SCBT FINANCIAL CORPORATION
520 Gervais Street
Columbia, South Carolina 29201
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 25, 2006
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of SCBT Financial Corporation, a South Carolina corporation
(the "Company"), will be held at the Company's headquarters in the
Dorchester-Jasper Room on the second floor, 520 Gervais Street, Columbia, South
Carolina at 2:00 p.m., on April 25, 2006, for the following purposes:
(1) To elect six directors of the Company to serve three-year terms;
(2) To ratify the appointment of J.W. Hunt and Company, LLP, Certified
Public Accountants, as independent auditors for the Company for the
fiscal year ending December 31, 2006; and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only record holders of Common Stock of the Company at the close of business
on March 10, 2006, are entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof.
The Company's Proxy, Proxy Statement (providing important shareholder
information for the Annual Meeting), and 2005 Annual Report to Shareholders
(which includes its 2005 Annual Report on Form 10-K) are enclosed with this
Notice.
You are cordially invited and urged to attend the Annual Meeting in person.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO PROMPTLY VOTE BY TELEPHONE, INTERNET, OR BY MAIL ON THE PROPOSALS
PRESENTED, FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD FOR WHICHEVER VOTING
METHOD YOU PREFER. IF YOU VOTE BY MAIL, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED, POSTAGE-PAID ENVELOPE.
IF YOU NEED ASSISTANCE IN COMPLETING YOUR PROXY, PLEASE CALL THE COMPANY AT
800-277-2175. IF YOU ARE A RECORD SHAREHOLDER, ATTEND THE ANNUAL MEETING AND
DESIRE TO REVOKE YOUR PROXY AND VOTE IN PERSON, YOU MAY DO SO. IN ANY EVENT, A
PROXY MAY BE REVOKED BY A RECORD HOLDER AT ANY TIME BEFORE IT IS EXERCISED.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
ALL THE PROPOSALS PRESENTED.
By Order of the Board of Directors
/S/ James C. Hunter, Jr.
------------------------
James C. Hunter, Jr.
Secretary
Columbia, South Carolina
March 24, 2006
SCBT FINANCIAL CORPORATION
520 Gervais Street
Columbia, South Carolina 29201
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held April 25, 2006
This Proxy Statement is furnished to shareholders of SCBT Financial
Corporation, a South Carolina corporation (herein, unless the context otherwise
requires, together with its subsidiaries, the "Company"), in connection with the
solicitation of proxies by the Company's board of directors for use at the
Annual Meeting of Shareholders to be held at the Company's headquarters in the
Dorchester-Jasper Room on the second floor, 520 Gervais Street, Columbia, South
Carolina at 2:00 p.m., on April 25, 2006 or any adjournment thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail, telephone or
other means by directors, officers and regular employees of the Company. The
Company may also request banking institutions, brokerage firms, custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of Common Stock of the Company held of record by such persons, and the
Company will reimburse the reasonable forwarding expenses. The cost of
solicitation of proxies will be paid by the Company. This Proxy Statement was
first mailed to shareholders on or about March 24, 2006.
The Company has its principal executive offices at 520 Gervais Street,
Columbia, South Carolina 29201. The Company's mailing address is P.O. Box 1030,
Columbia, South Carolina 29202, and its telephone number is 803-771-2265.
ANNUAL REPORT
The Annual Report to Shareholders (which includes the Company's Annual
Report on Form 10-K containing, among other things, the Company's fiscal year
ended December 31, 2005 financial statements) is enclosed herewith. Such Annual
Report to Shareholders does not form any part of the material for the
solicitation of proxies.
REVOCATION OF PROXY
Any record shareholder returning the accompanying proxy may revoke such
proxy at any time prior to its exercise (a) by giving written notice to the
Company of such revocation, (b) by voting in person at the meeting, or (c) by
executing and delivering to the Company a later dated proxy. Attendance at the
Annual Meeting will not in itself constitute revocation of a proxy. Any written
notice or proxy revoking a proxy should be sent to SCBT Financial Corporation,
P.O. Box 1030, Columbia, South Carolina 29202, Attention: James C. Hunter, Jr.
Written notice of revocation or delivery of a later dated proxy will be
effective upon receipt thereof by the Company.
QUORUM AND VOTING
The Company's only voting security is its $2.50 par value Common Stock
("Common Stock"), each share of which entitles the holder thereof to one vote on
each matter to come before the Annual Meeting. At the close of business on March
10, 2006 (the "Record Date"), the Company had issued and outstanding 8,671,091
shares of Common Stock, which were held of record by approximately 5,400
persons. Only shareholders of record at the close of business on the Record Date
are entitled to notice of and to vote on matters that come before the Annual
Meeting. Notwithstanding the Record Date specified above, the Company's stock
transfer books will not be closed and shares of the Common Stock may be
transferred subsequent to the Record Date. However, all votes must be cast in
the names of holders of record on the Record Date.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. If a share is
represented for any purpose at the Annual Meeting by the presence of the
registered owner or a person holding a valid proxy for the registered owner, it
is deemed to be present for the purposes of establishing a quorum. Therefore,
valid proxies which are marked "Abstain" or "Withhold" or as to which no vote is
marked, including proxies submitted by brokers who are the record owners of
shares but who lack the power to vote such shares (so-called "broker
non-votes"), will be included in determining the number of votes present or
represented at the Annual Meeting. If a quorum is not present or represented at
the meeting, the shareholders entitled to vote, present in person or represented
by proxy, have the power to adjourn the meeting from time to time until a quorum
is present or represented. If any such adjournment is for a period of less than
30 days, no notice, other than an announcement at the meeting, will be given of
the adjournment. If the adjournment is for 30 days or more, notice of the
adjourned meeting will be given in accordance with the Bylaws. Directors,
officers and regular employees of the Company may solicit proxies for the
reconvened meeting in person or by mail, telephone or other means. At any such
reconvened meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
noticed. Once a quorum has been established, it will not be destroyed by the
departure of shares prior to the adjournment of the meeting.
1
Provided a quorum is established at the meeting, directors will be elected
by a plurality of the votes cast at the Annual Meeting. Votes that are withheld,
broker non-votes and the failure to return a signed proxy will have no effect on
the outcome of the election of directors. Shareholders of the Company do not
have cumulative voting rights.
All other matters to be considered and acted upon at the Annual Meeting,
including the proposals to ratify the appointment of J. W. Hunt and Company,
LLP, Certified Public Accountants, as independent auditors, require that the
number of shares of Common Stock voted in favor of the matter exceed the number
of shares of Common Stock voted against the matter, provided a quorum has been
established. Abstentions, broker non-votes and the failure to return a signed
proxy will have no effect on the outcome of such matters.
ACTIONS TO BE TAKEN BY THE PROXIES
Each proxy, unless the shareholder otherwise specifies therein, will be
voted "FOR" the election of the persons named in this Proxy Statement as the
board of directors' nominees for election to the board of directors; and "FOR"
the ratification of the appointment of J. W. Hunt and Company, LLP as
independent auditors for the fiscal year ending December 31, 2006. In each case
where the shareholder has appropriately specified how the proxy is to be voted,
it will be voted in accordance with his specifications. As to any other matter
of business which may be brought before the Annual Meeting, a vote may be cast
pursuant to the accompanying proxy in accordance with the best judgment of the
persons voting the same. However, the board of directors does not know of any
such other business.
SHAREHOLDER PROPOSALS AND COMMUNICATIONS
Any shareholder of the Company desiring to include a proposal in the
Company's 2007 proxy materials for action at the 2007 Annual Meeting of
Shareholders must deliver the proposal to the executive offices of the Company
no later than November 15, 2006 if such proposal is to be considered for
inclusion in the 2007 proxy materials. Only proper proposals that are timely
received will be included in the Company's 2007 Proxy Statement and Proxy. In
addition, a shareholder who desires to nominate a person for election to the
board of directors of the Company or to make any other proposal for
consideration by shareholders at a shareholders' meeting must deliver notice of
such proposed action to the Secretary of the Company no less than 45 days before
such meeting. For a nominee for director, such notice should be addressed to the
Governance Committee of the Company at P.O. Box 1030, Columbia, South Carolina
29202. The recommendation must set forth the name and address of the shareholder
or shareholder group making the nomination; the name of the nominee; his or her
address; the number of shares of Company stock owned by the nominee; any
arrangements or understandings regarding nomination; the five-year business
experience of the recommended candidate; legal proceedings within the last five
years involving the candidate; a description of transactions between the
candidate and the Company valued in excess of $60,000 and other types of
business relationships with the Company; a description of any relationships or
agreements between the recommending shareholder or group and the candidate
regarding nomination; a description of known relationships between the candidate
and the Company's competitors, customers, business partners or other persons who
have a business relationship with the Company; and a statement of the
recommended candidate's qualifications for board membership. For any other
shareholder proposal, such notice must set forth the name and address of the
shareholder making the proposal and the text of the resolution to be voted on.
The Company does not have a formal process by which shareholders may
communicate with the board of directors. Historically, however, the Chairman of
the Board has undertaken responsibility for responding to questions and concerns
expressed by shareholders. In the view of the board of directors, this approach
has been sufficient to ensure that questions and concerns raised by shareholders
are adequately addressed. Any shareholder desiring to communicate with the board
may do so by writing to the secretary of the Company at P.O. Box 1030, Columbia,
South Carolina 29202.
BENEFICIAL OWNERSHIP OF CERTAIN PARTIES
The following table sets forth the number and percentage of outstanding
shares that exceed 5% beneficial ownership by any single person or group, as
known by the Company:
Name and Address of Amount of Beneficial Percent of Shares
Title of Class Beneficial Owner Ownership Outstanding
-------------- ---------------- --------- -----------
Common Stock Shares Wellington Management Company, LLP 456,813 5.27%
75 State Street, Boston, MA 02109
2
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 10, 2006, the number and
percentage of outstanding shares beneficially owned by (i) each director and
nominee for director of the Company, (ii) each executive officer named in the
Summary Compensation Table, and (iii) all executive officers and directors of
the Company as a group.
Amount and Nature of Beneficial Ownership
----------------------------------------------------------------------------------
Common Shares Percent of
Common Shares Subject to a Shares
Name of Beneficial Owner Beneficially Owned (1) Right to Acquire (2) Outstanding
---------------------------------- ----------------------------- -------------------------- -----------------
Colden R. Battey, Jr. (3) (6) 86,222 2,894 1.0%
Luther J. Battiste, III (6) 1,740 1,708 *
Joe E. Burns (4) (6) 9,875 7,897 *
Thomas S. Camp (4) (6) 7,656 15,337 *
Dalton B. Floyd, Jr. (6) 19,106 - *
M. Oswald Fogle (6) 10,585 2,621 *
Dwight W. Frierson (5) (6) 14,223 3,598 *
R. Caine Halter (6) 1,020 - *
Robert R. Hill, Jr. (6) 37,478 12,877 *
Robert R. Horger (4) (6) 39,633 15,426 *
Richard C. Mathis (4) (6) 16,939 11,976 *
Harry M. Mims, Jr. (6) 36,111 3,356 *
Ralph W. Norman (6) 7,103 2,863 *
John C. Pollok (3) (4) (6) 10,645 15,954 *
James W. Roquemore (3) (5) (6) 14,013 3,020 *
Thomas E. Suggs (6) 3,380 2,847 *
Susie H. VanHuss (6) 1,200 500 *
A. Dewall Waters (6) 30,610 2,747 *
John W. Williamson, III (6) 52,835 2,401 *
Cathy Cox Yeadon (3) (5) (6) 10,975 1,603 *
All directors and executive officers
as a group (21 Persons) (2) (4) (6) 423,828 114,167 6.2%
--------------------------------------------
* Indicates less than one percent of the outstanding SCBT Financial Corporation
Common Stock shares.
(1) As reported to the Company by the directors, nominees and executive
officers.
(2) Based on the number of shares acquirable by directors and executive
officers through vested stock options within 60 days of the Record Date
March 10, 2006.
(3) Excludes shares of family members of the following directors and
executive officers, each of whom disclaims beneficial ownership of such
shares: Mr. Battey, 20,844 shares; Mr. Pollok, 543 shares; Mr. Roquemore,
9,091 shares; and Ms. Yeadon, 4,074 shares.
(4) Includes shares held as of December 31, 2005 by the Company under the
Company's Employee Savings Plan, as follows: Mr. Burns, 1,167 shares; Mr.
Camp, 586 shares; Mr. Horger, 1,292 shares; Mr. Mathis, 1,670 shares; Mr.
Pollok, 1,795 shares; and all directors and executive officers as a
group, 7,663 shares.
(5) For Mr. Frierson, includes 6,704 shares owned by Coca-Cola Bottling
Company of Orangeburg, of which Mr. Frierson is a management affiliate.
Mr. Frierson may direct the voting and disposition of these shares on
that company's behalf. For Mr. Roquemore, includes 7,127 shares owned by
Patten Seed Company, of which Mr. Roquemore is a 30% owner and management
affiliate. For Ms. Yeadon, excludes 17,583 shares owned by Cox
Scholarship Fund, of which Ms. Yeadon is an affiliate.
(6) Includes shares of restricted stock, as to which the recipients have full
voting privileges. The shares are as follows: Mr. Burns, 3,983 shares;
Mr. Camp, 4,632 shares; Mr. Hill, 7,394 shares; Mr. Horger, 1,021 shares;
Mr. Mathis, 4,636 shares; Mr. Pollok, 5,219 shares; Mr. Halter, 200
shares; all other named non-employee directors, 50 shares except for Mr.
Floyd who has no such shares at this time;and all directors and executive
officers as a group, 27,685 shares. These restricted stock shares are not
currently vested.
3
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide for a maximum of 20
directors, to be divided into three classes each serving three-year terms, with
the classes as equal in number as possible. The board of directors has currently
established the number of directors at 16, effective at the Annual Meeting.
Colden R. Battey, Jr., M. Oswald Fogle, Dwight W. Frierson, and Thomas E. Suggs,
all of whom currently are directors of the Company and whose terms expire at the
Annual Meeting, have been nominated by the board of directors for reelection by
the shareholders. Additionally, Dalton B. Floyd, Jr. and R. Caine Halter, each
of whom since the last Annual Shareholders' Meeting was recommended by the
Governance Committee and subsequently elected to the board of directors by the
board members, have been nominated by the board of directors for election by the
shareholders.
The table below sets forth the name, age and business experience for the
past five years of each nominee for director and each current director of SCBT
Financial Corporation.
Year First
Name and Age Elected Director Business Experience for the Past Five Years
------------ ---------------- -------------------------------------------
Director Nominees Whose Terms Will Expire in 2009
Colden R. Battey, Jr. (70) 1999 Senior Partner of Harvey & Battey Law Firm, Beaufort, S.C.
Dalton B. Floyd, Jr. (67) Chairman and General Counsel of SunBank, N.A. since 1999.
He has also served as Chairman of Sun Bancshares Inc. during
the same time. Mr. Floyd has been counsel to Carolinas PGA
while maintaining his practice in the Floyd Law Firm, P.A.
M. Oswald Fogle (61) 2001 President of Decolam, Inc., a company engaged in the
lamination of boards and general warehousing.
Dwight W. Frierson (49) 1996 Vice Chairman of the Board, SCBT Financial Corporation
and South Carolina Bank and Trust, N.A. He is also Vice
President and General Manager of Coca-Cola Bottling
Company of Orangeburg, S.C.
R. Caine Halter (44) President of Coldwell Banker Commercial Caine Real Estate,
Greenville, SC, since 1983, a corporate real estate and real
estate investment firm.
Thomas E. Suggs (56) 2001 President and Chief Executive Officer of Keenan and
Suggs, Inc., an insurance brokerage and consulting firm.
Current Director Whose Terms Will Expire in 2008
Luther J. Battiste, III (56) 2001 Partner in the firm Johnson, Toal and Battiste, P.A.,
Attorneys at Law, Columbia, S.C. and Orangeburg, S.C.
Robert R. Hill, Jr. (39) 1996 President and Chief Executive Officer of SCBT Financial
Corporation and South Carolina Bank and Trust, N.A. since
November 6, 2004. Prior to that time, Mr. Hill served as
President and Chief Operating Officer of South Carolina Bank
and Trust, N.A. from 1999 to November 6, 2004.
Ralph W. Norman (52) 1996 President of Warren Norman Co., Inc., a real estate
brokerage firm.
4
Susie H. VanHuss (66) 2004 Executive Director of the University of South Carolina
Foundations and Professor Emeritus of Management
in the Moore School of Business, University of South
Carolina, Columbia, SC. As Executive Director, she is the
Chief Executive Officer of the USC Educational Foundation and
the USC Development Foundation, both 501(C) (3) non-profit
South Carolina corporations.
A. Dewall Waters (62) 1987 Partner in A.D. Waters Enterprises, LLC, a partnership
that owns and operates McDonald's restaurants.
Current Directors Whose Terms Will Expire in 2007
Robert R. Horger (55) 1991 Chairman of SCBT Financial Corporation and
South Carolina Bank and Trust, N.A. since 1998. He also
has served as Vice Chairman of SCBT Financial
Corporation and South Carolina Bank and Trust, N.A.
from 1994 to 1998. Mr. Horger is an attorney with Horger,
Barnwell and Reid in Orangeburg, S.C.
Harry M. Mims, Jr. (64) 1988 President of J.F. Cleckley & Company, a company
engaged in site development.
James W. Roquemore (51) 1994 Chief Executive Officer of Patten Seed Company, Inc. of
Lakeland, GA and General Manager of Super-Sod/Carolina, a
company that produces and markets turf, grass, sod and seed.
John W. Williamson, III (57) 2001 President of J.W. Williamson Ginnery, Inc., which is a
partner in Carolina Eastern-Williamson Lynchburg Grain
Company and Carolina Soy. Also serves as Chairman of
the Jackson Companies, which operate a camping resort,
golf community, and commercial development group in
Myrtle Beach, S.C.
Cathy Cox Yeadon (56) 1997 Retired; formerly Vice President, Human Resources at Cox
Industries, Inc., a wood products manufacturing and treating
company.
FAMILY RELATIONSHIPS
There are no family relationships among any of the directors and executive
officers of the Company.
COMPENSATION OF DIRECTORS
Directors who are also officers employed by the Company or its subsidiaries
do not receive fees or any other separate cash compensation for serving as a
director. Non-employee directors of the Company are paid a cash retainer of $500
per calendar quarter and $500 per meeting attended of the bank subsidiary board
of which they are a member. Members of the executive committee, audit committee,
compensation committee, governance committee, and trust asset management
committee are paid additional payments of $400, $400, $300, $300, and $300
respectively, for each meeting attended. The chairmen of the audit,
compensation, and governance committees currently receive $800, $800 and $500,
respectively, per committee meeting attended in lieu of the corresponding
amounts above. Under the Company's deferred compensation plan, directors may
elect to defer all or a portion of their directors' fees and to treat such
deferred amounts as though they were invested in one or more investment options
designated by the plan. Amounts deferred under the plan remain general
obligations of the Company and become payable at the times (or during the
periods) designated by participating directors.
In May 2005, the Company awarded to each non-employee director serving at
that time options to acquire 500 shares of the Company's common stock at the
fair market value at the time of award, and 200 shares of restricted stock.
These awards were granted following the Company's annual shareholders' meeting
and vested over a period of one year from the date of grant. The Company intends
to grant annually to its non-employee directors stock options and restricted
stock awards in similar amounts and terms following the shareholders' meeting.
5
Robert R. Horger, who serves as Chairman of the Board of the Company,
currently receives $77,315 annually for serving in that capacity. In addition,
in January 2005, the Company granted to Mr. Horger 584 shares of restricted
stock valued at $33.57 per share at that time, and options to purchase 1,750
shares of the Company's common stock at $33.57 per share. These restricted stock
shares vest and the options become exercisable in four equal annual installments
over the four-year period following the date of grant.
The following table sets forth the fees and other forms of compensation
paid to Mr. Horger and the Company's non-fulltime employee directors in 2005,
along with a listing of the committees on which each board member serves.
Securities
Restricted Underlying Member of Following Committees
Name Directors Fees Stock Awards ($) (1) Options (#) E A C G P T
---- -------------- -------------------- ----------- - - - - - -
Robert R. Horger (2) $77,315 $19,605 1,750 * *
--------------------------------------------------------------------------------------------------------------------------------
Colden R. Battey, Jr. 18,800 5,786 500 * * * *
--------------------------------------------------------------------------------------------------------------------------------
Luther J. Battiste, III 12,600 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
Dalton B. Floyd, Jr. (3) 800 - - * *
--------------------------------------------------------------------------------------------------------------------------------
M. Oswald Fogle 17,500 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
Dwight W. Frierson 18,100 5,786 500 * * *
--------------------------------------------------------------------------------------------------------------------------------
R. Caine Halter (4) 8,100 12,660 - * *
--------------------------------------------------------------------------------------------------------------------------------
Harry M. Mims, Jr. 20,000 5,786 500 * * * *
--------------------------------------------------------------------------------------------------------------------------------
Ralph W. Norman 17,700 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
James W. Roquemore 17,600 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
Thomas E. Suggs 16,320 5,786 500 * * *
--------------------------------------------------------------------------------------------------------------------------------
Susie H. VanHuss 11,000 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
A. Dewall Waters 12,000 5,786 500 *
--------------------------------------------------------------------------------------------------------------------------------
John W. Williamson, III 11,600 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
Cathy Cox Yeadon 12,900 5,786 500 * *
--------------------------------------------------------------------------------------------------------------------------------
|X| E- Executive Committee
|X| A- Audit Committee
|X| C- Compensation Committee
|X| G-Governance Committee
|X| P- Policy Committee
|X| T- Trust Asset Management Committee
(1) Except as noted for Mr. Horger, Mr. Floyd and Mr. Halter, the directors
were granted 200 shares of restricted stock valued at $28.93 in 2005.
(2) Robert R. Horger serves as Chairman of the Board of the Company and
currently receives a salary of $77,315 annually for serving in that
capacity. He was granted 584 shares of restricted stock valued at $33.57
per share in 2005.
(3) Dalton B. Floyd, Jr. joined the board in December 2005 and was compensated
for attendance at one meeting and for his membership on the SunBank board.
(4) R. Caine Halter joined the board in May 2005. He was granted 400 shares of
restricted stock valued at $31.65 per share for his appointment to the
board of directors.
THE BOARD OF DIRECTORS AND COMMITTEES
During 2005, the board of directors of the Company held ten meetings. Each
director attended at least 75% of the aggregate of (a) the total number of
meetings of the board of directors held during the period for which he or she
served as a director, and (b) the total number of meetings held by all
committees of the board of directors of the Company on which he or she served.
There is no formal policy regarding attendance at annual shareholder
meetings; however, such attendance has always been strongly encouraged. Last
year, 14 of the Company's 15 directors active at that time attended the 2005
Annual Shareholders' Meeting.
6
The board of directors has determined that Colden R. Battey, Jr., Luther J.
Battiste, III, Dalton B. Floyd, Jr., M. Oswald Fogle, Dwight W. Frierson, R.
Caine Halter, Harry M. Mims, Jr., Ralph W. Norman, James W. Roquemore, Thomas E.
Suggs, Susie H. VanHuss, A. Dewall Waters, John W. Williamson, III, and Cathy
Cox Yeadon are independent directors under the independence requirements of The
NASDAQ Stock Market applicable to directors who do not serve on the audit
committee. Therefore, under these requirements, a majority of the members of the
Company's board of directors is independent.
The board of directors has adopted a Code of Ethics for Financial
Professionals that is applicable to the Company's chief executive officer, chief
financial officer, controller, financial controls and disclosures manager and
all managers reporting to these individuals who are responsible for accounting
and financial reporting. The Code of Ethics for Financial Professionals was
filed as Exhibit 14 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.
The board of directors of the Company maintains executive, audit,
compensation, governance, policy and trust asset management committees. The
functions, composition and frequency of meetings for these committees during
2005 were as follows:
Executive Committee - The executive committee is composed of Robert R.
Horger, Chairman, Colden R. Battey, Jr., Dwight W. Frierson, R. Caine Halter,
Robert R. Hill, Jr., Harry M. Mims, Jr., James W. Roquemore, and Thomas E.
Suggs. The board of directors of the Company may, by resolution adopted by a
majority of its members, delegate to the executive committee the power, with
certain exceptions, to exercise the authority of the board of directors in the
management of the affairs of the Company. The executive committee met
twenty-three times in 2005.
Audit Committee - The audit committee is composed of M. Oswald Fogle,
Chairman, Luther J. Battiste, III, Ralph W. Norman, John W. Williamson, III, and
Cathy Cox Yeadon. The board of directors has determined that all members of the
audit committee are independent directors under the independence requirements of
The NASDAQ Stock Market. The board of directors has also determined that M.
Oswald Fogle is an "audit committee financial expert" for purposes of the rules
and regulations of the Securities and Exchange Commission adopted pursuant to
the Sarbanes-Oxley Act of 2002. The audit committee held eleven meetings in
2005. The primary function of the audit committee is to assist the board of
directors of the Company in overseeing (i) the Company's accounting and
financial reporting processes generally, (ii) the audits of the Company's
financial statements and (iii) the Company's systems of internal controls
regarding finance and accounting. In such role, the audit committee reviews the
qualifications, performance and independence of the Company's independent
accountants and has the authority to appoint, evaluate and, where appropriate,
replace the Company's independent auditors. The audit committee also oversees
the Company's internal audit department. The board of directors has adopted a
charter for the audit committee, and a copy of the charter was filed as Appendix
B to the Company's 2004 proxy statement.
Compensation Committee - The compensation committee is composed of A.
Dewall Waters, Chairman, Colden R. Battey, Jr., M. Oswald Fogle, Harry M. Mims,
Jr. and Susie H. VanHuss. The compensation committee met five times in 2005. The
board of directors has determined that all members of the compensation committee
are independent directors under the independence requirements of The NASDAQ
Stock Market applicable to directors who do not serve on the audit committee.
The compensation committee, among other functions, evaluates the performance of
the executive officers of the Company and recommends to the board of directors,
through the executive committee, matters concerning compensation, salaries,
benefits and other forms of executive compensation to officers of the Company.
Governance Committee - The governance committee is composed of Dwight W.
Frierson, Chairman, Colden R. Battey, Jr., Dalton B. Floyd, Jr., Ralph W. Norman
and Thomas E. Suggs. The board of directors has determined that all members of
the governance committee are independent directors under the independence
requirements of The NASDAQ Stock Market applicable to directors who do not serve
on the audit committee. The governance committee met one time in 2005. The
governance committee acts as the nominating committee for the purpose of
recommending to the board of directors nominees for election to the board of
directors. The governance committee also periodically reviews and, where
appropriate, recommends changes to the Company's corporate governance practices.
The governance committee has not established any specific, minimum
qualifications that must be met for a person to be nominated to serve as a
director, and the governance committee has not identified any specific qualities
or skills that it believes are necessary to be nominated as a director. Nominees
for the board are reviewed by the governance committee on a case-by-case basis
based on a number of factors, including a proposed nominee's independence, age,
skills, occupation, diversity and experience and any other factors beneficial to
the Company. The governance committee will consider nominees identified by its
members, other directors, officers and employees of the Company and other
persons, including shareholders of the Company.
The governance committee will consider nominees for director recommended by
a shareholder if the shareholder provides the committee with the information
described in paragraph 6 under the caption "Committee Authority and
Responsibilities" of the governance committee's charter. The governance
committee's charter was included as Appendix A to the Company's 2005 proxy
statement. The required information regarding a director nominee is also
discussed in general terms within the last paragraph of the "Shareholder
Proposals and Communications" section on page 2 of this proxy statement.
7
Policy Committee - The policy committee is composed of Dwight W. Frierson,
Chairman, Colden R. Battey, Jr., R. Caine Halter, Robert R. Hill, Jr., Robert R.
Horger, Harry M. Mims, Jr., James W. Roquemore, and Thomas E. Suggs. The primary
purpose of the policy committee is to recommend and approve new policies and
review and approve present policies or policy updates and changes. The policy
committee met three times in 2005.
Trust Asset Management Committee - The trust asset management committee is
composed of Cathy Cox Yeadon, Chair, Luther J. Battiste, III, Dalton B. Floyd,
Jr., Harry M. Mims, Jr. and Susie H. VanHuss. The trust asset management
committee met three times in 2005. The primary purpose of the trust asset
management committee is to oversee the activities of the trust and asset
management department and the investment services activities of the Company's
subsidiary banks.
EXECUTIVE COMPENSATION
The following table summarizes for the years indicated the current and
long-term compensation for the Chief Executive Officer of the Company, the
former Chief Executive Officer of the Company, and the four most highly
compensated executive officers other than the Chief Executive Officer (the
"named executive officers").
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation (1) Compensation Awards
---------------- -------------------
Name and Restricted Securities Underlying All Other
Principal Position Year Salary Bonus (2) Stock Awards (3) Options (#) (4) Compensation (5)
------------------ ---- ------ --------- ---------------- --------------- ----------------
Robert R. Hill, Jr. 2005 $252,560 $149,130 $72,108 6,443 $7,613
President and Chief 2004 199,754 -- - 6,300 4,012
Executive Officer 2003 184,000 57,600 - 6,300 5,174
John C. Pollok 2005 $190,000 $106,570 $41,963 3,750 $6,928
Senior Executive Vice 2004 169,388 -- - 5,250 6,052
President and Chief 2003 156,154 63,600 - 4,200 4,406
Operating Officer
Thomas S. Camp 2005 $178,376 $91,393 $22,391 2,000 $6,732
President and CEO 2004 170,560 -- - 4,200 6,055
South Carolina Bank 2003 164,000 61,635 - 4,200 4,712
and Trust of the
Piedmont, N.A.
Richard C. Mathis 2005 $174,700 $90,170 $30,784 2,750 $6,635
Executive Vice 2004 165,900 -- - 4,410 5,923
President and 2003 158,000 40,900 - 4,410 4,443
Chief Financial Officer
Joe E. Burns 2005 $157,777 $85,230 $27,964 2,500 $5,967
Executive Vice 2004 152,000 -- - 4,200 5,443
President and Chief 2003 146,000 36,500 $54,920 4,200 4,105
Credit Officer
(1) Perquisites and personal benefits did not exceed $10,000 for any of the
named executives.
(2) These bonus amounts earned for performance in 2005 consist of cash
incentive payments and the award of immediately vested shares of the
Company's common stock, valued at its $33.42 per share fair market value at
year end 2005, to each named executive as follows: Mr. Hill, $99,000 cash
incentive and $50,130 stock; Mr. Pollok, $73,150 cash incentive and $33,420
stock; Mr. Camp, $57,973 cash incentive and $33,420 stock; Mr. Mathis,
$56,750 cash incentive and $33,420 stock; and Mr. Burns, $51,810 cash
incentive and $33,420 stock. For additional information about bonuses and
incentives, see discussion in the "Executive Officer Cash Incentives"
section on pages 12 and 13.
8
(3) From time to time, the Company has awarded shares of restricted stock to
its executive officers. Shares of restricted stock that were issued during
2005 will vest at 25% per year for a period of four years subject to the
continued employment of the officer. The Company did not grant any shares
of restricted stock to the executive officers named above during 2004.
Shares of restricted stock that were issued to Mr. Burns in 2003 generally
vest subject to the continued employment of the officer as follows: (a) 25%
of the shares vest free of restrictions on the third anniversary of the
date of grant; (b) 25% of the shares vest free of restrictions on the fifth
anniversary of the date of grant; and (c) 50% of the shares vest free of
restrictions on the seventh anniversary of the date of grant. An officer's
interest in any non-vested shares would terminate upon the termination of
the officer's employment with the Company, except that all restricted
shares will fully vest if there is a change in control of the Company or
the officer dies while employed by the Company. Each officer generally has
the right to vote restricted shares and to receive dividends paid on the
shares prior to vesting. The number and market value of unvested shares of
restricted stock held by the officers named above at December 31, 2005,
were as follows: Mr. Hill - 5,613 shares ($187,586); Mr. Pollok - 4,281
shares ($143,071); Mr. Camp - 4,132 shares ($138,091); Mr. Mathis - 3,948
shares ($131,942); and Mr. Burns - 3,799 shares ($126,962).
(4) Options granted in 2004 and 2003 reflect the effect of a 5% stock dividend
distributed on January 1, 2005.
(5) Includes contributions by the Company's subsidiaries through matching or
discretionary contributions to their employee savings plans allocated to
the named executive officers' accounts, and term life insurance premiums
paid by the Company's subsidiaries for the benefit of the named executive
officers as follows:
Employee Savings Plan (1) Life Insurance Premiums
------------------------- -----------------------
Robert R. Hill, Jr. 2005 $5,650 $1,963
2004 2,443 1,569
2003 3,680 1,494
John C. Pollok 2005 $5,480 $1,448
2004 4,697 1,355
2003 3,123 1,283
Thomas S. Camp 2005 $5,351 $1,381
2004 4,723 1,332
2003 3,280 1,332
Richard C. Mathis 2005 $5,241 $1,394
2004 4,575 1,348
2003 3,160 1,283
Joe E. Burns 2005 $4,733 $1,234
2004 4,209 1,234
2003 2,920 1,185
(1) The employee savings plan is a "tax qualified" plan under Section 401(a) of
the Internal Revenue Code and covers all employees.
EMPLOYMENT AGREEMENTS
Robert R. Hill, Jr.
In September 1999, the Company entered into an employment and
noncompetition agreement with Mr. Hill that extends for a rolling three-year
period. Under the agreement, Mr. Hill is entitled to receive base salary
(currently $300,000 per year during 2006), certain fringe benefits such as
country club dues and an automobile, and reimbursement of his business-related
expenses, and to participate in other compensatory and employee benefit plans
maintained by the Company from time to time, including the Company's cash
incentive and stock compensation plans. If Mr. Hill's employment is terminated
by reason of death, disability or without cause, or if he terminates his
employment because he is relocated or his responsibilities are reduced without
his consent, the Company generally is required to pay him (or his estate) his
base salary in effect at the time of termination for 12 months following
termination and to continue his health, medical and dental insurance and other
benefits during such period. In addition, if Mr. Hill's employment is terminated
by either Mr. Hill or the Company following a change in control (other than by
reason of death, disability or cause), Mr. Hill will be entitled to continued
compensation of an amount equal to the product of 2.99 multiplied by his "base
amount" as defined in Section 280G(b)(3) of the Internal Revenue Code (generally
the average of the previous five tax years' annual compensation), such amount to
be paid over 36 months or in lump sum at Mr. Hill's discretion. The Company must
also pay Mr. Hill's medical and life insurance during such 36-month period.
During his employment and for 12 months following any termination of his
employment, Mr. Hill has agreed not to compete with the Company through
accepting traditional banking services employment in any county where the
Company is conducting business, solicit customers of the Company, or induce any
Company employee to leave the Company for the purpose of competing with the
Company.
9
Other Named Executive Officers
The Company has entered into employment agreements with the other named
executive officers. Under these agreements, these executive officers are
entitled to receive annual base salary (currently during 2006, for Mr. Pollok,
$205,000; for Mr. Camp, $185,250; for Mr. Mathis, $178,300; and for Mr. Burns,
$162,750), certain fringe benefits which may vary among officers such as country
club dues and an automobile, reimbursement of their business-related expenses,
and participation in other compensatory and employee benefit plans maintained by
the Company from time to time, including the Company's cash incentive and stock
compensation plans. If their employment is terminated by the Company without
cause, the Company generally will be required to pay them their base salary in
effect at the time of termination for six months following termination. In
addition, if their employment is terminated by the Company following a change in
control for any reason other than as a result of death, disability or for cause,
the Company is required to pay them their base salary then in effect for 24
months following termination. During their employment and for a period of
between 6-18 months following their employment (depending on the circumstances
resulting in the termination of employment), each executive officer has agreed
not to compete with the Company through accepting traditional banking services
employment in the counties in South Carolina where his primary office is (or
formerly was) located or to solicit customers of the Company, or induce any
Company employee to leave the Company for the purpose of competing with the
Company in any county where the Company is conducting business.
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENTS
The Company has entered into supplemental executive retirement agreements
with its chief executive officer and the other named executive officers. The
Company had anticipated that it would amend these agreements (as expressed in
the 2005 proxy statement), but it has not yet done so. The Company is currently
considering amendments to the existing agreements, and appropriate filings will
be made with the Securities and Exchange Commission if such changes are adopted.
Under the agreements currently in place, the named executive officers
generally will be entitled to receive retirement benefits over the 20-year
period following retirement after age 65, or benefits at a reduced amount if
retirement occurs between ages 62 and 65 for Mr. Camp and Mr. Mathis. The annual
amount of such benefits may not exceed $75,000 for Mr. Hill and $50,000 for the
other executives. The exact amount of benefits would be generally determined by
reference to the number of calendar years after 2002 in which the Company
satisfied a specified performance measure, namely that the Company's diluted
earnings per share for the year equaled or exceeded 110% of the Company's
diluted earnings per share for the previous year. If the named executive
officers were to have retired at normal retirement age as of December 31, 2005,
they would have been entitled to approximately 33.3% of their maximum annual
retirement benefit based on this performance measure subsequent to December 31,
2002. A smaller annual benefit, payable over the 20-year period after the
executive attains his normal retirement age, will become payable if the
employment of any of these officers is terminated prior to attaining retirement
age for any reason other than death or for cause. If an executive dies, the
Company will be required to pay his estate a lump sum amount (which is $375,000
for Mr. Hill and $250,000 for the other executives) plus an annual amount (which
is $75,000 for Mr. Hill and $50,000 for the other executives) in monthly
installments over the 10-year period following death. These executives will
forfeit their retirement benefits if they compete with the Company. The
Company's obligations under the agreements are general unsecured obligations of
the Company, although the agreements require the Company to establish a grantor
("rabbi") trust for such benefits following a change in control.
DEFERRED COMPENSATION PLAN
The Company has adopted a deferred compensation plan in which directors,
executive officers and certain other officers are entitled to participate. Under
the plan, directors and executive officers may defer all or a portion of their
compensation from the Company and treat these amounts as though they were
invested in one or more deemed investment options designated by the plan.
Amounts payable under the plan remain general obligations of the Company and are
payable by the Company at the future times (or over the periods) designated by
plan participants upon their enrollment in the plan and their annual renewal of
enrollment.
10
STOCK OPTIONS
The following table provides information concerning stock options
exercised by the named executives in 2005 and the value of options held by each
executive at December 31, 2005.
AGGREGATED OPTION EXERCISES DURING 2005 AND YEAR END 2005 OPTION VALUES
Number of Secuities
Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options (3)
Acquired on Value At Fiscal Year-End (2) At Fiscal Year-End
Executive Officer Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
----------------- ------------ ------------ ----------- ------------- ----------- -------------
Robert R. Hill, Jr. - $ - 6,385 16,050 $84,852 $82,913
John C. Pollok - - 11,641 11,809 172,822 73,658
Thomas S. Camp - - 11,582 8,405 175,549 55,625
Richard C. Mathis 1,443 22,208 7,927 9,418 110,472 57,346
Joe E. Burns 1,155 19,592 6,181 8,762 77,111 53,152
(1) Based on the difference between the closing price on the date of exercise
and the option exercise price.
(2) Figures shown represent the total number of shares subject to unexercised
options held by the indicated executive officers at year-end 2005. The
number of shares subject to options that were exercisable and unexercisable
at year-end 2005 is displayed. The number of options granted has been
adjusted to reflect all stock dividends.
(3) Dollar amounts shown represent the value of "in-the-money" stock options
held by the indicated officers at year-end 2005. Shares subject to an
option are considered to be "in-the-money" if the fair market value at
December 31, 2005 of shares of stock exceeds the exercise or base price of
such shares. The value of the "in-the-money" options is computed based on
the difference between the $33.42 per share market value of the stock at
December 31, 2005 and the exercise or base price of the shares subject to
underlying options. The value of shares subject to options that are
exercisable and unexercisable at December 31, 2005 is displayed.
The following table provides information concerning the grant of stock options
during 2005 to the named executives.
OPTION GRANTS IN 2005
Potential Realizable Value
Percent of Total At Assumed
Number of Securities Options Granted to Exercise or Annual Rates of Stock Price
Underlying Options Employees in Base Price Appreciation for Option Term (3)
Executive Officer Granted (#) (1) Fiscal Year ($/Share) (2) Expiration Date 5% 10%
----------------- --------------- ----------- ------------- --------------- -- ---
Robert R. Hill, Jr. 6,443 14.14% $33.57 1/3/2015 $ 136,025 $ 344,713
John C. Pollok 3,750 8.23% $33.57 1/3/2015 79,170 200,632
Thomas S. Camp 2,000 4.39% $33.57 1/3/2015 42,224 107,004
Richard C. Mathis 2,750 6.03% $33.57 1/3/2015 58,058 147,130
Joe E. Burns 2,500 5.49% $33.57 1/3/2015 52,780 133,755
(1) All stock options become exercisable over a four-year period in 25%
increments.
(2) The exercise price equals the closing market price of the Company's common
stock for the business day preceding the date of the grant.
(3) The potential gains are based on the assumed annual rates of stock price
appreciation of 5% and 10% over the term of each option. Any actual gains
are dependent on the future performance of the Company's common stock and
general market conditions. There is no assurance that the assumed rates of
stock price appreciation will be achieved. Increases in the stock price
will benefit all shareholders commensurately.
11
REPORT ON EXECUTIVE OFFICER COMPENSATION
The Company's compensation committee is required to provide the Company's
shareholders with a report discussing the compensation committee's policies in
establishing compensation for the Company's executive officers. The report is
also required to discuss the relationship, if any, between the Company's
performance and executive officer compensation. Finally, the report must
specifically discuss the factors and criteria upon which the compensation paid
to the Company's Chief Executive Officer was based.
This report is provided as a summary of current practice with regard to the
annual compensation review and authorization of executive officer compensation,
and with respect to specific action taken for the chief executive officer. The
$1,000,000 tax deduction limitation for executive compensation which is not
performance based, added by the Omnibus Budget Reconciliation Act of 1993, is
not relevant to this year's report and does not affect either the Company's or
it subsidiaries' compensation policy. Should such limitations become relevant,
steps will be taken to amend the Company's and its subsidiaries' compensation
policy to assure compliance.
The fundamental philosophy of the Company's compensation program is to
offer competitive compensation opportunities for executive officers that are
based both on the individual's contribution and on the Company's performance.
The compensation paid is designed to retain and reward executive officers who
are capable of leading the Company in achieving its business objectives in an
industry characterized by complexity, competitiveness and change. The
compensation of the Company's executive officers is reviewed and approved
annually by the Compensation Committee. Annual compensation for the chief
executive officer (and other executive officers) consists primarily of three
elements.
|X| A base salary that is determined by individual contribution and
performance, and which is designed to provide a base level of
compensation that is at a median level to that provided to key
executives of a selected group of southeastern peer banking companies
of similar size and performance.
|X| A short-term cash incentive program that is directly linked to
individual performance and the Company's soundness, financial
performance, and growth and which may be supplemented by stock-based
bonuses based on similar criteria.
|X| A long-term incentive program that provides stock options and shares of
restricted stock to executive officers. Such awards provide an
incentive that focuses the executive's attention on managing the
Company from the perspective of a shareholder with an equity stake in
the business. The economic value of any such award is directly tied to
the future performance of the Company's stock and will provide value to
the recipient when the price of the Company's stock increases over
time.
Chief Executive Officer's Salary
Robert R. Hill, Jr. earned a salary of $252,560 in 2005. The compensation
committee established this amount in November 2004 when Mr. Hill was elected
chief executive officer upon the departure of the prior chief executive officer.
The committee considered Mr. Hill's 10-year tenure with the Company and his
experience as president and chief operating officer of the Company's lead bank
subsidiary for approximately 6 years. The committee, in consultation with a
compensation and benefits consultant, also reviewed average salary surveys for
persons in similar positions with banking organizations of similar size and
performance in the southeastern United States and nationally. The committee
determined that, in combination with the incentive and stock-based compensation
opportunities (described below), the $252,560 annual salary was appropriate for
2005.
Executive Officer Cash Incentives
In 2005, the chief executive officer, the other named executive officers,
and other senior executives participated in a performance-based executive
incentive arrangement that was filed on March 15, 2005 as Exhibit 10.28 to the
Company's Form 10-K for the year ended December 31, 2004. The chief executive
officer and other executives will likewise participate in this same arrangement
for 2006. Essentially, the executive bonus arrangement indicates that, first,
the Company's subsidiaries must attain a prescribed level for their composite
ratings from their principal banking regulator. Next, the net income for the
year must at least equal the net income from the prior year. Then, as the
Company and its subsidiaries' net incomes exceed the prior year's levels up to
and beyond a planned dollar amount of increase, incentives accrue on a pro-rata
basis up to a maximum of 110% of an aggregate cash incentive target level. This
incentive target level is determined as the aggregate dollar amount of the
executive officers' planned bonuses expressed as a percent of annual salary.
This bonus percentage was 36% for the chief executive officer and ranged from
30% to 35% for the other named executive officers. Attaining planned increases
in the earnings performance component can contribute up to 40% of each
executive's annual cash incentive. Attaining planned increases in balances of
total loans can contribute up to 20% of an executive's annual cash incentive.
Attaining planned increases in balances of deposits can also contribute up to
20% of an executive's annual cash incentive. Finally, each executive has
individual and/or divisional goals, the attainment of which can contribute up to
20% of an executive's annual cash incentive.
12
The Company and its subsidiaries attained and exceeded all these performance
targets in 2005, enabling cash incentive payments at the maximum 110% of
targeted amounts.
Additionally, because of the executives' performance in guiding the Company
to attain a high level of financial performance in 2005 (as evidenced in part by
the approximately 18% increase in diluted earnings per share from 2004, the
approximately 13.2% return on average equity in 2005, and the successful
completions of two bank acquisitions and one mortgage company acquisition in
2005), the compensation committee awarded the chief executive officer 1,500
shares of Company stock, the other named executives 1,000 shares each, and all
executives as a group 7,500 shares cumulatively (including those shares
specified for the named executives).
Cash Incentives for Executives in 2006
The chief executive officer and the other named executives will participate
in the same incentive plan during 2006 as that described in the immediately
preceding section.
Stock-Based Compensation
The Company, from time to time, also grants stock options and shares of
restricted stock to its executive officers. These stock-based incentive awards
help align the interests of the Company's executive officers with the interests
of the shareholders of the Company by providing economic value directly related
to increases in the value of the Company's stock. The number of options and
restricted shares granted to executive officers during any given year is based
on a number of factors, including job performance, seniority and job
responsibilities, company performance as to earnings and growth, the amount of
awards made in prior years, and industry information from compensation
consultants and published surveys regarding stock-based awards granted to
officers employed by comparable companies. Please refer to the Summary
Compensation Table on page 8 of this proxy statement for a listing of stock
options and restricted shares granted to the listed executives in 2005, 2004,
and 2003.
o Compensation Committee o
A. Dewall Waters, Chairman Colden R. Battey, Jr. M. Oswald Fogle
Harry M. Mims, Jr. Susie H. VanHuss
13
DEFINED BENEFIT PENSION PLAN AND OTHER RETIREMENT BENEFITS
South Carolina Bank and Trust, N.A. maintains for the Company a
noncontributory, defined benefit pension plan covering its employees, including
the Company's executive officers. The pension plan is a "tax qualified" plan
under Section 401(a) of the Internal Revenue Code and must also comply with
provisions of the Employee Retirement Income Security Act of 1974.
The pension table below shows estimated annual benefits payable upon
retirement to persons in the specified remuneration and years of service
categories as if retirement had occurred on December 31, 2005. The benefits
shown are computed on a single life only annuity basis.
----------------------------------------------------------------------------------------------------------
Employees' Pension Plan of south Carolina Bank and Trust
Estimated Annual Retirement Benefits
(For an Employee Whose Normal Retirement Date is 1/1/2006)
Years of Service
----------------------------------------------------------------------------------------------------------
FAC* 10 Years 20 Years 30 Years 40 Years
----------------------------------------------------------------------------------------------------------
$ 30,000 $ 2,700 $ 5,400 $ 8,100 $ 9,450
50,000 4,591 9,182 13,773 16,069
70,000 7,691 15,382 23,073 26,919
100,000 12,341 24,682 37,023 43,194
150,000 20,091 40,182 60,273 70,319
200,000 27,841 55,682 83,523 97,444
250,000 28,306 56,612 84,918 99,071
300,000 28,306 56,612 84,918 99,071
350,000 28,306 56,612 84,918 99,071
400,000 28,306 56,612 84,918 99,071
----------------------------------------------------------------------------------------------------------
* FAC: Final Average Compensation is computed as the average
amount of a participant's compensation earned over the last
60 months prior to his or her retirement date or early
termination of employment.
----------------------------------------------------------------------------------------------------------
Upon a participant's retirement at normal retirement date (age 65), a
monthly retirement benefit will be paid in accordance with pension plan
provisions. For an employee covered under the form of the pension plan in place
at the end of 2005, the amount of such monthly retirement benefit will equal
1/12 of the sum of (i) and (ii) as follows: (i) .90% of the pension plan
participant's final average compensation multiplied by his years of credited
service up to a maximum of 35 years; and (ii) .65% of the pension plan
participant's final average compensation in excess of his covered compensation
multiplied by his years of credited service up to a maximum of 35 years. For
purposes of the above formula, social security covered compensation is currently
set at $48,600 for an employee whose normal retirement date is January 1, 2006.
A participant's final average compensation consists of the average amount of a
participant's compensation earned over the last 60 months prior to early or
normal retirement. A participant is credited with one year of credited service
under the pension plan for each year in which 1,000 or more hours are worked.
Benefits under the pension plan are not subject to deduction for social security
or other offset amounts. For purposes of computing a participant's final average
compensation, the pension plan in 2005 used the following definition of
participant compensation during the first calendar quarter of 2005: W-2
earnings, overtime pay, 75% of cash bonuses, and 50% of commissions, but
excluding employer contributions to employee benefit plans, as limited by
Section 401 (a)(17) of the Internal Revenue Code.
Beginning January 1, 2006 and going forward, the Company has implemented
some noticeable changes to its defined benefits pension plan in order to
estimate and control more effectively its annual costs in regard to providing
retirement benefits and to direct more of its current and future employees
toward defined contribution retirement benefits. First, the definition of
includable pay for the pension plan has been adjusted to include no (0%)
incentive and bonus income for all employees. Next, the Company has implemented
a three-tiered program to provide benefits to its current and future employees.
(i) Current employees over age 45 as of December 31, 2005 and who have 5 or more
years of service will continue in the pension plan as described in the paragraph
above. These employees also have the opportunity to participate in a defined
contribution (401(k)) plan that features a Company match of 50% of the
employees' contributions up to 6% of salary. (Note that this is the form of the
Company's existing 401(k) plan.) Consequently, this first group of employees has
no changes, other than the definition of includable income, to its retirement
plans. (ii) Current employees under age 45 as of December 31, 2005 or who have
less than 5 years of service will receive a monthly pension plan benefit based
on .30% (reduced from .90%) of final average monthly, plus .20% (reduced from
..65%) of pay in excess of covered compensation. These employees, however, will
have the opportunity to participate in a 401(k) plan that features a Company
match of 100% of the employees' contributions up to 6% of salary. (iii) Any
employees hired on or after January 1, 2006 will not participate in a defined
benefit pension plan. Rather, this group of employees will have the opportunity
to participate in a 401(k) plan that features a Company match of 100% of
employees' contributions up to 6% of salary. Vesting in the Company's portion of
contributions for this group of employees will occur ratably from year two
through year 5 of enrollment in the plan.
14
The executive officer compensation used in 2005 for purposes of computing
executive officer benefits under the pension plan is approximately the same as
that shown in the Summary Compensation Table under Annual Compensation, adjusted
for the reduced percentage (75%) of cash bonus income that is included. As of
December 31, 2005, the named executive officers had accumulated the following
years of credited service toward retirement: Mr. Hill, 10 years credited
service; Mr. Pollok, 10 years credited service; Mr. Camp, 7 years credited
service; Mr. Mathis, 6 years credited service; and Mr. Burns, 5 years credited
service.
15
SHAREHOLDER PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total
shareholder return with a performance indicator of the overall stock market and
published industry indices. Shareholder return (measured through increases in
stock price and payment of dividends) is often a benchmark used in assessing
corporate performance and the reasonableness of compensation paid to executive
officers.
Shareholders should recognize that corporations often use a number of other
performance benchmarks (in addition to shareholder return) to set various levels
of executive officer compensation. The Company's 2005 Annual Report to
Shareholders contains a variety of relevant performance indicators concerning
the Company. Thus, shareholders may wish to consider other relevant performance
indicators in assessing shareholder return and the reasonableness of executive
compensation, such as growth in earnings per share, book value per share and
cash dividends per share, along with return on equity and return on assets
percentages. As described in the Report on Executive Officer Compensation, the
Company's compensation committee uses, among other considerations, growth in net
income, loans and deposits, performance of individual and divisional goals, and
qualitative factors in helping to determine incentive program awards.
The performance graph below compares the Company's cumulative total
return over the most recent five year period with the NASDAQ Composite and the
SNL Southeast Bank Index, a banking industry performance index for the
southeastern United States. Returns are shown on a total return basis, assuming
the reinvestment of dividends and a beginning stock index value of 100 per
share. The value of the Company's stock as shown in the graph is based on
published prices for transactions in the Company's stock.
[SEE SUPPLEMENTAL PDF FOR STOCK PERFORMANCE CHART GRAPH]
Period Ending
---------------------------------------------------------------------
Index 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
------------------------------------------------------------------------------------------------------------------
SCBT Financial Corporation 100.00 151.99 213.08 273.11 327.91 333.56
NASDAQ Composite 100.00 79.18 54.44 82.09 89.59 91.54
SNL Southeast Bank Index 100.00 124.58 137.62 172.81 204.94 209.78
Source : SNL Financial LC, Charlottesville, VA
(C) 2006
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's banking subsidiaries have loan and deposit relationships with
some of the directors of the Company and its subsidiaries and loan, deposit, and
fee-for-service relationships with some of the companies with which the
directors are associated, as well as with some members of the immediate families
of the directors. (The term "members of the immediate families" for purposes of
this paragraph includes each person's spouse, parents, children, siblings,
mother and father-in-law, sons and daughters-in-law, and brothers and
sisters-in-law.) Such loan, deposit, or fee relationships were made in the
ordinary course of business, were made on substantially the same terms,
including interest rates, collateral and fee pricing as those prevailing at the
time for comparable transactions with other persons, and did not, at the time
they were made, involve more than the normal risk of collectibility or present
other unfavorable features.
Robert R. Horger, Chairman of the Board of the Company, is a partner in the
law firm of Horger, Barnwell & Reid, which South Carolina Bank and Trust, N.A.
engaged as counsel during 2005 and may engage during the current fiscal year. In
2005, the Company made payments totaling $70,993 to Horger, Barnwell & Reid.
Colden R. Battey, Jr., a director, is a partner in the law firm of Harvey
and Battey, PA, which South Carolina Bank and Trust, N.A. engaged as counsel in
2005 and may engage during the current fiscal year. In 2005, the Company made
payments totaling $2,119 to Harvey and Battey, PA. Mr. Battey also has a 20%
interest in a partnership that leases an office building to South Carolina Bank
and Trust, N.A., in Beaufort, South Carolina. Annual lease payments to the
partnership under this lease are approximately $138,951.
Dalton B. Floyd, Jr., a director, is President of The Floyd Law Firm, PC,
which SunBank, N.A. and Sun Bancshares, Inc. engaged as counsel during 2005.
SCBT Financial Corporation is likely to engage in services with the firm during
the current fiscal year. In 2005, SunBank, NA, made payments totaling $9,502 to
The Floyd Law Firm, PC. Director Floyd also has a 50% interest in a corporation
that leases to SunBank a lot upon which a branch of SunBank resides at the
intersection of Riverwood Drive and Highway 17 Bypass in Murrells Inlet, SC. The
rent payments paid by SunBank under this lease during 2005 were approximately
$101,642.
R. Caine Halter, a director, is managing partner with a 6.25% personal
interest and an additional 1.7% interest through a family limited partnership in
a single asset company that owns an office building in Greenville, SC which
serves as the Upstate headquarters for South Carolina Bank and Trust, N.A.
During 2005, the Company's lease payments to the partnership under this lease
were $90,705.
Thomas E. Suggs, a director, is President and Chief Executive Officer of
Keenan and Suggs, Inc., an insurance brokerage and consulting firm that the
Company used during 2005 and will use during the current fiscal year as an
insurance broker for certain policies. In 2005, the Company made payments to
Keenan and Suggs, Inc., as the Company's insurance placement agent, totaling
$544,124. Keenan and Suggs, Inc. pays most of these funds, net of its agency
commissions which the firm recognizes as revenue, to the various insurance
companies providing insurance coverages to SCBT Financial Corporation or its
subsidiaries. Keenan and Suggs, Inc. specifies that it recognized $48,905 in
revenue in 2005 based on this activity.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by Section 16(a) of the Securities Exchange Act of 1934, SCBT
Financial Corporation's directors and executive officers are required to report
periodically their ownership of SCBT Financial Corporation stock and any changes
in ownership to the Securities and Exchange Commission. Based on a review of
forms 3, 4 and 5 and written representations made by these affiliates to the
Company, it appears that all such reports for these persons were filed in a
timely fashion in 2005.
INDEPENDENT ACCOUNTANTS
The audit committee has appointed J. W. Hunt and Company, LLP, independent
certified public accountants, as independent auditors for the Company and its
subsidiaries for the current fiscal year ending December 31, 2006, subject to
ratification by the Company's shareholders. J. W. Hunt and Company, LLP has
advised the Company that neither the firm nor any of its partners has any direct
or material interest in the Company and its subsidiaries except as auditors and
independent certified public accountants of the Company. Representatives of J.W.
Hunt and Company, LLP are expected to be at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
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AUDIT COMMITTEE REPORT
The audit committee oversees the Company's financial reporting process,
including internal controls, on behalf of the board of directors. The committee
is composed of five directors of the Company, each of whom is independent as
defined by the rules of The NASDAQ Stock Market applicable to directors who
serve on the audit committee. The audit committee operates under an audit
committee charter that complies with the requirements regarding audit committees
established by the Sarbanes-Oxley Act of 2002 and the rules and regulations of
the Securities and Exchange Commission and The NASDAQ Stock Market.
Management has the primary responsibility for the Company's financial
statements, internal controls, and financial reporting. The Company's
independent auditors are responsible for expressing an opinion on the conformity
of the Company's audited financial statements to generally accepted accounting
principles and the conformity of the Company with maintaining internal controls
over financial reporting as specified by the Sarbanes-Oxley Act of 2002.
In the context of its responsibilities, the audit committee met with
management and the independent auditors to review and discuss the December 31,
2005 audited financial statements. The audit committee discussed with the
independent auditors the matters required by Statement on Auditing Standards No.
61 (Communication with Audit Committees). In addition, the audit committee has
received from the independent auditors the written disclosures and letter
required by Independence Standards Board No. (Independence Discussion with audit
committees) and discussed with them their independence from the Company and its
management. The audit committee also has considered whether the independent
auditor's provision of non-audit services, as set forth in "Audit and Other
Fees" below, is compatible with the auditor's independence.
Based on the reviews and discussions referred to above, the audit committee
has determined to recommend to the board of directors that the audited financial
statements be included in the Company's Annual Report on SEC Form 10-K for the
year ended December 31, 2005 for filing with the Securities and Exchange
Commission.
o Audit Committee o
M. Oswald Fogle, Chairman Luther J. Battiste, III Ralph W. Norman
John W. Williamson, III Cathy Cox Yeadon
AUDIT AND OTHER FEES
The following listing presents the aggregate fees billed by J. W. Hunt and
Company, LLP, the Company's independent auditor, during 2005 and 2004 for (i)
audit fees, (ii) audit-related fees, (iii) tax fees and (iv) all other fees:
--------------------------------------- -------------------------------------------- -----------------------------------
2005 2004
--------------------------------------- -------------------------------------------- -----------------------------------
Audit Fees $221,429 $209,891
--------------------------------------- -------------------------------------------- -----------------------------------
Audit Related Fees (1) 12,000 12,000
--------------------------------------- -------------------------------------------- -----------------------------------
Tax Fees (2) 26,651 33,609
--------------------------------------- -------------------------------------------- -----------------------------------
All Other Fees (3) 30,434 38,851
--------------------------------------- -------------------------------------------- -----------------------------------
(1) Audit-related fees are for services rendered in connection with
attesting to internal controls over financial reporting in accordance
with the Federal Deposit Insurance Corporation Improvement Act of 1991.
(2) Tax fees are for services rendered primarily in connection with the
preparation of federal and state income and bank tax returns,
calculation of quarterly estimated income tax payment amounts and
research associated with various tax-related issues that affect the
Company.
(3) All other fees are for services rendered in connection with accounting
research and assistance related to actual or proposed transactions that
involve unusual or complex elements.
Pre-Approval Policy
The audit committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors. Under the policy, and in
accordance with the Sarbanes-Oxley Act of 2002, the audit committee may delegate
pre-approval authority to one or more of its members. However, any member to
whom such authority is delegated is required to report on any preapproval
decisions to the audit committee at its next scheduled meeting. The audit
committee did not fail to pre-approve any of the services provided by J. W. Hunt
and Company, LLP during 2005.
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AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company is mailing to shareholders contemporaneously with these proxy
materials a copy of its Annual Report on Form 10-K for the year ended December
31, 2005, filed with the Securities and Exchange Commission. Further inquiries
regarding the Form 10-K should be directed to: SCBT Financial Corporation, P.O.
Box 1030, Columbia, South Carolina 29202, attention: Karen L. Dey, Senior Vice
President and Controller.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Colden R. Battey, Jr., a director, is a partner in the law firm of Harvey
and Battey, PA, which South Carolina Bank and Trust, N.A. engaged as counsel for
certain transactions during 2005 and may engage during the current fiscal year.
In 2005, the Company made payments totaling $2,119 to Harvey & Battey, PA. Mr.
Battey also has a 20% interest in a partnership that leases an office building
to South Carolina Bank and Trust, N.A. in Beaufort, South Carolina. Annual lease
payments to the partnership under this lease are approximately $138,951. No
current or former officer, and no other member of the compensation committee,
has directly or indirectly entered into any transactions with the Company of a
nature that would be required to be disclosed in this Proxy Statement.
OTHER BUSINESS
The Company does not know of any other business to be presented at the
Annual Meeting. If any other matters are properly brought before the Annual
Meeting, however, it is the intention of the persons named in the accompanying
proxy to vote such proxy in accordance with their best judgment.
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