SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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 Section 240.14a-11(c) or Section 240.14a-12
Palmetto Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
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[Logo of Palmetto Bancshares, Inc.]
Palmetto Bancshares, Inc.
301 Hillcrest Drive
Post Office Box 49
Laurens, South Carolina 29360
(864) 984-4551
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Palmetto Bancshares, Inc. to be held on April 17, 2001, at 3:00 p.m. at The
Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South Carolina.
The attached Notice of the Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. Directors and officers
of Palmetto Bancshares, Inc., as well as representatives of KPMG LLP, our
independent auditors, will be present to respond to any questions shareholders
may have.
To ensure proper representation of your shares at the Annual Meeting, please
sign, date and return the enclosed proxy card as soon as possible, even if you
currently plan to attend the Annual Meeting. This will not prevent you from
voting in person, but will ensure that your vote will be counted if you are
unable to attend.
Sincerely,
/s/ L. Leon Patterson
L. Leon Patterson
Chairman and
Chief Executive Officer
The Palmetto Bank is a wholly owned subsidiary of Palmetto Bancshares, Inc.
PALMETTO BANCSHARES, INC.
301 HILLCREST DRIVE
P. O. BOX 49
LAURENS, SOUTH CAROLINA 29360
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 17, 2001
To the Shareholders of Palmetto Bancshares, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Palmetto
Bancshares, Inc. (the "Company") will be held on April 17, 2001, at 3:00 p.m.
at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South
Carolina, for the following purposes:
1. To elect five Directors to hold office until their respective terms
expire or until their successors are duly elected and qualified.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Shareholders of record at the close of business on March 2, 2001 will be
entitled to vote at the Annual Meeting.
By Order of the Board of Directors,
/s/ L. Leon Patterson
L. Leon Patterson
Chairman and Chief Executive Officer
Laurens, South Carolina
March 16, 2001
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-
PAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU
WISH, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT THE ANNUAL
MEETING.
PALMETTO BANCSHARES, INC.
301 HILLCREST DRIVE
P. O. BOX 49
LAURENS, SOUTH CAROLINA 29360
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 17, 2001
This Notice of Annual Meeting, Proxy Statement and Proxy (these "Proxy
Materials") are being furnished to shareholders in connection with a
solicitation of proxies by the Board of Directors of Palmetto Bancshares, Inc.
(the "Company"). This solicitation is being made in connection with the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on April 17, 2001, at
3:00 p.m. at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens,
South Carolina.
Voting Matters
Shareholders of record as of the close of business on March 2, 2001 will be
entitled to vote at the Annual Meeting. At the close of business on March 2,
2001, there were 6,259,734 shares of the Company's $5.00 par value common stock
("Common Stock") outstanding. Holders of Common Stock are entitled to one vote
per share on each of the matters presented at the Annual Meeting or any
adjournments thereof. Shares may be voted in person or by proxy. The presence,
either in person or by proxy, of holders of shares representing fifty-one
percent of the outstanding shares of stock entitled to vote at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting.
Revocability of Proxy
Shares represented by a properly executed Proxy in the accompanying form and
given by a shareholder, and not revoked, will be voted in accordance with such
instructions. As stated in the Proxy, if a returned Proxy does not specify
otherwise, the shares represented thereby will be voted in favor of the
proposals set forth herein. Proxies may be revoked at any time prior to their
being voted at the Annual Meeting by oral or written notice to Palmetto
Bancshares, Inc., 301 Hillcrest Drive, P. O. Box 49, Laurens, South Carolina
29360, Attn: Teresa M. Crabtree, Corporate Secretary, (864) 984-8321, by
execution and delivery of a subsequent proxy or by attendance and voting in
person at the Annual Meeting.
Solicitation of Proxies
This solicitation of proxies is being made by the Company, and the Company
will bear the cost of this proxy solicitation, including the cost of preparing,
handling, printing and mailing these Proxy Materials. Proxies will be solicited
principally through these Proxy Materials. Proxies may also be solicited by
telephone or through personal solicitation conducted by regular employees of
the Company. Banks, brokers and other custodians are requested to forward Proxy
Materials to their customers where appropriate, and the Company will reimburse
such banks, brokers and custodians for their reasonable out-of-pocket expenses
in sending the Proxy Materials to beneficial owners of the shares.
ELECTION OF DIRECTORS
Item 1 on the Proxy
Nominations for Election of Directors
The Company's Board of Directors is currently comprised of twelve persons.
The Board of Directors is divided into three classes of Directors with each
class being elected for staggered three-year terms. Directors will be elected
by a plurality of votes cast at the Annual Meeting. Abstentions and broker non-
votes with respect to Nominees (as defined below) will not be considered to be
either affirmative or negative votes.
Identification of Nominees
Management proposes to nominate to the Board of Directors the five persons
listed as nominees (the "Nominees") in the table below. Each of the Nominees is
currently serving as a Company Director. Each Nominee, if elected, will serve
until the expiration of his or her respective term and until such Nominee's
successor is duly qualified. Unless authority to vote with respect to the
election of one or more Nominees is "WITHHELD," it is the intention of the
persons named in the accompanying Proxy to vote such Proxy for the election of
these Nominees. Management believes that all such Nominees will be available
and able to serve as Directors. However, should any Nominee become unable to
accept nomination or election, it is the intention of the person named in the
Proxy, unless otherwise specifically instructed in the Proxy, to vote for the
election of such other persons as management may recommend.
The following table sets forth the names and ages of the five Nominees for
Directors and the Directors continuing in office, the positions and offices
with the Company held by each such person, and the period that each such person
has served as a Director of the Company.
Position or Director
Name Age Office with the Company Since
---- --- ----------------------- --------
Nominees For Directors
Terms to expire in 2004
W. Fred Davis, Jr............. 57 Director 1978
David P. George, Jr........... 60 Director 1973
Michael D. Glenn.............. 60 Director 1994
Ann B. Smith.................. 40 Director 1997
Term to expire in 2003
Sam B. Phillips, Jr. (1)...... 59 Director 2000
Directors Continuing In Office
Terms expiring in 2002
John T. Gramling, II.......... 59 Director 1984
James M. Shoemaker, Jr........ 68 Director 1984
Paul W. Stringer.............. 57 Director, President and 1986
Chief Operating Officer
Edward K. Snead............... 41 Director 1997
Terms expiring in 2003
L. Leon Patterson............. 59 Director, 1971
Chairman of the Board and
Chief Executive Officer
J. David Wasson, Jr........... 55 Director 1979
William S. Moore.............. 55 Director 1997
(1) Mr. Phillips was elected by the Board in December 2000 to fill a vacancy
among the Directors whose terms expire in 2003. He was elected to serve
until the 2001 shareholder's meeting and he is a nominee for election
through 2003.
2
Business Experience of Nominees and Directors
Mr. Davis was owner and President of Palmetto Spinning Corporation ("PSC"),
where he was employed from 1969 to 1995. Mr. Davis sold PSC to Martin Color-
fi, Inc. in 1994 and retired in 1995.
Mr. George has been General Manager of George Motor Company in Laurens,
South Carolina, since 1964.
Mr. Glenn has been a partner with the law firm of Glenn, Haigler & Maddox
since 1992. From 1983 to 1992 he was a sole practitioner in Anderson, South
Carolina.
Ms. Smith has been the Director of Annual Giving for Clemson University
since 1986.
Mr. Phillips has been Chief Executive Officer and owner of S.B. Phillips
Company, Inc. , an umbrella organization for several other businesses
including Phillips Staffing Services, a temporary staffing agency, in
Greenville, South Carolina since 1968. Mr. Phillips also serves as a director
of the South Carolina Chamber of Commerce and the Meyer Center for Special
Children.
Mr. Gramling has served as Vice President and Secretary of Gramling
Brothers, Inc., a diversified orchard business, since 1965, and has been the
President of Gramling Brothers, Inc. Real Estate, a real estate sales and
development company in Gramling, South Carolina, since 1970.
Mr. Shoemaker has been a member with the law firm of Wyche, Burgess,
Freeman and Parham, P.A., in Greenville, South Carolina, since 1965. Mr.
Shoemaker also serves as a director of One Price Clothing Stores, Inc., Ryans
Family Steak Houses, Inc., and Span-America Medical Systems, Inc.
Mr. Stringer has served as President and Chief Operating Officer of the
Company since April 1994 and as President and Chief Operating Officer of The
Palmetto Bank, a wholly-owned subsidiary of the Company ("The Palmetto Bank"),
since March 1986. From April 1990 to April 1994, he served as Executive Vice
President of the Company, and from 1982 to April 1990 he served as Vice
President of the Company. Mr. Stringer also has served as Executive Vice
President of The Palmetto Bank from May 1981 to February 1986, as Senior Vice
President from July 1978 to April 1981, and as Vice President from January
1977 to June 1978. Mr. Stringer is the South Carolina state chairman for the
American Bankers Association. Mr. Stringer also serves as a director of the
South Carolina Board of Financial Institutions, as a trustee of the South
Carolina Bankers Employee Benefit Trust and serves on the administrative
committee of the Community Bankers Council of America . Mr. Stringer served as
Chairman of the South Carolina Bankers Association from 1996-1997.
Mr. Snead is the owner and President of Snead Builders Supply Company,
Incorporated in Greenwood, South Carolina.
Mr. Patterson has served as Chairman of the Board and Chief Executive
Officer of the Company since April 1990 and as Chairman of the Board and Chief
Executive Officer of The Palmetto Bank, since March 1986. From April 1990 to
April 1994, he served as Chairman of the Board and President of the Company,
and from 1982 to April 1990 he served as President of the Company. Mr.
Patterson also served as Chairman and President of The Palmetto Bank from
January 1978 to February 1986, and as President in 1977.
Mr. Wasson has been President and Chief Executive Officer of Laurens
Electric Cooperative, Inc. since 1975.
Mr. Moore, currently an investor, is the former President of Reeves
Brothers, Inc., in Spartanburg, South Carolina.
3
Meetings and Committees of the Board of Directors
The Board of Directors held twelve meetings in 2000. The Board of Directors
has an Audit and Examining Committee which reviews the audit plan, the results
of the audit engagement of the Company's accountants, the scope and results of
the Company's procedures for internal auditing and internal control, and the
internal audit reports of the Company. The Audit Committee is currently
comprised of Messrs. Davis, Wasson, Moore and Phillips. Mr. Davis serves as
Chairman. The Audit Committee formally met twice during 2000.
The Board of Directors has a Compensation Committee which reviews the
Company's compensation policies and benefit plans and makes recommendations
regarding senior management compensation. Its report is set forth herein. The
Compensation Committee is currently comprised of Messrs. Moore, Phillips,
Shoemaker and Wasson. Mr. Shoemaker serves as Chairman. The Compensation
Committee met three times during 2000. No members of the Compensation Committee
are officers or employees of the Company.
The Board of Directors has a Trust Committee, which reviews the operation of
the Company's Trust Department. The Trust Committee is currently comprised of
Ms. Smith and Messrs. Snead and George. Mr. George serves as Chairman. The
Trust Committee met twelve times during 2000.
The Board of Directors has a Credit Committee, which reviews certain loan
applications and other credit matters. The Credit Committee is currently
comprised of Messrs. Davis, Gramling, Stringer, and Glenn. Mr. Gramling serves
as Chairman. The Credit Committee met twelve times during 2000.
The Company does not have a Nominating Committee. The functions typically
performed by a Nominating Committee were performed by the entire Board of
Directors. Mr. Patterson serves ex officio on all committees.
NAMED EXECUTIVE OFFICERS
The Company's executive officers are appointed by the Board of Directors and
serve at the pleasure of the Board. The following persons are the Company's
Chief Executive Officer and the two most highly compensated executive officers
(with compensation over $100,000) during fiscal year 2000 (the "Named Executive
Officers").
Company Offices Company
Name Age Currently Held Officer Since
---- --- --------------- -------------
L. Leon Patterson................ 59 Chief Executive Officer 1982
Paul W. Stringer................. 57 President and Chief 1982
Operating Officer
Ralph M. Burns, III.............. 50 Treasurer 1982
Business Experience of Named Executive Officers
Mr. Patterson's business experience is set forth above under "Business
Experience of Nominees and Directors."
Mr. Stringer's business experience is set forth above under "Business
Experience of Nominees and Directors."
Mr. Burns has served as Treasurer of the Company since April 1998. Mr. Burns
served as a Vice President of the Company from April 1990 until April 1998. Mr.
Burns also has served as Executive Vice President of The Palmetto Bank since
September 1999. From January 1982 until September 1999, he served as Senior
Vice President and Cashier of The Palmetto Bank, from January 1978 to December
1981, he served as Assistant Vice President and Cashier of The Palmetto Bank,
and from January 1976 to December 1977, he served as Assistant Cashier of The
Palmetto Bank.
4
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation Of Directors
During 2000 Directors received an annual fee of $12,500, which includes a
retainer fee of $3,500. However, if a Director misses more than one Directors'
meeting and such absence(s) is not excused by the Company, the Company reduces
such fee by $750 for each unexcused absence. In accordance with the preceding,
all Directors received the full annual fee due to no unexcused absences. The
Company feels that these payments are an appropriate reflection of the
Directors' service and the number of Directors' meetings attended. See Election
of Directors -- Meetings and Committees of the Board of Directors.
Summary of Cash and Certain Other Compensation to Named Executive Officers
The following table shows the cash compensation paid by the Company, as well
as certain other compensation paid or accrued, to the Company's Named Executive
Officers for the years ending December 31, 2000, 1999 and 1998.
Summary Compensation Table
Long-Term
Compensation
------------
Securities
Name and Other Annual Underlying All Other
Principal Position Salary Bonus Compensation Options Compensation
during 2000 Year ($) ($) ($) Granted (#) ($)
- ------------------------- ---- ------- ------ ------------ ------------ ------------
L. Leon Patterson, 2000 230,000 16,100 12,500(1) -0- 47,731(3)
Chairman of the Board and 1999 212,400 56,498 10,700(1) -0- 47,731
Chief Executive Officer 1998 198,500 41,685 9,000(1) 36,000 47,731
Paul W. Stringer, 2000 200,000 14,000 12,500(1) -0- 34,877(4)
Director, President and 1999 175,000 46,550 10,700(1) -0- 34,877
Chief Operating Officer 1998 163,000 34,230 9,000(1) 30,000 34,886
Ralph M. Burns, III, 2000 100,000 7,000 (2) -0- -0-
Treasurer 1999 94,333 26,600 (2) -0- -0-
1998 88,400 18,564 (2) 18,000 -0-
- --------
(1) Included in Other Annual Compensation for Mr. Patterson and Mr. Stringer is
the annual fee they received for their service as directors.
(2) Certain amounts may have been expended by the Company which may have had
value as a personal benefit to the executive officer. However, the total
value of such benefits did not exceed the lesser of $50,000 or 10% of the
annual salary and bonus of such executive officer.
(3) This amount is comprised of premiums paid by the Company on behalf of Mr.
Patterson with respect to life insurance not generally available to all
Company employees.
(4) This amount is comprised of premiums paid by the Company on behalf of Mr.
Stringer with respect to life insurance not generally available to all
Company employees.
Stock Options
The Company made no option grants with respect to the Common Stock of the
Company to the Named Executive Officers in 2000.
5
Option Exercises
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
Value of
Number Unexercised In-
of Securities Underlying the-Money
Unexercised Options at 2000
Options at 2000 Fiscal Fiscal Year-
Year-End (#) End($)(1)
Shares Value ------------------------ ----------------
Acquired on Realized Exercisable\ Exercisable\
Name Exercise (#) ($) Unexercisable Unexercisable
- ---- ----------- -------- ------------- ----------------
L. Leon Patterson....... 0 0 21,600\14,400 $351,000\234,000
Paul W. Stringer........ 0 0 18,000\12,000 $292,500\195,000
Ralph M. Burns III...... 0 0 10,100\7,200 $164,125\117,000
(1) Based on the difference between the option exercise price and the current
trading price of the Company's stock at December 31, 2000.
Pension Plan
The following table sets forth the estimated annual benefits (in single-life
annuity amounts) payable upon normal retirement in fiscal year 2000 to
participants whose highest average five-year earnings and years of service are
as listed. The table assumes integration at the current wage base of $76,200.
At the end of 2000, the Named Executive Officers above had the following final
average compensation credited for purposes of the Pension Plan and number of
years of service: Mr. Patterson, $241,124, 33 years; Mr. Stringer, $200,511,
31 years; and Mr. Burns, $109,412, 25 years.
Pension Plan Table
Years of Service
-------------------------------------------------------------------
Remuneration 5 10 20 25 30 35
- ------------ ------- ------- ------- ------- ------- -------
$100,000 $ 7,859 $15,719 $31,437 $39,296 $47,156 $55,015
120,000 9,659 19,319 38,637 48,296 57,956 67,615
140,000 11,459 22,919 45,837 57,296 68,756 80,215
160,000 + up 13,259 26,519 53,037 66,296 79,556 92,815
The base compensation and any bonuses are covered by the Pension Plan. There
is no variation between the compensation covered by the Pension Plan and the
amounts listed in the Summary Compensation Table. The benefits of the Pension
Plan are based on straight-life annuity amounts and are not subject to any
deduction for Social Security or other offset amounts.
Board Compensation Committee Report on Executive Compensation
Decisions with respect to the compensation of the Company's executive
officers are made by the Compensation Committee of the Board. Each member of
the Compensation Committee is a non-employee director. All decisions of the
Compensation Committee relating to the compensation matters are reviewed by the
full Board of Directors. Set forth below is a report submitted by the
Compensation Committee which addresses the Company's compensation policies for
2000 with respect to Mr. Patterson as CEO, and Messrs. Stringer, and Burns, who
represent all executive officers of the Company who earned in excess of
$100,000 during 2000.
6
Compensation Committee Report
General Compensation Policies and Specific Guidelines. The Compensation
Committee believes that compensation arrangements should be structured so as to
provide competitive levels of compensation that integrate pay with the
Company's performance goals. The Company has in place a Senior Management
Incentive Plan (the "Bonus Plan"), which establishes a point system that
determines incentive cash awards based on the extent to which the Company met
certain performance goals adopted by the Compensation Committee. The Bonus Plan
provides that the twelve members of senior management who are designated each
year by the Compensation Committee (the "Senior Executives", which includes the
Named Executive Officers) will receive up to 35% of their base salary in
incentive cash compensation if 100% of the performance goals were met and
exceeded by specified amounts. For 2000, the Compensation Committee adopted
seven performance goals, including return on assets, return on equity, net
interest margin, net overhead ratio, net charge-off ratio, deposit growth and
loan growth.
Base salaries were set by the Board, after recommendation by the
Compensation Committee. They were intended to reflect individual performance
and responsibility and to represent compensation believed by the Compensation
Committee to be appropriate for the Senior Executives.
Relationship of Performance to Executive Compensation. As described above,
Company performance was an integral part in determining the compensation of
Senior Executives. Assuming that 100% of the performance goals are met each
year, approximately 35% of a Senior Executive's total compensation will consist
of incentive payments made pursuant to the Bonus Plan. In 2000, one of the
seven performance goals were met or exceeded. Internal goals are the Company's
means of judging its performance.
Compensation Paid during 2000. Compensation paid the Company's executive
officers in 2000 consisted of the following elements: base salary and bonus.
Based on Company performance, the Senior Executives, earned bonuses equal to
7% of their base salary at December 31, 2000, pursuant to the Bonus Plan.
Other Compensation Plans and Compensation. The Company has adopted certain
executive officer life insurance plans and certain broad-based employee benefit
plans in which Senior Executives participate. The value of these items for the
Named Executive Officers is set forth in the Summary Compensation Table above
under the "All Other Compensation" heading. Executive officers also may have
received perquisites in connection with their employment. However, such
perquisites totaled less than 10% of their cash compensation in 2000. The
foregoing benefits and compensation are not directly or indirectly tied to
Company performance.
Mr. Patterson's 2000 Compensation. Mr. Patterson's 2000 compensation consisted
of a base salary, cash bonus, split-dollar life insurance and supplemental life
insurance policies, and certain perquisites (which did not exceed 10% of his
base salary and bonus) and the various forms of other compensation set forth in
the preceding paragraph that were available generally to all employees. Mr.
Patterson's base salary was $230,000 in 2000, as recommended by the
Compensation Committee to the Board of Directors. Mr. Patterson also received
$12,500 in annual fees for his service as director, which is included in the
Summary Compensation Table above under the "Other Annual Compensation" heading.
Mr. Patterson's cash bonus was determined in accordance with the Bonus Plan and
was 7% of his base salary, or $16,100, for 2000.
Compensation Committee:
James M. Shoemaker, Jr., Chairman
J. David Wasson, Jr.
William S. Moore
Sam B. Phillips, Jr.
7
The following report does not constitute soliciting material and is not
considered filed or incorporated by reference into any other filing by Palmetto
Bancshares, Inc. under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, unless we expressly state
otherwise.
Audit Committee Report
The audit committee has (1) reviewed and discussed the audited financial
statements with management, (2) discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61, (3)
received from the auditors disclosures regarding the auditors' independence
required by Independence Standards Board Standard No. 1, and (4) discussed with
the auditors the auditors' independence. Based on the review and discussions
noted above, the audit committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
On January 16, 2001, the Company's Board of Directors adopted a written
charter for the audit committee. The charter is included herein as Appendix A.
Audit Committee:
Fred W. Davis, Jr., Chairman
J. David Wasson, Jr.
William S. Moore
Sam B. Phillips, Jr.
8
COMPARISON OF CUMULATIVE TOTAL RETURNS
Performance Graph
The following graph sets forth the performance of the Company's Common Stock
for the period from December 31, 1995 through December 31, 2000 as compared to
the NASDAQ Market Composite Index and an index comprised of all NASDAQ
commercial banks and bank holding companies. All stock prices reflect the
reinvestment of cash dividends.
1995 1996 1997 1998 1999 2000
Palmetto Banchshares 100 149.56 189.5 221.63 242.11 254.42
Nasdaq Composite 100 122.71 144.34 183.97 269.56 230.27
Nasdaq Bank 100 126.16 189.75 177.98 169.99 184.67
9
PALMETTO BANCSHARES, INC.
ANNUAL INCREASE OF $100 INVESTMENT
December 31, 1995 to December 31, 2000
Palmetto Bancshares Stock Price plus Dividend
------------------------------------------------
Initial Value Value % Investment
Investment Beginning End Increase End
---------- --------- ------- -------- ----------
12/31/95....................... 100.00
12/31/96....................... 100.00 6.78 10.14 49.56% 149.56
12/31/97....................... 149.56 10.14 14.19 39.94% 189.50
12/31/98....................... 189.50 14.19 18.75 32.14% 221.63
12/31/99....................... 221.63 18.75 22.59 20.48% 242.11
12/31/00....................... 242.11 22.59 25.37 12.31% 254.42
NASDAQ COMPOSITE MARKET INDEX
ANNUAL INCREASE OF $100 INVESTMENT
December 31, 1995 to December 31, 2000
NASDAQ Market Index Stock Price
-------------------------------------------------
Initial Price Price % Investment
Investment Beginning End Increase End
---------- --------- -------- -------- ----------
12/31/95...................... 100.00
12/31/96...................... 100.00 1,052.13 1,291.03 22.71% 122.71
12/31/97...................... 122.71 1,291.03 1,570.35 21.64% 144.34
12/31/98...................... 144.34 1,570.35 2,192.69 39.63% 183.97
12/31/99...................... 183.97 2,192.69 4,069.31 85.59% 269.56
12/31/00...................... 269.56 4,069.31 2,470.52 -39.29% 230.27
NASDAQ BANK COMPOSITE INDEX
ANNUAL INCREASE OF $100 INVESTMENT
December 31, 1995 to December 31, 2000
NASDAQ Market Index Stock Price
-------------------------------------------------
Initial Price Price % Investment
Investment Beginning End Increase End
---------- --------- -------- -------- ----------
12/31/95...................... 100.00
12/31/96...................... 100.00 1,009.41 1,273.46 26.16% 126.16
12/31/97...................... 126.16 1,273.46 2,083.22 63.59% 189.75
12/31/98...................... 189.75 2,083.22 1,838.00 -11.77% 177.98
12/31/99...................... 177.98 1,838.00 1,691.29 -7.98% 169.99
12/31/00...................... 169.99 1,691.29 1,939.45 14.67% 184.67
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company knows of no person who, or group that, owns beneficially more
than 5% of the outstanding shares of Common Stock of the Company as of March 2,
2001, except as set forth below: (Unless otherwise noted, each person has sole
voting power and sole investment power with respect to shares listed.)
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class
- ------------------------------------ -------------------- ----------
L. Leon Patterson............................... 549,054 (2) 8.77%
301 Hillcrest Drive
Laurens, SC 29360
The information below is furnished as of March 2, 2001 as to the Company's
Common Stock owned beneficially or of record by each of the Directors
individually, by the Named Executive Officers and by all Directors and
executive officers of the Company as a group. Unless otherwise noted, each
person has sole voting power and sole investment power with respect to shares
listed.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------------ ------------------------ ----------------
Directors
L. Leon Patterson..................... 549,054(2) 8.77%
Paul W. Stringer...................... 76,618(3) 1.22%
James M. Shoemaker, Jr................ 17,200(5) (4)
John T. Gramling, II.................. 15,000(5) (4)
W. Fred Davis, Jr..................... 56,045(6) (4)
David P. George, Jr................... 11,511(5) (4)
J. David Wasson....................... 10,800(5) (4)
Michael D. Glenn...................... 11,230(5) (4)
Ann B. Smith.......................... 4,200(7) (4)
Edward K. Snead....................... 15,120(8) (4)
William S. Moore...................... 19,200(9) (4)
Sam B. Phillips....................... 25,500 (4)
Named Executive Officer
Ralph M. Burns, III................... 50,158(10) (4)
Directors and Executive
Officer as a Group (13 persons)..... 861,636 13.76%
(1) Beneficial ownership consists of shares owned directly or indirectly as
well as shares underlying options or other rights to acquire the shares
that are currently exercisable or that will be exercisable on or before May
1, 2001.
(2) The number of shares shown as beneficially owned by Mr. Patterson includes
31,490 shares in the 401(k) account of Mr. Patterson, 57,964 shares owned
by Mr. Patterson's wife, as to which shares Mr. Patterson disclaims
beneficial ownership, and 21,600 unissued shares that can be acquired by
the exercise of stock options prior to May 1, 2001.
(3) The number of shares shown as beneficially owned by Mr. Stringer includes
25,858 shares in the 401(k) account of Mr. Stringer, and 18,000 unissued
shares that can be acquired by the exercise of stock options prior to May
1, 2001.
(4) Each of these persons owns less than one percent of the outstanding shares
of common stock of the Company.
11
(5) Also included are 3,000 unissued shares that can be acquired by the
exercise of stock options prior to May 1, 2001.
(6) The number of shares beneficially owned by Mr. Davis includes 2,794 shares
owned by his wife and 5,000 shares in an estate of which Mr. Davis is the
executor. Mr. Davis disclaims beneficial ownership of these shares. Also
included are 3,000 unissued shares that can be acquired by the exercise of
stock options prior to May 1, 2001.
(7) The number of shares beneficially owned by Ms. Smith includes 500 shares
each in trust accounts for her two sons, as to which she acts as custodian.
Ms. Smith disclaims beneficial ownership of the trust account shares. Also
included are 1,000 unissued shares that can be acquired by the exercise of
stock options prior to May 1, 2001.
(8) The number of shares shown as beneficially owned by Mr. Snead includes
3,534 shares total in separate trust accounts for his two sons and one
daughter, as to which he acts as Custodian. The number of shares also
includes 1,410 shares owned by Mr. Snead's wife. Mr. Snead disclaims
beneficial ownership of the trust account shares and the shares owned by
his wife. Also included are 3,000 unissued shares that can be acquired by
the exercise of stock options prior to May 1, 2001.
(9) The number of shares beneficially owned by Mr. Moore includes 600 shares
each in trust accounts for the benefit of Mr. Moore's son and daughter. Mr.
Moore disclaims beneficial ownership of these shares. Also included are
1,000 unissued shares that can be acquired by the exercise of stock options
prior to May 1, 2001.
(10) The number of shares shown as beneficially owned by Mr. Burns includes
16,342 shares in the 401(k) account of Mr. Burns, 1,576 shares that are
under power of attorney of Mr. Burns, of which Mr. Burns disclaims
beneficial ownership, and 9,400 unissued shares that can be acquired by
the exercise of stock options prior to May 1, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the Company's directors and officers are also customers of the
Company and have home mortgages, personal credit lines, credit cards, and other
loans with the Company. All of these 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 involve more than the normal risk of
collectibility or present other unfavorable features.
The law firm of Wyche, Burgess, Freeman & Parham, P.A. serves as general
counsel to the Company and receives legal fees from the Company. Mr. Shoemaker,
a Director of the Company and Chairman of the Compensation Committee, is a
member of such law firm. The Company believes that the terms of its
relationship with the law firm are at least as favorable as could be obtained
from a third party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock of the Company. Executive officers,
Directors and greater than ten-percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
filed. To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during 2000, all required Section 16(a) filings
applicable to its executive officers, Directors and greater than 10% beneficial
owners were made on a timely basis.
12
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG LLP, the Company's independent auditor during 2000,
will be present at the Annual Meeting with the opportunity to make a statement
if they desire to do so, and they will be available to respond to appropriate
questions from shareholders.
The Audit Committee will present a recommendation to the Board of Directors
to engage Elliott, Davis and Company LLP as the Company's independent auditor
for fiscal year 2001.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the Company's annual financial statements for the most recent fiscal year
and the reviews of the financial statements included in the Company's Forms 10-
Q for that fiscal year were $58,970.
Financial Information Systems Design and Implementation Fees
There were no fees billed for professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by KPMG LLP for the most
recent fiscal year.
All Other Fees
The aggregate fees billed for all professional services rendered by KPMG LLP
for the most recent fiscal year other than those described in the prior two
paragraphs were $55,905. The Audit Committee has considered whether the
provision of these services is compatible with maintaining KPMG LLP's
independence.
SHAREHOLDER PROPOSALS
Proposals by shareholders for consideration at the 2002 Annual Meeting of
Shareholders must be received at the Company's offices at 301 Hillcrest Drive,
P. O. Box 49, Laurens, South Carolina 29360, no later than November 16, 2001,
if any such proposal is to be eligible for inclusion in the Company's proxy
materials for its 2002 Annual Meeting. Under the regulations of the Securities
and Exchange Commission, the Company is not required to include shareholder
proposals in its proxy materials unless certain other conditions specified in
those regulations are satisfied. Any shareholder desiring to submit a proposal
to an annual or special meeting of shareholders shall submit information
regarding the proposal, together with the proposal, to the Company at least 45
days prior to the shareholders' meeting at which such proposal is requested to
be presented.
FINANCIAL INFORMATION
The Company's 2000 Annual Report and Form 10-K (without exhibits) are being
mailed to shareholders contemporaneously with these Proxy Materials. The
Company will provide without charge to any shareholder of record as of March 2,
2001, who so requests in writing, an additional copy of the Company's Annual
Report on Form 10-K (without exhibits) for the year ended December 31, 2000
filed with the Securities and Exchange Commission. Any such request should be
directed to Palmetto Bancshares, Inc., Post Office Box 49, Laurens, South
Carolina 29360 Attention: Corporate Secretary.
OTHER MATTERS
Management is not aware of any other matter to be brought before the Annual
Meeting. If other matters are duly presented for action, it is the intention of
the persons named in the enclosed proxy to vote on such matters in accordance
with their judgment.
By order of the Board of Directors,
/s/ L. Leon Patterson
L. Leon Patterson
Chairman and Chief Executive Officer
March 16, 2001
Laurens, South Carolina
13
Appendix A
Palmetto Bancshares, Inc.
Charter of the Audit Committee of the Board of Directors
I.Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
. Monitor the integrity of Palmetto Bancshares, Inc.'s ("the Company's")
financial reporting process and systems of internal controls regarding
finance, accounting, and legal compliance.
. Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
. Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.
. Report to the Board of Directors
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or experts it deems necessary in
the performance of its duties.
II.Audit Committee Composition and Meetings
Audit Committee members shall meet the requirements of the New York Stock
Exchange/1/. The Audit Committee shall be comprised of three or more
directors as determined by the Board, each of whom shall be independent
nonexecutive directors/2/, free from any relationship that would interfere
with the exercise of his or her independent judgment. All members of the
Committee shall have a basic understanding of finance and accounting and
the regulatory requirements of the Company's industry and be able to read
and understand fundamental financial statements.
Audit Committee members shall be appointed by the Board. If an audit
committee Chair is not designated or present, the members of the Committee
may designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet at
least annually with management, the director of the internal auditing
department, the independent auditors, and as a committee to discuss any
matters that the Committee or each of these groups believe should be
discussed/3/. The Committee may ask members of management or others to
attend meetings and provide pertinent information as necessary. In
addition, the Committee, or at least its Chair, should communicate with
management and/or the independent auditors quarterly to review the
Company's financial statements when there are any significant findings
based upon the auditors limited review procedures.
- --------
/1/Since Palmetto Bancshares stock is not traded on any exchange, the Company
has elected to comply with the New York Stock Exchange's definition of
independence (Sections 303.01(B)(2)(a) and (3)) as allowed by the Securities
and Exchange Commission guidelines.
/2/The exchanges have established criteria for assessing independence:
.Former employees. Must be a minimum of three years.
.Family members of former employees. Must be a minimum of three years.
.Business relationships. The NYSE does not allow business relationships that
impair the director's business judgment.
.None of the exchanges allow cross-directorships--an audit committee member's
compensation cannot be impacted by an employee of the Company.
/3/The Committee may ask members of management or others to attend meetings and
provide pertinent information as necessary.
NYSE rules allow one former employee, or one family member of a former
employee, to be an audit committee member (with less than three years
separation) if it is determined by the Board to be in the Company's best
interest. The NYSE requires annual written affirmation of the Audit Committee
independence.
14
III.Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with SEC regulations.
2. Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices, and judgments.
3. In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control, and report
such exposures. Review significant findings prepared by the independent
auditors and the internal auditing department together with management's
responses, including the status of previous recommendations.
4. If there are any significant findings based upon the independent auditors
limited review procedures, review with financial management and the
independent auditors the company's quarterly financial statements prior to
filing or distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9)/4/. The Chair of
the Committee may represent the entire Audit Committee for purposes of this
review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee shall review the
independence and performance of the auditors and annually recommend to the
Board of Directors the appointment of the independent auditors or approve
any discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors audit plan -- discuss scope, staffing,
locations, reliance upon management, and internal audit and general audit
approach.
9. Discuss the results of the audit with the independent auditors. Discuss
certain matters required to be communicated to audit committees in
accordance with AICPA SAS 61./5/
- --------
/4/If matters are identified during the interim review which would need to be
communicated under SAS 61, the auditor must communicate them to the audit
committee or be satisfied that they have been communicated to the audit
committee by management. Therefore, quarterly communications may not be
required.
/5/Statement of Auditing Standards (SAS) No. 61 requires that auditors discuss
certain matters with audit committees of all SEC engagements. The
communication may be in writing or oral and may take place before or after
the financial statements are issued. Items to be communicated include:
.The auditor's responsibility under Generally Accepted Auditing Standards
(GAAS);
.Significant accounting policies;
15
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
Internal Audit Department and Legal Compliance
12. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as needed.
The internal audit department shall be responsible to senior management,
but have a direct reporting responsibility to the Board of Directors
through the Committee.
13. Review the appointment, performance, and replacement of the senior internal
audit executive.
14. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
15. On at least an annual basis, review with the Company's counsel, any legal
matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
Other Audit Committee Responsibilities
16. Annually prepare a report to shareholders as required by the Securities and
Exchange Commission. The report should be included in the Company's annual
proxy statement/6/.
17. Perform any other activities consistent with this Charter, the Company's
by-laws, and governing law, as the Committee or the Board deems necessary
or appropriate.
18. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
- --------
.Management judgments and accounting estimates;
.Significant audit adjustments;
.Other information in documents containing audited financial statements;
.Disagreements with management--including accounting principles, scope of
audit, disclosures;
.Consultation with other accountants by management;
.Major issues discussed with management prior to retention; and
.Difficulties encountered in performing the audit.
/6/The SEC requires that the Audit Committee issue a report to shareholders
stating whether they have:
.Reviewed and discussed the audited financial statements with management;
.Discussed with the independent auditors the matters required to be discussed
by SAS 61; and
.Received certain disclosures from the auditors regarding their independence
as required by the ISB 1 and then include a statement if based on this
review if the audit committee recommended to the board to include the
audited financial statements in the annual report filed with the SEC.
16
P
R Palmetto Bancshares, Inc.
O Annual Meeting, April 17, 2001
X
Y
The undersigned shareholder of Palmetto Bancshares, Inc., hereby revoking
all previous proxies, hereby appoints L. Leon Patterson and Teresa M. Crabtree
and each of them, the attorneys of the undersigned, with power of substitution,
to vote all stock of Palmetto Bancshares, Inc. standing in the name of the
undersigned upon all matters at the Company's Annual Meeting to be held at The
Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South Carolina
on Tuesday, April 17, 2001 at 3:00 p.m. and at any adjournments thereof, with
all powers the undersigned would possess if personally present, and without
limiting the general authorization and power hereby given, directs said
attorneys or either of them to cast the undersigned's vote as specified below.
1. ELECTION OF DIRECTORS FOR THE TERMS SPECIFIED BELOW:
[_] FOR ALL NOMINEES set forth below [_] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below): below:
Terms to expire in 2004
- -----------------------
w. Fred Davis, Jr. David P. George, Jr. Michael D. Glenn
Ann B. Smith
Term to expire in 2003
- ----------------------
Sam B. Phillips, Jr.
INSTRUCTION: To withhold authority to vote for any individual Nominee, strike a
line through the Nominee's name in the list above.
2. At their discretion upon such other matters as may properly come before
the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PALMETTO
BANCSHARES, INC. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR
APPROVAL OF EACH OF THE PROPOSAL 1 ABOVE, AND PROXYHOLDERS WILL VOTE IN THEIR
DISCRETION UPON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENTS.
Please sign this Proxy as your name or names appear hereon. If stock is held
jointly, signature should appear for both names. When signing as attorney,
administrator, trustee, guardian or agent, please indicate the capacity in which
you are acting. If stock is held by a corporation, please sign in full corporate
name by authorized officer and give title of office.
Dated this ______ day of _____________, 2001
_______________________________ _________________________
Print Name Print Name
(and title if appropriate) (and title if appropriate)
_______________________________ __________________________
Signature Signature
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.