JEFFERSON BANKSHARES, INC.
123 East Main Street
Charlottesville, Virginia 22902
To the Shareholders of
Jefferson Bankshares, Inc.:
You are cordially invited to attend the annual meeting of shareholders of
Jefferson Bankshares, Inc., which will be held Tuesday, April 22, 1997,
beginning at 10:00 A.M. local time in the Community Room in the Jefferson
National Bank Operations Center at 321 East Main Street in Charlottesville,
Virginia.
The Notice of Meeting, the Proxy Statement containing information about
business to be transacted at the meeting and the form of proxy are enclosed.
The corporation's Annual Report for 1996 has already been mailed to you under
separate cover.
Whether or not you plan to attend the annual meeting in person, please
date and sign the proxy and return it as soon as possible in the enclosed
stamped, addressed envelope. If you are present at the annual meeting and
wish to vote in person, you may withdraw the proxy at that time.
I appreciate your continuing support of Jefferson Bankshares, Inc., and I
encourage you to recommend the corporation's services to your friends and
neighbors.
I look forward to seeing you at the meeting.
Sincerely,
O. Kenton McCartney
President and
Chief Executive Officer
CHARLOTTESVILLE, VIRGINIA
MARCH 14, 1997
JEFFERSON BANKSHARES, INC.
Charlottesville, Virginia
Notice of Annual Meeting of Shareholders
To be Held April 22, 1997
To the Shareholders of
Jefferson Bankshares, Inc.:
The 1997 annual meeting of shareholders of Jefferson Bankshares, Inc.
will be held in the Community Room of the Jefferson National Bank Operations
Center at 321 East Main Street in Charlottesville, Virginia, on Tuesday, April
22, 1997, at 10:00 A.M. local time for the following purposes:
1. To elect directors of Jefferson Bankshares, Inc. for the following
year;
2. To approve the selection of KPMG Peat Marwick LLP as independent
auditors for Jefferson Bankshares, Inc. for 1997;
3. To act upon such other matters as may properly come before the
meeting.
You are entitled to notice of and to vote at the meeting if you were a
shareholder of record at the close of business on February 28, 1997.
William M. Watson, Jr.
General Counsel and Secretary
CHARLOTTESVILLE, VIRGINIA
MARCH 14, 1997
___________________________________________________________________________
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED STAMPED, ADDRESSED ENVELOPE SO THAT YOUR SHARES
CAN BE VOTED IF YOU ARE UNABLE TO ATTEND THE MEETING.
___________________________________________________________________________
JEFFERSON BANKSHARES, INC.
123 East Main Street
Charlottesville, Virginia
PROXY STATEMENT
GENERAL INFORMATION
Proxy Statement
This Proxy Statement explains the matters on which shareholders will vote
at the 1997 annual meeting and gives information about the persons who will be
nominated for election as directors of Jefferson Bankshares, Inc. (the
"Corporation"). The approximate mailing date of this Proxy Statement and the
enclosed proxy is March 14, 1997. The executive offices of the Corporation
are located in the Jefferson National Bank Building at 123 East Main Street in
Charlottesville, Virginia; and the mailing address for such offices is Post
Office Box 711, Charlottesville, Virginia 22902.
Voting By Proxy
You may use the enclosed proxy to vote in the election of directors and
on the selection of auditors for the Corporation. Any shareholder giving a
proxy may revoke it at any time before it is voted by delivering another proxy
or written notice of revocation to the Corporation's Secretary. A proxy, if
executed and not revoked, will be voted for the election of the nominees for
director named herein and for the approval of the selection of KPMG Peat
Marwick LLP as independent auditors for the Corporation for 1997, unless it
contains specific instructions to the contrary, in which event it will be
voted in accordance with such instructions.
Solicitation Of Proxies
The proxies are being solicited by the Corporation, which will pay the
cost of solicitation. The solicitation will be made primarily by use of the
mails, although some officers and regular employees of the Corporation and its
subsidiaries may solicit proxies personally or by telephone (but without any
compensation in addition to their regular salaries). The Corporation will
reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses which they incur in sending proxy
materials to the beneficial owners of the Corporation's common stock.
Voting Securities
You are entitled to notice of and to vote at the 1997 annual meeting if
you were a shareholder of record on February 28, 1997. As of that date,
13,960,578 shares of the Corporation's common stock were outstanding. Each
share of common stock is entitled to one vote.
A majority of the votes entitled to be cast on matters to be considered
at the meeting constitutes a quorum. If a share is represented for any
purpose at the meeting, it is deemed to be present for quorum purposes and for
all other matters as well. Abstentions and shares held of record by a broker
or its nominee ("Broker Shares") that are voted on any matter are included in
determining the number of votes present or represented at the meeting. Broker
Shares that are not voted on any matter at the meeting will not be included in
determining whether a quorum is present at such meeting.
The election of each nominee for director requires the affirmative vote
of the holders of a plurality of the shares of common stock cast in the
election of directors. The affirmative vote of a majority of the votes cast
will be required to act on all other matters to come before the annual
meeting. Votes that are withheld and Broker Shares that are not voted will
not be included in determining the number of votes cast and, therefore, will
have no effect on the election of directors or other matters to come before
the annual meeting.
Principal Beneficial Owners
The Corporation knows of no person who, as of February 28, 1997,
beneficially owned or had the right to acquire more than five percent of the
Corporation's outstanding common stock.
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
Shares Beneficially Owned By Directors And Executive Officers
Following is a table which indicates as of February 28, 1997, the amount
and the percent of beneficial ownership of the Corporation's common stock for
each director, executive officer named in the Summary Compensation Table, and
all directors and executive officers as a group. Unless otherwise noted, each
individual has sole voting and sole investment power with respect to the
number of shares set forth opposite his name.
Amount and Nature of
Beneficial Ownership
Percent of
Name Number of Shares (1) Common Stock
Robert H. Campbell, Jr. 11,856 (2) *
John T. Casteen, II 2,491 *
Hovey S. Dabney 80,000 (3) *
Lawrence S. Eagleburger 915 *
Hunter Faulconer 218,346 (4) 1.56
Fred L. Glaize, III 301,400 (5) 2.16
Henry H. Harrell 12,466 *
Alex J. Kay, Jr. 18,006 *
J. A. Kessler, Jr. 4,082 (6) *
O. Kenton McCartney 19,836 (7) *
Allen T. Nelson, Jr. 4,662 *
W. A. Pace, Jr. 16,838 *
W. A. Rinehart, III 44,684 (8) *
Gilbert M. Rosenthal 16,586 *
Alson H. Smith, Jr. 2,914 *
William M. Watson, Jr. 6,707 (9) *
H. A. Williamson, Jr. 15,435 *
Directors and Executive Officers
as a group (18 Persons) 784,173 (10) 5.62
* Less than 1%
(1) Includes the following number of shares of common stock that
may be acquired within 60 days of February 28, 1997, through the
exercise of stock options awarded under one or more of the
Corporation's stock based incentive plans by the following directors,
executive officers and group: Mr. Campbell - 3,620; Mr. McCartney -
8,200; Mr. Nelson - 3,200; Mr. Pace - 4,300; Mr. Watson - 2,300; and
all directors and officers as a group - 23,380.
(2) Excludes 231 shares owned by Mrs. Campbell.
(3) Excludes 1,600 shares owned by Mrs. Dabney.
(4) Includes 134,666 shares held by a trust under the Estate of P. H.
Faulconer. Mr. Faulconer and Jefferson National Bank are co-trustees of
the trust, and Mr. Faulconer has a life interest in a portion of the
income from the trust.
(5) Includes 288,364 shares owned by Amherst Corporation, 31% of the
stock of which is beneficially owned by Mr. Glaize and of which Mr.
Glaize is President and a director, and 2,671 shares owned by
Glaize Development, Inc., 32% of the stock of which is beneficially
owned by Mr. Glaize and of which Mr. Glaize is a Vice President
and a director.
(6) Excludes 8,108 shares owned by Mrs. Kessler.
(7) Excludes 1,500 shares owned by Mrs. McCartney.
(8) Includes 21,000 shares held by a revocable trust in which Mr.
Rinehart has all beneficial interests and of which Jefferson National
is the trustee. Also includes 22,684 shares held by two trusts of
which Mr. Rinehart and Jefferson National are co-trustees. Mr.
Rinehart has a life interest in one of the two trusts and a residual
interest in the other. Excludes 1,133 shares owned by Mrs. Rinehart.
(9) Excludes 1,000 shares owned by Mrs. Watson.
(10) Excludes 13,572 shares held by spouses of directors and
executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers, and persons who own more than ten
percent of the Corporation's common stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of the Corporation's common stock and to provide copies of the
reports to the Corporation. To the Corporation's knowledge, based solely on a
review of the copies of such reports furnished to the Corporation and written
representations that no reports were required to be filed, during the fiscal
year ended December 31, 1996, the Corporation's executive officers, directors
and greater than ten percent beneficial owners complied with their respective
Section 16(a) reporting requirements except as noted below.
During September, 1995, Donald W. Fulton, Jr., one of the Corporation's
executive officers, acquired approximately five shares of the Corporation's
common stock through the investment of funds pursuant to the Corporation's
Employee Stock Purchase Plan. Mr. Fulton unintentionally omitted this
transaction from the year-end Form 5 filed with the Securities and Exchange
Commission during February, 1996. Mr. Fulton corrected this omission through
an amended Form 5 filed with the Securities and Exchange Commission during
November, 1996.
Nominations For Directors
Thirteen persons are to be elected as directors of the Corporation, each
to serve until their successors are elected and qualified. The 13 persons who
are named below will be nominated at the meeting. Each person is presently a
director, has consented to being named as a nominee in this Proxy Statement,
and has indicated that he is willing to serve as a director if elected.
However, if at the time of the meeting any nominee is unable or unwilling to
serve, shares represented by proxies will be voted at the discretion of the
proxies for such other person or persons as the Board of Directors may
nominate.
Shareholders may nominate other persons at the meeting, if certain rules
are followed. However, only 13 persons will be elected directors, and, if
additional nominations are made at the meeting, the 13 persons receiving the
greatest number of votes will be elected. The rules governing nominations by
shareholders are contained in the Corporation's Bylaws. A shareholder who
desires to make an additional nomination at the meeting must first give a
written notice to the President of the Corporation at its executive office in
Charlottesville, Virginia, at least 14 days before the meeting. The notice
must state: (i) the name, address and principal occupation of each proposed
nominee; (ii) to the extent known, the number of shares of the Corporation's
common stock that will be voted for him or her; (iii) the name and residence
address of the nominating shareholder; and (iv) the number of shares of the
Corporation's common stock which the nominating shareholder owns. Unless such
notice has been given, the chairman of the meeting may disregard the
nomination.
Name, Age and Positions Held with
Principal Occupation the Corporation Year First
for Last Five Years or Subsidiaries Became a Director
John T. Casteen, III (53) Director and Chairman of 1990
President, University the Executive Compensation
of Virginia Committee of the Corporation;
a member of the Central
Region Board of Directors of
Jefferson National Bank
Hovey S. Dabney (73) Chairman and Chairman 1979
Retired (before of the Executive Committee
January, 1994, the Chief of the Corporation; Chairman
Executive Officer of of Jefferson National Bank
the Corporation and
Jefferson National Bank)
Lawrence S. Eagleburger (66)(1) Director and a member 1993
Senior Foreign Policy Advisor, of the Executive Committee
Baker, Donelson, Bearman & of the Corporation; a
Caldwell (law firm) member of the Central Region
Board of Directors of
Jefferson National Bank
Hunter Faulconer (90) Director and a member 1979
Farmer, horse breeder and of the Executive Compensation
investor Committee of the Corporation;
a member of the Central Region
Board of Directors of
Jefferson National Bank
Fred L. Glaize, III (61)(2) Director and a member 1984
Partner, Glaize and Bros. of the Executive Committee
(building supply company) of the Corporation; a member
of the Northern Region Board
of Directors of Jefferson
National Bank
Henry H. Harrell (57)(3) Director and a member 1979
Chairman, Director, and of the Executive Compensation
Chief Executive Officer, Committee of the Corporation;
Universal Corporation a member of the Eastern Region
(leaf tobacco dealer) Board of Directors of
Jefferson National Bank
Alex J. Kay, Jr. (68) Director and a member of 1979
Retired Director of the Executive Committee of
Operations Support, Philip the Corporation; a member
Morris, U.S.A., Inc. of the Eastern Region Board of
(tobacco products) Directors of Jefferson National
Bank
J. A. Kessler, Jr. (69) Director and a member of 1979
Director, R. E. Lee & Son, the Audit Committee of the
Inc. (retired as President Corporation; a member of the
of R. E. Lee & Son, Inc. Central Region Board of
effective January 1, 1996) Directors of Jefferson National
(building contractor) Bank
O. Kenton McCartney (53) Director, President and 1992
Has worked full-time with Chief Executive Officer of the
Corporation or affiliates Corporation; Director, President
and Chief Executive Officer of
Jefferson National Bank; Director
of Charter Insurance Managers, Inc.,
Grace Insurance Agency,
Incorporated; Jefferson Financial,
Inc., and Jefferson Properties, Inc.
W. A. Rinehart, III (79) Director and a member of 1979
Retired; (before 1991, a the Audit Committee of the
consultant or Senior Vice Corporation; a member of
President, Hilb, Rogal and the Central Region Board of
Hamilton of Charlottesville) Directors of Jefferson National
(independent general Bank
insurance agency)
Gilbert M. Rosenthal (71)(4) Director and a member of 1979
Retired; (before October the Executive Committee of the
1993, the Chairman and Chief Corporation; a member of
Executive Officer of the Eastern Region Board of
Standard Drug Company) Directors of Jefferson National
(retail business) Bank
Alson H. Smith, Jr. (69) Director and Chairman of 1984
Chairman, Shenandoah the Audit Committee of the
Foods, Inc. (wholesale Corporation; a member of the
food distributor) Northern Region Board of
Directors of Jefferson National
Bank
H. A. Williamson, Jr. (66) Director and a member of the 1989
Realtor Audit Committee of the
Corporation; a member of the
Hampton Roads Region Board of
Directors of Jefferson National
Bank
______________________________________________________________________________
(1) From March 1989 - August 1992, Deputy Secretary of State; from
August 1992 - January 1993, Acting Secretary of State and Secretary
of State. Mr. Eagleburger is also a director of Dresser Industries,
Inc., Phillips Petroleum Company, Stimsonite Corporation, Universal
Corporation, Corning Incorporated, and Comsat Corp. all of which are
subject to the reporting requirements of the Securities Exchange Act
of 1934.
(2) In 1991, the Office of Thrift Supervision ("OTS") advised Mr. Glaize
of its intention to initiate administrative proceedings against him
for failure to obtain the prior approval of OTS and to file certain
required reports in connection with the acquisition of the stock of a
financial institution. Mr. Glaize consented to the entry of a cease
and desist order and the assessment of a $1,000 penalty during June,
1992. The order directed Mr. Glaize, among other things, to cease
and desist from any violations of certain federal banking and
securities laws. Mr. Glaize has advised the Corporation that he was
unaware that his actions might have required regulatory approval or
the filing of reports and that he has disposed of all of the shares
at issue.
(3) Universal Corporation is subject to the reporting requirements of the
Securities Exchange Act of 1934.
(4) Mr. Rosenthal is also a director of American Filtrona Corporation,
which is subject to the reporting requirements of the Securities
Exchange Act of 1934.
___________________________________________________________________________
The Corporation has an Audit Committee which meets with both internal and
independent auditors to discuss and to review their work and the strengths and
weaknesses of financial controls. The Committee met four times in 1996.
Messrs. Smith, Kessler, Rinehart and Williamson are members of the Committee.
The Corporation has an Executive Compensation Committee which recommends
the annual compensation for the Chief Executive Officer and reviews
recommendations made by the Chief Executive Officer as to annual compensation
for executive officers and other key employees. The Committee met twice in
1996. Messrs. Casteen, Faulconer and Harrell are members of the Committee.
The Corporation has an Executive Committee which can act in lieu of the
Board of Directors with respect to regular business matters. The Committee
met five times in 1996. Messrs. Dabney, Eagleburger, Glaize, Kay and
Rosenthal are members of the Committee.
In 1996, the Corporation's Board of Directors met six times. No
incumbent director attended fewer than 75% of the meetings for which
he was responsible during 1996.
Compensation of Executive Officers and Directors
A. Executive Compensation Committee Report on Executive Compensation
The Corporation's compensation program for executive officers is
administered by the Executive Compensation Committee of the Board of
Directors. The Committee is composed entirely of non-employee directors and
currently consists of Messrs. Casteen, Faulconer and Harrell. Mr. Casteen
serves as chairman of the Committee. Committee members are not eligible to
participate in any of the plans that cover the Corporation's executive
officers.
Executive compensation consists primarily of base salary, participation
in the Executive Incentive Plan and awards under the Corporation's 1995 Long
Term Incentive Stock Plan (the "Incentive Stock Plan"). Executives also
participate in the Corporation's Profit Sharing Plan, Pension Plan and, if
applicable, Senior Officer's Supplemental Pension Plan and Excess Benefit
Plan, each of which is described elsewhere in this Proxy Statement. Total
compensation is designed to attract and retain qualified personnel capable of
enabling the Corporation to achieve its objectives in an environment
characterized by increased competition and regulatory oversight.
The Corporation is subject to Section 162(m) of the Internal Revenue
Code which imposes a $1 million dollar limit on the amount of compensation
that will be deductible by the Corporation with respect to the Chief Executive
Officer and the four other most highly compensated executive officers.
Performance-based compensation that meets certain requirements is not subject
to the deduction limit. The Committee, with the assistance of the
Corporation's legal counsel, has reviewed the impact of Section 162(m) on the
Corporation and believes that it is unlikely that the compensation paid to any
executive officer during the current fiscal year will exceed the limit.
Furthermore, the Incentive Stock Plan generally is designed to comply with the
requirements of the performance-based compensation exemption from the $1
million limit. The Committee will continue to monitor the impact of the
Section 162(m) limit and to assess alternatives for avoiding any loss of tax
deductions in future years.
The Executive Compensation Committee establishes the incentive awards
and recommends to the Board of Directors the annual salary for the Chief
Executive Officer and the other executive officers. The Committee receives
recommendations from the Chief Executive Officer as to the annual salary and
incentive stock awards for the other executive officers and other key
employees. In reviewing the Chief Executive Officer's recommendations, the
Committee meets with the Chief Executive Officer to discuss the performance
appraisals for the executive officers and considers the profitability of the
Corporation, the salary structure of the Corporation (including the average
annual salary increase) and the relative importance of the executive officer
in enabling the Corporation to achieve its goals. The Executive Compensation
Committee approved all recommendations of the Chief Executive Officer and the
Board of Directors approved all recommendations of the Executive Compensation
Committee for the most recent fiscal year.
Each year salaries for personnel other than the Chief Executive Officer
are increased, on average, by a target percentage determined through the
Corporation's budgetary process with consideration given primarily to the
Corporation's past and anticipated financial performance and, secondarily, to
general economic conditions. Methods used to measure the Corporation's
financial performance include net income on both an aggregate and per share
basis, the rate of growth of net income, return on average equity (i.e., net
income divided by average equity), return on average assets (i.e., net income
divided by average assets), and the measures for safety and soundness used by
the various regulatory agencies.
During the five-year period from 1992 through 1996, average annual
salary increases ranged from 3.69% to 4.97%. For 1996, this average increase
was 4.01% which reflected the Corporation's performance in 1995. For 1995,
the Corporation achieved record earnings and a return on average assets of
1.25% and a return on average equity of 11.43%, as compared to 1.18% and
11.05%, respectively, in 1994. An individual executive officer's increase may
have varied from this average increase depending upon such officer's
performance and contributions during the most recent fiscal year, and upon any
changes in such officer's job duties and level of responsibility.
All senior officers, including each of the executive officers,
participate in the Executive Incentive Plan. The Executive Incentive Plan
helps focus management's efforts on financial performance measures most
closely linked to the Corporation's business objectives and to increase the
portion of total compensation dependent upon corporate performance. Under the
Executive Incentive Plan, an officer can earn a cash award based on the extent
to which the Corporation meets certain performance goals established by the
Committee early in the year. The performance goals used in 1996 were net
income (calculated after payment of any awards under the Executive Incentive
Plan) and an "efficiency ratio," defined as the ratio of non-interest expense
to the sum of non-interest income and net interest income. These performance
goals were weighted two-thirds on net income and one-third on the efficiency
ratio. Under the plan, target performance with respect to each goal results
in an aggregate award available for distribution among the participants equal
to 11.25% of the aggregate base salaries of the participants. The maximum
award is 15% of participants' aggregate base salaries if maximum performance
is achieved with respect to each goal and a minimum award is 2.5% of
participants' aggregate base salaries if minimum performance is achieved with
respect to only one goal. The aggregate award is then divided into two pools,
with 60% allocated among participants on a pro rata basis and 40% allocated
based on quantitative and qualitative assessments of individual performance.
The Corporation met or exceeded target performance with respect to each of
the performance measures in 1996. Participating officers received awards
between approximately 12% and 14.2% of salary under the Executive Incentive
Plan for 1996. The average award equaled approximately 13% of salary.
Long-term incentives are provided by grants of stock options under the
Corporation's Incentive Stock Plan. Because the value of stock options is
entirely a function of the value of the Corporation's stock, the Committee
believes that this component of the Corporation's compensation package closely
aligns the interests of the executives with those of the Corporation's
stockholders. The approximate number of options to be granted to a particular
officer is determined under a formula established each year by the Committee
which is based on the officer's position and salary. That number may then be
adjusted by the Committee based on individual merit and circumstance. The
Committee does not consider it necessary to discriminate among executives
based on their respective holdings of the Corporation's common stock in order
to achieve the plan's purposes.
The approach used by the Committee to establish compensation for the
Chief Executive Officer is different from that used for other executive
officers. Rather than directly tying the Chief Executive Officer's salary to
corporate performance and, thus, creating the potential for significant
changes for any given year, the Committee sets the salary at a level that
reflects individual performance and experience and that it considers to be
sufficient to attract and retain a qualified person to be the chief executive
officer given the Corporation's trade area. Although the Committee's approach
is, for the most part, subjective, the Committee also takes into consideration
salary levels for comparable positions at comparable financial institutions.
Length of service with the Corporation and standing in the local, as well as
the banking, community and corporate performance are also considered by the
Committee.
In determining compensation levels at comparable financial institutions,
the Committee relied on an analysis prepared by an outside consultant of nine
peer group commercial banks with total assets between $1 and $3 billion and
headquartered in the southeastern United States. All of these banks are
included in the commercial banks industry index used in the Corporation's
performance table. The analysis included information for calendar years 1992
through 1994. With respect to total compensation, this analysis showed the
"average" base salary, bonus and then other compensation. This analysis
indicated that the Chief Executive Officer's salary for 1994 was only slightly
below that of the average for the selected peer group but that, as compared to
the peer group, the Corporation's bonus payments were significantly below the
peer group average.
Based on the Committee's favorable evaluation of Mr. McCartney's
individual performance and the other factors described above, the Committee
recommended that Mr. McCartney's salary be increased to $290,000, or 5.45%
above his 1995 salary. Mr. McCartney also received a bonus of 13% of salary
pursuant to the terms of the Executive Incentive Plan. The Committee also
awarded Mr. McCartney 11,000 stock options under the Incentive Stock Plan, the
amount being determined as described above.
John T. Casteen, III, Chairman
Hunter Faulconer, Henry H. Harrell
B. Summary Compensation Table
The following table sets forth information about the compensation
paid by the Corporation during its three most recent fiscal years to those
individuals who were the Corporation's Chief Executive Officer and, as of
the end of 1996, next four highest paid executive officers.
<TABLE>
Annual Compensation Long Term Compensation
Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Salary($) Bonus($(6) Awards($)(7) Options/SARs(#) Compensation
<C> <C> <C> <C> <C> <C> <C>
O. Kenton McCartney, 1996 290,000 54,442 - 11,000 23,453
President and Chief Executive Officer (1) 1995 275,000 41,858 - 15,000 21,954
1994 250,000 8,118 71,550 - 21,740
W. A. Pace, Jr. 1996 175,000 27,308 - 5,600 25,484
Senior Vice President (2) 1995 168,900 20,969 - 8,000 23,371
1994 163,000 1,380 39,750 - 22,173
Robert H. Campbell, Jr. 1996 152,550 22,131 - 4,700 25,599
1995 141,100 16,192 - 6,700 22,435
1994 133,900 318 51,675 - 17,990
Allen T. Nelson, Jr. 1996 127,200 16,564 - 4,000 18,069
Senior Vice President, Treasurer and Chief 1995 124,800 14,104 - 6,000 15,164
Financial Officer (4) 1994 120,000 64 19,875 - 14,653
William M. Watson, Jr. 1996 120,000 16,127 - 4,000 14,708
General Counsel and Secretary (5) 1995 97,700 11,055 - 5,000 10,346
1994 93,000 64 31,800 - 9,330
(1) Prior to January 1, 1994, Mr. McCartney was President and Chief
Operating Officer of both the Corporation and Jefferson National Bank.
Effective as of January 1, 1994, Mr. McCartney became President
and Chief Executive Officer of both the Corporation and Jefferson
National Bank.
(2) Mr. Pace is also a Vice Chairman of Jefferson National Bank.
(3) Effective as of October 1, 1996, Mr. Campbell is also a Vice
Chairman of Jefferson National Bank. Prior to that date he was
Executive Vice President and Service Division Manager of Jefferson
National Bank.
(4) Mr. Nelson is also Executive Vice President and Chief Financial
Officer of Jefferson National Bank.
(5) Mr. Watson is also General Counsel and, as of January 1, 1996,
Executive Vice President-Loan Administration of Jefferson National
Bank.
(6) Includes a Christmas gift and taxes on such gift, and for 1995 and
1996, amounts paid under the Executive Incentive Plan.
As to Messrs. McCartney, Pace and Campbell, the amount also
includes a bonus equal to the amount by which each of their
respective allocations under the Profit Sharing Plan was less than
it would have been in the absence of Internal Revenue Code limits
on the amount of compensation considered.
(7) Represents the value of units awarded under the Corporation's 1985
Incentive Stock Plan, without deduction for units that may be
surrendered at the time of distribution of the award to pay
applicable payroll taxes on the award. In lieu of actual dividends,
the grantee receives, at the end of the year, cash in an amount
equal to the dividends that would have been paid during the year on
the awarded units had such units been actual shares of the
Corporation's common stock. As of December 31, 1996, Mr. McCartney held
12,000 units with a value of $339,750; Mr. Pace held 10,800 units
with a value of $305,775; Mr. Campbell held 9,600 units with a
value of $271,800; Mr. Nelson held 600 units with a value of
$16,988; and Mr. Watson held 2,880 units with a value of $81,540.
These units will vest in three equal instalments on May 1, 1997,
1998, and 1999.
(8) Includes (i) amounts allocated under the Profit Sharing Plan and
(ii) amounts paid under the Split Dollar Life Insurance Plan to
enable the executives to pay the term life portion of the premium
for such insurance and, assuming a market interest rate of 8%, the
present value of the benefit to the named executives of the portion
of the premiums for such insurance paid directly by the Corporation.
During 1996, the amounts allocated under the Profit Sharing Plan to
Messrs. McCartney, Pace, Campbell, Nelson and Watson were $14,508,
$14,508 $14,508, $13,667 and $12,682, respectively; and the dollar
value of the premium and other benefits paid under the Split Dollar
Life Insurance Plan for Messrs. McCartney, Pace, Campbell, Nelson
and Watson were $8,945, $10,976, $11,091, $4,402 and $2,026,
respectively.
C. Option Grants and Holdings
The following tables provide information concerning options granted
during 1996 to the Corporation's executive officers named in the Summary
Compensation Table and information concerning options held by such
individuals at December 31, 1996. No SARs were granted during 1996.
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Percent of Total Rates of Stock Price
Number of Options Granted Appreciation for Option
Securities Underlying to Employees in Exercise Expiration Term ($) (3)
Name Options Granted (#)(1) Fiscal Year Price ($/sh)(2) Date 5% ($) 10% ($)
<C> <C> <C> <C> <C> <C> <C>
O. Kenton McCartney 11,000 12.70% 20.3125 1/2/06 140,517 356,101
W. A. Pace, Jr. 5,600 6.47% 20.3125 1/2/06 71,536 181,287
Robert H. Campbell, Jr. 4,700 5.43% 20.3125 1/2/06 60,039 152,152
Allen T. Nelson, Jr. 4,000 4.62% 20.3125 1/2/06 51,097 129,491
William M. Watson, Jr. 4,000 4.62% 20.3125 1/2/06 51,097 129,491
(1) The options become exercisable at the rate of 20% per year
beginning on January 2, 1997.
(2) The exercise price for all options is the fair market value
of the common stock on January 2, 1996.
(3) Any such appreciation will inure to the benefit of all
shareholders. The value of the Corporation's outstanding common
stock would increase by $178,338,008 and $451,944,396, based on
assumed stock price appreciation rates of 5% and 10%, respectively,
from the date of the grant until the end of such options' term.
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised
Name Unexercised Options at FY-End (#) In-The Money Options at F-Y End ($)
Exercisable Unexercisable Exercisable Unexercisable
<C> <C> <C> <C> <C>
O. Kenton McCartney 3,000 23,000 22,687 169,812
Walter A. Pace, Jr. 1,600 12,000 12,100 88,650
Robert H. Campbell, Jr. 1,340 10,060 10,133 74,316
Allen T. Nelson, Jr. 1,200 8,800 9,075 66,050
William M. Watson, Jr. 1,000 8,000 7,562 59,000
D. Pension, and Profit Sharing and Related Plans
The Corporation maintains a Pension Plan, a Profit Sharing Plan, an
Excess Benefit Plan (the "Excess Plan"), and a Senior Officer's
Supplemental Pension Plan (the "Supplemental Pension Plan"). The
Pension Plan and Profit Sharing Plan are tax qualified retirement plans. The
Pension Plan and Profit Sharing Plan cover all salaried employees who have
satisfied certain minimum age and length of service requirements.
The Excess Plan and Supplemental Pension Plan are unfunded, non-qualified
deferred compensation plans which cover a select group of management
or highly compensated employees.
The Corporation annually contributes to the Profit Sharing Plan up to
5.25% of its net operating income (as adjusted for non-taxable income from
loans and investments, securities gains and losses, loan loss provisions, and
net loan charge-offs). The contribution is allocated among
individual accounts based upon each participant's compensation relative to the
compensation of other participants. Forfeitures and 75% of the Corporation's
contributions are allocated to a restricted portion of the accounts, while the
balance is allocated to a non-restricted portion of the accounts. The
restricted portion vests 20% per year in the third through seventh years of
credited service, while the non-restricted portion vests 100% after the third
year of credited service. A participant's account is distributable upon
retirement, death, termination of employment, or disability, and the vested
amount of the restricted portion of a participant's account may be wholly or
partially withdrawn during employment for reasons of hardship. The non-
restricted portion is also withdrawable during employment to the extent that
the portion exceeds allocations for the last two years. During 1996, no
withdrawals were made by any of the named executive officers.
A participant's retirement benefit under the Pension Plan is based on
the participant's base pay (excluding bonuses, deferred or supplemental
compensation or other forms of compensation) and the participant's years of
credited service. The retirement benefit payable to a participant who retires
on or after his retirement date is generally equal to (i) 1.10% of a
participant's "final average compensation" (i.e., the average of a
participant's monthly base pay for the highest 60 consecutive months of
credited service during the last 120 months) plus .65% of a participant's
final average compensation in excess of the "average wage base" (i.e., the
average of the Social Security taxable wage bases during a participant's
working lifetime, up to 35 years) multiplied by the participant's years of
service up to 25 years, plus (ii) 1% of a participant's final average
compensation multiplied by a participant's years of service in excess of 25
years. For participants who participated in the Pension Plan prior to January
1, 1989, there is a minimum benefit based on the accrued benefit earned at
December 31, 1988 plus the formula referred to above for service after
December 31, 1988. In addition, for participants who participated in the plan
prior to January 1, 1994, there is a minimum benefit based on the accrued
benefit earned on December 31, 1993 based on the Internal Revenue Code (the
"Code") compensation limits in effect at that time. Benefits under the
Pension Plan are integrated with, and not offset by, a participant's Social
Security benefits.
The compensation taken into account in calculating a participant's
retirement benefit under the Pension Plan in 1996 was limited to $150,000 in
accordance with applicable provisions of the Code. In addition, certain other
provisions of the Code limit the total amount that may be paid from the
Pension Plan. The Excess Plan pays a benefit equal to the amounts that may
not otherwise be paid from the Pension Plan because of the limits imposed by
the Code.
The following table shows the estimated annual benefits that would be
paid on a straight life annuity basis to a participant in the Pension Plan who
retired at the participant's normal retirement date (normally at the
attainment of age 65). As noted above, benefits under the Pension Plan are
limited to the extent prescribed by the Code, and any amounts in excess of
such limitations will be paid under the Excess Plan. Accordingly, the amounts
shown in the table reflect the aggregate of payments under the Pension Plan
and the Excess Plan.
</TABLE>
<TABLE>
<CAPTION>
Highest Consecutive
Five-Year Average Estimated Annual Pensions for Representatives
Compensation Year of Credited Service
10 20 30 40 45 50
<C> <C> <C> <C> <C> <C> <C>
100,000 17,058 34,116 48,130 59,100 65,585 70,070
150,000 26,657 53,314 74,870 91,324 99,552 107,779
200,000 36,256 72,511 101,609 123,548 134,518 145,488
250,000 45,854 91,708 128,348 155,773 169,485 183,197
300,000 55,453 110,906 155,087 187,997 204,452 220,906
350,000 65,052 130,103 181,826 220,221 239,418 258,615
400,000 74,650 149,300 208,565 252,445 274,385 296,324
450,000 84,249 168,498 235,304 284,669 309,351 334,033
At December 31, 1996, Messrs. McCartney, Pace, Campbell, Nelson, and
Watson had 13, 47, 25, 3 and 6 years of credited service, respectively,
under the Pension Plan. For determining benefits under the Pension Plan and
Excess Plan, covered compensation for each of these individuals is the amount
shown in the Summary Compensation Table under the heading "Salary."
In addition to benefits under the Pension Plan and the Excess Plan,
officers of the Corporation and its subsidiaries with the title of Senior Vice
President (or equivalent) and above are eligible to receive benefits under the
Senior Officer's Supplemental Pension Plan. The plan provides for payments
equal to ten percent of the monthly benefits payable under the Pension Plan
(computed on a life annuity basis with guaranteed payments for ten years) upon
retirement after attainment of age 60 with 25 years of service to the
Corporation or its predecessors. Payments continue until the earlier of ten
years or death. Benefits are subject to forfeiture if a participant's
employment is terminated for cause or if the participant competes with the
Corporation or discloses certain confidential information within two years
after termination of employment. Messrs. McCartney, Pace, Campbell, Nelson,
and Watson have 13, 47, 25, 3, and 6 years of service, respectively, for
purposes of this plan. It is estimated that, upon retirement at age 65, Mr.
McCartney would receive $6,075 per year, Mr. Pace would receive $9,375 per
year, Mr. Campbell would receive $5,696 per year and Mr. Watson would
receive $4,087 per year. Mr. Nelson would not be entitled to any benefits
under the plan if he retired at age 65, although he may be eligible to receive
a benefit in the event of retirement at a later time.
E. Contracts with Executives
The Corporation has agreements with Messrs. McCartney, Campbell, Nelson
and Watson and selected other officers of the Corporation or its affiliates,
which relate to the officers' employment following a change of control of the
Corporation. The initial term of each agreement is for a period of two years.
The term is extended for an additional one-year period on the anniversary date
of the agreement, unless 60 days prior to any anniversary date the Corporation
gives notice that the term of the agreement will not be extended.
Each agreement provides for the officer's continued employment for two
years following a change of control event (the "Employment Period"). During
the Employment Period, the officer will be entitled to annual salary and bonus
at the level applicable to the officer during the 12 months immediately
preceding the change of control event. The officer also will be entitled to
participate in incentive and other benefit programs on terms at least as
favorable as those in effect at the time of the change of control event.
The agreements also provide certain benefits if, following a change of
control, an officer's employment is terminated by the Corporation or its
successor other than for death or disability, or if the officer resigns for
"good reason" such as a reduction in responsibilities or compensation. In
such event, the Corporation will be obligated to pay to the officer a lump sum
amount equal to a specified percentage of his salary paid within the 12 months
preceding the change of control. Under the agreements no officer is to
receive less than 100% or more than 299% of his salary. Messrs. McCartney,
Campbell and Watson would each receive 299% of their respective salaries and
Mr. Nelson would receive 200% of his salary. The lump sum amount will be
reduced to take into account any other payment or benefit that arises or
accrues contingent on a change of control so that the excise tax which may be
imposed pursuant to Section 4999 of the Internal Revenue Code will not apply
and the Corporation's payment will generally be deductible.
F. Director Compensation
Non-employee directors of the Corporation and its subsidiaries receive
fees for their services. For 1996, the Corporation paid a retainer of $4,500,
a fee of $750 for each board meeting attended and a fee of $250 for each
Committee meeting attended. In 1996 Jefferson National Bank paid (i) non-
employee members of its board of directors a retainer of $2,500, a fee of $300
for each board meeting attended and a fee of $175 for each committee meeting
attended; (ii) non-employee members of boards of directors for regions a
quarterly retainer of $400 and a fee of $225 for each meeting attended; and
(iii) non-employee members of boards for local offices a quarterly retainer of
$200 and a fee of $125 for each meeting attended.
The Corporation and its subsidiaries have a plan that permits directors
and members of advisory boards of directors to receive all or any portion of
their retainers and meeting fees in cash or shares of the Corporation's common
stock. Directors may also elect to defer the payment of fees until the
director's death, disability, retirement as a director, other cessation of
services as a director, or change in control of the Corporation, as defined in
the plan. The payment of deferred fees may be made in a lump sum or in
instalments as specified by the committee administering the plan. Messrs.
Eagleburger, Glaize, Harrell, Kay, and Rosenthal have elected to participate
in the plan and purchase shares of the Corporation's common stock with all or
a portion of their fees.
All shares issued under the plan are purchased directly from the
Corporation on the first business day of each month. The purchase price is
equal to the average of the high and low sales prices of the Corporation's
common stock on such date or, if there are no trades of the Corporation's
common stock on such date, the average of the high bid and low asked prices of
the Corporation's common stock reported in the National Market System of the
Nasdaq Stock Market for such date.
Fees payable in shares are credited to an account in the director's
name. All dividends or other cash distributions with respect to such shares
are used to purchase additional shares of the Corporation's common stock.
Fees payable in cash on a deferred basis are credited with interest at an
assumed rate equal to what would have been credited on such deferred fees had
they been invested in a six-month certificate of deposit of Jefferson National
Bank on the last day of the preceding fiscal quarter.
G. Performance Table
The following table compares the cumulative total return, assuming the
reinvestment of dividends, for the period from December 31, 1991 through
December 31, 1996 from an investment of $100 in each of the Corporation's
common stock, the Nasdaq Market Index, and the Standard Industrial
Classification Code 602 - Commercial Banks ("SIC Code 602") Index.
PERFORMANCE GRAPH INSERTED HERE
</TABLE>
<TABLE>
<C> <C> <C> <C> <C> <C> <C>
Jefferson Bankshares, Inc. $100.00 $141.46 $161.60 $171.28 $180.39 $264.67
SIC Code 602 $100.00 $118.98 $140.49 $133.52 $189.50 $263.29
Nasdaq Market $100.00 $100.98 $121.13 $127.17 $164.96 $204.98
Media General Financial Services, Inc. supplied the necessary information to
construct the table and prepared both the Nasdaq Market Index and the SIC Code
602 Index. The Nasdaq Market Index consists of the equity securities of all
companies whose securities have been traded in the Nasdaq Stock Market at any
time during the period from December 31, 1991 through December 31, 1996. The
SIC Code 602 Index consists of the equity securities of all commercial banks
in the United States whose securities are traded on either the New York Stock
Exchange or American Stock Exchange or in the Nasdaq Stock Market at any time
during the period from December 31, 1991 through December 31, 1996. As of
December 31, 1996, approximately 5,478 companies were included in the Nasdaq
Market Index and 491 commercial banks were included in the SIC Code 602 Index.
The performance of any individual company's common stock is influenced
not only by the company's own performance and future prospects, but also by a
number of external factors over which the company and its management have
indirect or no control, including general economic conditions, expectations
for the company's future performance, and conditions affecting or expected to
affect the company's industry. In addition, stock performance can be affected
by factors such as trading volume, analytical research coverage by the
investment community, and the propensity of shareholders to hold the stock for
investment purposes. The relative weight of these factors also varies over
time. Consequently, stock performance, including measurement against indices,
may not be representative of a company's financial performance for given
periods of time.
Loans To Officers And Directors
The Corporation's subsidiary bank has made loans to some of the
Corporation's directors and officers. All such loans were made in the
ordinary course of business on substantially the same terms, including
interest rates and collateral, as were in effect at the time the loans were
made for comparable transactions with other persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, Richmond,
Virginia, as independent auditors for the Corporation for 1997, but the
selection is subject to the approval of shareholders. The firm audited the
books and records of the Corporation and its subsidiaries for 1996.
Representatives from the firm are expected to be present at the annual meeting
with the opportunity to make a statement and to answer any questions you may
have.
KPMG Peat Marwick LLP has advised the Corporation that neither it nor any
of its members have any direct financial interest or material indirect
financial interest in the securities of the Corporation or any of its
subsidiaries or any connection with the Corporation or any of its subsidiaries
in the capacity of promoter, underwriter, voting trustee, director, officer or
employee.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any shareholder wishing to make a proposal to be acted upon at the 1998
annual meeting must present such proposal to the Secretary of the Corporation
at its executive office in Charlottesville, Virginia not later than November
14, 1997, in order for the proposal to be included in the Corporation's 1998
proxy materials. Any such proposal should meet applicable requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder.
OTHER MATTERS
The Corporation is not aware of any other matters to come before the
meeting. However, if other matters are properly raised at the meeting, the
persons named in the enclosed form of proxy will vote the proxy in their
discretion.
The Corporation will furnish, without charge to any shareholder, a copy
of its Form 10-K that it files annually with the Securities and Exchange
Commission. A copy of this report for the year ended December 31, 1996 may be
obtained upon written request to the Corporation's Secretary.
William M. Watson, Jr.
General Counsel and Secretary
CHARLOTTESVILLE, VIRGINIA
MARCH 14, 1997
Jefferson Bankshares, Inc.
123 East Main Street
Charlottesville, Virginia
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON APRIL 22, 1997
I appoint JAMES S. KENNAN, ROBERT E. STROUD and HOWARD B. WATKINS, or
any one of them, with power of substitution to each, proxies to vote my shares
of the stock of Jefferson Bankshares, Inc. at the annual meeting of
shareholders to be held on April 22, 1997, or at any subsequent session of
such meeting.
WHEN THIS FORM IS PROPERLY EXECUTED, THE PROXIES WILL VOTE AS
SPECIFICALLY INDICATED ON THE REVERSE SIDE. THE PROXIES WILL VOTE "FOR"
NOMINEES IN PROPOSAL 1, UNLESS AUTHORITY TO DO SO IS WITHHELD, WILL VOTE "FOR"
PROPOSAL 2, UNLESS ANOTHER CHOICE IS INDICATED.
(Continued and to be signed and dated on the reverse side.)
(Back Page)
1. ELECTION OF DIRECTORS:
FOR all nominees WITHHOLD AUTHORITY to *Exceptions ( )
listed below ( ) vote for all nominees
listed below ( )
Jefferson's Nominees: John T. Casteen, III; Hovey S. Dabney; Lawrence S.
Eagleburger; Hunter Faulconer; Fred L. Glaize, III; Henry H. Harrell; Alex J.
Kay, Jr.; J. A Kessler, Jr.; O. Kenton McCartney; W. A. Rinehart, III; Gilbert
M. Rosenthal; Alson H. Smith, Jr.; H. A. Williamson, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write the nominee's name in the space provided
below.)
*Exceptions _______________________________________________________________
2. APPROVAL OF AUDITORS: To approve the selection of KPMG Peat Marwick LLP
as independent auditors for 1997.
FOR ( ) AGAINST ( ) ABSTAIN ( )
3. The Proxies are authorized to vote in their discretion upon such other
matters as may properly come before the meeting and to vote for any
person recommended by the Board of Directors as a substitute for any
nominee mentioned above if, at the time of the meeting, such nominee
is unable or unwilling to serve.
Change of Address or Comments Mark Here ( )
Please date and sign exactly as
name(s) appear(s) at left, including
joint names. A person signing in a
representative capacity should
indicate any title or the capacity.
Dated:___________________, 1997
______________________________
Signature
______________________________
</TABLE>
