Meeting the Highest Standards
First Citizens through its Board of Directors and management, has long sought to meet the highest standards of corporate governance. These Guidelines are a further effort in that regard and will help guide the Board and management. Guidelines should be considered in conjunction with First Citizens Bancshares, Inc. Bylaws and applicable provisions of corporate law and regulations.
Selection and Composition of the Board
The Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. The Compensation, Nominating and Corporate Governance Committee (the "Committee") is responsible for reviewing with the Board, on a periodic basis, the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. This assessment includes issues such as independence, age, diversity, skills such as understanding the financial services industry, general business knowledge and experience, all in the context of an assessment of the perceived needs of the Board at that point in time. Each Board member is expected to ensure that existing and planned future commitments do not materially interfere with the member's service as a fully contributing Director of First Citizens.
Nominees to be proposed for election to the Board of Directors of the corporation other than those made by the existing Board of Directors must be delivered in writing to the Secretary of First Citizens Bancshares ninety (90) days prior to the month and day that proxy materials regarding the most recent election of directors were mailed to shareholders. The written notice must include the full name of the proposed director, age and date of birth, educational background and a list of business experience and positions held by the proposed director for the preceding five (5) years. The notice must include home and business addresses and telephone numbers. In addition, the submission must include a signed representation by the nominee to timely provide all necessary information requested by the corporation in order that disclosure requirements may be met in the solicitation of proxies for the election of directors. The name of each nominee for director must be placed in nomination by a shareholder present in person at the Annual Meeting of the Corporation. The nominee must also be present in person at the annual meeting.
First Citizens shall have a majority of independent Directors. At least once each year, the Board will review any and all relationships that exist with a Director and his/her related interests for the purpose of determining whether the Director is independent. This information shall be initially reviewed by the Governance Committee or, in the case of members of the Governance Committee, the Board. It is the policy of the Board that a Director is presumed to be independent unless the Director (or their immediate family members) (i) is/was a current/former employee/executive of the Corporation during the last three (3) years; (ii) is/was a current/former employee/partner of the Corporation's current or former independent auditors during the last three (3) years; (iii) is an owner, partner, employee, director of an entity with material relationships (makes payments to, or receives payments from the Corporation which exceed the greater of $1 million, or 2% of the entity's gross revenues) with the Corporation, either as a vendor or customer, except in situations where revenues are generated as a result of a competitive bid process in which the business relationship is determined to be in the best interest of the Corporation; and (iv) receives more than $100,000 per year in direct compensation from the Corporation other than director and related fees.
The Board shall broadly consider all relevant facts and circumstances when making a determination of independence. The Board shall consider the issue not merely from the standpoint of a Director, but also from that of persons or organizations with which the Director has an affiliation. An independent Director should be free of any relationship with First Citizens or its management that may impair the Director's ability to make independent judgments. Particular attention will be paid to whether a Director is independent from management and to any credit relationships that may exist with a Director or a related interest.
The following guidelines are to be followed when determining the impact of a credit relationship on a Director's independence: Extensions of credit that comply with Regulation O shall be presumed to be consistent with Director independence. Normal, arms length credit relationships entered into in the ordinary course of business shall not negate Director independence. In addition, an extension of credit to a company, an executive officer of which serves on the Board of First Citizens, must meet the substantive requirements of Regulation O in order to maintain the independence of such Director. Such loans must be made on substantially the same terms, including interest rates and collateral, following credit-underwriting procedures that are no less stringent than those prevailing at the time for comparable transactions by First Citizens with other persons. Such loans also shall not involve more than the normal risk of repayment or other unfavorable features and no event of default shall have occurred. The Board must review any credit of a director or his or her related interests that has become criticized in order to determine the impact that such classification has on the Director's independence.
Orientation of New Directors
New Directors must participate in the Corporation's Director Orientation Program, which should be conducted within two months of the annual meeting at which new Directors are elected or within three months of the time a new Director otherwise joins the Board. This orientation will include presentations by executive management to familiarize new Directors with the Corporation's Strategic Plan, financial accounting and risk management issues, compliance programs, the Corporation's Code of Conduct, its principal officers, and internal and independent auditors.
The basic responsibility of Directors of the Corporation is to exercise their business judgment in good faith to act in what they reasonably believe to be in the best interest of the Corporation. In discharging that obligation, Directors should be entitled to rely on the honesty and integrity of their fellow Directors and the Corporation's senior executives and outside advisors and auditors. Directors shall also be entitled to have the Corporation purchase reasonable directors' and officers' liability insurance on their behalf, to the benefits of indemnification to the fullest extent permitted by law and the Corporation's Articles of Incorporation, By-laws and any indemnification agreements.
Directors are expected to attend Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. Information and data needed to make informed decisions will be provided Directors prior to scheduled meetings.
The Board has no policy with respect to the separation of the offices of Chairman and the Chief Executive Officer (the "CEO"). The Board believes this matter is part of the succession planning process, which is overseen by the Governance Committee, and that it is in the best interest of the Corporation for the Board to make a determination when it elects a new chief executive officer or Board Chairman.
The Board believes that the number of shares of the Corporation's common stock owned by each Director is a personal decision; however, the Board strongly supports the position that Directors should own a meaningful number of shares in the Corporation, not less than that mandated by regulation for Directors of National Banks.
The responsibility for communications and relationships on behalf to the Corporation with institutional investors, the media, and customers should be management's. The Board may participate occasionally in such interaction at the request of or with prior knowledge of management. The Chairman of the Board and Chief Executive Officer is responsible for establishing effective communications with First Citizens stakeholder groups, i.e., shareholders, Regulators, customers, Company associates, communities, suppliers, creditors, government and corporate partners. It is the policy of the Board that management speaks for First Citizens.
In order to facilitate open discussion, the Board believes maintaining confidentiality of information and deliberations is an imperative.
The Board will have a Presiding Director, selected by non-employee Directors, who will chair regularly scheduled meetings of non-employee Directors. Normally, the Chairman of the Governance Committee shall be the Presiding Officer. In the absence of the Chairman of the Governance Committee, the Chairman of the Audit Committee shall be the Presiding Director. Non-employee Directors of the Board will meet at least once each year, and at such other times as deemed necessary, and such meeting(s) will be presided over by the Presiding Director.
Directors have full and free access to officers and employees of the Corporation. Any meetings or contacts that a Director wishes to initiate may be arranged through the CEO, the Corporate Secretary or directly by the Director. Directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Corporation and will, to the extent not inappropriate, copy the CEO on any written communications between a Director and an officer or employee of the Corporation.
Shareholders desiring to communicate directly with the Board of Directors may do so through the Corporate Governance/Nominating/Compensation Committee by contacting the Chairman or any member of the committee. Committee membership is listed below or may be obtained by calling the Audit Department at (731) 287-4275. Letters sent via the US Postal Service may be mailed to Chairman, Corporate Governance Committee, First Citizens National Bank Audit Department, P.O. Box 890, Dyersburg, TN 38025-0890.
Board Composition and Performance
The Board believes that the number of Directors should not exceed a number that can function efficiently as a body. The exact number of Directors constituting the Board of Directors of First Citizens shall be fixed from time to time solely by the Board of Directors by resolution. It is the sense of the Board that individual Directors who change their principal occupation, position or responsibility they held when elected to the Board should volunteer to resign from the Board. However, it is not the sense of the Board that in every instance Directors who retire or change the position they held when they joined the Board should necessarily leave the Board. There should, however, be an opportunity for the Board through the Governance Committee to review the continued appropriateness of Board membership under such circumstances.
The Board is not of the opinion that term limits should be established. While term limits could possibly insure the presence of fresh ideas and viewpoints, they have the disadvantage of losing the contribution of Directors who have been able to develop, over a period of time, increasing insight into the Corporation and its operations and, therefore, provide an increasing contribution to the Board as a whole. Retirement of a Director from the Board of the Corporation is established by policy to occur January 1st following their 75th birthday, excepting those Directors elected to Board service prior to January 1st, 1984, in which case there is no mandatory retirement age.
The form and amount of Director compensation will be determined by the Governance Committee in accordance with policies and principles set forth in its charter and any other applicable rules. Company staff will report annually to the Governance Committee, the status of First Citizens Board compensation in relation to that of comparable peer banks. The Governance committee will consider that Directors' independence may be jeopardized if Director compensation and prerequisites exceed customary levels.
Annual Performance Evaluation
The Board of Directors will conduct an annual self-evaluation with the assistance of the Governance Committee to determine whether it and its committees are functioning effectively. The Governance Committee will receive comments from all Directors and report annually to the Board with an assessment of the Board's performance. This will be discussed with the full Board following the end of each calendar year. The assessment will focus on the Board's contribution to the Corporation and specifically focus on areas in which the Board or management believes that the Board could improve.
The Chairman of the Board and the Chief Executive Officer will establish an agenda for each Board Meeting. Board members may suggest the inclusion of additional item(s) on the agenda for Board consideration and/or discussion by contacting the Board Chairman, CEO or Board Secretary.
The Governance Committee is responsible, after consultation with the Chairman of the Board and Chief Executive Officer, and with consideration of the desires of individual Board members, for the assignment of the Board members to various Committees. It is the sense of the Board that consideration should be given to rotating Committee members periodically, but the Board does not mandate a policy of such rotation since there may be reasons to maintain an individual Director's Committee membership for a longer period.
The Board will have at all times an Executive Committee, Audit Committee, Compensation/Nominations/Corporate Governance Committee, Trust Committee, Community Reinvestment Act Committee and Investment Committee. All members of the Audit and Corporate Governance Committee will be independent Directors under criteria established by the applicable regulatory authorities. In general, committee members will be nominated by the Governance Committee and appointed by the Board. It is the sense of the Board that consideration should be given to rotating committee members periodically, but the Board does not feel that rotation should be mandated as a policy.
Each committee will have its own charter. Charters will set forth purposes, goals and responsibilities of the committees as well as certain specific qualifications for committee membership and procedures for committee member appointments. In addition, charters will address committee reporting to the Board. The charters will also provide that each committee annually evaluates its performance.
The Board may, from time to time, establish or maintain additional standing or temporary committees as necessary or appropriate.
CEO Evaluation and Management Succession
The Governance Committee will conduct an annual review of the CEO's performance, as set forth in its charter. The Board of Directors will review the Governance Committee's report in order to confirm that the CEO is providing effective leadership for the Corporation in the long- and short-term.
The Governance committee should periodically report to the Board on succession planning. The entire Board will work with the Governance committee to nominate and evaluate potential successors to the CEO. The CEO should at all times make available his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
FIRST CITIZENS NATIONAL BANK
CODE OF CONDUCT
APPROVED BY: Board of Directors
First Citizens Bancshares, Inc.
First Citizens National Bank