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. _____)
Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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First Bancorp
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
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Amount previously paid:
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Form, schedule or registration statement no.:
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Filing party:
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300 SW Broad Street
Southern Pines, North Carolina 28387
Telephone (910) 246-2500
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE
HELD THURSDAY, MAY 12, 2016
To Our Shareholders:
The annual meeting of shareholders of First
Bancorp (the “Company”) will be held at the James H. Garner Conference Center, 211 Burnette Street, Troy, North Carolina
(see map on outside back cover) on Thursday, May 12, 2016 at 10:00 a.m. local time, for the purpose of considering and acting on
the following matters:
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1.
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A proposal to elect nine (9) nominees to the Board of Directors to serve until the 2017 annual meeting of shareholders, or
until their successors are elected and qualified.
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2.
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A proposal to ratify the appointment of Elliott Davis Decosimo, PLLC as the independent auditors of the Company for 2016.
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3.
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To approve, on a non-binding advisory basis, the compensation paid to the Company’s named executive officers, as disclosed
in the accompanying proxy statement (“say on pay”).
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4.
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Such other business as may properly come before the meeting, or any adjournment thereof.
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Only shareholders of record as of the close
of business on March 23, 2016 are entitled to notice of and to vote at the annual meeting and any adjournment thereof.
Whether or not you expect to be present
at the annual meeting, please complete, date and sign the enclosed form of proxy and return it promptly in the enclosed envelope.
If you attend the meeting, your proxy will be returned to you upon request. You may also vote by telephone or on the Internet,
as described in the proxy statement and on the proxy card.
Please note that the attached form of proxy
includes a request from the Company to indicate whether or not you plan to attend the annual meeting. For planning purposes, management
of the Company would appreciate you filling in the appropriate box indicating whether or not you plan to attend the annual meeting.
If you initially indicate that you are not planning to attend and later want to, or do not indicate one way or the other, you are
still welcome and invited to attend the meeting.
The proxy statement accompanying this notice
sets forth further information concerning the proposals to be considered at the annual meeting. You are urged to study this information
carefully.
Included in this package, in compliance with
applicable regulations, is the Company’s 2015 Annual Report, which includes a letter from the chief executive officer, and
the Company’s Form 10-K. The Form 10-K includes the Company’s financial statements and other required disclosures.
By Order of the Board of Directors
Elizabeth B. Bostian
Important notice regarding the availability
of proxy materials
for the shareholder meeting to be held on
May 12, 2016.
The Proxy Statement and 2015 Annual Report
on Form 10-K
are also available at www.edocumentview.com/FBNC
First Bancorp
300 SW Broad Street
Southern Pines, North Carolina 28387
Telephone (910) 246-2500
PROXY
STATEMENT
INTRODUCTION
This proxy statement is furnished to the shareholders
of First Bancorp (hereinafter sometimes referred to as the “Company”) by the Board of Directors in connection with
its solicitation of proxies for use at the annual meeting of shareholders of the Company to be held on Thursday, May 12, 2016 at
10:00 a.m. local time, at the James H. Garner Conference Center, 211 Burnette Street, Troy, North Carolina (see map on outside
back cover), and at any adjournment thereof. Action will be taken at the annual meeting on the items described in this proxy statement
and on any other business that properly comes before the meeting.
This proxy statement and accompanying form
of proxy are first being mailed to shareholders on or about April 4, 2016.
The accompanying proxy is for use at the 2016
Annual Meeting if a shareholder either will be unable to attend in person or will attend but wishes to vote by proxy. Most shareholders
have a choice of voting by completing the enclosed proxy card and mailing it in the postage-paid envelope provided, voting over
the Internet or using a toll-free number. Shareholders should refer to the proxy card or the information forwarded by the shareholder’s
bank, broker or other holder of record to see which voting options are available. Shareholders who vote over the Internet may incur
costs, such as telephone and Internet access charges, for which the shareholder is responsible. The Internet and telephone voting
facilities for eligible shareholders of record will close at 11:59 p.m. Eastern Daylight Time on May 11, 2016. Specific instructions
to be followed by any eligible shareholder interested in voting via the Internet or telephone are shown on the enclosed proxy card.
The Internet and telephone voting procedures are designed to authenticate the shareholder’s identity and to allow shareholders
to vote their shares and confirm that their instructions have been properly recorded. In the event that the proxy card does not
reference Internet or telephone voting information because the recipient is not the registered owner of the shares, the proxy card
must be completed and returned in the self-addressed, postage-paid envelope provided.
If you hold your shares in street name, it
is critical that you cast your vote if you want it to count in the election of our director nominees (Proposal 1 of this Proxy
Statement). Previously, if you held your shares in street name and you did not indicate how you wanted your shares voted in the
election of directors, your bank or broker was allowed to vote those shares on your behalf in the election of directors as they
felt appropriate. Changes in regulations were made to take away the ability of your bank or broker to vote your uninstructed shares
in the election of directors on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your
bank or broker how to vote in the election of directors, no votes will be cast on your behalf.
Any shareholder giving a proxy may revoke it
at any time before a vote is taken by (i) duly executing a proxy bearing a later date; (ii) executing a notice of revocation in
a written instrument filed with the secretary of the Company; or (iii) appearing at the meeting and notifying the secretary of
the shareholder’s intention to vote in person. Unless a contrary choice is specified, all shares represented by valid proxies
received pursuant to this solicitation, and not revoked before they are exercised, will be voted as set forth in this proxy statement.
In addition, the proxy confers discretionary authority upon the persons named therein, or their substitutes, with respect to any
other business that may properly come before the meeting.
The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of the Company’s common stock entitled to vote is necessary to constitute
a quorum at the annual meeting. If a quorum is not present or represented at the annual meeting, the shareholders present and entitled
to vote have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a
quorum is present or represented. At any such adjourned meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the meeting as originally notified. Abstentions from the vote on a particular proposal
and broker non-votes will be counted as present for purposes of determining if a quorum is present, but will not be counted as
votes on the proposal in question.
The Company will bear the entire cost of preparing
this proxy statement and of soliciting proxies. Proxies may be solicited by employees of the Company, either personally, by special
letter, or by telephone. Employees will not receive additional compensation for the solicitation of proxies. The Company also will
request brokers and others to send solicitation material to beneficial owners of stock and will reimburse their costs for this
purpose.
Only shareholders of record as of the close
of business on March 23, 2016 (the “Record Date”) will be entitled to vote at the annual meeting or any adjournment
thereof. The number of outstanding shares of the Company’s common stock entitled to vote at the annual meeting is 19,750,969.
Shareholders are entitled to one vote for each share of the Company’s common stock.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The Securities Exchange Act of 1934, as amended
(the “Exchange Act”), requires that any person who acquires the beneficial ownership of more than five percent of the
Company’s common stock notify the Securities and Exchange Commission (the “SEC”) and the Company. Following
is certain information, as of the most recent practicable date, regarding those persons or groups who held of record, or who are
known to the Company to own beneficially, more than five percent of the Company’s outstanding common stock.
Name and Address of Beneficial Owner
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Amount and Nature of
Beneficial Ownership
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Percent of Class
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Wellington Management Company, LLP
280 Congress Street
Boston, MA 02210
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1,448,005 shares
of common stock (1)
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7.33%
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BlackRock Inc.
40 East 52
nd
Street
New York, NY 10022
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1,217,887 shares
of common stock (2)
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6.17%
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Basswood Capital Management
645 Madison Avenue, 10
th
Floor
New York, NY 10022
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1,068,895 shares
of common stock (3)
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5.41%
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(1)
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This is based on a Schedule 13G/A filed by Wellington Management Group, LLP on February 11, 2016, and the schedule indicates
that the ability to vote or dispose of the shares is shared.
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(2)
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This is based on a Schedule 13G/A filed by BlackRock Inc. on January 26, 2016, and the schedule indicates sole power to vote
and dispose of these shares.
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(3)
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This is based on a Schedule 13G/A filed by Basswood Capital Management on February 11, 2016, and the schedule indicates that
the ability to vote or dispose of the shares is shared.
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PROPOSAL 1 - ELECTION OF DIRECTORS
Section 3.02 of the Company’s bylaws
provides that the number of directors on the Board of Directors of the Company will be not less than three nor more than 18, as
may be fixed by resolution duly adopted by the Board of Directors at or prior to the annual meeting at which such directors are
to be elected. In accordance with the bylaws, the size of the board has been fixed at nine members.
In the absence of any specifications to the
contrary, proxies will be voted for the election of all nine of the nominees listed in the table below by casting an equal number
of votes for each such nominee. If, at or before the time of the meeting, any of the nominees listed below becomes unavailable
for any reason, the proxyholders have the discretion to vote for a substitute nominee or nominees. The board currently knows of
no reason why any nominee listed below is likely to become unavailable. The nine nominees receiving a plurality of votes cast shall
be elected. This means that the nine nominees with the most votes will be elected. Only votes “FOR” a nominee will
affect the outcome.
The Company’s Articles of Incorporation
provide that, if cumulative voting applies, each shareholder is “entitled to multiply the number of votes he is entitled
to cast by the number of directors for whom he is entitled to vote and cast the product for a single candidate or distribute the
product among two or more candidates.” Cumulative voting procedures will not be followed at the annual meeting unless a shareholder
calls for cumulative voting as provided in the Company’s Articles of Incorporation, by announcing at the meeting before the
voting for directors starts, his or her intention to vote cumulatively. If cumulative voting is properly invoked by a shareholder,
the chair shall declare that all shares entitled to vote have the right to vote cumulatively and shall thereupon grant a recess
of not less than two days, nor more than seven days, as the chair shall determine, or of such other period of time as is unanimously
agreed upon. If cumulative voting applies, the proxyholders may, in their discretion, vote the shares to which such proxies relate
on a basis other than equally for each of the nominees named below and for less than all such nominees, but the proxyholders will
cast such votes in a manner that would tend to elect the greatest number of such nominees (or any substitutes therefor in the case
of unavailability) as the number of votes cast by them would permit.
NOMINATIONS FOR DIRECTOR
Nominees for election to the Board of Directors
are selected by the incumbent board prior to each annual meeting, and the nominees listed below were selected in that manner. Nominations
from shareholders must be made in accordance with the Company’s bylaws, which generally require such nominations to be made
in writing and not less than 60 nor more than 90 days prior to the meeting at which directors are to be elected and to include
certain information about the proposed nominee, in addition to other requirements.
A copy of the bylaw provision setting forth
the complete procedure for shareholder nominations of directors may be obtained upon written request to First Bancorp, 300 SW Broad
Street, Southern Pines, North Carolina 28387, Attention: Elizabeth B. Bostian, Secretary.
The Company’s bylaws state that no individual
may be elected to, or may serve on, the Board of Directors any time after his or her 75th birthday, except that if a director is
elected to the Board of Directors prior to his or her 75th birthday and reaches the age of 75 while serving as a director, such
director’s term shall continue until the next annual meeting of shareholders, at which time the director shall retire. The
bylaws allow the Board of Directors to make exceptions to this limitation in connection with mergers or acquisitions. The bylaws
also state that the foregoing provisions do not apply to any individual during the time such individual is serving as chief executive
officer of the Company.
See also “Director Nomination Process”
included in the section entitled “Corporate Governance Policies and Practices” below.
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Except as noted below, the following table
sets forth certain information as of December 31, 2015, with respect to the Company's current directors, the nine nominees
for election to the Board of Directors and the executive officers of the Company (all of these persons may be contacted at 300
SW Broad Street, Southern Pines, North Carolina 28387). The nine nominees are each current directors and have served on the Board
of Directors since the 2015 Annual Meeting. In accordance with the Company’s bylaws, the size of the board has been fixed
at nine members.
Each of the nine nominees has indicated
a willingness to serve if elected. The Board of Directors recommends a vote “FOR” the election of these nominees.
TABLE OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
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Common Stock Beneficially Owned (1)
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Name (Age)**
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Current Director (D),
Nominee (N), or
Position with Company
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Number of
Shares Owned
(excluding options)
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Number of
Shares That
May Be
Acquired
within 60
Days by
Exercising
Options
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Total
Number of
Shares
Beneficially
Owned
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Percent
of Class
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Directors and Nominees
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Richard H. Moore (55)
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CEO (D) (N)
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128,469
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(2)
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—
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128,469
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*
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Daniel T. Blue, Jr. (66)
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(D) (N)
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11,786
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—
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11,786
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*
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Mary Clara Capel (57)
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(D) (N)
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10,909
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9,000
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19,909
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*
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James C. Crawford, III (59)
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(D) (N)
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73,379
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(3)
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—
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73,379
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*
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Thomas F. Phillips (70)
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(D) (N)
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76,908
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(4)
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9,000
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85,908
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*
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O. Temple Sloan, III (55)
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(D) (N)
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4,172
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—
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4,172
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*
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Frederick L. Taylor, II (46)
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(D) (N)
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21,023
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9,000
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30,023
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*
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Virginia C. Thomasson (64)
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(D) (N)
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20,370
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9,000
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29,370
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*
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Dennis A. Wicker (63)
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(D) (N)
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26,980
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(5)
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9,000
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35,980
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*
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Non-Director Executive
Officers
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Eric P. Credle (47)
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Executive Vice President &
Chief Financial Officer
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28,853
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(6)
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6,270
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35,123
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*
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Michael G. Mayer (56)
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President of First Bank &
First Bancorp
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6,850
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(7)
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―
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6,850
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*
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Edward F. Soccorso (43)
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Executive Vice President &
Chief Strategy Officer
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6,607
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(8)
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―
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6,607
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*
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Directors/Nominees and Non-Director Executive Officers as a Group (12 persons)
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416,306
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(9)
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51,270
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467,576
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2.37
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%
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*
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Indicates beneficial ownership of less than 1%.
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**
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Age information is as of April 4, 2016.
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Notes to Table of Directors, Nominees and Executive
Officers:
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(1)
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Unless otherwise indicated, each individual has sole voting and investment power with respect to all shares beneficially owned
by such individual. The “Number of Shares Owned” in the table above includes executive officers’ reported shares
in the 401(k) defined contribution plan, which are voted by the plan trustee and not by the shareholder for whom such shares are
listed.
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(2)
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Mr. Moore’s shares includes 40,000 shares of restricted stock that were subject to vesting conditions related to the
attainment of earnings goals in calendar year 2015. In 2016, it was determined that the goal for 2015 was not reached, and therefore
the shares were forfeited. Mr. Moore’s shares also includes 3,298 shares held in the Company’s 401(k) defined contribution
plan.
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(3)
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Mr. Crawford’s shares include 6,325 shares held by his spouse and 6,600 shares held jointly with his children.
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(4)
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Mr. Phillips’ shares include 1,965 shares held by his spouse and 186 shares that his spouse owns jointly with two of
their children.
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(5)
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Mr. Wicker’s shares include 5,000 shares held by his spouse.
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(6)
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Mr. Credle’s shares include 10,326 shares held in the Company’s 401(k) defined contribution plan.
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(7)
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Mr. Mayer’s shares include 286 shares held in the Company’s 401(k) defined contribution plan.
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(8)
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Mr. Soccorso’s shares include 844 shares held in the Company’s 401(k) defined contribution plan.
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(9)
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The number of shares held by directors, nominees, and non-director executive officers includes 194,859 shares of the Company’s
stock that have been pledged as collateral by these persons for loans received from the Company and other financial institutions,
as follows: Mr. Phillips – 32,976 shares; and Mr. Credle – 13,768 shares.
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Director Nominees
Daniel T. Blue, Jr.
, 66, is the managing
partner of the law firm Blue Stephens and Fellers LLP, located in Raleigh, North Carolina, where he has been an attorney since
1973. In 1980, Mr. Blue was elected to the North Carolina House of Representatives and was re-elected twelve times. From 1991 –
1995, Mr. Blue was twice elected Speaker of the North Carolina House of Representatives. Mr. Blue currently serves in the North
Carolina Senate, representing Wake County, and was elected in March 2014 as the Senate Minority Leader. Mr. Blue is the immediate
past Chair of the Board of Trustees of Duke University. He is a former member of the Duke University Health System and a former
director of Duke University Management Company. Mr. Blue has been a director of the Company and First Bank since 2010.
Mr. Blue has an extensive background in law
and public service, and has skills related to executive decision making, as well as oversight, governance and management of large
organizations.
Mary Clara Capel
, 57, is a member of
senior management as the director of administration at Capel, Incorporated, a rug manufacturer, importer and exporter located in
Troy, North Carolina, where she has been employed since 1981, including fifteen years in her current position. She is a past member
of the North Carolina Banking Commission and attended the North Carolina Bank Directors College. Ms. Capel has been a director
of the Company and First Bank since 2005. Ms. Capel is the current chairman of the Board of Directors of the Company.
Ms. Capel brings business executive decision
making and oversight skills as a result of her 35 years of experience with a third-generation family business, which has grown
from its rug manufacturing operation in Troy, North Carolina to importing and exporting rugs worldwide.
James C. Crawford, III
, 59, served on
the Board of Directors, including as its Chairman, of Great Pee Dee Bancorp, Inc., a bank holding company headquartered in Cheraw,
South Carolina, from 1992 until its acquisition by the Company in April 2008. Mr. Crawford is the retired Chief Executive Officer
of B.C. Moore and Sons, Inc., a department store chain. Mr. Crawford has been a director of the Company and First Bank since 2008.
Mr. Crawford is the current chairman of the Board of Directors of First Bank.
Mr. Crawford brings extensive experience with
accounting and finance, as well as oversight and management of multiple businesses.
Richard H. Moore
,
55, was named
as President and Chief Executive Officer of the Company in June 2012. Prior to joining the Company, he served as a managing director
of San Diego-based Relational Investors LLC, a Registered Investment Advisor that advises the investment decisions of some of the
largest pension funds in the world. Prior to joining Relational Investors, Mr. Moore served two terms as State Treasurer of North
Carolina and served for four years as the Secretary of Crime Control and Public Safety. Mr. Moore also previously served as Chair
of the North Carolina State Banking Commission for eight years. Mr. Moore served two terms on the Board of Executives of the New
York Stock Exchange and is currently the chair of the New York Stock Exchange Regulation Board. Mr. Moore was previously an Assistant
U.S. Attorney and also practiced corporate, real estate and tax law for many years. Mr. Moore is a former trustee of Wake Forest
University and served on its Investment Committee. Mr. Moore is also a director of the Durham-based North Carolina Mutual Life
Insurance Company. Mr. Moore has been a director of the Company and First Bank since 2010.
Mr. Moore’s career has provided him with
extensive financial and accounting experience and gives him keen insight with respect to budget and audit matters, as well as the
oversight, governance and management of larger organizations.
Thomas F. Phillips
, 70, is an automobile
dealer and owner of Phillips Ford, located in Carthage, North Carolina. He served as a director of First Savings Bancorp, Inc.
from 1985 until its merger with the Company in 2000. Mr. Phillips has served as a director of the Company and First Bank since
2000.
Mr. Phillips brings over 30 years of financial
experience gained during his director terms with First Savings Bancorp and the Company. Mr. Phillips has extensive skills in accounting,
finance and risk management.
O. Temple Sloan, III,
55, is the former
Chief Executive Officer and President for General Parts, Inc. (GPI), the largest privately-owned auto parts supplier in the United
States, which owned and operated more than 3,100 CARQUEST Auto Parts stores and over 80 WORLDPAC branches in the United States,
Canada and Puerto Rico.
Prior to GPI’s acquisition by Advance Auto
Parts, Inc., Mr. Sloan served as President and Chief Executive Officer of GPI from 2008 to January 2, 2014 and as President of
GPI from 2001 to 2008. Mr. Sloan is currently a director of Advance Auto Parts, Inc. and Golden Corral Corporation, and previously
served as a director of Car Care Council. He is currently a member of the Board of Trustees of Northwood University and a member
of The University of North Carolina Board of Governors.
Mr. Sloan brings to the Company business leadership,
innovation, executive decision making and oversight skills as a result of 30 years of experience in a commercial business.
Frederick L. Taylor, II
, 46, is President
of Troy Lumber Company, located in Troy, North Carolina, where he has been employed since 1992. Mr. Taylor has been a director
of the Company and First Bank since 2005.
Mr. Taylor brings business-building skills
and experience to the Company. Additionally, Mr. Taylor has experience in overseeing the preparation of financial statements and
review of accounting matters.
Virginia Thomasson
, 64, is a Certified
Public Accountant with the firm Holden, Thomasson, & Longfellow, P.C., located in Southern Pines, North Carolina, where she
has been a partner since 1988. She served as a director of First Savings Bancorp, Inc. from 1997 until its merger with the Company
in 2000. Ms. Thomasson has served as a director of the Company and First Bank since 2000. Ms. Thomasson has been designated as
an “audit committee financial expert” in accordance with SEC regulations.
Ms. Thomasson brings to the Company experience
and skills in public accounting and over 18 years of financial industry experience.
Dennis A. Wicker
, 63, is a partner in
the law firm Nelson Mullins Riley and Scarborough, LLP, located in Raleigh, North Carolina, a position he has held since 2009.
From 2008 to 2009, Mr. Wicker was a shareholder and a member of the Executive Committee of the law firm of SZD Wicker, LPA, and
from 2001 to 2008 he was a partner in the law firm of Helms, Mullis & Wicker, LLP. Mr. Wicker served as Lieutenant Governor
of North Carolina from 1993 to 2001. Mr. Wicker has been a director of the Company and First Bank since 2001. Mr. Wicker currently
serves as a director of Coca Cola Bottling Company Consolidated and within the past five years served as a director of Air T, Inc.
Mr. Wicker has an extensive background in law
and public service and brings to the Company executive decision making, governance and risk assessment skills.
Executive Officers
In addition to Mr. Moore, the executive officers
of the Company and First Bank are currently as follows:
Eric P. Credle
, 47, is an Executive
Vice President of the Company and First Bank and has served as the Chief Financial Officer of the Company and First Bank since
joining the Company in 1997.
Michael G. Mayer
, 56, was named the
President of First Bank effective March 10, 2014 and was appointed as a director of First Bank in October 2014. Mr. Mayer was named
the President of the Company on February 23, 2016. Prior to joining the Company, Mr. Mayer most recently served as Chief Executive
Officer of 1
st
Financial Services Corporation, parent company of Mountain 1
st
Bank & Trust, a position
he held from January 2010 until 1
st
Financial Services Corporation’s acquisition in January of 2014. Mr. Mayer
previously served as President and Chief Executive Officer of Carolina Commerce Bank from 2009 until 2010 and Colony Signature
Bank (In Organization) from 2007 to 2009, and has held various senior banking positions over his thirty year banking career.
Edward F. Soccorso
, 43, is an Executive
Vice President of First Bank and is the Chief Strategy Officer of the Company and First Bank. Mr. Soccorso joined the Company
in 2012 and served as Co-Chief Credit Officer of First Bank from January 2013 until November 2014 when he was named to the Chief
Strategy Officer position. Prior to joining First Bank, Mr. Soccorso was Director at Piedmont Investment Advisors, LLC where
he managed the team dedicated to advising the U.S. Treasury on bank investments made under the Troubled Asset Relief Program (TARP).
Prior to joining Piedmont in 2009, Mr. Soccorso was a Senior Vice President at Four Corners Capital Management, LLC, a Registered
Investment Advisor that managed asset backed and fixed income portfolios for institutional investors.
BOARD COMMITTEES AND ATTENDANCE
The Board of Directors has established four
standing committees: the Executive and Loan Committee, the Audit Committee, the Compensation Committee, and the Nominating and
Corporate Governance Committee. In addition, the Board of Directors may establish other committees from time to time for specific
purposes. The following table presents the 2016 membership of the committees that are described below. The chair of each committee
is noted with a “(c)”. Following the table is additional information regarding each committee.
|
Executive
and Loan
Committee
|
Audit
Committee
|
Compensation
Committee
|
Nominating and
Corporate
Governance
Committee
|
Daniel T. Blue, Jr.
|
X
|
X
|
X
|
X
|
Mary Clara Capel
|
X (c)
|
X
|
X (c)
|
X (c)
|
James C. Crawford, III
|
X
|
X
|
X
|
X
|
Richard H. Moore
|
X
|
|
|
|
Thomas F. Phillips
|
X
|
X
|
X
|
X
|
O. Temple Sloan, III
|
X
|
X
|
X
|
X
|
Frederick L. Taylor, II
|
X
|
X
|
X
|
X
|
Virginia C. Thomasson
|
X
|
X (c)
|
X
|
X
|
Dennis A. Wicker
|
X
|
|
X
|
X
|
|
|
|
|
|
Executive and Loan Committee
The Executive and Loan Committee is authorized,
between meetings of the Board of Directors, to perform all duties and exercise all authority of the Board of Directors, except
those duties and authorities exclusively reserved to the Board of Directors by the Company’s bylaws or by statute. The Executive
and Loan Committee also serves as Loan Committee for First Bank. The Executive and Loan Committee held 16 meetings during 2015.
Audit Committee
The Audit Committee is responsible for the
appointment, compensation and oversight of the Company’s independent auditors, and must approve in advance all audit fees
and the terms of all non-audit services provided by the independent auditors. The Audit Committee also reviews and presents to
the Board of Directors information regarding the effectiveness of the Company’s policies and procedures with respect to auditing,
accounting, and internal controls. The Audit Committee also reviews the Company’s financial reporting process on behalf of
the Board of Directors. All of the current members of the Audit Committee are independent, as defined by the Nasdaq Stock Market
(“NASDAQ”) and the Exchange Act, as well as the Company’s Corporate Governance Guidelines. The Audit Committee
held five meetings during 2015.
The Board of Directors has determined that
Ms. Thomasson is an “audit committee financial expert” within the meaning of SEC rules and regulations. The Audit Committee
reviews and ratifies its charter on an annual basis. The Audit Committee charter is available on the Company’s website at
www.LocalFirstBank.com under the tab “About Us – Investor Relations – Governance Documents.”
Compensation Committee
Generally, the Compensation Committee is responsible
for reviewing the compensation policies and benefit plans of the Company and for making recommendations regarding the compensation
of its executive officers. The Compensation Committee also administers the Company’s equity compensation plans. The Compensation
Committee has the authority to delegate any of its responsibilities to subcommittees. Each of the current members of this committee
is independent under the rules and regulations of NASDAQ and the Exchange Act, as well as the Company’s Corporate Governance
Guidelines. The Compensation Committee held two meetings during 2015. The Compensation Committee operates under a charter that
has been approved by the Board of Directors. The Compensation Committee reviews and ratifies its charter on an annual basis, and
the charter is available on the Company’s website at www.LocalFirstBank.com under the tab “About Us – Investor
Relations – Governance Documents.”
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee
is responsible for i) identifying qualified individuals to become Board members, ii) determining the composition of the Board and
its committees, and iii) developing and implementing the Company’s corporate governance guidelines. The Nominating and Corporate
Governance Committee will consider shareholder nominees for Board membership. Any shareholder wishing to nominate a candidate for
director must follow the procedures described in the section “Nominations For Director” above. The section below entitled
“Corporate Governance Policies and Practices - Director Nomination Process” describes the process utilized by the Nominating
and Corporate Governance Committee for identifying and evaluating candidates to be nominated as directors. The Nominating and Corporate
Governance Committee reviews and ratifies its charter on an annual basis, and the charter is available on the Company’s website
at www.LocalFirstBank.com under the tab “About Us – Investor Relations – Governance Documents.” Each of
the current members of this committee is independent as defined by NASDAQ rules and the Company’s Corporate Governance Guidelines.
The Nominating and Corporate Governance Committee held three meetings during 2015.
Attendance
The Board of Directors held 14 meetings during
2015. All of the directors and nominees for re-election attended at least 75% of the aggregate of the meetings of the Board of
Directors and the committees described above on which they served during the period they were directors and members of such committees.
CORPORATE GOVERNANCE POLICIES AND PRACTICES
The Company has developed,
and operates under, corporate governance principles and practices that are designed to maximize long-term shareholder value, align
the interests of the board and management with those of the Company’s shareholders, and promote the highest ethical conduct
among the Company’s directors and employees. Highlights of the Company’s corporate governance policies, practices and
procedures are described below.
Director Independence
The Board of Directors believes that a substantial
majority of the board should consist of directors who are independent under rules set forth by NASDAQ and as defined in our Corporate
Governance Guidelines. The Board of Directors makes an annual determination regarding the independence of each of the Company’s
directors. The Board last made these determinations for each member of the board in March 2016, based on the review of director
questionnaires designed to elicit information regarding independence. The Board has determined that eight of its nine current directors
are independent as contemplated by NASDAQ and our Corporate Governance Guidelines. The individual who is not independent is Mr.
Moore because he is a current employee of the Company. For 2015, Mr. Wicker was also considered to not be independent because of
payments made by the Company to a family member in 2011 and 2012.
Annual Director Re-Election
Since the Company’s
inception, its bylaws have required that directors must stand for re-election to the Board of Directors at each annual shareholders’
meeting. The Board of Directors believes that this policy makes it easier for shareholders to hold directors more directly accountable
for corporate performance compared to the staggered-board structure in use at many public companies, which permits directors to
hold their positions for several years.
Separation of the Offices of Chairman and
Chief Executive Officer
The Board of Directors believes
that one of its main purposes is to protect shareholders’ interests by providing independent oversight of management, including
the Chief Executive Officer. Although not required by the Company’s bylaws, the Board of Directors has historically believed,
and continues to believe, that this objective is facilitated by having an independent director serve as Chairman, thereby separating
the offices of Chairman of the Board of Directors and Chief Executive Officer. The Chairman of the Board is responsible for approving
meeting schedules and agendas, as well as acting as a liaison between the Chief Executive Officer and the independent directors.
The Board’s Role in Risk Oversight
The Board of Directors
believes that each member in his or her fiduciary capacity has a responsibility to monitor and manage risks faced by the Company.
At a minimum, this requires the members of our Board of Directors to be actively engaged in board discussions, review materials
provided to them, and know when it is appropriate to request further information from management and/or engage the assistance of
outside advisors. Furthermore, because the banking industry is highly regulated, certain risks to the Company are monitored by
the Board of Directors and the Audit Committee through its review of the Company’s compliance with regulations set forth
by its regulatory authorities and recommendations contained in regulatory examinations.
Because we believe
risk oversight is a responsibility for each member of the Board of Directors, we do not concentrate the Board’s responsibility
for risk oversight in a single committee. Instead, each of our committees concentrates on specific risks for which they have an
expertise, and each committee is required to regularly report to the Board of Directors on its findings. For example, the Audit
Committee regularly monitors the Company’s exposure to fraud and internal control risk. Our Compensation Committee’s
role in monitoring the risks related to our compensation structure is discussed in further detail below. See “Compensation
Committee Report” on page 26.
Executive Sessions
The Board of Directors has
adopted a resolution requiring that the independent directors of the Company meet at least twice a year in executive session with
no non-independent directors or employees of the Company present. At these meetings, the independent directors discuss strategic
or other key issues regarding the Company. Two of these executive sessions were held in 2015.
Director Nomination Process
The Nominating and Corporate Governance Committee
is responsible for identifying individuals qualified to become Board members and recommending to the Board the individuals for
nomination as members of the Board. The goal of the Nominating and Corporate Governance Committee is to create a Board that will
demonstrate objectivity and the highest degree of integrity on an individual and collective basis. In evaluating current members
and new candidates, the Nominating and Corporate Governance Committee considers the needs of the Board and the Company in light
of the current mix of director skills and attributes. In addition to requiring that each director possess the highest integrity
and character, the Nominating and Corporate Governance Committee’s evaluation of director candidates includes an assessment
of issues and factors regarding an individual’s familiarity with the Company’s geographic market area, independence
as defined by the various regulatory authorities, business experience, accounting and financial expertise, diversity, and awareness
of the Company’s responsibilities to its customers, employees, regulatory bodies, and the communities in which it operates.
The Nominating and Corporate Governance Committee also takes into consideration the Board’s established policies relating
to the Board’s retirement policy and the ability of directors to devote adequate time to Board and committee matters. When
the Nominating and Corporate Governance Committee is considering current Board members for nomination for re-election, the Committee
also considers prior Board contributions and performance, as well as meeting attendance records.
The Nominating and Corporate Governance Committee
does not have any formal guidelines regarding how it should consider diversity in identifying nominees for director. However, the
Committee values the diversity on our current board and is generally cognizant of the benefits of a diverse board.
The Nominating and Corporate Governance Committee
may seek the input of the other members of the Board and management in identifying and attracting director candidates that are
consistent with the criteria outlined above. In addition, the Committee may use the services of consultants or a search firm, although
it has not done so in the past. The Nominating and Corporate Governance Committee also will consider recommendations by Company
shareholders of qualified director candidates for possible nomination to the Board. Shareholders may recommend qualified director
candidates by writing to the Company’s Corporate Secretary at 300 SW Broad Street, Southern Pines, North Carolina 28387.
Submissions should include information regarding a candidate’s background, qualifications, experience, and willingness to
serve as a director. Based on a preliminary assessment of a candidate’s qualifications, the Nominating and Corporate Governance
Committee may conduct interviews with the candidate and request additional information from the candidate. The Committee uses the
same process for evaluating all nominees, including those recommended by shareholders.
In addition, the Company’s bylaws contain
specific conditions under which persons may be nominated directly by shareholders as directors at an annual meeting of shareholders.
The provisions include the condition that shareholders comply with the advance notice time-frame requirements described under the
section entitled “Nominations for Director” above.
Stock Ownership Requirements
The Company’s Board of Directors has
adopted a common stock ownership policy for members of the board. This policy requires that any candidate for the Board must either
own, or commit to acquire, common stock of the Company with a monetary value at least equal to an established minimum. Prior to
March 2016, the minimum value established by the policy was $50,000. In March 2016, the minimum was increased to $100,000. Newly
elected directors have one year from the date of their election to acquire the necessary stock. Once the minimum ownership requirement
is met, the Board member is deemed to have satisfied this requirement even if subsequent decreases in the Company’s stock
price cause the value of the member’s holdings to fall below the minimum. All current directors are currently in compliance
with the current policy except for Mr. Sloan, who complied with the previous policy of $50,000 and is expected to comply with the
new policy within the next year. The Board believes that this stock ownership policy substantially enhances shareholder value by
materially aligning the Board’s interests with those of the shareholders.
Mandatory Retirement
The Company’s bylaws state that no individual
may be elected to, or may serve on, the Board of Directors any time after his or her 75th birthday, except that if a director is
elected to the Board prior to his or her 75th birthday and reaches the age of 75 while serving as a director, such director’s
term shall continue until the next annual meeting of shareholders, at which time the director shall retire. The bylaws allow for
the Board to make exceptions to this limitation in connection with mergers or acquisitions. The bylaws also state that the foregoing
provisions do not apply to any individual during the time such individual is serving as chief executive officer of the Company.
Communications with Directors
The Board of Directors believes that it is
important that a direct and open line of communication exist between the Board and the shareholders and other interested parties.
Any shareholder or other interested party who desires to contact one or more of the Company’s directors may send a letter
to the following address:
First Bancorp Board of Directors
P.O. Box 417
Troy, North Carolina 27371
In addition, any shareholder or other interested
party who has any concerns or complaints relating to accounting, internal controls or auditing matters may contact the Audit Committee
by writing to the following address:
First Bancorp Audit Committee
P.O. Box 417
Troy, North Carolina 27371
All such communications will be forwarded to
the appropriate party as soon as practicable without being screened.
Annual Meeting Policy
Directors are expected to
attend the Company’s annual meeting of shareholders. All members of the 2015 Board attended the Company’s 2015 annual
meeting of shareholders.
Cumulative Voting
The Company’s bylaws
provide for the availability of “cumulative voting” in the election of directors. Under cumulative voting, each shareholder
calculates the number of votes available to such shareholder by multiplying the number of votes to which his or her shares are
normally entitled by the number of directors for whom the shareholder is entitled to vote. The shareholder can then cast the sum
for a single candidate or can distribute it in any manner among any number of candidates. For example, if nine directors are to
be elected, a shareholder who owns 1,000 shares will have 9,000 votes. This shareholder can cast all of these votes for one candidate,
or 1,000 for nine candidates, or 3,000 for each of three candidates, or any other mathematically possible combination.
The purpose of cumulative voting is to preserve
the right of minority shareholders, or a group of shareholders acting together, to obtain representation on the Board of Directors
that is roughly proportional to their ownership interest in the corporation. The Company’s Board of Directors believes that
the minority representation guaranteed by cumulative voting is an appropriate feature of corporate democracy and is not likely
to cause harmful factionalism on the board.
Cumulative voting procedures will not be followed
at the annual meeting unless a shareholder calls for cumulative voting as provided in the Company’s Articles of Incorporation,
by announcing at the meeting before the voting for directors starts, his or her intention to vote cumulatively. See the third paragraph
under “Proposal 1- Election of Directors” above for additional information regarding cumulative voting.
Code of Ethics
The Board of Directors has adopted a Code of
Ethics that applies to the Company’s directors and employees, including the Chief Executive Officer, Chief Financial Officer
and Principal Accounting Officer. The Code includes guidelines relating to ethical handling of actual or potential conflicts of
interest, compliance with laws, accurate financial reporting, and procedures for promoting compliance with, and reporting violations
of, the Code of Ethics. The Code of Ethics is available on the Company’s website
at www.LocalFirstBank.com
under the tab “About Us – Investor Relations – Governance Documents.” Any amendments or waivers to the
Code of Ethics will be disclosed in the same location on the Company’s website.
The nominees who receive the highest number
of votes cast, up to the number of directors to be elected, shall be elected as directors. The Board of Directors recommends that
shareholders vote “FOR” the proposal to elect the nine nominees as directors. Unless indicated to the contrary, proxies
will be voted “FOR” the nine nominees listed above.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
In this section, we discuss our compensation
program as it pertains to our principal executive officer, our principal financial officer and our two other most highly compensated
executive officers in 2015 (“NEOs”). As discussed below, the compensation policies relating to our current Chief Executive
Officer, who joined our company in June 2012, are discussed separately in cases where they differ materially from those for our
other three named executive officers (“Other NEOs”). Our discussion focuses on compensation and practices relating
to 2015, our most recently completed fiscal year.
Structure and Role of
the Compensation Committee
The Compensation Committee
of our Board of Directors consists entirely of independent directors. It operates under a written charter that the board has adopted.
The Compensation Committee is primarily responsible
for the following:
|
·
|
reviewing the Company’s overall compensation practices as they relate to the Company’s risks;
|
|
·
|
reviewing the performance of our chief executive officer, or CEO;
|
|
·
|
determining, or recommending to the board for its determination, the CEO’s compensation, including salary, bonus, incentive
and equity compensation;
|
|
·
|
reviewing and approving the CEO’s recommendations about the compensation of our other executive officers;
|
|
·
|
recommending to the board the performance targets for our annual incentive bonus plan;
|
|
·
|
periodically reviewing our equity-based and other incentive plans and recommending any revisions to the board;
|
|
·
|
recommending to the board any discretionary 401(k) contributions;
|
|
·
|
recommending director compensation to the board;
|
|
·
|
approving any equity compensation grants;
|
|
·
|
approving employment or other agreements with the Company’s executive officers; and
|
|
·
|
reviewing the Company’s compliance with legal and regulatory requirements related to compensation arrangements or practices.
|
Compensation Philosophy
and Objectives
The objectives of our
executive compensation programs are:
|
·
|
fairly compensating executives for their efforts;
|
|
·
|
attracting and retaining quality executive leadership;
|
|
·
|
rewarding the achievement of annual corporate performance targets; and
|
|
·
|
aligning officers’ long-term interests with those of our shareholders.
|
Our compensation program seeks to reward our
executives’ contributions to corporate performance, including contributions of leadership, effort, creative ideas, industry
and operational knowledge, and ethical behavior, all in pursuit of increasing shareholder value. The committee’s general
philosophy is that we should compensate our executive officers at approximately the same average level as corresponding officers
at similarly situated peer financial service companies. While that is our general philosophy, we may position a base salary in
the upper quartile of the market due to experience, performance, or competitive situations. Also, we provide incentives that may
result in compensation reaching the upper quartile of the market when performance exceeds targets.
Because the Compensation Committee bases its
compensation decisions on the objectives and philosophy described above, it does not take into account an individual’s net
worth or the wealth the individual has accumulated from prior compensation.
Competitive Positioning
Periodically, the Compensation Committee engages
outside compensation consultants to evaluate whether our compensation practices are consistent with meeting our objectives. In
these engagements, the Compensation Committee has instructed the outside consultant to compare our compensation practices and compensation
levels to those of a peer group of similarly situated financial service companies. The consultant then provides the Compensation
Committee with analysis and recommendations.
In November 2013,
the Compensation Committee met with Blanchard Consulting Group, who had been engaged by the Committee to review and advise the
Committee on executive compensation matters. At this meeting,
Blanchard Consulting Group presented the Committee with its
findings, which it based on a study of 2012 data (the most recent data then available).
The Blanchard Consulting Group analysis compared
the compensation of our NEOs to a representative sample of 23 publicly traded financial institutions that were comparable to the
Company in either location and asset size or in performance measures. This peer group consisted of the following companies:
·
Ameris Bancorp
|
·
Renasant Corporation
|
·
BNC Bancorp
|
·
Republic Bancorp
|
·
Capital City Bank Group, Inc.
|
·
SCBT Financial Corporation
|
·
Cardinal Financial Corporation
|
·
Seacoast Banking Corp. of Florida
|
·
Carter Bank & Trust
|
·
State Bank Financial Corporation
|
·
CenterState Banks, Inc.
|
·
StellarOne Corporation
|
·
City Holding Company
|
·
S.Y. Bancorp, Inc.
|
·
CommunityOne Bancorp
|
·
TowneBank
|
·
Community Trust Bancorp, Inc.
|
·
Union First Market Bankshares Corp.
|
·
Fidelity Southern Corporation
|
·
VantageSouth Bancshares, Inc.
|
·
First Community Bancshares, Inc.
|
·
Virginia Commerce Bancorp, Inc.
|
·
Hampton Roads Bancshares, Inc.
|
|
The results of the analysis were considered
by the Compensation Committee in determining the appropriate components and amounts of executive compensation, as described below.
Executive Compensation
Program Overview
The five primary components
of our executive compensation program are:
|
·
|
Post-termination compensation
|
In the information that follows, we discuss
the compensation of our Chief Executive Officer and then we discuss the compensation of our Other NEOs.
Compensation of Richard H. Moore, Chief Executive
Officer
Base Salary
– When Mr. Moore entered
into an employment agreement with the Company in August 2012 after joining the Company in June 2012, his initial annual base salary
was set at $475,000. His base salary remained at that same amount for 2013. In 2014, the Compensation Committee increased his base
salary to $525,000 based on the Committee’s review of the Company’s performance since Mr. Moore joined the Company
and the results of a November 2013 Blanchard Consulting Group peer study (discussed above) that indicated Mr. Moore’s base
salary and total compensation were below that of the peer group. Following the increase in Mr. Moore’s base salary for 2014,
the Compensation Committee believed that it remained appropriate for 2015, and thus Mr. Moore’s base salary was $525,000
for 2015.
Performance Incentive Plan
– Mr.
Moore’s employment agreement states that he has the opportunity to earn an annual bonus with a value of between $150,000
and $600,000 based on the Company’s attainment of an annual earnings goal established by the Compensation Committee for that
year. According to the employment agreement, the bonus earned is to be paid 50% in cash and 50% in restricted stock, with the stock
vesting in one-third increments at each of the following three year ends. If the actual earnings for a year are at the “Threshold”
level, Mr. Moore will earn a bonus with a value of $150,000; if they are at the “Target” level, he will earn a bonus
with a value of $300,000; and if they are at the “Maximum” level, he will earn a bonus with a value of $600,000. The
amount payable where performance is greater than Threshold but less than Target or greater than Target but less than Maximum are
to be determined on the basis of straight line interpolation between points. The payment of the bonus is conditioned on the Company
having achieved a satisfactory regulatory review as of such date as determined by the Board of Directors. Any bonuses granted in
accordance with this plan are subject to clawback provisions that allow the Company to recoup amounts paid under the plan if the
Company is required to restate its financial statements within three years of the payment. The amount of the clawback is computed
by calculating the difference in the award payment based on the restated financial statement amounts compared to the originally
stated amounts that were used to calculate the award.
As noted above, the bonus under Mr. Moore’s
employment agreement is based on the Company’s attainment of an earnings goal. The earnings goal for 2015 was defined by
the Compensation Committee as the Company’s earnings per common basic share as computed under generally accepted accounting
principles. For 2015, the Compensation Committee established a Target earnings per share goal of $1.45, which was the same as the
Company’s corporate budget for 2015. The Threshold goal of $1.23 was set at 85% of the Target goal and the Maximum goal of
$2.18 earnings per share was set at 150% of the Target earnings per share goal.
At a meeting held on February 23, 2016, the
Compensation Committee reviewed the Company’s actual earnings per common basic share for 2015, which amounted to $1.34. Accordingly,
Mr. Moore’s performance was determined to be at 75.0% of the Target goal and his bonus was computed to be $225,000. Additionally,
in light of an assessment of his performance and in recognition of the Company’s achievement of other goals, the Compensation
Committee elected to increase Mr. Moore’s bonus by $100,000 to $325,000. In accordance with the terms described above, he
was paid 50% of that amount in cash, which amounted to $162,500, and he was granted 8,745 shares of restricted common stock, with
a value of $162,500, which will vest in equal one-third increments on December 31, 2016, December 31, 2017 and December 31, 2018.
Long-Term Incentive Compensation
–
Upon the execution of his employment agreement in August 2012, Mr. Moore was granted 40,000 shares of restricted stock of the Company.
The 40,000 shares would have vested on December 31, 2015 if the Company had achieved a specified earnings goal in 2015. The earnings
goal set was defined by the Compensation Committee as an earnings per share goal that was to be measured in a manner consistent
with generally accepted accounting principles, except that it excluded certain items of income and expense that are volatile, unpredictable
and generally relate to actions taken by the Company that occurred prior to Mr. Moore’s employment and are almost entirely
out of his control. Accordingly, loan discount accretion related to two-failed bank transactions, provisions for loan losses, securities
gains/losses, foreclosed property write-downs, indemnification asset income/expense and other gains/losses are examples of items
that the Compensation Committee believed should be excluded from the measurement (as well as the related tax impact). The 2015
earnings goal, computed as just described, was set by the Compensation Committee for the vesting of the options at a level that
the Committee estimated would be a 50% improvement from the Company’s approximate level of performance at the time the award
was granted. At a Compensation Committee meeting held on February 23, 2016, the Committee determined that the Company’s earnings
for 2015 fell below the targeted goal for the stock to vest. Accordingly, the shares did not vest and were forfeited.
As discussed in the section “Equity Grants”
below, in February 2015, Mr. Moore, along with ten other officers of the Company, was granted shares of restricted common stock
in an effort to promote share ownership and management retention. The terms of the grants called for the shares to vest in one-third
increments on December 31, 2015, December 31, 2016 and December 31, 2017.
In addition to the financial terms discussed
above, other provisions of Mr. Moore’s employment agreement, as originally executed, included the following terms (see the
“Changes for 2016” section below for terms that will be modified by amendment in 2016):
|
·
|
One year term, automatically renews unless either party gives written notice of non-renewal.
|
|
·
|
Mr. Moore is entitled to participate in Company benefit plans made available to other employees – see discussion of these
benefits in the “Other NEO” compensation discussion below.
|
|
·
|
Reimbursement of the costs of participation in the North Carolina State Health Plan.
|
|
·
|
Upon termination upon the occurrence of certain adverse conditions for Mr. Moore within twelve months of a change in control,
Mr. Moore would be entitled to two times his base salary, continuation of health insurance reimbursements for twelve months, and
his long term incentive compensation awards vest in full.
|
|
·
|
In the event Mr. Moore is terminated by the Company without cause, Mr. Moore’s long term incentive compensation awards
vest in full.
|
|
·
|
For twelve months following termination of employment, Mr. Moore is subject to non-competition and non-solicitation obligations.
|
Any Long-Term Incentive Compensation awards
realized by Mr. Moore are expected to be under the Company’s 2014 Equity Plan, which has clawback provisions – see
discussion under “Equity Grants” below.
Changes for 2016
At its February 2016 meeting, the Compensation
Committee determined that Mr. Moore’s base salary would remain at $525,000 for 2016. Based on the results of a November 2013
Blanchard Consulting Group peer study (discussed above), the Committee concluded that his current salary remains appropriate.
In March 2016, based on a review of current
market terms with a compensation consultant, the Compensation Committee and Mr. Moore reached an agreement in principle to amend
his employment agreement to change the following:
|
·
|
The change in control multiple was changed from two times to 2.99 times.
|
|
·
|
The term for the non-competition and non-solicitation obligations following termination of employment was changed from twelve
months to six months.
|
Additionally, Mr. Moore’s employment
agreement will be amended to change the performance criteria for the Performance Incentive Plan from being a single goal, based
solely on earnings, to being multiple goals that are consistent with those set under the Annual Incentive Plan that is applicable
to the Other NEOs.
Except as otherwise described, the following
section discusses the compensation of our Other NEOs.
We pay each officer
a base salary because it provides a minimum level of compensation and is necessary for recruitment and retention. The Compensation
Committee intends that our Other NEOs’ base salaries will provide them with a competitive baseline level of compensation
based on their individual experience, performance and scope of responsibility. An important aspect of base salary is the ability
of the Compensation Committee, the board and the CEO (in the case of other officers’ salaries) to use annual base salary
adjustments to reflect an individual’s performance or changed responsibilities.
Base salary levels
are also important because we generally tie incentive and long-term compensation to an officer’s base salary. For example,
awards under our annual bonus plan, the Annual Incentive Plan, are denominated as a percentage of base salary.
The results of the Blanchard study discussed
above indicated that, except for the Chief Credit Officer position, base salaries for our Other NEOs were at or near the peer average.
The study indicated that the peer average for base salary for the Chief Credit Officer position was significantly higher than the
salary of Edward F. Soccorso, who fulfilled many of those same roles for the Company as the Co-Chief Credit Officer (his position
at the time). Based on their review of the Blanchard study at a meeting held on February 24, 2015 and an assessment of the responsibilities
and performance of our Other NEOs, the Compensation Committee determined that the base salary of our Other NEOs would remain the
same as the annual salary they were earning at the end of 2014, as follows:
Named Executive Officer
|
Annual Salary at
December 31, 2014 ($)
|
Salary for
2015 ($)
|
Michael G. Mayer
|
400,000
|
400,000
|
Edward F. Soccorso
|
325,000
|
325,000
|
Eric P. Credle
|
325,000
|
325,000
|
At a Compensation
Committee meeting held on February 23, 2016, the Committee determined that the base salary for each of the NEO’s continued
to be appropriate and would remain unchanged in 2016, except that Mr. Mayer’s salary was adjusted to $425,000 as a result
of an assessment of his performance and in recognition of his promotion as the Company’s President.
The Compensation Committee designed our Annual
Incentive Plan to provide our Other NEOs with the opportunity to earn an annual cash and/or stock bonus of 40% to 50% of their
base salary if we achieved targeted levels of financial performance, with the opportunity for each officer to earn up to twice
the target percentage if certain goals were met. The Committee and the board believe that a meaningful, but not overwhelming, amount
of each of our Other NEO’s annual direct compensation should be tied to achieving corporate performance targets. The Committee
believes this structure reflects a proper balance of direct compensation that provides our officers with a baseline level of financial
stability (in the form of base salary), while also providing an appropriate incentive for achieving annual targets that drive our
corporate performance. Amounts of annual incentive earned were included in the Blanchard Consulting Group analysis described above,
which the Committee considers in determining the appropriateness of amounts of annual incentive awards that are able to be earned
by our NEOs.
Our Annual Incentive Plan pays cash and/or
stock bonuses within the first 75 days of each year based on corporate performance in the preceding fiscal year. Each participant’s
total possible bonus is based on a target bonus percentage set for each participant. The plan uses multiple performance measures
to determine the amount of each participant’s total bonus. The Committee assigns a weight to each performance measure, with
the sum of the weights equal to 100%. The weight is the percentage of each participant’s total bonus that will be based on
that particular performance measure. The Committee also sets threshold, target and maximum performance levels for each measure.
If we do not achieve the threshold performance level, participants earn no bonus for that measure. Participants earn 50% of their
target bonus for the measure if we meet the threshold level, 100% if we meet the target level and 200% if we achieve the maximum
level. Bonuses are directly proportional to performance between any of these set points. Thus, an officer’s bonus amount
could range from 0% to 200% of the officer’s target bonus percentage under the terms of the plan.
The Compensation Committee approved a new annual
incentive plan in February 2015, which did not contain significant changes from the prior annual incentive plan in place. However
the new plan includes clawback provisions that allow the Company to recoup amounts paid to certain employees under the plan if
the Company is required to restate its financial statements. The amount of the clawback is computed by calculating the difference
in the award payment based on the restated financial statement amounts compared to the originally stated amounts that were used
to calculate the award. The employees subject to the clawback provision are to be notified in writing that this provision applies
to them. Each of our Other NEOs have been notified that this provision applies to them.
Prior to 2010, the Compensation Committee recommended,
and the board approved, the target bonuses in the table below for our Other NEOs. In order to determine each officer’s cash
bonus, the percentage listed below is multiplied by the officer’s base salary, which is then multiplied by the sum of the
performance percentages earned that are described above. Based on the challenging economic conditions facing the banking industry
and the Company’s lower levels of expected profitability in recent years, for each of the years 2010 - 2013, the Compensation
Committee decided that every participant’s target bonus percentage would be reduced by two-thirds of its established level.
For 2014, as a result of increased profitability and a recovering economy, the percentage was only reduced by one-third of its
established level, which the Committee determined would also be appropriate for 2015. Accordingly, each Other NEO’s target
bonus was reduced as reflected in the table below.
Named Executive Officer
|
Target Bonus
Percentage – Initial
|
Target Bonus
Percentage – After
2015 Reduction
|
Michael G. Mayer
|
50%
|
33.3%
|
Edward F. Soccorso
|
40%
|
26.7%
|
Eric P. Credle
|
40%
|
26.7%
|
The following table shows the thresholds, targets,
maximums, and weightings for each performance goal that the Committee approved for 2015 for the Company’s officers (other
than those classified as regional, line of business, or branch officers) and the performance percentages that resulted from the
actual results:
|
Measurement
|
Threshold
|
Target
|
Maximum
|
Weight
|
Actual for
2015
|
Performance
Percentage
|
1
|
Earnings Per Share - Basic
|
$1.23
|
$1.45
|
$2.18
|
55%
|
$1.34
|
41%
|
2
|
Loan Growth (non-covered)
|
4.34%
|
5.10%
|
7.65%
|
15%
|
6.25%
|
22%
|
3
|
Core Deposit Growth
|
3.49%
|
4.10%
|
6.15%
|
15%
|
12.56%
|
30%
|
4
|
Companywide Referral Goals
|
7,398
|
8,704
|
13,056
|
15%
|
9,135
|
17%
|
|
|
|
|
|
100%
|
|
110%
|
We selected each of the above goals for our
executive officer compensation because we selected those same types of goals for our branch employees and we desired to have the
interests of our executive officers aligned as much as possible with our employees in the field. The following includes some of
the specific reasons we selected each goal:
|
1)
|
Earnings Per Share – Basic – A direct profitability measure.
|
|
2)
|
Loan Growth (non-covered) – Impacts the profitability of the Company.
|
|
3)
|
Core Deposit Growth – Funds future growth and impacts the profitability of the Company.
|
|
4)
|
Companywide Referral Goals – This relates to the total amount of referrals made by branch employees to our mortgage,
wealth management and insurance divisions. Referrals of existing customers to other divisions of the Company impacts profitability
and diversifies the Company’s revenue stream.
|
The term “non-covered” means that
we exclude from the calculation assets assumed in two failed-bank acquisitions that are covered by loss-share agreements with the
FDIC. We believed it was appropriate to exclude those assets from the measurement criteria due to their unique characteristics.
In addition to the goals noted above, the Compensation
Committee also set two triggers that the Company had to meet for any of the above-described bonuses to be paid. In other words,
if the Company did not achieve both triggers, no bonuses would be paid to our Other NEOs no matter what the results were for the
four goals noted above. The two triggers were:
|
·
|
The Compensation Committee’s determination that the results of the annual safety and soundness exam performed by regulatory
authorities were satisfactory.
|
|
·
|
The Company’s earnings per share must exceed $0.96, which was approximately two-thirds of the budgeted goal.
|
As shown above, the total payout percentage
according to the terms of the Annual Incentive Plan was 110% and the Compensation Committee determined that the two triggers noted
above were achieved.
Accordingly, the following table illustrates
how each Other NEO’s incentive bonus for 2015 was calculated. These payments were made in March 2016.
Named Executive Officer
|
(A)
2015 Salary ($)
|
(B)
Target Bonus
Percentage –
Reduced (1)
|
(C)
Performance
Percentage
|
(A times B times C)
Value of Incentive
Plan Compensation ($)
|
Michael G. Mayer (2)
|
400,000
|
33.3%
|
110%
|
146,768
|
Edward F. Soccorso (2)
|
325,000
|
26.7%
|
110%
|
95,399
|
Eric P. Credle (2)
|
325,000
|
26.7%
|
110%
|
95,399
|
|
(1)
|
As previously discussed, due to challenges facing the banking industry and the Company’s lower levels of expected profitability
in recent years, the Compensation Committee decided that every officer’s target bonus percentage would be reduced below its
established level. For 2015, the Committee reduced each officer’s target bonus percentage by one-third.
|
|
(2)
|
At the Compensation Committee meeting held on February 24, 2015, the Committee determined that 11 senior members of the Company’s
management team, including Mr. Mayer, Mr. Soccorso and Mr. Credle, would receive 50% of their bonus in cash and the other 50% in
shares of restricted stock instead of the previous practice of paying the bonus in all cash. The Committee determined that the
stock would vest in one-third increments at December 31, 2016, December 31, 2017 and December 31, 2018. This determination was
made in order to promote retention and share ownership among members of senior management. As a result, on February 23, 2016, Mr.
Mayer was granted 3,949 shares of stock with a value of $73,384, and Mr. Soccorso and Mr. Credle were each granted 2,567 shares
of stock with a value of $47,700 representing the 50% stock component. Additionally in March 2016, Mr. Mayer was paid $73,384 in
cash and Mr. Soccorso and Mr. Credle were each paid cash of $47,699 representing the 50% cash component.
|
In addition to the amount shown above, the
Compensation Committee granted Mr. Mayer a discretionary bonus of $18,000 in recognition of 2015 performance, which was paid in
the same mix of cash and stock and subject to the same terms as the incentive discussed above.
For 2016, the Compensation Committee determined
that the target bonus percentage for each officer participating in the Annual Incentive Plan, including each of our Other NEOs,
would again be reduced by one-third of the original percentage. Additionally, the Compensation Committee determined that participants
would earn 150% of their target bonus for achieving the maximum level for each goal, which is a change from the 200% previously
earned for achieving the maximum level.
As previously discussed, during 2016 we made
equity grants to Mr. Moore, Mr. Soccorso and Mr. Credle related to performance for 2015.
Additionally, in 2015, in consultation with
a compensation consultant and in an effort to promote share ownership and management retention, the Compensation Committee granted
shares of restricted common stock to 11 officers, including each of our NEOs, equal to either 15% or 20% of their base salary,
with each of our NEOs being at the 20% level. The Committee determined those percentages based on the recommendation of the compensation
consultant, who stated that the percentages were reflective of industry norms. The shares vest in one-third increments on December
31, 2015, December 31, 2016 and December 31, 2017. The following are the number of shares that were granted on February 24, 2015
to the Company NEOs, with the shares granted having a value equal to 20% of the NEO’s annual base salary:
Mr. Moore – 6,115 shares
Mr. Mayer – 4,659 shares
Mr. Soccorso – 3,785 shares
Mr. Credle – 3,785 shares
While it is anticipated that similar grants
may be made in future years, no similar grants have been made thus far in 2016. Depending on the Company’s performance during
2016, similar grants may be made later in the year.
All
equity grants currently made, including the grants just described, are under the Company’s 2014 Equity Plan. That plan has
standard clawback provisions that provide that any compensation paid pursuant to the plan which is subject to recovery under any
law, government regulation or stock exchange listing requirement, including, but not limited to, the Dodd-Frank Wall Street Reform
and Consumer Protection Act and implementing rules and regulations of that Act, will be subject to such deductions, recovery and
clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement. Participants
shall, upon written demand by the Company, promptly repay any such compensation or take such other action as the Company may require
for compliance with these provisions.
We provide a competitive benefits program for
our NEOs, including our CEO. We provide these benefits in order to retain and attract an appropriate caliber of talent and recognize
that other companies with which we compete for talent provide similar benefits to their executive officers.
The following table lists
our current benefit programs and shows, for each, the employees eligible for each benefit:
Benefit Plan
|
|
Named Executive
Officers
|
|
Certain Managers
and Individual
Contributors
|
|
All
Full-Time
Employees
|
Supplemental Executive Retirement Plan
|
|
(1)
|
|
X
|
|
|
Perquisites
|
|
X
|
|
X
|
|
(5)
|
401(k) Plan
|
|
X
|
|
X
|
|
X
|
Defined Benefit Pension Plan
|
|
(2)
|
|
(2)
|
|
(2)
|
Health Insurance
|
|
X
|
|
X
|
|
X
|
Life Insurance (3)
|
|
X
|
|
X
|
|
X
|
Bank-Owned Life Insurance (4)
|
|
(4)
|
|
(4)
|
|
|
Disability Insurance
|
|
X
|
|
X
|
|
X
|
|
(1)
|
Mr. Credle is a participant in the Supplemental Executive Retirement Plan. Due to their hire date, the other NEOs are not participants
in the plan. As discussed below, we froze the benefits of this plan as of December 31, 2012 for all participants.
|
|
(2)
|
Our defined benefit pension plan covers all full-time employees hired on or before June 11, 2009. This plan was frozen as of
December 31, 2012 for all participants, which means that no further benefits will be earned by participants. As discussed below,
we also froze the benefits of our Supplemental Executive Retirement Plan as of that same date.
|
|
(3)
|
The Company provides life insurance for each of its employees amounting to two times the employee’s salary, subject to
a cap of $300,000.
|
|
(4)
|
The Company has purchased single-premium bank-owned life insurance policies that insure the lives of approximately 60 officers
of the Company. For participating employees, life insurance benefits are two times the employee’s salary with no cap. In
the event of death while employed by the Company, all proceeds from the life insurance that exceed two times the employee’s
salary are payable to the Company.
|
|
(5)
|
All employees are eligible to participate in the Company’s loan discount program, which is described in the “Perquisites”
section below.
|
Supplemental Executive Retirement Plan
We sponsor a supplemental executive retirement
plan, or SERP, for the benefit of certain members of our senior management, including Mr. Credle. Due to their hire dates, the
other NEOs are not participants in the SERP. The purpose of the SERP is to provide additional monthly pension benefits to ensure
that each participant will receive lifetime pension benefits beyond the amounts that we can pay under our qualified pension plan.
The SERP generally provides participants with an annual benefit at retirement equal to 3% of final average compensation multiplied
by years of service, up to a maximum of 60% of final average compensation. The amount of a participant’s SERP benefit is
reduced by (1) the amount payable under our qualified pension plan, and (2) 50% of the participant’s primary Social Security
benefit.
We set the benefits payable under the SERP
in 1993 at the inception of the plan, in consultation with an employee benefits consultant who assisted us with plan design. At
that time, the employee benefits consultant provided peer information and gave his expert opinion that the benefits payable under
this plan were reasonable and would further our objectives of attracting and retaining senior management executives.
During 2012, we decided that we wanted to offer
a uniform set of retirement benefits that would be applicable to all employees and not just those that were hired after June 11,
2009 or those that had achieved a certain level within the Company. Accordingly, effective December 31, 2012, in addition to freezing
the qualified defined benefit pension plan (as noted above), we also froze our SERP, which means that the participants of that
plan will not earn future benefits under the plan.
Perquisites
We provide only very limited perquisites. During
2015, the only perquisites provided to any of the NEOs were as follows:
|
·
|
We paid country club dues amounting to $10,625 for Mr. Mayer. Mr. Mayer used the country club exclusively for business purposes.
|
|
·
|
We paid civic club dues amounting to $580 on behalf of Mr. Credle.
|
|
5.
|
Post-Termination Compensation
|
Accelerated Vesting
Our current equity plan and the SERP have change
in control provisions that automatically vest all participants in the benefits of each plan in the event of a change in the control
of our Company. We believe that other companies with which we compete for executive talent provide a similar acceleration benefit,
and that these provisions therefore assist us in attracting and retaining talent.
Employment Agreements
We have employment agreements with each of
our Other NEOs. The employment agreement with our CEO has been previously described. See “Compensation of Richard H. Moore,
Chief Executive Officer” above.
As of December 31, 2015, our Other NEOs each
had employment agreements with one year terms that renew annually unless either party gives written notice of non-renewal. Each
of these agreements provides for the payment of certain severance benefits to the officer upon termination of employment in certain
circumstances, including following a change in the control of our company. For more information about these benefits, see the section
below captioned “Executive Compensation – Potential Payments Upon Termination.” Each
agreement also contains non-competition and confidentiality covenants that protect our company if the officer leaves.
The objectives of the
Other NEO employment agreements were as follows:
|
·
|
The non-competition covenant protects us by preventing an officer from leaving our company and immediately joining a competitor,
which could result in the officer taking business away from us.
|
|
·
|
The confidentiality covenant protects us by preventing an officer from disclosing trade secrets or confidential information
regarding our company or our customers for two years after the officer leaves his or her employment with the Company.
|
|
·
|
The change-in-control severance payment provision benefits us by minimizing the uncertainty and distraction caused by the current
climate of bank acquisitions, and by allowing our executive officers to focus on performance by providing transition assistance
in the event of a change in control.
|
The Compensation Committee and the board believe
the amount of the severance benefits potentially payable to each NEO under these agreements is reasonable and consistent with industry
standards.
The above discussion describes
the five primary components of our executive compensation program. The following section describes other guidelines and procedures
affecting executive compensation.
Other Guidelines and
Procedures Affecting Executive Compensation
Stock Option Grants
When we approve a stock option grant, we set
a date in the future as the measurement date for the exercise price of the stock option. We do not “back-date” stock
option grants. We do not have a policy or practice of making stock option grants during periods in which there is material non-public
information about our Company.
Tax Considerations
It has been and continues to be our intent
that all incentive payments be deductible unless maintaining deductibility would undermine our ability to meet our primary compensation
objectives or is otherwise not in our best interest. At this time, essentially all compensation we have paid to the NEOs is deductible
under the federal tax code, except for income realized from exercise of incentive stock options by some NEOs.
Share Ownership Guidelines for Named Executive
Officers
Until February 2015, we encouraged, but did
not require, our NEOs to own shares of our common stock. At a Compensation Committee meeting held on February 24, 2015, the Committee
adopted a Stock Ownership and Retention Policy. This policy requires the CEO to own shares of common stock of the Company with
a value of at least two times his or her annual base salary and for all Other NEOs to own Company stock with a value equal to their
base salary. NEOs who have not met the ownership requirements within five years of being subject to the policy (i.e. becoming a
NEO) are subject to restrictions on future stock sales until they are in compliance with the policy.
Consideration of Prior-Year Shareholder
Advisory Vote
At the 2015 annual meeting of shareholders,
on the proposal approving, on an advisory basis, the compensation paid to our named executive officers as disclosed in the proxy
statement for that annual meeting, 98 percent of the votes cast were cast in favor of the proposal. The Compensation Committee
considered this high level of support as providing confirmation that the shareholders support our compensation policies and decisions
for our named executive officers, and determined that its approach to the 2016 compensation policies and decisions would remain
generally consistent with the approach in 2015.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company has
reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based
on its review and discussion, the Compensation Committee recommended to the board that the Compensation Discussion and Analysis
be included in this proxy statement and in the Company’s annual report on Form 10-K for filing with the SEC.
The Compensation Committee has conducted a
risk-based assessment of the Company’s compensation plans, policies and practices to determine whether such plans, policies
and practices create risks that are reasonably likely to have a material adverse effect on the Company. Based on this assessment,
the Committee has concluded that the Company’s compensation plans, policies and practices do not create risks that are reasonably
likely to have a material adverse effect on the Company. As part of its assessment, the Compensation Committee evaluated the Company’s
compensation plans and programs to determine their propensity to cause undue risk taking by employees, including senior executive
officers, relative to the level of risk associated with the Company’s business model and operations. The Committee believes
that the Company does not use highly leveraged short-term incentives that encourage high risk behavior at the expense or to the
detriment of long-term value, or which are reasonably likely to create a material adverse effect. The Committee completed its assessment
in 2016 as part of its obligation to oversee the compensation risk assessment process for the Company.
Submitted by the Compensation Committee of
the Company’s Board of Directors.
Daniel Blue, Jr.
|
O. Temple Sloan, III
|
Mary Clara Capel - Chairman
|
Frederick L. Taylor, II
|
James C. Crawford, III
|
Virginia C. Thomasson
|
Thomas F. Phillips
|
Dennis A. Wicker
|
|
|
Summary Compensation Table
The following table shows the compensation
we paid in each of the last three fiscal years to the NEOs.
2015 SUMMARY COMPENSATION
TABLE
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Awards ($)
|
Non-Equity
Incentive Plan
Compensation
($) (4)
|
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings ($) (5)
|
All Other
Compens-
ation ($) (6)
|
Total ($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(g)
|
(h)
|
(i)
|
(j)
|
Richard H. Moore
|
2015
|
525,000
|
100,000 (2)
|
217,500 (3)
|
112,500
|
—
|
30,476
|
985,476
|
President and Chief
|
2014
|
525,000
|
—
|
145,935
|
145,935
|
—
|
24,420
|
841,290
|
Executive Officer
|
2013
|
475,000
|
150,000
|
278,225
|
—
|
—
|
20,407
|
923,632
|
|
|
|
|
|
|
|
|
|
Michael G. Mayer (1)
|
2015
|
400,000
|
18,000 (2)
|
153,384 (3)
|
73,384
|
—
|
23,746
|
668,514
|
President of First Bank
|
2014
|
325,614
|
—
|
—
|
75,514
|
—
|
19,775
|
420,903
|
|
|
|
|
|
|
|
|
|
Edward F. Soccorso
|
2015
|
325,000
|
—
|
112,700 (3)
|
47,699
|
—
|
12,728
|
498,127
|
Executive Vice President and
|
2014
|
325,000
|
20,000
|
29,451
|
29,451
|
—
|
10,753
|
414,655
|
Chief Strategy Officer
|
2013
|
195,000
|
20,000
|
—
|
12,448
|
—
|
5,942
|
233,390
|
|
|
|
|
|
|
|
|
|
Eric P. Credle
|
2015
|
325,000
|
—
|
112,700 (3)
|
47,699
|
20,000
|
13,468
|
518,867
|
Executive Vice President
|
2014
|
316,250
|
20,000
|
29,451
|
29,451
|
100,000
|
11,574
|
506,726
|
and Chief Financial Officer
|
2013
|
283,868
|
—
|
—
|
36,241
|
—
|
11,658
|
331,767
|
Notes:
|
(1)
|
Mr. Mayer’s employment with the Company began in March 2014.
|
|
(2)
|
Discretionary bonuses of $100,000 for Mr. Moore and $18,000 for Mr. Mayer were granted in recognition of performance and achievement
of Company goals related to 2015. Each of these discretionary bonuses were paid in 50% cash and 50% stock, with the stock vesting
in equal increments on December 31, 2016, 2017 and 2018.
|
|
(3)
|
The stock awards for 2015 relate to the following:
|
|
o
|
50% of the annual incentive award earned by each NEO. See the sections of the Compensation and Discussion Analysis above entitled
“Performance Incentive Plan” for Mr. Moore and “Annual Incentive” for the Other NEOs.
|
|
o
|
Ownership and retention-based stock grants made in February 24, 2015 equal to 20% of each NEO’s annual base salary. See
the section of the Compensation and Discussion Analysis above entitled “Equity Grants”
|
|
(4)
|
All amounts in this column were paid pursuant to the Performance Incentive Plan for Mr. Moore and the Annual Incentive Plan
for the Other NEOs. See the Compensation and Discussion Analysis above for further discussion.
|
|
(5)
|
The amounts in this column reflect the annual change in the total actuarial net present value of the NEOs’ accrued benefits
under our pension plan and SERP. In 2013, the pension value for Mr. Credle declined by $82,000 due to changes in actuarial assumptions.
Mr. Moore, Mr. Mayer and Mr. Soccorso do not participate in these plans.
|
|
(6)
|
The following table shows the components of “All Other Compensation.”
|
All Other Compensation
|
Name
|
Year
|
Defined
Contribution
Plan ($)
|
Club/Civic
Dues ($)
|
Dividends on
Restricted Stock
(1) ($)
|
Life
Insurance (2)
($)
|
Total ($)
|
|
|
|
|
|
|
|
Richard H. Moore
|
2015
|
9,994
|
—
|
19,156
|
1,326
|
30,476
|
|
2014
|
10,375
|
—
|
12,800
|
1,245
|
24,420
|
|
2013
|
7,125
|
—
|
12,800
|
482
|
20,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Mayer
|
2015
|
10,600
|
10,625
|
1,491
|
1,030
|
23,746
|
|
2014
|
10,400
|
9,375
|
—
|
—
|
19,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward F. Soccorso
|
2015
|
10,600
|
—
|
1,760
|
368
|
12,728
|
|
2014
|
10,400
|
—
|
—
|
353
|
10,753
|
|
2013
|
5,850
|
—
|
—
|
92
|
5,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric P. Credle
|
2015
|
10,600
|
580
|
1,760
|
528
|
13,468
|
|
2014
|
10,400
|
580
|
100
|
494
|
11,574
|
|
2013
|
10,200
|
580
|
478
|
400
|
11,658
|
|
(1)
|
The amounts in this column represent the amount of cash dividends earned on shares of unvested, restricted stock.
|
|
(2)
|
The amounts in the column represent the benefit associated with the life insurance provided by
the bank-owned life insurance policies discussed in “
Perquisites
” in the Compensation Discussion and Analysis
section above.
|
We have entered into employment agreements
with 12 of our officers, including each of the NEOs. Each employment agreement provides for post-termination benefits that we must
pay in certain circumstances. See “Potential Payments Upon Termination” below for more information about these potential
benefits, and about the non-competition and confidentiality covenants contained in the agreements.
Grants of Plan-Based Awards
The amounts shown in the table below
relate to 1) the range of possible non-equity and equity payouts in 2016 for 2015 performance under the Performance Incentive Plan
for Mr. Moore and the Annual Incentive Plan for Other NEOs, and 2) grants of stock made on February 24, 2015 to promote share ownership
and management retention.
Under both incentive plans, we pay cash
bonuses within the first 75 days following year end based on corporate performance in the preceding fiscal year. According to the
Performance Incentive Plan, Mr. Moore’s bonus is payable in an equal mix of cash and restricted stock, while payments under
the Annual Incentive Plan can be paid in cash or restricted stock or a mix of the two. In February 2015, the Compensation Committee
determined that 11 members of senior management, including each NEO, would be paid their award in a mix of 50% cash and 50% restricted
stock.
|
Estimated Possible Payouts Under Non-
Equity Incentive Plan Awards (1)
|
Estimated Future Payouts Under Equity Incentive
Plan Awards (2)
|
|
|
Name
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
All Other Stock
Awards: Number of
Shares of stock or
Units (#) (3)
|
Grant Date Fair
Value of Stock
and Option
Awards ($) (4)
|
(a)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(l)
|
|
|
|
|
|
|
|
|
|
Richard H. Moore
|
75,000
|
150,000
|
300,000
|
4,037
|
8,073
|
16,146
|
6,115
|
105,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Mayer
|
33,333
|
66,667
|
133,333
|
1,794
|
3,588
|
7,176
|
4,659
|
80,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward F. Soccorso
|
21,667
|
43,333
|
86,667
|
1,166
|
2,332
|
4,665
|
3,785
|
65,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric P. Credle
|
21,667
|
43,333
|
86,667
|
1,166
|
2,332
|
4,665
|
3,785
|
65,594
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
These amounts represent ranges of the possible performance-based cash bonuses that could have been paid in 2016 based on 2015
performance pursuant to the Performance Incentive Plan for Mr. Moore and the Annual Incentive Plan for the Other NEOs. See beginning
on page 16 for a discussion regarding the range of these potential payouts and the actual payout for Mr. Moore under his Performance
Incentive Plan, and see beginning on page 18 for a discussion regarding the range of potential payouts for the Other NEOs and their
actual payouts under the Annual Incentive Plan.
|
|
(2)
|
These amounts represent ranges of the possible performance-based equity grants that could have been made in 2016 based on 2015
performance pursuant to the Performance Incentive Plan for Mr. Moore and the Annual Incentive Plan for the Other NEOs who were
due to receive their payouts in a mix of cash and restricted stock. The number of shares shown is computed by dividing the value
of the equity payout, which is the same as the value of the cash payout, by the closing price of the Company’s stock price
on February 23, 2016, the date the grant was made. See beginning on page 16 for a discussion regarding the range of these potential
payouts and the actual payout for Mr. Moore under his Performance Incentive Plan, and see beginning on page 18 for a discussion
regarding the range of potential payouts for the Other NEOs and their actual payouts under the Annual Incentive Plan.
|
|
(3)
|
The amounts in this column reflect the shares of the Company’s common stock that were granted to each NEO on February
24, 2015 in order to promote share ownership and management retention. See beginning on page 21 for additional discussion regarding
these grants.
|
|
(4)
|
These amounts represent the value of the grants in column (i) based on the value of the Company’s common stock on the
date of the grant of $17.33 per share.
|
Outstanding Equity Awards at Fiscal Year-End
The following table provides
information about the equity awards our NEOs held as of the end of 2015.
|
|
Option Awards
|
Stock Awards
|
Name
|
Grant Date
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
|
Market Value of
Shares of Stock
That Have Not
Vested ($)
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested (#)
|
Equity Incentive
Plan Awards:
Market Or Payout
Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested ($)
|
(a)
|
|
(b)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
Richard H. Moore
|
2/11/2014 (1)
|
|
|
|
|
|
|
5,219
|
97,804
|
|
2/24/2015 (2)
|
|
|
|
|
|
|
5,686
|
106,556
|
|
2/24/2015 (3)
|
|
|
|
|
4,076
|
76,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Mayer
|
2/24/2015 (3)
|
|
|
|
|
3,106
|
58,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward F. Soccorso
|
2/24/2015 (2)
|
|
|
|
|
|
|
1,143
|
21,420
|
|
2/24/2015 (3)
|
|
|
|
|
2,523
|
47,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric P. Credle
|
6/17/2008
|
6,270
|
|
16.53
|
6/17/2018
|
|
|
|
|
|
2/24/2015 (2)
|
|
|
|
|
|
|
1,143
|
21,420
|
|
2/24/2015 (3)
|
|
|
|
|
2,523
|
47,281
|
|
|
Notes:
|
(1)
|
This award relates to a grant of 15,657 shares made to Mr. Moore related to 2013 performance. One-third of these shares vested
immediately, with the remaining two-thirds vesting in equal increments on January 1, 2015 and January 1, 2016. Thus, the shares
on this row represent one-third of the original award and became fully vested on January 1, 2016.
|
|
(2)
|
These amounts relate to awards for 2014 performance. Mr. Moore was granted a total of 8,529 shares and Mr. Soccorso and Mr.
Credle were each granted a total of 1,715 shares. The terms for these awards called for vesting to occur in equal one-third increments
on December 31, 2015, 2016 and 2017. Thus, one-third of the total award vested on December 31, 2015, and the amounts in these rows
will vest in equal increments on December 31, 2016 and 2017.
|
|
(3)
|
These amounts relate to grants made to promote share ownership and management retention. As previously discussed, each NEO
was granted stock with a value of 20% of their annual base salary which resulted in the following grants: Mr. Moore – 8,529
shares, Mr. Mayer – 4,659 shares, and Mr. Soccorso and Mr. Credle each – 3,785 shares. The terms for these awards called
for vesting to occur in equal one-third increments on December 31, 2015, 2016 and 2017. Thus, one-third of the total award vested
on December 31, 2015, and the amounts in these rows will vest in equal increments on December 31, 2016 and 2017.
|
Option Exercises and Stock Vested
None of our NEOs exercised
stock options during 2015. The following table shows the number of shares of stock that vested and the value realized on the date
of vesting, as determined by the Company’s stock price at the close of business on the date the stock vested.
|
Stock Awards
|
Name
|
Number of Shares
Acquired on
Vesting (#)
|
Value Realized
On Vesting ($)
|
(a)
|
(d)
|
(e)
|
|
|
|
Richard H. Moore (1)
|
10,101
|
187,884
|
|
|
|
|
|
|
Michael G. Mayer (2)
|
1,553
|
29,103
|
|
|
|
|
|
|
Edward F. Soccorso (3)
|
1,834
|
34,369
|
|
|
|
|
|
|
Eric P. Credle (4)
|
1,834
|
34,369
|
|
|
|
|
(1)
|
Mr. Moore’s shares of stock that vested in 2015 related to three grants:
|
|
·
|
On February 11, 2014, Mr. Moore was granted 15,657 shares of stock related to 2013 performance, with one-third of the total
grant vesting immediately, and the remaining two-thirds vesting in equal increments on January 1, 2015 and 2016. Thus, one third
of the total grant, or 5,219 shares, vested on January 1, 2015, when the value of the Company stock was $18.47 per share, which
resulted in a value realized on vesting of $96,395.
|
|
·
|
On February 24, 2015, Mr. Moore was granted 8,529 shares of stock related to 2014 performance, with vesting to occur in equal
one-third increments on December 31, 2015, 2016, and 2017. Thus, one third of the total grant, or 2,843 shares, vested on December
31, 2015, when the value of the Company stock was $18.74 per share, which resulted in a value realized on vesting of $53,278.
|
|
·
|
On February 24, 2015, Mr. Moore was granted 6,115 shares of stock to promote share ownership and management retention, with
vesting to occur in equal one-third increments on December 31, 2015, 2016, and 2017. Thus, one third of the total grant, or 2,039
shares, vested on December 31, 2015, when the value of the Company stock was $18.74 per share, which resulted in a value realized
on vesting of $38,211.
|
|
(2)
|
Mr. Mayer’s shares of stock that vested in 2015 related to the following grant:
|
|
·
|
On February 24, 2015, Mr. Mayer was granted 4,659 shares of stock to promote share ownership and management retention, with
vesting to occur in equal one-third increments on December 31, 2015, 2016, and 2017. Thus, one third of the total grant, or 1,553
shares, vested on December 31, 2015, when the value of the Company stock was $18.74 per share, which resulted in a value realized
on vesting of $29,103.
|
|
(3)
|
Mr. Soccorso’s and Mr. Credle’s shares of stock that vested in 2015 each related to two grants:
|
|
·
|
On February 24, 2015, Mr. Soccorso and Mr. Credle were each granted 1,715 shares of stock related to 2014 performance, with
vesting to occur in equal one-third increments on December 31, 2015, 2016, and 2017. Thus, one third of the total grant for each,
or 572 shares, vested on December 31, 2015, when the value of the Company stock was $18.74 per share, which resulted in a value
realized on vesting for each of $10,719.
|
|
·
|
On February 24, 2015, Mr. Soccorso and Mr. Credle were each granted 3,785 shares of stock to promote share ownership and management
retention, with vesting to occur in equal one-third increments on December 31, 2015, 2016, and 2017. Thus, one third of the total
grant for each, or 1,262 shares, vested on December 31, 2015, when the value of the Company stock was $18.74 per share, which resulted
in a value realized on vesting for each of $23,650.
|
Pension Benefits
The following table shows
information about the NEOs’ accrued benefits as of December 31, 2015 under our tax-qualified pension plan and our supplemental
executive retirement plan, or SERP.
Name
|
Plan Name
|
Number of Years
Credited Service
(#)
|
Present Value of
Accumulated
Benefit ($) (2)
|
(a)
|
(b)
|
(c)
|
(d)
|
|
|
|
|
Richard H. Moore (1)
|
—
|
—
|
—
|
|
|
|
|
|
|
|
|
Michael G. Mayer (1)
|
—
|
—
|
—
|
|
|
|
|
|
|
|
|
Edward F. Soccorso (1)
|
—
|
—
|
—
|
|
|
|
|
|
|
|
|
Eric P. Credle
|
Qualified Plan
|
15
|
259,000
|
|
SERP
|
15
|
83,000
|
|
|
|
|
|
(1)
|
Because of their hire dates and the Company’s freezing of both pension plans on December 31, 2012, Mr. Moore, Mr. Mayer
and Mr. Soccorso are not participants in either plan.
|
|
(2)
|
The present value of each officer’s accumulated benefit under each plan was calculated using the following assumptions:
The officer retires at age 65. At that time, the officer takes a lump sum based on his or her accrued benefit as of December 31,
2015. The lump sum is calculated using the 2013 IRS Fully Generational Mortality Table and is discounted to December 31, 2015 using
a rate of return of 4.17% per year.
|
|
(3)
|
The number of years of credited service is different from Mr. Credle’s number of years of service because the number
of years of credited service was capped when the Company froze both plans on December 31, 2012.
|
Pension Plan
Our tax-qualified pension plan covers
all full-time employees hired on or before June 11, 2009 and provides each participant with an annual retirement benefit paid monthly
in cash. Based on their hire dates, Mr. Credle is the only NEO who participates in the plan. At normal retirement age of 65, this
benefit is equal to the sum of:
|
(1)
|
0.75% of the participant’s final average compensation multiplied by his/her years of service (up to 40), and
|
|
(2)
|
0.65% of the participant’s final average compensation in excess of “covered compensation” (the average of
the Social Security taxable wage base during the 35-year period that ends with the year the participant reaches Social Security
retirement age), multiplied by years of service (up to 35).
|
“Final average compensation” means
the average of the participant’s highest consecutive five years of compensation during his or her last 10 years of employment.
For purposes of this plan, “compensation” generally means base salary plus bonuses. However, the federal tax code limits
the amount of compensation we can take into account for purposes of the pension plan. The limit was $265,000 for 2015.
Each participant becomes fully vested in his
or her plan benefits after five years of service. Early retirement, with reduced monthly benefits, is available to any participant
who leaves the company at or after age 55 with 15 years of service. The plan also provides a death benefit to a vested participant’s
surviving spouse.
As required by federal pension laws, benefits
under the pension plan are funded by assets held in a tax-exempt trust. Effective December 31, 2012, the Compensation Committee
froze the benefits payable under the pension plan.
SERP
Our SERP is for the benefit of our senior management,
including the NEOs (excluding Mr. Moore, Mr. Mayer and Mr. Soccorso, who based on their hire dates, are not participants). The
purpose of the SERP is to provide additional monthly pension benefits to ensure that each participant will receive lifetime pension
benefits beyond the amounts that we can pay under our qualified pension plan. The SERP generally provides participants with an
annual benefit at normal retirement age of 65, payable monthly in cash, equal to 3% of final average compensation multiplied by
years of service (up to a maximum of 20 years). For purposes of the SERP, “final average compensation” has the same
meaning as under our pension plan. The amount of a participant’s SERP benefit is reduced by (1) the amount payable under
our qualified pension plan, and (2) 50% of the participant’s primary social security benefit.
Each participant becomes fully vested in his
or her SERP benefits at retirement, death, disability or a change in control. Early retirement, with reduced monthly benefits,
is available to any participant who leaves the company at or after age 55 with 15 years of service. The plan also provides a death
benefit to a vested participant’s surviving spouse.
Because the SERP is a non-qualified plan, its
benefits are unsecured, and a participant’s claim for benefits under the plan is no greater than the claim of a general creditor.
As a general rule, we do not grant extra years
of credited service under either the pension plan or the SERP. On one occasion, we credited two officers of an acquired company
with three extra years of service under the SERP. None of the NEOs has received any extra years of credited service under either
plan.
Effective December 31, 2012, the Compensation
Committee froze the benefits payable under the SERP.
Potential Payments Upon Termination or Change in Control
This section contains information about
arrangements that provide for compensation to our NEOs in connection with their termination. Actual circumstances resulting in
the departure of an NEO cannot be predicted and may differ from the assumptions used in the information outlined below.
Employment Agreements
As noted above, we are party to employment
agreements with 12 of our officers, including each of our NEOs. The term for all agreements is one year, and they automatically
renew for an additional one year period on each anniversary date.
Under each of the employment agreements,
if we terminate the officer without cause, we have agreed to pay the officer’s base salary for the greater of 1) the remainder
of the agreement term, or 2) three months for Mr. Moore and six months for all others. In addition, for Mr. Moore, we have agreed
to reimburse him for the costs of his participation in the health plan of a previous employer for the same period of time as described
in the preceding sentence.
The definition of “without cause,”
as provided in each NEOs agreement, would generally be anything excluding the following – an employee’s:
|
·
|
Gross negligence or willful misconduct, or
|
|
·
|
Refusal to comply with policies, procedures, practices or directions, after notice and opportunity to cure within 15 days after
such notice, or
|
|
·
|
Commission of an act of dishonesty or moral turpitude, or
|
|
·
|
Commission of a felony, or
|
|
·
|
Breach of the agreement.
|
Pursuant to these employment agreements, we
have also agreed to pay a lump sum payment if employment ends due to a long-term disability. For Mr. Moore, in the event of termination
due to disability, we would owe him a lump sum payment equal to three months of base salary. All other officers would receive a
lump sum payment equal to the greater of 1) base salary for the remaining contractual term, or 2) base salary for six months.
Each employment agreement also provides for
severance payments to the officer if we terminate his/her employment within 12 months after a change in control without cause (as
defined above) or if the employee terminates employment for good reason within 12 months after a change in control. For Mr. Moore,
the amount of the severance payment is 2.99 times his annual salary (this multiple was 2.00 until March 2016), and in addition
the Company will reimburse Mr. Moore for the costs he incurs to participate in the health plan of a previous employer for twelve
months. For our Other NEOs with agreements, the amount of the severance payment, which we would be required to pay after termination
following a change of control, is equal to 2.99x the officer’s base salary as of the date of the change in control. Mr. Soccorso’s
agreement also limits that payment to no more than 2.99 multiplied by the officer’s “base amount” under Section
280G(b)(3) of the Internal Revenue Code. Additionally, for our Other NEOs with agreements, we have agreed to reimburse their COBRA
health care premiums until the earliest of: 1) the twelve month anniversary of the last date of employment with the Company, 2)
the date the officer is no longer eligible to participate in COBRA coverage, and 3) the date on which the officer becomes eligible
to receive substantially similar coverage from another employer.
The definition of “good reason” in each agreement
is:
|
·
|
A material diminution in authority, duties, or responsibilities of such employee immediately prior to the change-in-control,
or
|
|
·
|
A material change in geographic location at which the employee must perform services, or
|
|
·
|
Any other action or inaction that constitutes a material breach of the agreement.
|
Provided that, in order for the employee
to be able to terminate for good reason, the employee must first provide notice to the Company of the condition within thirty days
of the initial existence of such condition with no remedy to the condition being provided by the Company within thirty days of
such notice.
The agreements define “control”
as the power, either directly or indirectly, to direct our management or policies or to vote 40% or more of any class of our securities.
In general, any change in control of our Company triggers the change in control provisions of the employment agreements. However,
the agreements expressly exclude as a “change in control” any merger, consolidation or reorganization following which
the owners of our capital stock who were previously entitled to vote in the election of our directors own 61% or more of the resulting
entity’s voting stock.
The following table shows the lump
sum cash severance amounts we would have owed our NEOs under their employment agreements if they had terminated employment on
December 31, 2015 under various circumstances.
Name
|
Nature of Payment
|
Involuntary
Termination for Cause
or Voluntary
Termination by
Employee ($)
|
Involuntary
Termination
Without Cause ($)
(1)
|
Termination due
to Long-Term
Disability ($) (2)
|
Change In Control
($) (3)
|
|
|
|
|
|
|
Richard H. Moore
|
Severance - Cash
|
—
|
354,452
|
131,250
|
1,062,132
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Mayer
|
Severance - Cash
|
—
|
200,000
|
200,000
|
1,218,164
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward F. Soccorso
|
Severance - Cash
|
—
|
162,500
|
162,500
|
817,954
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric P. Credle
|
Severance - Cash
|
—
|
277,153
|
277,153
|
990,590
|
|
|
|
|
|
|
|
(1)
|
These amounts are equal to 1/12 of each officer’s base salary as of December 31, 2015 multiplied by the number of months
remaining in his/her employment agreement term. Mr. Moore’s amount also includes the estimated health care cost reimbursement
that the Company must pay him for that same time period, which is in accordance with the terms of his employment agreement.
|
|
(2)
|
For Mr. Moore, the amount in this column is three months of base salary. For Mr. Mayer and Mr. Soccorso, the amount is equal
to six months of their base salary because that number of months is greater than the number of months remaining in their employment
agreement as of December 31, 2015. For Mr. Credle, the amount is equal to approximately 10.25 months of base salary because that
is the remaining term of his employment agreement as of December 31, 2015, and it is greater than six months.
|
|
(3)
|
For Mr. Moore, this amount is equal to two times his base salary plus the estimated health care cost reimbursement that the
Company must pay him for twelve months. For Mr. Mayer and Mr. Credle, the amount shown is equal to 2.99 times their annual base
salary plus COBRA health care reimbursements for twelve months. For Mr. Soccorso, his amount is equal to twelve months of COBRA
health care reimbursement plus 2.99 multiplied by his “base amount” under Section 280G(b)(3) of the Internal Revenue
Code because that amount is less than 2.99 times his base salary.
|
|
(4)
|
Mr. Moore’s employment agreement will be amended in 2016 to increase the change-in-control multiple from two times his
base salary to 2.99 times his base salary. Assuming a 2.99 multiple, the amount for Mr. Moore in this column becomes $1,581,882.
|
Our current equity plan and the SERP
have change in control provisions that, under certain circumstances, automatically vest all participants in the benefits of each
plan in the event of a change in control of our Company. See “Outstanding Equity Awards at Fiscal Year End” for information
about the equity awards that our NEOs held as of the end of 2015 that would be subject to accelerated vesting upon a change in
control. See “Pension Benefits – SERP” for information about the NEO benefits that would be subject to accelerated
vesting upon a change in control.
The employment agreements also contain
non-competition, non-solicitation and confidentiality covenants by the officers. The non-competition and non-solicitation covenants
prohibit each officer from:
|
·
|
engaging, directly or indirectly, in any competing activity or business within a restricted territory for a certain period
of time after leaving our Company, which we call the restricted period;
|
|
·
|
soliciting or recruiting any of our employees during the restricted period; and
|
|
·
|
making sales contacts with or soliciting any of our customers for any products or services that we offer, in either case within
the restricted territory during the restricted period.
|
For Mr. Moore, the restricted period
is one year irrespective of the circumstances of termination and the restricted territory includes (i) a 60-mile radius around
the Company’s headquarters, (ii) any city, metropolitan area, county, or state in which Mr. Moore’s substantial services
were provided, or for which Mr. Moore had substantial responsibility, or in which Mr. Moore worked on Company projects, while employed
by the Company, or (iii) any city, metropolitan area, county or state in which the Company is located or does or, during Mr. Moore’s
employment with Company, did business. Pursuant to a 2016 amendment to Mr. Moore’s employment agreement, the restricted period
will be reduced to six months.
For Mr. Mayer, Mr. Soccorso, and Mr.
Credle the restricted period is six months irrespective of the circumstances of termination and the restricted territory is a 60-mile
radius of the location of the Company’s headquarters during the officer’s employment with the Company, and also includes
a 25-mile radius of the location of any bank branch.
The confidentiality covenants contained
in each employment agreement prohibit the officer from disclosing any confidential business secrets or other confidential data
both during the term of the employment agreement and for a defined term thereafter. The term of these covenants is for fifteen
years after termination for Mr. Moore, and five years for Mr. Mayer, Mr. Soccorso, and Mr. Credle.
COMPENSATION OF DIRECTORS
The Board of Directors establishes compensation
for board members based primarily on consultation with an outside consultant, who assists the Board of Directors in evaluating
whether its members are receiving fair compensation for the services they perform. This evaluation is based primarily on a comparison
to other financial services companies of a similar size. The peer companies that were used in the most recent comparison were the
same as those used during the evaluation of NEO compensation described on page 15 above.
Based on this evaluation, the Board set the
following fees for 2016. These fees are only paid to non-employee directors.
Annual Retainer
|
·
|
Baseline retainer for all directors - $21,000
|
|
·
|
Additional retainer for members of the Audit Committee - $1,000
|
|
·
|
Additional retainer for the Chairman of the Board of the Company - $6,000
|
|
·
|
Additional retainer for the Chairman of the Board of First Bank - $6,000
|
|
·
|
Additional retainer for the Chairman of the Audit Committee - $6,000
|
Additional Fees
|
·
|
No additional fees are paid to directors for attending board or committee meetings.
|
|
·
|
Board members are permitted to also serve on First Bank’s local advisory boards and receive fees of $400 per year in
connection with that service. Of the current board members, only Mr. Crawford serves on a local advisory board.
|
Non-employee directors of the Company also
participate in the Company’s equity plan. In June 2015, each non-employee director of the Company received 1,022 shares of
the Company’s common stock. The number of shares of stock granted produced a value that was approximately the same as stock
option grants that each director had received in years prior to 2010. The Board of Directors intends to make similar grants of
common stock, in June of each year, to non-employee directors.
Directors who retire from the board and are
named Director Emeritus receive fees of $4,000 per year for three years.
The following table sets forth compensation we paid to our directors
in 2015:
Name
|
Fees Earned or Paid
in Cash ($)
|
Stock Awards
($)
|
Non-Equity Incentive
Plan Compensation
($)
|
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
All Other Compensation
($)
|
Total ($)
|
(a)
|
(b)
|
(c) (1)
|
(e)
|
(f)
|
(g) (2)
|
(h)
|
|
|
|
|
|
|
|
Daniel T. Blue, Jr.
|
22,000
|
16,097
|
—
|
—
|
—
|
38,097
|
Mary Clara Capel
|
28,000
|
16,097
|
—
|
—
|
—
|
44,097
|
James C. Crawford, III
|
28,000
|
16,097
|
—
|
—
|
400
|
44,497
|
Thomas F. Phillips
|
22,000
|
16,097
|
—
|
—
|
—
|
38,097
|
Frederick L. Taylor II
|
22,000
|
16,097
|
—
|
—
|
—
|
38,097
|
Virginia C. Thomasson
|
26,000
|
16,097
|
—
|
—
|
—
|
42,097
|
Dennis A. Wicker
|
21,000
|
16,097
|
—
|
—
|
—
|
37,097
|
|
(1)
|
On June 1, 2015, each non-employee director was granted 1,022 shares of common stock with no vesting requirements. The grant
date fair value of each share of stock was $15.75.
|
|
(2)
|
The amount in the “All Other Compensation” column represents local advisory fees earned by Mr. Crawford.
|
Th
e following table shows the
number of stock options that each non-employee director held as of December 31, 2015:
Aggregate Outstanding Equity Awards
|
Name
|
Options
Outstanding (#)
|
|
|
Daniel T. Blue, Jr.
|
—
|
Mary Clara Capel
|
9,000
|
James C. Crawford, III
|
—
|
Thomas F. Phillips
|
9,000
|
Frederick L. Taylor II
|
9,000
|
Virginia C. Thomasson
|
9,000
|
Dennis A. Wicker
|
9,000
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The 2015 members of the Compensation Committee
were Mr. Blue, Ms. Capel (chairman), Mr. Crawford III, Mr. Phillips, Mr. Sloan, Mr. Taylor II, and Ms. Thomasson, and Mr. Willis.
None of these members has ever been an officer or employee of the Company. There are no Compensation Committee interlocks, as described
in SEC rules and regulations.
CERTAIN TRANSACTIONS
Under the rules of the Securities and Exchange
Commission (SEC), public companies such as First Bancorp are required to disclose certain “related party transactions.”
These are transactions in which the Company is a participant where the amount involved exceeds $120,000, and a Company director,
executive officer, or owner of more than 5% of our common stock has a direct or indirect material interest. In addition to the
rules and regulations of the SEC, the Company and First Bank are subject to Federal Reserve Board Regulation O, which governs extensions
of credit by First Bank to any executive officer, director or principal shareholder of the Company or First Bank. The Company has
established processes for reviewing and approving extensions of credit and other related party transactions. Related party transactions
are approved by the Board of Directors, and the related person does not participate in the deliberations or cast a vote. The Audit
Committee also reviews all related party transactions and determines whether to ratify or approve such transactions.
The Company collects information about
related party transactions from its officers and directors through annual questionnaires distributed to officers and directors,
or when transactions or proposed transactions are reported throughout the year. Each director and officer agrees to abide by the
Company's Code of Ethics, which provides that officers and directors should avoid conflicts of interest and that any transaction
or situation that could involve a conflict of interest between the Company and an officer or director must be reported and
must be approved by the Audit Committee or the Board (or another committee thereof) if and when appropriate. The
Code of Ethics identifies a non-exclusive list of situations that may present a conflict of interest, including significant
dealings with a competitor, customer or supplier, similar dealings by an immediate family member, personal investments in entities
that do business with the Company, and gifts and gratuities that influence a person’s business decisions, as well as
other transactions between an individual and the Company. The Audit Committee’s charter provides that the Audit Committee
will review, investigate and monitor matters pertaining to the integrity or independence of the Board, including related party
transactions. The Audit Committee and the Board review and make determinations about related party transactions or other conflicts
of interest as they arise, and in addition the Audit Committee conducts an annual review of all related party transactions early
in each fiscal year, after director and officer questionnaires have been received from management and the Board.
Certain of the directors, nominees, principal
shareholders and officers (and their affiliates) of the Company have deposit accounts and other transactions with First Bank, including
loans in the ordinary course of business. Except as discussed in the next sentence, all loans or other extensions of credit made
by First Bank to directors, nominees, principal shareholders and executive officers of the Company and to affiliates of such persons
were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with independent third parties and did not involve more than the normal risk
of collectibility or present other unfavorable features. As discussed in “
Perquisites
” in the Compensation Discussion
and Analysis section above, in accordance with applicable banking regulations, the Company has a home loan program that all of
our employees are eligible to participate in that allows employees to borrow money for a loan on their primary residence, subject
to our normal credit underwriting standards, at interest rates slightly less than the interest rate offered to non-employees. At
December 31, 2015, the aggregate principal amount of loans to directors, nominees, principal shareholders and officers of the Company
and to affiliates of such persons, or loans in which such persons had a material interest, was approximately $3,411,000. No reportable
loans of this type are on nonaccrual status or are otherwise impaired.
During 2015, the Company paid $248,082 to the
law firm Nelson Mullins Riley & Scarborough (“NMRS”) for various legal services. Mr. Wicker is a partner
in NMRS. The Audit Committee and Board were aware of this relationship when they approved NMRS to perform legal work for
the Company in 2015. The fees paid to NMRS amount to less than one-tenth of 1% of that firm’s total revenue and did
not exceed established thresholds that are incompatible with being considered independent, as set by NASDAQ and our Corporate Governance
Guidelines. Mr. Wicker performed no work for the Company and received no direct compensation related to the engagement.
The Board considered this relationship in determining that Mr. Wicker is an independent member of the Board and Compensation Committee
for 2016, as contemplated by NASDAQ and our Corporate Governance Guidelines.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws
of the United States, the Company’s directors, its executive officers, and any persons holding more than 10% of the Company’s
common stock are required to report their ownership of the Company’s common stock and any changes in that ownership to the
Securities and Exchange Commission and the National Association of Securities Dealers Automated Quotation System. Specific due
dates for these reports have been established, and the Company is required to report in this proxy statement any failure to file
by these dates during 2015. Based upon a review of such reports and representations from the Company’s directors and executive
officers, the Company believes that all such reports were filed on a timely basis in 2015, except that Mr. Sloan filed one late
report.
PROPOSAL 2 – RATIFICATION
OF INDEPENDENT AUDITORS
The Audit Committee has approved the selection
of the firm Elliott Davis Decosimo, PLLC to serve as the independent auditors for 2016. Action by the shareholders is not required
by law in the appointment of independent auditors, but their appointment is submitted by the Audit Committee and the Board of Directors
in order to give the shareholders an opportunity to present their views. If the proposal is approved, the Audit Committee, in its
discretion, may direct the appointment of different independent auditors at any time during the year if it determines that such
a change would be in the best interests of the Company and its shareholders. If the proposal to ratify the selection of Elliott
Davis Decosimo, PLLC as the Company's independent auditors is rejected by shareholders, then the Audit Committee will reconsider
its choice of independent auditors. The Board of Directors recommends that the shareholders vote for the proposal to ratify the
selection of the Company’s independent auditors.
Representatives of Elliott Davis Decosimo,
PLLC are expected to be present at the annual meeting. The representatives will be available to respond to appropriate questions
and will be given an opportunity to make any statement they consider appropriate.
AUDIT COMMITTEE REPORT
Management has the primary responsibility for
the financial statements and the reporting process. The Company’s independent auditor, which was Elliott Davis Decosimo,
PLLC (“Elliott Davis”) for 2015, is responsible for expressing an opinion on the conformity of the Company’s
audited financial statements to accounting principles generally accepted in the United States of America and for attesting to the
Company’s control over financial reporting. The Company’s Audit Committee pre-approves all audit services and permitted
non-audit services (including the fees and terms thereof) to be performed by the independent auditors. The Audit Committee may
delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals
of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented
to the full Audit Committee at its next scheduled meeting.
The Audit Committee has reviewed and discussed
with management and Elliott Davis the audited financial statements as of and for the year ended December 31, 2015. The Audit
Committee also discussed with Elliott Davis the matters required to be discussed by the Public Company Accounting Oversight Board
(“PCAOB”) Auditing Standard AS 16, “Communication with Audit Committees,” and Rule 2-07 of Regulation S-X
promulgated by the SEC, as modified or supplemented. In addition, the Audit Committee has received from Elliott Davis the written
disclosures and letter required by the applicable requirements of the PCAOB regarding Elliott Davis’ communications with
the Audit Committee concerning independence and discussed with them their independence from the Company and its management. The
Audit Committee also has considered whether Elliott Davis’ provision of any information technology services or other non-audit
services to the Company is compatible with the concept of auditor independence. In this analysis, the Audit Committee reviewed
the services and related fees provided by Elliott Davis in the following categories and amounts:
|
|
2015
|
|
|
2014
|
|
Audit Fees (1)
|
|
$
|
393,845
|
|
|
$
|
393,100
|
|
Other Audit Fees (2)
|
|
|
46,150
|
|
|
|
14,500
|
|
Audit-Related Fees (3)
|
|
|
24,500
|
|
|
|
20,000
|
|
Tax Fees
|
|
|
3,450
|
|
|
|
—
|
|
Total Fees
|
|
$
|
467,945
|
|
|
$
|
427,600
|
|
|
(1)
|
For 2014 and 2015, audit fees included fees for the integrated audit of the consolidated financial statements and internal
control over financial reporting (Sarbanes-Oxley Section 404), and quarterly reviews of the interim consolidated financial statements.
|
|
(2)
|
In 2014 and 2015, other audit fees consisted of procedures performed related our audit of supplementary financial and compliance
information required by the Department of Housing and Urban Development’s (“HUD”) Uniform Financial Reporting
Standards for HUD Housing Programs to maintain the Bank’s FHA approved supervised mortgagee status. For 2015, other audit
fees also included fees associated with a SEC investigation into the Company’s failure to disclose certain related party
transactions between the Company and certain of its officers and/or directors or their immediate family members during the period
from 2009 through 2011, which was settled in 2015. For 2014, other audit fees also included fees associated with consents related
to SEC filings related to the Company’s registration of common shares for its 401(k) plan and its equity plan.
|
|
(3)
|
For 2014 and 2015, audit-related fees consisted primarily of fees for the audit of the Company’s employee benefit plans.
|
|
(4)
|
For 2014 and 2015, tax fees consisted of consulting fees and assistance with various tax matters.
|
Based on the reviews and discussions referred
to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included
in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 for filing with the SEC.
The Board of Directors has determined that
Ms. Thomasson is an “audit committee financial expert” within the meaning of SEC rules and regulations.
The Board of Directors has adopted a written
charter for the Audit Committee, which is reviewed and reassessed for adequacy on an annual basis. The Audit Committee charter
is available on the Company’s website at
www.LocalFirstBank.com
under the tab “About
Us – Corporate Profile – Investor Relations – Governance Documents.”
RESPECTFULLY SUBMITTED
BY THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS:
Daniel T. Blue, Jr.
|
Thomas F. Phillips
|
Jack D. Briggs
|
O. Temple Sloan, III
|
Mary Clara Capel
|
Frederick L. Taylor, II
|
James C. Crawford, III
|
Virginia C. Thomasson – Chairman
|
|
|
The affirmative vote of the holders of a
majority of shares of common stock represented and voting at the meeting (either in person or by proxy) is required for approval
of this proposal. The Board of Directors recommends that shareholders vote “FOR” this proposal. Unless indicated to
the contrary, proxies will be voted “FOR” this proposal.
PROPOSAL 3 – ADVISORY VOTE APPROVING
“SAY ON PAY” PROPOSAL
The
SEC rules adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) require
the Company to provide shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation
of our named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the
SEC.
A description of the the compensation paid
to our named executive officers is included in the “Compensation Discussion and Analysis” section above and the tabular
disclosures regarding named executive officer compensation (together with the accompanying narrative disclosure) contained in this
proxy statement.
We believe that our executive compensation
policies and procedures are strongly aligned with the long-term interests of our shareholders. We also believe that levels of compensation
received by our senior executive officers are fair, reasonable and within the ranges of compensation paid by comparable financial
institutions to similarly situated executives.
This proposal, commonly known as a “Say
on Pay,” gives you as a shareholder the opportunity to endorse or not endorse our executive compensation programs, policies
and procedures through the following resolution:
“Resolved, that the shareholders approve
the overall executive compensation programs, policies and procedures employed by First Bancorp, as described in the “Compensation
Discussion and Analysis” section and the tabular disclosure regarding named executive officer compensation (together with
the accompanying narrative disclosure) contained in the proxy statement provided to the shareholders of First Bancorp on or about
April 4, 2016.”
Because your vote is advisory, it will
not be binding upon the Company. However, the Compensation Committee and Board may take into account the outcome of the vote when
considering future executive compensation arrangements.
The Board of Directors recommends that
shareholders vote “FOR” this proposal. Unless indicated to the contrary, proxies will be voted “FOR” this
proposal.
SHAREHOLDERS PROPOSALS FOR 2017 MEETING
Shareholders may submit proposals appropriate
for shareholder action at the Company’s 2017 annual meeting consistent with the regulations of the SEC. For proposals to
be considered for inclusion in the proxy statement for the 2017 annual meeting, they must be received by the Company no later than
December 7, 2016. Such proposals should be directed to First Bancorp, Attn. Elizabeth Bostian, 300 SW Broad Street, Southern Pines,
North Carolina 28387.
The bylaws of the Company establish an advance
notice procedure for shareholder proposals to be brought before a meeting of shareholders of the Company. Subject to any other
applicable requirements, only such business may be conducted at a meeting of the shareholders as has been brought before the meeting
by, or at the direction of, the Board of Directors or by a shareholder who has given to the Secretary of the Company timely written
notice, in proper form, of the shareholder’s intention to bring that business before the meeting. The presiding officer at
such meeting has the authority to make such determinations. To be timely, notice of other business to be brought before any meeting
must generally be received by the Secretary of the Company not less than 60 nor more than 90 days in advance of the shareholders’
meeting. The notice of any shareholder proposal must set forth the various information required under the bylaws. The person submitting
the notice must provide, among other things, the name and address under which such shareholder appears on the Company's books and
the class and number of shares of the Company’s capital stock that are beneficially owned by such shareholder. Any shareholder
desiring a copy of the Company’s bylaws will be furnished one without charge upon written request to the Secretary of the
Company at the Company’s address noted above.
DELIVERY OF PROXY STATEMENTS AND
NOTICE OF INTERNET AVAILABILITY OF PROXY
MATERIALS
As permitted by the Exchange Act, only one
copy of the proxy statement and annual report is being delivered to shareholders residing at the same address, unless such shareholders
have notified the Company of their desire to receive multiple copies of the proxy statement. Additionally, some shareholders have
consented to be excluded from the mailing of the proxy statement and annual report, and instead only be notified of the internet
web address where they can access the proxy statement and annual report electronically. The internet address where these documents
can be accessed is www.edocumentview.com/FBNC.
The Company will promptly deliver, upon oral
or written request, a separate copy of the proxy statement and annual report to any shareholder residing at an address to which
only one copy was mailed or to shareholders who originally consented to only receive notice of internet availability. Requests
for additional copies and/or requests for multiple copies of the proxy statement and annual report in the future should be directed
to First Bancorp, Attn. Elizabeth B. Bostian, 300 SW Broad Street, Southern Pines, North Carolina 28387, e-mailing Ms. Bostian
at ebostian@LocalFirstBank.com, or by calling 1-910-246-2500 and asking to speak to Elizabeth Bostian.
Shareholders residing at the same address and
currently receiving multiple copies of the proxy statement and annual report may contact the Company as noted above to request
that only a single copy of the proxy statement and annual report be mailed in the future.
OTHER MATTERS
As of the date of this proxy statement, the
Board of Directors does not know of any other business to be presented for consideration or action at the annual meeting. If other
matters properly come before the annual meeting, the enclosed proxy will be deemed to confer discretionary authority to the individuals
named as proxies therein to vote the shares represented by such proxy as to any such matters.
By Order of the Board of Directors,
Elizabeth B. Bostian
Secretary
April 4, 2016
Directions to the
James H. Garner Conference Center
211 Burnette Street, Troy, North Carolina
27371
Location of the 2016
First Bancorp Annual Shareholders’
Meeting
Thursday, May 12, 2016 - 10:00 a.m.
First Bancorp
This Proxy is Solicited on Behalf of the
Board of Directors
The undersigned hereby appoints Richard H.
Moore and Elizabeth B. Bostian, and each of them, attorneys and proxies with full power of substitution, to act and vote as designated
below the shares of common stock of First Bancorp held of record by the undersigned on March 23, 2016, at the annual meeting of
shareholders to be held on May 12, 2016, or any adjournment or adjournments thereof.
|
1.
|
PROPOSAL to elect nine (9) nominees to the Board of Directors to serve until the 2017 Annual Meeting of Shareholders, or until
their successors are elected and qualified.
|
|
o
|
FOR the 9 nominees listed below
|
o
|
WITHHOLD AUTHORITY
|
|
|
(except as marked to the contrary below).
|
|
to vote for the 9 nominees below.
|
(Instruction: To withhold authority to vote for any individual nominee, strike a line through the nominee’s name in the list below).
Daniel T. Blue, Jr.
|
Richard H. Moore
|
Frederick L. Taylor, II
|
Mary Clara Capel
|
Thomas F. Phillips
|
Virginia C. Thomasson
|
James C. Crawford, III
|
O. Temple Sloan, III
|
Dennis A. Wicker
|
|
2.
|
PROPOSAL to ratify the appointment of Elliott Davis Decosimo, PLLC, as the independent auditors of the Company for 2016.
|
|
o
FOR
|
o
AGAINST
|
o
ABSTAIN
|
|
3.
|
PROPOSAL to consider and approve an advisory (non-binding) resolution on executive compensation,
also known as “say on pay” (as more fully described in the accompanying proxy statement).
|
|
o
FOR
|
o
AGAINST
|
o
ABSTAIN
|
|
4.
|
In their discretion, the proxies are authorized to vote on any other business that may properly come before the meeting.
|
|
5.
|
Do you plan to attend the May 12, 2016 meeting?
o
YES
o
NO
|
This proxy when properly executed will be voted as directed herein.
If no direction is made, this proxy will be voted “FOR” all nominees in Proposal 1, “FOR” Proposal 2, and
“FOR” Proposal 3. If, at or before the time of the meeting, any of the nominees listed above has become unavailable
for any reason, the proxies have the discretion to vote for a substitute nominee or nominees.
|
Dated
|
,
|
2016
|
|
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
|
Signature (if jointly held)
|
(Please sign exactly as the name appears on this proxy. If signing
as attorney, administrator, executor, guardian, or trustee, please give title as such. If a corporation, please sign in full corporate
name by the President or other authorized officer. If a partnership, please sign in partnership name by authorized person.)
Please mark, sign, date and return promptly in the envelope provided.
If you attend the meeting, you may withdraw your proxy and vote in person. If you wish to vote by telephone or internet, please
read the instructions below.
INSTRUCTIONS FOR VOTING YOUR PROXY
Shareholders of record have three alternative
ways of voting their proxies:
1. By Mail (traditional method); or
2. By Telephone (using a Touch-Tone Phone);
or
3. By Internet
Your telephone or Internet vote authorizes the named proxies to
vote your shares in the same manner as if you marked, signed, dated and returned your proxy card. Please note all votes cast via
the telephone or Internet must be cast prior to 11:59 p.m., Eastern Daylight Time, on May 11, 2016.
Vote by Telephone
|
Vote by Internet
|
It’s fast, convenient and immediate!
|
It’s fast, convenient, and your vote is
|
Call Toll-Free on a Touch-Tone Phone: 1-800-690-6903
|
immediately confirmed and posted.
|
|
|
Follow these four easy steps:
|
Follow these four easy steps:
|
1. Read the accompanying Proxy Statement
and Proxy Card
|
1. Read the accompanying Proxy Statement
and Proxy Card
|
2. Call the toll-free number:
1-800-690-6903
|
2. Go to the website:
https://www.proxyvote.com
|
3. Enter the Control Number located
on your Proxy
Card below.
|
3. Enter your Control Number located on your
Proxy
Card below.
|
4. Follow the recorded instructions
|
4. Follow the instructions on the website.
|
|
|
Your vote is important!
Call 1-800-690-6903 anytime
|
Your vote is important!
Go to https://www.proxyvote.com
|
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It is not necessary to return your proxy
card if you are voting by telephone or internet.
Please note that the last vote received, whether
by telephone, internet, or by mail, will be the vote counted.
For Telephone/Internet Voting:
Control Number
Control Number Provided
Here
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