FIRST FARMERS AND MERCHANTS CORPORATION
COLUMBIA, TENNESSEE
March 23, 2012
Dear Shareholder:
The 2011 annual
report to shareholders for First Farmers and Merchants Corporation and its bank
subsidiary, First Farmers and Merchants Bank, is enclosed. Because this
information will be discussed during the business session of our annual
meeting, we encourage you to bring the annual report with you.
The official notice
of the meeting of shareholders, proxy and proxy statement are enclosed. PLEASE
COMPLETE AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE. If you attend
the meeting, you will have the opportunity to withdraw your proxy and vote in
person.
Please note that
the annual meeting will be held on the
2nd
Floor, in the First Farmers and Merchants Bank Northside Office, 901 Nashville
Highway, Columbia, Tennessee, on April 17, 2012 at 11:30 a.m. Central Time.
Please indicate on your proxy if you will be attending the meeting.
Sincerely yours,
T. Randy Stevens
Chairman of the Board and
Chief Executive Officer
FIRST FARMERS
AND MERCHANTS CORPORATION
816 South Garden
Street, P.O. Box 1148, Columbia, Tennessee 38402-1148
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
To Be Held on the 17th day of April, 2012
To
the Shareholders of First Farmers and Merchants Corporation:
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Shareholders of First Farmers and
Merchants Corporation (the Corporation) will be held on
the 2
nd
Floor, in the First Farmers and
Merchants Bank Northside Office, 901 Nashville Highway, Columbia, Tennessee,
38401 on April 17, 2012 at 11:30 a.m., Central Time,
for the following purposes:
1. Election of Directors:
Election of the following 15 nominees as directors of the Corporation:
Kenneth
A. Abercrombie
|
Thomas
Napier Gordon
|
Patrick
J. Riley
|
Kimberly
D. Vella
|
James L. Bailey, Jr.
|
Dalton M. Mounger
|
Matthew M. Scoggins, Jr.
|
Dan C. Wheeler
|
M. Darlene Baxter
|
Timothy E. Pettus
|
T. Randy Stevens
|
Dr. David S. Williams
|
Jonathan M. Edwards
|
Dr. Joseph W. Remke, III
|
W. Lacy Upchurch
|
|
2. To transact such other business
as may properly be brought before the annual meeting or any adjournment
thereof.
Shareholders
of record at the close of business on March 1,
2012 are entitled to
notice of and to vote at the meeting.
To
assure that your shares are represented at the meeting, please mark, date, sign
and promptly return the enclosed proxy card. The proxy is revocable and will
not affect your right to vote in person in the event you are able to attend the
meeting.
By order of the Board of Directors,
|
|
|
|
Martha M. McKennon
|
Secretary
|
March 23, 2012
2
FIRST FARMERS
AND MERCHANTS CORPORATION
816 South Garden
Street, P. O. Box 1148
Columbia,
Tennessee 38402-1148
PROXY STATEMENT
ANNUAL MEETING
OF SHAREHOLDERS
To Be Held on the 17th day of April, 2012
The
accompanying proxy is solicited by and on behalf of the Board of Directors of
First Farmers and Merchants Corporation (the Corporation) for use at the
Thirtieth Annual Meeting of Shareholders to be held on April 17, 2012 and any
adjournment thereof (the Annual Meeting). The time and place of the Annual
Meeting are set forth in the accompanying Notice of Annual Meeting of
Shareholders. All expenses of preparing, printing and mailing the proxy and
all materials used in the solicitation thereof will be borne by the
Corporation. In addition to the use of the mail, proxies may be solicited in
person or by telephone by directors, officers and other personnel of the
Corporation or its subsidiary, First Farmers and Merchants Bank (the Bank),
none of whom will receive additional compensation for such services. The
Corporation will also request custodians and nominees to forward soliciting
materials to the beneficial owners of common stock of the Corporation, $10.00
par value per share (Common Stock), held of record by them and will pay
reasonable expenses of such persons for forwarding such material. The date on
which this Proxy Statement and the accompanying proxy card are first being
mailed to shareholders of the Corporation is March 25, 2012.
PURPOSES OF THE MEETING
The
Annual Meeting will be held for the purposes of (i) electing directors, and (ii)
transacting whatever other business may properly be brought before the meeting
or any adjournment thereof.
QUORUM AND VOTING
At the close of business on March 1,
2012, the Corporation had 5,330,000 shares of Common Stock issued and
outstanding. Only holders of record of Common Stock at the close of business
on March 1, 2012 are entitled to notice of and to vote on matters that properly
come before the Annual Meeting or any adjournment thereof. A shareholder is
entitled to one vote in person or by proxy at the Annual Meeting for each share
of Common Stock held of record in his or her name.
The presence in person or by proxy
of the holders of a majority of the outstanding shares of Common Stock entitled
to vote at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting or any adjournment thereof. Abstentions and broker non-votes are
included for purposes of determining if a quorum exists. Abstentions will not
constitute a vote for or against any of the matters presented for
shareholder approval at the annual meeting and will be disregarded in the
calculation of a plurality or of votes cast for each of the matters
presented. Broker non-votes occur when a broker or nominee returns a proxy but
does not have discretionary authority to vote on a particular proposal because
the proposal does not concern a routine matter and the broker has not received
voting instructions from the beneficial holder. For purposes of determining the
outcome of any matter as to which a broker or nominee has physically indicated
on the proxy that it does not have discretionary authority to vote, those
shares will be treated as not entitled to vote with respect to that matter.
If a quorum is not present at the
time of the Annual Meeting, the Chairman of the meeting or a majority of shares
entitled to vote, represented in person or by proxy, have the power to adjourn
the Annual Meeting until a quorum shall be present or represented by proxy.
3
If the enclosed proxy is properly
executed, returned and not revoked, it will be voted in accordance with the
instructions, if any, given by the shareholder. Unless shares are held by a
broker, if a proxy is executed and returned but no specification is made, the proxy
will be voted
FOR
the election of all nominees as directors of the
Corporation. If any other business is properly presented at the meeting, the
proxy holders will vote your proxy in accordance with their discretion.
Any shareholder has the power to revoke
his or her proxy at any time, prior to the vote being taken at the Annual
Meeting, by written notice or subsequently dated proxy received by the
Corporation, or by revocation by the shareholder in person at the Annual
Meeting or any adjournment thereof. If you wish to attend the Annual Meeting
and need directions to the First Farmers and Merchants Northside Branch,
Columbia, Tennessee, please contact Martha McKennon, Secretary of the Corporation,
at (931) 388-3145.
4
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has nominated
the 15 individuals below for election as directors to serve until the annual
meeting of shareholders in 2013 or until their successors are qualified and
elected. Article III, Section 2 of the Corporations Amended and Restated
By-laws (the Bylaws) provide that there shall be no fewer than five
directors. The Board of Directors believes it is in the best interest of the
Corporation that there be 15 directors of the Corporation at this time.
Proxies cannot be voted for a greater number of persons than the nominees
named.
Directors are elected by a plurality
of the votes cast by the shares of Common Stock entitled to vote at the Annual
Meeting, if a quorum is present. Neither abstentions nor broker non-votes will
have the effect of voting for or in opposition to a director. The
Corporations charter does not provide for cumulative voting and, accordingly,
shareholders do not have cumulative voting rights with respect to the election
of directors. Consequently, each shareholder of record may only cast one vote
per share of Common Stock for each nominee.
Unless a proxy specifies otherwise
or there is a broker non-vote, the persons named in the proxy will vote the
shares covered thereby
FOR
the nominees listed below. Should any
nominee become unavailable for election, shares covered by a proxy will be
voted for a substitute nominee selected by the current Board of Directors.
Fourteen of the 15 nominees are
currently serving as directors and have served as a director since the 2011
annual meeting of shareholders. Directors are chosen based on their business
skills, knowledge, experience, leadership skills and understanding of the
Banks business. William R. Walter, who is presently a member of the Board of
Directors, has reached retirement age and, therefore, will not stand for
re-election.
New Nominee for Election
The Board of Directors has nominated
Kimberly D. Vella to serve on the Board of Directors and she has not previously
served in such capacity. Ms. Vella has consented to be a candidate and to
serve as a director if elected.
Kimberly D. Vella
, age 45, joined Tractor Supply Company in January 1997 as Director,
Human Resources and was promoted to Vice President, Human Resources in May
2001. She was named Senior Vice President, Human Resources in May 2007 and is
a member of the Companys Executive Committee. In her current role, Kim leads
the strategic human resources efforts to attract, develop, engage, reward, and
align talent in support of the companys pursuit of talent generation and
operating success. Prior to joining Tractor Supply Company, Ms. Vella held
various human resources positions in retail, manufacturing and wholesale
industries at Ferguson Enterprises, Genesco and the RTM Restaurant Group.
Ms. Vella holds her Bachelor of Arts degree in Human
Relations from Trevecca University. She previously served as a Board Member of
the YWCA and the United Way of Williamson County and was honored as a recipient
of the 2009 Nashville Business Journal
Women of Influence
. Ms. Vella was nominated to be a member of the
Board of Directors because of her leadership skills and years of experience as
a director of Human Resources.
5
Incumbent Directors Standing
for Re-election
The following information sets forth the
name, age, length of service and a summary of specific experiences,
qualifications, attributes or skills for each of the nominees for re-election
as directors who are incumbent members of the Board of Directors. No director
holds a directorship with any other public company or registered investment
company.
Kenneth A. Abercrombie
, age 69, has been a director of both the Corporation
and the Bank since 1988. Mr. Abercrombie is a licensed funeral director and is
presently associated with his son in a funeral home business. Mr. Abercrombie
served as President and CEO of Loretto Casket Company from 1983 when he
purchased the company until he sold the company in 2001. He continued to serve
as plant manager for Loretto Casket Company until 2005. Mr. Abercrombie is a
member of the Southeastern Law Enforcement Training Seminar Board of Directors,
Tennessee Funeral Directors Association, Alabama Funeral Directors Association
and Friends of Lawrenceburg. He is a past President and Member of the
Tennessee Funeral Supply Sales Association, past member of the Lawrence County
Board of Education and past Chairman, Lawrence County Chamber of Commerce. Mr.
Abercrombie is a native of Lawrence County and a graduate of the University of
North Alabama. Mr. Abercrombie was nominated to be a member of the Board of
Directors because of his business skills and extensive experience as a director
of the Corporation.
James L. Bailey, Jr.
, age 69, has
been a director of the both the Corporation and the Bank since 1982. Mr. Bailey
currently serves as Maury County Mayor. Mr. Bailey owned Bailey Drugs for
several years. Mr. Bailey is a member of the South Central Tennessee
Development District Board of Directors, Deputy Director of the Office of
Emergency Management of Maury County, Maury Alliance Board of Directors and
Maury Alliance Economic Development Committee. He was appointed by the
Governor to the State of Tennessee Collateral Pool. Mr. Bailey has been
designated as a Certified Public Administrator by the University of Tennessee.
He is a graduate of both the Columbia Military Academy and the University of
Tennessee at Memphis College of Pharmacy. Mr. Bailey was nominated to be a
member of the Board of Directors because of his leadership skills as County
Mayor and a business owner and his extensive experience as a director of the
Corporation.
M. Darlene Baxter
, age 65, has been a
director of both the Corporation and the Bank since 2007. Ms. Baxter is a
native of Maury County, Tennessee and a retired Vice President of Maury
Regional Medical Center. She served more than 25 years in the Maury Regional
Health Care system. She was appointed Executive Director of the newly-created
Maury Regional Healthcare Foundation. She was instrumental in Maury Regional
Medical Center being the first employer in the county to provide childcare
services and worked on the development of the hospital into a healthcare
system. She was involved in the operations of the Lewis Ambulatory Care Center,
Wayne Medical Center and Marshall Medical Center. She represented Maury
Regional Medical Center during General Motors transition to Spring Hill, at
which time the hospital developed an agreement to provide on-site healthcare
services to GM employees. Ms. Baxter is a member of the Columbia State Community
College Foundation Board, Kiwanis Club, Martin Methodist College Alumni
Association Board, and Boys and Girls Club of Columbia Board. In 2006, she
served on the Banks Maury County Advisory Board of Directors. Ms. Baxter was
nominated to be a member of the Board of Directors because of her leadership
skills and years of business experience as an executive officer of a regional
hospital.
6
Jonathan
M. Edwards,
age 51, has served as a director of the Corporation and
the Bank since 2010. Mr. Edwards has served as president and chief
executive officer of the Edwards Group of Companies, including Edwards Oil
Company of Lawrenceburg, Inc., Edwards Oil Company, Inc., South Tennessee Oil
Company, Inc., Edwards Land Company L. P. and Edwards Real Estate, LLC since
1988. He is a Tennessee native and holds a bachelors degree from the
University of North Alabama. Mr. Edwards other affiliations include the
following: immediate past president and three-term board member of the
Tennessee Fuel and Convenience Association; Chairman of the Lawrence County
Chamber of Commerce (2006-2007); Columbia State Community College Foundation
Board (2004-2007); First Farmers and Merchants Bank Advisory Board (2002 to
2010); Lawrence County Joint Community Industrial Development Board (1999 to
present); Tennessee State Petroleum Underground Storage Tank Board (1996-2004);
LifePoint Crockett Hospital Board (1999-2004); Texaco Orlando Regional
Wholesale Council (1997-1999); Director of Alabama Oilmens Association/Alabama
Association of Convenience Stores (1996-1999); Bank of America Advisory Board
(1993-2002); and Tennessee Grocers Association Director (1990-1993). Mr.
Edwards was nominated to be a member of the Board of Directors because of his
business management and leadership skills.
Thomas Napier Gordon
, age 60, has
served as a director of both the Corporation and the Bank since 1986. Mr.
Gordon is actively involved in real estate investments. His civic and
community endeavors have included Business and Industry Chairman of the March
of Dimes Annual Drive, Director of Kings Daughters School, and Zion Christian
Academy and deacon at Zion Presbyterian Church. Mr. Gordon received his
Doctorate of Jurisprudence from Vanderbilt University in 1976 and has practiced
law in Columbia, Tennessee since that time. Mr. Gordon was nominated to be a
member of the Board of Directors because of his experience as an attorney and
businessman and his extensive experience as a director of the Corporation.
Dalton M. Mounger,
age 61, has served as a director
of the Corporation and the Bank since 2010. Mr. Mounger is an attorney in
private practice in Columbia, Tennessee and is a certified public accountant.
He holds a bachelors and juris doctor degree from the University of Mississippi.
Mr. Mounger has served on the boards of the Maury Alliance, Maury County YMCA,
Columbia State Community College Foundation Board, Columbia Main Street, Maury
County Public Education Foundation Board, First Farmers and Merchants Bank
Advisory Board, Columbia Central High School Academic Boosters and Kiwanis Club
of Columbia. Mr. Mounger was nominated to be a member of the Board of
Directors because of his legal, accounting, and business management skills.
Timothy E.
Pettus
, age 60, is President and a
director of the Corporation and the Bank. Mr. Pettus has been an officer of
the Bank since July 2002. He served as the Vice Chairman of the Bank from
April 2005 until his appointment as President of the Corporation and the Bank
in January 2007. Mr. Pettus served as Regional President, Southern Region of
the Bank, from July 2002 until becoming Vice Chairman of the Bank. From 1998
until July 2002, he was a senior banking executive with Bank of America in
Lawrence County, Tennessee. He was first elected as a director of the
Corporation and the Bank in January 2008.
Mr. Pettus was
nominated to be a member of the Board of Directors because of his 37 years of
experience in banking and his leadership skills and knowledge from serving as
President of the Bank.
Dr.
Joseph W. Remke, III
, age 61, has served as a director of both the
Corporation and the Bank since 1999. Dr. Remke has been in private optometric
practice since 1976. Dr. Remke is a native of Lawrence County. He
attended Austin Peay State University and received his doctorate in optometry
from Southern College of Optometry. He is past president of the Tennessee
Optometric Association and has been honored as Tennessees Optometrist of the
Year. Dr. Remke is past president of the Lawrence County Chamber of Commerce
and is past chairman of the City of Lawrenceburg Board of Public Utilities. He
has served on the boards of the 21
st
Century Council, the Columbia
State Community College Foundation, the Austin Peay State University Foundation
and the Sacred Heart School Endowment. He is the president of Remke Eye
Clinic, a multi-disciplinary eye clinic. Dr. Remke was nominated to be a
member of the Board of Directors because of his leadership and management
skills and his business experience.
7
Patrick J. Riley
, age 64, has served as a director
of both the Corporation and the Bank since 2011. Mr. Riley has served
as President and Chief Executive Officer of RCR Building Corporation since
1985. He is a licensed general contractor in 18 states. Mr. Riley was employed
with Frank Orr Architects as a contract administrator and draftsman from 1972
to 1973; with Bob Haley, Inc., general contractor, as Vice President from 1973
to 1976; and with Gregg Construction Company, Inc. as Vice President from 1976
to 1985. He attended Memphis State University where he studied Construction
Technology, University of Tennessee where he studied Real Estate and Owen
School of Management at Vanderbilt University where he studied various courses.
Mr. Riley has served on the Board of Directors and as Chairman of Business
Development for Associated Builders and Contractors, on the Board of Associated
General Contractors, on the Advisory Boards of director for Kraft Bros,
Eastman, Patton & Harrell CPAs and First Farmers and Merchants Bank for
Williamson County, on the Board of Trustees of Father Ryan High School, as Past
President of the local chapter of American Society of Professional Estimators,
and a member of the Rutherford County Code Official Association, Construction
Financial Management Association, Construction Management Association of
America, Nashville Area Chamber of Commerce, Kidney Foundation of Middle
Tennessee, the Easter Seal Society and the CEO Roundtable. Mr. Riley was
nominated as a member of the Board of Directors based on his expertise and
proven success in organizational management and developing innovative programs
and strategies.
Matthew M. Scoggins, Jr.
, age 62, has
served as a director of both the Corporation and the Bank since 2008. Mr.
Scoggins has served as the Chief Executive Officer of Tennessee Farmers
Insurance Companies (TFIC) since January 2004. He joined TFIC in 1978, and
has served in numerous positions including agent, agency manager, regional
manager, lobbyist, and chief operating officer for TFICs property &
casualty division. Mr. Scoggins is a Tennessee native who holds a Bachelors
degree from the University of Tennessee and an M.B.A. from Belmont University.
Mr. Scoggins was nominated to be a member of the Board of Directors because of
his leadership skills and his executive experience in the insurance industry.
T. Randy Stevens
, age 60, is Chairman of the Board of Directors, Chief
Executive Officer and a director of the Corporation and the Bank. He has been
employed by the Bank since 1973 and was promoted to Commercial Bank Officer in
1974. He was appointed Assistant Vice President in 1976 and promoted to Vice
President in 1979. Mr. Stevens was appointed Vice President and Trust Officer
of the Bank in 1982 and promoted to First Vice President in 1984. He was
promoted to Executive Vice President and Chief Administrative Officer of the
Bank in 1990. Mr. Stevens was elected as a director of the Bank and the
Corporation in 1991 and appointed Vice President of the Corporation in 1991. He
was appointed President and Chief Operating Officer of the Bank, effective
December 31, 1995, and President and Chief Operating Officer of the Corporation
in April 1996. He was appointed Chief Executive Officer of the Bank and the
Corporation in June 2002. He has been Chairman of the Board of Directors of
the Corporation and the Bank since April 2005. Mr. Stevens was nominated to be a member of the Board of Directors
because of his 38 years of experience in banking, his position as CEO of the
Corporation and the Bank and his leadership experience as a long-time director
of the Bank, the Corporation and other organizations.
W. Lacy Upchurch
, age 65, has served
as a director of both the Corporation and the Bank since 2007. Mr. Upchurch is
the seventh president of the Tennessee Farm Bureau Federation, the nations
largest state Farm Bureau, and a full-time farmer. In addition to being one of
Cumberland Countys major beef producers, Mr. Upchurch has served as Chairman
of the Tennessee Pork Producers and on the Board of the Tennessee Cattlemens
Association, the Governors Economic Development Board, various committees for
the University of Tennessee and numerous Farm Bureau committees at the state
level. In 2006, he served on the Banks Maury County Advisory Board. A
Fentress County native, Mr. Upchurch received his undergraduate and masters
degrees from the University of Tennessee. Mr. Upchurch was nominated to be a
member of the Board of Directors because of his leadership and business skills
and his knowledge of the agriculture and insurance industry.
8
Dan C. Wheeler
, age 69, has served as a
director of both the Corporation and the Bank since 1993. Mr. Wheeler is a
retired Director of the University of Tennessee Extension Center for Profitable
Agriculture. Prior to assuming the Directorship of the Center, he served for
over seven years as Commissioner of the Tennessee Department of Agriculture
after having completing a 30 year career with the Tennessee Farm Bureau
Federation, including 20 years as the Chief Staff Officer. He is a past member
of the Board of Trustees of the University of Tennessee, the Tennessee Board of
Regents and the Tennessee Economic Growth Board. Mr. Wheeler holds a Bachelor
of Science degree in agriculture from the University of Tennessee. Mr. Wheeler
was nominated to be a member of the Board of Directors because of his
leadership in agricultural business and his experience as chair of the Banks
Audit Committee.
Dr. David S. Williams
, age 65, has
served as a director of both the Corporation and the Bank since 2001. Dr.
Williams has been in private orthodontic dental practice in Columbia since
1976. He is a past president of the St. Louis University Orthodontic Alumni
Association, past president of the Southern Association of Orthodontists, board
member from Tennessee for the Southern Association of Orthodontists and Board
of Directors and Orthodontic Consultant to the Tennessee Board of Dentistry.
He is president-elect of the Charles H. Tweed International Foundation for Education
and Research, a faculty member with the graduate orthodontic department of St.
Louis University, St. Louis, Missouri, and an examiner for the American Board
of Orthodontics Certification program. Dr. Williams is a native of St. Louis,
Missouri, and received his Doctor of Dental Surgery degree from the University
of Tennessee College of Dentistry and Masters of Science degree from St. Louis
University Graduate Orthodontic Department. Dr. Williams was nominated to be a
member of the Board of Directors because of his business and finance skills
developed from owning a dental practice.
Required Vote
If a quorum is present, the election of
directors requires a plurality of the votes cast in person or by proxy by the
shares of Common Stock entitled to vote at the meeting.
The Board of Directors recommends
that the shareholders vote FOR each of the nominees.
9
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
table below sets forth certain information, as of January 1, 2012, with respect
to the beneficial ownership of the Corporations Common Stock by (i) each
person known by us to be the beneficial owner of more than 5% of the
outstanding shares of the Corporations Common Stock, (ii) each director and
nominee, (iii) each of the Named Executive Officers and (iv) all of the
Corporations directors and executive officers as a group:
Name of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
(1)
|
Percent of Class
|
FAMCO
(2)
|
565,137
|
10.603%
|
Thomas Napier Gordon
(3)
|
136,648
|
2.564%
|
T. Randy Stevens
(4)
|
75,000
|
1.407%
|
Patrick J. Riley
(5)
|
37,029
|
*
|
James L. Bailey, Jr.
|
17,088
|
*
|
John P. Tomlinson, III
(6)
|
15,966
|
*
|
Dan C. Wheeler
(7)
|
15,668
|
*
|
N. Houston Parks
(8)
|
14,144
|
*
|
Timothy E. Pettus
(9)
|
13,398
|
*
|
Matthew M. Scoggins
(10)
|
7,574
|
*
|
Joseph W. Remke,III
(11)
|
7,160
|
*
|
David S. Williams
(12)
|
6,800
|
*
|
Kenneth A. Ambercrombie
|
5,000
|
*
|
M. Darlene Baxter
|
2,500
|
*
|
Jonathan M. Edwards
(13)
|
1,600
|
*
|
Dalton M. Mounger
(14)
|
1,400
|
*
|
Kimberly D. Vella
(15)
|
1,000
|
*
|
Patricia P. Bearden
(16)
|
434
|
*
|
W. Lacy Upchurch
|
400
|
*
|
Directors and Executive
Officers as a Group (18)
|
358,809
|
6.732%
|
*
|
Less than 1%
|
(1)
|
Unless otherwise indicated, all shares are owned of record.
|
(2)
|
These shares of Common Stock are held in a fiduciary capacity by a Tennessee general partnership (FAMCO) established solely for the purpose of holding legal title to securities and other property transferred to it by the Bank as trustee, agent or otherwise. Except for those shares held in the Banks Profit Sharing Plan, the beneficial holders have the right to vote 100% of these shares. The shares voted by the Banks Profit Sharing Benefit Committee on behalf of the beneficial holders under the Profit Sharing Plan will be voted in a manner consistent with the best interests of the beneficiaries as determined by the committee in its fiduciary capacity. FAMCOS address is 816 South Garden Street, Columbia, Tennessee 38401.
|
(3)
|
Includes 18,120 shares held by Thomas Napier Gordon, Jr., Mr. Gordons son, 18,120 shares held by Edward Bradshaw Gordon, Mr. Gordons son and 800 shares held by Teri Hasenour Gordon, Mr. Gordons wife.
|
(4)
|
Includes 2,000 shares held by Leesa M. Stevens, Mr. Stevens wife, 36,000 shares held by Leesa M. Stevens Family Partnership, L.P., a limited partnership of which Mr. Stevens is a limited partner, and 35,800 shares held by Thomas Randall Stevens Family Partnership, L.P., a limited partnership of which Mr. Stevens is a limited partner.
|
(5)
|
Includes 2,000 shares held in a brokered account by Mr. Riley.
|
(6)
|
Includes 100 shares held by Teresa J. Beck, Mr. Tomlinsons wife, and 2,000 shares held by FAMCO IRA John P. Tomlinson.
|
(7)
|
Includes 5,400 shares held by Mary Carol Wheeler, Mr. Wheelers wife.
|
(8)
|
As equal tenants in common with spouse, Suzanne C. Parks.
|
(9)
|
Includes 2,100 shares held jointly by Timothy E. Pettus and Ellen Pettus, Mr. Pettus mother, 200 shares held jointly in trucking company, and 5,578 shares held by FAMCO IRA Timothy E. Pettus.
|
(10)
|
Includes 1,274 shares held by FAMCO IRA Matthew M. Scoggins, Jr. and 869 shares held by FAMCO IRA Mary P. Scoggins, in custody of Mr. Scoggins wife.
|
(11)
|
Includes 4,100 shares held by FAMCO IRA Dr. Joseph W. Remke, III.
|
(12)
|
Includes 2,000 shares held by David S. Williams in a brokered account.
|
(13)
|
Includes 800 shares held by Cynthia Leigh Edwards, Mr. Edwards wife.
|
(14)
|
Includes 1,000 shares held by Dalton M. Mounger Retirement Plan and 400 shares held by Dalton M. Mounger in a brokered account.
|
(15)
|
Includes 1,000 shares held by Kimberly D. Vella in a brokered account.
|
(16)
|
Includes 124 shares held by FAMCO
Roth IRA Patricia P. Bearden.
|
10
EXECUTIVE
OFFICERS
The biographical information of the
executive officers of the Corporation and the Bank, as of March 1, 2012, is
presented below. None of these executive officers has a family relationship
with any officer or employee of the Corporation or the Bank. The biographies of
Messrs. Pettus and Stevens are provided in the section above entitled PROPOSAL
1: ELECTION OF DIRECTORS.
John P. Tomlinson, III
, age 61, is Chief Administrative Officer of the
Bank. He has been employed by the Bank since 1973 and was promoted to
Commercial Bank Officer in 1974. He was appointed Assistant Vice President of
the Bank in 1976 and promoted to Vice President in 1979. Mr. Tomlinson was
appointed Manager of Mortgage Lending in 1986 and promoted to Senior Vice
President in 1990. He was appointed Executive Vice President of the Bank in
1995 and elected Secretary of the Corporation in April 1996. He was appointed
Vice President of the Corporation in December 1996 and Senior Executive Vice
President of the Bank in 1998. Mr. Tomlinson was appointed Senior Executive
Vice President of the Corporation in 1999. He was appointed Chief Operating
Officer in June 2002 and Regional President of the Bank in 2003. He served as
President of the Corporation and the Bank from April 2005 to January 2007. In
January 2007, he was named Chief Administrative Officer of the Bank. Mr.
Tomlinson served as a director of the Corporation and the Bank from 2000 to
2008.
N. Houston Parks
, age 62, is General Counsel of the Bank. He has been
employed by the Bank since July 1997 and began as Senior Vice President and
Senior Trust Officer. He was appointed Executive Vice President and Senior
Trust Officer in 2002. In 2005, he was promoted to Vice Chairman and Chief
Operating Officer of the Bank and Treasurer of the Corporation. Mr. Parks was
appointed General Counsel of the Bank in 2009. He served as Treasurer of the
Corporation from 2005 to 2010.
Patricia P. Bearden
, age 49, is Treasurer of the Corporation and Chief
Financial Officer of the Bank. She has been employed by the Bank since 1998
and was promoted to Trust Officer in 2000. She was promoted to Vice President
and Trust Officer in 2003. Ms. Bearden was appointed Chief Financial Officer
of the Bank in 2005 and was appointed Assistant Treasurer of the Corporation in
April 2005. In 2010, Ms. Bearden was appointed Treasurer of the Corporation.
Martha M. McKennon
, age 67, is Secretary of the Corporation and
Secretary, Vice President and Executive Assistant of the Bank. She has been
employed by the Bank since 1974 and was promoted to Customer Service
Representative in 1980. She was appointed Executive Assistant of the Bank in
1984 and Assistant Vice President, Executive Assistant in 1991. Ms. McKennon
was appointed Assistant Secretary of the Corporation in December 1996 and
appointed Vice President/Executive Assistant of the Bank in 1997. She was
appointed Secretary of the Corporation in 1999 and Secretary to the Board of
Directors of the Corporation and the Bank in 2000.
CORPORATE
GOVERNANCE
Director
Qualifications
The Board of Directors has not
established formal qualification guidelines for its members. The Board
considers only potential nominees who have several years of relevant business
experience. Non-management director nominees generally need to be independent,
as defined by the listing standards of the New York Stock Exchange. Any nominee
must be willing to serve for the nominal directors compensation paid by the
Corporation. In addition, the Board of Directors evaluates nominees with the
goal of maintaining a diversity of background and experience that complements
the other directors.
11
Any shareholder, by written notice
submitted to the Corporate Secretary, can nominate candidates for election to
the Board of Directors of the Corporation. The written notice should be
provided in accordance with the process contained in the Bylaws as more fully
described in the GENERAL INFORMATION Items of Business for 2013 Annual
Meeting of Shareholders section of this Proxy Statement. Candidates nominated
by shareholders are evaluated in the same manner as the candidates nominated by
the Board of Directors.
Director
Independence
The Board has determined that 13 of
its 15 existing directors are independent in accordance with the listing
standards of the New York Stock Exchange. The two individuals who are not
independent, Messrs. Stevens and Pettus, are both executive officers of the
Corporation. In addition, the Board of Directors has determined that the new
director nominee, Ms. Vella, is independent in accordance with the listing
standards of the New York Stock Exchange.
During 2011, there were no relationships
or transactions that the Board of Directors discussed in making its independence
determinations with respect to each director identified as independent and no
relationships or transactions precluded any such directors from being
independent. The Corporation is not aware of any family relationships among any
of its directors and executive officers.
Board
Leadership Structure and Role in Risk Oversight and Management
Mr.
Stevens has served as both the Chairman of the Board of Directors and the Chief
Executive Officer of the Corporation since 2005. The Board believes that a
unified chairman and chief executive officer position has provided clarity of
leadership and operating efficiencies. Additionally, Mr. Stevens management
experience and close relationship with the other officers of the Corporation
improves the Boards effectiveness in its role of monitoring the management of
the Corporation. The Board does not have a lead independent director. The
Board is actively involved in oversight of risks that could affect the
Corporation. Although the full Board has retained responsibility for general
oversight of risks, this oversight is conducted primarily through committees of
the Board, as disclosed in the description of each of the committees below and
in the charters of each of the committees. The Board receives full reports by
each committee chair regarding the committees considerations and actions, as
well as regular reports directly from officers responsible for oversight of
particular risks within the Corporation.
Committees of the Board of Directors
The
Board of Directors conducts its business through its own meetings and through
committees of the Banks Board of Directors, which are described below. There
are no standing committees of the Board of Directors of the Corporation because
the principal business of the consolidated company is conducted by the Bank
rather than the Corporation, which is a bank holding company. The Board of
Directors of the Bank is identical to the Board of Directors of the
Corporation.
The Corporation does not have a
standing nominating committee. The entire Board of Directors of the
Corporation fulfills the role of a nominating committee. Factors such as the
Corporations size and the nature of its business, the consistently high rate
of participation in meetings by each director, the fact that over half of the
Corporations directors are independent (as defined by the listing standards of
the New York Stock Exchange) and are individuals who come from diverse
backgrounds, and the infrequent historical turnover in the membership of the
Board of Directors contribute to the belief of the Board of Directors that a
separate, independent nominating committee is not necessary. The entire Board
of Directors serving as a nominating committee currently does not have a
charter and, as noted above, not all of the directors are independent, as
defined by the listing standards of the New York Stock Exchange. Furthermore,
the Board of Directors has not specifically adopted a policy regarding the
consideration of shareholder nominees for directors, but its general policy is
to welcome and consider any recommendations for future nominees. The Board of
Directors will consider for nomination as director of the Corporation any
director candidate recommended or nominated by shareholders in accordance with
the process outlined under the section below entitled GENERAL INFORMATION
Items of Business for 2013 Annual Meeting of Shareholders.
12
The Banks Board of Directors has five
standing committees:
Audit/Compliance/CRA Committee;
Compensation Committee;
Executive Committee;
Oversight Committee; and
Trust Committee;
The following table sets
forth the current members of the committees of the Board of Directors of the
Bank:
Name
|
Audit
|
Compensation
|
Executive
|
Oversight
|
Trust
|
Kenneth A. Abercrombie
|
|
Chair
|
X
|
X
|
|
James L. Bailey, Jr.
|
X
|
|
X
|
|
|
M. Darlene Baxter
|
|
X
|
|
X
|
|
Jonathan M. Edwards
|
X
|
|
|
|
|
Thomas Napier Gordon
|
|
X
|
X
|
|
X
|
Dalton M. Mounger
|
X
|
|
X
|
X
|
|
N. Houston Parks
(1)
|
|
|
|
|
Chair
|
Timothy E. Pettus
|
|
|
X
|
|
|
Dr. Joseph W. Remke, III
|
X
|
|
|
X
|
|
Patrick J. Riley
|
|
X
|
X
|
|
|
Matthew M. Scoggins, Jr.
(2)
|
X
|
|
|
|
X
|
T. Randy Stevens
|
|
X
|
Chair
|
Chair
|
X
|
W. Lacy Upchurch
|
|
|
|
|
X
|
William R. Walter
|
|
X
|
X
|
|
X
|
Dan C. Wheeler
|
Chair
|
X
|
|
X
|
|
Dr. David S. Williams
|
X
|
|
|
|
|
________________________
(1)
|
Non-director member of Trust Committee.
|
(2)
|
Audit Committee financial expert.
|
|
|
Audit/Compliance/Community
Reinvestment Act (CRA) Committee
|
Number of 2011 meetings: 10
|
The Bank has a separately designated
standing Audit/Compliance/CRA Committee (the Audit Committee). This
committee provides assistance to the Banks Board of Directors in fulfilling
its responsibilities related to internal control monitoring, accounting
procedures, reporting practices, regulatory compliance and quality and
integrity of the financial reports of the Bank. The charter of the Audit
Committee was attached as an appendix to the Corporations proxy statement for
the 2010 annual meeting. The Audit Committee is composed solely of directors
who are independent, based on the listing standards of the New York Stock Exchange
and are free of any relationship that, in the opinion of the Board of
Directors, would interfere with their exercise of independent judgment as a
committee member. Mr. Scoggins serves as the Audit Committee Financial Expert
pursuant to Section 407 of the Sarbanes Oxley Act of 2002 and the rules
promulgated by the Securities and Exchange Commission (SEC) thereunder.
13
The
Audit Committees primary responsibilities fall into three broad categories:
-
Monitoring the preparation of
quarterly and annual financial reports prepared by the management of the
Corporation and the Bank, which includes discussing draft financial statements
and accounting and reporting matters with management and the Corporations
independent registered public accounting firm.
-
Responsibility for matters
concerning the relationship between the Corporation and the Bank and the
Corporations independent auditors. This relationship includes:
-
recommending the appointment or
removal of the Corporations independent auditors;
-
reviewing the scope of their audit
services and related fees, as well as any other services being provided; and
-
determining whether the
Corporations auditors are independent.
-
Overseeing managements
implementation of effective systems of internal controls, including the review
of the activities and recommendations of the Banks internal auditing program.
The Audit Committee has implemented
procedures to ensure that during the course of each fiscal year it devotes the
attention that it deems necessary or appropriate to each of the matters
assigned to it under the committees charter. The Audit Committee Charter is
available on the Tools Annual Report page of the Corporations website at
www.myfirstfarmers.com.
Compensation
Committee
|
Number of 2011
meetings: 6
|
The Compensation Committees primary
duties and responsibilities include establishing and monitoring compensation
and benefit plan policies of the Bank and making recommendations regarding
compensation and benefits for the officers of the Bank. The Compensation
Committee has the authority to conduct or authorize investigations into any
matters within the scope of its responsibilities and has the authority to
retain such outside counsel, experts, and other advisors as it deems
appropriate to assist it in conducting of any such investigation. This
committee recommends to the Board of Directors of the Corporation and the Bank
fees for board and committee meetings. The Compensation Committee reviews,
evaluates and recommends to the Board of Directors of the Bank the officers
compensation program and deferred profit-sharing contributions for all eligible
employees. The charter of the Compensation Committee is available on the
Tools Annual Report page of the Corporations website at
www.myfirstfarmers.com
.
Executive
Committee
|
Number of 2011 meetings:
40
|
The Executive Committee reviews and
recommends to the Banks Board of Directors for its approval selected actions
with regard to the general direction and conduct of the Corporation and the
Bank. This committee acts on loan applications and reviews overdrafts, cash
items, loans, lines of credit and loan reviews in accordance with the Banks
policies that have been approved by the Board of Directors.
Oversight
Committee
|
Number of 2011 meetings:
4
|
The Oversight Committee ensures
prompt action by the Bank in response to recommendations from, and reviews the
results of examinations performed by, the Banks regulatory agencies. It also
reviews managements response to reports of examination and periodically
monitors the action taken by management in response to examination findings.
14
Trust
Committee
|
Number of 2011 meetings: 12
|
The Trust Committee supervises the
operations of the Trust and Financial Management Department of the Bank to
ensure proper exercise of the fiduciary powers of the Bank.
Directors
Attendance at Meetings
The Board of Directors of the
Corporation met five times during 2011. Each member of the Board of Directors
of the Bank and the Corporation attended at least 75% of the aggregate meetings
of the Board of Directors and committees of which he or she was a member.
The Corporation does not have a
policy regarding director attendance at annual meetings of shareholders because
of the willingness of each director to be present at all annual meetings and
the historical attendance of each director. All directors attended the
2011annual meeting of shareholders.
Shareholder
Communication with the Board of Directors
The Board of Directors of the
Corporation has adopted a process to facilitate written communications by
shareholders or other interested parties to the Board of Directors. Persons
wishing to write to the Board of Directors of the Corporation or a specified
director or committee of the Bank Board of Directors should send correspondence
to the Corporate Secretary at First Farmers and Merchants Corporation, P.O. Box
1148, Columbia, Tennessee, 38402-1148.
All communications properly received
from shareholders or other interested parties will be forwarded to the members
of the Board of Directors, or to a specific director or committee if so
designated by such person. Any shareholder who wishes to communicate with a
specific Board member should send instructions asking that the material be
forwarded to the director. Solicitations, junk mail and frivolous
communications will not be forwarded but will be made available to any director
who wishes to review them.
Code
of Ethics
The Board of Directors of the
Corporation has not adopted a Code of Ethics, as defined by the rules and
regulations of the SEC, because the principal business of the consolidated
company is conducted by the Bank rather than the Corporation, which is a bank
holding company. The Board of Directors of the Bank, however, has adopted a
Code of Ethics for all employees of the Bank. A copy of this Code of Ethics
can be obtained without charge by a written request to Human Resources
Director, First Farmers and Merchants Bank, P.O. Box 1148, Columbia, Tennessee,
38402-1148.
15
C
OMPENSATION DISCUSSION AND ANALYSIS
The executive officers of the
Corporation do not receive compensation for service as executive officers of
the Corporation but instead receive compensation from the Bank for service as
executive officers of the Bank. The Compensation Committee of the Bank designs
and implements compensation programs to attract, retain and motivate officers,
employees and directors by offering attractive and competitive compensation
elements and amounts. These goals are balanced against the need to control
expenses for the benefit of the shareholders of the Corporation. The
compensation programs are designed to reward production and foster loyalty to
the Bank and the Corporation. To be competitive, the Bank seeks to provide
salaries and benefits comparable to the median of those provided by other
banking companies of similar asset size in the Banks peer group. The Bank
strives to be competitive using peer benchmark analysis of current market
levels of compensation. The Compensation Committee believes that, in large part
because of the Banks compensation system, it has been able to assemble a team
of effective and productive officers and employees.
General Compensation Philosophy
Decisions with respect to the compensation
of the Banks executive officers, including the Named Executive Officers, are
made by the Compensation Committee. The Compensation Committee believes that
the actions of each executive officer have the potential to impact the
short-term and long-term profitability of the Corporation and the Bank.
Consequently, the Compensation Committee places considerable importance on its
task of designing and administering an executive compensation program.
The Bank has an executive
compensation program that considers factors such as shareholder value and the
overall performance of the Corporation and the Bank, as further described below
under Cash Bonus Plan. The main components of the executive compensation
program are base salary, cash bonus plan, employee benefits and perquisites.
The Corporation and the Bank currently do not have an equity incentive
compensation program. The Compensation Committee believes that an equity
incentive program is not currently in the best interest of the Corporation or
the Bank.
In determining the aggregate amount
of base salary and cash bonus for the Named Executive Officers, the
Compensation Committee considers compensation levels for the chief executive
officer, the chief financial officer and other executive officer positions of
peer financial institutions as published in annual compensation and benefits
surveys conducted by the Tennessee Bankers Association. These surveys do not
identify the specific banks or bank holding companies that participated in the
survey, but do provide data for the participating institutions grouped
according to asset size and geographic region. In its review of the aggregate
amount of base salary and incentive bonus for the Named Executive Officers for
2011, the Compensation Committee primarily focused on data in these surveys for
financial institutions with an asset size of $500 million to $1 billion. The
aggregate base salaries of $1,012,700 of the Named Executive Officers in 2011
generally were within the range of the median compensation levels of the peer
group.
As required by the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 and related SEC rules, in
connection with the 2011 annual meeting of shareholders, the Corporation
solicited advisory votes by shareholders on executive compensation and on the
frequency with which the advisory vote on executive compensation would be
solicited. The Corporations Board of Directors recommended that the advisory
vote on executive compensation be solicited every three years, and this frequency
of shareholder vote received the greatest number of votes from shareholders.
The Board of Directors has determined that the Company will hold an advisory
vote on the compensation of the Named Executive Officers every three years
until the next shareholder advisory vote on this matter, which will occur at
the annual meeting of shareholders in 2017.
16
In establishing and recommending
2011 compensation for Mr. Stevens and the other Named Executives Officers, the
Compensation Committee considered the advisory vote on executive
compensation from the 2011 annual meeting
of shareholders. Over 90% of the shares represented and
voting at the 2011 annual meeting (excluding abstentions and broker
non-votes) were voted in favor of the Named Executive Officer compensation
for the three-year period ending December 31, 2010, as described in the proxy
statement related to that meeting.
Components
of Compensation
Base Salary
Base salary represents a fixed labor
cost and is designed so that the executive officers receive acceptable
salaries, helping the Bank keep talent needed to meet the challenges in the
financial service industry. Many factors are included in determining base
salaries such as job responsibilities, the scope of the position, length of
service with the Bank, individual performance and compensation for similar
positions in the Banks peer group. All base salaries are reviewed annually.
In August 2007, the Bank adopted a new salary administration program for
determining base salary. In this system, all positions are assigned a position
level and each position level has a salary range that is defined by a minimum,
mid-point and maximum salary. The minimum of each salary range is typically 75%
of the mid-point of the applicable salary range and the maximum of each salary
range is typically 125% of the mid-point. The Bank hired Koker Goodwin and
Associates (now HRN Management Group) in 2007 to produce the salary ranges for
each position level and the Compensation Committee plans to update the ranges
annually in October of each year with respect to the following year based on
several salary surveys. The salary ranges are adjusted for the Bank according
to its asset size and geographic location. The salary ranges have been and will
be used only as a guide for setting base salaries and will not reflect any
incentive pay, benefits or other executive perquisites. All base salaries can
be expressed as a percentage of the mid-point of the salary range applicable to
each position level (the Compa-Ratio). In 2011, each of the Named Executive
Officers received a base salary increase compared to 2010 base salary as
follows, based on a combination of the above-mentioned factors:
Name
|
Salary Increase
|
T. Randy Stevens
|
4.11%
|
Patricia P. Bearden
|
4.00%
|
Timothy E. Pettus
|
4.55%
|
John P. Tomlinson, III
|
2.33%
|
N. Houston Parks
|
2.33%
|
For 2012, the base salary of each of the
Named Executive Officers had the following Compa-Ratio:
Name
|
Compa-Ratio
|
T. Randy Stevens
|
80.3%
|
Patricia P. Bearden
|
82.0%
|
Timothy E. Pettus
|
92.6%
|
John P. Tomlinson, III
|
94.4%
|
N. Houston Parks
|
94.4%
|
The
Compensation Committee has set the base salary for each of the Named Executive
Officers for 2012 as follows:
Name
|
2012 Base Salary
|
Increase from 2011
|
T. Randy Stevens
|
$320,697
|
6.65%
|
|
Patricia P. Bearden
|
135,000
|
3.85%
|
|
Timothy E. Pettus
|
242,000
|
5.22%
|
|
John
P. Tomlinson, III
|
181,000
|
2.84%
|
|
N. Houston Parks
|
181,000
|
2.84%
|
|
17
Cash Bonus
Plan
The
second component in the executive compensation program is a cash bonus plan.
The cash bonus plan is used as a short-term incentive to drive achievement of
annual Bank performance goals. This plan determines the bonuses for all
eligible employees including officers as a percentage of their salary and is
based on an evaluation of each executives performance as well as the Banks
performance in various categories, including the following that were used in
2011:
The cash bonus plan is used as a
short-term incentive to drive achievement of annual Bank performance goals.
During 2011, the Compensation Committee established performance goals under the
cash bonus plan. The maximum performance goal multiplier under each
performance goal was 20%. The sum of the performance goal multipliers (which
equals 100% if the maximum target level for each performance goal is achieved)
was 24% 2011. Performance goal multipliers ranging from 4% to 20% were
assigned to varying target levels for each performance goal as follows (dollars
in millions):
|
Performance Goal Multiplier Based on 2011 Target
Levels
|
2011 Actual
|
Performance Goal
|
4%
*
|
8%
|
12%
|
16%
|
20%
|
Performance
|
Return
on assets
|
≥ 1.00%
|
≥ 1.05%
|
≥ 1.08%
|
≥ 1.10%
|
≥ 1.15%
|
0.84%
|
Delinquencies
and non-accruals
|
≤ 1.90%
|
≤ 1.80%
|
≤ 1.70%
|
≤ 1.60%
|
≤ 1.50%
|
3.64%
|
Gross
loan growth
|
≥ 1.00%
|
≥ 2.00%
|
≥ 3.00%
|
≥ 4.00%
|
≥ 5.00%
|
-4.90%
|
Net
deposit growth
|
≥ 1.00%
|
≥ 2.00%
|
≥ 3.00%
|
≥ 4.00%
|
≥ 5.00%
|
5.50%
|
Net
income
|
≥ $8.00
|
≥ $8.30
|
≥ $8.60
|
≥ $8.90
|
≥ $9.10
|
$8.20
|
________________________
* If the minimum
target level was not achieved for a performance goal, then 0% was allocated to
that performance goal multiplier.
The Compensation
Committee also established maximum bonus percentages based on the position of
each Named Executive Officer in accordance with four different levels, which
maximum bonus percentage was higher for positions with more responsibility:
Chief Executive Officer (70%); President (50%); Senior Executive (35%); and
Chief Financial Officer (25%). The sum of the performance goal multipliers (24%
for 2011) was multiplied by the maximum bonus percentage resulting in the
aggregate bonus multiplier. The aggregate bonus multiplier was then multiplied
by the respective base salary for each Named Executive Officer and the product
was the Named Executive Officers bonus for 2011.
The following bonuses were paid to
the Named Executive Officers based on achievement of the performance goals for
2011:
18
Name
|
|
Bonus
|
|
Actual Bonus as
Percentage of
Base Salary
|
|
Maximum Potential
Bonus (Percentage of
Base Salary)
|
T. Randy Stevens
|
|
$54,973
|
|
18.3%
|
|
70%
|
Patricia P. Bearden
|
|
7,800
|
|
6.0%
|
|
25%
|
Timothy E. Pettus
|
|
27,600
|
|
12.0%
|
|
50%
|
John P. Tomlinson, III
|
|
14,784
|
|
8.4%
|
|
35%
|
N. Houston Parks
|
|
14,784
|
|
8.4%
|
|
35%
|
All of these
bonuses were in the same range as the bonus levels of the Banks peer group for
executives with similar positions.
Employee
Benefits
The Bank provides the following
benefits for all employees of the Bank, including the Named Executive Officers:
-
In 1996, the Bank established an
officer group term replacement/split-dollar plan to provide life insurance
benefits that continue after retirement. A single premium universal life
insurance policy was purchased to fund the plan and a split-dollar agreement
was made with an irrevocable trust that specified the portion of the insurance
proceeds that would become part of the trust. For additional information, see
the section below entitled Split-Dollar Arrangements and Deferred Compensation
Agreements.
-
The Bank offers health insurance,
life insurance and disability insurance at a minimal cost to full-time
employees and makes available health insurance for each employees family, the
premiums for which are shared by the employee and the Bank. Each employee
receives personal copies of these insurance plans detailing the coverage
provided. Any eligible employee who becomes disabled can continue coverage
under the Banks health insurance and life insurance plans. The disabled
employee must pay the same premiums as employees who have the same coverage and
who are actively at work. This coverage will continue to be provided by the
Bank for the entire period of time that the employee is eligible and receives
compensation under the Banks group long-term disability insurance policy.
-
The Bank has adopted the Deferred
Profit Sharing Plan, which is a tax-qualified profit sharing retirement plan
that has been approved by the Internal Revenue Service. All employees of the
Bank are eligible to participate who are at least 20 years old and who have
completed one year of service with the Bank. An individual account is
maintained for participants to record contributions by the Bank on their behalf
and adjustments for gains and losses on investments. Participant accounts are
subject to forfeiture upon termination of employment prior to vesting. Accounts
become vested over a period of six years, with 25% vested after two years of
service, an additional 15% after the third year of service and 20% each year
thereafter until the benefit is 100% vested at the end of sixth year. The
Banks contribution to the plan is determined by the annual performance of the
Bank and is subject to annual approval by the Board of Directors of the Bank.
Contributions are allocated to participant accounts pro rata to their compensation
each year. The aggregate amount the Bank contributed to the Deferred Profit
Sharing Plan for the 275 participants during 2011 was $873,378.
-
The Bank provides dental insurance
coverage for all eligible employees and makes dental insurance available for
eligible dependents at the employees expense.
-
The Bank pays for one physical
examination each year for all officers of the Bank, including the Named
Executive Officers. The Bank pays for flu immunizations annually for all
officers and employees. Payment is made upon the presentation of an itemized
statement from the physician providing the services.
19
-
The Bank provides long-term
disability insurance to eligible employees at no cost to the employee.
-
The Bank offers a Cafeteria Plan
under Internal Revenue Code Section 125 that gives employees the opportunity to
pay for certain benefits on a pre-tax basis rather than on an after-tax basis.
Expenses that are eligible for the Section 125 Plan include certain insurance
premiums, certain out-of-pocket medical expenses and dependent care expenses.
Money spent for these items included in the Section 125 Plan is not subject to
Social Security or federal income taxes.
Perquisites
In addition to salaries, bonus opportunities and employee benefits, the
Bank provides to certain executive officers, including four of the Named
Executive Officers, certain perquisites so that the Bank remains competitive in
its ability to hire and retain talented employees. These perquisites include
the use of a company vehicle or a vehicle allowance, certain club memberships
and the payment of dues for those clubs. The Bank currently provides these
perquisites to all of the Named Executive Officers except Ms. Bearden. The
Banks policy for providing perquisites is based on the number of years of
experience within the banking industry and the executives position with the
Bank. The Compensation Committee periodically reviews perquisites that are made
available to the executive offers, including the Chief Executive Officer, to
ensure that they are in line with market practice.
Split-Dollar
Arrangements and Deferred Compensation Agreements
The Bank provides certain split-dollar insurance
and/or deferred compensation agreements to fund death benefits (the Plan) for
directors and certain officers of the Bank in order to encourage their
continued employment and service with the Bank and to reward them for their
past service and contribution.
The Bank has entered into separate agreements with
each of its directors and the Named Executive Officers relating to the Plan.
For the directors, each participant is entitled to designate a beneficiary to
receive an amount of death benefits equal to a specified amount or the
net-at-risk insurance portion of the proceeds (defined as total proceeds minus
the cash surrender value of the policy). For the Named Executive Officers, each
participant is entitled to designate a beneficiary to receive an amount of
death benefits equal to the lesser of two and one-half times the participants
base annual salary at the effective date of the Plan or the net-at-risk
insurance portion of the proceeds. A director or Named Executive Officer shall
forfeit his or her right to the benefits provided by this Plan if he or she is
terminated for cause, removed under certain other circumstances or violates the
non-compete or confidentiality restrictive covenants contained in his or her
agreement with the Bank. The non-compete provisions generally provide that the
Plan participant may not, without the prior written consent of the Corporation,
directly or indirectly (i) become employed by, participate in or be connected
in any manner with the ownership, management, operation or control of any bank,
savings and loan or similar financial institution if the participants responsibilities
will include providing banking or other financial services within a 25-mile
radius of any office maintained by the Corporation as of the date of
termination of service, (ii) participate in any way in hiring or otherwise
engaging, or assisting any other person in hiring or otherwise engaging, any
individual who was employed by the Corporation as of the date of termination of
service, (iii) assist, advise or serve in any capacity any third party in any
action against or transaction involving the Corporation, or (iv) sell, offer to
sell, provide banking or other financial services, assist any other person in
selling or providing banking or other financial services, or solicit or
otherwise compete for any orders, contract or accounts for services of a kind
or nature like or substantially similarly to those sold by the Corporation to
or from any person from whom the participant or the Corporation, to the
knowledge of the participant, provided banking or other financial services or
such other services during the three-year period immediately prior to the
termination of the participants service.
20
Because Messrs. Pettus and Stevens are directors and
Mr. Tomlinson is a former director, each of them also has Director Deferred
Compensation Agreements. For a description of these agreements, see the section
below entitled COMPENSATION OF DIRECTORS Deferred Compensation Agreements
and Split-Dollar Arrangements.
Group Term Carve-Out Plans
The Bank owns certain life insurance
policies on the lives of participating executive officers and pays the premiums
on these policies. Under the Banks Group Term Carve-Out Plans, the Bank has
agreed to pay certain death proceeds under these life insurance policies to a
beneficiary designated by each participating executive. In general, if a
participant dies while employed by the Bank, the participants beneficiary will
be entitled to a benefit equal to two and one-half times the deceased
participants base annual salary at the effective date of the plan. All of the
Named Executive Officers participate in the Banks 2002 Group Term Carve-Out
Plan except Ms. Bearden, who participates in the Banks 2007 Group Term
Carve-Out Plan. The Named Executive Officers beneficiaries are entitled to the
following respective benefits under the Group Term Carve-Out Plans:
Name
|
|
Benefit Under Group
Term Carve-Out Plan
|
T. Randy Stevens
|
|
$450,000
|
|
Patricia P. Bearden
|
|
262,500
|
|
Timothy E. Pettus
|
|
250,000
|
|
John P. Tomlinson, III
|
|
325,000
|
|
N. Houston Parks
|
|
250,000
|
|
Risk
Management Considerations
The
Compensation Committee believes that the Banks performance-based cash bonus
program creates incentives to create long-term shareholder value. Several
elements of the program are designed to promote the creation of long-term value
and thereby discourage behavior that leads to excessive risk:
-
Rather than determining cash bonus
awards based on a single metric, the Compensation Committee applies a
structured, principled framework that considers a balanced set of financial
performance metrics that collectively best indicate successful management; and
-
The performance metrics used to
determine the amount of an executives bonus are metrics that the Compensation
Committee believes drive long-term shareholder value. Moreover, the
Compensation Committee attempts to set goals for these metrics that encourage
success without encouraging excessive risk taking to achieve short-term
results.
In addition, under the Sarbanes-Oxley Act of 2002, if the Corporation
is required to restate its financial results as a result of material
noncompliance with financial reporting requirements under the securities laws
as a result of misconduct, the chief executive officer and the chief financial
officer must generally repay any bonus or other incentive-based compensation (including
profits realized from the sale of Common Stock) received during the 12-month
period following the filing of the erroneous financial results.
The Bank generally uses the same performance metrics for its cash bonus
programs for the Named Executive Officers, other executive officers and
non-executive employees.
21
Management and the Compensation Committee periodically evaluate the
risks involved with all compensation programs and do not believe that any of
the Banks compensation programs create risks that are reasonably likely to
pose a material adverse impact to the Corporation.
Named
Executive Officer Compensation
The executive compensation program
described above is applied in setting the Named Executive Officers
compensation. The Compensation Committee reviews the executive compensation
program in relation to the performance of the Corporations net income. Mr.
Stevens participates in the same executive compensation program available to
the other Named Executive Officers. Although Mr. Stevens is a member of the
Compensation Committee, he does not participate in discussions regarding his
compensation as the Chief Executive Officer of the Bank. None of the Named
Executive Officers have employment, severance or change-of-control agreements.
The Named Executive Officers serve at the will of the Board of Directors, which
enables the Bank to terminate their employment with discretion as to the terms
of any severance arrangement. This is consistent with the Banks
performance-based philosophy.
Conclusion
The Compensation Committee believes
that this mix of market-based salaries, cash bonuses, employee benefits and
perquisites represents a balance that will motivate the management team to
continue to produce strong returns. The Compensation Committee further
believes this program strikes an appropriate balance with the interests and
needs of the Corporation and the Bank in operating a financial service
business.
22
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the
Board of Directors of the Bank has reviewed and discussed the Compensation
Discussion and Analysis required by SEC Regulation S-K, Item 402(b) with
management. Based on our review and discussions, the Compensation Committee
recommended to the Board of Directors of the Bank, who recommended to the Board
of Directors of the Corporation, that the Compensation Discussion and Analysis
be included in this Proxy Statement and be incorporated by reference in the
Corporations Annual Report on Form 10-K for the year ended December 31, 2011.
Compensation Committee of the Banks Board of Directors:
|
|
Kenneth A. Abercrombie, Chairman
|
M. Darlene Baxter
|
Thomas N. Gordon
|
Patrick J. Riley
|
T. Randy Stevens
|
William R. Walter
|
Daniel C. Wheeler
|
23
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth the
aggregate remuneration accrued or paid by the Bank during the three fiscal
years ended December 31, 2011 to the Named Executive Officers:
Name and
Principal Position
|
Year
|
Salary
|
Bonus
|
Stock Awards
|
Option Awards
|
Non-Equity
Incentive Plan Compensation
|
Change in
Pension Value and Nonqualified
Deferred Compensation Earnings
|
All Other
Compensation
(1)
|
Total
Compensation
|
T. Randy Stevens
|
2011
|
$300,697
|
$54,973
|
$
|
$
|
$
|
$
|
$132,815
|
$488,485
|
Chairman of
the Board,
|
2010
|
288,818
|
51,589
|
$
|
$
|
$
|
$
|
114,952
|
455,359
|
Chief
Executive Officer of the
|
2009
|
288,818
|
193,557
|
|
|
|
|
114,384
|
596,759
|
Corporation
and the Bank
|
|
|
|
|
|
|
|
|
|
Patricia P.
Bearden
|
2011
|
130,000
|
7,800
|
|
|
|
|
18,434
|
156,234
|
Treasurer of
the
|
2010
|
125,000
|
7,500
|
|
|
|
|
16,007
|
148,507
|
Corporation
and Chief
|
2009
|
120,000
|
13,200
|
|
|
|
|
18,693
|
151,893
|
Financial
Officer of the Bank
|
|
|
|
|
|
|
|
|
|
Timothy E.
Pettus
|
2011
|
230,000
|
27,600
|
|
|
|
|
65,532
|
323,132
|
President of
the Corporation
|
2010
|
220,000
|
26,400
|
|
|
|
|
63,099
|
309,499
|
and the Bank
|
2009
|
220,000
|
48,400
|
|
|
|
|
59,720
|
328,120
|
John P.
Tomlinson, III
|
2011
|
176,000
|
14,784
|
|
|
|
|
39,241
|
230,025
|
Chief
Administrative Officer
|
2010
|
172,000
|
14,448
|
|
|
|
|
32,948
|
219,396
|
of the Bank
|
2009
|
168,000
|
25,872
|
|
|
|
|
41,017
|
234,889
|
N. Houston Parks
|
2011
|
176,000
|
14,784
|
|
|
|
|
30,921
|
221,705
|
General
Counsel
|
2010
|
172,000
|
14,448
|
|
|
|
|
30,732
|
217,180
|
of the Bank
|
2009
|
170,000
|
26,180
|
|
|
|
|
37,295
|
233,475
|
________________________
(1) All
other compensation for 2011 includes the following amounts:
Name and
Principal Position
|
Fees for Services as Directors
(2)
|
Contributions to Deferred Profit Sharing
Plan
|
Imputed Income on Group Carve Out Plan
|
Personal Use of Company Automobile
|
Club Membership and Dues
|
Physical Exams
|
Total
|
T. Randy Stevens
|
$ 105,061
|
$ 19,600
|
$ 821
|
$ 870
|
$ 4,552
|
$ 1,911
|
$ 132,815
|
Patricia P.
Bearden
|
6,400
|
10,400
|
559
|
-
|
799
|
275
|
18,434
|
Timothy E.
Pettus
|
41,520
|
18,400
|
513
|
165
|
4,936
|
-
|
65,532
|
John P.
Tomlinson, III
|
15,633
|
14,080
|
694
|
8,400
|
140
|
294
|
39,241
|
N. Houston Parks
|
5,400
|
14,080
|
502
|
8,400
|
2,539
|
-
|
30,921
|
________________________
(2) Fees and interest for service by Named
Executive Officers on the Board of Directors of the Corporation and the Bank
and certain committees of the Board of Directors of the Bank during the year
ended December 31, 2011 are reflected in the following table:
Name
|
Fees Earned
or Paid in Cash
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan
Compensation
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation Earnings
|
All Other
Compensation
|
Total
|
T. Randy Stevens
|
$ 53,800
|
$
|
$
|
$
|
$ 51,261
|
$
|
$ 105,061
|
Patricia P.
Bearden
**
|
6,400
|
|
|
|
-
|
|
6,400
|
Timothy E.
Pettus
|
34,800
|
|
|
|
6,720
|
|
41,520
|
John P.
Tomlinson, III
***
|
3,600
|
|
|
|
12,033
|
|
15,633
|
N. Houston Parks
***
|
5,400
|
|
|
|
-
|
|
5,400
|
________________________
*
|
Represents interest earned on deferred compensation accounts and/or earnings on compensation
|
|
that is deferred on a basis that is not tax-qualified.
|
**
|
Ms. Bearden was not a director but received fees for attending board meetings.
|
***
|
Mr. Tomlinson and Mr. Parks were not directors but received fees for attending committee meetings.
|
|
|
24
Potential Payments Upon Termination
or Change-in-Control
The Bank has entered into certain
agreements and maintains certain plans that will require it to provide
compensation to Named Executive Officers in the event of death. The amount of
compensation payable to each Named Executive Officer as beneficiary if each
corresponding executive on December 31, 2011 is listed in the tables below.
Mr. Stevens
|
|
|
|
Termination
|
|
|
|
|
Involuntary
|
Involuntary
|
Related to
|
|
|
Executive Benefits and Payments upon
|
|
Termination
|
Termination
|
Change in
|
Death or
|
|
Termination
|
Retirement
|
without Cause
|
for Cause
|
Control
|
Disability
|
|
Cash
Payments
|
$
|
$
|
$
|
$
|
1,410,379
|
(1)
|
Insurance
Benefits
|
|
|
|
|
|
|
Excise
Tax Gross-up
|
|
|
|
|
|
|
Ms. Bearden
|
|
|
|
Termination
|
|
|
|
|
Involuntary
|
Involuntary
|
Related to
|
|
|
Executive Benefits and Payments upon
|
|
Termination
|
Termination
|
Change in
|
Death or
|
|
Termination
|
Retirement
|
without Cause
|
for Cause
|
Control
|
Disability
|
|
Cash
Payments
|
$
|
$
|
$
|
$
|
262,500
|
(2)
|
Insurance
Benefits
|
|
|
|
|
|
|
Excise
Tax Gross-up
|
|
|
|
|
|
|
Mr. Pettus
|
|
|
|
Termination
|
|
|
|
|
Involuntary
|
Involuntary
|
Related to
|
|
|
Executive Benefits and Payments upon
|
|
Termination
|
Termination
|
Change in
|
Death or
|
|
Termination
|
Retirement
|
without Cause
|
for Cause
|
Control
|
Disability
|
|
Cash
Payments
|
$
|
$
|
$
|
$
|
1,162,000
|
(3)
|
Insurance
Benefits
|
|
|
|
|
|
|
Excise
Tax Gross-up
|
|
|
|
|
|
|
Mr. Tomlinson
|
|
|
|
Termination
|
|
|
|
|
Involuntary
|
Involuntary
|
Related to
|
|
|
Executive Benefits and Payments upon
|
|
Termination
|
Termination
|
Change in
|
Death or
|
|
Termination
|
Retirement
|
without Cause
|
for Cause
|
Control
|
Disability
|
|
Cash
Payments
|
$
|
$
|
$
|
$
|
621,642
|
(4)
|
Insurance
Benefits
|
|
|
|
|
|
|
Excise
Tax Gross-up
|
|
|
|
|
|
|
25
Mr. Parks
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
Involuntary
|
Involuntary
|
Related to
|
|
|
Executive Benefits and Payments upon
|
|
Termination
|
Termination
|
Change in
|
Death or
|
|
Termination
|
Retirement
|
without Cause
|
for Cause
|
Control
|
Disability
|
|
Cash
Payments
|
$
|
$
|
$
|
$
|
250,000
|
(5)
|
Insurance
Benefits
|
|
|
|
|
|
|
Excise
Tax Gross-up
|
|
|
|
|
|
|
________________________
(1)
|
The amounts shown reflect a payment to the Named Executive Officers beneficiary equal to the sum of (i) the net-at- risk insurance portion of the proceeds under a split-dollar arrangement (i.e., total proceeds minus the cash surrender value of the policy), plus (ii) an amount equal to the greater of the Named Executive Officers deferral account balance under a Director Deferred Compensation Agreement with the Corporation or a fixed amount based on actuarial calculations, plus (iii) an amount equal to the greater of the Named Executive Officers deferral account balance under a Director Deferred Compensation Agreement with the Bank or a fixed amount based on actuarial calculations, plus (iv) an amount equal to two and one-half times the Named Executive Officers base salary as set forth in the Banks 2002 Group Term Carve-Out Plan.
|
(2)
|
The amount shown reflects a payment to Ms. Beardens beneficiary in an amount equal to two and one-half times Ms. Beardens base salary as set forth in the Banks 2007 Group Term Carve-Out Plan.
|
(3)
|
The amounts shown reflect a payment to the Named Executive Officers beneficiary equal to the sum of (i) an amount equal to the greater of the Named Executive Officers deferral account balance under a Director Deferred Compensation Agreement with the Corporation or a fixed amount based on actuarial calculations, plus (ii) an amount equal to the greater of the Named Executive Officers deferral account balance under a Director Deferred Compensation Agreement with the Bank or a fixed amount based on actuarial calculations, plus (iii) an amount equal to two and one-half times the Named Executive Officers base salary as set forth in the Banks 2002 Group Term Carve- Out Plan.
|
(4)
|
The amount shown reflects a payment to Mr. Tomlinsons beneficiary equal to the sum of (i) Mr. Tomlinsons deferral account balance under a Director Deferred Compensation Agreement with the Corporation, plus (ii) Mr. Tomlinsons deferral account balance under a Director Deferred Compensation Agreement with the Bank plus (iii) an amount equal to two and one-half times Mr. Tomlinsons base salary as set forth in the Banks 2002 Group Term Carve-Out Plan.
|
(5)
|
The amount shown reflects a payment to Mr. Parks beneficiary in an amount equal to two and one-half times Mr. Parks base salary as set forth in the Banks 2002 Group Term Carve-Out Plan.
|
26
COMPENSATION OF DIRECTORS
The following
table summarizes the compensation of the non-management directors for the Bank
and the Corporation during the year ended December 31, 2011.
Name
(1)
|
Fees Earned
or Paid in Cash
|
Stock Awards
|
Option Awards
|
Non-Equity Incentive Plan Compensation
|
Change in Pension
Value and Nonqualified
Deferred
Compensation
Earnings
(2)
|
All Other
Compensation
|
Total
|
Kenneth Abercrombie
|
$37,400
|
$
|
$
|
$
|
$30,605
|
|
$
|
$68,005
|
|
James L. Bailey, Jr.
|
36,400
|
|
|
|
40,033
|
|
|
76,433
|
|
M. Darlene Baxter
|
17,600
|
|
|
|
4,559
|
|
|
22,159
|
|
Jonathan M. Edwards
|
15,400
|
|
|
|
824
|
|
|
16,224
|
|
Thomas Napier Gordon
|
37,200
|
|
|
|
-
|
|
|
37,200
|
|
Dalton M. Mounger
|
37,600
|
|
|
|
2,090
|
|
|
39,690
|
|
Dr. Joseph W. Remke, III
|
18,200
|
|
|
|
14,824
|
|
|
33,024
|
|
Patrick J. Riley
|
24,800
|
|
|
|
-
|
|
|
24,800
|
|
Matthew M. Scoggins, Jr.
|
20,800
|
|
|
|
-
|
|
|
20,800
|
|
W. Lacy Upchurch
|
16,000
|
|
|
|
4,792
|
|
|
20,792
|
|
William R. Walter
|
36,600
|
|
|
|
16,008
|
|
|
52,608
|
|
Dan C. Wheeler
|
22,000
|
|
|
|
30,994
|
|
|
52,994
|
|
Dr. David S. Williams
|
16,200
|
|
|
|
13,007
|
|
|
29,207
|
|
________________________
(1)
|
Messrs. Stevens and Pettus receive compensation for serving as members of the Board of Directors of the Corporation and the Bank and certain committees of the Bank Board as described above in the section entitled EXECUTIVE COMPENSATION Summary Compensation Table.
|
(2)
|
Represents interest earned on deferred compensation accounts.
|
During
2011, each director of the Corporation received an annual retainer of $4,000
and was paid a fee of $600 for each Board meeting attended. Each Bank director
received $600 for each Bank Board of Directors meeting attended and each
honorary Bank director received $400 for each Bank Board of Directors meeting
attended. Each member of the Banks Executive Committee received $400 for each
meeting attended. Each committee chair received $600 and each committee member
received $400 for attendance at any scheduled or formally called committee
meeting of any standing or specially appointed committee. During 2011, the
Corporation and the Bank together paid total cash directors fees of $208,250
and directors fees in the amount of $354,675 were deferred. The method of
compensating directors is the same for management and non-management directors.
Deferred Compensation Agreements and Split-Dollar
Arrangements
Directors of the Corporation may defer fees payable to
them for their service as directors by entering into a Director Deferred
Compensation Agreement with the Corporation. Directors of the Bank may defer fees
under similar agreements with the Bank. Under these agreements, a director may
defer all or some portion of his or her directors fees. Amounts so deferred
are accounted for separately on the books of the Corporation or the Bank, as
the case may be, segregated from other assets owned by the applicable entity
and subject to the claims of general creditors of the applicable entity.
Deferred amounts generally earn interest at
The Wall Street Journals
published
prime rate on the last day of the previous calendar year plus 300 basis points.
Deferred amounts are generally payable to the director on the first to occur of
(i) termination of the directors Board service for reasons other than death or
(ii) termination of the corresponding Director Deferred Compensation Agreement.
If, however, the director dies while serving on the Board of Directors, his
beneficiary will be paid the greater of the deferred amount or the projected
benefit, which is a fixed amount based on actuarial calculations. Hardship
payments may be made out of the deferred amounts in the sole discretion of the
Board of Directors upon request of a director. These agreements may be
terminated by the Corporation or the Bank, as the case may be, at any time upon
90 days advance written notice to the effected director. In general, the
agreements have similar terms but not all of the agreements have identical
terms.
27
For a description of the split-dollar arrangements
with the directors, see the section above entitled COMPENSATION DISCUSSION AND
ANALYSIS Components of Composition Split-Dollar Arrangements and Deferred
Compensation Agreements.
Based on the terms of the Director Deferred
Compensation Agreements and the Director Split-Dollar Agreements, the directors
of the Corporation have the following death benefits:
Name
|
Benefit Under
Split-Dollar
Agreement
with Bank
|
Benefit Under
Deferred Compensation
Agreement
with Bank
|
Benefit Under
Deferred Compensation
Agreement
with Corporation
|
Total Benefit
|
|
|
|
|
|
Kenneth A. Abercrombie
|
$100,000
|
|
$354,374
|
|
$190,212
|
|
$644,586
|
|
James L. Bailey, Jr.
|
100,000
|
|
559,097
|
|
200,632
|
|
859,729
|
|
M. Darlene Baxter
|
-
|
|
176,500
|
|
92,500
|
|
269,000
|
|
Jonathan M. Edwards
|
-
|
|
668,000
|
|
328,000
|
|
996,000
|
|
Thomas Napier Gordon
|
-
|
|
-
|
|
-
|
|
-
|
|
Dalton M. Mounger
|
-
|
|
48,939
|
|
9,589
|
|
58,528
|
|
Timothy E. Pettus
|
-
|
|
750,000
|
|
162,000
|
|
912,000
|
|
Dr. Joseph W. Remke, III
|
100,000
|
|
658,340
|
|
376,797
|
|
1,135,137
|
|
Patrick J. Riley
|
-
|
|
-
|
|
-
|
|
-
|
|
Matthew M. Scoggins, Jr.
|
-
|
|
-
|
|
-
|
|
-
|
|
T. Randy Stevens
|
100,000
|
|
635,438
|
|
224,941
|
|
960,379
|
|
W. Lacy Upchurch
|
-
|
|
163,000
|
|
85,500
|
|
248,500
|
|
William R. Walter
|
100,000
|
|
204,264
|
|
84,854
|
|
389,118
|
|
Dan C. Wheeler
|
100,000
|
|
375,317
|
|
187,281
|
|
662,598
|
|
Dr. David S. Williams
|
100,000
|
|
274,621
|
|
166,189
|
|
540,810
|
|
28
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Ms. Baxter and Messrs. Abercrombie,
Gordon, Riley, Stevens, Walter, and Wheeler served as members of the Banks
Compensation Committee throughout 2011. Mr. Stevens serves as Chairman of the
Board of Directors of the Bank and the Corporation and Chief Executive Officer
of the Bank and the Corporation. None of the other members of the Compensation
Committee, however, have at any time been an officer or employee of the
Corporation or the Bank, nor have any of the members had any other relationship
requiring disclosure by the Corporation. During 2011, none of the executive
officers of the Bank or the Corporation served as a member of another entitys
compensation committee, one of whose executive officers served on the Banks
Compensation Committee or was a director of the Corporation, and none of the
executive officers of the Bank or the Corporation served as a director of
another entity, one of whose executive officers served on the Banks
Compensation Committee. Members of the Compensation Committee may, from time to
time, have banking relationships in the ordinary course of business with the
Bank, as described in the section below entitled RELATED PERSON TRANSACTIONS.
RELATED PERSON TRANSACTIONS
During 2011, the Bank engaged in
customary banking transactions and had outstanding loans to certain of the
Corporations and Banks directors, including Messrs. Abercrombie, Gordon and
Stevens and members of the immediate families of such directors. Messrs.
Abercrombie and Gordon, their affiliates, families and companies in which they
hold 10% or more ownership had outstanding loan balances of $458,011.34 at
December 31, 2011. These loans were made in the ordinary course of business,
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other borrowers, and did not involve more than the normal risk of
collectability or present other unfavorable features.
Neither the Corporation nor the Bank
has any written policies or procedures for the review, approval or ratification
of any related person transaction required to be reported. Nonetheless,
management of the Corporation and the Bank is responsible for reviewing and
approving any transaction between the Corporation or the Bank and any director
or officer of the Corporation, the Bank or members of their immediate family or
entities with which they are affiliated. In addition, on an annual basis each
director and executive officer of the Corporation and the Bank is obligated to
complete a Director and Officer Questionnaire, which requires the director or
executive officer to disclose any related person transactions or business
relationships involving the Corporation or its subsidiaries that are required
to be disclosed pursuant to Item 404 of SEC Regulation S-K. During 2011, there
were no transactions with related persons other than the loans described above.
29
AUDIT
COMMITTEE REPORT
In overseeing the preparation of the
Corporations and the Banks financial statements, the Audit Committee met with
both management and the Corporations independent registered public accounting
firm to review and discuss all financial statements prior to their issuance and
to discuss significant accounting issues. The Corporation files consolidated
financial statements that include the financial condition and results of
operation of the Bank for the periods indicated. In addition, the Audit
Committee took the following actions:
(i) Management advised the Audit Committee that
all financial statements were prepared in accordance with generally accepted
accounting principles.
(ii) The Audit Committee discussed with the
Corporations independent registered public accounting firm the matters
required to be discussed pursuant to Auditing Standards No. 61 as amended
(AICPA Professional Standards, Vol. 1 AU section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T.
(iii) The Audit Committee also received the written
disclosures and the letter from the Corporations independent registered public
accounting firm regarding the independence of such accountants as required by
the applicable requirements of the Public Accounting Oversight Board regarding
the independent accountants communications with the Audit Committee concerning
independence, and has discussed with such accountants their independence from
the Corporation and its management.
(iv) Based on its review and
discussions with the Banks management and the Corporations independent
registered public accounting firm, the Audit Committee recommended to the
Banks Board of Directors, who recommended to the Corporations Board of
Directors, approval of the inclusion of the audited consolidated financial
statements of the Corporation and its subsidiary, the Bank, in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2011 for filing with
the SEC.
Audit Committee of the Banks Board of Directors:
|
|
Dan C. Wheeler, Chairman
|
James L. Bailey, Jr.
|
Jonathan M. Edwards
|
Dalton M. Mounger
|
Dr. Joseph W. Remke, III
|
Matthew M. Scoggins, Jr.
|
Dr. David S. Williams
|
|
30
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Bank has
appointed, and the Corporations Board of Directors has ratified the
appointment of, the firm of BKD LLP to serve as the Corporations independent
registered public accounting firm for 2012. BKD LLP is replacing KraftCPAs
PLLC. Representatives of BKD LLP will be at the annual meeting, will have an
opportunity to make a statement if they desire and will be available to respond
to appropriate questions.
During the period covering the
fiscal years ended December 31, 2010 and 2011, KraftCPAs PLLC performed the
following professional services that were approved by the Audit Committee:
|
|
2011
|
|
2010
|
Audit Fees
(1)
|
|
$ 164,939
|
|
$ 155,530
|
Audit-Related Fees
(2)
|
|
6,850
|
|
8,229
|
Tax Fees
(3)
|
|
20,750
|
|
18,000
|
All Other Fees
(4)
|
|
2,240
|
|
5,447
|
|
|
$ 194,779
|
|
$ 187,206
|
_______________________
(1)
|
Fees for professional services rendered by KraftCPAs PLLC in connection with the audit of the Corporations consolidated annual financial statements, the audit of internal controls over financial reporting (pursuant to Section 404 of Sarbanes-Oxley) and reviews of the interim condensed consolidated financial statements included in the Corporations quarterly reports on Form 10-Q for the first three fiscal quarters of the fiscal years ended December 31, 2010 and 2011.
|
(2)
|
Fees for services rendered by KraftCPAs PLLC for audit of pension plan.
|
(3)
|
Fees for services rendered by KraftCPAs PLLC for assistance with tax compliance regarding tax filings and also for other tax advice and consulting services.
|
(4)
|
Other fees for services consisted of consultations regarding responses to the SEC comment letter in 2011, future modification in REIT taxation, non-accrual interest tax election matters, and regulations regarding amortization of computer related costs for tax purposes.
|
The Audit Committee reviews and
pre-approves each audit and permitted non-audit service provided by the auditor
prior to its engagement to perform such services. The Audit Committee has not
adopted any other pre-approval policies or procedures.
31
GENERAL INFORMATION
Other
Matters
As of the date of this Proxy
Statement, the management of the Corporation and the Bank knows of no other
business that will be presented at the Annual Meeting.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires the Corporations executive
officers, directors and beneficial owners of more than 10% of the Common Stock
to file reports of ownership and changes in ownership with the SEC. Such
executive officers, directors and greater than 10% shareholders are also
required to furnish the Corporation with copies of all Section 16(a) reports
that they file. Based solely on a review of (1) the applicable filings, and
any amendments thereto, made with the SEC and posted on the SECs EDGAR website
and (2) written representations from the Corporations executive officers and
directors, the Corporation believes that all reports were filed in a timely
manner during 2011.
Items
of Business for 2013 Annual Meeting of Shareholders
The Bylaws provide that nominations
of persons for election of directors and proposals of business to be transacted
by the shareholders at an annual meeting of shareholders may be made by any
shareholder of record who is entitled to vote and who provides timely and
proper notice. In order to be considered timely, a shareholders notice must be
received by the Secretary at the principal office of the Corporation not
earlier than the close of business on the date which is 120 calendar days and
not later than the close of business on the date which is 90 calendar days
prior to the first anniversary of the preceding years annual meeting of
shareholders. However, if the date of the applicable years annual meeting is
more than 30 days before or more than 60 days after the first anniversary of
the date of the previous years meeting, then a shareholders notice to be timely
must be received by the Secretary not earlier than the close of business on the
date which is 120 calendar days prior to the date on which the Corporation
first mailed its proxy statement to shareholders in connection with the
applicable years annual meeting and not later than the date of the later to
occur of (i) 90 calendar days before the date on which the Corporation first
mailed its proxy statement to shareholders in connection with the applicable
years annual meeting of shareholders or (ii) ten calendar days after the
Corporations first public announcement of the date of the applicable years
annual meeting of shareholders. In no event shall any adjournment or
postponement of an annual meeting or the public announcement thereof commence a
new time period for the giving of a shareholders notice as described above.
Further, for a shareholders notice
to be proper, it must set forth:
-
the name and address of the
shareholder;
-
the class and number of shares of
stock of the Corporation held of record and beneficially owned by such
shareholder;
-
the name(s), including any
beneficial owners, and address(es) of such shareholder(s) in which all such
shares of stock are registered on the stock transfer books of the Corporation;
-
a representation that the shareholder
intends to appear at the meeting in person or by proxy to submit the business
specified in such notice;
-
a brief description of the
business desired to be submitted to the annual meeting of shareholders, the
complete text of any resolutions intended to be presented at the annual meeting
and the reasons for conducting such business at the annual meeting of
shareholders;
32
-
any personal or other material
interest of the shareholder in the business to be submitted;
-
as to each person whom the
shareholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Exchange Act (including such
persons written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and
-
all other information relating to
the nomination or proposed business which may be required to be disclosed under
applicable law. In addition, a shareholder seeking to submit such nominations
or business at the meeting shall promptly provide any other information
reasonably requested by the Corporation.
Nominations by shareholders of
persons for election to the Corporations Board of Directors may also be made
at a special meeting of shareholders if the shareholders notice, in the form
required by the Bylaws, is delivered to the Corporate Secretary at the
principal office of the Corporation not earlier than the date which is 120
calendar days before the date of such special meeting and not later than the
date of the later to occur of (i) 90 calendar days before the date of such
special meeting of shareholders or (ii) ten calendar days after the
Corporations first public announcement of the date of the special meeting of
shareholders.
Shareholders who wish to nominate a
candidate for election to the Corporations Board of Directors (other than the
candidates proposed by the Corporations Board of Directors) or propose any
other business at the 2013 annual meeting of shareholders must deliver written
notice to the Corporate Secretary at the address below not earlier than
December 21, 2012 or later than January 18, 2013. Shareholders who satisfy the
SEC requirements and wish to have a proposal considered for inclusion in the
Corporations proxy statement for the 2013 annual meeting of shareholders
should submit the proposal in writing by mailing it to the Corporate Secretary
at the address below no later than November 23, 2012.
Any nomination for director or other
proposal by a shareholder that is not submitted in a timely manner and does not
comply with these notice requirements will be disregarded, and upon the
instructions of the presiding officer of the annual meeting all votes cast for
each such nominee and such proposal will be disregarded. Nominations or
proposals for consideration at an annual meeting of shareholders must be sent
to the following address:
First Farmers and Merchants Corporation
Attention:
Corporate Secretary
P.O. Box 1148
Columbia,
Tennessee 38402-1148
Shareholder
Comments at 2012 Annual Meeting of Shareholders
A shareholder who wishes to make
comments to or ask questions of the presiding officer at the Annual Meeting on
April 17, 2012 must submit in writing the comments or questions no later than
April 9, 2012 to: First Farmers and Merchants Corporation, Attention: Corporate
Secretary, P.O. Box 1148, Columbia, TN 38402-1148. Management reserves the
right to edit or exclude any such comments or questions in the interests of
relevance, appropriateness and time. A written communication of any such
editing or exclusion will be sent to the shareholder before the Annual Meeting.
Annual
Report
The Corporations annual report to
shareholders for the fiscal year 2011 is enclosed but is not intended to be
part of this Proxy Statement.
33
COPIES OF
THE CORPORATIONS ANNUAL REPORT ON FORM 10-K FILED WITH THE SEC WILL BE
MAILED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST MADE TO: PATRICIA
P. BEARDEN, TREASURER, FIRST FARMERS AND MERCHANTS CORPORATION, P. O. BOX 1148,
COLUMBIA, TENNESSEE 38402-1148.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting to Be Held on April 17, 2012:
This Proxy Statement and the
Corporations 2011 Annual Report to Shareholders are available on the Tools
Annual Report page of the Corporations website at
www.myfirstfarmers.com.
By
the order of the Board of Directors,
|
|
/s/
Martha M. McKennon
|
|
Martha M. McKennon
|
Corporate Secretary
|
34