<PAGE> 1
Schedule 14 A Information
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14A-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11 (c) or ss.240.14a-12
First National Corporation
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (l) and 0-11.
1) Title of each class of securities to which transaction applies:
Not Applicable.
2) Aggregate number of securities to which transaction applies: Not Applicable.
3) Per unit price of 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): Not Applicable.
4) Proposed maximum aggregate value of transaction: Not Applicable.
5) Total fee paid: Not Applicable
[ ] Fee paid previously with preliminary materials.
[ ] 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date Filed:
<PAGE> 2
FIRST NATIONAL CORPORATION
950 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 25, 2000
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of First National Corporation, a South Carolina corporation
(the "Company"), will be held at the Main Banking Center of First National Bank,
950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina at 2:00 p.m., on
April 25, 2000, 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, as independent
auditors for the Company for the fiscal year ending December 31, 2000;
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 24, 2000, 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 its 1999 Annual Report to Shareholders
(which includes its 1999 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 COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE. IF YOU NEED ASSISTANCE IN COMPLETING
YOUR PROXY, PLEASE CALL THE COMPANY AT TELEPHONE NUMBER (803) 534-2175. IF YOU
ARE A RECORD SHAREHOLDER AND 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
James C. Hunter, Jr.
Secretary
Orangeburg, South Carolina
March 31, 2000
<PAGE> 3
FIRST NATIONAL CORPORATION
950 John C. Calhoun Drive, S.E.
Orangeburg, South Carolina 29115
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held April 25, 2000
This Proxy Statement is furnished to shareholders of First National
Corporation, a South Carolina corporation (herein, unless the context otherwise
requires, together with its subsidiaries, the "Company" or "First National"), 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 Main Banking
Center of First National Bank, 950 John C. Calhoun Drive, S.E., Orangeburg,
South Carolina at 2:00 p.m., on April 25, 2000 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 31, 2000.
The Company has its principal executive offices at 950 John C. Calhoun
Drive, S.E., Orangeburg, South Carolina 29115. The Company's telephone number is
(803) 534-2175.
ANNUAL REPORT
The Annual Report to Shareholders (which includes the Company's Annual
Report on Form 10-K containing the Company's fiscal year ended December 31, 1999
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 First National Corporation,
950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina 29115, 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
24, 2000 (the "Record Date"), the Company had issued and outstanding 7,041,101
shares of Common Stock, which were held of record by approximately 2,900
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.
<PAGE> 4
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 that are the record owners of
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.
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
or shares that are not voted in the election of directors (including brokers
non-votes) will have no effect on the outcome of election of directors.
Cumulative voting will not be permitted.
All other matters which may be considered and acted upon at the Annual
Meeting, including ratification of J. W. Hunt and Company, LLP 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. Votes that are withheld or shares that
are not voted (including brokers non-votes) 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
accountants for the fiscal year ending December 31, 2000. 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
Any shareholder of the Company desiring to present a proposal for action at
the 2001 Annual Meeting of Shareholders must deliver the proposal to the
executive offices of the Company no later than December 1, 2000 if such proposal
is to be considered for inclusion in the 2001 proxy materials. Only proper
proposals that are timely received will be included in the Company's 2001 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 must
set forth the name of the nominee, his or her address, the number of shares of
stock owned by the nominee and the name and address of the shareholder making
the nomination. 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.
2
<PAGE> 5
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 24, 2000, the number and
percentage of outstanding shares beneficially owned by (i) each director of the
Company, (ii) each person named in the Summary Compensation Table, and (iii) all
executive officers and directors of the Company as a group. No person is known
by the Company to own more than 5% of the outstanding Common Stock.
Name Beneficially Owned Ownership
- ---- ------------------ ---------
Colden R. Battey, Jr. 99,392 (1) 1.4%
Charles W. Clark 68,771 *
William W. Coleman, Jr. 16,048 (2) (3) *
Dwight W. Frierson 5,417 (4) *
John L. Gramling, Jr. 6,573 (5) *
Richard L. Gray 81,492 (6) 1.2%
Robert R. Hill, Jr. 20,811 (3) (7) *
C. John Hipp, III 53,642 (3) (8) (9) *
Robert R. Horger 30,586 (10) *
James C. Hunter, Jr. 31,809 (3) (9) (11) *
Harry M. Mims, Jr. 30,312 *
Dane H. Murray 47,943 (3) (9) (12) *
Ralph W. Norman 4,802 (13) *
Anne H. Oswald 745 *
Samuel A. Rodgers 11,036 *
James W. Roquemore 27,843 (14) *
Phil M. Smith 33,307 (3) (9) (15) *
Walter L. Tobin 462 (16) *
Johnny E. Ward 51,951 (17) *
A. Dewall Waters 24,078 (18) *
Cathy Cox Yeadon 14,633 (19) *
All directors and executive
officers as a group (21 Persons) 674,132 (20) 9.6%
- ---------------------------------------------
*Indicates less than one percent of the outstanding First National Common Stock.
+ Includes service as a director of First National Bank prior to formation of
the Company in 1985.
(1) Includes 18,047 shares owned by Mr. Battey's spouse and 20,583 shares in
an IRA.
(2) Includes 123 shares owned jointly with Mr. Coleman's spouse, 3,317 shares
held in an individual retirement account, 165 shares in First National's
401(k) plan, and 2,750 shares subject to currently exercisable options.
(3) Mr. Coleman, Mr. Hill, Mr. Hipp, Mr. Hunter, Mr. Murray and Mr. Smith are
partners in a partnership that owns shares of First National stock. The
partnership agreement requires unanimous consent to vote or dispose of any
shares of First National stock held by the partnership. The table above
reflects each partner's interest in such partnership as follows: Mr.
Coleman -- 6,686 shares; Mr. Hill -- 6,686 shares; Mr. Hipp -- 6,690
shares; Mr. Hunter -- 3,343 shares; Mr. Murray -- 3,343 shares; and Mr.
Smith -- 3,343 shares.
(4) Includes 3,286 shares jointly owned with Mr. Frierson's spouse, 1,831
shares held as custodian for Mr. Frierson's children, and 300 shares owned
by Mr. Frierson's spouse.
(5) Includes 748 shares owned by Mr. Gramling's spouse.
(6) Includes 25,437 shares owned by Mr. Gray's spouse.
(7) Includes 1,005 shares held in an individual retirement account, 8,662
shares subject to currently exercisable options, 462 shares in First
National's 401(k) plan, and 3,996 shares owned jointly with Mr.
Hill's spouse.
(8) Includes 951 shares in an individual retirement account, 392 shares owned
by Mr. Hipp's spouse in an individual retirement account, 13,860 shares
subject to currently exercisable options, and 13,975 shares of restricted
stock which Mr. Hipp presently has the right to vote.
(9) Mr. Hipp, Mr. Hunter, Mr. Murray and Mr. Smith are partners in a
partnership that owns shares of First National stock. The partnership
agreement requires unanimous consent to vote or dispose of any shares of
First National stock held by the partnership. The table reflects each
partner's interest in such partnership as follows: Mr. Hipp -- 5,788
shares; Mr. Hunter -- 5,788 shares; Mr. Murray -- 5,788 shares; and Mr.
Smith -- 5,788 shares.
3
<PAGE> 6
(10) Includes 7,712 shares held in an individual retirement account, and 3,333
shares owned by Mr. Horger's spouse.
(11) Includes 1,846 shares owned jointly with Mr. Hunter's spouse, 401 shares
owned by Mr. Hunter's spouse, 4,330 shares held in an individual
retirement account, and 8,662 shares subject to currently exercisable
options.
(12) Includes 3,891 shares in an individual retirement account, 1,952 shares
owned by Mr. Murray's spouse in an individual retirement account, 8,662
shares subject to currently exercisable options, and 2,152 shares in First
National's 401(k) plan.
(13) Includes 426 shares held by Mr. Norman's spouse as custodian for their
children.
(14) Includes 989 shares in an individual retirement account, 2,857 shares
owned by Mr. Roquemore's spouse in an individual retirement account, 5,797
shares held by Mr. Roquemore as custodian for his children, and 9,430
shares owned by affiliated companies.
(15) Includes 14,613 shares owned jointly with Mr. Smith's spouse, 901 shares
in First National's 401(k) plan, and 8,662 shares subject to currently
exercisable options.
(16) Such shares are jointly owned with Mr. Tobin's spouse.
(17) Includes 20,133 shares held in an individual retirement account, 4,500
shares held by a partnership in which Mr. Ward is a partner, 2,755 shares
owned by Mr. Ward's spouse, 5,829 shares held in a retirement plan, and
651 shares owned by Mr. Ward's spouse in an individual retirement account.
(18) Includes 11,391 shares held in an individual retirement account.
(19) Includes 2,888 shares owned by Mrs. Yeadon's spouse, 64 shares held by
Mrs. Yeadon's spouse as custodian for a minor grandchild, 4,866 shares
owned by an affiliated company, and 700 shares owned in an individual
retirement account.
(20) Includes 19,057 shares subject of currently exercisable options
ELECTION OF DIRECTORS
The Articles of Incorporation of First National 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 of First
National has set the number of directors at 18. Walter L. Tobin, Charles W.
Clark, C. John Hipp, III, Dwight W. Frierson, Richard L. Gray, and Colden R.
Battey, Jr., all of whom currently are directors of First National and whose
terms expire at the annual meeting, have been nominated by the First National
board of directors for reelection by the shareholders. First National's bylaws
provide that no shareholder may nominate a person for election as a director of
First National unless the shareholder has notified the Secretary of First
National in writing not less than 45 days prior to the meeting at which
directors are to be elected. Such notice must set forth the name of the nominee,
his or her address, the number of shares of First National stock owned by the
nominee and the name and address of the shareholder making the nomination.
The table below sets forth the name, age and business experience for the
past five years for each of the directors of First National.
Director Nominees for Terms to Expire in 2003
<TABLE>
<CAPTION>
Year Elected
Name, and Age Director Business Experience for the Past Five Years
- ------------- ------------ -------------------------------------------
<S> <C> <C>
Walter L. Tobin (57) 1996 Retired Superintendent of School District Five in Orangeburg
County.
Charles W. Clark (49) 1993 President of Santee Shores, Inc., a company engaged in the
development and management of real estate.
C. John Hipp, III (48) 1994 President and Chief Executive Officer of First National
Corporation and First National Bank since 1994; from 1991 to
1994, President of Rock Hill National Bank and Rock Hill
National Bank Corporation; from 1990 to 1991, Executive Vice
President of Rock Hill National Bank.
Dwight W. Frierson (42) 1996 Vice Chairman of the Board, First National Corporation and
First National Bank since 1999; Vice President and General
Manager of Orangeburg Coca-Cola Bottling Company; Owner and
operator, TCBY franchise in Orangeburg, South Carolina;
Partner in a TCBY franchise in Lexington County, South
Carolina.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C>
Colden R. Battey, Jr. (63) 1999 Formerly Chairman of the Board of FirstBancorporation, Inc.
and FirstBank, N.A.; Senior partner of Harvey & Battey Law
Firm, Beaufort, South Carolina.
Richard L. Gray (68) 1999 President of Grayco, a lumber and home products company.
Current Directors Whose Terms Expire in 2001
John L. Gramling, Jr. (67) 1974* Farmer.
Robert R. Horger (48) 1991 Chairman of the Board of First National Corporation and First
National Bank since 1998; from 1994 to 1998, Vice Chairman of
the Board, First National Corporation and First National
Bank; Attorney, Horger, Barnwell and Reid in Orangeburg,
South Carolina.
Harry M. Mims, Jr. (57) 1988 President of J. F. Cleckley & Company , a company engaged in
site
development and paving.
Cathy Cox Yeadon (49) 1997 Human Resources Manager of Cox Wood Preserving
Co., Inc., a wood preserver.
James W. Roquemore (43) 1994 Executive Vice President, Patten Seed Company, Inc.,
in Lakeland, Georgia and General Manager of Super
Sod/Carolina, a company that produces and markets turf,
grass, sod and seed. Owner and operator of golf courses in
Georgia.
Johnny E. Ward (57) 1991 President of W & W Truck & Tractor Company, Inc., a company
that provides logging and farming equipment, sales and
service.
Current Directors Whose Terms Expire in 2002
William W. Coleman, Jr. (49) 1999 President of Florence County National Bank since April 1998;
Organizer of Florence County National Bank from September
1997 to April 1998; Area Executive of National Bank of South
Carolina from 1992 to 1997.
Robert R. Hill, Jr. (32) 1996 Senior Executive Vice President and Chief Operating Officer
of First National Bank since January 1999; President of the
National Bank of York County from July 1996 to January 1999;
Organizer of the National Bank of York County from October
1995 to July 1996; Team Leader for the northern region of
South Carolina for NationsBank, N.A. from March 1995 to
October 1995; Vice President of Commercial Lending, Rock Hill
National Bank from October 1990 to March 1995.
Ralph W. Norman (45) 1996 President of Warren Norman Co., Inc., a real estate brokerage
firm; Chairman of the Board of the National Bank of York
County.
Anne H. Oswald (51) 1991 Partner, Oswald and White Realty, a real estate brokerage
agency.
Samuel A. Rodgers (67) 1998 Vice Chairman of Carolina Eastern, Inc., a distributor of
agricultural products; Chairman of the Board, Florence
County National Bank.
A. Dewall Waters (54) 1987 Partner, Main Waters Enterprises, a partnership which owns
and operates McDonald's Restaurants.
</TABLE>
* Includes service as a director of First National Bank prior to the formation
of First National in 1985.
5
<PAGE> 8
Compensation of Directors
During 1999, First National directors each received an annual retainer of
$1,200, payable quarterly, plus a fee of $250 per month. In addition, members of
the executive committee were paid at the rate of $150 per week. Members of the
audit committee were paid $100 per committee meeting attended. Directors who are
also officers of First National or its subsidiaries do not receive any such
fees.
Meetings of the Board of Directors and Committees
During 1999, the board of directors of First National held eight regular
meetings. Each director attended at least 75% of the aggregate of (a) the total
number of meetings of the board of directors of First National 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 First National on
which he or she served.
The board of directors of First National maintains audit, compensation,
executive and policy committees. The functions, composition and frequency of
meetings for these Committees during 1999 were as follows:
Audit Committee - The audit committee was composed of M. Oswald Fogle,
Chairman, Colden R. Battey, Jr., Richard L. Gray, Samuel A. Rodgers, Thomas E.
Suggs, and Walter L. Tobin. The audit committee held 10 meetings in 1999. The
audit committee recommends to the board of directors the appointment of
independent auditors, reviews with the independent auditors the recommendations
and results of the audit engagement, maintains direct reporting responsibility
and regular communication with the internal audit staff of First National Bank,
Florence County National Bank, National Bank of York County, and CreditSouth
Financial Services Corporation, reviews the scope and the results of the audits
of the Company's internal audit department and other matters pertaining to First
National's accounting and financial reporting functions, approves the services
to be performed by the independent auditors, considers the range of audit and
non-audit fees, and reviews the adequacy of First National's, First National
Bank's, Florence County National Bank's, National Bank of York County's, and
CreditSouth Financial Services Corporation's systems of internal accounting
controls.
Executive Committee - The executive committee is composed of Robert R.
Horger, Chairman, Dwight W. Frierson, James W. Roquemore, Charles W. Clark,
Harry M. Mims, Jr., and C. John Hipp, III. The board of directors of First
National 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 First
National. The executive committee also acts as nominating committee for the
purpose of recommending to the board of directors nominees for election to the
board of directors. The executive committee will consider nominees recommended
by record shareholders if the nomination is in writing and delivered to the
Secretary of First National not less than 45 days prior to the meeting of
shareholders at which directors are to be elected. The written nomination must
state the name, address and number of shares owned by the nominee, and the name
and address of the shareholder making the nomination. The executive committee
met 41 times in 1999.
Compensation Committee - The compensation committee is composed of A. Dewall
Waters, Chairman, Charles W. Clark, Robert R. Horger and Harry M. Mims, Jr. The
compensation committee met three times in 1999. The compensation committee
evaluates the performance of the executive officers of First National and
recommends to the board of directors, through the executive committee, matters
concerning compensation, salaries, and other forms of executive compensation to
officers of First National Bank, National Bank of York County, Florence County
National Bank and CreditSouth Financial Services Corporation.
Policy Committee - The policy committee is composed of Dwight W. Frierson,
Chairman, Robert R. Horger, C. John Hipp, III, Charles W. Clark, Harry M. Mims,
Jr., and James W. Roquemore. The primary purpose of the policy committee is to
recommend new policies and review present policies of First National. The policy
committee met seven times in 1999.
EXECUTIVE COMPENSATION
The following table summarizes for the years indicated current and long-term
compensation for the Chief Executive Officer of First National and the four most
highly compensated executive officers other than the Chief Executive Officer.
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation (1) Compensation Awards
------------ -------------------
Year Salary Bonus (2) Long-Term
Name and -------------------------------- Restricted Securities Underlying All Other
Principal Position Stock Awards (3) Options Compensation (4)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. John Hipp, III 1999 $225,512 $85,737 - - $5,858
President and Chief 1998 204,721 68,875 - - 5,556
Executive Officer 1997 174,231 49,157 - - 4,523
Robert R. Hill, Jr. 1999 $123,976 $55,915 - - $4,851
Senior Executive 1998 105,077 6,000 - - 3,245
Vice President 1997 93,534 4,500 - - 2,781
James C. Hunter, Jr. 1999 $108,901 $36,025 - - $3,401
Executive Vice 1998 105,250 42,031 - - 3,215
President 1997 93,534 24,229 - - 2,578
Dane H. Murray 1999 $ 99,185 $43,980 - - $3,048
Executive Vice 1998 95,631 31,164 - - 2,951
President 1997 81,236 25,459 - - 2,292
Phil M. Smith 1999 $ 95,025 $41,890 - - $3,016
Executive Vice 1998 93,000 31,040 - - 2,947
President 1997 82,543 24,207 - - 2,283
</TABLE>
(1) Prerequisites and personal benefits did not exceed the lesser of $50,000 or
10% of total salary plus bonus.
(2) Figures shown represent actual cash bonuses paid during the year indicated.
First National Bank maintains an incentive compensation plan. Amounts
payable under the incentive compensation plan are based on First National's
performance in terms of its return on equity for any calendar year. The
First National Bank compensation committee sets performance goals for First
National at the beginning of any calendar year. The board of directors of
First National, however, has the discretion to change during any year the
performance goals, payment amounts and other requirements of the incentive
compensation plan. The incentive compensation plan creates an "incentive
pool" determined by multiplying a certain percentage of First National Bank
income over a stated percentage return on equity for the calendar year in
question. Amounts paid into the incentive pool are distributed to
participating employees based on the individual employee's merit and salary
level.
(3) No shares of restricted stock were granted to executive officers during
1999, 1998 and 1997. The value of restricted stock holdings by Mr. Hipp at
December 31, 1999 was $267,985.
(4) Includes contributions by First National Bank through matching or
discretionary contributions to its employee savings plan allocated to the
named executive officers' accounts, and term life insurance premiums paid by
First National Bank for the benefit of the named executive officers as
follows:
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<PAGE> 10
Employee Savings Plan Life Insurance Premiums
--------------------- -----------------------
C. John Hipp, III 1999 $3,200 $2,658
1998 3,200 2,356
1997 3,200 1,323
Robert R. Hill, Jr. 1999 2,401 1,450
1998 2,150 1,095
1997 1,806 975
James C. Hunter, Jr. 1999 2,120 1,281
1998 2,031 1,184
1997 1,870 708
Dane H. Murray 1999 1,900 1,148
1998 1,868 1,083
1997 1,647 645
Phil M. Smith 1999 1,880 1,136
1998 1,877 1,070
1997 1,650 632
The employee savings plan is a "tax qualified" plan under Section 401(a) of
the Internal Revenue Code and covers all First National Bank employees.
Employment Agreement
In March, 1994, C. John Hipp, III, entered into an employment agreement with
First National providing for his employment as President and Chief Executive
Officer of First National Bank. The term of the agreement began May 1, 1994, and
ended April 30, 1997, with provision for Mr. Hipp's continued employment at will
after April 30, 1997. The agreement provides for compensation for Mr. Hipp at
the 1994 level or a greater rate set by the board of directors of First National
or by a committee appointed by the board of directors, plus fringe benefits and
reimbursement of expenses. Under the terms of the agreement, Mr. Hipp has also
been granted options to purchase up to a total of 13,975 shares of First
National stock (after giving effect to all stock dividends and splits since the
date of original grant) under the terms and conditions of First National's 1992
stock option plan. If Mr. Hipp's employment is terminated for any reason by
either Mr. Hipp or by First National after April 30, 1997 and prior to April 30,
2004, following a sale or merger, Mr. Hipp will be entitled to continued
compensation at the rate then in effect for a period of three years or until
April 30, 2004, whichever period is shorter. If Mr. Hipp is terminated after
April 30, 1997 and prior to April 30, 2004 without cause or because of death or
disability, Mr. Hipp (or his estate) will be entitled to be paid his then
current salary for a period of one year from the date of such termination. Upon
termination without cause, after a sale or merger, or after disability, Mr. Hipp
is under an affirmative obligation for one year following termination to
actively seek and accept comparable alternative employment, and any compensation
received by him or earnable by him with reasonable diligence following such
termination will be deducted from amounts owed to him by First National under
the employment agreement.
Restricted Stock Plan
On January 25, 1996, the board of directors of First National approved the
issuance of restricted stock to C. John Hipp, III, President and Chief Executive
Officer of First National. On March 7, 1996, the board of directors fixed the
number of restricted shares issuable at 11,977 (after giving effect to all stock
dividends and splits since the date of original grant). The grant is conditioned
upon continued employment of Mr. Hipp as Chief Executive Officer of First
National at each vesting date as follows: a) 25% of the shares vest free of
restrictions in 1999; b) an additional 25% of the shares vest free of
restrictions in 2001; and c) the remaining 50% of the shares vest free of
restrictions in 2003. Termination of Mr. Hipp's employment as Chief Executive
Officer for any reason (except death or change in control of First National)
prior to a vesting date would terminate any interest in non-vested shares. Prior
to vesting of the shares, as long as Mr. Hipp remains Chief Executive Officer of
First National, he will have the right to vote such shares and to receive
dividends paid with respect to such shares. All restricted shares will fully
vest in the event of a change in control of First National or upon death of Mr.
Hipp while serving as Chief Executive Officer.
8
<PAGE> 11
Stock Options
The following table shows the total number of options held at December 31,
1999. None of the executive officers listed below exercised any options during
l999.
Aggregated Option Exercises During 1999 and Year End 1999 Option values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised In-
Shares Unexercised Options (1) the-Money Options (2)
Acquired on Value ----------------------------------------------------------
Executive Officer Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. John Hipp, III 13,975 $300,323 13,860 4,620 $148,094 $54,008
Robert R. Hill, Jr. -- -- 8,662 2,888 101,259 33,761
James C. Hunter, Jr. -- -- 8,662 2,888 101,259 33,761
Dane H. Murray -- -- 8,662 2,888 101,259 33,761
Phil M. Smith -- -- 8,662 2,888 101,259 33,761
</TABLE>
(1) Figures shown represent the total number of shares subject to unexercised
options held by the indicated executive officers at year end l999. The
number of shares subject to options which were exercisable and unexercisable
at year end 1999 is also shown. The number of options granted has been
adjusted to reflect all stock splits and dividends.
(2) Dollar amounts shown represent the value of stock options held by the
indicated executive officers at December 31, 1999. Only those shares subject
to options which are "in-the-money" are reported. Shares subject to an
option are considered to be "in-the-money" if the fair market value at
December 31, 1999 of shares of First National stock exceeds the exercise or
base price of such shares. At December 31, 1999, First National's stock
price exceeded the exercise price of all shares subject to option, and thus
all stock options were considered "in-the-money." For those options
"in-the-money" value is computed based on the difference between the fair
market value of First National stock at December 31, 1999 and the exercise
or base price of the shares subject to underlying option. The value of
shares subject to options exercisable and unexercisable at December 31, 1999
is also shown.
Report on Executive Officer Compensation
First National's compensation committee is required to provide shareholders
of First National with a report discussing the basis for the compensation
committee's action in establishing compensation for First National's executive
officers. The report is also required to discuss the relationship, if any,
between First National's performance and executive officer compensation.
Finally, the report must specifically discuss the factors and criteria upon
which the compensation paid to First National's Chief Executive Officer was
based.
The fundamental philosophy of First National's compensation program is to
offer competitive compensation opportunities for executive officers that are
based both on the individual's contribution and on First National's performance.
The compensation paid is designed to retain and reward executive officers who
are capable of leading First National in achieving its business objectives in an
industry characterized by complexity, competitiveness and change. The
compensation of First National's executive officers is reviewed and approved
annually by First National Bank compensation committee, which acts as First
National's compensation committee. Annual compensation for First National's
Chief Executive Officer (and other executive officers) consists of three
elements.
o A base salary that is determined by individual contribution and
performance, and which is designed to provide a base level of
compensation comparable to that provided key executives of other
financial institutions of similar size and performance.
o A short-term cash incentive program that is directly linked to
individual performance and indirectly linked to First National's
performance.
9
<PAGE> 12
o A long-term incentive program that provides stock options to executive
officers. Stock option grants provide an incentive that focuses the
executive's attention on managing First National from the perspective of
a shareholder with an equity stake in the business. The economic value
of any stock option granted is directly tied to the future performance
of First National's stock and will provide value to the recipient only
when the price of First National's stock increases over the option grant
price.
For First National's key executives, base salary is targeted to approximate
average salaries for individuals in similar positions with similar levels of
responsibilities who are employed by other banking organizations of similar size
and financial performance. During 1999, First National increased the Chief
Executive Officer's base salary by 10.2% The compensation committee determined
that the 10.2% increase in the Chief Executive Officer's base salary was
appropriate in light of two primary factors. The first factor was a desire of
First National to provide the Chief Executive Officer with a base salary
comparable to that paid on average by other banking organizations of similar
size and financial performance. First National periodically participates in
local, state and other salary/compensation surveys and has access to other
published salary/compensation data. The compensation committee annually reviews
national, regional, statewide and local peer group salary data (to the extent
available) to assist it in setting appropriate levels of the Chief Executive
Officer's and other executive officers' base salaries. A second factor
considered by the Compensation Committee in setting and adjusting base salary
was First National's 1999 performance accomplishment of a 10.79% return on
equity. This performance indicator is updated annually, where needed, to help
determine the increase in First National's key executives' base salary and is
also used to help determine the annual cash incentive, as described below.
First National has also established a short-term cash incentive plan for
First National Bank and National Bank of York County. First National's other
subsidiaries (Florence County National Bank, and CreditSouth Financial Services
Corporation) did not participate in the incentive program for 1999, but Florence
County National Bank will begin participating in 2000. Under the plan, all
salaried employees of the sponsoring subsidiary are eligible to participate. For
purposes of determining the cash incentive payable under the plan, performance
is measured based on return on equity. At the beginning of each year, the
compensation committee sets a performance goal expressed as a target return on
equity percentage. The board of directors, at its discretion, retains the
flexibility to change performance goals, bonus amounts and requirements of the
plan during the year. An "incentive pool" is determined by multiplying a certain
percentage of net income above the target return on equity for the calendar year
in question. Amounts paid into the incentive pool are distributed to salaried
employees based on their salary level and performance, which is measured by
their annual evaluation rating. For First National's key executives, the annual
cash incentive during the years 1997, 1998 and 1999 ranged from 4.8% to 45.1% of
base salary. This means that up to approximately 45.1% of annual compensation
was variable, fluctuates significantly from year to year, and was directly and
indirectly tied to business and individual performance.
No stock option plan awards were made during the years 1997, 1998 and 1999.
This report is provided as a summary of current practice with regard to
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, added by the
Omnibus Budget Reconciliation Act of 1993, is not relevant to this year's report
and does not affect either First National's or it subsidiaries' compensation
policy. Should such limitations become relevant, steps will be taken to amend
First National's and its subsidiaries' compensation policy to assure compliance.
o Compensation Committee o
A. Dewall Waters, Chairman Harry M. Mims, Jr. Charles W. Clark
Robert R. Horger
10
<PAGE> 13
DEFINED BENEFIT PENSION PLAN
First National Bank maintains a noncontributory, defined benefit pension
plan covering its employees, including 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, 1999. The benefits
shown are computed on a single life only annuity basis.
Employees' Pension Plan of First National Bank
Estimated Annual Retirement Benefits
(For an Employee Whose Normal Retirement Date is 1/1/2000)
FAC* 10 Years 20 Years 30 Years 40 Years
---- -------- -------- -------- --------
$ 30,000 $ 2,700 $ 5,400 $ 8,100 $ 9,450
40,000 4,055 8,110 12,165 14,193
50,000 5,605 11,210 16,815 19,618
60,000 7,155 14,310 21,465 25,043
70,000 8,705 17,410 26,115 30,468
80,000 10,255 20,510 30,765 35,893
90,000 11,805 23,610 35,415 41,318
100,000 13,355 26,710 40,065 46,743
110,000 14,905 29,810 44,715 52,168
120,000 16,455 32,910 49,365 57,593
* 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 his normal retirement date (age 65), a
monthly retirement benefit will be paid in accordance with pension plan
provisions. 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,
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. In addition, 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 uses the following
definition of participant compensation: W-2 earnings, including bonuses,
overtime and commissions, but excluding employer contributions to employee
benefit plans, as limited by Section 401 (a)(17) of the Internal Revenue Code .
For purposes of executive officer participation in the pension plan, the
executive officer compensation used for purposes of computing executive officer
benefits under the pension plan is the same as that shown in the Summary
Compensation Table. As of December 31, 1999 the named executive officers had
accumulated the following years of credited service toward retirement: C. John
Hipp, III, 6 years of credited service; James C. Hunter, Jr., 35 years credited
service; Robert R. Hill, Jr., 4 years credited service; Dane H. Murray, 29 years
of credited service; and Phil M. Smith, 26 years of credited service.
11
<PAGE> 14
SHAREHOLDER PERFORMANCE GRAPH
First National is required to provide its shareholders with a line graph
comparing First National's cumulative total shareholder return with a
performance indicator of the overall stock market and either a published
industry index or a First National-determined peer comparison. 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 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. First National's 1999 Annual Report to
Shareholders contains a variety of relevant performance indicators concerning
First National. 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, First National's compensation committee utilizes return on equity
in helping to determine short-term cash incentive program awards.
The performance graph below compares First National's cumulative total
return over the most recent five year period with both the Nasdaq Composite
Index (reflecting overall stock market performance) and the Nasdaq Bank Index
(reflecting changes in banking industry stocks). Returns are shown on a total
return basis, assuming the reinvestment of dividends and a beginning stock index
price of $100 per share. The value of First National's stock as shown in the
graph is based on information known to First National regarding transactions in
First National's stock. Because there was no active trading market in First
National's stock prior to listing on the American Stock Exchange in January
1997, the information prior to that time is based on a limited number of
transactions.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First National Corporation $100.00 $125.06 $145.35 $248.89 $331.18 $269.93
- -------------------------------------------------------------------------------------------
Nasdaq Composite Index 100.00 134.19 166.21 202.18 282.30 523.92
- -------------------------------------------------------------------------------------------
Nasdaq Bank Index 100.00 144.81 182.69 298.87 263.69 242.65
- -------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
First National Bank, Florence County National Bank and National Bank of York
County have loan and deposit relationships with some of the directors of First
National and its subsidiaries and with companies with which the directors are
associated as well as with 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, mothers and
fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law.)
Such loans were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other 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 First National, is a partner in
the law firm of Horger, Barnwell & Reid, which First National Bank has retained
as general counsel during the past five years. First National Bank proposes to
retain the firm during the current fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by Section 16(a) of the Securities Exchange Act of 1934, First
National's directors and executive officers are required to report periodically
their ownership of First National 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 to First National, it appears that all such reports
for these persons were filed in a timely fashion in 1999.
INDEPENDENT ACCOUNTANTS
The board of directors, upon the recommendation of the audit committee, has
appointed J. W. Hunt and Company, LLP, independent certified public accountants,
as independent auditors for First National and its subsidiaries for the current
fiscal year ending December 31, 2000, subject to ratification by First
National's shareholders. J. W. Hunt and Company, LLP has advised First National
that neither the firm nor any of its partners has any direct or material
interest in First National and its subsidiaries except as auditors and
independent certified public accountants of First National. 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.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
First National, upon request and without charge, will provide shareholders
with a copy of its Annual Report on Form 10-K for the year ended December 31,
1999 filed with the Securities and Exchange Commission. Shareholders should
direct their requests to: First National Corporation, 950 John C. Calhoun Drive,
S.E., Orangeburg, South Carolina 29115, attention: James C. Hunter, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert R. Horger, Chairman of the Board of the Company serves on the
Compensation Committee of the Company. Although, Mr. Horger did not participate
in any discussions concerning his compensation, he did participate in
discussions regarding the compensation of other executive officers.
OTHER BUSINESS
The board of directors of First National 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.
13
<PAGE> 16
P R O X Y FIRST NATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS -- TUESDAY, APRIL 25, 2000
C. John Hipp, III and James C. Hunter, Jr., or either of them with full
power of substitution, are hereby appointed as agent(s) of the undersigned to
vote as proxies all of the shares of Common Stock of First National Corporation
held of record by the undersigned on the Record Date at the Annual Meeting of
Shareholders to be held on April 25, 2000, and at any adjournment thereof, as
follows:
1. ELECTION OF DIRECTORS:
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to [ ] WITHHOLD AUTHORITY on
(except any I have written below) vote for all nominees listed below the following nominees only
</TABLE>
Walter L. Tobin, Charles W. Clark, C. John Hipp, III, Dwight W. Frierson, Colden
R. Battey, Jr., Richard L. Gray
INSTRUCTION: To withhold authority to vote for any individual(s) write the
nominee's(s') name(s) on the line below.
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY APPOINTMENT OF J. W. HUNT & COMPANY, LLP, CERTIFIED PUBLIC
ACCOUNTANTS, AS THE COMPANY'S INDEPENDENT AUDITORS FOR 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated on reverse side)
3. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be brought
before the meeting).
THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH
RESPECT TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR"
SUCH MATTER.
Please sign exactly as name
appears below. When signing as
attorney, executor,
administrator, trustee, or
guardian, please give full
title. If more than one
trustee, all should sign. All
joint owners must sign.
Dated: , 2000
------------------
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