UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

 

 

 

March 13, 201518, 2016

 

Dear Shareholders:

We hope you can attend the meeting. Whether or not you can attend, we urge you to submit your proxy promptly. Even after submitting the proxy, you may, of course, vote in person on all matters brought before the meeting.

 

  

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To our Shareholders:

 

Notice is hereby given that, pursuant to the call of its Board of Directors, an Annual Meeting of Shareholders of First Financial Corporation (“Corporation”(the “Corporation”) will be held on Wednesday, April 15, 201520, 2016 at 11:00 a.m., local time, at One First Financial Plaza, Terre Haute, Indiana.

 

 

 

March 13, 201518, 2016 

 

 

TABLE OF CONTENTS

 

FIRST FINANCIAL CORPORATION

ONE FIRST FINANCIAL PLAZA

P.O. BOX 540

TERRE HAUTE, INDIANA 47808

(812) 238-6000

 

PROXY STATEMENT 

 

 

QUESTIONS AND ANSWERS ABOUT THE MEETING

 

This Proxy Statement describes the matters on which we would like you to vote and provides information so that you can make an informed decision; however, you do not need to attend the annual meeting to vote your shares. See “How do I vote my shares before the Annual Meeting?vote?” We expect to begin sending this proxy statement, the attached notice of annual meeting and the proxy card(s) on or about March 13, 2015,18, 2016, to all shareholders entitled to vote.

 

 

 

The shares represented by a properly executed and returned proxy card will be voted according to your instructions. If no instructions are provided on a signed proxy card, the persons named as proxies on your proxy card will vote in accordance with the above recommendations of the Board of Directors.Board.

telephone, via the Internet at www.proxyvote.com or completed, dated, signed and returned in the envelope provided by April 8, 201513, 2016. In order to maintain confidentiality, your voting instruction will be received by Broadridge Financial Solutions, Inc., who will tabulate the voting instruction results and provide them to the ESOP trustee on an aggregate basis. Please do not return your voting instructions to the Corporation. Your voting instructions will be kept confidential by the ESOP trustee and will not be disclosed to any of our directors, officers or employees. Unless the terms of the ESOP or the fiduciary duties of the ESOP trustee require otherwise, the ESOP trustee will vote your ESOP shares in accordance with your instructions. If you do not returnsubmit your voting instruction cardinstructions in a timely manner or if you return the voting instruction card unsigned or without indicating how you desire to vote the shares allocated to

Stock exchange rules applicable to brokers grant your broker discretionary authority to vote your shares without receiving your instructions only on certain matters. Your broker has discretionary voting authority under these rules to vote your shares on the ratification of Crowe Horwath LLP as our independent registered public accounting firm. However, unless you provide voting instructions to your broker, your broker does not have discretionary authority to vote on the election of directors or approval on an advisory basis of the compensation of our named executive officers. Therefore, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.

Q: What is an “abstention” or a broker “non-vote” and how do they affect the vote?

An “abstention” occurs when a shareholder sends in a proxy with explicit instructions to decline to vote on a particular matter. Abstentions are counted as present for purposes of determining a quorum, but are not counted as votes cast and, therefore, will have no effect on the outcome of the vote on the election of directors or any other proposal.

 

A broker “non-vote” occurs when a broker or other nominee who holds shares for the beneficial owner is unable to vote those shares because the broker or other nominee does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner of the shares. Brokers will have discretionary voting power to vote shares for which no voting instructions have been provided by the beneficial owner only with respect to the ratification of Crowe Horwath LLP as our independent registered public accounting firm. Brokers will not have such discretionary voting power to vote shares with respect to the election of directors or approval on an advisory basis of the compensation of our named executive officers. Shares that are the subject of a broker non-vote are included for quorum purposes, but a broker non-vote with respect to a proposal will not be counted as a vote represented at the meeting and entitled to vote and, consequently, as a general matter, will have no effect on the outcome of the vote.

 

 

Please note that your attendance at the annual meeting in person will not cause your previously granted proxy to be revoked unless you specifically so request.

 

directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether a quorum is present.

The proposal for the ratification of the appointment of Crowe Horwath LLP as our independent registered public accounting firm for the fiscal year ending December 31, 20152016 will be approved if the votes cast for the proposal exceed those cast against the proposal. Abstentions will not be counted as votes cast either for or against these proposals.

 

 

If you have additional questions about this Proxy Statement or the annual meeting or would like additional copies of this document or our 20142015 Annual Report on Form 10-K, please contact: Rodger A. McHargue, Secretary, First Financial Corporation, One First Financial Plaza, P.O. Box 540, Terre Haute, Indiana 47808, (812) 238-6000.

 

PROPOSAL 1: ELECTION OF DIRECTORS

 

The board of directorsBoard as of the 20152016 annual meeting of shareholders will consist of ten members, divided into three classes of approximately equal size that are elected for staggered three-year terms. The boardBoard believes this structure helps to maintain continuity and stability and ensures we have directors serving on the boardBoard who have substantial knowledge of the Corporation, all of which the boardBoard believes facilitates long-term value for our shareholders.

 

 

 

Nominated for a term expiring in 2018:2019:

 

Directors whose term expires in 2017

Directors whose term expires in 2016:2018:

 

Recommendation of the Board of Directors

 

The Governance and Nominating Committee believes that well-functioning boards consist of a diverse collection of individuals that bring a variety of complementary skills. Although the board of directorsBoard does not have a formal policy with regard to the consideration of diversity in identifying directors, diversity is one of the factors that the Governance and Nominating Committee may, pursuant to its committee charter, take into account in identifying director candidates. The Governance and Nominating Committee generally considers each director eligible for nomination in the broad context of the overall composition of our board of directorsBoard with a view toward constituting a boardBoard that, as a body, possesses the demonstrated senior leadership and management experience to oversee our business. The Committee has historically sought directors that bring broad and varied skills and knowledge from retail and wholesale businesses, legal, financial and government. The experience, qualifications, attributes, or skills that led the Governance and Nominating Committee to conclude that each of the members of the board of directorsBoard nominated by the Governance and Nominating Committee should serve on the boardBoard are generally described below:

 

W. Curtis Brighton

B. Guille Cox, Jr.

Thomas T. Dinkel

Anton H. George

Gregory L. Gibson

William R. Krieble

Norman L. Lowery

Ronald K. Rich

Virginia L. Smith

William J. Voges

 

Meetings and Attendance

 

During the year ended December 31, 2014,2015, the Board of Directors of the Corporation met 18 times.18-times. Each director attended more than 75% of the aggregate of (i) all meetings of the Board held while he or she was a director and (ii) all meetings of committees on which he or she served during the period that he or she served on the committee. Although the Corporation has no formal policy on director attendance at annual meetings of shareholders, they are encouraged to attend such meetings. All directors attended the 20142015 Annual Meeting of Shareholders.

 

Committees

 

The Board of Directors has determined that none of its members currently meets the definition of an “audit committee financial expert” under federal securities laws. To be considered an “audit committee financial expert,” an individual’s past experience generally mustshould include experience in the preparation or audit of comparable public company financial statements, or the supervision of someone in the preparation or audit of comparable public company financial statements. The Board has determined that in order to best fulfill the functions of our Board and our Audit Committee, each member of the Board and the Audit Committee should ideally understand community banking and the local markets in which the Corporation and the Bank

do business. Accordingly, potential candidates who have such attributes in addition to having the experience the Board believes is necessary to qualify as “audit committee financial experts” are limited. Further, the Board believes that the addition of an “audit committee financial expert” is not necessary at this time given the level of financial knowledge and experience the current members of the Audit Committee possess.

 

Compensation of Directors

The table below summarizes the compensation paid by the Corporation to each non-employee director for the fiscal year ended December 31, 2014.2015.

purchase an insurance product, of which the Corporation is the beneficiary, that funds benefit payments. An amount equal to the face amount of the policy, will be paid to the director in addition to an amount equal to the tax savings the Corporation will receive by obtaining the proceeds from the policy on a tax-free basis.basis, will be paid to the director or his or her beneficiary. Payment will be made to the director or his or her beneficiary in 120 monthly installments beginning on the first day of the month after the earlier of the director’s 65th birthday or death. Each year from the initial date of deferral until payments begin, the Corporation accrues a non-cash expense, which will equal, in the aggregate, the amount of the payments to be made to the director over the ten-year period. If a director fails for any reason, other than death, to serve as a director during the entire five-year period, or the director fails to attend at least 12 regular or special meetings of the Board each year, the amount of benefits paid will be prorated appropriately. For 2014,2015, the allocated cost of the deferred directors’ fees was $137,964.$142,416. This plan was closed to new participants in 2011. During 2015, no directors deferred amounts under this plan, and those directors who have attained age 65 received payments attributable to previously-deferred amounts under the plan in the following amounts: Mr. Dinkel - $27,000, Mr. Krieble - $10,363, Mr. Norman L. Lowery - $118,930 and Ms. Smith - $74,914.

Director Stock Ownership Guidelines

 

The Board of Directors believes that directors more effectively represent the Corporation’s shareholders if they are shareholders themselves. Therefore, the Board has adopted stock ownership guidelines applicable to all directors, other than Norman L. Lowery, who is subject to the stock ownership guidelines for executive officers discussed under “Compensation Discussion and Analysis.” Under the guidelines, directors must own a number of shares of the Corporation’s common stock equal in value to three times their annual Corporation retainer for services as a director. Additionally, directors may not dispose of shares of Corporation stock until they have satisfied the guidelines. Directors are expected to be in compliance with the stock ownership guidelines not later than five years after the date of their initial election or appointment as a director of the Corporation. In the case of individuals who were directors when the current guidelines became effective, compliance is required within five years of the effective date. Additionally, directors may not dispose of shares of Corporation stock until they have satisfied the guidelines.by February 21, 2017. Presently, seveneight of our nine non-employee directors have met their stock ownership levels under these guidelines.

 

Anti-Hedging Policy

 

Hedging and similar monetization transactions by a director or an executive officer can lead to a misalignment between the objectives of that director or executive officer and the objectives of our shareholders. Accordingly, all directors, officers and employees are prohibited from engaging in hedging or monetization transactions with respect to the securities of the Corporation.

Compensation Committee Interlocks and Insider Participation

 

During 20142015 none of the members of the Compensation and Employee Benefits Committee was or is an officer or employee of the Corporation, and no executive officer of the Corporation served or serves on the compensation committee (or other board committee performing equivalent functions)functions or, in the absence of any such committee, the entire board of directors) or on the board of directors of any company that employed or employs any member of the Corporation’s Compensation and Employee Benefits Committee. In addition, no executive officer of the Corporation served or serves on the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any company one of whose executive officers serves on our Board, of Directors, except for Norman D. Lowery, the Chief Operating Officer, who is a member of the board of directors of Princeton Mining Company, Inc., for which Virginia Smith, one of our directors, serves as President.

 

Certain Relationships and Related Transactions

 

features. Loans made to directors and executive officers that are subject to federal banking regulations are exempt from the insider loan prohibitions included in the Sarbanes-Oxley Act of 2002.

The Code of Ethics provides that directors, officers and employees of the Corporation must make business decisions for the Corporation free of conflicting influences. Such persons are expected to avoid situations that may lead to real or apparent material conflicts between such person’s self-interest and theirsuch person’s duties or responsibilities as a director, officer or employee of the Corporation. The senior compliance officer or other designated individual is responsible for annually reaffirming compliance with the Code of Ethics by the directors, officers and employees of the Corporation.

 

General

Consideration of Director Candidates

 

 

 

 

Our Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of the Corporation’s risks. The Board regularly reviews information regarding the Corporation’s financial results, operations and liquidity, as well as the risks associated with each.

The Audit Committee oversees management of the Corporation’s financial risks, including the oversight of our internal audit function and potential conflicts of interest. The Compensation and Employee Benefits Committee is responsible for overseeing the management of risks relating to the Corporation’s executive compensation plans and arrangements. The Governance and Nominating Committee manages risks associated with the independence of the Board of Directors. Board.

The Director’s Enterprise Risk Management Committee and the Enterprise Risk Management Committee advise and assist the Board in its oversight and management of enterprise risk. The Enterprise Risk Management Committee is composed of Board members W. Curtis Brighton, William R. Krieble and Ronald K. Rich, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Chief Credit Officer, Chief Risk Officer, the Chief Compliance Officer, the Director of Branch Banking, the heads of Operations, Human Resources, Loan Review, Auditing, Information Technology, a Senior Attorney, the Security Officer, the Chief Information Security Officer, an IT Cyber Security Analyst, and representatives from our subsidiaries The Morris Plan Company of Terre Haute and Forrest Sherer Insurance.Inc. The Director’s Enterprise Risk Management Committee is composed of Board members W. Curtis Brighton (Chairman), William R. Krieble, and Ronald K. Rich, who are responsible for, among other matters, coordinating risk management issues with other Board and management level committees as well as establishing and maintaining effective policies, procedures and practices for identifying, measuring and mitigating enterprise risk. The Enterprise Risk Management Committee and the Director’s Enterprise Risk Management Committee receive regular reports from management and meet no less frequently than quarterly to discuss matters relating to the management of the various components of enterprise risk, including credit, interest rate, liquidity, compliance, technology, transaction, reputation and strategic risks.

While each committee is responsible for evaluating certain risks and overseeing the management of these risks, the entire Board of Directors is regularly informed about such risks through committee reports.

 

Director Independence

The Board of Directors has determined that a majority of the members of the Board, including Messrs. Cox, Krieble, Rich, George, Dinkel, Voges, Brighton and Gibson, are independent, as independence is defined under revised listing standards of the NASDAQ Global Select Market applicable to the Corporation.

 

The Board of Directors has adopted Corporate Governance Guidelines containing general principles regarding the functions of the Board of Directors and its committees. The Governance and Nominating Committee periodically reviews the Corporate Governance Guidelines and will recommend changes to the Board as it deems appropriate. A copy of the Corporate Governance Guidelines is available on the Corporation’s web site at www.first-online.com on the “Investor Relations” page under the link “Governance Documents”.

Code of Ethics

 

The Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of the Corporation’s directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer and controller. The Corporation intends to disclose any amendments to the Code of Ethics by posting such amendments on its website. In addition, any waivers of the Code of Ethics for directors or executive officers of the Corporation will be disclosed in a report on Form 8-K filed with the Securities and Exchange Commission.SEC. A copy of the Code of Ethics is available on the Corporation’s web site at www.first-online.com on the “Investor Relations” page under the link “Governance Documents”.

Communications with Independent Directors

 

 

Governance Documents

 

 

REPORT OF THE AUDIT COMMITTEE REPORT

 

In accordance with its written charter adopted by the Board, of Directors, the Audit Committee of the Board assisted the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Corporation. All of the members of the Audit Committee are independent, as defined in the Corporation’s listing requirements. During 2014,2015, the Audit Committee met four times, and the Audit Committee chair, as representative of the Audit Committee, discussed the interim financial information contained in each quarterly earnings announcement with management and the independent public accounting firm prior to public release.

 

The Audit Committee discussed and reviewed with the independent public accounting firm all communications required by standards of the Public Company Accounting Oversight Board, including the matters required to be discussed by Auditing Standard No. 16, “Communication with Audit Committees,” and, with and without management present, discussed and reviewed the results of the independent public accounting firm’s examination of the financial statements. The Audit Committee also discussed the results of the internal audit examinations.

Based on the above-mentioned review and discussions with management and the independent public accounting firm, the Audit Committee recommended to the Board that the Corporation’s audited financial statements be included in its 2015 Annual Report on Form 10-K for the year ended December 31, 2014, for filing with the Securities and Exchange CommissionSEC.

 

 

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

 

aCompletion of our $21.6 million stock repurchase program, which returned an additional $13.6$8.0 million to shareholders in 2014.2015.

Norman L. Lowery - Chief Executive Officer and President, First Financial Corporation and First Financial Bank, N.A. (our “CEO”).

     The total direct compensation described in the table above reflects the Compensation Committee’s pay decisions relating to base salary and to the variable, at-risk pay earned for performance through the end of the year. For our CEO, actual total direct compensation was $1,311,301$1,307,808 and $1,386,008$1,311,301 for performance throughin 2015 and 2014, and 2013, respectively. These amounts are not the total compensation reported in the Summary Compensation Table (SCT)(“SCT”) on page 27.25. The amounts in the SCT reflect LTI awards, made in the particular year, but based on prior year’s performance (the SCT table amount for stock awards in 20142015 reflects the February 20142015 award based on 20132014 performance). The total compensation shown in the SCT also includes amounts related to increases in the actuarial value of long-standing retirement plans, primarily attributable to continued service and the effect of changes in interest rates and mortality assumptions, and not the awarding of additional compensation by the Committee.

Elements of Compensation

The table below reports the performance measures (“Measure”), target performance goals (“Goal”), our results (“Actual”), the level of achievement against the goal (% of Goal), the weightings (“Weight”), and the resulting score for the CEO and other NEOs (“Score”) under the Short-Term Incentive Plan. For our CEO, Mr. Norman L. Lowery, the performance measures relate to Corporation-wide performance; the performance measures for the other NEOs are tied to Bank and/or departmental performance. The amount of STIP earned in 20142015 by each executive officer reflects the overall score multiplied by his or her target bonus and is set forth in the Non-Equity Incentive Plan column of the SCT.

performance measures relate to Corporation-wide performance. For the other NEOs, the performance measures, other than earnings per share growth,EPS and tangible book value, are tied to Bank performance. The amount of LTIP earned in 2014 by each executive officer reflects the overall score multiplied by his or her target LTIP award. In accordance with SEC disclosure rules, the LTIP award based on 20142015 performance will be reported in 2016 proxy statement. The amount of LTIP awarded in February 2014,2015, based on 20132014 performance, is set forth in the Stock Awards column in the SCT.

 

EXECUTIVE COMPENSATION

 

Grants of Plan-Based Awards