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.
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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Fee paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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CAROLINA
FINANCIAL CORPORATION
288 Meeting Street
Charleston, SC 29401
(843) 723-7700
March
20, 2017
Dear Stockholder:
On
behalf of the Board of Directors and management of Carolina Financial Corporation (the “Company”), we cordially invite
you to attend the Annual Meeting of Stockholders. The meeting will be held at 5:00 p.m. on April 26, 2017 at the Marina Inn at
Grande Dunes, 8121 Amalfi Place, Myrtle Beach, South Carolina.
In addition
to the annual stockholder vote on corporate business items, the meeting will include management’s report to you on the Company’s
fiscal 2016 financial and operating performance.
An
important aspect of the meeting process is the stockholder vote on corporate business items. We urge you to exercise your rights
as a stockholder to vote and participate in this process. Stockholders are being asked to consider and vote upon the following
proposals: (i) to elect three directors to serve for a term of three years and (ii) to ratify the appointment of the Company’s
independent registered public accounting firm for the fiscal year ended December 31, 2017. The Board of Directors has carefully
considered these proposals and unanimously recommends that you vote for each of the nominees and in favor of the proposal calling
for a “yes” or “no” vote.
We
encourage you to attend the meeting in person. Whether or not you attend the meeting, we hope that you will read the enclosed
proxy statement and vote your shares in advance of the Annual Meeting either by internet, telephone or by mail. Instructions regarding
internet and telephone voting are included on the proxy card. If you choose to submit a proxy by mail, please mark, sign and date
the proxy card and promptly return it in the enclosed postage-paid envelope. This will save the Company additional expense in
soliciting proxies and will ensure that your shares are represented. If you need assistance in completing your proxy, please call
the Assistant Secretary of the Company at (843) 534-5142. If you are a stockholder of record, attend the meeting, and desire to
revoke your proxy and vote in person, you may do so.
Thank you for your
attention to this important matter.
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Sincerely,
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G. Manly Eubank
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Chairman of the Board
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CAROLINA
FINANCIAL CORPORATION
288
Meeting Street
Charleston, South Carolina 29401
(843) 723-7700
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 2017
Notice
is hereby given that the Annual Meeting of Stockholders (the “Meeting”) of Carolina Financial Corporation (the “Company”)
will be held at the Marina Inn at Grande Dunes, 8121 Amalfi Place, Myrtle Beach, South Carolina. at 5:00 p.m., local time, on
April 26, 2017.
A proxy card and a
proxy statement for the Meeting are enclosed.
The Meeting is for
the purpose of considering and acting upon:
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The
election of three directors to serve for a term of three years;
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2.
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The
ratification of the appointment of Elliott Davis Decosimo, LLC as the independent registered
public accounting firm of the Company for the fiscal year ending December 31, 2017; and
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3.
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Such
other matters as may properly come before the Meeting, or any adjournments thereof.
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The
Board of Directors is not aware of any other business to come before the Meeting. Any action may be taken on the foregoing proposals
at the Meeting on the date specified above or on any date or dates to which the Meeting may be adjourned. Stockholders of record
at the close of business on March 3, 2017 are the stockholders entitled to vote at the Meeting and any adjournments thereof. A
complete list of these stockholders will be available at the Company’s offices prior to the Meeting.
Whether
or not you plan to attend the Meeting in person, you are requested to promptly vote by telephone, internet, or by mail on the
proposals presented, following the instructions on the proxy card for whichever voting method you prefer. If you vote by mail,
please mark, sign and date the proxy card and promptly return it in the enclosed postage-paid envelope. If you need assistance
in completing your proxy card, please call the Assistant Secretary of the Company at 843-534-5142.
If you are a record shareholder,
attend the meeting, and desire to revoke your proxy and vote in person, you may do so. In any event, a proxy may be revoked by
a record shareholder at any time before it is executed.
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BY ORDER OF THE BOARD OF DIRECTORS
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M. J. Huggins, III
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Executive Vice President and Secretary
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Charleston, South Carolina
March 20, 2017
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
CAROLINA
FINANCIAL CORPORATION
288 Meeting Street
Charleston, South Carolina 29401
(843) 723-7700
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2017
This
proxy statement is furnished in connection with the solicitation on behalf of the Board of Directors of Carolina Financial Corporation
(the “Company”), the parent company of CresCom Bank (the “Bank”), Crescent Mortgage Company (“Crescent
Mortgage”), and Carolina Services Corporation of Charleston (“Carolina Services Corporation”), which are direct
subsidiaries of the Bank, to be used at the Annual Meeting of Stockholders of the Company (the “Meeting”), which will
be held at the Marina Inn at Grande Dunes, 8121 Amalfi Place, Myrtle Beach, South Carolina on April 26, 2017, at 5:00 p.m., local
time, and all adjournments of the Meeting. The accompanying Notice of Annual Meeting and this proxy statement are first being
mailed to stockholders on or about March 20, 2017.
At
the Meeting, stockholders of the Company are being asked to consider and vote upon the election of three directors to serve for
a term of three years and to ratify the appointment of Elliott Davis Decosimo, LLC as the independent registered public accounting
firm for the Company for the fiscal year ended December 31, 2017.
Vote Required and Proxy
Information
The
Board of Directors set March 3, 2017, as the record date for the Meeting. Stockholders that owned the Company’s common
stock at the close of business on that date are entitled to vote and to attend the Meeting. As of the record date, there were
14,438,595 shares of common stock outstanding, which were held
by 1,175 stockholders of record. Each share of the Company’s common stock is entitled to one vote on all matters voted
on at the Meeting. If you are a stockholder of record who wishes to vote, you may do so by selecting one of the following
options:
Voting
by Proxy
: You are requested to vote the enclosed form of proxy, which is solicited on behalf of the Board of Directors,
either by internet, telephone or by mail. Instructions regarding internet and telephone voting are included on the proxy card.
If you choose to submit a proxy by mail, please mark, sign and date the proxy card and promptly return it in the enclosed postage-paid
envelope. No postage is required if mailed within the United States. If you receive more than one proxy card, it means that you
have multiple accounts at the transfer agent. Please vote all proxy cards to be certain that all your shares are voted.
Voting in Person
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Stockholders of record may vote in person at the Meeting.
Many
of the Company’s stockholders hold their shares through a stockbroker, bank, or other nominee rather than directly in their
own name. If you hold the Company’s shares in a stock brokerage account or by a bank or other nominee, you are considered
the
beneficial owner
of shares held in street
name,
and these materials are being forwarded to you by your broker or nominee, which is considered the
stockholder of record
with respect to those shares. As the
beneficial owner
, you have the right to direct your broker or nominee how to vote
and are also invited to attend the Meeting. However, since you are not the
stockholder of record
, you may not vote these
shares in person at the Meeting unless you obtain a signed proxy from the
stockholder of record
giving you the right to
vote the shares. Your broker or nominee has enclosed or provided a voting instruction card for you to use to direct your broker
or nominee how to vote these shares.
If
you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of the Company’s
director nominees.
In the past, if you held your shares in street name and you did not indicate how you wanted your shares
voted on certain matters, your bank or broker was allowed to vote those shares on your behalf as they felt appropriate. Your brokerage
firm may now vote your shares only under certain circumstances. Brokerage firms have authority under stock exchange rules to vote
their customers’ shares on certain “routine” matters. We expect that brokers will be allowed to exercise discretionary
authority for
beneficial owners
who have not provided voting instructions ONLY with respect to the ratification of the
appointment of our independent registered public accounting firm, but not with respect to the election of directors. If you hold
your shares in street name, it is critical that you cast your vote so your shares may be voted on all proposals.
When
a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted for purposes of establishing
a quorum to conduct business at the meeting. If a brokerage firm indicates on a proxy that it does not have discretionary authority
to vote certain shares on a particular matter, then those shares will be treated as “broker non-votes.”
A
majority or more of the outstanding shares of common stock entitled to vote at the Meeting will constitute a quorum. We will include
abstentions and broker non-votes in determining whether a quorum exists. If a share is represented for any purpose at the Meeting
by the presence of the registered owner or a person holding a valid proxy for the registered owner, it is deemed to be present
for the purposes of establishing a quorum. Therefore, valid proxies which are marked “Abstain” or “Withhold”
or as to which no vote is marked, including broker non-votes, will be included in determining the number of votes present or represented
at the Meeting.
Assuming in each case
that a quorum is present:
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With respect to Proposal
No. 1, the directors will be elected by a plurality of the votes of the shares of common stock present in person or represented
by proxy at the Meeting and entitled to vote on the election of directors. This means that the individuals who receive the highest
number of votes are selected as directors up to the maximum number of directors to be elected at the Meeting. Abstentions, broker
non-votes, and the failure to return a signed proxy will have no effect on the outcome of the vote on this matter.
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With respect to Proposal
No. 2, the proposal will be approved if the number of shares of common stock voted in favor of the matter exceed the number of
shares of common stock voted against the matter. Abstentions, broker non-votes, and the failure to return a signed proxy will
have no effect on the outcome of the vote on this matter.
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Any other matters
that may be brought before the Meeting will be determined by a majority of the votes cast.
As
of the record date, the Company’s directors and executive officers owned or were deemed to control approximately 12.26%
of the Company’s common stock, and they have indicated that they intend to vote their shares for the election of the Company’s
director nominees and for the ratification of Elliott Davis Decosimo, LLC as our independent registered public accounting firm
for the fiscal year ended December 31, 2017.
When
you sign the proxy card, you appoint W. Scott Brandon and Robert M. Moïse as your representatives at the Meeting. Messrs.
Brandon and Moïse will vote your proxy as you have instructed them on the proxy card. If you submit a proxy but do not specify
how you would like it to be voted, Messrs. Brandon and Moïse will vote your proxy for the election to the Board of Directors
of all the nominees listed below under “Election of Directors” and for the ratification of the appointment of Elliott
Davis Decosimo, LLC as the independent registered public accounting firm for the Company for the fiscal year ending December 31,
2017. The Company is not aware of any other matters to be considered at the Meeting. However, if any other matters come before
the Meeting, Messrs. Brandon and Moïse will vote your proxy on such matters in accordance with their judgment.
A
proxy given pursuant to the solicitation may be revoked at any time before it is voted. Proxies may be revoked by (i) filing with
the Secretary of the Company at or before the Meeting a written notice of revocation bearing a later date than the proxy, (ii)
duly executing a subsequent proxy relating to the same shares and delivering it to the Secretary of the Company at or before the
Meeting, or (iii) attending the Meeting and voting in person (although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy before the Meeting should be delivered to M. J. Huggins, III, Secretary,
Carolina Financial Corporation, 288 Meeting Street, Charleston, South Carolina 29401.
The
Company is paying for the costs of preparing and mailing the proxy materials and of reimbursing brokers and others for their expenses
of forwarding copies of the proxy materials to its stockholders. Our officers and employees may assist in soliciting proxies but
will not receive additional compensation for doing so. The Company is distributing this proxy statement on or about March 20,
2017.
Important
Notice of Internet Availability
. The proxy statement and the Company’s 2016 Annual Report on Form 10-K are available
to the public for viewing under the Investor Relations section under the SEC Filings tab of the Company’s website https://www.haveanicebank.com.
In
addition, the above items and other filings with the Securities and Exchange Commission (the “SEC”) are also available
to the public on the SEC’s website at www.sec.gov. Upon written or oral request by any stockholder, we will deliver a copy
of the Company’s 2016 Annual Report on Form 10-K. Only one copy of the Company’s proxy materials is being delivered
to two or more stockholders who share an address. However, upon written or oral request, we will also promptly deliver a copy
of this proxy statement to the Company’s stockholders at a shared address to which a single copy of the document was delivered.
Stockholders should contact M. J. Huggins, III, Secretary, Carolina Financial Corporation,
288 Meeting Street Charleston,
South Carolina 29401 or at (843) 723-7700 if they wish to receive an additional copy of the Company’s proxy materials. Alternatively,
any stockholders sharing an address and currently receiving multiple copies of the proxy materials may request that a single copy
of the proxy materials be provided their shared address.
PROPOSAL I -
ELECTION OF DIRECTORS
General Information Regarding
Election of Directors
The
Company’s Board of Directors is presently composed of 11 members and divided into three classes. Directors of the Company
are generally elected to serve for a three-year term. The terms are staggered in order to provide for the election of approximately
one-third of the directors each year. The Company’s Bylaws provide for an age limitation in that no person who has reached
the age of 75 years may be elected or appointed to a term of office as a director.
Class I
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Class II
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Class III
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Robert M. Moïse, CPA
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W. Scott Brandon
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Robert G. Clawson, Jr
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David L. Morrow
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Jeffery L. Deal, M.D.
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Gary M. Griffin
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Jerold L. Rexroad
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Michael P. Leddy
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Daniel H. Isaac, Jr.
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Claudius E. Watts IV
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Thompson E. Penney
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At
the Meeting, stockholders will elect three nominees as Class III directors to serve a three-year term, expiring at the 2020 Annual
Meeting of Stockholders of the Company. The directors will be elected by a plurality of the votes cast at the Meeting. This means
that the three nominees receiving the highest number of votes will be elected. Abstentions and broker non-votes with respect to
the nominees will not be considered to be either affirmative or negative votes. Stockholders do not have cumulative voting rights
with respect to the election of directors.
The Board
of Directors recommends that you elect Messrs. Clawson, Griffin and Isaac as Class III directors.
One of
the Company’s current Class III directors – G. Manly Eubank – will not stand for re-election. His term as a director
will expire at the Meeting.
If
you submit a proxy but do not specify how you would like it to be voted, Messrs. Brandon and Moïse will vote your proxy to
elect Messrs. Clawson, Griffin and Isaac. If any of these nominees are unable or fails to accept nomination or election (which
we do not anticipate), Messrs. Brandon and Moïse will vote instead for a replacement to be recommended by the Board of Directors,
unless you specifically instruct otherwise in the proxy.
Information on Nominees
Set
forth below is certain information about the nominees, including their age, the period they have served as a director or executive
officer, their business experience for at least the past five years, the names of other publicly-held companies where they currently
serve as a director or served as a director during the past five years, and additional information about the specific experience,
qualifications, attributes, or skills that led to the Board of Directors’ conclusion that such person should serve as a
director for the Company.
Robert
G. Clawson, Jr., 74,
has served as a member of the Company’s Board of Directors since 1996. Mr. Clawson is a founding
member of the law firm of Clawson and Staubes, LLC, and is a member of the South Carolina State Bar, the American Bar Association,
the Metropolitan Exchange Club, and The Hibernian Society. Mr. Clawson is admitted to practice law before the South Carolina Supreme
Court, the U.S. District Court for the District of South Carolina, the U.S. Court of Appeals for the Fourth Circuit,
the
U.S. Court of Federal Claims, the U.S. Tax Court, and the U.S. Court of International Trade. Mr. Clawson previously served as
President of the South Carolina Municipal Attorneys Association and the College of Charleston Cougar Club. He is a graduate of
the University of North Carolina and the University of South Carolina School of Law. Mr. Clawson’s qualification as a member
of the Board of Directors is primarily attributed to his experience in founding a successful law practice and his extensive legal
experience.
Gary
M. Griffin, 62,
a native of Greer, South Carolina, served as a director of Greer Bancshares Incorporated and Greer State Bank
(collectively, “Greer”) from 1992 until March 2017 when they were acquired by the Company and the Bank. Under the
definitive agreement governing the Company’s acquisition of Greer, the Company agreed to appoint Mr. Griffin as a Class
III director and nominate him for re-election at the Meeting. During his tenure as a Greer director, Mr. Griffin served two terms
as Chairman of the Board of Directors. He is a graduate of Furman University and has served as
Vice-President and part
owner of Mutual Home Stores, a group of retail home furnishings stores in the upstate region of South Carolina, where he has over
40 years of work experience in all aspects of the business. Mr. Griffin is a past president of the Greer Lions Club. He has served
as a board member and treasurer of Greer Community Ministries, which provides a Meals on Wheels program in the region. He also
served as a board member of The Greer Relief and Resources Agency. Mr. Griffin’s qualification to serve on the Company’s
Board of Directors is primarily attributed to his previous experience serving as a director of Greer, as well as his successful
business experience in the upstate region of South Carolina.
Daniel
H. Isaac, Jr., 65,
has served as a member of the Company’s Board of Directors since 2016 and has served as a member
of the Board of Directors of the Company’s wholly-owned subsidiary, CresCom Bank, since 2001. Mr. Isaac is founder and co-owner
of A&I Fire and Water Restoration. He holds a Bachelor of Science degree from The Citadel in Charleston, South Carolina. Mr.
Isaac has been involved in numerous local and state organizations. He previously served as Chairman of the Myrtle Beach Chamber
of Commerce and the South Carolina Department of Transportation. Mr. Isaac’s qualification to serve on the Company’s
Board of Directors is attributable primarily to his experience of founding a successful business and his involvement in many leadership
positions.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” EACH OF THE NOMINEES LISTED IN THIS PROXY STATEMENT.
Information of Other Directors
and Executive Officers
Set
forth below is also information about each of the Company’s other directors and executive officers, including their age,
the period they have served as a director or executive officer, their business experience for at least the past five years, the
names of other publicly-held companies where they currently serve as a director or served as a director during the past five years,
and additional information about the specific experience, qualifications, attributes, or skills that led to the board’s
conclusion that such person should serve as a director for the Company.
W.
Scott Brandon, 53,
has served as a member of the Company’s Board of Directors since 2001. Mr. Brandon is owner and CEO
of The Brandon Agency, South Carolina’s largest independently owned
advertising agency. He is
also owner of Intellistrand, an internet marketing company that buys, sells and monetizes intuitive domain names on the internet
as well as Fuel Interactive, South Carolina’s first and largest interactive-only advertising agency. He holds a Bachelor
of Science degree in Economics from Davidson College and a Juris Doctor degree from the University of South Carolina School of
Law. Mr. Brandon is a 2012 recipient of The American Advertising Federation’s Silver Medal Award for his outstanding contributions
to advertising and creative excellence. Mr. Brandon currently serves on the Board of Directors for the Charleston Metro Chamber
of Commerce, the Myrtle Beach Area Recovery Council and the Myrtle Beach Regional Economic Development Corporation and is a member
of the Board of Trustees for Brookgreen Gardens. He is a past member of the Horry-Georgetown Technical College Board of Visitors,
past board member of The E. Craig Wall School of Business Administration Board of Visitors, past board member of the American
Heart Association (Coastal Chapter), past board member of the Better Business Bureau, past board member of the Salvation Army
Horry County as well as the Myrtle Beach Haven. He is a current member of Young Presidents Organization and Chief Executives Organization.
Mr. Brandon has substantial leadership and financial experience as founder of several successful businesses and is extensively
involved in the local community, both of which enhance his ability to serve on the Company’s Board of Directors.
Jeffery
L. Deal, M.D. 62,
has served as a member of the Company’s Board of Directors since 1996. Dr. Deal is an anthropologist
and physician and served as Director of Health Studies for Water Missions International, a non-profit non-governmental organization
that provides water and sanitation for developing areas. Dr. Deal is a founding partner of Charleston ENT, and previously served
as President of the Medical Staff of Bon Secours-St. Francis Hospital, Medical Director of a startup medical facility in South
Sudan, and several other related positions. Dr. Deal is a Fellow in the American College of Surgeons, a Fellow in the American
Academy of Otolaryngology - Head and Neck Surgery, and a Fellow in the Royal Society of Tropical Medicine. Dr. Deal is a graduate
of the Medical University of South Carolina and completed his residency at the National Naval Medical Center in Bethesda, Maryland.
He brings to the Board of Directors insights relative to the challenges and opportunities facing small businesses and healthcare
professionals within the Company’s market areas.
Michael
P. Leddy, 73,
has served as a member of the Company’s Board of Directors since 2013 and as a Director of Crescent Mortgage
Company since 2004. Prior to joining the Company’s Board of Directors, Mr. Leddy was the President and Chief Executive Officer
of Crescent Mortgage Company from 2008 until 2011. Mr. Leddy has more than 40 years of mortgage banking experience and was a founding
team member in the formation of Arvida Mortgage, a subsidiary of Walt Disney Productions. Mr. Leddy was briefly retired from 2011
until he joined the Company’s Board of Directors in 2013. Mr. Leddy served in the U.S. Navy on board the USS Thomas Jefferson.
He holds a Bachelor of Science degree in finance from University of Central Florida and a Juris Doctor degree from Atlanta Law
School. Mr. Leddy’s qualification as a member of the Board of Directors is primarily attributed to his experience in founding
two mortgage companies and previously holding the position of CEO of Crescent Mortgage Company, as well as his vast knowledge
of the mortgage industry.
Robert
M. Moïse, 68,
has served as a member of the Company’s Board of Directors since 1996. Mr. Moïse is a partner
with WebsterRogers LLP in Charleston, South Carolina. He holds Bachelor of Science and Master of Accountancy degrees from the
University of South Carolina and has been admitted to practice before the United States Tax Court. He serves as President of the
Coastal Council BSA and is a member of the Coastal Boys Council Board. He is a member of the American Institute of Certified Public
Accountants, having served on their national Tax Practice Responsibilities Committee and is a member of the South Carolina Association
of Certified Public Accountants. Mr. Moïse served as Chairman of the
Charleston
County Business License Appeals Board. In his professional practice, Mr. Moïse has, after leaving the Internal Revenue Service,
worked with national and local CPA firms and has concentrated his practice in the tax area with an emphasis on tax controversy
matters and complicated mergers, acquisitions and liquidations for many clients around the state. Mr. Moïse brings to the
board his 40 years of financial expertise and business skills. Mr. Moïse’s finance and accounting expertise also qualify
him to serve as Chairman of the Company’s Audit Committee and to be considered an “audit committee financial expert.”
David
L. Morrow, 66,
has served as an Executive Vice President of the Company since 2004 and has served as a member of the Company’s
Board of Directors since 2001. Mr. Morrow is a graduate of Clemson University with a Bachelor of Science degree and has more than
42 years of experience in banking and financial institution management in South Carolina. Prior to founding Crescent Bank, a predecessor
to CresCom Bank, he served as President of Carolina First Savings Bank and also as Executive Vice President and member of the
Board of Directors of Carolina First Bank. He is currently a member of the Clemson University Board of Visitors, a member of the
Board of Directors and 1
st
Vice Chairman for the S.C. Bankers Association (SCBA) and a member of the Board of Advisors
of the Hollings Cancer Center at the Medical University of South Carolina. Most recently, Mr. Morrow was also named to a three-year
appointment with the Federal Reserve Community Depository Institutions Advisory Council (CDIAC), as well as the ABA Community
Bankers Council. He is also a past Board member of the Storm Eye Institute at the Medical University of South Carolina, a past
member of the Board of Directors of Leadership South Carolina and a past member of the Board of Directors for the South Carolina
Museum Foundation. His years of experience in financial institution management, including previous service as a director of a
state-wide financial institution and CEO of both predecessor banks of CresCom Bank, provide a valuable perspective as a director.
Thompson
E. “Thom” Penney, 66,
has served as a member of the Company’s Board of Directors since 2013. Mr. Penney
is the Chairman of the Board and President/CEO (a position he has held since 1989) of LS3P, a multi-disciplinary firm offering
architecture, planning, and interior architecture services to clients throughout the United States. With more than 300 personnel
throughout eight Southeastern offices, he is responsible for overall firm management, organizational vision, successful integration
of professional services, marketing, and operations of the firm. Mr. Penney has more than 42 years of experience in the architectural
field and under his leadership, LS3P has grown to become a firm consistently recognized by Engineering News and Record as one
of the Top 500 Design Firms and Top 50 Architectural Firms in the United States. A graduate of Clemson University with a bachelor’s
degree (1972) and master’s degree (1974) in architecture, Penney received the Alumni Distinguished Service Award from Clemson
University, was recipient of the AIA South Carolina Medal of Distinction, its highest honor, he has received the Joseph P. Riley
Leadership Award from the Charleston Metro Chamber and was honored with the Award for Ethics and Civic Responsibility from The
Free Enterprise Foundation. Mr. Penney generously volunteers his time to his profession and community, having served as National
President of The American Institute of Architects (2003); Chairman of the Charleston Metro Chamber of Commerce (2008), and is
current Co-Chair of the National AIA-AGC Joint Committee. He is also on the Boards of the South Carolina Aquarium, the Charleston
Regional Development Alliance, the AIA large Firm Roundtable, and is Vice Chair of the Trident CEO Council. His qualifications
as a member of the Board of Directors is attributed to his business expertise within the Company’s market areas.
Jerold
L. Rexroad, 56,
has served as the Company’s President and Chief Executive Officer since 2012 and as a director since
2012. Mr. Rexroad also serves as Executive Chairman of the Board of the Bank and Executive Chairman of the Board of Crescent Mortgage
Company. Mr. Rexroad joined the Company in May 2008 as Executive Vice President. Mr. Rexroad began his career in 1982 with Peat,
Marwick,
Mitchell
and Co., a predecessor to the international accounting firm KPMG LLP, and is a Certified Public Accountant. He became a KPMG partner
in 1994 with responsibilities for all financial institutions in South Carolina. In 1995, Mr. Rexroad joined Coastal Financial
Corporation as Executive Vice President and Chief Financial Officer. Under his oversight, the bank grew organically from $375
million in total assets to over $1.8 billion in total assets. Coastal Financial Corporation was sold to BB&T in 2007. Mr.
Rexroad is a member of the American Institute of Certified Public Accountants and the South Carolina Association of Certified
Public Accountants. Mr. Rexroad is a graduate of Bob Jones University, cum laude. His leadership experience, including over 30
years of experience in public accounting and financial institution management, as well as his service as the chief financial officer
of a public bank holding company, enhance his ability to serve on the Company’s Board of Directors. These roles have required
industry expertise combined with operational and global management expertise.
Claudius
E. “Bud” Watts IV, 55,
has served as a member of the Company’s Board of Directors since 2015. Mr. Watts
is a Partner and Managing Director of The Carlyle Group where he specializes in control equity investments in larger companies
focused on software, software enabled services, semiconductors, and electronic systems. Mr. Watts established the firm’s
Technology Buyout Group in 2004 and led it until 2014. Mr. Watts led Carlyle’s investment in, and, currently serves on the
Board of Directors of, CommScope (NASDAQ: COMM), where he has served as Director since 2011. Previously, Mr. Watts led Carlyle’s
investments in, and served on, the Boards of Directors of technology companies SS&C Technologies, Open Link Financial, Open
Solutions, Freescale Semiconductor, and Jazz Semiconductor, as well as aerospace companies Firth Rixon, Sippican, and CPU Technology.
In addition to his current business activities,
Mr. Watts also serves as the Chairman of the Board of The Citadel Foundation
and The Citadel Trust, which manage the primary endowment funds supporting The Citadel. Prior to joining Carlyle in 2000, Mr.
Watts was a Managing Director in the Mergers & Acquisitions group of First Union Securities, Inc. He joined First Union Securities
when First Union acquired Bowles Hollowell Conner & Co., where Mr. Watts was a principal. Prior to joining Bowles Hollowell,
Mr. Watts was a fighter pilot in the U.S. Air Force. During his service, he was qualified as an instructor pilot in both the F-16
and A-10 aircraft and served in a number of leadership and operations management positions in the United States and abroad. Mr.
Watts earned a B.S. in electrical engineering cum laude from The Citadel in Charleston, South Carolina, and an M.B.A. from the
Harvard Graduate School of Business Administration. His qualifications as a member of the Board of Directors is attributed to
his business expertise with public companies.
Other
than Messrs. Morrow and Rexroad, for which disclosure is provided above, the following provides information regarding the Company’s
other executive officers:
William
A. Gehman, III, 56,
has served as the Company’s Executive Vice President and Chief Financial Officer since 2012. Prior
to being promoted to Chief Financial officer, Mr. Gehman was the Company’s Controller from 2008 to 2012. Mr. Gehman is also
the Chief Financial Officer of the Bank, Crescent Mortgage Company and Carolina Services Corporation. Mr. Gehman, a Certified
Public Accountant with over 14 years of experience in financial institutions, spent over nine years with Peat, Marwick, Mitchell
& Co., after which he joined Coastal Financial Corporation in 2002 as Senior Vice President and Corporate Controller, where
his responsibilities included public and regulatory reporting. Mr. Gehman is a member of the American Institute of Certified Public
Accountants and the South Carolina Association of Certified Public Accountants. Mr. Gehman is a graduate of Liberty Baptist College.
M.
J. Huggins, III, 54,
has served as the Company’s Executive Vice President since 2010 and Secretary since 2012. Mr. Huggins
is also a founding board member and former President, Chief Credit Officer and Secretary of Crescent Bank. Prior to joining the
Company and assisting in the founding of
Crescent
Bank, Mr. Huggins served as Area Executive and Senior Vice President of Carolina First Bank, responsible for commercial and retail
operations from Georgetown to Myrtle Beach, South Carolina. Prior to his tenure with Carolina First Bank, Mr. Huggins worked for
C&S Bank. Mr. Huggins is an executive board member of the Wall College Board of Visitors at Coastal Carolina University. He
is a graduate of Coastal Carolina University (Wall College Alumnus of the Year in 2003) and The Graduate School of Banking at
Louisiana State University.
Fowler
Williams, 42,
has served as President, as well as a Director of Crescent Mortgage Company since 2011. In 2016, Mr. Williams
was promoted to CEO and President of Crescent Mortgage Company. In his 17 years at Crescent Mortgage Company, Mr. Williams has
previously worked as National Sales Manager and Executive Vice President over Sales and Operations. Mr. Williams holds the highest
designation in the mortgage industry as a Certified Mortgage Banker (CMB). Mr. Williams has served as Chairman of the Mortgage
Action Alliance (MAA), the grassroots policy, advocacy, and lobbying network for the real estate finance industry. Mr. Williams
also has been named 2015-2016 Chairman of the Community Bank and Credit Union Network (CBCUN) for the Mortgage Bankers Association
where he serves on the Independent Mortgage Bankers Executive Counsel and the Regulatory Compliance Committee. Mr. Williams also
has been named to the Customer Advisory Board of Freddie Mac, both the QM and TRID regulatory implementation committees for the
MBA, and has twice been named to the forty most influential mortgage professionals under 40 by National Mortgage Professional
magazine.
Family and
Business Relationships
. No director has a family relationship with any other director or executive officer of the Company.
PROPOSAL
II – RATIFICATION OF APPOINTMENT OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our
Audit Committee has appointed Elliott Davis Decosimo, LLC to be the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2017, subject to the ratification of the appointment by the Company’s stockholders.
Representatives of Elliott Davis Decosimo, LLC are expected to attend the Meeting to respond to appropriate questions and to make
a statement if they so desire. Although stockholder ratification of the appointment of the registered public accounting firm for
the Company is not required by the Company’s Bylaws or otherwise, the Company is submitting the selection of Elliott Davis
Decosimo, LLC to its stockholders for ratification to permit stockholders to participate in this important corporate decision.
If not ratified, the Audit Committee will reconsider the selection, although the Audit Committee will not be required to select
a different independent registered public accounting firm.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ELLIOTT DAVIS DECOSIMO,
LLC AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017.
CORPORATE GOVERNANCE
Board Leadership Structure
and Role in Risk Oversight
The
Board of Directors is focused on the Company’s corporate governance practices and values independent board oversight as
an essential component of strong corporate performance to enhance stockholder value. The Board of Directors’ commitment
to independent oversight is demonstrated by the fact that the majority of the Company’s directors are independent.
The
Company believes that it is preferable for an independent director to serve as Chairman of the Board of Directors. G. Manly Eubank,
a director of the Company since 1996 and a long-time resident of the Company’s primary market area, has served as Chairman
of the Board of Directors since 2015
.
Effective upon Mr. Eubank’s retirement from the Board of Directors at the Meeting,
Claudius E. “Bud” Watts IV will serve as Chairman of the Board of Directors. The Company believes it is the Chief
Executive Officer’s responsibility to run the Company and the Chairman’s responsibility to run the Board of Directors.
As directors continue to have more oversight responsibility than ever before, the Company believes it is beneficial to have an
independent Chairman whose sole job is leading the Board of Directors. In making its decision to have an independent Chairman,
the Company considered the time that
Mr. Rexroad will be required to devote as Chief Executive Officer of the Company.
By having another director serve as Chairman of the Board of Directors, Mr. Rexroad will be able to focus his entire energy on
running the Company. This will also ensure there is no duplication of effort between the Chief Executive Officer and the Chairman.
The Company believes this structure provides strong leadership for the Board of Directors, while also positioning the Chief Executive
Officer as the leader of the Company in the eyes of the Company’s customers, employees, and other stakeholders.
Risk
oversight is the responsibility of the Board of Directors, collectively and individually. The Board of Directors fulfills this
responsibility through a combination of oversight with respect to direct board reports from management and the delegation of specific
risk monitoring to its committees, which in turn provide reports to the full Board of Directors at each regular meeting. Notwithstanding
the foregoing, the Board of Directors believes that its role is one of oversight, recognizing that management is responsible for
executing the Company’s risk management policies.
At
each regular meeting, the Board of Directors’ standing agenda requires reports from the Chief Financial Officer and other
executive officers, who collectively are responsible for all risk areas. Their agenda items are designed to elicit information
with respect to each of these areas. The Board of Directors does not concentrate the delegation of its responsibility for risk
oversight in a single committee. Instead, each of the Board of Directors’ committees concentrates on specific risks for
which its members have an expertise, and each committee is required to regularly report to the Board of Directors on its findings.
The Company believes this division of responsibility is the most effective approach for addressing the risks it faces and that
the Board of Directors leadership structure supports this approach.
The
Company recognizes that different board leadership structures may be appropriate for companies in different situations. The Company
will continue to reexamine its corporate governance policies and leadership structures on an ongoing basis to ensure that they
continue to meet the Company’s needs.
Director Independence
The
Board of Directors annually evaluates the independence of its members based on Item 407(a) of Regulation S-K and NASDAQ Rule 5605(a)(2).
In addition, the Board of Directors annually evaluates the independence of its Audit Committee and Compensation Committee members
based on NASDAQ Rules 5605(c)(2) and (d)(2), respectively. The Company’s corporate governance guidelines and principles
require that a majority of the Board of Directors be composed of directors who meet the requirements for independence established
by these standards. The Board of Directors has concluded that the Company has a majority of independent directors and that the
Board of Directors meets the standards of NASDAQ Rule 5605(a)(2). The Board of Directors has also concluded that the members of
the Audit Committee meet the standards of NASDAQ Rule 5605(c)(2) and that the members of the Compensation Committee meet the standards
of NASDAQ Rule 5605(d)(2).
The
Board of Directors has determined that Messrs. Brandon, Clawson, Deal, Eubank, Isaac, Leddy, Moïse, Penney and Watts are
independent taking into account the matters discussed under “Certain Relationships and Related Transactions.” Mr.
Rexroad, the Company’s President and Chief Executive Officer, and Mr. Morrow, the Company’s Executive Vice President,
are not considered to be independent as they are also executive officers of the Company.
Meetings and Committees
of the Board of Directors
During
2016, the Board of Directors held eight regular and special meetings. Each of the current directors attended at least 75% of the
aggregate of such board meetings and meetings of each committee on which they served for the periods during which they served.
The Board of Directors has not implemented a formal policy regarding director attendance at the Company’s Annual Meeting
of Stockholders, although each director is expected to attend all Annual Meetings of Stockholders absent unusual or extenuating
circumstances. All of the Company’s directors attended the 2016 Annual Meeting of Stockholders.
The
Board of Directors has standing Audit, Compensation/Benefits and Corporate Governance/ Nominating committees, each of which is
described in more detail below. The Board of Directors previously also had an Executive and a Finance and Capital Allocation Committee;
however, in May 2016, the Executive and the Finance and Capital Allocation Committees were dissolved, but the Board may reconstitute
the Executive Committee should the need arise.
Audit Committee
The
Audit Committee is responsible for the review of the Company’s annual audit report prepared by the Company’s independent
registered public accounting firm. The Audit Committee is composed of five members: Messrs. Moïse, Deal, Isaac, Leddy and
Watts each of whom is a non-management director. The Audit Committee met five times during the 2016 fiscal year.
The
Audit Committee’s review includes a detailed discussion with the independent registered public accounting firm and recommendation
to the full Board of Directors concerning any action to be taken regarding the audit. The Audit Committee also has the authority
to conduct or authorize investigations into any matters within its scope of responsibility. The Audit Committee is empowered to:
|
·
|
appoint, compensate, retain,
and oversee the work of any registered public accounting firm employed by the Company for the purpose of preparing or issuing
an audit report or performing other audit, review, or attest services for the Company, with any such registered public accounting
firm reporting directly to the Audit Committee;
|
|
·
|
resolve any disagreements
between management and the independent registered public accounting firm regarding financial reporting;
|
|
·
|
pre-approve all external
audit services;
|
|
·
|
retain independent counsel,
accountants, or others to advise the committee or assist in the conduct of an investigation;
|
|
·
|
meet with the Company’s
officers, employees, independent registered public accounting firm, or outside counsel as deemed necessary.
|
Under
its charter, all members of the Audit Committee must be independent members. Each of the current Audit Committee members is independent
under NASDAQ rules. The Audit Committee Charter provides that at least one member of the committee shall be a “financial
expert.” The financial expert on the Audit Committee is Robert M. Moïse.
The
Audit Committee functions are set forth in its charter, which was adopted on June 18, 2014 and revised December 16, 2015. A copy
of the Audit Committee Charter may be found under the Investor Relations section under the Governance Documents tab of the Company’s
website,
https://www.haveanicebank.com.
Audit Committee Matters
Report of the Audit
Committee of the Board of Directors
The
report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates the information contained in the report by reference, and shall not be deemed filed
under such acts.
The
Audit Committee reviewed and discussed with management the audited financial statements. The Audit Committee also discussed with
its independent registered public accounting firm those matters required to be discussed by the independent registered public
accounting firm with the Audit Committee under the rules adopted by the Public Company Accounting Oversight Board (the “PCAOB”).
The Audit Committee received from the independent registered public accounting firm the written disclosures and letters required
by applicable requirements of the PCAOB regarding the firm’s independence and has discussed with the firm its independence
from the Company and its management. In reliance on the reviews and discussions referred to 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 fiscal year ended December 31, 2016 for filing with the SEC.
The report
of the Audit Committee is included herein at the direction of its members, Messrs. Moïse, Deal, Isaac, Leddy and Watts.
Independent Certified
Public Accountants
Elliott
Davis Decosimo, LLC was the Company’s independent registered public accounting firm during the fiscal years ended December
31, 2016 and 2015 and provided Audit and Audit-related services. For the fiscal years ended December 31, 2016 and 2015, Representatives
of Elliott Davis Decosimo, LLC are expected to be present at the Meeting to respond to appropriate questions and to make a statement
if they so desire. The following table shows the fees that the Company paid for services performed in the fiscal year ended December
31, 2016 and 2015:
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December
31, 2016
|
|
|
December
31, 2015
|
|
Audit Fees
|
|
$
|
238,495
|
|
|
$
|
239,100
|
|
Audit-Related Fees
|
|
|
8,150
|
|
|
|
64,180
|
|
Total
|
|
$
|
246,645
|
|
|
$
|
303,280
|
|
Audit
Fees.
This category includes the aggregate fees billed for professional services rendered by the Company’s independent
registered public accounting firm during the 2016 and 2015 fiscal years for the audit of the Company’s annual financial
statements, internal financial reporting controls under FDICIA, HUD audits, annual reports on Form 10-K, and quarterly reports
on Form 10-Q.
Audit-Related
Fees
. For 2016, audit-related fees consisted of services rendered in connection with the filing of SEC Forms to the S-4 and
the audit procedures performed in connection with the Company’s acquisition of Congaree Bancshares, Inc. For 2015, audit-related
fees consisted of services rendered in connection with the filing of SEC Forms S-8, S-3, and S-4.
Corporate Governance/Nominating
Committee
The
Corporate Governance/Nominating Committee is responsible for identifying potential directors and presenting them for nomination
to the Board of Directors. The Corporate Governance/ Nominating Committee is composed of six members: Messrs. Deal, Clawson, Leddy,
Moise, Penney and Watts. The Corporate Governance/ Nominating Committee met three times during the 2016 fiscal year.
Potential
director candidates may come to the attention of the Corporate Governance/ Nominating Committee through current members of the
Board of Directors, stockholders, or other persons. In evaluating such recommendations, the Corporate Governance/Nominating Committee
uses the qualifications and standards discussed below and seeks to achieve a balance of knowledge, experience, and capability
on the Board of Directors. The Company does not pay a third party to assist in identifying and evaluating potential director candidates.
The
Corporate Governance/Nominating Committee recommends to the Board of Directors criteria for the selection of new directors, evaluates
the qualifications and independence of potential candidates for directors, including any nominees submitted by stockholders, in
accordance with the provisions of the Company’s certificate of incorporation and bylaws, and recommends to the Board of
Directors a slate of nominees for election by the stockholders at the annual meeting of stockholders. The Corporate Governance/Nominating
Committee is also responsible for recommending to the Board of Directors any nominees to be considered to fill a vacancy or a
newly created directorship resulting from any increase in the authorized number of directors. When considering a person to be
recommended for nomination as a director, the Corporate Governance/Nominating Committee considers, among other factors, the skills
and background needed by the Company and possessed by the person, diversity of the Board of Directors, and the ability of the
person to devote the necessary time to service as a director. Each director must represent the interests of our stockholders.
Any
stockholder may nominate persons for election to the Board of Directors by complying with the procedures set forth in our bylaws,
which require that timely written notice be provided to the Secretary of the Company in advance of the meeting of stockholders
at which directors are to be elected. To be timely, such notice must be delivered or received not less than 90 days prior to the
date of the meeting; provided, that if less than 100 days’ notice or prior disclosure of the date of the meeting is given
or made to stockholders, such notice must be received not later than the close of business on the 10
th
day following
the day on which such notice was given or made to stockholders. Each notice must set forth: (i) all information relating to such
person that is required to be disclosed in solicitations of proxies for the election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent
to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving
notice of (x) the name and address, as they appear on the Company’s books, of such stockholder and (y) the class and number
of shares of the Company’s capital stock that are beneficially owned by such stockholder. The officer of the Company or
other person presiding at the meeting may determine that a nomination was not made in accordance with the foregoing procedure
and disregard the defective nomination.
The
Corporate Governance/Nominating Committee annually reviews the adequacy of, and the Company’s compliance with, the corporate
governance principals of the Company and recommends any proposed changes to the Board of Directors for approval. The Corporate
Governance/Nominating Committee also administers the annual self-evaluation process for the Board of Directors and each of its
committees.
The
Corporate Governance/Nominating Committee functions are set forth in its charter, which was adopted on April 24, 2013 and revised
on June 18, 2014. A copy of the Corporate Governance/Nominating Charter may be found under the Investor Relations section under
the Governance Documents tab of the Company’s website, https://www.haveanicebank.com.
Compensation/Benefits
Committee
The
Compensation/Benefits Committee is responsible for evaluating the performance of the Company’s principal officers and employees
and determining the compensation and benefits to be paid to such persons. The Compensation/Benefits Committee is composed of five
members: Messrs. Penney, Clawson, Deal, Isaac and Leddy. The Compensation/Benefits Committee met seven times during the 2016 fiscal
year.
The
Compensation/Benefits Committee is authorized to (i) review and approve annually the corporate goals and objectives relevant to
the compensation of the chief executive officers of the Company and the Bank, (ii) conduct an annual evaluation of the performance
of the Chief Executive Officer of the Company, and (iii) annually review and establish the base salary and incentive bonus levels
and payments to the Chief Executive Officer and all other executive officers of the Company and the Bank. The Compensation/Benefits
Committee is also responsible for administering the Corporation’s incentive plans, including equity-based incentive plans,
and for reviewing and granting equity awards to all eligible employees. The Compensation/Benefits Committee may delegate to one
or more officers of the Company who are also directors the authority to designate officers and employees of the Company or its
subsidiaries to receive equity awards and to determine the number of such awards to be granted to them; provided, that such delegation
shall include the total number of equity awards that may be granted under such authority and that no officer may be delegated
the power to designate himself or herself the recipient of such awards. In addition, the Compensation/Benefits Committee may engage
compensation consultants or other advisors as it deems appropriate to assist it in performing its duties and responsibilities.
In
determining the compensation for executive officers, the Compensation/Benefits Committee’s objectives are to encourage the
achievement of the Company’s long-range objectives by providing compensation that directly relates to the performance of
the individual and the achievement of internal strategic objectives. The Compensation/Benefits Committee believes that its executive
officers’ level of compensation is reasonable based upon the Company’s corporate goals and objectives, the business
plan of the Bank, normal and customary levels of compensation within the banking industry taking into consideration geographic
and competitive factors, the Bank’s asset quality, capital level, operations and profitability and the duties performed
and responsibilities held by the officer.
The
Compensation/Benefits Committee functions are set forth in its charter, which was adopted on April 24, 2013 and revised on February
17, 2016. A copy of the Compensation/Benefits Committee Charter may be found under the Investor Relations section under the Governance
Documents section of the Corporate Information tab of the Company’s website, https://www.haveanicebank.com.
Finance and Capital
Allocation Committee
The
Board of Directors previously had a Finance and Capital Allocation Committee, which was responsible for reviewing the Company’s
financial results and accounting policies. The Finance and Capital Allocation Committee was composed of seven members: Messrs.
Brandon, Leddy, Moïse, Morrow, Rexroad, Rosen and Watts. The Finance and Capital Allocation Committee met two times during
the 2016 fiscal year.
Stockholder Communications
The
Board of Directors has implemented a process for stockholders of the Company to send communications to the Board of Directors.
Any stockholder desiring to communicate with the Board of Directors, or with specific individual directors, may so do by writing
to M. J. Huggins, III, Secretary, Carolina Financial Corporation, 288 Meeting Street, Charleston, South Carolina 29401. The Secretary
has been instructed by the Board of Directors to promptly forward all such communications to the addressees indicated thereon.
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
Director Compensation
During
2016, non-employee directors of the Company received a retainer fee of $8,000 paid in cash and 618 shares of the Company’s
common stock. Those directors not employed by a subsidiary of the Company also received $500 for each committee meeting attended.
The Chairman of the Company’s Board of Directors received an annual fee of $51,500, paid monthly, and 618 shares of the
Company’s common stock. Additionally, the Chairmen of the Company’s Audit, Governance/Nominating and Compensation/
Benefits each received a fee of $5,000 per year while the Board Loan Committee Chairman received $2,500 per year.
As
directors of CresCom Bank, Messrs. Brandon, Clawson, Deal, Moïse, Penney and Watts received $1,250 per meeting. As
a director of Crescent Mortgage Company, Mr. Clawson received $1,250 per meeting, and Mr. Leddy, who serves as Vice Chairman of
Crescent Mortgage Company, received an annual retainer of $25,000 for his services on Crescent Mortgage Company’s Board
of Directors. As directors of Carolina Services Corporation, Mr. Edward L. Proctor, Mr. Donald B. Shackelford, and
Mrs.
Mary E. Eaddy received $1,000 per meeting.
DIRECTOR COMPENSATION
TABLE
|
|
Fees
Earned or
|
|
|
|
|
|
|
|
|
|
Paid
in
|
|
|
Stock
|
|
|
|
|
Director
Name
|
|
Cash
(1)
|
|
|
Awards
|
|
|
Total
|
|
Howell
V. Bellamy, Jr.
(2)
|
|
$
|
3,000
|
|
|
|
—
|
|
|
$
|
3,000
|
|
W.
Scott Brandon
|
|
$
|
35,250
|
|
|
$
|
11,989
|
|
|
$
|
47,239
|
|
Robert
G. Clawson, Jr.
|
|
$
|
53,250
|
|
|
$
|
11,989
|
|
|
$
|
65,239
|
|
Jeffery
L. Deal, M.D.
|
|
$
|
35,250
|
|
|
$
|
11,989
|
|
|
$
|
47,239
|
|
G.
Manly Eubank
|
|
$
|
51,500
|
|
|
$
|
11,989
|
|
|
$
|
63,489
|
|
Daniel
H. Isaac, Jr
|
|
$
|
38,950
|
|
|
$
|
11,989
|
|
|
$
|
50,939
|
|
Michael
P. Leddy
|
|
$
|
56,500
|
|
|
$
|
11,989
|
|
|
$
|
68,489
|
|
Robert
M. Moïse, CPA
|
|
$
|
43,250
|
|
|
$
|
11,989
|
|
|
$
|
55,239
|
|
Thompson
E. Penney
|
|
$
|
42,900
|
|
|
$
|
11,989
|
|
|
$
|
54,889
|
|
Benedict
P. Rosen
(2)
|
|
$
|
21,000
|
|
|
|
—
|
|
|
$
|
21,000
|
|
Claudius
E. Watts IV
|
|
$
|
38,250
|
|
|
$
|
11,989
|
|
|
$
|
50,239
|
|
Bonum
S. Wilson, Jr
(2)
|
|
$
|
11,000
|
|
|
|
—
|
|
|
$
|
11,000
|
|
|
(1)
|
Includes fees, if any, for
serving on boards of the Company’s subsidiaries.
|
|
(2)
|
Retired from the Board of
Directors with the 2015 annual meeting.
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table shows how many shares of common stock are owned by the directors and director nominees, the named executive officers,
owners of more than 5% of the outstanding common stock, and all directors and executive officers as a group as of March 17, 2017.
Unless otherwise indicated, the mailing address for each beneficial owner is care of Carolina Financial Corporation, 288 Meeting
Street, Charleston, SC 29401.
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Percent
of
|
|
Directors
and Named Executive Officers
|
|
|
Age
|
|
|
Beneficially
Owned
(1)(2)(3)(4)
|
|
|
Beneficial
Ownership
(5)
|
|
W.
Scott Brandon
|
|
|
53
|
|
|
|
169,067
|
|
|
|
1.17
|
%
|
Robert
G. Clawson, Jr.
|
|
|
74
|
|
|
|
150,725
|
|
|
|
1.05
|
%
|
Jeffery
L. Deal, M.D.
|
|
|
62
|
|
|
|
59,945
|
|
|
|
0.42
|
%
|
G.
Manly Eubank
|
|
|
80
|
|
|
|
234,382
|
|
|
|
1.63
|
%
|
M.J.
Huggins, III
|
|
|
54
|
|
|
|
83,598
|
|
|
|
0.58
|
%
|
Daniel
H. Isaac, Jr.
|
|
|
65
|
|
|
|
49,733
|
|
|
|
0.35
|
%
|
Michael
P. Leddy
|
|
|
73
|
|
|
|
92,607
|
|
|
|
0.64
|
%
|
David
L. Morrow
|
|
|
66
|
|
|
|
198,597
|
|
|
|
1.38
|
%
|
Robert
M. Moïse, CPA
|
|
|
68
|
|
|
|
138,158
|
|
|
|
0.96
|
%
|
Thompson
E. Penney
|
|
|
66
|
|
|
|
30,235
|
|
|
|
0.21
|
%
|
Jerold
L. Rexroad
|
|
|
56
|
|
|
|
411,880
|
|
|
|
2.84
|
%
|
Claudius
E. Watts IV
|
|
|
55
|
|
|
|
69,181
|
|
|
|
0.48
|
%
|
All
Directors and Executive Officers as a Group of (14 persons)
|
|
|
|
|
|
|
1,688,108
|
|
|
|
12.23
|
%
|
|
(1)
|
Includes shares for which
the named person has sole voting and investment power, has shared voting and investment power with a spouse, holds in an IRA or
SEP, or holds in a trust as trustee for the benefit of himself, unless otherwise indicated in these footnotes.
|
|
(2)
|
Includes unvested shares
of restricted stock, as to which the directors and executive officers have full voting privileges. The shares are as follows:
Mr. Huggins, 14,400 shares; Mr. Morrow, 14,400 shares; Mr. Rexroad, 36,585 shares.
|
|
(3)
|
Includes shares that may
be acquired within 60 days of March 17, 2017 by exercising vested stock options or unvested stock options that will vest within
60 days of March 17, 2017. The shares are as follows: Mr. Huggins, 18,094 shares; Mr. Morrow, 38,744 shares; Mr. Rexroad, 101,833
shares.
|
|
(4)
|
Excludes shares of common
stock owned by or for the benefit of family members of the following director, who disclaims beneficial ownership of such shares:
Mr. Clawson, 13,272 shares.
|
|
(5)
|
For each individual, this
percentage is determined by assuming the named person exercises all options which he has the right to acquire within 60 days,
but that no other person exercise any options. For the directors and executive officers as a group, this percentage is determined
by assuming that each director and executive officer exercises all options which he has the right to acquire within 60 days but
that no other persons exercises any options. The calculations are based on 14,399,652 shares of common stock outstanding at March
17, 2017.
|
Executive
Compensation
Summary
Compensation Table
The following
table shows the compensation the Company paid for the years ended December 31, 2016 and 2015 to its named executive officers during
such periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive
Plan
|
|
|
All
Other
|
|
|
|
|
Name
and Principal Position
|
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
(1)
|
|
|
Awards
(2)
|
|
|
Compensation
(3)
|
|
|
Compensation
(4)
|
|
|
Total
|
|
Jerold
L. Rexroad
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director,
President and Chief Executive Officer;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
of Crescent Mortgage Company;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
of CresCom Bank
|
|
|
2016
|
|
|
$
|
463,500
|
|
|
|
—
|
|
|
$
|
224,650
|
|
|
$
|
111,870
|
|
|
$
|
418,598
|
|
|
$
|
52,487
|
|
|
$
|
1,271,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director,
President and Chief Executive Officer;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
and CEO of Crescent Mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company;
Chairman and Senior Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice
President of CresCom Bank
|
|
|
2015
|
|
|
$
|
450,000
|
|
|
|
—
|
|
|
$
|
160,046
|
|
|
$
|
87,205
|
|
|
$
|
371,250
|
|
|
$
|
52,316
|
|
|
$
|
1,120,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Morrow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director,
Executive Vice President;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer, President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
of CresCom Bank
|
|
|
2016
|
|
|
$
|
386,250
|
|
|
|
—
|
|
|
$
|
70,037
|
|
|
$
|
51,036
|
|
|
$
|
271,582
|
|
|
$
|
48,057
|
|
|
$
|
826,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director,
Executive Vice President;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer, President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
of CresCom Bank
|
|
|
2015
|
|
|
$
|
375,000
|
|
|
|
—
|
|
|
$
|
68,786
|
|
|
$
|
49,
833
|
|
|
$
|
222,773
|
|
|
$
|
59,402
|
|
|
$
|
775,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.
J. Huggins, III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President and Secretary;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
of Commercial Banking,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary
and Director of CresCom Bank
|
|
|
2016
|
|
|
$
|
262,250
|
|
|
|
—
|
|
|
$
|
30,861
|
|
|
$
|
19,820
|
|
|
$
|
184,676
|
|
|
$
|
87,382
|
|
|
$
|
584,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President and Secretary;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
of Commercial Banking,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary
and Director of CresCom Bank
|
|
|
2015
|
|
|
$
|
255,000
|
|
|
|
—
|
|
|
$
|
27,763
|
|
|
$
|
19,933
|
|
|
$
|
139,915
|
|
|
$
|
84,291
|
|
|
$
|
526,902
|
|
|
(1)
|
All 2016 and 2015 stock awards
were issued from the Company’s 2013 Equity Incentive Plan . In 2016, 9,598 shares of restricted stock and 2,799 restricted
stock units were awarded to Mr. Rexroad, 3,110 restricted stock units were awarded to Mr. Morrow and 1,087 restricted stock units
were awarded to Mr. Huggins. In addition, Mr. Rexroad, Mr. Morrow and
Mr. Huggins were awarded 750, 625, and 425 shares
of common stock, respectively, for meeting certain performance thresholds related to their 2016 incentive compensation plans,
which are discussed below. In 2015, 7,554 shares of restricted stock and 4,320 restricted stock units were awarded to Mr. Rexroad,
4,320 restricted stock units were awarded to Mr. Morrow and 1,296 restricted stock units were awarded to Mr. Huggins. In addition,
Mr. Rexroad, Mr. Morrow and Mr. Huggins were awarded 1,359, 1,132, and 770 shares of common stock, respectively, for meeting certain
performance thresholds related to their 2015 incentive compensation plans The value for each of these awards is its grant date
fair value calculated by multiplying the number of shares subject to the award by the closing market price per share for the day
prior to the date such award was granted, computed in accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718.
|
|
(2)
|
All 2016 and 2015 options
awards were issued from the 2013 Equity Incentive Plan. In 2016, Mr. Rexroad was awarded
20,613 options, Mr. Morrow was
awarded 9,229 options and Mr. Huggins was awarded 3,584 options. Options granted to
Mr. Rexroad, Mr. Morrow and Mr. Huggins
in 2016 vest over three years ratably. In 2015, Mr. Rexroad was awarded 24,590 options, Mr. Morrow was awarded 14,052 options
and Mr. Huggins was awarded 5,621 options. Options granted to
Mr. Rexroad, Mr. Morrow and Mr. Huggins in 2015 vest over
three years ratably. The value for each of these awards is its grant date fair value calculated by multiplying the number of shares
subject to the award by the closing market price per share for the day prior to the date such award was granted, computed in accordance
with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
|
|
(3)
|
Amounts awarded for each
year under one or more of the Company’s cash incentive plans and related bonuses were paid in the subsequent fiscal year.
Bonus compensation for Messrs. Rexroad, Morrow and Huggins was determined by the Compensation/Benefits Committee of the Board
for meeting certain performance thresholds related to their 2016 incentive compensation plans.
|
|
(4)
|
All other compensation includes
the Company’s contributions under the 401(k) Plan, dividends on unvested restricted stock and car allowances paid by the
Company to the named executives. In addition, life insurance premiums and other payments received in connection with LifeComp
life insurance arrangements were paid for Mr. Huggins in 2016 and 2015. Under the agreements with Mr. Huggins, the Bank pays,
among other things, the premiums on each policy and additional amounts to the executive to cover federal income taxes owed with
respect to his deemed bonuses under the LifeComp Agreement. In 2016 and 2015, the Company allocated $24,000 in life insurance
premiums to Mr. Huggins. In 2016 and 2015, the Company also paid $16,000 in other compensation to Mr. Huggins to cover federal
income taxes owed with respect to the deemed bonuses. See “Benefit Plans – Elite LifeComp Program” below for
additional information regarding the LifeComp Agreements between the Bank and Mr. Huggins.
|
Outstanding
Equity Awards at Fiscal Year-End
The following
table summarized outstanding equity awards to our named executive officers at December 31, 2016:
|
|
Stock
Options
|
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
Equity
Incentive
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Plan
Awards:
|
|
|
|
Plan
Awards:
|
|
|
|
|
|
|
|
|
Plan
Awards:
|
|
|
Market
of
|
|
|
|
Number
of Shares
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Payout
Value
|
|
|
|
underlying
|
|
|
|
|
|
|
|
|
Unearned
|
|
|
of
Unearned
|
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Shares
that
|
|
|
Shares
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
have
not
|
|
|
that
have
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date
|
|
|
Vested
|
|
|
not
Vested
|
|
Jerold
L. Rexroad
|
|
|
78,902
|
|
|
|
—
|
|
|
$
|
4.17
|
|
|
|
4/25/2023
|
|
|
|
33,834
|
|
|
$
|
1,041,749
|
|
|
|
|
8,197
|
|
|
|
16,394
|
|
|
$
|
11.58
|
|
|
|
1/21/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
16,613
|
|
|
$
|
16.56
|
|
|
|
1/20/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
4,000
|
|
|
$
|
16.83
|
|
|
|
3/16/2026
|
|
|
|
|
|
|
|
|
|
David
L. Morrow
|
|
|
26,299
|
|
|
|
—
|
|
|
$
|
4.17
|
|
|
|
4/25/2023
|
|
|
|
14,400
|
|
|
$
|
443,376
|
|
|
|
|
4,684
|
|
|
|
9,368
|
|
|
$
|
11.58
|
|
|
|
1/21/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
9,229
|
|
|
$
|
16.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.J.
Huggins, III
|
|
|
6,576
|
|
|
|
—
|
|
|
$
|
4.17
|
|
|
|
4/25/2023
|
|
|
|
14,400
|
|
|
$
|
443,376
|
|
|
|
|
6,576
|
|
|
|
—
|
|
|
$
|
8.54
|
|
|
|
4/25/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
1,874
|
|
|
|
3,747
|
|
|
$
|
11.58
|
|
|
|
1/21/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
3,584
|
|
|
$
|
16.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreements
The
Company has entered into an employment agreement with Mr. Jerold L. Rexroad, its President and Chief Executive Officer, and the
Bank has entered into employment agreements with Messrs. David L. Morrow and M. J. Huggins, III, its President/Chief Executive
Officer and President of Commercial Banking, respectively. The employment agreements between the Bank and its two executives are
substantially identical to the employment agreement of Mr. Rexroad, except that Mr. Huggins
also participates in the Elite LifeComp
program. Under the employment agreements, Mr. Rexroad currently receives a base salary of $463,500, Mr. Morrow currently receives
a base salary of $386,250, and
Mr. Huggins currently receives a base salary of $262,650.
The
employment agreements provide that upon the occurrence of an “Event of Termination,” as defined in the agreements,
the Company or Bank, as applicable, will pay the executive, beneficiary, or estate, three times the average over the past three
years of the sum of the executive’s annualized base salary, other cash compensation paid to the executive and contributions
made on the executive’s behalf to Company-sponsored employee benefit plans. If the executive’s employment is terminated
without cause as an “Event of Termination,” the executive agrees that for a period of one year the employee will not
compete with the Company or Bank within 30 miles of the Company’s main office.
The
employment agreements also provide that upon the occurrence of a “Change in Control”, as defined in the agreements,
the Company or Bank as applicable, will pay the executive, beneficiary, or estate 2.99 times the average over the past five years
of the sum of the executive’s “annual compensation”, as defined in the agreements, and contributions made on
the executive behalf to Company-sponsored employee benefit plans.
If
an event occurred that triggered an obligation to pay benefits to Messrs. Rexroad, Morrow and Huggins as of December 31, 2016,
Carolina Financial Corporation and/or the Bank would be required to pay, in the aggregate, (i) approximately $5.9 million, exclusive
of a possible gross-up for additional tax payments, in the event the executive’s employment terminated in connection with
a Change in Control, and (ii) approximately $6.1 million in the event the executive’s employment terminated without cause
upon an Event of Termination that does not include a Change in Control.
Incentive Compensation
Plan
For
fiscal years 2016 and 2015, the Board of Directors implemented an incentive compensation plan for Messrs. Rexroad, Morrow, and
Huggins, which was tied to achieving certain earnings and operational targets. Upon completion of the financial results for 2016
and 2015, the Compensation Committee reviewed the attainment of the targets included in the incentive plan and approved the incentive
compensation cash bonuses paid to executives. For 2016, Mr. Rexroad earned of $418,598, Mr. Morrow earned $271,582, and Mr. Huggins
earned $184,676. For 2015, Mr. Rexroad earned $371,250, Mr. Morrow earned $222,773, and Mr. Huggins earned $139,915. The level
of compensation approved by the Compensation Committee was based upon the level of the attainment of targeted objectives as well
as the attainment of personal objectives. The objectives included in the bonus plan included:
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·
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Operating
earnings, as defined in the plan, at Carolina Financial Corporation and
CresCom
Bank,
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·
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Nonperforming
assets to total assets ratios,
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·
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Growth
in checking balances and growth in the number of checking accounts,
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·
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Loan
growth metrics, excluding loans acquired in acquisitions, and
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·
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Operating
Bank ROAA goals.
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Elite
LifeComp Program
A
life insurance policy has been purchased on the life of Mr. Huggins under split-dollar life insurance arrangements between the
executive and the Bank in order to provide the executive with target retirement and death benefits following termination of employment.
Under the arrangement, referred to as the LifeComp Agreement, the executive is named as the policy owner, but the Bank pays the
premiums on his policy for a period of years and is entitled to recover a death benefit of $1.8 million under the policy as key
man insurance. Until the executive attains an age specified in such executive’s agreement, the Bank annually pays the executive
an amount that is deemed to be, initially, a partial premium payment, and later, an incremental increase in the executive’s
interest in the policy’s cash surrender value. Also, during the term of the executive’s employment, the Bank pays
to the executive an amount sufficient to cover the interest payments owed by the executive to the Company on the loans, and also
an additional amount to cover federal income taxes to which the executive becomes subject upon payment of bonuses.
Under
an addendum to the LifeComp Agreement entered into and effective as of January 2007, if the executive’s employment with
the Bank terminates for reasons other than for cause or due to a change in control, the Company has agreed to continue its obligations
under the LifeComp Agreement until the date on which the split-dollar life insurance arrangement is terminated. Pursuant to the
agreement with
Mr. Huggins, the termination date is February 27, 2022. Until such termination date, the addendum requires
the Company, or its successor, to make all premium payments that would become due after the change in control or event of termination
and also to “gross-up” the executive’s income through a series of bonus payments in order to: (i) facilitate
the executive’s payment of his portion of the premiums, (ii) enable the executive to partially repay the accumulated loan
balance on the deemed loans made by the Bank to the executive to pay the executive’s portion of said premiums, (iii) cover
the deemed interest due on such loans, and (iv) cover federal income taxes that the executive would owe with respect to the deemed
bonuses and interest owed (but not paid) on the loans. Beginning at retirement age, the executive is entitled to draw a retirement
benefit from the cash surrender value of the policy for a period of up to 15 years. The annual target retirement benefit payable
to Mr. Huggins is $75,000. In addition, the executive is entitled to a death benefit from the policy of $1 million prior to retirement,
and a lesser amount once the executive begins to receive the retirement benefits under the policy. In the event the executive
is terminated for cause, the executive loses all rights under the agreement. Life insurance premium and other payments. Under
the agreement
the Bank pays, among other things, the premiums on each policy and additional amounts to the executives to
cover federal income taxes owed with respect to their deemed bonuses under the LifeComp Agreements. In both 2016 and 2015, the
Company allocated $24,000 in life insurance premium to Mr. Huggins and $16,000 in other compensation to cover federal income taxes
owed with respect to the deemed bonuses.
Certain Relationships
and Related Transactions
The
Bank has followed a policy of granting commercial and consumer loans, and loans secured by one-to four-family real estate to officers,
directors and employees. Loans to directors and executive officers are made in the ordinary course of business and on the same
terms and conditions as those of comparable transactions with the general public prevailing at the time, in accordance with the
Banks’ underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable
features.
All
loans by the Bank to its directors and executive officers are subject to federal regulations restricting loan and other transactions
with affiliated persons of the Bank. Federal law generally requires that all loans to directors and executive officers be made
on terms and conditions comparable to those
for similar transactions with non-affiliates, subject to limited exceptions. Loans
to all directors, executive officers, and their associates totaled $14.0 million at December 31, 2016, which was 8.6% of the Company’s
stockholders’ equity at that date. There were no loans outstanding to any director, executive officer or their affiliates
at preferential rates or terms, which in the aggregate exceeded $100,000 during the year ended December 31, 2016. All loans to
directors and officers were performing in accordance with their terms at December 31, 2016.
Compensation Committee
Interlocks and Insider Participation
The
members of the Compensation/Benefits Committee during 2016 were Messrs. Penney, Clawson, Deal, Isaac and Leddy. No member of the
Compensation/Benefits Committee was at any time during 2016 or at any other time an officer or employee of the Company or any
of its subsidiaries, and no member of the Compensation/Benefits Committee had any relationship with the Company requiring disclosure
under Item 404 of Regulation S-K. No executive officer of the Company has served on the board of directors or compensation committee
of any other entity that has or has had one or more executive officers who served as a member of the Compensation/Benefits Committee
during 2016.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires directors, executive officers, and 10% stockholders to file reports of holdings
and transactions in the Company’s stock with the SEC. Based on a review of Section 16(a) reports, amendments thereto, and
written representations from the Company’s directors and executive officers, the Company believes that all of its directors,
executive officers, and 10% stockholders have made all filings required under Section 16(a) in a timely manner, with the following
exceptions:
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·
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Mr.
Morrow filed one late form 4 to update his indirect ownership based on shares and;
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·
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Mr.
Rexroad filed one late form 4 to update his indirect d ownership based on shares acquired.
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Code
of Ethics
The
Company expects all of its employees to conduct themselves honestly and ethically. The Company has adopted a Code of Ethics that
reflects the Company’s policy of responsible and ethical business practices, and applies to all directors, officers, and
employees of the Company and its subsidiaries. Stockholders and other interested persons may view the Company’s Codes of
Ethics on the Investor Relations section under the Governance Documents section of the Corporate Information tab of the Company’s
website, http://www.haveanicebank.com.
Stockholder Proposals
for the 2018 Annual Meeting of Stockholders
Stockholders
interested in submitting a proposal for inclusion in the proxy statement for the Company’s 2018 Annual Meeting of Stockholders
may do so by following the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion, stockholder proposals must be
received by the Company’s Chairman of the Board of Directors, Chief Executive Officer, or Corporate Secretary at 288 Meeting
Street Charleston, SC 29401 no later than November 20, 2017. To ensure prompt receipt by the Company, the proposal should be sent
certified mail, return receipt requested. Proposals must comply with the Company’s Bylaws related to stockholder proposals
in order to be included in the Company’s proxy materials.
IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting
methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by
11:59 p.m., Eastern Time, on April 25, 2017.
Vote by Internet
• Go to www.investorvote.com/CARO
• Or scan the QR code with your smartphone
• Follow the steps outlined on the secure website
Vote by telephone
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories &
Canada on a touch tone telephone
• Follow the instructions provided by the recorded message
Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas.
Annual Meeting Proxy Card
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
1234 5678 9012 345
A Proposals — The Board of Directors recommends a vote “FOR” the proposals and the election of the nominees listed.
1. The election as directors of all nominees listed below (except as marked to the contrary):
For Withhold For Withhold For Withhold
01 - Robert G. Clawson, Jr.
02 - Gary M. Griffin
03 - Daniel H. Isaac, Jr.
For Against Abstain
2. The ratification of the appointment of Elliott Davis Decosimo,
LLC as the independent registered public accounting firm of
the Company for the fiscal year ending December 31, 2017.
3. In their discretion, the proxies are authorized to vote on any other business that may properly come before the Meeting or any adjournment or postponement thereof.
B Non-Voting Items
Change of Address — Please print your new address below. Comments — Please print your comments below.
Meeting Attendance
Mark the box to the right
if you plan to attend the
Annual Meeting.
C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give
full title.
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Proxy — Carolina Financial Corporation
ANNUAL MEETING OF STOCKHOLDERS — April 26, 2017
The undersigned hereby appoints W. Scott Brandon and Robert M. Moïse with full powers of substitution, to act as attorneys and proxies for the undersigned
to vote all shares of capital stock of Carolina Financial Corporation (the “Company”) which the undersigned is entitled to vote at the Annual Meeting of
Stockholders (the “Meeting”) to be held at the Marina Inn at Grande Dunes, 8121 Amalfi Place, Myrtle Beach, SC 29572 at 5:00 p.m. and at any and all
adjournments and postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL
AND EACH OF THE NOMINEES LISTED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
IMPORTANT ANNUAL MEETING INFORMATION
Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas.
Annual Meeting Proxy Card
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A Proposals — The Board of Directors recommends a vote “FOR” the proposals and the election of the nominees listed.
1. The election as directors of all nominees listed below (except as marked to the contrary):
For Withhold For Withhold For Withhold
01 - Robert G. Clawson, Jr.
02 - Gary M. Griffin
03 - Daniel H. Isaac, Jr.
For Against Abstain
2. The ratification of the appointment of Elliott Davis Decosimo,
LLC as the independent registered public accounting firm of
the Company for the fiscal year ending December 31, 2017.
3. In their discretion, the proxies are authorized to vote on any other business that may properly come before the Meeting or any adjournment or postponement thereof.
B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give
full title.
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
Proxy — Carolina Financial Corporation
The undersigned hereby appoints W. Scott Brandon and Robert M. Moïse with full powers of substitution, to act as attorneys and proxies for the undersigned
to vote all shares of capital stock of Carolina Financial Corporation (the “Company”) which the undersigned is entitled to vote at the Annual Meeting of
Stockholders (the “Meeting”) to be held at the Marina Inn at Grande Dunes, 8121 Amalfi Place, Myrtle Beach, SC 29572 at 5:00 p.m. and at any and all
adjournments and postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL
AND EACH OF THE NOMINEES LISTED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
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