Schedule 14A
(Rule 14A-101)
Information Required In Proxy Statement
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 Under Rule 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):
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] Fee paid previously with preliminary materials.
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[LOGO]
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 16, 2002, 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 Elliott Davis, 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
PALMETTO BANCSHARES, INC.
301 HILLCREST DRIVE
P. O. BOX 49
LAURENS, SOUTH CAROLINA 29360
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 16, 2002
-----------------
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 16, 2002, at 3:00 p.m.
at The Palmetto Bank, Corporate Center, 301 Hillcrest Drive, Laurens, South
Carolina, for the following purposes:
1. To elect four 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 1, 2002 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 15, 2002
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 16, 2002
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 16, 2002, 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 1, 2002 will be
entitled to vote at the Annual Meeting. At the close of business on March 1,
2002, there were 6,291,353 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 at least
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.
1
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 four 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 four 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
Name Age Office with the Company Director Since
---- --- ----------------------- --------------
Nominees For Directors
Terms expiring in 2005
John T. Gramling, II 60 Director 1984
James M. Shoemaker, Jr. 69 Director 1984
Paul W. Stringer 58 Director, President and 1986
Chief Operating Officer
Edward K. Snead 42 Director 1997
Directors Continuing In Office
Terms to expire in 2004
W. Fred Davis, Jr. 58 Director 1978
David P. George, Jr. 61 Director 1973
Michael D. Glenn 61 Director 1994
Ann B. Smith 41 Director 1997
Terms expiring in 2003
L. Leon Patterson 60 Director, Chairman of 1971
the Board and
Chief Executive Officer
J. David Wasson, Jr. 56 Director 1979
Sam B. Phillips, Jr. 60 Director 2000
William S. Moore 56 Director 1997
2
Business Experience of Nominees and Directors
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., Ryan's 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 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 the American Bankers Association, Mr. Stringer
served as Chairman of the South Carolina Bankers Association from 1996-1997.
Mr. Snead has been the owner and President of Snead Builders Supply Company,
Incorporated in Greenwood, South Carolina since 1981.
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. 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. 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. Moore, an investor since 1993, 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 eleven meetings in 2001. 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 2001.
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 2001. 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 eleven times during 2001.
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 eleven times during 2001.
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 2001 (the "Named Executive
Officers").
Name Age Company Offices Currently Held Company Officer Since
---- --- ------------------------------ ---------------------
L. Leon Patterson 60 Chief Executive Officer 1982
Paul W. Stringer 58 President and Chief 1982
Operating Officer
Ralph M. Burns, III 51 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 2001 Directors received an annual fee of $14,000, which includes a
retainer fee of $5,000. However, if a Director misses more than one Directors'
meeting and such absence is not excused by the Company, the Company reduces
such fee by $750 for each unexcused absence. In accordance with the preceding,
all Directors received the full annual fee due to no unexcused absences. The
Company feels that these payments are an appropriate reflection of the
Directors' service and the number of Directors' meetings attended. See
"Election of Directors--Meetings and Committees of the Board of Directors".
Summary of Cash and Certain Other Compensation to Named Executive Officers
The following table shows the cash compensation paid by the Company, as well
as certain other compensation paid or accrued, to the Company's Named Executive
Officers for the years ending December 31, 2001, 2000 and 1999.
Summary Compensation Table
Long-Term
Compensation
- - ------------
Securities
Name and Underlying
Principal Position Salary Bonus Other Annual Options All Other
During 2001 Year ($) ($) Compensation ($) Granted (#) Compensation ($)
----------- ---- ------- ------- ---------------- ------------ ----------------
L. Leon Patterson, 2001 280,000 119,000 14,000(1) -0- 47,731(3)
Chairman of the Board and 2000 230,000 16,100 12,500(1) -0- 47,731
Chief Executive Officer 1999 212,400 56,498 10,700(1) -0- 47,731
Paul W. Stringer, 2001 250,000 106,250 14,000(1) -0- 34,877(4)
Director, President and 2000 200,000 14,000 12,500(1) -0- 34,877
Chief Operating Officer 1999 175,000 46,550 10,700(1) -0- 34,877
Ralph M. Burns, III, 2001 110,000 46,750 (2) -0- -0-
Treasurer 2000 100,000 7,000 (2) -0- -0-
1999 94,333 16,600 (2) -0- -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 $50,000 or 10% of the
annual salary and bonus of such executive officer.
(3) This amount is comprised of premiums paid by the Company on behalf of Mr.
Patterson with respect to life insurance not generally available to all
Company employees.
(4) This amount is comprised of premiums paid by the Company on behalf of Mr.
Stringer with respect to life insurance not generally available to all
Company employees.
5
Stock Options
The Company made no option grants with respect to the Common Stock of the
Company to the Named Executive Officers in 2001.
Option Exercises
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at 2001 Fiscal Options at 2001
Year-End (#) Fiscal Year-End ($) (1)
Shares ---------------------- -----------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ ---------------------- -----------------------
L. Leon Patterson. 3,200 58,400 25,600/7,200 $467,200/117,000
Paul W. Stringer.. 0 0 24,000/6,000 $ 438,000/97,500
Ralph M. Burns III 0 0 13,000/3,600 $ 237,250/58,500
- --------
(1) Based on the difference between the option exercise price and the current
trading price of the Company's stock at December 31, 2001.
Pension Plan
The following table sets forth the estimated annual benefits (in single-life
annuity amounts) payable upon normal retirement in fiscal year 2001 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 $80,400.
At the end of 2001, 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, $275,976, 34 years; Mr. Stringer, $235,009, 32
years; and Mr. Burns, $119,411, 26 years.
Pension Plan Table
Years of Service
- -------------------------------
Remuneration 20 25 30 35
------------ ------- ------- ------- -------
$100,000..... $31,162 $38,953 $46,744 $54,534
120,000..... 38,362 47,953 57,544 67,134
140,000..... 45,562 56,953 68,344 79,734
160,000 + up 52,762 65,953 79,144 92,334
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.
6
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
2001 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 2001.
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 50% of their base salary in
incentive cash compensation if 100% of the performance goals were met and
exceeded by specified amounts. For 2001, 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 50% of a Senior Executive's total compensation will consist
of incentive payments made pursuant to the Bonus Plan. In 2001, five of the
seven performance goals were met or exceeded. Internal goals are the Company's
means of judging its performance.
Compensation Paid during 2001. Compensation paid the Company's executive
officers in 2001 consisted of the following elements: base salary and bonus.
Based on Company performance, the Senior Executives earned bonuses equal to
42.50% of their base salary at December 31, 2001, 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 2001. The
foregoing benefits and compensation are not directly or indirectly tied to
Company performance.
7
Mr. Patterson's 2001 Compensation. Mr. Patterson's 2001 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 $280,000 in 2001, as recommended by the
Compensation Committee to the Board of Directors. Mr. Patterson also received
$14,000 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 42.50% of his base salary, or $119,000, for 2001.
Compensation Committee:
James M. Shoemaker, Jr., Chairman
J. David Wasson, Jr.
William S. Moore
Sam B. Phillips, Jr.
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, 2001 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, which the Company filed with its proxy
statement for its 2001 annual meeting of shareholders.
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, 1996 through December 31, 2001 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.
[CHART]
PALMETTO BANCSHARES NASDAQ COMPOSITE NASDAQ BANK
12/31/96 100.00 100.00 100.00
12/31/97 139.94 121.64 163.59
12/31/98 172.08 161.27 151.82
12/31/99 192.56 246.85 143.83
12/31/00 204.86 207.56 158.51
12/31/01 212.90 186.51 168.58
9
PALMETTO BANCSHARES, INC.
ANNUAL INCREASE OF $100 INVESTMENT
December 31, 1996 to December 31, 2001
Palmetto Bancshares Stock Price plus Dividend
Initial Value Value % Investment
Investment Beginning End Increase End
---------- --------- ----- -------- ----------
12/31/96 100.00
12/31/97 100.00 10.14 14.19 39.94% 139.94
12/31/98 139.94 14.19 18.75 32.14% 172.08
12/31/99 172.08 18.75 22.59 20.48% 192.56
12/31/00 192.56 22.59 25.37 12.31% 204.86
12/31/01 204.86 25.37 27.41 8.04% 212.90
NASDAQ COMPOSITE MARKET INDEX
ANNUAL INCREASE OF $100 INVESTMENT
December 31, 1996 to December 31, 2001
NASDAQ Market Index Stock Price
Initial Price Price % Investment
Investment Beginning End Increase End
---------- --------- -------- -------- ----------
12/31/96 100.00
12/31/97 100.00 1,291.03 1,570.35 21.64% 121.64
12/31/98 121.64 1,570.35 2,192.69 39.63% 161.27
12/31/99 161.27 2,192.69 4,069.31 85.59% 246.85
12/31/00 246.85 4,069.31 2,470.52 -39.29% 207.56
12/31/01 207.56 2,470.52 1,950.40 -21.05% 186.51
NASDAQ BANK COMPOSITE INDEX
ANNUAL INCREASE OF $100 INVESTMENT
December 31, 1996 to December 31, 2001
NASDAQ Market Index Stock Price
Initial Price Price % Investment
Investment Beginning End Increase End
---------- --------- -------- -------- ----------
12/31/96 100.00
12/31/97 100.00 1,273.46 2,083.22 63.59% 163.59
12/31/98 163.59 2,083.22 1,838.00 -11.77% 151.82
12/31/99 151.82 1,838.00 1,691.29 -7.98% 143.83
12/31/00 143.83 1,691.29 1,939.45 14.67% 158.51
12/31/01 158.51 1,939.45 2,134.89 10.08% 168.58
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 1,
2002, 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 Beneficial
Name and Address of Beneficial Owner Ownership Percent of Class
------------------------------------ ----------------- ----------------
L. Leon Patterson 554,017(1) 8.81%
301 Hillcrest Drive
Laurens, SC 29360
- --------
(1) The number of shares shown as beneficially owned by Mr. Patterson includes
31,490 shares in the 401(k) account of Mr. Patterson, 58,764 shares owned
by Mr. Patterson's wife, as to which shares Mr. Patterson disclaims
beneficial ownership, and 25,600 unissued shares that can be acquired by
the exercise of stock options prior to May 1, 2002.
The information below is furnished as of March 1, 2002 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........................... 554,017(2) 8.81%
Paul W. Stringer............................ 82,618(3) 1.31%
James M. Shoemaker, Jr...................... 18,200(5) (4)
John T. Gramling, II........................ 16,000(5) (4)
W. Fred Davis, Jr........................... 57,045(6) (4)
David P. George, Jr......................... 12,511(5) (4)
J. David Wasson............................. 11,800(5) (4)
Michael D. Glenn............................ 13,730(5) (4)
Ann B. Smith................................ 5,200(7) (4)
Edward K. Snead............................. 16,120(8) (4)
William S. Moore............................ 20,200(9) (4)
Sam B. Phillips............................. 26,500(5) (4)
Named Executive Officer
Ralph M. Burns, III......................... 52,182(10) (4)
Directors and Executive Officer as a
Group (13 persons)................... 886,123 14.08%
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(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, 2002.
(2) The number of shares shown as beneficially owned by Mr. Patterson includes
31,490 shares in the 401(k) account of Mr. Patterson, 58,764 shares owned
by Mr. Patterson's wife, as to which shares Mr. Patterson disclaims
beneficial ownership, and 25,600 unissued shares that can be acquired by
the exercise of stock options prior to May 1, 2002.
(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 24,000 unissued
shares that can be acquired by the exercise of stock options prior to May
1, 2002.
(4) Each of these persons owns less than one percent of the outstanding shares
of common stock of the Company.
(5) Also included are 4,000 unissued shares that can be acquired by the
exercise of stock options prior to May 1, 2002.
(6) The number of shares beneficially owned by Mr. Davis includes 2,794 shares
owned by his wife and 3,750 shares in an estate of which Mr. Davis is the
executor. Mr. Davis disclaims beneficial ownership of these shares. Also
included are 4,000 unissued shares that can be acquired by the exercise of
stock options prior to May 1, 2002.
(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, 2002.
(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 4,000 unissued shares that can be acquired by
the exercise of stock options prior to May 1, 2002.
(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.
(10) The number of shares shown as beneficially owned by Mr. Burns includes
16,342 shares in the 401(k) account of Mr. Burns and 13,000 unissued
shares that can be acquired by the exercise of stock options prior to May
1, 2002.
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.
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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 2001, all required Section 16(a) filings
applicable to its executive officers, Directors and greater than 10% beneficial
owners were made on a timely basis with the exception of the following. Messrs.
Patterson and Phillips were late in filing a Form 4 that disclosed one
transaction each. Mr. Glenn engaged in a single transaction that should have
been filed on Form 4, but was instead filed on Form 5 in a timely manner.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Elliott Davis, LLP, the Company's independent auditor
during 2001, 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.
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the Company's annual financial statements and employee benefit plans 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 $79,030.
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 Elliott Davis, LLP for
the most recent fiscal year.
All Other Fees
The aggregate fees billed for all professional services rendered by Elliott
Davis, LLP for the most recent fiscal year other than those described in the
prior two paragraphs were $14,000. The Audit Committee has considered whether
the provision of these services is compatible with maintaining Elliott Davis,
LLP's independence.
SHAREHOLDER PROPOSALS
Proposals by shareholders for consideration at the 2003 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 15, 2002,
if any such proposal is to be eligible for inclusion in the Company's proxy
materials for its 2003 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.
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FINANCIAL INFORMATION
The Company's 2001 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 1,
2002, 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, 2001
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 15, 2002
Laurens, South Carolina
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