UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. )
þ Filed
by the Registrant
o Filed
by a party other than the Registrant
Check
the appropriate box: |
o |
Preliminary
Proxy Statement |
o |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ |
Definitive
Proxy Statement |
o |
Definitive
Additional Materials |
o |
Soliciting
Material Under § 240.14a-12 |
First
Community Corporation
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
|
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Payment
of Filing Fee (Check the appropriate box): |
þ |
No
fee required. |
o |
Fee
paid previously with preliminary materials. |
o |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11. |
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 17, 2023
Dear
Fellow Shareholder:
You
are cordially invited to attend the 2023 Annual Meeting of Shareholders of First Community Corporation, the holding company for First
Community Bank. At the meeting, we will report on our performance in 2022 and answer your questions. We look forward to discussing both
our accomplishments and our plans with you.
This
letter serves as your official notice that we will hold the meeting on May 17, 2023 at 11:00 a.m. local time, at our principal executive
office located at 5455 Sunset Boulevard, Lexington, South Carolina 29072 for the following purposes:
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1. |
To elect as directors the four nominees named in the
accompanying proxy statement; |
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2. |
To approve the compensation of our named executive
officers as disclosed in the accompanying proxy statement (this is a non-binding, advisory vote) (“Say-on-Pay”); |
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3. |
To ratify the appointment of Elliott Davis, LLC as
our independent registered public accountants for 2023; and |
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4. |
To
transact any other business that may properly come before the meeting or any adjournment of the meeting. |
Shareholders
owning shares of our common stock at the close of business on March 10, 2023 are entitled to attend and vote at the meeting. A list of
these shareholders will be available at our principal executive office prior to the meeting.
Important
Notice Regarding the Availability of Proxy Materials for the 2023 Annual Meeting. This year, we are taking advantage of the rules
of the U.S. Securities and Exchange Commission (“SEC”) that allow us to furnish our proxy materials over the Internet. We
are mailing to our shareholders a Notice of Internet Availability of Proxy Materials over the Internet, rather than mailing a full paper
set of the materials. We anticipate that the Notice of Internet Availability of Proxy Materials will first be sent to shareholders on
or before April 7, 2023. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials
on the Internet, as well as instructions on obtaining a paper or e-mail copy of the proxy materials. This process will reduce our costs
to print and distribute our proxy materials, while also reducing our environmental impact.
Attendance
Considerations. Although our informal policy is generally to have our board members be present in person at our annual meeting of
shareholders, that is not a legal requirement. We are encouraging but not requiring our directors to attend the annual meeting in person
this year.
You
have a number of ways to vote in addition to voting by ballot if you are present in person at the meeting, and we encourage you to use
them. We encourage you to vote as soon as possible by telephone, through the Internet, or by signing, dating and mailing your proxy card
in the envelope enclosed. Telephone and Internet voting permits you to vote at your convenience, 24 hours a day, seven days a week. If
your shares are held in the name of a bank, broker or other holder of record, you are considered the beneficial owner of shares held
in “street name,” and you will receive instructions from such holder of record that you must follow for your shares to be
voted. Please follow their instructions carefully. Also, please note that if the holder of record of your shares is a bank, broker or
other nominee and you wish to vote in person at the annual meeting, you must request a legal proxy or broker’s proxy from your
bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the annual meeting.
Please
use this opportunity to take part in our affairs by voting on the business to come before this meeting.
By
order of the Board of Directors,
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C.
Jimmy Chao |
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Michael
C. Crapps |
Chairman
of the Board |
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President
and Chief Executive Officer |
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5455
Sunset Boulevard, Lexington, South Carolina 29072
Telephone:
(803) 951-2265 / Fax: (803) 358-6900
FIRST
COMMUNITY CORPORATION
5455
Sunset Boulevard Lexington, South Carolina 29072
Proxy
Statement for Annual Meeting of Shareholders to be Held on May 17, 2023
The
board of directors of First Community Corporation, “we,” “us,” “our,” or the “company,”
is furnishing this proxy statement to solicit proxies for use at our 2023 Annual Meeting of Shareholders. This proxy statement contains
important information for you to consider when deciding how to vote on the matters brought before the meeting. We encourage you to read
it carefully. We anticipate that the Notice of Internet Availability of Proxy Materials will first be sent to shareholders on or about
April 7, 2023. The proxy statement and the form of proxy relating to the annual meeting are first being made available to shareholders
on or about April 4, 2023.
Voting
Information
Our
board of directors set March 10, 2023 as the record date for the meeting. Shareholders owning shares of our common stock at the close
of business on that date are entitled to attend and vote at the meeting, with each share entitled to one vote on all matters voted on
at the meeting. There were 7,591,095 shares of common stock outstanding on the record date.
Quorum
and Adjournment
A
majority of the issued and outstanding shares of common stock entitled to vote at the meeting will constitute a quorum. If a quorum is
not present or represented at the meeting, the shareholders entitled to vote, present in person or represented by proxy, shall have the
power to adjourn the meeting, without notice other than announcement at the meeting, until a quorum is present or represented. At an
adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the
meeting as originally notified. Once a share is represented for any purpose at a meeting it is deemed present for quorum purposes unless
a new record date is set. We will count abstentions and broker non-votes, which are described below, in determining whether a quorum
exists.
Shares
Held in Street Name
Many
of our shareholders hold their shares through a broker, bank, or other nominee rather than directly in their own name. If you hold our
shares in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name,
and your broker or nominee, who is considered the shareholder of record with respect to those shares, is forwarding these materials to
you. As the beneficial owner, you have the right to direct your broker, bank, or other nominee how to vote and are also invited to attend
the annual meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the meeting unless
you obtain a signed proxy from the shareholder of record giving you the right to vote the shares. Your broker, bank, or other nominee
has enclosed or provided a voting instruction card for you to use to direct your broker, bank, or other nominee how to vote these shares.
If
a share is represented for any purpose at the annual meeting by the presence of the registered owner or a person holding a valid proxy
for the registered owner, it is deemed to be present for the purpose of establishing a quorum. Therefore, valid proxies which are marked
“Abstain” or “Withhold” or as to which no vote is marked, including broker non-votes (which are described below),
will be included in determining whether a quorum is present at the annual meeting.
Appointed
Proxies
When
you sign the proxy card, you appoint D. Shawn Jordan and John F. (Jack) Walker, IV as your representatives at the meeting. Messrs.
Jordan and Walker will vote your proxy as you have instructed them on the proxy card. If you submit a proxy but do not specify how
you would like it to be voted, Messrs. Jordan and Walker will vote your proxy for the election to the board of directors of all
nominees listed below under “Election of Directors,” for the approval of the compensation of our named executive
officers as disclosed in this proxy statement (this is a non-binding, advisory vote), and for the ratification of the appointment of our independent registered
public accountants for the year ending December 31, 2023. We are not aware of any other matters to be considered at the meeting. However,
if any other matters come before the meeting, Messrs. Jordan and Walker will vote your proxy on such matters in accordance with their
judgment.
Required Vote
Assuming
that a quorum is present:
| · | Proposal
No. 1: Election of Directors. Our directors will be elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and entitled to vote
on the election of directors. This means that the nominees who receive the highest number
of votes are selected as directors up to the maximum number of directors to be elected at
the meeting. There is no cumulative voting with respect to the election of directors. Abstentions,
broker non-votes or the failure to return a signed proxy will not be counted and will have
no impact on the election of a director. A shareholder may vote “FOR” or “WITHHOLD”
authority to vote for each of the nominees. If a shareholder withholds authority to vote
with respect to one or more director nominees, such vote will have no effect on the election
of such nominees. |
| · | Proposal
No. 2: Non-Binding, Advisory Vote on Compensation of the Named Executive Officers. The
proposal will be approved if the number of shares of common stock voted in favor of the matter
exceeds the number of shares of common stock voted against the matter. This vote is advisory
and will not be binding upon our board of directors. However, the Human Resources and
Compensation Committee (which we refer to in this proxy statement as the “compensation
committee”) and the board of directors will take into account the outcome of the vote
when considering future executive compensation arrangements. If a shareholder submits a proxy
but does not specify how he or she would like it to be voted, then the proxy will be voted
“FOR” the approval of the compensation of our named executive officers. Abstentions,
broker non-votes, and the failure to return a signed proxy will have no effect on the outcome
of the votes on this matter. |
| · | Proposal
No. 3: Ratification of the Appointment of Elliott Davis, LLC. The proposal will be approved
if the number of shares of common stock voted in favor of the matter exceeds the number of
shares of common stock voted against the matter. If a shareholder submits a proxy but does
not specify how he or she would like it to be voted, then the proxy will be voted “FOR”
the ratification of the appointment of Elliott Davis, LLC as our independent registered public
accountants for the year ending December 31, 2023. Abstentions, broker non-votes, and the
failure to return a signed proxy will have no effect on the outcome of the votes on this
matter. |
Revocability
of Proxies and Changes to Your Vote
If
you are a shareholder of record (i.e., you hold your shares directly instead of through a brokerage account), you may revoke your proxy
or change your vote by
| · | signing
and delivering another proxy with a later date, |
| · | voting
in person at the meeting, or |
| · | voting
again over the Internet or by telephone prior to 11:59 pm, Eastern Time, on May 16, 2023. |
If
you hold your shares through a brokerage account, you must contact your brokerage firm to revoke your proxy. Further, if you hold your
shares in street name, your brokerage firm may vote your shares under certain circumstances. Brokerage firms have authority under stock
exchange rules to vote their customers’ unvoted shares on certain “routine” matters. We expect that brokers will be
allowed to exercise discretionary authority for beneficial owners who have not provided voting instructions ONLY with respect to Proposal
No. 3 Ratification of the Appointment of Elliott Davis, LLC—but not with respect to any of the other proposals to be voted
on at the annual meeting. If you hold your shares in street name, please provide voting instructions to your bank, broker or
other nominee so that your shares may be voted on all other proposals.
Solicitation
of Proxies
The
proxy for our annual meeting is being solicited on behalf of our board of directors. Proxies may be solicited by our directors, officers
and other employees in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees
will receive no compensation for these activities in addition to their regular compensation, but may be reimbursed for out-of-pocket
expenses in connection with such solicitation. We will bear the entire cost of soliciting proxies from you. In addition to the delivery
of proxy materials by mail, we may request banks, brokers and other record holders to send proxies and proxy materials to the beneficial
owners of our common stock and secure their voting instructions and will reimburse them for their reasonable expenses in so doing.
Important
Notice of Internet Availability
This
proxy statement and the accompanying 2022 Annual Report on Form 10-K are available to the public for viewing on the Internet at www.proxyvote.com.
Pursuant to the SEC “Notice and Access” rules, we are furnishing our proxy materials to our shareholders over the Internet
instead of mailing each of our shareholders paper copies of those materials. As a result, we will send our shareholders by mail a Notice
of Internet Availability of Proxy Materials, which we refer to as the Notice, containing instructions on how to access our proxy materials
over the Internet and how to vote. The Notice is not a ballot or proxy card and cannot be used to vote your shares of common stock.
The Notice also tells you how to access your proxy card to vote on the Internet. If you received a Notice by mail and would like to receive
a printed or email copy of the proxy materials, please follow the instructions included in the Notice. You will not receive paper copies
of the proxy materials unless you request the materials by following the instructions on the Notice.
If
you own shares of common stock in more than one account—for example, in a joint account with your spouse and in your individual
brokerage account—you may have received more than one Notice. To vote all of your shares of common stock, please follow each of
the separate proxy voting instructions that you received for your shares of common stock held in each of your different accounts.
Availability
of Information; Householding
The
SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements
and annual reports, or Notices Regarding the Availability of Proxy Materials, if applicable, with respect to two or more shareholders
sharing the same address by delivering a single proxy statement and annual report, or Notice Regarding the Availability of Proxy Materials,
if applicable, addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially
means extra convenience for shareholders and cost savings for companies. In accordance with these rules, only one proxy statement and
annual report, or Notice Regarding the Availability of Proxy Materials, if applicable, will be delivered to multiple shareholders sharing
an address unless we have received contrary instructions from one or more of the shareholders.
Shareholders
who currently receive multiple copies of the proxy statement and annual report at their address and would like to request “householding”
of their communications should contact their broker if they are beneficial owners or direct their request to us at the contact information
below if they are registered holders.
If,
at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and
annual report, or Notice Regarding the Availability of Proxy Materials, if applicable, please notify your broker, if you are a beneficial
owner or, if you are a registered holder, direct your written request to the contact information below.
Upon
written or oral request, we will promptly deliver a separate copy of our annual report on Form 10-K or this proxy statement to our shareholders
at a shared address to which a single copy of the document was delivered. Please address such requests to us at the contact information
below.
First
Community Corporation
Attention:
Corporate Secretary
5455
Sunset Blvd.
Lexington,
South Carolina 29072
Telephone:
(803) 951-0500
Proposal
No. 1
Election
of Directors
Our
board of directors currently has 12 members divided into three classes with staggered terms, so that the terms of only approximately
one-third of our board members expire at each annual meeting. The current terms of the Class II directors will expire at this 2023 annual
meeting of shareholders. The terms of the Class III directors will expire at the 2024 annual meeting of shareholders, and the terms of
the Class I directors will expire at the 2025 annual meeting of shareholders.
Our
current directors and their classes are:
Class
I | |
Class
II | |
Class
III |
Michael
C. Crapps | |
Thomas
C. Brown* | |
C. Jimmy
Chao |
Jan
H. Hollar | |
W.
James Kitchens, Jr.* | |
Ray
E. Jones |
Mickey
E. Layden | |
Edward
J. Tarver* | |
E.
Leland Reynolds |
Jane
S. Sosebee | |
Roderick
M. Todd, Jr.* | |
Alexander
Snipe, Jr. |
| |
| |
|
*
Standing for re-election by the shareholders at the meeting.
Under
our bylaws, in the event that a director attains age 72 during the director’s term of office, the director shall serve only until
the director’s current term expires and shall not be eligible for re-election. None of the Class II director nominees will attain
the age of 72 prior to our 2023 Annual Meeting of Shareholders on May 17, 2023.
Thomas
C. Brown, W. James Kitchens, Jr., Edward J. Tarver, and Roderick M. Todd, Jr., our current directors whose terms expire at this annual
meeting, have been nominated by the board of directors to be elected at the meeting to serve a three-year term expiring at the 2026 annual
meeting of shareholders or until each person’s successor is duly elected and qualified. The board of directors recommends that
you elect Class II director nominees Messrs. Brown, Kitchens, Tarver, and Todd as Class II directors.
If
a quorum is present, the directors will be elected by a plurality of the votes cast at the meeting. This means that the four nominees
receiving the highest number of votes will be elected directors. There is no cumulative voting with respect to the election of directors.
Abstentions, broker non-votes, and the failure to return a signed proxy will have no effect on the outcome of the vote on this matter.
You may vote “FOR” or “WITHHOLD” authority to vote for each of the nominees. If you “withhold” authority
to vote with respect to one or more director nominees, your vote will have no effect on the election of such nominees. If you submit
a proxy but do not specify how you would like it to be voted, Messrs. Jordan and Walker will vote your proxy to elect each of the Class
II director nominees Messrs. Brown, Kitchens, Tarver, and Todd. If any of these nominees is unable or fails to accept nomination or election
(which we do not anticipate), Messrs. Jordan and Walker will vote instead for a replacement nominee to be recommended by the board of
directors, unless you specifically instruct otherwise in the proxy.
Director
Qualifications
All
of our directors bring to the board of directors leadership experience, derived from their business, professional, and board experiences.
Four of our current 12 directors have served as directors of the company since its inception in 1994. Two directors were directors on
the board of companies that we acquired, one in 2006 and one in 2014. Four directors have previously served on non-related bank boards.
Certain individual qualifications and skills of our directors that contribute to the board of directors’ effectiveness as a whole
are described in the information provided below.
Information
Regarding Our Nominees and Directors
The
following describes at least the last five years of business experience of each nominee proposed for election as a director, as well
as the specific experience, qualifications, attributes or skills that led to the conclusion that the nominee should serve as our director.
There is no family relationship between any of our directors, nominees or executive officers, and there are no arrangements or understandings
between the directors and any other person pursuant to which he or she was or is to be selected as a director or nominee. Each of our
directors is also a director of First Community Bank, which we refer to herein as the “bank.”
Information
Regarding Nominees for Directors
Set
forth below is information about our four Class II nominees to the board of directors. Each nominee has consented to being named as a
nominee and agreed to serve if elected. If any named nominee is unable to serve, proxies will be voted for the remaining named nominees.
Class
II Nominees
Thomas
C. Brown, 65, Class II director, has served as our director since our formation in 1994. Mr. Brown is currently the Rector
at St. Paul’s Church in Greenville, South Carolina and has served in that role since 2011. From 2008 to 2011, he served as the
Assistant Rector at All Saints Church, Pawley’s Island, South Carolina. Previously, Mr. Brown was the president and owner of T.C.B.
Enterprises of South Carolina, Inc., a Myrtle Beach based restaurant business. Mr. Brown graduated from Clemson University in 1981 with
a B.S. degree in Civil Engineering. He completed a three-year term serving on the Clemson Board of Visitors.
Mr.
Brown has owned and operated a small business for many years. He has extensive knowledge of the small business environment and the related
challenges. He brings to the board his unique insight and useful perspective related to the small business environment, which is a primary
target market segment for us.
W.
James Kitchens, Jr., 61, Class II director, has served as our director since our formation in 1994 and as our vice chair since
2021. Mr. Kitchens is president of The Kitchens Firm, PA (formerly known as The Kitchens Firm, Inc.), and its predecessor firm, an accounting
firm located in Columbia, South Carolina and has served in that role since 1996. He is a Certified Public Accountant and an investment
consultant and currently holds the Chartered Financial Analyst designation. Mr. Kitchens earned a B.S. degree in mathematics from The
University of the South in 1984 and an M.B.A. degree from Duke University in 1986.
Mr.
Kitchens brings to the board knowledge and understanding of tax and financial accounting issues. He has lived most of his life in the
Midlands of South Carolina and has a strong knowledge of the business environment in the markets we serve.
Edward
J. Tarver, 63, Class II director, has served as our director since 2017. Mr. Tarver co-founded the law firm of Enoch Tarver,
P.C. in 2017. Prior to opening his own law firm, he served as the U.S. Attorney for the Southern District of Georgia from November 2009
to March 2017 and was an associate and partner with the Hull Barrett, P.C. law firm in Augusta, Georgia from 1992 to 2009. In 1999, he
became a partner at Hull Barrett, P.C. practicing employment discrimination, general civil litigation and public finance law. Mr. Tarver
was elected as a Senator in the Georgia General Assembly representing Senate District 22 in 2005 and was re-elected in 2006 and 2008.
He has previously served as a director for Georgia Bank and Trust Company, Georgia Lawyers Insurance Company, Southeastern Natural Sciences
Academy, and the Georgia Chamber of Commerce. Mr. Tarver served in the U.S. Army as a Field Artillery Officer for seven years, attaining
the rank of Captain. He received his B.A. degree from Augusta State University in 1981 and a J.D. degree from the University of Georgia
School of Law in 1991.
Mr.
Tarver’s experience as a U.S. Attorney, co-founder of the law firm of Enoch Tarver, P.C., and a partner in the legal firm of Hull
Barrett, P.C., as well as his prior experience on various boards as a director, brings significant organizational and administrative
skills to our board of directors. As a U.S. Attorney, he spent considerable time investigating and prosecuting white-collar fraud and
cyber-related criminal activity. His legal experience and insights provide our board with important perspective on corporate governance
related matters and corporate strategy.
Roderick
M. Todd, Jr., 59, Class II director, has served as our director since our merger with DeKalb Bankshares, Inc.
in June 2006. Mr. Todd served as a director of DeKalb Bankshares, Inc. and the Bank of Camden, from its inception in 2001 until
June 2006. In July 2000, Mr. Todd founded the law firm Roderick M. Todd, Jr. Attorney and Counselor at Law. Formerly, he was a partner
in Cooper and Todd, LLP, Attorneys, from 1994 to 2000. Mr. Todd is a graduate of the University of South Carolina and the University
of South Carolina School of Law.
Mr. Todd
has extensive experience in running and operating his own legal practice in Camden, South Carolina. As a prior director of a start-up
community bank, he brings additional insights to our board, relative to community bank operations. He has strong ties to the Camden market,
which is a market into which we expanded in 2006 through our acquisition of DeKalb Bankshares, Inc.
Information
Regarding Continuing Directors
Set
forth below is also information about each of our other directors.
Michael
C. Crapps, 64, Class I director, has served as our president and chief executive officer and as a director since our formation
in 1994. He received a B.S. degree in Economics in 1980 from Clemson University, an M.B.A. degree from the University of South Carolina
in 1984, and is a graduate of the LSU Graduate School of Banking of the South. He began his banking career with South Carolina National
Bank in 1980 and, from 1985 to 1994, he was with Republic National Bank in Columbia, South Carolina where he became president, chief
executive officer, and a director of that bank. During his career, Mr. Crapps has been responsible for virtually all aspects of banking,
including branches, commercial banking, operations, credit administration, accounting, human resources, and compliance. Mr. Crapps has
served the banking industry as a member of the Federal Reserve Bank of Richmond’s Charlotte Branch Board of Directors and the Federal
Reserve Bank of Richmond’s Community Depository Institutions Advisory Council. He has also served with the South Carolina Bankers
Association (“SCBA”), as a former chair and on its board of directors. The SCBA selected Mr. Crapps as the 1997 Young Banker
of the Year. Additionally, he currently serves his local community as follows:
| · | Clemson
University IPTAY Board of Directors, |
| · | Midlands
Business Leadership Group, serving on its Executive Committee and co-chair of its Coordinating
Council, and |
| · | Business
Development Corporation Board of Directors and Executive Committee member. |
He
is a past chair of Navigating from Good to Great (Ng2G) Foundation Board of Directors, the Greater Lexington Chamber of Commerce, the
Saluda Shoals Park Foundation and the South Atlantic Division of the American Cancer Society. Furthermore, he previously served on the
Clemson University Foundation Board of Directors.
Mr.
Crapps’ experience in banking and vision for our company give him the leadership and consensus building skills that provide significant
insight and expertise to the board. As a lifelong resident of Lexington, South Carolina, he has significant ties to the Midlands of South
Carolina. He has been very active in local community and civic organizations.
Mr.
Crapps has received numerous awards during his career including multiple recognitions as one of the 50 Most Influential People in our
local communities and is a 2022 inductee into their Hall of Fame. In 2021, he was recognized by SC Biz as the number one “Power
Player” in the banking sector in South Carolina. He has recently been recognized by the South Carolina Foundation for Educational
Leadership and the South Carolina Association of School Administrators as a 2023 Distinguished South Carolina Public School Graduate,
one of three people statewide to be recognized with this award.
Under
Mr. Crapps’ leadership, First Community Bank has been recognized multiple times as a “best bank,” “best mortgage
lender,” and “best places to work” in addition to numerous lending awards from the Small Business Administration.
Jan
H. Hollar, 67, Class I director, has served as our director since May 2021. Ms. Hollar is a retired banker with a career that
spanned 40 years in community banking with institutions ranging in size from de novo to $4.5 billion. Prior to retiring, Ms. Hollar most
recently served as interim chief executive officer of the Myrtle Beach Area Chamber of Commerce from May 2018 to August 2018. Before
that, she served as chief executive officer and as a member of the Board of Directors of HCSB Financial Corporation (Nasdaq: HCFB), and
its banking subsidiary Horry County State Bank, from April 2016 until it was acquired in July 2017 and as consulting CEO from October
2015 until April 2016. Ms. Hollar was hired by HCFB to rebuild and recapitalize the bank. From 2008 until 2017, Ms. Hollar self-owned
and operated Jan H. Hollar, CPA, PC, a professional corporation providing accounting consulting for financial institutions. Ms. Hollar
has served as chief financial officer for four different community banks and has directed bank operations in the areas of finance, accounting,
deposits, loans, human resources, technology, facilities, strategic planning and shareholder relations. She is a licensed CPA in South
Carolina and North Carolina. She has worked as a consultant for a number of community banks and has served as instructor at the South
Carolina Banker’s School. Ms. Hollar’s community involvement and philanthropic activities include prior work with Lily Pad
Haven, a Charlotte-based safe haven for sex-trafficking victims and the Kajiado Children’s Home ministry in Kenya. A Furman University
graduate, she holds a bachelor’s degree in economics and business administration with a concentration in accounting. She currently
resides in Greenville and Myrtle Beach, South Carolina.
Ms.
Hollar’s extensive experience in community banking including leadership positions in executive management and at the board level
in addition to experience in a number of areas of bank operations brings substantial insight to our board as it relates to the opportunities,
challenges and issues in the community banking industry and her connections to the Upstate of South Carolina provide us with insight
and connection to that market.
Mickey
E. Layden, 68, Class I director, has served as our director since May 2019. Ms. Layden is the President/CEO of LCK, LLC, a partner
firm of Colliers International South Carolina and a certified women-owned project management services organization. She is also Executive
Vice President and Principal of Colliers International South Carolina. Since 1988, Ms. Layden has led the real estate management division
of Colliers International South Carolina, overseeing a large staff and responsible for over 18 million square feet of space. Ms. Layden
has served in senior leadership roles at the national level within the Institute of Real Estate Management (“IREM”), including
Senior Vice President for Membership, IREM Foundation board member, IREM faculty member and chair of numerous other committees within
the organization. In January 2020, she was recognized as one of the “50 Most Influential People in Columbia” by the Columbia
Business Monthly. Furthermore, she has been recognized in many publications and organizations as a woman of influence in the business
community, receiving the 2013 Influential Women in Business CEO Award, the 2010 Corporate TWIN Award, the 2011 Girl Scouts of South Carolina
Mountains to Midlands Women of Distinction Award, and she was included in the Columbia Business Monthly’s 2011 “Women of
Influence”. She currently serves her local community as a member of the board of directors of the Lexington Medical Center and
a member of the Midlands Business Leadership Group.
Additionally,
Ms. Layden is a past chair of the board of directors of Midlands Housing Alliance, Inc. (Transitions) and secretary and executive committee
member of the YMCA board of directors. She has served in leadership roles of many other organizations and community projects throughout
her career, including being a past member of the board of trustees of South Carolina Independent Colleges and Universities.
As
an experienced business professional, Ms. Layden has many ties to the Midlands of South Carolina and has been very active in local community
and civic organizations—all of which qualify her to serve on our board of directors and enhance her ability to contribute as a
director.
Jane
S. Sosebee, 66, Class I director, has served as our director since May 2019. Ms. Sosebee recently retired after over 44 years
of experience in the telecommunication industry. From 2019 until her retirement, she was the state President of AT&T South Carolina,
where she was responsible for its regulatory, economic development, legislative and community affairs activities in the state. She has
served AT&T and its predecessor companies for over 44 years in various leadership positions. Ms. Sosebee has worked closely with
state and community leaders to help bring new technology and jobs to the state and improve the quality of life for South Carolinians.
A
native of Laurens, South Carolina, Ms. Sosebee attended Clemson University, where she was awarded a Bachelor’s in English. She
has served on and chaired the Clemson University Foundation Board. In 2009, she was awarded the University’s Distinguished Service
Award. This award is the highest honor that the Alumni Association can bestow and is given to those alumni who have not only devoted
their life to professionalism and public service, but who have also continued a lifelong dedication to Clemson University. She is currently
serving or has served the local community as follows:
· |
Clemson University Finance Corporation – Past Board Member |
· |
Greenville Chamber – Past Board Member and Chair |
· |
Upstate Alliance – Past Board Member and Chair |
· |
Anderson Chamber – Past Board Member |
· |
Palmetto Bank – Past Director |
· |
First Citizen’s Bank – Past Community Advisory Board Member |
· |
Peace Center – Past Trustee |
· |
Urban League of the Upstate – Past Regional Board Member |
· |
Tri-County Technical College Foundation – Past Board Member |
· |
Leadership SC Alumna |
· |
Leadership Anderson Alumna |
· |
Fort Hill Presbyterian Church - Elder |
Ms.
Sosebee’s extensive business experience, volunteerism, leadership, and knowledge of the markets that we serve qualify her to serve
on our board of directors and enhance her ability to contribute as a director.
C.
Jimmy Chao, 67, Class III director, has served as our director since our formation in 1994 and as our chairman since 2021. Mr.
Chao served as vice chair from May 2020 to May 2021. Mr. Chao lives in Lexington, South Carolina, and, since 1987, he has been CEO of
the engineering firm, Chao and Associates, Inc., located in Columbia, South Carolina. Furthermore, he served as president of the engineering
and surveying firm, Chao Engineering, Inc. from 2000 to 2020. He received a M.S. degree in Structural Engineering at the University of
South Carolina and completed all of the course requirements for his PhD. Mr. Chao is a member of the American Society of Civil Engineers,
the National Society of Professional Engineers and the Society of American Military Engineers. In 2009, he was selected as SC Civil Engineer
of the Year by the American Society of Civil Engineers. He holds a Professional Engineer license in South Carolina, North Carolina, Georgia,
Alabama, Florida and many other states. He is past chair of the Educational Foundation of Lexington School District One and a member
of the University of South Carolina’s Design Review Committee. He serves as an adjunct professor at the University of South Carolina
Department of Civil & Environmental Engineering. In 2017, he was appointed by the Governor of South Carolina to the Board of Registration
for Professional Engineers and Surveyors.
Mr.
Chao has a strong knowledge of the issues facing small business professionals, which is a target market segment for us. He has extensive
knowledge of the business environment and the markets we serve.
Ray
E. Jones, 52, Class III director, has served as our director since January 2021. Since 2004, Mr. Jones has served as a Partner
in the Columbia office of Parker Poe Adams & Bernstein LLP, Attorneys and Counselors at Law. In his role as Partner in the Columbia
office of Parker Poe, Mr. Jones provides advice and counsel to a broad spectrum of clients in matters relating to public finance, local
taxation, financing of affordable housing and economic development. A native of Columbia, South Carolina, Mr. Jones attended the University
of South Carolina where he received a Bachelor’s in Finance, a Master’s in International Business Administration through
the Darla Moore School of Business and a Juris Doctorate through the School of Law. Mr. Jones has received numerous recognitions for
his work as an attorney focused on economic development and public finance.
Furthermore,
Mr. Jones has served on the following boards:
| · | Saluda
Shoals Foundation, Board of Directors, 2013-2020, Chair, 2017, |
| · | March
of Dimes, Board of Directors, South Carolina Chapter, 2005-2010; Chair, 2007-2008, and |
| · | South
Carolina Economic Developers’ Association, Board of Directors, 2011-2013. |
With
more than 20 years of experience, Mr. Jones brings a wealth of knowledge of South Carolina businesses, local government, public finance,
affordable housing and economic development and is an invaluable asset to our board.
E.
Leland Reynolds, 68, Class III director, has served as a director since our merger with Savannah River Banking Corporation (“Savannah
River”) in February 2014. He is the co-owner and vice president, since 1986, of H. G. Reynolds Co, Inc., a regional general contractor
specializing in governmental and educational construction. Mr. Reynolds is a graduate of Clemson University, where he received his degree
in Building Science. His civic and professional associations include Clemson University, Aiken Edgefield Economic Development Partnership,
and USC Aiken.
Mr.
Reynold’s experience and background as a co-owner and executive of a regional business allows him to bring significant management
and leadership skills to our board. He has strong community ties to Aiken, South Carolina and the surrounding markets.
Alexander
Snipe, Jr., 71, has served as a Class III director of our board since May 2005. Since September 1992, Mr. Snipe has been
the president and chief executive officer of Glory Communications, Inc., which is headquartered in Columbia, South Carolina, and operates
radio stations in Columbia, Florence, and Moncks Corner, South Carolina; and Augusta, Georgia. Prior to forming Glory Communications,
Inc., Mr. Snipe was a general sales manager at one of Columbia’s top radio stations for 10 years. He has over 30 years of broadcasting
experience; serves on the South Carolina Broadcasters Association board of directors; is a past president of such Association; and is
a South Carolina’s Broadcast Hall of Fame inductee. He is a former board member of the Columbia Urban League, the William L. Bonner
Bible College, The Gospel Heritage Foundation, and the National Association of Broadcasters Radio Board.
Mr.
Snipe has significant experience operating a small business since 1992. He is an active community leader and serves several other associations
and foundations. He has strong ties to the Midlands of South Carolina and has extensive knowledge of the business environment and the
markets we serve.
Information
Regarding Our Executive Officers
Biographical
information for each of our executive officers is provided below (other than Mr. Crapps). Because Mr. Crapps also serves on our board
of directors, we have provided his biographical information above with our other directors.
John
Ted Nissen, 61, has been with the bank since its inception in 1995 and has been the chief banking officer of the company and
the president and chief banking officer of the bank since March 2021. Prior to March 2021, Mr. Nissen was the chief commercial and retail
banking officer of the company since June 2019; and executive vice president and chief commercial and retail banking officer of the bank
since February 2013. He also serves as a member of the bank’s Executive Leadership Team. A graduate of Presbyterian College in
Clinton, South Carolina, Mr. Nissen has over 37 years of experience in the banking industry. He is an active board member and chairman
of the Lexington Medical Center Foundation Board, a past board member of the South Carolina Bankers Association, and currently serves
on the Loan Approval Committee for the Business Development Corporation and also serves on the Competitiveness Council for Midlands Business
Leadership Group (MBLG). He is a graduate of Leadership Columbia and past board member of Engenuity SC, the Columbia Chamber of Commerce,
Midlands Technical College Foundation, the Boys and Girls Club, and Harvest Hope Food Bank.
Robin
D. Brown, 55, has been with the bank since it began organization in August of 1994. She has served as chief human resources
officer and chief marketing officer of the company since June of 2019; and executive vice president and chief human resources officer
and chief marketing officer of the bank since February 2013. She also serves as a member of the bank’s Executive Leadership Team.
Ms. Brown has 38 years of experience in the banking industry and worked for the National Bank of South Carolina and Republic National
Bank prior to joining the company. Ms. Brown currently serves on and is a past Chairperson of the Human Resources Committee of the South
Carolina Bankers Association. Ms. Brown is a magna cum laude graduate of the University of South Carolina Honors College and received
her B.S. degree in Business Administration and did post graduate work at the USC School of Business. Ms. Brown is a founding board member
of the Lexington County Sheriff’s Foundation and has served that organization in various roles since 1999. She is a board member
of Carolina Wildlife Center and is a past board member of the Palmetto Center for Women. She is also a graduate of Leadership Lexington
County.
Tanya
A. Butts, 64, has been the chief operations/risk officer of the company since June 2019 and executive vice president and chief
operations/risk officer of the bank since November 2016. She also serves as a member of the bank’s Executive Leadership Team. Prior
to joining the bank, Ms. Butts had more than 32 years of experience in financial services, working for regional, national and international
commercial banking and mortgage banking organizations such as BancBoston Mortgage, Chase Mortgage, National Australia Bank, Carolina
First Bank and TD Bank. During her career, she has been responsible for senior or executive management of information technology and
bank operations and risk, and has helped lead organizations through significant change. She earned a B.S. degree from Jacksonville University,
graduating magna cum laude. She is an active community volunteer and presently serves on the United Way of the Midlands Board.
D.
Shawn Jordan, 55, has been the executive vice president and chief financial officer of the company and bank since January 2020
and the executive vice president of the company and bank since November 2019. He also serves as a member of the bank’s Executive
Leadership Team. During Mr. Jordan’s 31-year career in the banking industry, he has held leadership and executive positions with
public and private financial institutions including local, regional and national organizations. His responsibilities have included corporate
analytics; strategic planning; budgeting; forecasting; management, board, regulatory and external reporting; balance sheet management,
including capital, liquidity, funding and interest rate risk planning and management; expected credit losses and allowance for loan and
lease losses modeling, including CECL; regulatory relations; wealth management; valuation analysis; and mergers and acquisitions. Mr.
Jordan served as senior vice president and manager of corporate analytics with IBERIABANK from April 2018 to November 2019. Prior to
joining IBERIABANK, from October 2011 until its merger with State Bank Financial Corporation in October 2017, Mr. Jordan worked with
AloStar Bank of Commerce where he served as executive vice president and chief financial officer. Mr. Jordan stayed on with State Bank
Financial Corporation until March 2018. He holds a bachelor’s degree in economics from Centre College and an M.B.A. from Eastern
Kentucky University.
John
F. (Jack) Walker, IV, 57, has over 34 years of experience in the banking industry. He has been the executive vice president and
chief credit officer of the company and the bank since August 2019 and has been with the bank since September 2009. He has held various
positions within the credit administration area, most recently being promoted to executive vice president and chief credit officer of
the bank on August 1, 2019. He also serves as a member of the bank’s Executive Leadership Team. Prior to becoming the chief credit
officer, Mr. Walker served as the bank’s senior vice president – loan approval and special assets officer. From 2005 through
2009, he worked at NetBank Business Finance as a director of franchise/commercial credit. Prior to this, he was with SouthTrust Bank
for five years as a senior vice president – commercial banking and for 10 years with SunTrust Bank as a first vice president. He
earned a bachelor’s degree in computer science from Yale University.
Proposal
No. 2
Non-Binding,
Advisory Vote on Compensation of the Named Executive Officers
The
rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enable our shareholders to vote
to approve, on a non-binding basis, the compensation of our named executive officers. Accordingly, we are asking you to approve the compensation
of our named executive officers as described under “Director and Executive Officer Compensation” and the tabular disclosure
regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement. The vote
on this resolution is not intended to address any specific element of compensation, but rather relates to the overall compensation of
our named executive officers as described in this proxy statement in accordance with the applicable SEC compensation disclosure rules.
We
seek to align the interests of our named executive officers with the interests of our shareholders. Therefore, our compensation programs
are designed to reward our named executive officers for the achievement of strategic and operational goals and the achievement of increased
shareholder value, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. We believe that our compensation
policies and procedures are competitive and focused on performance and are aligned with the long-term interest of our shareholders.
This
proposal, commonly known as a “Say-on-Pay” proposal, gives you as a shareholder the opportunity to express your views regarding
the compensation of the named executive officers by voting to approve or not approve such compensation as described in this proxy statement.
This vote is advisory and will not be binding on us, the board of directors or the compensation committee. However, we will take into
account the outcome of the vote when considering future executive compensation arrangements.
The
board of directors believes our compensation policies and procedures achieve this objective and, therefore, recommend shareholders vote
“FOR” the proposal through the following resolution:
“RESOLVED,
that the compensation paid to our named executive officers, as disclosed in our Proxy Statement for the 2023 Annual Meeting of Shareholders
pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the compensation tables and the
related narrative discussion in the Proxy Statement, is hereby APPROVED.”
If
a quorum is present, the proposal will be approved if the number of shares of common stock voted in favor of the matter exceeds the number
of shares of common stock voted against the matter. Abstentions, broker non-votes, and the failure to return a signed proxy will have
no effect on the outcome of the vote on this matter.
Proposal
No. 3
Ratification
of Appointment of the Independent Registered Public Accounting Firm
On
March 14, 2023, our Audit and Compliance Committee, which we refer to herein as the audit committee, of the board of directors appointed
Elliott Davis, LLC as our independent registered public accounting firm for the year ending December 31, 2023. Although we are not required
to seek shareholder ratification in the selection of our accountants, we believe obtaining shareholder ratification is desirable. If
the shareholders do not ratify the appointment of Elliott Davis, LLC, the audit committee will re-evaluate the engagement of our independent
auditors. Even if the shareholders do ratify the appointment, our audit committee has the discretion to appoint a different independent
registered public accounting firm at any time during the year if the audit committee believes that such a change would be in the best
interest of our shareholders and the company. We expect that a representative of Elliott Davis, LLC will be available either in-person
or via telephone during the meeting to respond to appropriate questions from shareholders. The representative will also have an opportunity
to make a statement if he or she desires to do so.
If
a quorum is present, this proposal will be approved if the number of shares of common stock voted in favor of the matter exceeds the
number of shares of common stock voted against the matter. Because this proposal is a “routine” matter, if you do not submit
voting instructions to your broker, your broker may exercise its discretion to vote your shares on this proposal. Abstentions and the
failure to return a signed proxy will have no effect on the outcome of the vote on this matter.
The
board unanimously recommends that shareholders vote “FOR” the ratification of the appointment of Elliott Davis, LLC as our
independent registered public accounting firm for the year ending December 31, 2023.
CORPORATE
GOVERNANCE
Introduction
Our
directors meet regularly to review our operations and discuss our business plans and strategies. Our board of directors met 12 times
during 2022. Each director attended at least 75% of the combined total of meetings of the board and meetings of each committee on which
such director served during 2022. Neither our board nor the nominating committee has implemented a formal policy regarding director attendance
at an annual meeting of shareholders. Although board members are encouraged to attend the annual shareholders meeting, we recognize that
conflicts may occasionally arise that will prevent a director from attending an annual meeting. Nine of our directors attended our 2022
Annual Meeting of Shareholders in person.
Director
Independence
Under
the rules of The Nasdaq Stock Market, which we refer to herein as Nasdaq, independent directors must constitute a majority of a listed
company’s board of directors. A director will only qualify as an “independent director” if, in the opinion of that
company’s board of directors, that person does not have a relationship that would interfere with the director’s exercise
of independent judgment in carrying out the responsibilities of a director.
Our
board has determined that a majority of its members are independent as defined by the listing standards of Nasdaq. Specifically, our
board of directors has determined that the following directors are independent: Thomas C. Brown, C. Jimmy Chao, Jan H. Hollar, Ray E.
Jones, W. James Kitchens, Jr., Mickey E. Layden, E. Leland Reynolds, Alexander Snipe, Jr., Jane S. Sosebee, Edward J. Tarver, and Roderick
M. Todd, Jr. Michael C. Crapps is considered an inside director and, therefore, is not independent because of his employment as an executive
officer of the company. In making the independence determinations, the board took into consideration (in addition to the factors that
would trigger a disclosure requirement under Item 404) (i) real estate sales commissions paid pursuant to normal market terms totaling
$32,600 and $32,600, in 2022 and 2021, respectively, to an entity in which Ms. Layden owns 9.8% of the equity interest and serves as
the executive vice president and principal and (ii) loan inspection services fees paid pursuant to normal market terms totaling of $9,150
and zero, in 2022 and 2021, respectively, to an entity in which Ms. Layden owns 67% of the equity and serves as president and CEO. In
each case, the board determined that her interest in the transactions was financially de minimis and would not interfere with the exercise
of her independent judgment in carrying out the responsibilities of a director.
Board
Diversity Disclosure
In
accordance with the Nasdaq Listing Rule 5606, each Nasdaq-listed company must annually disclose information on each director’s
voluntary self-identified characteristics. The table below includes information on the diversity of the board of directors based upon
such information voluntarily provided by each director.
Board
Diversity Matrix (As of April 4, 2023)(1) |
Total
Number of Directors | |
| 12 | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
| |
| Female | | |
| Male | | |
| Non-Binary | | |
| Did
Not
Disclose | |
Part
I: Gender Identity | |
| | | |
| | | |
| | | |
| | |
Directors | |
| 3 | | |
| 8 | | |
| — | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | |
Part
II: Demographic Background | |
| | | |
| | | |
| | | |
| | |
African
American or Black | |
| — | | |
| 2 | | |
| — | | |
| — | |
Alaskan
Native or Native American | |
| — | | |
| — | | |
| — | | |
| — | |
Asian | |
| — | | |
| 1 | | |
| — | | |
| — | |
Hispanic
or Latinx | |
| — | | |
| — | | |
| — | | |
| — | |
Native
Hawaiian or Pacific Islander | |
| — | | |
| — | | |
| — | | |
| — | |
White | |
| 3 | | |
| 5 | | |
| — | | |
| — | |
Two
or More Races or Ethnicities | |
| — | | |
| — | | |
| — | | |
| — | |
LGBTQ+ | |
| — | | |
| — | | |
| — | | |
| — | |
Did
Not Disclose Demographic Background | |
| — | | |
| — | | |
| — | | |
| 1 | |
| (1) | Unchanged
from the Board Diversity Matrix as of April 6, 2022 presented in the proxy statement for
our 2022 annual meeting of shareholders. |
Code
of Business Conduct and Ethics
The
board of directors has established a Code of Business Conduct and Ethics that applies to all directors, officers and employees, which
may be found by clicking the link for “Investors” under the “About” tab on our website at www.firstcommunitysc.com.
The information on our website is not part of this proxy statement. We intend to post on our website all disclosures that are required
by law or Nasdaq listing standards concerning any amendments to, or waivers from, the Code of Business Conduct and Ethics. Shareholders
may request a copy of the Code of Business Conduct and Ethics by written request directed to First Community Corporation, Attention:
Corporate Secretary, 5455 Sunset Blvd., Lexington, South Carolina 29072.
Stock
Ownership Guidelines
We
have a stock ownership policy that requires (i) members of our Executive Leadership Team, which includes our executive officers,
to own a minimum of two times their annual base salary for such Executive Leadership Team member and (ii) directors, who were directors
prior to February 21, 2023, to own a minimum of 10,000 shares of our common stock. Executive Leadership Team members are permitted to
sell and or surrender up to 50 percent of vested stock awards primarily to satisfy tax withholding obligations on vested shares. Director
deferred units held in our Amended and Restated Non-Employee Director Deferred Compensation Plan are included in such director’s
ownership calculations. There is no period for either our Executive Leadership Team members or directors to achieve compliance; however,
such covered persons may not sell our common stock until the applicable stock ownership threshold is satisfied.
Effective
February 21, 2023, we approved the following stock ownership requirements applicable to new directors, on or after February 21, 2023:
(i) own a minimum of 1,000 shares of our common stock; (ii) own a minimum of 5,000 shares of our common stock within five years of becoming
a director (the “long-term ownership requirement”); and (iii) own a minimum of 10,000 shares of our common stock in order
to sell our common stock. Any director deferred units held in our Amended and Restated Non-Employee Director Deferred Compensation Plan
are included in such director’s ownership calculations. If a director does not meet the long-term ownership requirement, the director’s
cash retainer will be deferred into share units under our Amended and Restated Non-Employee Director Deferred Compensation Plan until
the long-term ownership requirement is met.
We
monitor ownership levels and compliance on an ongoing basis by requiring Executive Leadership Team members and directors to receive pre-approval
from the chief executive officer or chief financial officer prior to trading in our common stock.
Prohibitions
on Short Sales
We
consider it improper and inappropriate for our directors, officers and employees to engage in short-term or speculative transactions
in our securities. Accordingly, under our Insider Trading Policy:
| · | we
prohibit the sale of any of our securities “short,” which includes transactions
that involve securities that the seller does not own at the time of sale, or, if owned, are
not delivered within 20 days after the sale or deposited in the mail or other usual channels
of transportation within five days after the sale; and |
| · | we
warn insiders about the implications on call options and put options with regard to Section
16 of the Exchange Act. |
Communications
with the Board of Directors
Shareholders
may communicate directly to our board of directors in writing by sending a letter to the board at: First Community Corporation, Attention:
Corporate Secretary, 5455 Sunset Blvd., Lexington, South Carolina 29072. All letters directed to the board of directors will be received
and processed by the corporate secretary and will be forwarded to the chairman of the nominating committee without any editing or screening.
Board
Leadership Structure
We
are focused on our corporate governance practices and value independent board oversight as an essential component of strong corporate
performance to enhance shareholder value. Our commitment to independent oversight is demonstrated by the fact that a majority of our
directors are independent. In addition, each member of our board of directors’ audit, compensation, and nominating committees are
independent.
Our
board of directors believes that it is preferable for one of our independent directors to serve as chairman of the board. Director C.
Jimmy Chao was appointed to serve as chairman of our board immediately on May 19, 2021. Mr. Chao served as vice chair of our board since
May 2020 and has served as our director since our formation in 1994. We believe it is the chairman’s responsibility to guide the
board as it provides leadership to our executive management while our chief executive officer manages the company. As directors continue
to be faced with more oversight responsibility than ever before, we believe it is beneficial to have separate individuals in the role
of chairman and chief executive officer. In making its decision to have an independent chairman, our board of directors considered the
time and attention that Mr. Crapps is required to devote to managing our day-to-day operations. By having another director serve as chairman
of our board of directors, Mr. Crapps is able to focus more of his attention on running the company. This will also ensure there is no
duplication of effort between the chairman and the chief executive officer. We believe this board leadership structure is appropriate
in maximizing the effectiveness of board oversight and in providing perspective to our business that is independent from executive management.
We
recognize that different board leadership structures may be appropriate for companies in different situations. We will continue to reexamine
our corporate governance policies and leadership structures on an ongoing basis to ensure that they continue to meet our needs.
Board’s
Role in Risk Oversight
Our
audit committee is primarily responsible for overseeing our risk management processes on behalf of the full board of directors. The audit
committee focuses on financial reporting risk and oversight of the internal audit process. It receives reports from management at least
quarterly regarding our assessment of risks and the adequacy and effectiveness of our internal control systems, as well as reviews
reports through our Enterprise Risk Management process that include credit and market risk (including liquidity and interest rate risk)
and operational risk (including compliance and legal risk). Strategic and reputation risk are also regularly considered by the audit
committee. The audit committee also receives reports from management addressing the most serious risks impacting our day-to-day operations.
Our director of internal audit reports to the audit committee and meets with the audit committee in executive sessions as needed to discuss
any potential risk or control issues involving management. The audit committee reports regularly to the full board of directors, which
also considers our entire risk profile. The full board of directors focuses on certain significant risks facing the company and on certain
aspects of our general risk management strategy. Management is responsible for the day-to-day risk management processes. Our board has
appointed a chief risk officer responsible for the strategic management of compliance, operational, cyber, fraud and physical security.
Our credit and balance sheet management risks are managed by our chief credit officer and chief financial officer, respectively. We believe
this division of responsibility is the most effective approach for addressing the risks facing our company and that our board leadership
structure supports this approach.
Our
compensation committee is responsible for overseeing the management of risks related to our executive and non-executive compensation
plans. Our nominating committee oversees the management of risk associated with the board, including independence, nomination and competence
of the directors. Our loan committee is responsible for the oversight of the management of risks related to our loan portfolio. Our asset-liability
committee is responsible for oversight of the management of risks associated with our policies and procedures related to all aspects
of balance sheet management, including investment management, liquidity management, interest rate risk management, and capital management.
Cyber
and Information Security. With respect to cybersecurity, on a quarterly basis, our audit committee receives reports from management
on cybersecurity risks and preparedness. Interim reports are to be produced in the case of any extraordinary events. While our audit
committee, and the board of directors to which it reports, oversees our cybersecurity risk management, our management and information
technology, and enterprise risk management departments, specifically our information security officer, are responsible for the day-to-day
cybersecurity risk management processes. Threats from cyber-attacks are severe, attacks are sophisticated and increasing in volume, and
attackers respond rapidly to changes in defensive measures. Formal security awareness training is conducted regularly to increase overall
employee awareness about cyber threats. Our systems and those of our customers and third-party service providers are under constant threat
and it is possible that we could experience a significant event in the future. We maintain a cyber insurance policy that is designed
to reduce the risk of loss resulting from cyber security breaches. While we believe that our cybersecurity programs are appropriate and
have been effective to prevent material incidents thus far, risks and exposures related to cybersecurity attacks are expected to remain
high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding
use of Internet banking, mobile banking and other technology-based products and services by us and our customers.
Environmental,
Social and Governance (ESG). Our board of directors understands its role as stewards of long-term corporate performance, and
that a board of directors has an important role to play in overseeing the company’s efforts to be aware of, and to navigate, the
evolving risk and opportunities related to ESG matters. Our compensation committee annually reviews our compensation strategies, benefit
plans including insurance and retirement and equity programs, and considers issues of fairness to employees and long-term sustainability
of our business as part of their review. Our nominating committee reviews governance matters and is focused on diversity and considers
diversity to be an important consideration as we seek to best understand how to effectively do business in and serve our community. Committees
of the board of directors assist the board of directors in fulfilling its oversight responsibilities with respect to our development
and implementation of corporate social responsibility initiatives, including those related to various ESG matters. In 2023, we will continue
to evaluate ESG and respond as appropriate to evolving guidance and expectations.
We
have a company-wide recycling program and encourage our employees to reduce, reuse and recycle waste. We also have a monthly service
for commingled recycling pick up at many of our banking locations. During 2022, we recycled 11,328 pounds of commingled recycling. Furthermore,
we shred paper for security purposes, but it also has a positive impact on the environment. We shredded and recycled 88 thousand pounds
(or 44 tons) of paper in 2022, which saved 748 trees. We also have taken innovative steps to improve our energy usage by changing old light fixtures to LED light fixtures. In 2022, we changed 85 recessed fixtures and 18 wall sconces covering 12,600 square feet
of space at our Newberry, South Carolina location. Furthermore, we changed all of the light fixtures to LED light fixtures at our Gilbert,
South Carolina and Red Bank, South Carolina banking offices, 80 fixtures in total; each of these locations is approximately 3,000 square
feet. We plan to upgrade the energy efficiency
of some of our locations each year until all of our locations have been upgraded.
Committees
of the Board
Our
board of directors has an audit committee, a compensation committee, and a nominating committee. Each committee serves in a dual capacity
as a committee of the company and of the bank.
Audit
Committee
Our
audit committee met four times in 2022. The following directors are members of our audit committee: Edward J. Tarver (Chair), Jan H.
Hollar, W. James Kitchens, Jr., Ray E. Jones and Jane S. Sosebee. Our board of directors has determined that all of these committee members
are independent, as contemplated in the listing standards of Nasdaq. Our board has also determined that Mr. Kitchens qualifies as an
“audit committee financial expert” under SEC rules.
Our
audit committee operates under a written charter adopted by the board of directors and is responsible for reviewing our financial statements,
evaluating internal accounting controls, reviewing reports of regulatory authorities, and determining that all audits and examinations
required by law are performed. Our audit committee approves the independent auditors, reviews and approves the auditor’s audit
plans, and reviews with the independent auditors the results of the audit and management’s responses. The audit committee charter
may be found by clicking on the link for “Investors” under the “About” tab on our website at www.firstcommunitysc.com.
The charter outlines the audit committee’s responsibilities for overseeing the entire audit function and appraising the effectiveness
of internal and external audit efforts and may be amended by the board at any time. The audit committee reports its findings to our board
of directors.
Compensation
Committee
Our
compensation committee met five times during 2022 and reviewed our compensation policies and practices and concluded that they do not
create risks that are reasonably likely to have a material adverse effect on us. The following directors are members of the compensation
committee: Thomas C. Brown (Chair), Mickey E. Layden, E. Leland Reynolds, Alexander Snipe, Jr. and Roderick M. Todd, Jr. Our board of
directors has evaluated the independence of the members of our compensation committee and has determined that each member of our compensation
committee meets the definition of an “independent director” under Nasdaq standards and qualifies as a “non-employee
director” within the meaning of Rule 16b-3 under the Exchange Act.
Our
compensation committee operates under a written charter adopted by the board of directors and is responsible for developing and making
recommendations to the board with respect to our board and executive compensation policies and for the approval and administration of
our existing and proposed board and executive compensation plans. The compensation committee charter may be found by clicking on the
link for “Investors” under the “About” tab on our website at www.firstcommunitysc.com.
Our
compensation committee is responsible for reviewing and recommending to the board of directors the compensation of directors and the
chief executive officer. The compensation committee charter does not authorize the compensation committee to form and delegate its authority
to subcommittees. Specifically, the compensation committee determines the contents of our board and executive compensation plans, authorizes
the awards to be made pursuant to such plans and reviews and recommends annually all compensation decisions relating to our board and
chief executive officer. The compensation committee annually reviews the other executive officers’ performance and base salary
and incentive compensation plan, equity plans, and any special or supplemental benefits. Our chief executive officer annually evaluates
the performance of each of the other executive officers and reviews the compensation packages for each of them with the compensation
committee. The compensation packages for the remaining non-executive employees are determined by individual supervisors in conjunction
with the bank’s chief human resources officer and based on criteria included in the bank’s overall budget, which is approved
annually by our board of directors.
The
compensation committee has authority with respect to:
| · | Annually
reviewing the form and amount of director compensation and recommending compensation packages
to the board. |
| · | Annually
reviewing employee compensation strategies, benefit plans including insurance and retirement
plans, and equity programs. |
| · | Approving
officer title designations/promotions. |
| · | Appointing
trustees to oversee our 401(k) plan. |
| · | Annually
evaluating our chief executive officer’s performance as it compares to our goals and
objectives, providing feedback to him on his performance, and recommending to the board his
compensation package, including base salary level, incentive compensation plan, equity plans,
and any special or supplemental benefits (during such voting and deliberations, the chief
executive officer is not present). |
| · | Annually
reviewing the other executive officers’ performance and approving their individual
compensation packages, including base salary level, incentive compensation plan, equity plans,
and any special or supplemental benefits. |
| · | Reviewing
and making recommendations to our board concerning employment agreements, severance agreements,
change in control agreements, as well as any supplemental benefits. |
| · | Overseeing
all incentive plans and considering methods of creating incentives for management to achieve
sustained growth in earnings and shareholder value and the retention of key management personnel.
This may include annual cash incentive plans, long-term incentive plans, equity plans, as
well as any special supplemental benefits. The compensation committee makes a recommendation
to the board concerning the design structure of such plans. |
| · | Ensuring
that our incentive compensation programs do not encourage unnecessary and excessive risk
taking that would threaten our value or the integrity of our financial reporting. |
| · | Retaining
or obtaining the advice, if needed, of a compensation consultant, legal counsel or other
advisor, after compliance with Nasdaq listing Rule 5605(d)(3). |
| · | Serving
as the stock committee or stock sub-committee and, as such, approving awards under our stock
option plan and other equity plans. |
| · | Approving
our annual report on executive compensation and directors’ fees for inclusion in our
proxy statement, if applicable. |
| · | Approving
the annual committee report for inclusion in our proxy statement, if required. |
| · | Reporting
annually to the board on succession planning for key positions, including the chief executive
officer, executive leadership team members, director of mortgage banking, director of financial
planning, BSA officer, compliance officer, and information security officer. |
| · | Reporting
its activities and recommendations to the board of directors at any regular or special meeting
of the board. |
| · | Annually
reviewing its charter and presenting it to the board for approval. |
Role
of Our Compensation Consultant
We
periodically engage an external national compensation consulting firm to provide independent compensation consulting services regarding
our director and executive management compensation. In 2022, our compensation committee engaged Blanchard Consulting Group to conduct
this independent external review of board and executive compensation. Blanchard Consulting Group reported directly to the compensation
committee and assisted with accumulation and analysis of updated peer data. It is anticipated that we will engage an external compensation
consulting firm approximately every three years.
The
following consulting services were provided by Blanchard Consulting Group to the compensation committee in 2022:
| · | Revised
our compensation peer group of publicly-traded and other financial institutions; |
| · | Reviewed
the competitiveness of the compensation elements of our top executives, including base salary,
annual incentive or bonus, long-term incentives (stock options and restricted stock), all
other compensation, perquisites and retirement benefits as compared to that of the peer group; |
| · | Reviewed
the competitiveness of our director compensation elements as compared to that of the peer
group. |
| · | Recommended
and made observations regarding the potential alignment of our executive compensation practices
with our overall business strategy and culture relative to the market as defined by the peer
group. This included a review of the current performance-based programs with respect to the
annual cash incentives and annual equity grants and making observations and recommendations
on changes to the plan design; and |
| · | Provided
education to the compensation committee regarding industry compensation trends. |
Blanchard
Consulting Group is available to the compensation committee and the executive vice president of human resources for ongoing consultation
relative to compensation issues.
Compensation
Committee’s Relationship with its Independent Compensation Consultant
Our
compensation committee considered the independence of Blanchard Consulting Group in accordance with SEC rules and Nasdaq listing standards.
In selecting these consultants the following factors were considered: (1) other services provided to us by the company; (2) fees paid
by us as a percentage of the company’s total revenue; (3) policies or procedures maintained by the company that are designed to
prevent a conflict of interest; (4) any business or personal relationships between the senior advisors and a member of the compensation
committee; (5) any company stock owned by the senior advisors; and (6) any business or personal relationships between our executive officers
and the senior advisors. Our compensation committee discussed these considerations and concluded that the work performed by the company
and its senior advisors involved in the engagements did not raise any conflict of interest.
Selected
Peer Review and Compensation Committee Functions
A
primary role of the compensation committee is to analyze the competitiveness of, and the structure and amounts of annual base salary,
annual cash awards and long-term equity awards, where applicable, to be paid to our executives. The compensation committee also structures
and monitors our equity-based compensation plans and employment agreements with its executive officers which include, among other things,
provisions relating to executives in the event of a change in control of the company. In order to gauge the competitiveness of our executive
compensation level, the compensation committee may analyze market data regarding annual base salary, annual cash bonus awards and long-term
equity incentive awards paid by certain companies in what the compensation committee considers the company’s “primary competitor
group.”
For
their external compensation review of board and executive compensation, Blanchard Consulting Group recommended using a peer group comprised
of publicly traded banks with assets sizes between $1 billion and $3 billion as of December 31, 2021 who are located in the southeastern
United States including Alabama, Georgia, Kentucky, North Carolina, South Carolina, Tennessee, and Virginia.
Auburn National Bancorporation,
Inc. (AUBN) |
Limestone Bancorp, Inc. (LMST) |
Blue Ridge Bankshares, Inc. (BRBS) |
MainStreet Bancshares, Inc. (MNSB) |
C&F Financial Corporation (CFFI) |
National Bankshares, Inc. (NKSH) |
Colony Bankcorp, Inc. (CBAN) |
Old Point Financial Corporation (OPOF) |
Eagle Financial Services, Inc. (EFSI) |
Peoples Bancorp of North Carolina, Inc. (PEBK) |
F & M Bank Corp. (FMBM) |
River Financial Corporation (RVRF) |
First National Corporation (FXNC) |
Security Federal Corporation (SFDL) |
FVCBankcorp, Inc. (FVCB) |
Southern First Bancshares, Inc. (SFST) |
GrandSouth Bancorporation (GRRB) |
Southern States Bancshares, Inc. (SSBK) |
John
Marshall Bancorp, Inc. (JMSB) |
Virginia
National Bankshares Corporation (VABK) |
The
peer data was reviewed and, with respect to each of the top executive officer positions, compared for the scope of responsibilities of
the position within the company to the equivalent responsibilities of positions within the companies included in the survey data. The
compensation committee then compared our compensation and benefits practices with those of the banks included in the survey data and
took the results into account when establishing compensation guidelines and recommendations for executives in establishing compensation
for bank executives. In determining each executive’s base salary and annual cash bonus opportunity, the compensation committee
considered those two elements together, as well as other factors, in order to set an appropriate level of total annual cash compensation.
In general, the compensation committee seeks to give each executive the opportunity to earn an annual cash bonus that, if earned and
when combined with the executive’s base salary, would result in total annual cash compensation to the executive that is competitive
with the market data provided by the surveys. Consideration of compensation structures among the selected primary competitor group was
only one of the tools used by the compensation committee to assess competitive compensation and to determine appropriate compensation
amounts and structures for the company’s executive officers. In order to attract, retain and incentivize executive officers of
the company, the compensation committee may, in its discretion and judgment, determine that it is in the best interest of the company
to negotiate compensation packages that vary significantly from the compensation levels and incentive structures offered by competitors.
Total compensation for executives is targeted to be between the 45th and 90th percentile of market when compared to peer banking organizations.
For
peer comparison metrics in the cash and equity incentive plans, the company uses a peer index of ½ to 1 ½ times the company’s
asset size for publicly traded banks located in the southeastern United States. Data is compiled from S&P Global Market Intelligence
based on the 2022 filings as reported by each peer group institution. For year-end 2022, that index included:
Auburn National Bancorporation,
Inc. (AUBN) |
MainStreet Bancshares, Inc. (MNSB) |
Bank of the James Financial Group, Inc. (BOTJ) |
Morris State Bancshares, Inc. (MBLU) |
BankFirst Capital Corporation (BFCC) |
Mountain Commerce Bancorp, Inc. (MCBI) |
BayFirst Financial Corp. (BAFN) |
National Bankshares, Inc. (NKSH) |
C&F Financial Corporation (CFFI) |
Old Point Financial Corporation (OPOF) |
Chesapeake Financial Shares, Inc. (CPKF) |
Peoples Bancorp of North Carolina, Inc. (PEBK) |
Citizens Bancorp Investment, Inc. (CBTN) |
Peoples Financial
Corporation (PFBX) |
Citizens Holding Company (CIZN) |
Pinnacle Bankshares Corporation (PPBN) |
CoastalSouth Bancshares, Inc. (COSO) |
Prime Meridian Holding Company (PMHG) |
Dogwood State Bank (DSBX) |
Skyline Bankshares, Inc. (PKKW) |
Eagle Financial Services, Inc. (EFSI) |
South Atlantic Bancshares, Inc. (SABK) |
F & M Bank Corp. (FMBM) |
Southern States Bancshares, Inc. (SSBK) |
First National Corporation (FXNC) |
United Bancorporation of Alabama, Inc. (UBAB) |
First US Bancshares, Inc. (FUSB) |
USCB Financial Holdings, Inc. (USCB) |
Freedom Financial Holdings, Inc. (FDVA) |
Uwharrie Capital
Corp (UWHR) |
FVCBankcorp, Inc. (FVCB) |
Virginia National Bankshares Corporation (VABK) |
John
Marshall Bancorp, Inc. (JMSB) |
White River Bancshares Company (WRIV) |
Nomination
and Corporate Governance Committee
The
nominating committee met two times during 2022. The following directors are members of our nominating committee: Roderick M. Todd, Jr.
(Chair), E. Leland Reynolds, Jane S. Sosebee, Alexander Snipe, Jr. and Edward J. Tarver. Our board of directors has determined that all
of these committee members are independent, as contemplated in the listing standards of Nasdaq.
The
board of directors has adopted a nominating committee charter, which may be found by clicking on the link for “Investors”
under the “About” tab on our website at www.firstcommunitysc.com. The charter provides that the responsibilities of
the committee include:
| · | reviewing
the qualifications and independence of the members of the board and its various committee
assignments; |
| · | evaluating
incumbent directors in determining consideration for re-election; |
| · | recommending
board nominees for election; |
| · | providing
guidance on board and corporate governance issues; and |
| · | considering
director candidates recommended by shareholders who submit nominations in accordance with
our bylaws. |
Shareholders
who submit candidates for nomination must deliver nominations in writing to our corporate secretary no later than (i) with respect to
an election to be held at an annual meeting of shareholders, 90 days in advance of such meeting; and (ii) with respect to an election
to be held at a special meeting of shareholders for the election of directors, seven days after notice of the special meeting is given
to shareholders. Each notice must set forth: (i) the name and address of the shareholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the shareholder is a holder of record of stock of the company entitled
to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the SEC’s
proxy rules, had the nominee been nominated, or intended to be nominated, by the board of directors; and (v) the consent of each nominee
to serve as a director of the company if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure. For a complete description of the procedures and disclosure requirements to be complied
with by shareholders in connection with submitting director nominations, shareholders should refer to our bylaws.
The
nominating committee has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees.
In determining whether to recommend a director nominee, the nominating committee members consider and discuss diversity, among other
factors, with a view toward the needs of the board of directors as a whole. The nominating committee members generally conceptualize
diversity expansively to include, without limitation, concepts such as race, gender, national origin, disability, differences of viewpoint,
professional experience, education, skill and other qualities or attributes that contribute to board heterogeneity, when identifying
and recommending director nominees. The nominating committee believes that the inclusion of diversity as one of many factors considered
in selecting director nominees is consistent with the committee’s goal of creating a board of directors that best serves our needs
and the interests of our shareholders.
In
evaluating such director recommendations, the nominating committee uses a variety of criteria to evaluate the qualifications and skills
necessary for members of our board of directors. Under these criteria, members of the board of directors should have the highest professional
and personal ethics and values, consistent with our longstanding values and standards, and broad experience at the policy-making level
in business, government, education, technology or public interest. Directors should be committed to enhancing shareholder value and should
have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other
boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly
all director duties. Each director must represent the interests of our shareholders.
The
nominating committee uses a variety of methods for identifying and evaluating nominees for director. The nominating committee regularly
assesses the appropriate size of the board of directors, and whether any vacancies are expected due to retirement or otherwise. If vacancies
are anticipated, or otherwise arise, the nominating committee considers various potential candidates for director. Candidates may come
to their attention through current members of the board, shareholders, or other persons. These candidates are evaluated at regular or
special meetings of the board and may be considered at any point during the year. The nominating committee considers properly submitted
shareholder recommendations for candidates. In evaluating such recommendations, the nominating committee uses the qualifications and
standards discussed above, and it seeks to achieve a balance of knowledge, experience and capability on the board of directors.
Report
of the Audit Committee
Management
is responsible for our internal controls and the financial reporting process. The independent auditors are responsible for performing
an independent audit of our consolidated financial statements in accordance with accounting principles generally accepted in the U.S.
and issuing a report thereon. The audit committee’s responsibility is to monitor and oversee these processes.
In
this context, the audit committee has met and held discussions with management and Elliott Davis, LLC, our independent auditors. In discharging
its oversight responsibility as to the audit process, the audit committee has received the written disclosures and the letter from the
independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s
communications with the audit committee concerning independence and has discussed with the independent auditors their independence from
the company and its management. The audit committee also discussed with management, the internal auditors and the independent auditors
the quality and adequacy of our internal controls and the internal audit function’s organization, responsibilities, budget and
staffing. The audit committee reviewed both with the independent and internal auditors their audit plans, audit scope and identification
of audit risks.
The
audit committee reviewed and discussed with the independent auditors the matters required to be discussed by the applicable requirements
of the Public Company Accounting Oversight Board and the SEC, and with and without management present, discussed and reviewed the results
of the independent auditors’ examination of the financial statements. The audit committee also discussed the results of the internal
audit examinations.
The
committee reviewed and discussed the audited consolidated financial statements of the company as of and for the year ended December 31,
2022 with management and the independent auditors.
Based
on the above-mentioned review and discussions with management and the independent auditors, the audit committee recommended to the board
that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2022
for filing with the SEC. On March 15, 2023, the committee appointed Elliott Davis, LLC as our independent auditors for 2023.
The
report of the audit committee is included herein at the direction of its members: Mr. Tarver (Chair), Ms. Hollar, Mr. Kitchens, Mr. Jones
and Ms. Sosebee.
DIRECTOR
AND EXECUTIVE OFFICER COMPENSATION
General
Compensation Philosophy
Our
compensation committee has determined that we, as a performance-driven business, should reward financial results with appropriate compensation.
The compensation committee’s strategy for carrying out this philosophy is to link executive compensation with our financial performance
and, at the same time, to be sensitive to external market factors, which might affect such performance but be outside the control of
the company’s executives. The compensation committee recognizes the importance of maintaining compensation and benefits at competitive
levels designed to attract and retain talented executives. The compensation committee has typically included annual equity award grants
as an element of executive compensation and may consider implementation of additional equity awards grants in the future as a component
of executive compensation. The compensation committee believes that equity-based compensation aligns the long-term interests of employees
with those of our shareholders. In determining whether to make equity award grants in the future, the compensation committee will consider
the recommendations of the chief executive officer regarding the granting of equity awards for our key executives, other than our chief
executive officer. In determining appropriate equity-based compensation awards for our executives, the compensation committee anticipates
that it will generally focus on our current and future performance, the current and future performance and achievements of our executives,
and the executive’s present and potential future contribution to our success.
Executive
Compensation
The
following table shows the compensation we paid for the years ended December 31, 2022 and 2021 to our principal executive officer and
the two most highly compensated other executive officers who were serving as executive officers at the year end of 2022, which we refer
to herein as our named executive officers.
Summary
Compensation Table
Name
& Principal
Position | |
Year | | |
Salary
($) | | |
Bonus
($) | | |
Stock
Awards(1)(2) ($) | | |
Option
Awards ($) | | |
Non-Equity
Incentive Plan Compensation(3) ($) | | |
Non-qualified
Deferred Compensation Earnings(4) ($) | | |
All
Other Compensation(5) ($) | | |
Total
($) | |
Michael
C. Crapps, | |
| 2022 | | |
| 482,064 | | |
| — | | |
| 139,728 | | |
| — | | |
| 147,085 | | |
| 126,641 | | |
| 15,470 | | |
| 910,988 | |
President
and Chief | |
| 2021 | | |
| 465,762 | | |
| — | | |
| 134,354 | | |
| — | | |
| 198,133 | | |
| 121,210 | | |
| 14,070 | | |
| 933,529 | |
Executive
Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
J. Ted
Nissen, Executive | |
| 2022 | | |
| 291,200 | | |
| — | | |
| 84,000 | | |
| — | | |
| 88,850 | | |
| 47,007 | | |
| 14,664 | | |
| 525,721 | |
Vice
President and | |
| 2021 | | |
| 280,000 | | |
| — | | |
| 78,000 | | |
| — | | |
| 119,111 | | |
| 44,991 | | |
| 13,259 | | |
| 535,361 | |
Chief
Banking Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
D. Shawn
Jordan, | |
| 2022 | | |
| 253,000 | | |
| — | | |
| 73,500 | | |
| — | | |
| 77,194 | | |
| 30,493 | | |
| 11,334 | | |
| 445,521 | |
Executive
Vice President and
Chief Financial Officer | |
| 2021 | | |
| 245,000 | | |
| — | | |
| 70,502 | | |
| — | | |
| 104,222 | | |
| 29,186 | | |
| 10,923 | | |
| 459,833 | |
| (1) | This
amount represents the grant date fair value of equity awards in accordance with FASB ASC
Topic 718. The grant date fair value per share of the equity awards shown above equals $20.93
and $17.59 in 2022 and 2021, respectively. See discussion of assumptions used in the valuation
of the equity awards in Note 18, “Stock Options, Restricted Stock, Restricted Stock
Units, and Deferred Compensation” in the “Notes to Consolidated Financial Statements”
included within the Annual Report on Form 10-K for the year ended December 31, 2022. For
a discussion of the awards granted in 2022, see “Long-term Equity Compensation Awards,”
below. |
| (2) | The
fair value of the time-based restricted stock units received in 2022 by each named executive
officer as of the grant date is as follows: Mr. Crapps, $69,864; Mr. Nissen, $42,000; and
Mr. Jordan, $36,750. The fair value of the performance-based restricted stock units received
in 2022 by each named executive officer as of the grant date, assuming the target payout
is as follows: Mr. Crapps, $69,864; Mr. Nissen, $42,000; and Mr. Jordan, $36,750.; assuming
the maximum payout, is as follows: Mr. Crapps, $104,796; Mr. Nissen, $63,000; and Mr. Jordan,
$55,125. |
| (3) | This
amount represents the total cash payout under the terms of our 2022 Management Incentive
Plan for Key Executives. See “Annual Cash Incentive Awards—Performance-Based
Annual Cash Incentive Awards” below for a description of how our compensation committee
determined the incentive payments awarded to our named executive officers in 2022. |
| (4) | This
amount reflects the change in the present value of benefits attributable to named executive
officers for the applicable compensation, as calculated under non-qualified retirement benefit
plans. |
| (5) | The
amount for all Other Compensation includes the following: |
| |
| | |
401(k)
Match | | |
Country
Club Dues | | |
Life
Insurance
Premiums | | |
Total | |
Michael C. Crapps | |
| 2022 | | |
$ | 12,200 | | |
$ | 1,155 | | |
$ | 2,115 | | |
$ | 15,470 | |
| |
| 2021 | | |
$ | 10,800 | | |
$ | 1,155 | | |
$ | 2,115 | | |
$ | 14,070 | |
J. Ted Nissen | |
| 2022 | | |
$ | 12,200 | | |
$ | 1,155 | | |
$ | 1,309 | | |
$ | 14,664 | |
| |
| 2021 | | |
$ | 10,800 | | |
$ | 1,155 | | |
$ | 1,304 | | |
$ | 13,259 | |
D. Shawn Jordan | |
| 2022 | | |
$ | 10,067 | | |
| — | | |
$ | 1,267 | | |
$ | 11,334 | |
| |
| 2021 | | |
$ | 9,733 | | |
| — | | |
$ | 1,190 | | |
$ | 10,923 | |
Annual
Cash Incentive Awards
Performance-Based
Annual Cash Incentive Awards
Our
compensation committee adopted the 2020 Management Incentive Plan for Key Executives to provide for the payment of cash bonuses to our
named executive officers upon our achievement of certain plan criteria goals during 2022. The plan was designed to be consistent with
our philosophy that executive compensation should be linked with our financial performance. In order for any bonus to be paid to any
executive officer under the plan, we had to achieve at least 80% of budgeted net core income for the year and maintain an internal soundness
measure that is based on a regulatory rating, both of which we achieved in 2022. Upon meeting certain goals for efficiency
ratio (core), net interest income, loan portfolio growth, pure deposit growth and a modifier based on return on average assets, the executive
officers are eligible to receive a 30% cash payout at the target level and 45% at the maximum level. Payouts are pro-rated if actual
results fall between the threshold, target and maximum levels.
The
following sets forth the pre-established performance goals for which the annual cash incentive awards for the year ended December 31,
2022 were based:
|
|
Weight as
percent
of Salary |
|
Threshold |
|
Target |
|
Maximum |
|
Actual Earned |
|
Actual
Performance
Compared to |
All
Named Executive Officers’ – total opportunity |
|
|
|
15% |
|
30% |
|
45% |
|
30.51% |
|
|
Efficiency
ratio (core)(1) |
|
25% |
|
105%
of Budget |
|
Budget |
|
93%
of Budget |
|
|
|
97.48%
of Budget |
Net
interest income(1) |
|
25% |
|
95%
of Budget |
|
Budget |
|
107%
of Budget |
|
|
|
107.36%
of Budget |
Loan
portfolio growth(1) |
|
25% |
|
95%
of Budget |
|
Budget |
|
107%
of Budget |
|
|
|
105.01%
of Budget |
Pure
deposit growth(1) (2) |
|
25% |
|
95%
of Budget |
|
Budget |
|
107%
of Budget |
|
|
|
105.41%
of Budget |
Modifier: return
on average assets(3) |
|
|
|
75%
at 0 to 25th percentile |
|
100%
at 50th percentile |
|
125%
at 75th+ percentile |
|
|
|
75%
based on 24th percentile |
|
(1) |
Based
on internal 2022 Budget. |
|
(2) |
Pure
deposits include total deposits less certificates of deposits plus cash management repurchase agreements. |
|
(3) |
Performance
compared to an index of banks from publicly traded peer banks with an asset size of one-half
to one-and-one-half of the company’s asset size located in the southeast.
Data is compiled from S&P Global Market Intelligence based on the 2022 filings as reported
by each peer group institution. At December 31, 2022, the index of peer banks used for the
performance-based annual incentive compensation awards included the following banks:
|
Auburn National Bancorporation,
Inc. (AUBN) |
MainStreet Bancshares, Inc. (MNSB) |
Bank of the James Financial Group, Inc. (BOTJ) |
Morris State Bancshares, Inc. (MBLU) |
BankFirst Capital Corporation (BFCC) |
Mountain Commerce Bancorp, Inc. (MCBI) |
BayFirst Financial Corp. (BAFN) |
National Bankshares, Inc. (NKSH) |
C&F Financial Corporation (CFFI) |
Old Point Financial Corporation (OPOF) |
Chesapeake Financial Shares, Inc. (CPKF) |
Peoples Bancorp of North Carolina, Inc. (PEBK) |
Citizens Bancorp Investment, Inc. (CBTN) |
Peoples Financial Corporation (PFBX) |
Citizens Holding Company (CIZN) |
Pinnacle Bankshares Corporation (PPBN) |
CoastalSouth Bancshares, Inc. (COSO) |
Prime Meridian Holding Company (PMHG) |
Dogwood State Bank (DSBX) |
Skyline Bankshares, Inc. (PKKW) |
Eagle Financial Services, Inc. (EFSI) |
South Atlantic Bancshares, Inc. (SABK) |
F & M Bank Corp. (FMBM) |
Southern States Bancshares, Inc. (SSBK) |
First National Corporation (FXNC) |
United Bancorporation of Alabama, Inc. (UBAB) |
First US Bancshares, Inc. (FUSB) |
USCB Financial Holdings, Inc. (USCB) |
Freedom Financial Holdings, Inc. (FDVA) |
Uwharrie Capital Corp (UWHR) |
FVCBankcorp, Inc. (FVCB) |
Virginia National Bankshares Corporation (VABK) |
John
Marshall Bancorp, Inc. (JMSB) |
White
River Bancshares Company (WRIV) |
Actual
cash incentive payout amounts are disclosed in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table included
elsewhere in this proxy statement.
The
size of the total potential bonus pool available under the plan declined as our profitability declined, subject to the maximum aggregate
cash bonus amount of $2,191,950 to all executive officers including the named executive officers. The maximum aggregate cash bonus
amount is based on 15% of net income.
Long-Term
Equity Compensation Awards
Our
compensation committee believes that the primary benefit to the company of long-term awards is to motivate our named executive officers
to increase shareholder value and ensure adequate executive retention through the grant of long-term compensation awards, particularly
restricted stock and restricted stock unit awards. Under our equity incentive award plan, we also may grant awards in the form of other
equity and performance-based incentives, as may be deemed appropriate by the compensation committee from time to time. The compensation
committee has the ability to alter the cash and equity incentive plans and modify the pay-outs if in their sole discretion it is warranted.
This would include the ability to modify or cancel restricted stock vesting dates.
On
February 15, 2022, the compensation committee, in its discretion, granted the following time-based restricted stock units (“TRSUs”)
and performance-based restricted stock units (“PRSUs”) to the named executive officers with a grant date of February 17,
2022. The grant date fair values of the equity awards are disclosed below and in the Summary Compensation Table included elsewhere in
this proxy statement. The compensation committee did not grant any restricted stock awards to the named executive officers in 2022.
| |
|
Grant Date | | |
Shares
of
Restricted
Stock
(#) | | |
TRSUs
(#) | | |
PRSUs
(#)(1) | | |
Subtotal
($) | | |
Total
($) | |
Michael
C. Crapps | |
| 02/17/2022 | | |
| — | | |
| 3,338 | | |
| 3,338 | | |
| 139,728 | | |
| 139,728 | |
J.
Ted Nissen | |
| 02/17/2022 | | |
| — | | |
| 2,007 | | |
| 2,007 | | |
| 84,000 | | |
| 84,000 | |
D.
Shawn Jordan | |
| 02/17/2022 | | |
| — | | |
| 1,756 | | |
| 1,756 | | |
| 73,500 | | |
| 73,500 | |
| (1) | Amount
shown is the target amount of each award. The range of PRSUs actually earned can be in the
range of 0% of target for below threshold performance, 50% of target for threshold performance,
100% of target for target performance, to 150% of target for maximum performance. Payouts
are pro-rated if actual results fall between the threshold, target and maximum levels. |
Restricted
Shares. There were no restricted shares granted to named executive officers in 2022.
TRSUs.
The TRSUs cliff vest at the end of three years from the grant date.
PRSUs.
Under the terms of the PRSU agreement, the PRSUs will vest at the end of the three year performance period based on our achievement of
performance goals determined by the compensation committee during the performance period at a threshold, target and maximum performance
level, with accelerated vesting in certain circumstances, if (1) the bank has achieved an internal soundness measure that is based on
a regulatory rating, (2) we have achieved at least 80% of budgeted net core income in each calendar year during the performance period,
and (3) the named executive officer continues to be employed with the us through the applicable performance vesting date. The performance
metrics selected by the compensation committee for the above-referenced awards, each based on a measurement period that begins January
1, 2022 and ends December 31, 2024, are:
| · | total
shareholder return measured relative to the Nasdaq Bank Index (CBNK) and Dow Jones U.S. Micro
Cap Banks Index, with the starting price of a share of our common stock as the closing price
on the last business day immediately preceding the start of the applicable performance period
and the ending share price as the closing price of a share of our common stock on the last
day of the applicable performance period, |
| · | return
on average equity, averaged over the 12 calendar quarters of the applicable performance period,
which is then compared to the return on average equity, for the applicable quarters, to an
index of publicly traded peer banks with an asset size of one-half to one-and-one-half of
the company’s asset size located in the southeast, as recommended by our compensation
consultant, Pearl Meyer, and |
| · | non-performing
assets, as of the end of each applicable quarter, averaged over the 12 calendar quarters
of the applicable performance period, which is then compared to the non-performing assets
as a percentage of total assets, for the applicable quarters, to an index of publicly traded
peer banks with an asset size of one-half to one-and-one-half of the company’s asset
size located in the southeast, as recommended by our compensation consultant, Pearl Meyer.
|
For
return on average equity and non-performing assets, the data is compiled from S&P Global Market Intelligence as reported by each
peer group institution.
The
compensation committee established threshold, target and maximum performance levels for each selected performance measure. Payments for
achievement of the threshold, target and maximum performance measures are 50%, 100% and 150%, respectively. Actual performance between
threshold, target and maximum performance levels will be interpolated to determine the amount of payment based on relative achievement
of the corporate performance metrics.
Named
Executive Officer Employment Agreements
Chief
Executive Officer
Michael
C. Crapps. On December 8, 2015, we entered into an amended and restated employment agreement with Mr. Crapps, current president and
chief executive officer of the company and chief executive officer of the bank. The parties entered into the amended and restated employment
agreement to amend Mr. Crapps’ existing employment agreement to ensure documentary compliance with Section 409A of the Internal
Revenue Code.
Unless
terminated earlier according to provisions in the employment agreement, the agreement provides a three-year term of employment and at
the end of each day during the term of employment the term of the agreement is automatically extended for an additional day so that the
remaining term continues to be three years, except that either party can give the other party written notice of and fix the term to a
finite term of three years from the date of the written notice.
The
base salary for Mr. Crapps is subject to annual review by our board of directors and may be increased. Under his agreement, Mr. Crapps
is eligible to receive bonuses if he meets the goals set forth annually for him by our long-term equity incentive program and for the
grant of stock options, restricted stock and other similar awards.
Mr.
Crapps is provided with a country club membership as well as a life insurance policy for the benefit of his spouse and heirs. Mr. Crapps
is also entitled to participation in our retirement, health, welfare and other benefit plans and programs applicable to employees generally
or to senior executives.
The
employment agreement provides that, if we terminate Mr. Crapps’ employment without cause, subject to the possibility of a six-month
delay, on the 60th day after the date of termination, we will pay Mr. Crapps compensation in an amount equal to twice the amount of his
then current monthly base salary and thereafter on the first day of the month for the next 22 months compensation in an amount equal
to 100% of his then current monthly base salary, plus any bonus earned or accrued through the date of termination.
The
employment agreement contains provisions relating to non-solicitation of customers and personnel and non-competition during the term
of employment and the two years thereafter, as well as a provision relating to the protection of confidential information.
Payments
to our Chief Executive Officer upon a Change in Control
| · | After
a change in control and regardless of whether Mr. Crapps remains employed by the company
or its successor, we will pay Mr. Crapps an amount equal to three times the then current
annual base salary as well as any bonus earned through the date of change in control, and
we will remove any restrictions on outstanding incentive awards so that all such awards vest
immediately. |
| · | If
Mr. Crapps’ employment is terminated without cause within two years following a change
in control: |
| o | Mr.
Crapps may continue participation in our group health plan pursuant to the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”). If Mr. Crapps elects COBRA coverage for
group health coverage, he will be obligated to pay only the portion of the full COBRA cost
of the coverage equal to an active employee’s share of premiums for coverage for the
respective plan year and, on the 60th day after the date of termination following a change
in control, we will pay Mr. Crapps compensation in an amount equal to six times the amount
of the initial monthly portion of our share of such COBRA premiums; provided, however, that
such benefits will be eliminated if and when Mr. Crapps is offered Affordable Care Act compliant
group health coverage from a subsequent employer, and |
| o | To
the extent that “portable” life insurance coverage is offered under our life
insurance programs and after such termination Mr. Crapps continues to pay for “portable”
life insurance coverage that was provided by the company immediately prior to such termination,
we will reimburse the life insurance premiums paid by Mr. Crapps with respect to such life
insurance coverage with respect to the two-year period ending immediately after such termination. |
In
the event that our independent accountants acting as our auditors on the date of a change in control determine that the payments provided
for in the employment agreement constitute “excess parachute payments” under Section 280G of the Internal Revenue Code, then
the compensation payable under the employment agreement will be reduced to an amount the value of which is $1.00 less than the maximum
amount that could be paid to Mr. Crapps without his compensation being treated as “excess parachute payments” under Section
280G.
Other
Named Executive Officers
J.
Ted Nissen and D. Shawn Jordan. On December 8, 2015, we entered into an amended and restated employment agreement with J. Ted Nissen,
current chief banking officer of the company and president and chief banking officer of the bank. Mr. Nissen entered into the amended
and restated employment agreement to amend his existing employment agreement to ensure documentary compliance with Section 409A of the
Internal Revenue Code. On November 12, 2019, we entered into an employment agreement with D. Shawn Jordan, executive vice president and
chief financial officer of the company and the bank.
Mr.
Nissen’s and Mr. Jordan’s respective employment agreement provides for an initial term of three years, to be extended automatically
each day for an additional day so that the remaining term of the agreement will continue to be three years. The term may be fixed at
three years without extension by notice of either party to the other. Mr. Nissen’s and Mr. Jordan’s respective employment
agreements provide for an annual salary that is reviewed annually and may be increased from time to time. Mr. Nissen and Mr. Jordan are
each eligible to receive annual payments based upon achievement criteria established by the board of directors.
Mr.
Nissen’s and Mr. Jordan’s respective employment agreement provides that, if we terminate the executive’s employment
without cause, subject to the possibility of a six-month delay, on the 60th day after the date of termination, we will pay such executive
compensation in an amount equal to twice the amount of the executive’s then current monthly base salary and thereafter on the first
day of the month for the next 10 months compensation in an amount equal to 100% of the executive’s then current monthly base salary,
plus any bonus earned or accrued through the date of termination. Mr. Nissen’s and Mr. Jordan’s employment agreements contain
provisions relating to non-solicitation of customers and personnel and non-competition during the term of employment and the 12 months
thereafter, as well as a provision relating to the protection of confidential information.
Payments
to Mr. Nissen and Mr. Jordan upon a Change in Control
Under
Mr. Nissen’s employment agreement,
| · | after
a change in control and regardless of whether the executive remains employed by the company
or its successor, we will pay the executive an amount equal to two times the then current
annual base salary as well as any bonus earned through the date of change in control, and
we will remove any restrictions on outstanding incentive awards so that all such awards vest
immediately. |
Under
Mr. Jordan’s employment agreement,
| · | if
the executive’s employment is terminated by the employer without cause or by the executive
for good reason upon or during the two years following a change in control (a “Qualifying
Termination”), we will pay the executive an amount equal to two times the then current
annual base salary as well as any bonus earned through the Qualifying Termination, and we
will remove any restrictions on outstanding incentive awards so that all such awards vest
immediately. |
Under
Mr. Nissen’s and Mr. Jordan’s employment agreements,
| · | if
the executive’s employment is terminated without cause within two years following a
change in control: |
| o | the
executive may continue participation in our group health plan pursuant to COBRA. If the executive
elects COBRA coverage for group health coverage, he will be obligated to pay only the portion
of the full COBRA cost of the coverage equal to an active employee’s share of premiums
for coverage for the respective plan year and, on the 60th day after the date of termination
following a change in control, the company will pay the executive compensation in an amount
equal to six times the amount of the initial monthly portion of our share of such COBRA premiums;
provided, however, that such benefits will be eliminated if and when the executive is offered
Affordable Care Act compliant group health coverage from a subsequent employer, and |
| o | to
the extent that “portable” life insurance coverage is offered under our life
insurance programs and after such termination the executive continues to pay for “portable”
life insurance coverage that was provided by the company immediately prior to such termination,
we will reimburse the life insurance premiums paid by the executive with respect to such
life insurance coverage with respect to the two-year period ending immediately after such
termination. |
Outstanding
Equity Awards at Fiscal Year-End
The
following table shows the number of shares covered by both exercisable and non-exercisable options and stock awards owned by the individuals
named in the Summary Compensation Table as of December 31, 2022, as well as the related exercise prices and expiration dates. Options
and stock awards are granted pursuant to our equity incentive plan.
Outstanding
Equity Awards at December 31, 2022
| |
Option
Awards | | |
Stock
Awards | |
Name | |
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | |
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | |
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | |
Option
Exercise
Price ($) | | |
Option
Expiration
Date | | |
Number
of
Shares or
Units of
Stock That
Have Not
Vested (#)(1) | | |
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)(2) | | |
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested (#) | | |
Equity
Incentive
Plan
Awards:
Market or Payout
Value
of Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)(2)(3) | |
Michael
C. Crapps | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 12,540 | | |
| 274,501 | | |
| 7,157 | | |
| 156,667 | |
J.
Ted Nissen | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 6,307 | | |
| 138,060 | | |
| 4,224 | | |
| 92,463 | |
D.
Shawn Jordan | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 5,322 | | |
| 116,499 | | |
| 3,760 | | |
| 82,306 | |
| (1) | There
were no restricted stock awards granted to named executive officers in 2022. However, restricted
stock awards were granted to named executive officers prior to 2022 and cliff vest over a
three-year period. There were no TRSUs granted to named executive officers prior to 2021.
The TRSU awards granted in 2022 cliff vest over a three-year period. The following restricted
stock awards or restricted stock units vest on February 25, 2023, February 17, 2024 and February
17, 2025, respectively: Mr. Crapps; 5,383, 3,819 and 3,338; Mr. Nissen; 2,083, 2,217 and
2,007; and Mr. Jordan; 0, 2,004 and 1,756. Furthermore, Mr. Jordan has 1,562 shares of restricted
stock remaining on a grant of 3,908 shares on his hire date of November 12, 2019. The remaining
1,562 shares have the following vesting schedule: 781 on November 12, 2023 and 781 on November
12, 2024. |
| (2) | Amounts
are based upon the adjusted closing price of our common stock on December 30, 2022 (the last
trading day of the year) of $21.89 per share. |
| (3) | Represents
PRSUs that are subject to the achievement of pre-established performance targets and the
officer’s continued service through the vesting date. Any PRSUs that vest will be converted
to shares of our common stock on a one-for-one basis. PRSUs that do not vest will be forfeited.
The number of unearned PRSUs reported assumes the units are earned and vested on a one-for-one
basis (representing satisfaction of corporate performance goals at the target performance
level). |
Option
Exercises and Stock Vested
The
following table provides information concerning stock awards that vested in 2022 for our named executive officers. There were no stock
options exercised by any named executive officers during the year ended December 31, 2022.
| |
Option
Awards | | |
Stock
Awards | |
Name | |
Number
of Shares
Acquired on
Exercise (#) | | |
Value
Realized on
Exercise ($) | | |
Number
of
Shares
Acquired on
Vesting (#) | | |
Value
Realized on
Vesting ($)(1) | |
Michael
C. Crapps | |
| — | | |
| — | | |
| 2,693 | | |
| 54,829 | |
J.
Ted Nissen | |
| — | | |
| — | | |
| 1,042 | | |
| 21,215 | |
D.
Shawn Jordan | |
| — | | |
| — | | |
| 782 | | |
| 16,031 | |
| (1) | The
amounts reported in this column were calculated using the per share closing price of our
common stock on the vesting date of the awards. |
Equity
Compensation Plan Information
The
following table contains certain information as of December 31, 2022, relating to securities authorized for issuance under our equity
compensation plans.
Plan
Category | |
Number
of securities to be issued upon exercise of outstanding options, warrants and rights(a) | | |
Weighted-average
exercise price of outstanding options, warrants and rights (b) | | |
Number
of securities remaining available for future issuance under equity compensation plans (c)
(excluding securities reflected in column(a)) | |
Equity
compensation plans approved by security holders(1) | |
| 65,936 | | |
$ | n/a | | |
| 186,094 | (2) |
Equity
compensation plans not approved by security holders | |
| n/a | | |
| n/a | | |
| — | |
Total | |
| 65,936 | | |
$ | n/a | | |
| 186,094 | (2) |
| (1) | Column (a) consists of shares of our common stock issuable upon vesting of restricted stock and restricted stock units, including 16,636
TRSUs and 13,301 PRSUs at the target payout (with a maximum payout of 19,954 PRSUs) issued under our 2011 Stock Incentive Plan (the “2011
Plan”). Our 2021 Omnibus Equity Incentive Plan (the “2021 Plan”) replaced the 2011 Plan and no new awards may be granted
under the 2011 Plan. As of December 31, 2022, we issued 11,738 TRSUs and 11,738 PRSUs at the target payout (with a maximum payout of
17,608 PRSUs) under our 2021 Plan. Restricted stock units are settled for shares of our common stock on a one-for-one basis. The PRSUs
have a payout range from 0% of target for below threshold performance, 50% of target for threshold performance, 100% of target for target
performance and 150% of target for maximum performance; payouts are pro-rated if actual results fall between the threshold, target, and
maximum levels. PRSUs are reported in column (a) assuming achievement at the maximum performance level. Restricted stock units have no
exercise price and, therefore, have no weighted-average exercise price to report in column (b). Column (c) consists of shares reserved
for future issuance under our 2021 Plan. |
| (2) | The number of shares in this column were calculated as follows: |
First
Community Corporation 2021 Omnibus Equity Incentive Plan (In shares / units) | |
| |
| |
2022 | |
Initial
reserve – May 19, 2021 | |
| 225,000 | |
Shares
/ units granted | |
| | |
Time-based
restricted stock units – officer | |
| (11,738 | ) |
Performance-based
restricted stock units – officer(a) | |
| (17,608 | ) |
Restricted
stock – officer | |
| (2,201 | ) |
Restricted
stock – director | |
| (7,359 | ) |
Remaining
reserve – December 31, 2022 | |
| 186,094 | |
| (a) | Performance-based
restricted stock units are initially granted and expensed at target levels; however, they
are reserved at maximum levels. |
Certain
Retirement and Salary Continuation Benefits
We
have established the First Community Bank, Profit Sharing Plan, a qualified 401(k) defined contribution plan, pursuant to which we make
matching and discretionary contributions on behalf of each of the executive officers. We also maintain and pay premiums on behalf of
each executive officer under a life insurance plan and provide partial payment of premiums for medical benefits if the executive officer
so elects.
We
have entered into salary continuation agreements with executives Crapps, Nissen and Jordan. The salary continuation agreements provide
for an annual supplemental retirement benefit to be paid to each of the executives, commencing at the specified normal retirement age
and payable in monthly installments for a prescribed number of years.
Each
executive will receive this benefit if the executive’s employment is terminated following a change in control (as defined in each
executive’s employment agreement). If the executive dies after a separation of service but before the executive’s annual
supplemental benefit commences, the executive’s benefit will be paid to the executive’s beneficiaries, beginning with the
month following the bank’s receipt of a copy of the executive’s death certificate. If the executive dies after the executive’s
benefit has commenced, the remaining benefits will be paid to the executive’s beneficiaries at the same time and in the same amounts
that would have been distributed to the executive had the executive survived. If the executive dies during active service, 100% of the
executive’s accrual balance (as defined in the salary continuation agreement) will be paid in a lump sum to the executive’s
beneficiaries.
If
the executive experiences a disability that results in a separation of service prior to the normal retirement age, the executive will
be entitled to 100% of the executive’s accrual balance determined as of the end of the plan year preceding termination.
If
the executive is terminated without cause (as defined in the executive’s employment agreement), the executive is entitled to 100%
of his accrual balance determined as of the end of the plan year preceding such termination. This benefit is determined by vesting the
executive in 10% of the accrual balance at the end of the first plan year, and an additional 10% of such amount at the end of each succeeding
year thereafter until the executive becomes 100% vested in the accrual balance.
To
offset the annual expense accruals for the benefits payable to the executives under the salary continuation agreements, the bank acquired
bank-owned life insurance (“BOLI”). It is anticipated that the BOLI will provide full cost recovery of the benefits paid
to the executives under the salary continuation agreements upon their deaths.
The
foregoing summary of the material features of the salary continuation agreements for Messrs. Crapps, Nissen and Jordan is qualified in
its entirety by reference to the provisions of the agreements, the form of which is attached as Exhibit 10.5 to our Annual Report on
Form 10-K filed with the SEC on March 22, 2023. See also the discussion under “Named Executive Officer Employment Agreements”
in this proxy statement.
Pay
Versus Performance
The
following table sets forth information concerning the compensation of our chief executive officer, or “CEO,” and, on an average
basis, the compensation of our Non-CEO named executive officers, or “Non-CEO NEOs,” for each of the fiscal years ending December
31, 2022 and 2021, as such compensation relates to our financial performance for each such fiscal year.
Year | |
Summary
Compensation
Table for
CEO1 ($) | | |
Compensation
Actually Paid
to CEO1,2 ($) | | |
Average
Summary
Compensation
Table Total
for Non-CEO
NEOs1 ($) | | |
Average
Compensation
Actually Paid to
Non-CEO
NEOs1,3 ($) | | |
Value
of Initial Fixed $100 Investment Based on Total Shareholder Return ($)4 | | |
Net
Income ($ in thousands) | |
2022 | |
| 910,988 | | |
| 929,148 | | |
| 485,621 | | |
| 486,697 | | |
| 135.67 | | |
| 14,613 | |
2021 | |
| 933,529 | | |
| 993,463 | | |
| 497,597 | | |
| 517,522 | | |
| 125.95 | | |
| 15,465 | |
1 | For
each year in the above table, the CEO is Michael C. Crapps, president and chief executive officer, and the Non-CEO NEOs are J. Ted Nissen,
executive vice president and chief banking officer, and D. Shawn Jordan, executive vice president and chief financial officer. |
2 | This
column represents the “compensation actually paid” to our CEO for each year, determined by starting with the amount set forth
in the Summary Compensation Table (“SCT”) in the column entitled “Total Compensation” for the applicable year
and adjusting that amount as follows (totaling $18,160 and $59,934 for the years 2022 and 2021, respectively): |
| – | Increase
for fair value of awards granted during year that remain unvested as of year-end |
| – | Increase
for change in fair value from prior year-end to current year-end of awards granted prior
to year that were outstanding and unvested as of year-end |
| – | Increase
/ decrease for change in fair value from prior year-end to vesting date of awards granted
prior to year that vested during year |
3 | This
column represents the “compensation actually paid” to our Non-CEO NEOs for each year, determined by starting with the amount
set forth in the SCT in the column entitled “Total Compensation” for the applicable year (and taking the average of those
amounts for the non-CEO NEOs) and adjusting that amount as follows (totaling $1,076 and $19,925 for the years 2022 and 2021, respectively): |
| – | Increase
for fair value of awards granted during year that remain unvested as of year-end |
| – | Increase
for change in fair value from prior year-end to current year-end of awards granted prior
to year that were outstanding and unvested as of year-end |
| – | Increase
/ decrease for change in fair value from prior year-end to vesting date of awards granted
prior to year that vested during year |
4 | Total
Shareholder Return assumes $100 was invested in our common stock on December 31, 2020 and assumes the reinvestment of all cash dividends
prior to any tax effect and retention of all stock dividends. |
Relationship
Between Pay and Performance
The
relationship between compensation actually paid to our CEO and the average of the compensation actually paid to our other non-CEO NEOs
and the performance measures shown in the table above is described in further detail below. As illustrated below, the compensation actually
paid to our CEO and the other non-CEO NEOs, as calculated in accordance with the SEC requirements, has generally trended over the full
two-year period in line with the performance measure of net income disclosed in the table above. Compared to 2021, our 2022 net income
declined 5.5% while the compensation actually paid to our CEO declined congruently 6.5% and the average compensation actually paid to
our non-CEO NEOs declined congruently 6.0%. Although our TSR increased to $135.67 in 2022 from $125.95 in 2021, the compensation actually
paid to our CEO declined incongruously 6.5% and the average compensation actually paid to our non-CEO NEOs declined incongruously 6.0%.
In addition to our financial performance, we also evaluate all elements of our NEO compensation based on qualitative factors and an evaluation
of competitive compensation levels with other comparable institutions.
Relationship
Between Compensation Actually Paid and Our TSR
The
graph below shows the relationship between the compensation actually paid to our CEO and the average compensation actually paid to our
non-CEO NEOs and our TSR.
Relationship
Between Compensation Actually Paid and Our Net Income
The
graph below shows the relationship between the compensation actually paid to our CEO and the average compensation actually paid to our
non-CEO NEOs and our net income.
Director
Compensation
During
the year ended December 31, 2022, the chairman of the board received a $12,500 retainer and $1,350 for attendance at each board
meeting while chairs of the ALCO committee, the audit committee, the executive committee, the compensation committee and the
nominating committee received $9,500 as an annual retainer and the chair of the loan committee received $11,500 as an annual
retainer. The remaining outside directors received a retainer in the amount of $7,500. Outside directors, excluding the chairman of
the board, received fees of $1,000 for attendance at each board meeting and $500 for attendance at each committee meeting except for
members of the audit committee who received $750 for each audit committee meeting. Mr. Crapps, as an employee of the company, does
not receive any director compensation. He is not listed in the following table because his compensation as a named executive
officer is described elsewhere in this proxy statement.
The
following is a summary of the compensation paid to directors (other than Mr. Crapps) for 2022.
Director* | |
Fees
Earned or Paid
in
Cash(1)
($) | | |
Stock
Awards(2)
($) | | |
Option
Awards
($) | | |
Non-Equity
Incentive
Plan
Compensation
($) | | |
Nonqualified
Deferred
Compensation
Earnings
($) | | |
All
Other
Compensation
($) | | |
Total
($) | |
Thomas
C. Brown | |
| 25,500 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 39,502 | |
C.
Jimmy Chao | |
| 35,200 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 49,202 | |
Jan
H. Hollar | |
| 25,000 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 39,002 | |
Ray
E. Jones | |
| 24,000 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 38,002 | |
W.
James Kitchens, Jr. | |
| 27,500 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 41,502 | |
Mickey
E. Layden | |
| 27,000 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 41,002 | |
E.
Leland Reynolds | |
| 26,000 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 40,002 | |
Alexander
Snipe, Jr. | |
| 34,000 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 48,002 | |
Jane
S. Sosebee | |
| 25,500 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 39,502 | |
Edward
J. Tarver | |
| 25,500 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 39,502 | |
Roderick
M. Todd, Jr. | |
| 27,500 | | |
| 14,002 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 41,502 | |
| * | There
were no outstanding stock options held by our directors at December 31, 2022. |
| (1) | We
have implemented a director deferred compensation plan whereby the director can elect to
defer all or any part of any annual retainer or monthly meeting fee payable to the director
in respect of the following calendar year for service on the board of directors or a committee
of the board. The director receives units of common stock for the amounts deferred under
the plan, and the units can be exchanged for common stock when the director retires. The
amounts reflected in this column include the 2022 deferred amounts. |
| (2) | On
February 17, 2022, each non-employee director was granted 669 shares of restricted stock
as part of the overall board compensation plan. The shares were valued at $20.93 per share
and were unvested as of December 31, 2022. The shares fully vested on January 1, 2023. The
value of restricted stock grants shown above equals the grant date fair value in accordance
with FASB ASC Topic 718. |
The
following table summarizes the fee amounts deferred for each director electing all or partial deferral.
Name | |
Fees
Deferred
and Dividend
Allocation
($)(1) | | |
Accumulated
Share Units
(#)(2) | | |
Accumulated
Share Units
Since Inception(3) | |
Thomas
C. Brown | |
| 27,323 | | |
| 1,366 | | |
| 4,193 | |
C.
Jimmy Chao | |
| 55,939 | | |
| 2,831 | | |
| 41,423 | |
W.
James Kitchens, Jr. | |
| 4,767 | | |
| 245 | | |
| 9,321 | |
Alexander
Snipe, Jr | |
| 52,018 | | |
| 2,636 | | |
| 37,038 | |
Edward
J. Tarver | |
| 12,576 | | |
| 645 | | |
| 1,512 | |
| (1) | The
“Fees Deferred and Dividend Allocation” column reflects the amount of deferred
fees for the year ended December 31, 2022 and dividend allocations on the accumulated share
units. Under our Non-Employee Director Deferred Compensation Plan, as amended
and restated effective as of January 1, 2021, a director may elect to defer all or any part
of annual retainer and monthly meeting fees payable with respect to service on the board
of directors or a committee of the board. Units of common stock are credited to the director’s
account as of the last day of such calendar quarter during which the compensation is earned.
Furthermore, dividend allocations on the accumulated share units are credited to the director’s
account on the company’s common stock dividend payable dates. The non-employee director’s
account balance is distributed by issuance of common stock within 30 days following such
director’s separation from service from the board of directors. |
| (2) | The
amounts reflected in the “Accumulated Share Units” column reflect the number
of units of common stock accumulated during the year ended December 31, 2022, including dividend
allocations. |
| (3) | The
amounts reflected in the “Accumulated Share Units Since Inception” column reflect
the number of units of common stock accumulated since the director began deferring annual
retainer and monthly board and committee fees, including dividend allocations. In general,
the director’s vested account balance will be distributed in a lump sum of our common
stock on the 30th day following cessation of service from the board, including cessation
of service as a result of death or disability. |
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information known to us with respect to beneficial ownership of our common stock as of March 24, 2023 for
(i) each director and nominee, (ii) each holder of 5.0% or greater of our common stock, (iii) our named executive officers, and (iv)
all executive officers and incumbent directors as a group. Unless otherwise indicated, the mailing address for each beneficial owner
is care of First Community Corporation, 5455 Sunset Boulevard, Lexington, South Carolina, 29072.
Name | |
Shares
of Common Stock
Owned(1)* | | |
Right
to Acquire(2)* | | |
%
of Beneficial
Ownership(3) | |
Named
Executive Officers | |
| | | |
| | | |
| | |
Michael
C. Crapps(4) | |
| 74,795 | | |
| — | | |
| 0.99 | % |
J. Ted
Nissen | |
| 31,679 | | |
| — | | |
| 0.42 | % |
D. Shawn
Jordan | |
| 5,912 | | |
| — | | |
| 0.08 | % |
Directors
and Director Nominees | |
| | | |
| | | |
| | |
Thomas
C. Brown | |
| 28,407 | | |
| 4,193 | | |
| 0.43 | % |
C. Jimmy
Chao | |
| 40,516 | | |
| 41,423 | | |
| 1.07 | % |
Jan
H. Hollar | |
| 5,359 | | |
| — | | |
| 0.07 | % |
Ray
E. Jones | |
| 2,153 | | |
| — | | |
| 0.03 | % |
W. James
Kitchens, Jr.(5) | |
| 24,372 | | |
| 9,321 | | |
| 0.44 | % |
Mickey
E. Layden | |
| 6,108 | | |
| — | | |
| 0.08 | % |
E. Leland
Reynolds | |
| 26,459 | | |
| — | | |
| 0.35 | % |
Alexander
Snipe, Jr.(6) | |
| 10,181 | | |
| 37,038 | | |
| 0.62 | % |
Jane
S. Sosebee(7) | |
| 4,162 | | |
| — | | |
| 0.05 | % |
Edward
J. Tarver | |
| 3,948 | | |
| 1,512 | | |
| 0.07 | % |
Roderick
M. Todd, Jr. | |
| 11,481 | | |
| — | | |
| 0.15 | % |
All executive officers and
directors as a group (17 persons)(3) | |
| 301,439 | | |
| 93,487 | | |
| 5.14 | % |
Greater
than 5% Shareholders | |
| | | |
| | | |
| | |
Fourthstone
LLC(8) | |
| 539,786 | | |
| — | | |
| 7.11 | % |
Manulife
Financial Corporation(9) | |
| 391,734 | | |
| — | | |
| 5.16 | % |
| * | For
purposes of the tabular disclosure above, all fractional shares have been rounded down to
the nearest whole share. |
| (1) | Beneficial
ownership is determined under the rules of the SEC and generally includes voting or investment
power with respect to securities. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, to our knowledge the persons named in the
table above have sole voting and investment power with respect to all shares of common stock
beneficially owned. |
| (2) | No
executive officer has the right to acquire additional shares of our common stock within 60
days of March 24, 2023. However, with respect to certain directors, accumulated share units
under our Amended and restated Non-Employee Director Deferred Compensation Plan are distributed
in our common stock within 30 days following such director’s separation from service
from the board of directors. |
| (3) | For
each individual, this percentage is determined by assuming the named person exercises all
rights with respect to our common stock within 60 days of March 24, 2023 which he or she
has the right to acquire within 60 days, but that no other person exercises any such rights
with respect to our common stock. For the directors and executive officers as a group, this
percentage is determined by assuming that each director and executive officer exercises all
rights with respect to our common stock which he or she has the right to acquire within 60
days, but that no other persons exercise any such right. The calculations are based on 7,587,763
shares of common stock outstanding on March 24, 2023. |
| (4) | Includes
9,805 shares held indirectly by Mr. Crapps’ spouse. |
| (5) | Includes 9,223 shares held indirectly by Kitchens Family Investments, LLC and 6,044 shares held indirectly by Kitchens Trust Investments, LLC. Also, includes 465 shares held indirectly by Charitable Contribution Fund, Inc.,which is a 501(c)(3) non-profit organization. Mr. Kitchens disclaims any pecuniary interest in Charitable Contribution Fund, Inc.; however, he may direct the voting and disposition of these shares.
|
| (6) | Includes
3,927 shares held indirectly by Glory Communications, Inc. Mr. Snipe owns 100% of Glory Communications,
Inc. and serves as its President and CEO. |
| (7) | Includes
95 shares held indirectly by Ms. Sosebee’s spouse. |
| (8) | Based
on the Schedule 13G filed on February 14, 2023 by Fourthstone LLC; Fourthstone Master Opportunity
Fund Ltd; Fourthstone GP LLC; Fourthstone QP Opportunity Fund LP; Fourthstone Small-Cap Financials
Fund LP; and L. Phillip Stone, IV, with respect to our common stock held as of December 31,
2022. Based on the Schedule 13G (i) Fourthstone LLC has shared voting and dispositive power
over 539,786 shares; (ii) Fourthstone Master Opportunity Fund Ltd has shared voting and dispositive
power over 376,487 shares; (iii) Fourthstone GP LLC has shared voting and dispositive power
over 162,299 shares; (iv) Fourthstone QP Opportunity Fund LP has shared voting and dispositive
power over 158,981 shares; (v) Fourthstone Small-Cap Financials Fund LP has shared voting
and dispositive power over 3,318 shares; and (vi) L. Phillip Stone, IV has shared voting
and dispositive power over 539,786 shares. The address of the business office of each of
the foregoing persons is 575 Maryville Centre Drive, Suite 110, St. Louis, MO 63141. |
| (9) | The
Manulife Financial Corporation (“MFC”) information set forth in this proxy statement
is based on information set forth in a Schedule 13G/A filed by MFC and MFC’s indirect,
wholly-owned subsidiary, Manulife Investment Management (US) LLC (“MIM (US)”),
with the SEC on February 14, 2023, reporting that MFC has sole voting and dispositive power
over no shares of our common stock and MIM (US) has sole voting and dispositive power over
391,734 shares of our common stock. Through its parent-subsidiary relationship to MIM (US),
MFC may be deemed to have beneficial ownership of these same shares. The mailing address
for MIM (US) is 197 Clarendon Street, Boston, Massachusetts 02116. The mailing address of
MFC is 200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5. |
Certain
Relationships and Related Party Transactions
Statement
of Policy Regarding Transactions with Related Persons
Our
bank is subject to the provisions of Section 23A of the Federal Reserve Act, which places limits on the amount of loans or extensions
of credit to, or investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized
by the securities or obligations of affiliates. The bank is also subject to the provisions of Section 23B of the Federal Reserve Act
which, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time
for comparable transactions with nonaffiliated companies.
The
bank has had, and expects to have in the future, loans and other banking transactions in the ordinary course of business with directors
(including our independent directors) and executive officers of the company and its subsidiaries, including members of their families
or corporations, partnerships or other organizations in which such officers or directors have a controlling interest. These loans are
made on substantially the same terms (including interest rates and collateral) as those available at the time for comparable transactions
with persons not related to the bank and did not involve more than the normal risk of collectability or present other unfavorable features.
The
aggregate dollar amount of loans outstanding to directors and executive officers of the bank was approximately $2.8 million at December
31, 2021 and $2.2 million at December 31, 2022.
Review
of Related Party Transactions
We
have adopted a Code of Business Conduct and Ethics that contains written procedures for our audit committee (or another independent body
of the board of the directors) to follow when reviewing transactions between the company and its directors and executive officers, their
immediate family members, and entities with which they have a position or relationship. These procedures are intended to determine whether
any such related person transaction impairs the independence of a director or presents a conflict of interest on the part of a director
or executive officer. This policy also requires the bank to comply with Regulation O, which contains restrictions on extensions of credit
to executive officers, directors, certain principal shareholders, and their related interests. Such extensions of credit (i) must be
made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions
with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. The Code of
Business Conduct and Ethics may be found on our website by clicking on the link for “Investors” under the “About”
tab on our website at www.firstcommunitysc.com.
Other
Relationships
Manning
C. Crapps is employed with the bank’s financial planning and investment advisory division, First Community Financial Consultants,
as an investment officer and financial consultant. He receives compensation based on a commission structure that also applies to other
investment officers and financial consultants employed by the First Community Financial Consultants division. He is the son of our director
and president and chief executive officer, Michael C. Crapps, and received total compensation of approximately $213,549 in 2022 and approximately
$220,833 in 2021.
Annual
Questionnaires
We
annually require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits
information about related person transactions. Our nominating committee, which consists entirely of independent directors, annually reviews
all relationships and amounts disclosed in the directors’ and officers’ questionnaires, and our board of directors makes
a formal determination regarding each director’s independence under Nasdaq listing standards and applicable SEC rules.
Independent
Registered Public Accountants
We
selected Elliott Davis, LLC, to serve as our independent registered public accounting firm for the year ending December 31, 2022. A representative
of Elliott Davis, LLC, is expected to be available either in-person, by telephone, or by Microsoft Teams at our annual meeting and will
have the opportunity to make a statement if desired and is expected to be available to respond to appropriate questions.
Audit
and Related Fees
The
following table shows the fees payable in the years ended December 31, 2022 and 2021 to Elliott Davis, LLC:
| |
2022 | | |
2021 | |
Audit
Fees(1) | |
$ | 182,000 | | |
$ | 171,200 | |
Audit-Related
Fees(2) | |
| 30,750 | | |
| 32,190 | |
Tax
Fees(3) | |
| 43,175 | | |
| 31,685 | |
All
Other Fees(4) | |
| — | | |
| — | |
Total | |
$ | 255,925 | | |
$ | 235,075 | |
| (1) | Audit
Fees consisted primarily of the audit of our annual consolidated financial statements
and for reviews of the condensed consolidated financial statements included in our Quarterly
Reports on Form 10-Q. |
| (2) | Audit
Related Fees for 2022 and 2021 consisted primarily of procedures related to offering
documents, the audit of our 401(k) plan, HUD compliance audit, and miscellaneous accounting
and research discussions. |
| (3) | Tax
Fees. This category includes the aggregate fees billed for services related to corporate
tax compliance, as well as counsel and advisory services. |
| (4) | All
Other Fees. Elliott Davis, LLC did not bill us for any other services for 2022 and 2021. |
Oversight
of Accountants; Approval of Accounting Fees
Under
the provisions of its charter, the audit committee is responsible for the retention, compensation, and oversight of the work of the independent
auditors. The committee reviews any proposed services to ensure that securities laws do not prohibit them and approves the scope of all
services prior to being performed. All of the accounting services and fees reflected in the table above have been reviewed and approved
by the audit committee, and individuals who were not employees of the independent auditor performed none of the services.
Pre-Approval
Policy
Our
audit committee’s pre-approval guidelines with respect to pre-approval of audit and non-audit services are summarized below.
General.
The audit committee is required to pre-approve all audit and non-audit services performed by the independent auditor to assure that
the provision of such services does not impair the auditor’s independence. The independent auditors provide the audit committee
with an annual engagement letter outlining the scope of the audit and permissible non-audit services proposed for the fiscal year, along
with a fee proposal. The scope and fee proposal are reviewed with the internal auditor, the audit committee chair, and, when appropriate,
our management for their input (but not their approval). Once approved by the audit committee, the services outlined in the engagement
letter will have specific approval. All other audit and permissible non-audit services that have not been approved in connection with
the independent auditor’s engagement letter for the applicable year must be specifically pre-approved by the audit committee under
the same process as noted above, where practicable. The independent auditors shall not perform any prohibited non-audit services described
in Section 10A(g) of the Exchange Act. The audit committee must specifically pre-approve any proposed services that exceed pre-approved
cost levels. All services provided by Elliott Davis, LLC, and all fees related thereto, were approved pursuant to the pre-approval policy.
Tax
Services. The audit committee believes that the independent auditor can provide tax services to us, such as tax compliance, tax planning
and tax advice, without impairing the auditor’s independence. The audit committee will not permit the retention of the independent
auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance
and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations.
Shareholder
Proposals for the 2024 Annual Meeting of Shareholders
Any
shareholder of the company desiring to include a proposal pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 in our proxy
statement for action at the 2024 annual meeting of shareholders must deliver the proposal to the executive offices of the company no
later than December 6, 2023, unless the date of the 2024 annual meeting of shareholders is more than 30 days before or after May 17,
2024, in which case the proposal must be received a reasonable time before we begin to print and send our proxy materials. Only proper
proposals that are timely received and in compliance with Rule 14a-8 will be included in our 2024 proxy statement.
Under
our bylaws, shareholder proposals not intended for inclusion in our 2024 proxy statement pursuant to Rule 14a-8 but intended to be raised
at the 2024 annual meeting of shareholders, including nominations for election of director(s) other than the board’s nominees,
must be received no later than 90 days in advance of the 2024 annual meeting of shareholders and must comply with the procedural, informational
and other requirements outlined in our bylaws.
Our
2022 Annual Report on Form 10-K
Included
with these proxy materials is a copy of our 2022 Annual Report on Form 10-K without exhibits, as filed with the SEC. We will furnish
to each person whose proxy is solicited, on the written request of that person, a copy of the exhibits to that annual report for a charge
of ten cents per page. We will also mail to you without charge, upon request, a copy of any document specifically referenced or incorporated
by reference in this proxy statement. Requests should be mailed to First Community Corporation, Attention: Corporate Secretary, 5455
Sunset Blvd., Lexington, South Carolina 29072.
FIRST
COMMUNITY CORPORATION
5455
Sunset Boulevard Lexington, South Carolina 29072
www.firstcommunitysc.com
Signatu r e [PLEASE SIGN WITHIN BOX] Date Signatu r e (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DE T ACH AND RETURN THIS PORTION ON L Y THIS PROXY CARD IS V ALID ON L Y WHEN SIGNED AND D A TED. V01036 - P87886 Nominees: 1) Thomas C. B r own 2) W . James Kitchens, J r . 3) Edwa r d J. T arver 4) Roderick M. T odd, J r . 2. T o app r ove the compensation of our named executive o f ficers as disclosed in the p r oxy statement (this is a non - binding, advisory vote), (“Say - on - Pay”). The Boa r d of Di r ectors r ecommends you vote FOR the following pr oposals: 3. T o ratify the appointment of Elliott Davis, LLC as our independent r egiste r ed public accounting firm for 2023. Fo r W i t hh o ld F o r All A ll Al l Except ! ! ! T o withhol d authorit y t o vot e fo r an y individual nominee(s) , mar k “Fo r Al l Except “ an d writ e the number(s ) o f th e nominee(s ) o n th e lin e belo w . The Boa r d of Di r ectors r ecommends you vote FOR the following: 1. Election of Class II Di r ectors Fo r Agains t Abstain ! ! ! ! ! ! FIRST COMMUNITY CORPOR A TION FIRST COMMUNITY CORPOR A TION 5455 SUNSET B L VD. LEXINGTON, SC 29072 Please sign exactly as your name(s) appear(s) hereon . When signing as attorney, executor, administrator, or other fiduciary, please give full title as such . Joint owners should each sign personally . All holders must sign . If a corporation or partnership, please sign in full corporate or partnership name by authorized officer . VOTE BY INTERNET - ww w . p r oxyvote . com or scan the QR Ba r code above Use the Inte r net to transmit your voting instructions and for elect r onic delivery of information up until 11 : 59 p . m . Easte r n T ime on May 16 , 2023 . Follow the instructions to obtain your r eco r ds and to c r eate an elect r onic voting instruction form . ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials , yo u ca n consen t t o receivin g al l futur e prox y statements , proxy cards and annual reports electronically via e - mail or the Internet . To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years . VOTE BY PHONE - 1 - 800 - 690 - 6903 Use any touch - tone telephone to transmit your voting instructions up until 11 : 59 p . m . Easte r n T ime on May 16 , 2023 . Have your p r oxy ca r d in hand when you call and then follow the instructions . VOTE BY MAIL Mark , sig n an d dat e you r prox y car d an d retur n i t i n th e postage - pai d envelop e w e hav e provide d o r retur n i t t o Vot e Processing , c/ o Broadridge, 5 1 Mercede s Way , Edgewood , N Y 11717 . SCAN T O VIE W M A TERIAL S & VO TE w
Important Notice Rega r ding the A vailability of Pr oxy Materials for the Annual Meeting: The Notice & P r oxy Statement/10 - K a r e available at ww w .p r oxyvote.com V01037 - P87886 FIRST COMMUNITY CORPOR A TION Annual Meeting of Sha reholders May 17, 2023 11:00 A.M. Easte r n Time This pr oxy is solicited by the Boa r d of Di r ectors The undersigned he r eby constitutes and appoints D . Shawn Jo r dan and John F . (Jack) W alke r , IV and each of them, as his true and lawful agents and p r oxies with full power of substitution in each, to r ep r esent and vote, as indicated belo w , all of the sha r es of Common Stock of First Community Corporation that the undersigned would be entitled to vote at the Annual Meeting of Sha r eholders of the company to be held on May 17 , 2023 at our o f fice located at 5455 Sunset Blvd . , Lexington, South Ca r olina 29072 , at 11 : 00 A . M . Easte r n T ime, and at any adjou r nment or postponement the r eof, upon the matters described in the Notice of Annual Meeting of Sha r eholders and P r oxy Statement, r eceipt of which is acknowledged . These p r oxies a r e di r ected to vote on those matters described in the Notice of Annual Meeting of Sha r eholders and P r oxy Statement as follows : This pr ox y , when pr operly executed, will be voted in the manner di r ected he r ein by the undersigned shar eholde r . If no di r ection is made, this pr oxy will be voted “for” Pr oposal No . 1 , to elect four di r ector nominees to serve on the Boa r d of Di r ectors ; “for” Pr oposal No . 2 , to app r ove the compensation of our named executive o f ficers as disclosed in the pr oxy statement (this is a non - binding, advisory vote) ; and “for” Pr oposal No . 3 , to ratify the appointment of Elliott Davis, LLC as our independent r egiste r ed public accounting firm for the year ending December 31 , 2023 . This pr oxy also delegates disc r etionary authority to the pr oxies to vote with r espect to transact any other business that may pr operly come befo r e the meeting or any adjou r nment or postponement the r eof . Continued and to be signed on r everse side
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