SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
F&M National Corporation
(Name of Registrant as Specified in its Charter)
F&M National Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
( ) 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.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of F&M NATIONAL CORPORATION (the
"Company") will be held at the TraveLodge of Winchester, 1825 Dominion
Avenue, Winchester, Virginia on Tuesday, April 25, 1995, at 10 a.m. for the
following purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected and qualified;
2. To amend the Articles of Incorporation to increase the
number of authorized shares of common stock from 20,000,000 to
30,000,000 shares;
3. To ratify the selection by the Audit Committee of the
Board of Directors of Yount, Hyde, & Barbour, P. C.,
independent certified public accountants, as auditors of the
Company for 1995, and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The stock transfer books of the Company will not be closed, but only
Shareholders of record at the close of business on February 28, 1995, will be
entitled to vote at the meeting.
Attendance at the annual meeting will be limited to Shareholders, persons
holding proxies from Shareholders and certain representatives of the press
and financial community. If you wish to attend the meeting but your shares are
held in the name of a broker, trust, bank or other nominee, you should bring
with you written confirmation from the broker, trustee, bank or nominee of your
beneficial ownership of the shares.
You are cordially invited to attend the meeting in person. Whether or not
you plan to attend the meeting, it is important that your shares be
represented, and it would be helpful if you would return your signed and dated
Proxy promptly. If you attend the meeting, you may withdraw any Proxy
previously given and vote in person.
Following the adjournment of the meeting, officers and directors of the
Company will be available at that time to meet with you.
By Order of the Board of Directors
Alfred B. Whitt
Senior Vice President, Secretary and
Senior Financial Officer
March 14, 1995
March 14, 1995
P R O X Y S T A T E M E N T
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of F&M National Corporation (the "Company") to
be voted at the 1995 Annual Meeting of Shareholders to be held Tuesday, April
25, 1995, at 10 a.m. at the TraveLodge of Winchester, 1825 Dominion Avenue,
Winchester, Virginia, and any adjournment thereof. The distribution of this
Proxy Statement and related proxy material will commence on or about March 14,
1995.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies delivered pursuant to this solicitation will be
voted at the meeting in accordance with instructions noted thereon or, if no
direction is indicated, they will be voted in favor of the proposals set forth
in the Notice of Annual Meeting. Any Shareholder giving a proxy has the power
to revoke it at any time before the proxy is voted by giving written notice to
the Secretary of the Company, by executing or delivering a substitute proxy or
by attending the meeting and revoking the proxy at the meeting.
If a shareholder participates in the Company's Dividend Reinvestment and
Stock Purchase Plan, the enclosed proxy also includes those shares.
VOTING RIGHTS OF SHAREHOLDERS; PRINCIPAL SHAREHOLDERS
Only Shareholders of record at the close of business on February 28, 1995,
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the close of business on the record date,
____________ shares of Common Stock, par value $2.00 per share, were
outstanding and entitled to vote at the Annual Meeting. The Company has no
other class of stock outstanding. Each share of Common Stock will entitle the
holder thereof to one vote on all matters to come before the Annual Meeting.
A majority of the votes entitled to be cast, represented in person or by proxy,
will constitute a quorum for the transaction of business.
As of the record date, no person beneficially owned 5% or more of the
Company's Common Stock.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company,
including the cost of preparing and mailing. In addition to solicitation by
use of the mails, certain officers and employees of the Company (who will not
be compensated in addition to their regular salaries) may solicit proxies
personally or by telephone. The Company will reimburse banks, brokerage
firms, and other custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy material to beneficial owners of the
Company's Common Stock.
ELECTION OF DIRECTORS - PROPOSAL ONE
Absent instructions thereon to the contrary, duly executed proxies will be
voted for the election of the 15 nominees listed below. Each nominee named has
been recommended for election by the Board. In the unanticipated event that
prior to the election any one or more of such nominees becomes unable or
unwilling to serve, it is intended that the persons named in the proxy will
vote for the election of such other person in the place of such nominee as
the Board of Directors may recommend, unless the Board reduces its
membership prior to the meeting. The Company has no reason to expect that any
nominee will be unable to serve.
The 15 candidates receiving the largest pluralities of votes cast in the
election of directors will be elected to serve until the 1996 Annual Meeting
of Shareholders and until their successors are elected and qualified.
NOMINEES FOR ELECTION AS DIRECTORS
The following table sets forth certain information with respect to each
nominee for director. Except as otherwise indicated, each nominee has held his
present principal occupation or has occupied the offices indicated or similar
positions with the Company with substantially similar responsibilities for at
least the last five years.
<TABLE>
Principal Occupation For the Last Five Years
Nominee And (Age) Director Since and Other Information
<S> <C> <C>
Frank Armstrong, III (58) 1985 Chairman, President and Chief Executive Officer
of National Fruit Prooduct Company, Inc.,
since 1984. (2)
James L. Bowman (67) 1970 Chairman of the Board, F&M Bank-Martinsburg
since 1986; retired in 1988 as President of
Bowman Trucking Company. (2)
Betty H. Carroll (57) 1986 Senior Vice President of the Company since 1987;
President, Chief Executive Officer of F & M Bank-
Winchester. (2)
William H. Clement (67) 1988 Chairman of the Board of Automotive Industries,
Inc., since 1992 and Vice Chairman of Automotive
Industries Holding, Inc., since 1975. (1)(2)
W. M. Feltner (75) 1970 Chairman of the Board and Chief
Executive Officer of the Company; Chairman of the
Board of F & M Bank-Winchester. (2)
William R. Harris (66) 1986 Chairman of the Board, F & M Bank-Richmond;
Chairman of the Board of Harris Plumbing &
Heating, Inc., since 1952; a principal in Harris
Farms, Harris Mechanical Co., Inc., and Harris
Land Development Co., Inc.
L. David Horner, III (60) 1986 Chairman of the Board of Horner
Properties, Inc., since 1990; Chairman of the
Florida Food Industries, Inc., from 1977 to 1990.
Jack R. Huyett (62) 1990 President of the Company since
1992; President of F&M Bank-Blakeley from 1969 to 1992. (2)
William A. Julias (60) 1980 Chairman of the Board of F&M Bank-Massanutten
since 1975; Senior Partner of the law firm of
Julias, Blatt & Wolfe, P. C. Practicing attorney
since 1960.
George L. Romine (83) 1986 Retired in 1987 as Vice President
and Director of Abex Corporation; Executive Director of the
Winchester-Frederick County Economic
Development Commission from 1983 to 1990. (2)
John S. Scully, III (84) 1970 President of Winchester Cold
Storage Co., Inc., since 1984. (2)
J. D. Shockey, Jr. (52) 1970 President of Shockey Industries, Inc., a general
construction contractor. (2)
Fred G. Wayland, Jr. (66) 1994 Retired in 1992 as President and Chief Executive
Officer of PNB Financial Corporation.
C. Ridgely White(83) 1970 Chairman of the Board of J. V. Arthur, Inc., a
general insurance brokerage firm, from 1966 to
his retirement in 1989; Director of O'Sullivan
Corporation, a manufacturer of molded plastics.
(1)(2)
F. Dixon Whitworth, Jr. (50) 1985 Executive Vice President of the Company since
1985. (2)
</TABLE>
________________________
(1) Automotive Industries Holding, Inc., and O'Sullivan Corp. are publicly
traded companies, subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended.
(2) Serves as a Director of F & M Bank-Winchester, Winchester, Virginia.
In addition to serving as directors in the above table, the following named
persons serve as directors of other subsidiaries of the Company: Mrs.
Carroll, F&M Bank- Martinsburg, Apple Title Company, Big Apple Mortgage Co.,
Inc., Credit Bureau of Winchester, Inc., Winchester Credit Corporation, Rouss
Finance Company, RFC Mortgage Company, Peoples Loans, Inc., and Peoples
Credit Corporation; Mr. Huyett, F&M Bank- Blakeley, F&M Bank-Keyser, F&M
Bank-Peoples, Apple Title Company, Winchester Credit Corporation, Peoples
Loans, Inc., and Peoples Credit Corporation; and Mr. Whitworth, F&M
Bank-Central Virginia, F&M Bank-Richmond, F&M Bank-Hallmark, Apple Title
Company, and Winchester Credit Corporation.
BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Board of Directors holds regular monthly meetings on the second
Wednesday of each month and special meetings from time to time, as required, to
consider important matters occurring between regular meetings dates. During
1994, the Board held twelve regular meetings, and each of the directors
attended at least 75% of the aggregate of all meetings of the Board and all the
committees of the Board on which they served.
The Board of Directors has an Executive Committee, an Audit Committee, a
Nominating Committee, and a Human Resources Committee. These committees are
appointed each year at the Reorganizational Meeting of the Board of Directors.
The Executive Committee, whose members are Messrs. White, Harris, Romine,
Feltner, Huyett, and Mrs. Carroll, has and may exercise all the lawful
authority of the full Board of Directors, except as limited by Virginia law.
The Audit Committee, whose members are Messrs. Armstrong, Bowman, Horner,
Kalbach, and Loy, none of whom are employees of the Company or any of
its affiliates, recommends the independent auditors to be selected by the
Board, discusses with the independent auditors the scope of their proposed
audit, reviews the audit reports, discusses with management the implementation
of the auditors' recommendations, reviews the fee of the independent auditors
for audit and non-audit services, reviews the adequacy of the Company's
system of internal accounting controls and reviews reports of audit activities
performed by the Company's staff of internal auditors. This committee met
four times during 1994.
The Nominating Committee, whose members are Messrs. Clement, Harris, Julias,
Romine, Shockey, and White, none of whom are employees of the Company
or any of its affiliates, reviews the directors of the Company for
diversity of background and experience and recommends the slate of
directors to the Board of Directors for nomination to the Shareholders at
the Annual Meeting. This committee met twice during 1994.
The primary responsibilities of the Company's Human Resources Committee
are to review and recommend to the Board of Directors compensation of
senior management. This committee also administers awards made under the
Company's Officers' Incentive Bonus Plan and the granting of options to
purchase the Company's Common Stock. The committee, whose members are Messrs.
White, Clement, Romine, and Shockey, none of whom are employees of the
Company or any of its affiliates, reviews and makes recommendations to
the Board regarding new plans and amendments to existing compensation
and benefit plans.
In administering the Company's Stock Option Plan, the Human Resources
Committee determines the persons to whom options shall be granted, the number
of shares subject to each option, the option price, the period for which each
option is to be granted, and the terms and conditions of each option
agreement entered into. This committee met once during 1994.
DIRECTORS' FEES
Directors of the Company may be paid such reasonable fees as the Board of
Directors deems appropriate for their services for committee participation
and attendance at meetings of the Board of Directors. For the period
ending December, 1994, Board members received $500 for attendance at each
regular or special meeting of the Board, and outside directors received, in
addition, an annual retainer of $5,500. Board members were not compensated
for their services as participants in meetings of various committees, except
members of the Audit Committee and the Human Resources Committee who received
a fee of $200 for attending meetings of those committees. For the year 1994,
directors received an additional $1,200 annually for travel, lodging, and
related expenses incurred in attending Board and committee meetings. Directors
do not receive any other fees, and no consulting, director charitable
awards, or legacy arrangements exist.
AMENDMENT TO THE ARTICLES OF INCORPORATION - PROPOSAL TWO
The Board of Directors proposes and recommends that the Shareholders
approve an amendment to Article III of the Articles of Incorporation to
increase the number of shares of Common Stock which the Company is authorized
to issue from 20,000,000 shares to 30,000,000 shares. There will be no change
in the presently authorized 5,000,000 shares of Preferred Stock. If the
amendment is approved, the authorized capital stock of the Company will be
35,000,000 shares, divided into 30,000,000 shares of Common Stock of the par
value of $2.00 per share, and 5,000,000 shares of Preferred Stock without
par value. The first paragraph of Article III will be amended to read as
follows:
"The total number of shares of capital stock which the corporation shall
be authorized to issue shall be 35,000,000 shares consisting of 30,000,000
shares of Common Stock of the par value of $2.00 per share and
5,000,000 shares of Preferred Stock without par value. The Board of
Directors is authorized, subject to the limitations prescribed by law and
the provisions of this Article III, to provide for the issuance of shares of
preferred sock in one or more series and to fix and determine the relative
rights and preference of the shares of any series so established."
The Company had outstanding at February 28, 1995, shares of its
Common Stock. No shares of Preferred Stock have been issued. An additional
299,414 shares are reserved for issuance pursuant to the Company's Incentive
and Non-Qualified Stock Option Plan, 250,529 shares are reserved for issuance
under the Officers' Incentive Bonus Plan, 223,650 shares are reserved for
issuance under the 1993 Employees' Stock Purchase Plan, and 293,259 shares
are reserved for issuance under the Dividend Reinvestment and Stock
Purchase Plan. In addition, the Company has reserved 944,435 shares of Common
Stock for issuance to the shareholders of Bank of the Potomac, Herndon,
Virginia, upon consummation of the Company's proposed affiliation with that
institution. Thus, the Company now has approximately shares of
Common Stock available for stock dividends, stock splits, future acquisitions
and for the raising of additional capital. If the amendment is approved, the
Company will have shares available for issuance for these purposes.
Shareholders last approved an increase in the number of authorized shares of
Common Stock at the 1989 Annual Meeting of Shareholders, from 10,000,000
to 20,000,000 shares.
Since 1988, the Company has issued an aggregate of 6,246,364 authorized but
unissued shares of Common Stock or treasury shares to acquire six banking
institutions. In addition, the Company used 1,110,500 authorized but unissued
shares of Common Stock to raise additional capital. A stock dividend of 3%
was paid in 1989 and a 2.5% stock dividend was paid in 1994, and the Board
considers the payment of such stock dividends from time to time.
The Board of Directors unanimously recommends the adoption of the amendment
to the Shareholders so that the Company will have available authorized but
unissued shares of Common Stock, particularly for future acquisitions as well
as for stock dividends, stock splits, and the raising of additional capital as
needed. While the Company has in the past acquired banks in Virginia and West
Virginia by issuing additional shares of Common Stock, the increase in
authorized capital stock is not being proposed because of any specific
contemplated acquisition. In addition, the Company has no present plans to
raise additional capital or to split its Common Stock or declare a stock
dividend. The Board of Directors believes that having the authority to issue
additional shares of Common Stock will avoid the possible delay and expense of
calling a special meeting of shareholders for this purpose.
If the Amendment is adopted, the additional authorized shares of Common Stock
may be issued from time to time upon authorization by the Board of Directors
without further action of the Stockholders. The Amendment is not being
proposed as a means of preventing a change in control or takeover of the
Company. However, the Board of Directors could issue the additional shares
of Common Stock to dilute the stock ownership and voting power of persons
seeking to obtain control of the Company and the additional authorized shares
could be issued to purchasers who would support the Board of Directors in
opposing a takeover proposal. The existence of the additional authorized
shares could have the effect of defeating, discouraging, or making less
likely proposals for acquisition of the Company which some or a
majority of shareholders might deem advantageous. The Articles of
Incorporation authorize the issuance of 5,000,000 shares of Preferred Stock.
These shares could also be issued to dilute the stock ownership and voting power
of persons seeking to control the Company and could be issued to purchasers
supporting the Board of Directors' opposition to a takeover proposal. In
addition, such Preferred Shares could be issued with relative rights and
preferences which would make an acquisition or takeover of the Company
undesirable to persons who might otherwise have an interest in making offers
for the Company or its stock.
The Board of Directors recommends a vote in favor of the Amendment
because it believes that the availability of the additional shares of Common
Stock is needed to assure that the Company is in a position to expand through
acquisitions and to meet the opportunities which face the Company in the future.
Adoption of the Amendment to the Articles of Incorporation requires the
affirmative vote of the holders of a majority of the votes entitled to be cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
AMENDMENT TO THE ARTICLES OF INCORPORATION.
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the amount of Company Common Stock held
by each director and certain executive officers, and by the directors and
all executive officers as a group, as of February 28, 1995. Mr. Bowman is
the only director who beneficially owned more than 1% of the Company's Common
Stock as of February 28, 1995. His percentage ownership as of that date was
___%, and the directors and all executive officers as a group beneficially
owned as of that date ___% of the outstanding shares of Common Stock.
Name Stock Ownership (1)
Frank Armstrong, III . . . . . . . . . .
James L. Bowman . . . . . . . . . . . .
Betty H. Carroll . . . . . . . . . . . . (2)
William H. Clement . . . . . . . . . . .
W.M Feltner . . . . . . . . . . . . . . (2)
William R. Harris . . . . . . . . . . .
L. David Horner . . . . . . . . . . . .
Jack R. Huyett . . . . . . . . . . . . . (2)
William A. Julias . . . . . . . . . . .
George L. Romine . . . . . . . . . . . .
John S. Scully, III . . . . . . . . . .
J. D. Shockey, Jr. . . . . . . . . . . .
Fred G. Wayland, Jr. . . . . . . . . . .
C. Ridgely White . . . . . . . . . . . .
Alfred B. Whitt . . . . . . . . . . . . (2)
F. Dixon Whitworth, Jr. . . . . . . . . (2)
________________________
(1) Includes shares held jointly with spouse and/or as custodian
under the Virginia Uniform Gifts to Minors Act and as trustee
under the terms of certain trusts.
(2) Includes 21,900 shares issuable to Mrs. Carroll, 30,500 shares
issuable to Mr. Feltner, 10,637 shares issuable to Mr. Huyett,
_____ shares issuable to Mr. Whitt, and 7,483 shares issuable to
Mr. Whitworth under the Company's 1992 and 1982 Incentive and
Non-Qualified Stock Option Plans.
-8-
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the years ended
December 31, 1994, 1993, and 1992 of those persons who were, at December
31, 1994, (i) the chief executive officer and (ii) the other four most
highly compensated executive officers of the Company (the Named Officers):
<TABLE>
Summary Compensation Table
Long Term
Compensation
Annual Compensation(1) Awards(4)Payouts
All Other
Options LTIP Compen-
Name and Position Year Salary Bonus(2) Other(3) (Shares) Payouts sation(5)
<S> <C> <C> <C> <C> <C> <C> <C>
W. M. Feltner 1994 $407,200 $150,000 -- 10,000 -0- $ 9,225
Chairman of the 1993 $357,200 $110,000 -- 10,000 -0- $21,734
Board/Chief 1992 $356,600 $ 95,000 -- 10,000 -0- $22,616
Executive Officer
Jack R. Huyett 1994 $172,200 $ 55,000 -- 5,000 -0- $ 9,225
President/Chief 1993 $132,200 $ 35,000 -- -- -0- $16,409
Administrative 1992 $116,600 $ 20,000 -- 500 -0- $14,144
Officer
Betty H. Carroll 1994 $197,200 $54,000 -- 5,000 -0- $ 9,225
Senior Vice President; 1993 $182,200 $43,000 -- -- -0- $21,921
President/CEO, F&M 1992 $174,100 $35,000 -- 2,500 -0- $21,148
Bank-Winchester
F.Dixon Whitworth Jr. 1994 $127,200 $22,500 -- 1,000 -0- $ 8,988
Executive Vice 1993 $119,700 $20,000 -- -- -0- $12,512
President 1992 $119,100 $20,000 -- 500 -0- $13,934
Alfred B. Whitt 1994 $142,200 $37,500 -- 5,000 -0- $ 9,225
Senior Vice 1993 $117,200 $30,000 -- -- -0- $13,420
President/Secretary 1992 $101,600 $20,000 -- 1,000 -0- $11,815
</TABLE>
________________________
(1) No compensation was deferred during 1994. Salary includes fees
earned serving on the Board of Directors and various committees.
(2) Amounts awarded under the Incentive Compensation Plan.
(3) Unless the aggregate amount of such compensation is the lesser of
either $50,000 or 10% of the total annual salary and bonus
reported, no report is required.
(4) The Company's 1992 and 1982 Incentive and Non-Qualified Stock
Option Plans do not permit grants of restricted stock.
(5) Amounts of All Other Compensation are amounts contributed or
accrued for fiscal 1994, 1993, and 1992 for the Named Officers
under the Company's 401(k) Retirement Plan and the Company's
Employees' Stock Ownership Plan. The Company has an unfunded
plan that is similar to a Deferred Compensation Plan. Please
see page 11 for Deferred Compensation and Salary Continuation
Agreements.
OPTIONS/GRANTS TABLE
Shown below is further information on grants of stock options pursuant to
the 1992 and 1982 Incentive and Non-Qualified Stock Option Plans during the year
ended December 31, 1994, to the Named Officers which are reflected in the
Summary Compensation Table. No stock appreciation rights may be granted under
that Plan.
<TABLE>
Options/Grants in Last Fiscal Year
Potential
Individual Grants Realizable Value(3)
% of Total
Options Exercise Grant
Options Granted to or Base Date Expira-
Granted Employees Price Market tion
Name (1) in 1994 ($/Sh)(2) Price Date 0%($) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. M. Feltner 10,000 38.5 8.13 16.25 1/3/04 81,200 125,967 191,465
Jack R. Huyett 5,000 19.2 8.13 16.25 1/3/04 40,600 62,984 95,733
Betty H. Carroll 5,000 19.2 8.13 16.25 1/3/04 40,600 62,984 95,733
F.Dixon Whitworth Jr. 1,000 3.9 8.13 16.25 1/3/04 8,120 12,597 19,147
Alfred B. Whitt 5,000 19.2 8.13 16.25 1/3/04 40,600 62,984 95,733
________________________
(1) All options granted to Named Officers were granted on January 3,
1994, and first became exercisable on January 3, 1994. No
options were repriced during 1994.
(2) These options were granted with an exercise price of $8.13 per
share, and the price is not adjustable.
(3) Potential realizable value at assumed annual rates of stock
price appreciation based on actual option term annual compounding.
</TABLE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The Company sponsors a stock option plan which provides for the granting of
both incentive and non-qualified stock options to executive officers and key
employees of the Company and its Subsidiaries. The option price of incentive
options will not be less than the fair market value of the stock at the time an
option is granted. Non- qualified options may be granted at a price
established by the Board of Directors including prices less than the fair
market value on the date of grant. No option may be granted at an exercise
price less than one-half of the market price at the date of the grant.
Shown below is information with respect to the options exercised and the
unexercised options to purchase the Company's Common Stock granted in 1994 and
prior years under the 1992 and the 1982 Incentive and Non-Qualified Stock Option
Plans.
<TABLE>
Aggregated Option Exercises
in 1994 and Year-End Option Value
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Dec. 31, 1994 Dec. 31, 1994
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized(1) Unexercisable Unexercisable(2)
<S> <C> <C> <C> <C>
W. M. Feltner -0- 0 20,500/0 $157,838/$0
Jack R. Huyett -0- 0 5,637/0 $ 44,837/$0
Betty H. Carroll -0- 0 22,025/0 $189,585/$0
F.Dixon Whitworth Jr. 2,050 18,800 6,483/0 $ 53,679/$0
Alfred B. Whitt 1,000 9,500 13,313/0 $108,281/$0
________________________
(1) Market value of underlying securities at exercise, minus the exercise or
base price.
(2) Values are calculated by subtracting the exercise price from the fair
market value of the stock at December 31, 1994.
</TABLE>
RETIREMENT PLAN
The Company and its affiliates sponsor a defined contribution retirement plan.
This plan, originally adopted in 1986, was amended effective January 1, 1989,
to add a 401(k) cash or deferred feature. The plan covers substantially all
of the Company's full time employees and provides that an employee
automatically becomes eligible to participate as of the date he has reached
age 18 and has completed six months of service, whichever occurs last.
Under the plan, a participant may contribute an amount up to 10% of his
compensation for the year, subject to certain limitations. This contribution
is made in the form of a pre-tax salary reduction agreement with the Company.
For each plan year in which the employee makes a salary reduction
contribution, the Company will make a matching contribution. The amount
of each year's matching contribution is determined by the Board of
Directors, at its discretion, at the beginning of each year. For 1994, the
matching contribution was 25% of the amount contributed by each participant.
Participants are fully vested in their plan account balance attributable to
their salary reduction contribution and the Company matching contribution. The
Company may also make, but is not required to make, a discretionary contribution
for each participant out of its current or accumulated net profits.
The Company's discretionary contributions, if any, are allocated to
eligible employees' accounts in equal proportion to their compensation for the
year, with an additional allocation, as permitted by law, for participant
compensation in excess of the Social Security Wage Base for the year. The
Company's discretionary contributions and allocation as described above are,
however, subject to compliance with the applicable provisions of the Internal
Revenue Code of 1986, as amended.
The amount of the matching contribution and discretionary contribution, if
any, is determined on an annual basis by the Board of Directors. The total
plan expense for 1994, 1993 and 1992 was $115,300, $732,350, and $791,900,
respectively.
The Company and its affiliates sponsor an Employee Stock Ownership Plan
(ESOP). This plan was adopted in 1994 to be effective January 1, 1994.
The plan covers substantially all of the Company's full time employees and
provides that an employee automatically become eligible to participate as of
the date he has reached age 18 and has completed six months of service,
whichever occurs last. The Company may make, but is not required to make, a
discretionary contribution for each participant out of its current or
accumulated net profits.
The Company's discretionary contributions, if any, are allocated to
eligible employees' accounts in equal proportion to their compensation for the
year subject to a maximum eligible compensation of $150,000. The total
contribution may be contributed in cash or common stock. The total plan
expense for 1994, 1993, and 1992 was $699,800, $0, and $0, respectively.
Participants become vested in the Company discretionary contribution account
after completing five years of service or, if earlier, upon attaining age 65,
upon their total and permanent disability, or upon their death. Upon
retirement, total and permanent disability or death, a participant, or the
participant's beneficiary, will be entitled to receive all vested amounts
in his account in one lump sum or in installment payments over a period of
time. Upon termination of employment other than upon retirement, death or
total or permanent disability, vested amounts in a participant's account
are payable at his election either immediately or on a deferred basis; however,
if the vested amount is $3,500 or less, it will be paid immediately.
DEFERRED COMPENSATION AND SALARY CONTINUATION AGREEMENTS
The Company has Deferred Compensation and Salary Continuation Agreements
with executives who are officers of the Company or one of its
subsidiaries. These agreements provide that if the executive dies before
normal retirement, the Company will pay a fixed amount to his beneficiary
annually for 15 years, and that following normal retirement, the Company will
pay a fixed amount annually for 15 years to the executive, or if he dies, to
his beneficiary. The fixed amount is 25% of the executive's base monthly
salary at the date of his agreement. Early retirement at age 62 is provided
with a reduction in the annual benefit equal to 1/15th for each year prior to
age 65 that the individual retires. The agreements are updated from time to
time, and new agreements were signed with six officers in 1988, one officer in
1989, three officers in 1990, two officers in 1992, and six officers in 1993, a
total of 18 officers. Benefits under the plan are lost if the executive
voluntarily leaves the Company's employ, is discharged for good cause or
commits suicide within two years of the date of the agreement.
The amounts expensed by the Company for individual participants under the
Plan are not calculated separately or on an individual basis. For the years
1994, 1993, and 1992, the Company expensed an aggregate of $240,315,
$331,753, and $178,275, respectively, with respect to its aggregate
obligations under the Deferred Compensation and Salary Continuation
Agreements.
OFFICERS' INCENTIVE BONUS PLAN
The Board of Directors of the Company adopted an Officers' Incentive Bonus
Plan at its regular meeting held December 7, 1988. Since 1979, the Board
has awarded cash bonuses to motivate key officers of the Company and its
subsidiaries who contribute to the profits and growth of the Company. The plan
permits the payment of such bonuses in both Common Stock and cash.
The plan provides that the Board of Directors establish annually a profit
objective and those persons eligible to participate in the plan are
determined by the Human Resources Committee of the Board of Directors which
administers the plan. Funding of the 1994 plan was by a formula based on 12%
of net income in excess of 10% return on average equity capital, plus 6% of
net income in excess of 11.5% return on average equity capital. The plan
may be amended or terminated at anytime by action of the Board of Directors
of the Company.
For the years 1994, 1993, and 1992, the Company made cash awards under the
plan totaling $657,719, $542,457, and $450,408, respectively. In addition to
those persons named in the Summary Compensation Table, 295 persons in 1994, 247
persons in 1993, and 198 persons in 1992, received cash awards. No common
stock was issued under the plan for awards in 1994, 1993, or 1992.
1993 EMPLOYEE STOCK DISCOUNT PLAN
The Board of Directors, on November 4, 1992, approved an Employee Stock
Discount Plan which was approved by the Shareholders on April 13, 1993.
The plan operates on a calendar year basis. Employees who have completed six
months service by January 1 are eligible for option shares equal to 15% of base
salary as of January 1, divided by 85% of the January 1 market price (the
closing price as reported on the New York Stock Exchange).
The plan offers eligible employees of the Company and its participating
subsidiaries the opportunity to purchase company common stock through
payroll deduction. The option price of Company common stock purchased with a
participant's account shall be the lesser of: 85% of the market value of
the common stock on the offering commencement date; or 85% of the market
value of the common stock on the offering termination date.
Payroll deduction may be made at any rate from 2% through 15% of base pay
and may also be made from bonuses paid in December. The Human Resources
Committee of the Company's Board of Directors administers the plan.
The number of shares issued under the plan for the years 1994 and 1993 were
16,755 and 15,458 and the issue prices for 1994 and 1993 were $13.49
and $13.81, respectively. No shares were issued in 1992.
INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
During the year 1994, the Company's banking subsidiaries extended
credit to directors and officers of the Company and its subsidiaries. All
such loans (i) were made in the ordinary course of business, (ii) were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
and (iii) did not involve more than the normal risk of collectibility or
present unfavorable features.
The banking subsidiaries, pursuant to the Company's employee loan
policy, make individual general purpose loans on a nondiscriminatory basis
to employees of subsidiaries at interest rates below those for comparable
transactions with other persons. No such loans were outstanding to any
officer or director of the Company during 1994. The banking subsidiaries
are prohibited from making loans, with the exception of residential mortgages
and educational loans, to executive officers in excess of certain dollar
limits fixed by banking laws.
William A. Julias, a director of the Company, is also Chairman of the Board
of F&M Bank-Massanutten, a subsidiary of the Company. He is senior
partner of the Harrisonburg, Virginia, law firm of Julias, Blatt & Wolfe, P.
C., which serves as legal counsel for that bank.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee of the Board of Directors of the Company
(the "Committee") has furnished the following report on executive compensation:
The Committee has developed and implemented compensation policies and plans
which seek to enhance the profitability of the Company and, thus, shareholder
value. In furtherance of these goals, the policies and plans are designed to
provide competitive levels of compensation that rely somewhat on annual
and longer term incentive compensation to attract and retain corporate
officers and other key employees of outstanding abilities and to motivate
them to perform to the full extent of their abilities. Both types of
incentive compensation are variable and closely tied to corporate and
individual performance in a manner that encourages a continuing focus on
building profitability and shareholder value.
In its review of management performance and compensation, the Committee has
taken into account management's consistent commitment to the long-term
success of the Company. Based on its evaluation of these factors, the
Committee believes that the senior management of the Company is dedicated to
achieving significant improvements in long-term financial performance and that
the compensation policies and plans the Committee has implemented and
administered have contributed to achieving this management focus.
Compensation for each of the Named Officers, as well as other senior
executives, consists of a base salary and annual and longer term incentive
compensation. The Committee fixes base salaries at levels somewhat below the
competitive amounts paid to senior executives with comparable qualifications,
experience, and responsibilities, after comparing salary ranges of other bank
holding companies and other large locally headquartered companies. The
annual incentive compensation is approved as a percentage of the net
income of the Company. The longer-term incentive compensation is closely
tied to the Company's success in achieving significant financial
performance goals. The Committee considers the total compensation
(earned or potentially available) of each of the Named Officers and the other
senior executives in establishing each element of compensation.
During the fourth quarter of each year, the Chief Executive Officer submits
to the Committee the annual salaries for the past three years for the
Company's senior executives (other than the Chief Executive Officer), and the
Committee reviews the salaries and responsibilities of the officers, and
makes any modifications it deems appropriate. Salary proposals are developed
by the Company's Chief Executive Officer based on industry peer groups,
surveys, and performance judgments as to the past and expected future
contributions of the individual senior executives. The Committee
reviews and fixes the base salary of the Chief Executive Officer based on
similar competitive compensation data and the Committee's assessment of his
past performance and its expectation as to his future contributions in leading
the Company. The growth of the Company for 1994 exceeded $249,000,000 or 17.8%.
Peer group banks at September 30, 1994, increased by 12.36%. Although the
Committee, in establishing these salaries, uses a subjective approach and
does not rely on a formula or weights of specific factors, it carefully
considers all the factors listed above.
In addition to internal measurements and goals, the Committee considers
return on average assets (ROAA) and growth in total assets when evaluating
the performance of executive officers. ROAA is a measure used in the
industry to compare the profitability of banking companies. For the
period ending September 30, 1994, the Company's ROAA was 1.20%, compared to
1.08% for its 115 Peer Group Banks (115 financial institutions, like the
Company, between $1 billion and $3 billion in asset size, as supplied by the
Federal Reserve Board's Division of Banking). During the same period, the
Company's total assets grew at 18.63%, compared to 12.36% for the Peer Group
Banks. For a four-year average comparison of the Company's performance to the
Peer Group Banks, please see the table on page __.
The Incentive Compensation Plan stresses rewards for achievement of goals
set each year. Financial goals include operating earnings and return on
shareholder equity. The formula for 1994 was adopted by the Board of Directors
and was as follows: 12% of net income in excess of 10% return on equity
capital, plus 6% of net income in excess of 11.5% return on equity capital. At
the end of each year, this formula defines the total fund available for
distribution as bonuses.
The Committee distributes the incentive fund to eligible employees based
on the Committee's subjective evaluation of individual performance and
contribution to the Company and recommendations by certain senior officers.
In determining the Chief Executive Officer's award for 1994, in addition to
the factors discussed above, the Committee considered its evaluation of the
Company's performance and the state of the economy in the Company's service
area. It considered these factors both on an absolute basis and relative
to the performance of the Company's peers. In determining the awards for 1994
from the incentive fund to other eligible employees, including other Named
Officers, the Committee reviewed with the Chief Executive Officer
recommendations based on individual performance, as well as its evaluation of
factors substantially comparable to those considered in establishing the award
for the Chief Executive Officer.
The Committee considered the desirability of granting awards under the
Company's 1992 Incentive and Non-Qualified Stock Option Plan which provide
the Committee the flexibility to grant longer-term incentives in stock
options. The Committee believes that its past grant of options have
successfully focused the Company's senior management on building
profitability and shareholder value. Stock options were granted for 1994
and are reflected in the table, "Options/Grants in Last Fiscal Year".
The awards were based, among other things, on a review of competitive
compensation data from selected peer companies and information on their total
compensation as well as the Committee's perception of their past and expected
future contributions to the Company's achievement of its long-term goals. Like
other compensation decisions, the Committee does not use a formula or weight
specific factors in recommending stock options awards, but rather relies on
its own subjective evaluation.
The foregoing report has been furnished by Messrs. White, Romine, and Shockey.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994 and up to the present time, there were transactions between
certain of the Company's banking subsidiaries and certain members of the
Human Resources Committee, or their associates, all consisting of extensions of
credit by the banks in the ordinary course of business. Each transaction was
made on substantially the same terms, including interest rates, collateral and
repayment terms, as those prevailing at the time for comparable transactions
with the general public. In the opinion of management, none of the
transactions involve more than the normal risk of collectibility or
present other unfavorable features.
None of the members of the Human Resources Committee has served as an
officer or employee of the Company or any of its affiliates.
SHAREHOLDER RETURN
Management provides below a line graph which compares the Company's
cumulative shareholder return over a five-year period to the returns of the
Standard & Poor's Composite 500 Stock Index and to the returns of The
Carson Medlin Company's Independent Bank Index (IBI), investment bankers,
an index of 21 financial institutions located in Virginia, North Carolina,
South Carolina, Georgia, Tennessee, and Florida. In the IBI Bank Index, the
total five-year return was calculated for each of the institutions in the peer
group taking into consideration changes in stock price, cash dividends, and
stock splits since December 31, 1989. The individual results were than
weighted by the market capitalization of each institution in the survey
relative to the entire peer group.
(graph as defined by the following data points)
1989 1990 1991 1992 1993 1994
F&M NATIONAL CORP. 100 65 80 136 133 138
INDEPENDENT BANK INDEX-Weighted 100 89 99 136 160 193
S&P 500 INDEX 100 97 127 136 150 152
Specially, this graph was created by comparing the percentage change in stock
prices for the Company and both indices on a year to year basis, looking only
at the closing price of the stock as of December 31 of each year surveyed.
Accordingly, this graph may be affected by unusually high or low prices at
December 31, 1989, or by temporary swings in stock price at December 31 of a
given year. It is not necessarily the best measure of the Company's real
performance.
The Company has been advised to switch its Corporate Performance Index to
one that is more closely aligned with its current asset size. The new index
includes banks and thrifts in the $1 billion to $5 billion asset size. SNL
Securities is a research and publishing firm specializing in the collection
and dissemination of data on the banking, thrift, and financial
services industry. SNL Securities Corporate Performance Index Values
are market weighted, dividend investment numbers which measure the total
return from investing $100 five year ago. The bank and thrift index values
qualify as industry-specific peer groups for reporting purposes and measure the
return to an investor from placing $100 into a basket of bank or thrift
stocks and letting that money sit, with all dividends being re-invested
back into the stock paying the dividend.
(graph as defined by the following data points)
1989 1990 1991 1992 1993 1994
$1B-$5B Bank Index 100 67 97 141 169 179
F&M NatCorp-VA 100 65 80 136 133 138
S&P 500 Total Return 100 97 127 136 150 152
While it is true that growth in the Company's stock price over the past five
years has lagged behind the market somewhat, the Company has outperformed its
peer group for the last four years according to other measurements. Data is
not available for the IBI Bank Index for that period, but a review of certain
performance measurements for the four-year period ending September 30, 1994,
for the 115 Peer Group Banks with assets ranging from $1 billion the $3
billion indicates that the Company performed quite well. Please see below
for a comparison of selected annual performance measurements, averaged for
the four-year period ending September 30, 1994, for the Company and the Peer
Group Banks.
Peer Group Banks
Financial Institutions
F&M National Corp. Between $1 - $3 Billion
Return on assets 1.32% 0.80%
Asset growth 18.40% 9.14%
Equity capital to assets 9.69% 7.97%
Cash dividend/net income 46.43% 27.75%
Overhead expense/assets 3.21% 3.55%
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Yount, Hyde & Barbour, P. C., as the Company's independent public
accountants for the year ending December 31, 1995, and has further directed
that management submit the selection of independent public accountants for
ratification by the Shareholders at the Annual Meeting. Yount, Hyde &
Barbour, P. C., has been serving the Company for many years. This firm has
advised the Company that neither the firm nor any member of the firm now has,
or has held during the past five years, any direct or indirect financial
interest in the Company or any of its subsidiaries. Representatives of the firm
are expected to be present at the Annual Meeting and will be given an
opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
The appointment of Yount, Hyde & Barbour, P. C., is not required to be
submitted to a vote of Shareholders; however, the Board is submitting their
selection to the Shareholders for ratification as a matter of good
corporate practice. Unless otherwise directed, the proxies will be voted FOR
approval of the selection of Yount, Hyde & Barbour, P. C., as independent
certified public accountants, which approval shall be by a majority of the
Common Stock present in person or by proxy entitled to vote at the Annual
Meeting. In the event Shareholders fail to ratify the selection, the adverse
vote will be considered a direction to the Board of Directors to select other
auditors for the following year. However, because of the difficulty and expense
of making any substitution of auditors so long after the beginning of the
current year, it is contemplated that the appointment for the year 1995 will
be permitted to stand unless the Board finds good reasons for making a change.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If any other matter properly
comes before the Annual Meeting, the persons named in the accompanying proxy
intend to vote such proxy, to the extent entitled, in accordance with their best
judgment.
SHAREHOLDERS' PROPOSALS
Proposals which Shareholders wish to be presented for action at the 1995
Annual Meeting of Shareholders, scheduled for April 23, 1996, must be
received by the Company's management in writing prior to November 17,
1995. Proposals should be addressed to the Secretary of the Company, F&M
National Corporation, P. O. Box 2800, Winchester, Virginia 22604.
FINANCIAL STATEMENTS
A copy of the Annual Report of the Company for the year ended December 31,
1994, accompanies this Proxy Statement and Notice, but is not a part
of the proxy solicitation material.
By Order of the Board of Directors
Alfred B. Whitt, Senior Vice President and Secretary
Winchester, Virginia
March 14, 1995
<PAGE>
INSTRUCTIONS AND MAP TO TRAVELODGE OF WINCHESTER
COMING FROM TOWN.
Take Route 50 East. After you cross over Interstate I-81, turn right at
stoplight onto Route 522 South. TraveLodge will be on the right.
COMING FROM THE SOUTH ON I-81 (I.E., TRAVELLING NORTHBOUND). EXIT 313.
Take Exit 313 for Route 50 in Winchester. After coming off the Exit,
continue straight through stoplight across Route 50 (and onto Route 522
South). TraveLodge will be on the right after going through the intersection.
COMING FROM THE NORTH ON I-81 (I.E., TRAVELLING SOUTHBOUND). EXIT 313-A.
Take Exit 313-A onto Route 50 East in Winchester. At stoplight, turn right onto
Route 522. TraveLodge will be on the right.
PLEASE USE "BANQUET ROOM" ENTRANCE.
(MAP)
<PAGE>
APPENDIX
F&M NATIONAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Edward P.
Shank, C.D. Boyer, Jr., and George L. Romine as proxies, and each or any of them
with full power of substitution, to represent the undersigned and vote, as
designated below, all the shares of Common Stock of F&M National Corporation
held of record by the undersigned on February 28, 1994, at the Annual Meeting of
Shareholders to be held April 25, 1995, or any adjournment thereof on each of
the following matters:
1. Election of directors.
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the (to vote for all
contrary below) nominees listed below)
Frank Armstrong, III; James L. Bowman; Betty H. Carroll; William H. Clement;
W. M. Feltner; William R. Harris; L. David Horner, III; Jack R. Huyett;
William A. Julias; Goerge L. Romine; John S. Scully, III; J. D. Shockey,
Jr.; Fred G. Wayland, Jr.; C. Ridgely White; F. Dixon Whitworth, Jr.
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
print the name of the nominee in the space provided below.
2. To amend the Articles of Incorporation to increase the number of authorized
shares of common stock from 20,000,000 to 30,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the selection by the Audit Committee of the Board of Directors of
Yount, Hyde & Barbour, P.C., independent certified public accountants, as
auditors of the Company for 1995.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. The Board of Directors
has not been notified of any such matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
EACH PROPOSAL. ALL JOINT OWNERS MUST SIGN.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE REVERSE SIDE OF THIS CARD. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
DATED___________________ ______________________________
Signature
____________________ ______________________________
NUMBER OF SHARES Signature (if jointly owned)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
