,552
|
|
|
|
-
|
|
|
$
|
4.23
|
|
|
12/3/2011
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,552
|
|
|
|
1,701
|
|
|
$
|
14.99
|
|
|
1/31/2015
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
381
|
|
|
$
|
787
|
|
(1)
|
Options
granted pursuant to the company’s stock option plan expire ten years from
the date of grant and vest at a rate of 20% each year on the first five
anniversaries of the date of grant, except for Mr. Whaley.
Mr.
Whaley’s options were originally granted under the Carolina National Stock
Option Plan, which was absorbed into the First National Bancshares, Inc.
2000 Stock Incentive Plan as part of the acquisition effective January 31,
2008. These options vested fully at the acquisition
date. On January 30, 2009, Mr. Whaley notified First National
of his resignation as Executive Vice President, effective January 30,
2009.
|
(2)
|
Each
named executive officer, except for Mr. Whaley, fully vests in the shares
allocated pursuant to the First National Employee Stock Ownership Plan
after seven years of service with 20% of the shares allocated vesting each
year, beginning with the third year of service. As of December 31, 2008,
each named executive officer had been credited with four full years of
service.
|
Option
Grants in Last Fiscal Year
For the
year ended December 31, 2008, no options were granted to the named
executive officers.
Director
Compensation
The
following table shows the fees paid to each of the following directors for board
meeting and committee meeting attendance in 2008.
Name
|
|
Fees
Earned or
Paid
in
Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
C.
Dan Adams,
Chairman
|
|
$
|
23,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
23,900
|
|
Mellnee
G. Buchheit
|
|
|
12,300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,300
|
|
Jerry
L. Calvert,
Vice Chairman
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Martha
C. Chapman
|
|
|
11,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,100
|
|
W.
Russel Floyd, Jr.
|
|
|
16,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,700
|
|
Dr.
C. Tyrone Gilmore, Sr.
|
|
|
17,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,100
|
|
Gaines W. Hammond,
Jr.
(1)
|
|
|
3,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,900
|
|
William Hudson
(2)
|
|
|
25,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,100
|
|
Benjamin
R. Hines
|
|
|
22,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,700
|
|
I.
S. Leevy Johnson
(4)
|
|
|
9,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,100
|
|
Norman
F. Pulliam,
Chairman
E
meritus
|
|
|
14,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,700
|
|
Joel
A. Smith, III
(4)
|
|
|
9,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,600
|
|
Robert
E. Staton, Sr.
(4)
|
|
|
18,300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,300
|
|
William
H. Stern
(4)
|
|
|
16,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,400
|
|
Peter
E. Weisman
|
|
|
20,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,700
|
|
Donald
B. Wildman
|
|
|
13,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,100
|
|
Coleman
L. Young, Jr.
|
|
$
|
25,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
25,500
|
|
(1)
|
Dr.
Hammond resigned from the board on April 23,
2008. The resignation was not due to disagreements with the
company.
|
(2)
|
Mr.
Hudson resigned from the board on February 27, 2009. The
resignation was not due to disagreements with the
company.
|
(3)
|
Mr.
Calvert does not receive compensation for board meetings attended in his
role as our President and CEO.
|
|
Mr.
Johnson, Mr. Smith, Mr. Staton and Mr. Stern became members of the board
of directors in February 2008 pursuant to the acquisition of Carolina
National effective January 31,
2008.
|
During
2008, we paid our outside directors $800 for each board meeting they attended,
with the exception of the January 2008 board meeting, for which they received
$700. Our directors were also paid $400 for each committee meeting
they attended. Effective February 28, 2009, the board of directors voted to
suspend the payment of future board fees due to the bank’s reduced
profitability.
Security
Ownership of Certain Beneficial Owners and Management
The
following table shows how much of our common stock is considered to be
beneficially owned by the directors, named executive officers, and owners of
more than 5% of the outstanding common stock, as of June 5,
2009. Unless otherwise indicated, the address of each beneficial
owner is c/o First National Bancshares, Inc., 215 North Pine Street,
Spartanburg, South Carolina 29302.
|
|
Shares
Beneficially
|
|
|
Right
To
|
|
|
|
|
Name
|
|
Owned
(1)
|
|
|
Acquire
(2)
|
|
|
Percent
(3)
|
|
C. Dan Adams
(4)
|
|
|
149,860
|
|
|
|
85,065
|
|
|
|
3.68
|
%
|
Mellnee
G. Buchheit
|
|
|
85,646
|
|
|
|
51,039
|
|
|
|
2.15
|
%
|
Jerry L.
Calvert
(5)
|
|
|
79,106
|
|
|
|
204,156
|
|
|
|
4.36
|
%
|
Martha
C. Chapman
(13)
|
|
|
80,582
|
|
|
|
-
|
|
|
|
1.28
|
%
|
W. Russel Floyd, Jr.
(6)
|
|
|
100,499
|
|
|
|
51,039
|
|
|
|
2.39
|
%
|
Dr.
C. Tyrone Gilmore, Sr.
|
|
|
25,835
|
|
|
|
17,013
|
|
|
|
0.68
|
%
|
Benjamin R.
Hines
(7)
|
|
|
114,270
|
|
|
|
71,455
|
|
|
|
2.92
|
%
|
I.S.
Leevy Johnson
|
|
|
18,470
|
|
|
|
2,248
|
|
|
|
0.33
|
%
|
Kitty B.
Payne
(8)
|
|
|
12,760
|
|
|
|
18,658
|
|
|
|
0.50
|
%
|
Norman
F. Pulliam
|
|
|
181,050
|
|
|
|
102,078
|
|
|
|
4.42
|
%
|
Joel
A. Smith, III
|
|
|
27,860
|
|
|
|
2,935
|
|
|
|
0.49
|
%
|
Robert
E. Staton, Sr.
|
|
|
24,627
|
|
|
|
2,935
|
|
|
|
0.44
|
%
|
William
H. Stern
|
|
|
107,764
|
|
|
|
4,563
|
|
|
|
1.78
|
%
|
Peter E. Weisman
(9)
|
|
|
87,445
|
|
|
|
56,143
|
|
|
|
2.26
|
%
|
Roger B.
Whaley
(12)
|
|
|
17,735
|
|
|
|
97,904
|
|
|
|
1.81
|
%
|
Donald B.
Wildman
(10)
|
|
|
60,234
|
|
|
|
34,026
|
|
|
|
1.49
|
%
|
Coleman L. Young,
Jr.
(11)
|
|
|
74,687
|
|
|
|
42,533
|
|
|
|
1.85
|
%
|
David
H. Zabriskie
|
|
|
6,590
|
|
|
|
31,418
|
|
|
|
0.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
directors & executive officers as a group (18 persons)
|
|
|
1,255,020
|
|
|
|
875,208
|
|
|
|
29.70
|
%
|
(1)
|
Includes
shares for which the named person:
|
|
•has
sole voting and investment power,
|
|
•has
shared voting and investment power with a spouse or other family member in
trust, or
|
|
•holds
in an IRA or other retirement plan program, unless otherwise indicated in
these footnotes.
|
|
•does
not include shares that may be acquired by exercising stock options or
warrants.
|
(2)
|
Includes
shares that may be acquired within the next 60 days by exercising vested
stock options or warrants, but does not include any other stock options or
warrants. See Note 17 – Stock Compensation Plans to the
company’s audited financial statements for the fiscal year ended December
31, 2008, included in the company’s Annual Report on Form 10K for more
details on the beneficial owners’ right to acquire additional shares of
common stock.
|
(3)
|
Based
on 6,403,679 shares of common stock of the company outstanding as of
the record date of June 5, 2009, less 106,981 shares held in treasury by
the company, plus the number of shares which the named person exercising
all options or warrants has the right to acquire within 60 days, but that
no other persons exercise any options or
warrants.
|
(4)
|
Includes
84 shares in trust each for Carey Adams and Abby Adams, in which he acts
as custodian. Includes 55,834 shares pledged as collateral for
loans.
|
(5)
|
Includes
254 shares owned by his son Jerry Calvert, Jr., 254 shares owned by his
son Timothy R. Calvert and 254 shares owned by his daughter Casey M.
Calvert, all in a trust in which he acts as trustee. Includes 15,056
shares pledged as collateral for
loans.
|
(6)
|
Includes
2,971 shares in trust each for Whitley Stevens Floyd and Frances Hunter
Floyd, in which he acts as
custodian.
|
(7
)
|
Includes
107,182 shares held in the name of The Hines Family Ltd Partnership, of
which Mr. Hines is the sole voting
member.
|
(8
)
|
Includes
12,759 shares pledged as collateral for
loans.
|
(9
)
|
Includes
680 shares in trust for William Desvallees and 680 shares for Lucie
Desvallees for which he acts as
custodian.
|
(10
)
|
Includes
1,095 shares in trust for William Reid Wildman for which he acts as
custodian.
|
(1
1
)
|
Includes 63,799 shares
held in the name of
the Coleman Young Family Limited Partnership, of which Mr. Young is the
sole owner and voting
member.
|
(12
)
|
On
January 30, 2009, Mr. Whaley notified First National of his resignation as
Executive Vice President, effective January 30, 2009.
|
(13)
|
Shares
are held in the name of the Martha C. Chapman Revocable Trust, of which
Ms. Chapman acts as trustee.
|
Corporate
Governance
We
periodically review our corporate governance policies and procedures which are
designed to establish high standards of ethical conduct and provide that we
report results with accuracy and transparency and maintain full compliance with
the laws, rules and regulations that govern our operations. As part
of this periodic review, the board of directors reviews and adopts best
corporate governance policies and practices for us.
Code
of Ethics
We have
adopted a Code of Ethics that is designed to ensure that our directors,
executive officers and employees meet the highest standards of ethical
conduct. The Code of Ethics requires that our directors, executive
officers and employees avoid conflicts of interest, comply with all laws and
other legal requirements, conduct business in an honest and ethical manner and
otherwise act with integrity and in our best interest. Under the
terms of the Code of Ethics, directors, executive officers and employees are
required to report any conduct that they believe in good faith to be an actual
or apparent violation of the Code of Ethics.
As a
mechanism to encourage compliance with the Code of Ethics, we have adopted a
policy regarding our method of receiving, retaining and treating complaints
received regarding accounting, internal accounting controls or auditing
matters. This policy ensures that employees may submit concerns in
good faith regarding questionable accounting or auditing matters in a
confidential and anonymous manner without fear of dismissal or retaliation of
any kind. A copy of the Code of Ethics can be found in the investor
relations section of our website,
www.fnbwecandothat.com.
Meetings
and Committees of the Board of Directors
Our board
of directors has appointed a number of committees, including an audit committee,
compensation committee, and a nominating committee. During the year
ended December 31, 2008, our board and our bank’s board of directors held
fourteen meetings. The board of directors has determined, based on
recommendation from the audit committee, that each of our directors is
independent, as contemplated in the listing standards of the NASDAQ Global
Market, except our CEO due to his service as our employee and Donald B. Wildman
due to his role in the management of related party entities. In
addition, effective March 23, 2009, Joel A. Smith, III entered into an agreement
with the company to undertake executive management consulting responsibilities
as requested by our board of directors. While Mr. Smith serves in
this capacity, he cannot be considered independent. All of our
directors and the directors of the bank attended at least 75% of the aggregate
of such board and committee meetings. We note that the following directors began
their service on our board and its various committees, as discussed below, in
February of 2008, following our acquisition of Carolina National On January 31,
2008: I.S. Leevy Johnson, Joel A. Smith, III, William H. Stern and
Robert E. Staton, Sr. Our board has adopted an attendance policy
which requires our directors to attend the annual meeting unless the absence is
excused in advance by our board chairman. All of our directors attended our 2008
annual meeting. We have established a process for our shareholders to send
communications to our directors. Each of our directors may receive
mail at the location of our principal executive offices at 215 North Pine
Street, Spartanburg, South Carolina 29302.
Audit
Committee
The audit
committee is composed of Coleman L. Young, Jr. (Chairman), Mellnee G.
Buchheit, Dr. C. Tyrone Gilmore, Sr., Benjamin R. Hines, I. S.
Leevy Johnson, and W. Russel Floyd, Jr. Joel A. Smith, III
served as a member of the audit committee until his resignation from the
committee on March 23, 2009 to serve the bank in a consulting role, as described
above. The audit committee met four times in 2008. Each
member is considered independent as contemplated in the listing standards of the
NASDAQ Global Market.
The
functions of the audit committee are set forth in its charter, which is included
as Appendix A to this proxy statement. The initial charter was
adopted in March 2000 and was most recently ratified by the audit
committee in March 2009 with no amendments. The audit committee
has the responsibility of reviewing our financial statements, evaluating
internal accounting controls, reviewing reports of regulatory authorities, and
determining that all audits and examinations required by law are
performed. The audit committee is responsible for overseeing the
entire audit function and appraising the effectiveness of internal and external
audit efforts. The audit committee reports its findings to the board
of directors.
Compensation
Committee
The
compensation committee is composed of Mellnee G. Buchheit, Martha C.
Chapman, Norman F. Pulliam, C. Dan Adams, Robert E. Staton, Sr. (Chairman),
William H. Stern, and Coleman L. Young, Jr. The
compensation committee met four times in 2008. Each member is
considered independent as contemplated in the listing standards of the NASDAQ
Global Market. The compensation committee does not operate under a
formal charter.
The primary objectives of the compensation committee with respect
to the compensation of the company’s named executive officers are to attract,
motivate and retain talented and dedicated executives and to foster a team
orientation toward the achievement of company-wide business objectives which are
designed to enhance shareholder value. The company compensates its named
executive officers primarily through a combination of base salary and annual
bonus and secondarily through equity compensation and perquisites. Due to the
company’s reduced profitability for 2008, an annual bonus was not awarded to the
named executive officers in 2009. The compensation committee has
established certain general elements as part of its compensation philosophy to
achieve these goals with respect to the named executive officers as follows:
providing competitive base salaries and annual bonus targets, which are designed
to reward achievement of company financial performance objectives as well as
individual managerial effectiveness and offering equity incentives for the named
executive officers. As a result, the compensation package of the named executive
officers is designed to proportionately reward higher performance.
In
arriving at the overall compensation package structure for the named executive
officers, the compensation committee routinely utilizes third party information,
including compensation data obtained from surveys of compensation practices for
a cross-section of the banking industry, considering diverse performance,
capital structure and competitive challenges.
The base
salary of the named executive officers of the company is intended to provide a
competitive base level of pay for the services they provide. The base
salaries for our named executive officers are established after
reviewing each officer’s individual performance, as well as compensation data
including base salary information for a group of comparable high-performing peer
banks selected using factors such as financial performance, market presence and
plans for growth. The company believes that the fixed base annual salary levels
of the named executive officers helps the company to retain qualified executives
and provides a level of income stability for the named executive officers that
may lessen potential pressures to take excessive risks to achieve performance
measures under incentive compensation arrangements. The company has
historically increased the base salaries of its current named executive
officers annually since the bank’s opening.
The
minimum base salaries of the named executive officers are specified in the
employment agreements executed by each of the named executive officers, are
subject to review annually by the compensation committee and are ratified by the
company’s board of directors. The current base salary of each of the named
executive officers, which is set forth in the Summary Compensation Table, has
not increased subsequent to the execution of the executives’ employment
agreements due to the reduced profitability of the company in 2008. The amount
of any future increase in each named executive officers’ salary would
be determined after consideration of the third party information described
above and after evaluation of the individual executive’s performance, and the
future performance of the company.
Nominating
Committee
The
nominating committee is composed of C. Dan Adams (Chairman), W. Russel
Floyd, Jr., Coleman L. Young, Jr., and Robert E. Staton,
Sr. Each member is considered independent as contemplated in the
listing standards of the NASDAQ Global Market. The nominating
committee acts under a written charter adopted by the board of
directors. A copy of the charter is available in the investor
relations section of our website at www.fnbwecandothat.com. The nominating
committee met one time in 2008.
Our
nominating committee will consider director candidates recommended by
shareholders who submit nominations in accordance with our bylaws. In
evaluating such recommendations, the committee uses a variety of criteria to
evaluate the qualifications and skills necessary for members of our
boards. While no single qualification is determinative, the
nominating committee shall consider the skills and background needed by the
company and possessed by the person, diversity of the board, actual or potential
conflicts of interest, and the willingness and ability to devote time and energy
to the duties of a director. The nominating committee uses these
criteria in evaluating the qualifications of director candidates in addition to
any other factor relevant to a person’s potential service on the board of
directors. At least annually, the nominating committee reviews and
reassesses director fees and qualifications and recommends any proposed changes
to the board of directors.
Shareholders
must deliver nominations in writing either by personal delivery or by United
States mail, postage prepaid, return receipt requested, to the Secretary of the
company no later than (i) with respect to an election to be held at an
annual meeting of shareholders, ninety days in advance of such meeting; and
(ii) with respect to an election to be held at a special meeting of
shareholders for the election of directors, following the close of business on
the seventh day after notice of the date on which notice of such special meeting
is given to the shareholder. Each notice shall set forth:
(i) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a
representation that the shareholder is a holder of record of stock of the
company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(iii) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder; (iv) such other information regarding each nominee
proposed by such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
board of directors; and (v) the consent of each nominee to serve as a
director of the company if so elected. The chairman of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure.
Our
nominating committee uses a variety of methods for identifying and evaluating
nominees for director. The nominating committee regularly assesses
the appropriate size of the board of directors, and whether any vacancies are
expected due to retirement or otherwise. If vacancies are
anticipated, or otherwise arise, the nominating committee considers various
potential candidates for director. Candidates may come to their
attention through current members of the Board, shareholders, or other
persons. These candidates are evaluated at regular or special
meetings of the Board, and may be considered at any point during the
year. The nominating committee considers all properly submitted
shareholder recommendations for candidates. In evaluating such
recommendations, the nominating committee uses the qualifications and standards
discussed above and seeks to achieve a balance of knowledge, experience and
capability on the board of directors.
Report
of the Audit Committee of the Board
The
report of the audit committee shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that we specifically incorporate the information contained
in the report by reference, and shall not be deemed filed under such
acts.
The
report of the audit committee is included herein at the direction of its members
Coleman L. Young, Jr., Chairman, Mellnee G. Buchheit, W. Russel
Floyd, Jr., Dr. C. Tyrone Gilmore, Sr., Benjamin R. Hines,
I. S. Leevy Johnson and Joel A. Smith, III, who served as a member of the audit
committee until his resignation from the committee on March 23, 2009. Effective
March 23, 2009, Joel A. Smith, III entered into an agreement with the bank to
undertake executive management consulting responsibilities as requested by the
board of directors. While Mr. Smith serves in this capacity, he
cannot be considered independent. Each of these members is considered
independent as contemplated in the listing standards of the NASDAQ Global Market
and in applicable SEC rules.
The audit
committee has reviewed and discussed with management the audited consolidated
financial statements for the year ended December 31, 2008. Management
has the primary responsibility for our financial statements and the financial
reporting process, including the system of internal controls over financial
reporting. Management has represented to the audit committee that the
financial statements were prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). The
audit committee has discussed with the independent registered public accounting
firm the matters required to be discussed by the Statement on Auditing Standards
(“SAS”) No. 61 “Communication with Audit Committees”, as amended by SAS No.
90 “Audit Committee Communications”. The audit committee also has
received from the independent registered public accounting firm the written
disclosures and the letter required by Independence Standards Board Standard
No. 1 (“Independence Discussions with Audit Committees”) and has discussed
with our independent auditors the independent registered public accounting
firm’s independence from us and our management. In reliance on the
reviews and discussions referred to above, the audit committee recommended to
our board of directors that the audited consolidated financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2008, for filing with the SEC.
In
addition to its responsibilities described above with regard to communications
with management and the independent registered public accounting firm, the audit
committee’s responsibilities also include reviewing the company’s annual and
quarterly financial statements prior to filing or distribution, discussing the
results of the annual audit and reviewing the quarterly Chief Executive Officer
and Chief Financial Officer certifications. The Audit Committee
Charter includes a comprehensive Scope of Responsibilities detailing the
committee’s responsibilities and is included as Appendix A to this proxy
statement.
The board
of directors believes that each current member of our audit committee is
financially literate and fully qualified to monitor the performance of
management, our public disclosures of our financial condition and performance,
our internal accounting operations, and our independent registered public
accounting firm. The audit committee does not include an “audit
committee financial expert” as defined by the rules of the Securities and
Exchange Commission as no individual committee member meets the five attributes
and qualifies as an “audit committee financial expert”. However, we
believe that our committee members collectively are capable of (i)
an understanding of GAAP and financial statements, (ii) the ability to
assess the general application of GAAP in connection with the accounting for
estimates, accruals and reserves, (iii) experience preparing, auditing,
analyzing, or evaluating financial statements that present a breadth and
complexity of issues that are generally comparable to the breadth and complexity
of issues that can reasonably be expected to be inherent in our financial
statements, (iv) understanding internal controls and procedures for
financial reporting, and (v) understanding audit committee functions, all
of which are attributes of an “audit committee financial expert” under the
current rules adopted by the SEC.
Oversight
of Accountants; Approval of Accounting Fees
Under the
provisions of its charter, the audit committee recommends to the board of
directors the appointment of the independent registered public accounting firm
for the next year, reviews and approves the independent registered public
accounting firm’s audit plans, and reviews with the independent registered
public accounting firm the results of the audit and management’s
responses. The audit committee has adopted pre-approval policies and
procedures for audit and non-audit services. The pre-approval process
requires all services to be performed by our independent registered public
accounting firm to be approved in advance by the audit committee, regardless of
amount. These services may include audit services, audit-related
services, tax services and other services. As part of the
pre-approval process, our audit committee considers the nature of the services
to be provided and evaluates the likelihood that the approval of these services
will impair the independence of the independent registered public accounting
firm in determining whether to approve the services to be performed by the
independent registered public accounting firm. The audit committee
pre-approved the audit engagement, all audit-related engagements and all tax
engagements for the services of Elliott Davis, LLC, our independent registered
public accounting firm, paid during 2008 and 2007.
Consolidated
Audit Fees
The
aggregate fees billed for professional services rendered by Elliott Davis, LLC
during the years ended 2008 and 2007 for the audit of our annual financial
statements and reviews of those financial statements included in our quarterly
reports filed on SEC Form 10-Q, as well as Form 10-K, respectively,
totaled $105,000 and $60,000, respectively. For the year ended
December 31, 2008, these services included $10,000 in fees for the audit of the
consolidated financial statements of Carolina National and its wholly-owned
subsidiary, Carolina National Bank and Trust, as of and for the year ended
December 31, 2007, prior to its merger with and into First National, effective
January 31, 2008.
Audit
— Related Fees
The
aggregate fees billed for non-audit services, exclusive of the fees disclosed
relating to audit fees, rendered by Elliott Davis, LLC during the years ended
December 31, 2008 and 2007, were $25,500 and $116,100,
respectively. For the year ended December 31, 2008, these fees
included $12,700 for services related to First National’s acquisition of
Carolina National. For the year ended December 31, 2007, these
services include the assistance related to reviewing and analyzing the tax and
accounting treatment of the sale/leaseback transactions completed in February
and October 2007. For the year ended December 31, 2007, these
services also included the assistance related to providing comfort related to
the offering of our noncumulative perpetual preferred stock completed in July
2007 and the review of the prospectus/joint proxy statement filed in November
2007 for our acquisition of Carolina National.
Tax
Fees
We did
not engage Elliott Davis, LLC to provide, and the independent registered public
accounting firm did not bill for, any tax services for First National during the
year ended December 31, 2008 or 2007. The aggregate fees billed
for professional services rendered by Elliott Davis, LLC during the year ended
2008 for tax services for Carolina National during the years ended
December 31, 2008 and 2007, totaled $800 and $4,300,
respectively.
All
Other Fees
We did
not engage the independent registered public accounting firm to provide, and the
independent registered public accounting firm did not bill for, any other
services during the years ended December 31, 2008 or 2007.
Certain
Relationships and Related Transactions
Interests
of Management and Others in Certain Transactions
We enter
into banking and other transactions in the ordinary course of business with our
directors and officers and their affiliates.
It is our
policy that these related party transactions be on substantially the same terms
(including price, or interest rates and collateral) as those prevailing at the
time for comparable transactions with unrelated parties. We do not
expect these transactions to involve more than the normal risk of collectability
nor present other unfavorable features to us or the bank. Loans to
individual directors and officers must also comply with our bank subsidiary
lending policies and statutory lending limits, and directors with a personal
interest in any loan application are excluded from the consideration of the loan
application. We intend for all of our transactions with our
affiliates to be on terms no less favorable to us than could be obtained from an
unaffiliated third party and to be approved by a majority of disinterested
directors. Director independence is reviewed on an annual basis by
the audit committee.
In
February 2007, we entered into a transaction with a related party entity to sell
and subsequently lease back from the entity certain real properties previously
owned by our bank subsidiary for a price of $5.45 million. The
related party entity is a limited liability company owned by a group of eight
investors who serve as non-management directors of the company and our bank
subsidiary as follows: Benjamin R. Hines, C. Dan Adams, Norman F. Pulliam,
Mellnee Buchheit, the Coleman Young Family Limited Partnership, a limited
partnership of which Coleman L. Young, Jr. is the sole owner and voting member,
Weisman Associates Limited Partnership, a limited partnership of which Peter E.
Weisman is the sole owner and voting member, Donald B. Wildman (as managing
member) and W. Russel Floyd, Jr. The transaction was
approved by the board of directors of our bank subsidiary.
In
October 2007, we entered into a transaction with a related party entity to sell
and subsequently lease back from the entity certain real properties previously
owned by our bank subsidiary for a price of $3.6 million. The related
party entity is a limited liability company owned by a group of nine investors,
eight of which serve as non-management directors of the company and our bank
subsidiary as follows: C. Dan Adams, Norman F. Pulliam, Donald B.
Wildman (as managing member), Mellnee Buchheit, the Coleman Young Family Limited
Partnership, Peter E. Weisman and Benjamin R. Hines. Each investor
has a one-ninth interest in the limited liability corporation. The
transaction was approved by the board of directors of our bank
subsidiary.
Effective
March 23, 2009, Joel A. Smith, III entered into an agreement with the company to
undertake executive management consulting responsibilities in addition to
his service as a member of the board of directors as
requested by our board of directors. The term of the consulting
agreement is open-ended, with either party having the right to terminate the
agreement with ten days’ written notice to the other party. As a
consultant, Mr. Smith reports to the chairman of the board of
directors. Mr. Smith will receive compensation for these services
based on a daily rate set forth in the agreement. In his consulting role, Mr.
Smith does not have the authority to act for or on behalf of the company or to
bind the company to any contract except as granted by the express written
consent of the board of directors. While Mr. Smith serves in this
capacity, he cannot be considered an independent member of the board of
directors.
The
company has a written policy contained in its Code of Ethics which describes the
procedures for reviewing transactions between the company and its directors and
executive officers, their immediate family members and entities with which they
have a position or relationship. These procedures are intended to
determine whether any such related party transaction impairs the independence of
a director or presents a conflict of interest on the part of a director or
executive officer.
The
company annually requires each of its directors and executive officers to
complete a directors’ and officers’ questionnaire that elicits information about
related party transactions. The company’s management annually reviews
all transactions and relationships disclosed in the director and officer
questionnaires, and the board of directors makes a formal determination
regarding each director’s independence under NASDAQ Global Market listing
standards and applicable SEC rules.
In
addition, the company’s bank subsidiary is subject to the provisions of Section
23A of the Federal Reserve Act, which places limits on the amount of loans or
extensions of credit to, or investments in, or certain other transactions with,
affiliates and on the amount of advances to third parties collateralized by the
securities or obligations of affiliates. The bank is also subject to
the provisions of Section 23B of the Federal Reserve Act which, among other
things, prohibits an institution from engaging in certain transactions with
certain affiliates unless the transactions are on terms substantially the same,
or at least as favorable to such institution or its subsidiaries, as those
prevailing at the time for comparable transactions with nonaffiliated
companies. Under Regulation O, the bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal shareholders, and their related interests. Such extensions
of credit (i) must be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with third parties and (ii) must not involve more than the normal
risk of repayment or present other unfavorable features.
In
addition to the annual review, the company’s Code of Ethics requires that the
company’s CEO be notified of any proposed transaction involving a director or
executive officer that may present an actual or potential conflict of interest,
and that such transaction be presented to and approved by the audit
committee. Upon receiving any notice of a related party transaction
involving a director or executive officer, the CEO will discuss the transaction
with the Chair of the company’s audit committee. If the likelihood
exists that the transaction would present a conflict of interest or, in the case
of a director, impair the director’s independence, the audit committee will
review the transaction and its ramifications. If, in the case of a
director, the audit committee determines that the transaction presents a
conflict of interest or impairs the director’s independence, the board of
directors will determine the appropriate response. If, in the case of
an executive officer, the audit committee determines that the transaction
presents a conflict of interest, the audit committee will determine the
appropriate response.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
As
required by Section 16(a) of the Securities Exchange Act of 1934, our
directors and executive officers and certain other individuals are required to
report periodically their ownership of our common and preferred stock and any
changes in ownership to the SEC. Based on a review of Forms 3,
4, and 5 and any written representations made to us, it appears that these forms
were filed in a timely fashion during 2008.
Independent
Registered Public Accounting Firm
We have
selected Elliott Davis, LLC to serve as our independent registered public
accounting firm for the year ending December 31, 2009. We expect
that a representative from this firm will be present and available to answer
appropriate questions at the annual meeting and will have the opportunity to
make a statement if he or she desires to do so.
Shareholder
Proposals for the 2010 Annual Meeting of Shareholders
We
currently intend to hold our 2010 annual meeting in 2010. If shareholders wish
to include a proposal in our proxy statement relating to the 2010 annual
meeting, they must deliver a written copy of their proposal to our principal
executive offices no later than November 26, 2009. To ensure we
have prompt receipt, the proposal should be sent certified mail, return receipt
requested. Proposals must comply with our bylaws relating to
shareholder proposals in order to be included in our proxy
materials.
Any
shareholder proposal to be made at our annual meeting, but which is not
requested to be included in our proxy materials, must comply with our
bylaws. Proposals must be delivered to our principal executive
offices not less than 30 nor more than 60 days before the annual meeting
provided, however, that if less than 31 days’ notice of the meeting is given to
shareholders, such written notice must be delivered no later than 10 days after
notice of the annual meeting is mailed to shareholders.
June 5,
2009
Appendix
A
First
National Bancshares, Inc.
Charter
of the Audit Committee of the Board of Directors
Audit
Committee Charter
The board
of directors of the company has delegated to the Audit Committee the Board’s
responsibility for monitoring the audit function of the company, which includes
the selection of independent auditors, determination of the independence of the
independent auditors, and internal auditing and internal accounting
controls.
Members
of the Audit Committee shall discharge their committee duties using their
business judgment in accordance with standards prescribed for directors by
applicable state corporate law and rules adopted from time to time by the
Securities and Exchange Commission.
Membership
of the Audit Committee
The Audit
Committee is made up of three or more members of the board of
directors who meet applicable independence standards and have the
ability to read and understand basic financial statements.
Members
of the Audit Committee are encouraged to make use of training opportunities and
consultants to enhance their ability to perform their committee
responsibilities.
Scope of
Responsibilities
|
1.
|
Recommend
to the board of directors the selection of the company’s independent
accountants, who shall be accountable to the board of directors and the
Audit Committee, and, when appropriate, their
dismissal.
|
|
2.
|
Review
with the independent accountants their independence under applicable
standards of independence and report the results of the review to the
board of directors.
|
|
3.
|
On
an annual basis, in conjunction with commencement of the annual audit,
review the independent auditors’ audit plan and consider its scope,
staffing, reliance upon management and internal audit functions, general
audit approach, and the methods, practices, and policies governing the
audit work.
|
|
4.
|
Review
the budget, audit plans, changes in audit plans, activities,
organizational structure, and qualifications of the internal audit
department, as needed.
|
|
5.
|
Approve
all fees and other compensation (subject to de minimis exceptions as
defined by law for non-audit services) to be paid to the independent
auditors.
|
|
6.
|
Pre-approve
all audit and non-audit services (subject to de minimis exceptions as
defined by law for non-audit services) provided by the independent
auditors in accordance with applicable regulations. The Audit
Committee may delegate its authority to pre-approve nonaudit services to
one or more designated Audit Committee members. The decisions
of the designated member(s) shall be presented to, and ratified by, the
full Audit Committee at the next subsequent
meeting.
|
|
7.
|
In
consultation with management, the independent auditors, and the internal
auditors, review management’s periodic evaluations of the company’s
financial reporting processes and controls, including disclosure controls
and procedures and internal controls, and all reports or attestations of
the independent auditors on the company’s internal
controls. Review significant financial risk exposures
identified in such reports and the steps management has taken to monitor,
control, and report such exposures. Review significant findings
prepared by the independent auditors and the internal audit department
together with management’s
responses.
|
|
8.
|
Meet
with the independent accountants to review: (a) any
problems encountered in the audit including any restrictions imposed by
management; and (b) the adequacy and effectiveness of administrative,
operating and accounting policies of the company. Establish a
communications channel for the independent accountants to be able to
contact the Audit Committee directly without going through
management.
|
|
9.
|
Meet
with the internal auditors to review: (a) any problems
encountered in internal audits including any restrictions imposed by
management; and (b) the adequacy and effectiveness of administrative,
operating, and accounting policies of the company. Establish a
communications channel for the internal auditors to be able to contact the
Audit Committee directly without going through
management.
|
|
10.
|
Review
and approve all significant proposed accounting
changes.
|
|
11.
|
Review
and discuss with management and the independent auditors the company’s
annual audited financial statements prior to the filing of its Annual
Report on Form 10-K, including disclosures made in the “Management’s
Discussion and Analysis or Plan of Operation.” Report to the
board of directors the Audit Committee’s recommendation of whether to
include the audited financial statements in the company’s Annual Report on
Form 10-K.
|
|
12.
|
Review
and discuss with management and the independent auditor the company’s
quarterly financial statements prior to the filing of its Annual Report on
Form 10-Q, including disclosures made in the “Management’s Discussion
and Analysis or Plan of Operation.”
|
|
13.
|
Investigate
any matter which the Audit Committee deems to be in the interest of the
company and report its findings to the board of
directors.
|
|
14.
|
Review
and approve any Audit Committee report to be included in the company’s
proxy statement.
|
|
15.
|
Discuss
with management the company’s earnings press releases, including the use
of “pro forma” or “adjusted” non-GAAP information, as well as financial
information and earnings guidance, if any, provided to analysts and rating
agencies. Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types of
presentations to be made).
|
|
16.
|
Discuss
with management and the independent auditor the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures, on the
company’s financial statements.
|
|
17.
|
Prior
to releasing the annual audit report, discuss with the independent auditor
the matters required to be discussed by Statement and Auditing Standards
No. 61 relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work, any restrictions
on the scope of activities or access to requested information, and any
significant disagreements with
management.
|
|
18.
|
Review
with the Chief Executive Officer, President, Chief Financial Officer,
financial and other relevant management, and the independent auditors the
company’s annual and quarterly certifications as required by applicable
regulations. Discuss (1) any significant deficiencies
identified to the Audit Committee in the design or operation of financial
accounting, reporting, disclosure controls and procedures, and internal
controls, (2) the process used by the officers to certify the annual
and quarterly reports, (3) any material issues or risk exposures
identified during the certification process, and (4) the steps
management has taken to monitor, control, and report such exposures and
control deficiencies.
|
|
19.
|
Receive
and review with the independent auditors quarterly reports, and other
reports if requested by the Audit Committee from time to time, prepared by
the independent auditors concerning (i) the critical accounting
policies and practices of the company and (ii) all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management and the ramifications
and preferred treatment of such information. Direct the
independent auditors to provide to the Audit Committee, at the time they
are sent to management, all material written communications between the
independent auditors and
management.
|
|
20.
|
At
least annually, obtain and review a report by the independent auditors
describing (1) the independent auditors’ internal quality-control
procedures, (2) any material issues raised by the most recent
internal quality-control review or peer review of the independent auditors
or by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or more
independent audits carried out by the independent auditors, and any steps
taken to deal with any such issues, and (3) all relationships between
the independent auditors and the company, so that the Audit Committee can
assess the auditors’
independence.
|
|
21.
|
Ensure
the rotation of the audit partners as required by law. At least annually,
review and discuss with the independent auditors all relationships they
have with the company, including the provision of non-audit services, and
the necessity for rotation of independent auditor
personnel.
|
|
22.
|
Establish
procedures for the receipt, retention, and treatment of complaints
received by the company regarding accounting, internal accounting
controls, or auditing matters. Establish procedures for the
confidential, anonymous submission by employees of the company of concerns
regarding questionable accounting or auditing
matters.
|
|
23.
|
Establish
policies concerning the employment of employees and former employees of
the independent auditors, including policies addressing legal
requirements.
|
|
24.
|
Review
related party transactions on a quarterly basis and approve only those
which do not create or intensify existing
conflicts.
|
Audit
Committee Activities
|
1.
|
The
Audit Committee shall meet upon the call of its chairman and at such other
times as it shall determine.
|
|
2.
|
Meetings
of the Audit Committee shall be open only to members of the Audit
Committee and those invited to be present by the Audit
Committee.
|
|
3.
|
The
Audit Committee is authorized to employ and consult with accountants,
attorneys, and other professionals to assist
it.
|
|
4.
|
The
Audit Committee may meet together with the audit committees of the
company’s subsidiaries but no person who is not a member of the company’s
audit committee shall be entitled to vote on any matter considered by the
Audit Committee.
|
|
5.
|
The
Audit Committee shall have unlimited access to all employees, books, and
records of the company.
|
|
6.
|
The
Audit Committee shall report its activities and recommendations to the
board of directors at any regular or special meeting of the board of
directors.
|
|
7.
|
The
Audit Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for
approval. The Audit Committee shall annually review the Audit
Committee’s own performance.
|
|
8.
|
Discuss
with the company’s general counsel legal matters that may have a material
impact on the financial statements or the company’s compliance
policies.
|
Amendment
or Repeal of Charter
The board
of directors may amend or repeal this Charter and the duties of the Audit
Committee at any time.
Limitation
of the Audit Committee’s Role
While the
Audit Committee has the responsibilities and powers set forth in this Charter,
it is not the duty of the Audit Committee to plan or conduct audits or to
determine that the company’s financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.
Ratified
March 2009
First National Bancshares (SC) (MM) (NASDAQ:FNSC)
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