- --------------------------------------------------------------------------------
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:
[ ] Preliminary Proxy Statement
[ ] Confidential of Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 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] No fee required.
[ ] 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:
________________________________________________________________
5) Total fee paid:
________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] 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, 160 Front Royal Pike,
Winchester, Virginia, on Tuesday, April 27, 1999, at 10:00 a.m. for the
following purposes:
1. To elect thirteen directors to serve for the ensuing year;
2 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 1999; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of record at the close of business on February 26,
1999, will be entitled to notice of and to vote at the Annual Meeting.
Attendance at the Annual Meeting will be limited to shareholders of
record, persons holding proxies from shareholders and certain representatives of
the press and financial community. If you wish to attend the Annual Meeting, but
your shares are held in the name of a broker, bank or other nominee, you should
bring with you written confirmation from such nominee of your beneficial
ownership.
You are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend the meeting, it is important that your shares
be represented. Please complete, sign, date and return the enclosed proxy card
promptly. If you attend the Annual Meeting, you may withdraw any proxy
previously given and vote in person.
Following the adjournment of the Annual Meeting, officers and directors
of the Company will be available to meet with you.
By Order of the Board of Directors
/s/ MICHAEL L. BRYAN
--------------------------
Michael L. Bryan
CORPORATE SECRETARY
Winchester, Virginia
March 23, 1999
<PAGE>
F&M NATIONAL CORPORATION
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 1999 Annual Meeting of Shareholders to be held Tuesday, April
27, 1999, at 10:00 a.m. at the TraveLodge of Winchester, 160 Front Royal Pike,
Winchester, Virginia, and any adjournment thereof. The distribution of this
Proxy Statement and related proxy material will commence on or about March 23,
1999.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies delivered pursuant to this solicitation
will be voted at the Annual 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 Annual Meeting and revoking the proxy at
the meeting.
VOTING RIGHTS OF SHAREHOLDERS
Only shareholders of record at the close of business on February 26,
1999, will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. As of the close of business on February 26, 1999,
21,818,588 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. Shares for which the holder has elected
to abstain or to withhold the proxies' authority to vote (including broker
non-votes) on a matter will count toward a quorum, but will not be included in
determining the number of votes cast with respect to such matter.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company. 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
brokerage firms, and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in forwarding proxy material to beneficial owners of
the Company's common stock.
<PAGE>
ELECTION OF DIRECTORS - PROPOSAL ONE
The thirteen persons named below, each of whom currently serves on the
Board of Directors, will be nominated to serve as directors until the 2000
Annual Meeting of Shareholders or until their successors have been duly elected
and qualified. The persons named in the proxy will vote for the election of the
nominees named below unless authority is withheld. If for any reason any of the
persons named below should become unavailable to serve, an event which
management does not anticipate, proxies will be voted for the remaining nominees
and such other person or persons as the Board of Directors may designate. The
election of each nominee requires the affirmative vote of the holders of a
plurality of the shares of common stock cast in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEES SET FORTH BELOW.
<TABLE>
<CAPTION>
SERVED AS PRINCIPAL OCCUPATION
NAME AND AGE DIRECTOR SINCE DURING PAST FIVE YEARS
------------ -------------- ----------------------
<S> <C> <C> <C>
Frank Armstrong, III (62) 1985 Chairman, President and Chief Executive
Officer of National Fruit Product Company,
Inc. (food processor and distributor),
Winchester, Virginia.
William H. Clement (71) 1988 Vice Chairman, Hidden Creek Industries, Inc.
(a private real estate investment company),
Winchester, Virginia; Retired in 1995 as
Chairman of the Board of Automotive
Industries, Inc. and Vice Chairman of the
Board of Automotive Industries Holding, Inc.
(automobile parts manufacturer), Strasburg,
Virginia.
Charles E. Curtis (60) 1996 Vice Chairman and Chief Administrative
Officer, F&M National Corporation and Vice
Chairman of F&M Bank-Winchester as of January
1, 1998; President and Chief Executive
Officer of F&M Bank-Northern Virginia from
August 9, 1996 to December 31, 1997; President
and Chief Executive Officer of Fairfax Bank
and Trust Company from July 22, 1985 to
August 8, 1996.
W. M. Feltner (79) 1970 Chairman of the Board and Chief Executive
Officer of the Company; Chairman of the Board
of F&M Bank-Winchester.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SERVED AS PRINCIPAL OCCUPATION
NAME AND AGE DIRECTOR SINCE DURING PAST FIVE YEARS
------------ -------------- ----------------------
<S> <C> <C> <C>
John R. Fernstrom (52) 1997 Real Estate Investor.
William R. Harris (70) 1986 Chairman of the Board of Harris Heating &
Plumbing, Inc., Richmond, Virginia; Chairman
of the Board, F&M Bank-Richmond.
L. David Horner, III (64) 1986 Chairman of the Board of Horner Properties,
Inc. (real estate developer), Stuart, Florida.
Jack R. Huyett (66) 1990 Retired President, Chief Administrative
Officer and Vice Chairman of the Board of F&M
National Corporation.
George L. Romine (87) 1986 Retired Vice President and Director of Abex
Corporation (automobile parts
manufacturer), Winchester,
Virginia; Retired Executive
Director of the
Winchester-Frederick County
Economic Development
Commission.
J. D. Shockey, Jr. (56) 1970 President of Shockey Industries, Inc. (general
construction contractor), Winchester, Virginia.
Ronald W. Tydings (59) 1996 Attorney, Fairfax, Virginia; Chairman of the
Board, F&M Bank-Northern Virginia.
Fred G. Wayland, Jr. (70) 1994 Retired President and Chief Executive Officer
of PNB Financial Corporation (a bank holding
company which affiliated with the Company in
1994), Warrenton, Virginia.
Alfred B. Whitt (60) 1997 President, Vice Chairman and Chief Financial
Officer of F&M National Corporation and Vice
Chairman and Secretary of F&M Bank-Winchester
as of January 1, 1998; Senior Vice President,
Senior Financial Officer and Secretary of F&M
National Corporation from 1991 through 1997.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
During 1998, the Board of Directors held eleven regular monthly
meetings. No special Board meetings were held. Each of the nominees to the Board
attended at least 75% of the meetings of the Board and committees on which they
served.
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Nominating Committee, and the Human
Resources Committee.
EXECUTIVE COMMITTEE. The members of the Executive Committee for 1998
were Messrs. Clement, Feltner, Harris, Huyett, Romine, and Whitt. The Company's
Bylaws empower the Executive Committee to exercise the full authority of the
Board of Directors when it is not in session, except for certain matters
reserved to the Board by law. This committee did not meet during 1998.
3
<PAGE>
AUDIT COMMITTEE. The Audit Committee, whose members are Messrs.
Armstrong, Fernstrom, Horner, and Romine 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 1998.
NOMINATING COMMITTEE. The Nominating Committee was composed of Messrs.
Armstrong, Clement, and Shockey. The Nominating Committee recommends to the
Board of Directors candidates for election as directors of the Company. This
committee met once during 1998.
HUMAN RESOURCES COMMITTEE. The members of the Human Resources Committee
are Messrs. Clement, Romine, and Shockey. The primary responsibilities of this
committee are to review and recommend to the Board of Directors compensation of
senior management. This committee also administers cash awards made under the
Company's Officers' Incentive Bonus Plan and the granting of stock options under
the Company's stock option plan. This committee met once during 1998.
DIRECTORS' FEES
During 1998, each director received $600 for each Board meeting
attended. In addition, each non-employee director received an annual retainer of
$7,500. Board members were not compensated for committee meetings attended,
except those members of the Audit Committee and the Human Resources Committee
who received $200 for each committee meeting attended. Directors also received
$1,500 annually to cover travel, lodging, and related expenses incurred in
attending Board and committee meetings.
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth, as of February 26, 1999, certain
information with respect to the beneficial ownership of the Company's common
stock held by each director and nominee and each executive officer named in the
Summary Compensation Table below, and by the directors and all executive
officers as a group.
As of February 26, 1999, no person beneficially owned 5% or more of the
Company's common stock. The directors and all executive officers as a group
beneficially owned as of that date 5.9% of the outstanding shares of common
stock.
4
<PAGE>
STOCK
NAME OWNERSHIP (1)
Frank Armstrong, III.............................. 17,037
William H. Clement................................ 90,571
Charles E. Curtis................................. 180,989 (2)
W. M. Feltner..................................... 191,935 (2)
John R. Fernstrom................................. 13,173
William R. Harris................................. 108,868
L. David Horner, III.............................. 98,048
Jack R. Huyett.................................... 95,347
George L. Romine.................................. 26,751
J. D. Shockey, Jr................................. 29,718
Ronald W. Tydings................................. 171,120
Fred G. Wayland, Jr............................... 7,800
Alfred B. Whitt................................... 98,274 (2)
Betty H. Carroll.................................. 101,484 (2)
F. Dixon Whitworth, Jr........................... 50,726 (2)
All Directors & Executive Officers as a Group..... 1,289,991
- ---------------------
(1) Includes shares held by affiliated corporations, spouses and minor
children, and shares held jointly with spouses or as custodians or
trustees for children and others.
(2) Includes: 30,463 issuable to Mr. Curtis; 90,125 shares issuable to Mr.
Feltner; 47,625 shares issuable to Mr. Whitt; 47,625 shares issuable to
Mrs. Carroll; and 19,525 shares issuable to Mr. Whitworth under the
Company's stock option plans.
EXECUTIVE COMPENSATION
The table below sets forth certain information concerning the annual and
long-term compensation earned by the Chief Executive Officer and the other four
most highly compensated executive officers of the Company (collectively, the
"Named Officers") for each of the past three years, with the exception of Mr.
Charles E. Curtis for whom compensation information is provided only for 1997
and 1998 in view of his promotion to Vice Chairman and Chief Administrative
Officer of the Company.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
SECURITIES
NAME AND ANNUAL COMPENSATION(1) UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(2) BONUS OPTIONS(3) COMPENSATION(4)
------------------ ------- --------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
W. M. Feltner 1998 $608,700 $225,000 20,000 $10,500
Chairman of the Board/ 1997 607,800 225,000 20,000 10,375
Chief Executive Officer 1996 507,200 200,000 15,000 7,500
Betty H. Carroll 1998 $260,000 $85,000 10,000 $10,500
Senior Vice President; 1997 250,000 80,000 10,000 10,375
President/CEO, F&M 1996 222,200 74,000 7,500 9,761
Bank-Winchester
Alfred B. Whitt 1998 $218,700 $85,000 10,000 $10,500
Vice Chairman, President 1997 191,400 70,000 10,000 10,375
and Chief Financial Officer 1996 170,000 55,000 7,500 9,723
Charles E. Curtis 1998 $208,700 $75,000 10,000 $10,500
Vice Chairman/Chief 1997 177,800 50,000 1,500 10,375
Administrative Officer
F. Dixon Whitworth, Jr. 1998 $165,000 $50,000 5,000 $10,475
Executive Vice President; 1997 152,000 45,000 5,000 10,222
President, F&M Trust 1996 142,200 38,000 2,500 9,723
Company
</TABLE>
- ------------------------
(1) Each Named Officer received certain perquisites and other personal
benefits, the amounts of which are not shown because the aggregate
amount of such compensation during the year did not exceed the lesser of
$50,000 or 10% of total salary and bonus reported for such executive
officer.
(2) Includes directors' fees.
(3) The Company's stock option plan does not permit grants of restricted
stock, and this plan is the Company's only stock-based long-term
compensation plan currently in effect.
(4) These amounts represent Company contributions allocated under the
Company's 401(k) Retirement Plan and the Company's Employee Stock
Ownership Plan, respectively, to the Named Officers for 1998 in the
following amounts: W. M. Feltner, $2,500 and $8,000; Betty H. Carroll,
$2,500 and $8,000; Alfred B. Whitt, $2,500 and $8,000; Charles E.
Curtis, $2,500 and $8,000; and F. Dixon Whitworth, Jr., $2,475 and
$8,000.
STOCK OPTION GRANTS IN 1998
The Company's stock option plan provides for the granting of both
incentive and non-qualified stock options to executive officers and key
employees of the Company and its subsidiaries. While the option price of
incentive options may not be less than the fair market value of the stock at the
date of grant, non-qualified options may be granted at prices less than the fair
market value of the common stock
6
<PAGE>
on the date of grant, but in no event at an exercise price less than one-half of
the market price on the date of grant.
7
<PAGE>
The following table provides certain information concerning
non-qualified stock options granted during 1998 to the Named Officers. No stock
appreciation rights may be granted under the Company's stock option plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SHARES OPTIONS EXERCISE MARKET
UNDERLYING GRANTED TO PRICE PRICE BLACK-SCHOLES
OPTIONS EMPLOYEES PER ON GRANT EXPIRATION GRANT DATE
NAME GRANTED(1) IN 1998 SHARE DATE DATE VALUE (2)(3)
---- ---------- ------- ----- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
W. M. Feltner 20,000 29.9% $17.18 $34.375 1/2/08 $452,000
Betty H. Carroll 10,000 14.9 17.18 34.375 1/2/08 226,000
Alfred B. Whitt 10,000 14.9 17.18 34.375 1/2/08 226,000
Charles E. Curtis 10,000 14.9 17.18 34.375 1/2/08 226,000
F.D. Whitworth Jr. 5,000 7.5 17.18 34.375 1/2/08 113,000
</TABLE>
- -----------------------
(1) The stock options granted during 1998 to the Named Officers were granted on
January 2, 1998, and first became exercisable on that date.
(2) The values shown reflect standard application of the Black-Scholes pricing
model using (i) 60-month volatility (19.08%) and daily stock prices for the
five years prior to grant date, (ii) an option term of ten years, (iii) an
interest rate that corresponds to the U.S. Treasury rate with a ten-year
maturity (4.5%), and (iv) dividends at the average annualized rate in place
on the date of grant ($0.68). The Black-Scholes option pricing model is a
commonly utilized model for valuing options. The model assumes that the
possibilities of future stock returns (dividends plus share price
appreciation) resemble a normal "bell-shaped" curve.
(3) No allowance has been made for income taxes that will be due upon exercise.
STOCK OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table shows the number and value of unexercised options at
year-end. All stock options shown were exercisable at year-end. No stock options
were exercised during 1998 by a Named Officer.
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NAME DECEMBER 31, 1998(1) DECEMBER 31, 1998(2)
---- -------------------- --------------------
W. M. Feltner 70,125 $1,271,926
Betty H. Carroll 37,625 692,367
Alfred B. Whitt 37,625 692,367
Charles E. Curtis 30,301 526,516
F. Dixon Whitworth, Jr. 14,525 434,842
- ---------------------------
(1) All the stock options shown for each Named Officer are currently
exercisable.
(2) Values are calculated by subtracting the exercise price from the fair
market value of the stock at December 31, 1998.
8
<PAGE>
EMPLOYMENT ARRANGEMENTS
The Company has employment agreements with certain executive officers,
including Mrs. Carroll and Messrs. Curtis, Whitt, Whitworth, and 18 senior
officers that become effective upon a change in control of the Company. In the
case of the Named Officers, with the exception of Mr. Feltner, the Company or
its successor agrees to continue these officers in its employ for a term of
three years after the date of a change in control. During the contract term,
these officers will retain commensurate authority and responsibilities and
compensation benefits. They will receive base salaries at least equal to the
immediate prior year and bonuses at least equal to the annual bonus paid prior
to the change in control. If the officer's employment is terminated during the
three year period following a change in control other than for cause or
disability as defined in the agreement, or if the officer should terminate
employment because a material term of the contract is breached by the Company,
the officer will be entitled to a lump sum payment, in cash, within thirty days
after the date of termination. This lump sum will be equal to two times the sum
of the officer's base salary, annual bonus, and equivalent benefits for Mrs.
Carroll and Messrs. Curtis, Whitt, and Whitworth, and one times the sum of the
other senior officers' base salaries, annual bonuses, and equivalent benefits.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE FOLLOWING HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
AND THE GRAPH OF SHAREHOLDER RETURN SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES ACT OF 1934,
EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY
REFERENCE, AND SHALL NOT OTHERWISE BY DEEMED FILED UNDER SUCH ACTS.
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 on annual and
long-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 long-term incentive
compensation. The Committee fixes base salaries at levels that are competitive
or somewhat below the competitive amounts paid to senior executives with
comparable qualifications, experience, and responsibilities, after comparing
salary ranges of other bank
9
<PAGE>
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 long-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.
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 December
31, 1997, the Company's ROAA was 1.31%, compared to 1.28% for its 144 Peer Group
Banks (144 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). For a four-year average comparison of the Company's performance to the
Peer Group Banks, please see the table on page 12.
CEO COMPENSATION
The Committee reviews and fixes the base salary of the Chief Executive
Officer based on similar competitive compensation data similar to senior
executives and the Committee's assessment of his past performance and its
expectation as to his future contributions in leading the Company.
No salary increase was recommended for 1998.
Although the 1998 salary and option grant were not measured upon the
attainment of any specific goals by the Company, the Committee, in its
discretion and judgment in making these decisions, took into consideration his
individual contribution to the Company's performance for the prior fiscal year
reflected by: (1) a $1,817,000 increase in net income, and (2) a $17,101,000
increase in shareholders' equity. The growth of the Company for 1997 exceeded
$216,095,000 or 9.4%. Although the Committee, in establishing this salary, uses
a subjective approach and does not rely on a formula or weights of specific
factors, it carefully considers all the factors listed above.
ANNUAL INCENTIVES
The Incentive Compensation Plan stresses rewards for achievement of
goals set each year. Financial goals include operating earnings and return on
shareholders' equity. The formula for 1998 adopted by the Board of Directors 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.
10
<PAGE>
In determining the awards for 1998 from the incentive fund to other
eligible employees, including other Named Officers other than the Chief
Executive Officer, 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.
In determining the Chief Executive Officer's award for 1998, 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. The growth of the Company for the nine months ending September 30, 1998,
was 9.5% or $239,210,000. Net income growth was 9.3% for the same time period.
It considered these factors both on an absolute basis and relative to the
performance of the Company's peers.
STOCK INCENTIVES
The Committee considered the desirability of granting awards under the
Company's stock option plan, which provides the Committee the flexibility to
grant longer-term incentives in stock options. The Committee believes that its
past grant of options has successfully focused the Company's senior management
on building profitability and shareholder value. Stock options granted in 1998
are reflected in the table, "Stock Option Grants in 1998."
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 evaluation 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. Clement, Romine, and
Shockey.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998 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.
11
<PAGE>
SHAREHOLDER RETURN
The Company is subject to the rules of the Securities and Exchange
Commission (the "SEC") that require all public companies to present a graph of
total investment return in their annual proxy statements. The rules require a
line graph which compares the Company's five-year cumulative shareholder return
on its common stock with the Standard's & Poor's 500 Stock Index ("S&P 500 Stock
Index") and either a published industry index or an index of peer companies
selected by the Company. The graph below presents a comparison of the Company's
performance with the S&P 500 Stock Index and the SNL Securities $1 to $5 Billion
Bank Index (the "SNL $1B-$5B Bank Index"), assuming that investments of $100
were made on December 31, 1993, and that dividends were reinvested. SNL
Securities, based in Charlottesville, Virginia, is a research and publishing
firm specializing in the collection and dissemination of data on the financial
services industry.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
F&M NATIONAL CORPORATION, S&P 500 STOCK INDEX AND
THE SNL $1B-$5B BANK INDEX
(insert graph)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
F&M National Corporation 100.00 103.74 135.47 150.40 248.52 221.83
S&P 500 Stock Index 100.00 101.32 139.39 171.26 228.42 293.69
SNL $1B-$5B Bank Index 100.00 105.28 141.58 183.54 306.09 305.38
</TABLE>
12
<PAGE>
INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
During 1998, 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 of the Company, 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. 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.
J. D. Shockey, Jr., a director of the Company and F&M Bank-Winchester,
performed work for F&M Bank-Winchester during 1998 in connection with the
renovation of the 9 Court Square Complex which was under contract with Shockey
Industries, Inc. Ronald W. Tydings, a director of the Company, is also Chairman
of the Board of F&M Bank-Northern Virginia, a subsidiary of the Company. Mr.
Tydings serves as legal counsel for that bank.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, directors and executive officers of the Company are required to file
reports with the SEC indicating their holdings of and transactions in the
Company's stock. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, insiders of the Company complied with all filing
requirements during 1998 with the exception of Mr. Clement, who, on one occasion
with respect to one transaction, was late in filing a report. Such transaction
was subsequently reported.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS - PROPOSAL TWO
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, 1999, 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.
OTHER MATTERS
13
<PAGE>
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.
PROPOSALS FOR THE 2000 ANNUAL MEETING
The Company's Bylaws provide that, in addition to any other applicable
requirements, for business (including shareholder nominations of Director
candidates) to be properly brought before the Annual Meeting by a shareholder,
the shareholder must give timely notice in writing to the Secretary of the
Company at least 90 days prior to the Annual Meeting. As to each matter, the
notice must comply with certain informational requirements set forth in the
Bylaws. These requirements are separate and apart from and in addition to the
SEC's requirements that a shareholder must meet to have a shareholder proposal
included in the Company's proxy statement under SEC Rule 14a-8.
The 2000 Annual Meeting of Shareholders is scheduled for April 25, 2000.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for 1998 filed with
the SEC, excluding exhibits, can be obtained without charge by writing to Alfred
B. Whitt, President, F&M National Corporation, P.O. Box 2800, Winchester, VA
22604.
By Order of the Board of Directors
Michael L. Bryan
Corporate Secretary
Winchester, Virginia
March 23, 1999
14
<PAGE>
INSTRUCTIONS TO TRAVELODGE OF WINCHESTER
TRAVELLING EAST FROM WINCHESTER.
Take Route 50 East. After you cross over the Interstate I-81 overpass, turn
right at the intersection stoplight onto Route 522 South (Front Royal Pike).
TraveLodge is on the right.
TRAVELLING WEST ON ROUTE 50.
At the intersection of Route 50 East and Route 522 (Front Royal Pike), turn left
at the intersection stoplight. TraveLodge is on the right.
TRAVELLING NORTHBOUND ON I-81. EXIT 313.
Take Exit 313 for Route 50 - Winchester. After coming off the Exit, continue
straight through stoplight across Route 50 (and onto Route 522 South / Front
Royal Pike). TraveLodge will be on the right after going through the
intersection.
TRAVELLING SOUTHBOUND ON I-81. EXIT 313-A.
Take Exit 313-A onto Route 50 East in Winchester. At intersection stoplight,
turn right onto Route 522 (Front Royal Pike). TraveLodge is on the right.
PLEASE USE THE "BANQUET ROOM" ENTRANCE.
TraveLodge's address is 160 Front Royal Pike, Winchester, VA 22602.
Telephone: 540-665-0685
15
<PAGE>
F&M NATIONAL CORPORATION
WINCHESTER, VIRGINIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, revoking all prior proxies, hereby appoints Joseph E. Kalbach,
Thom F. Hanes, and James H. Atkinson, Jr., as proxies, and each or any of them
with full power of substitution, and hereby authorizes them to represent and to
vote, as designated below, all the shares of Common Stock of F&M NATIONAL
CORPORATION held of record by the undersigned on February 26, 1999, at the
Annual Meeting of Shareholders to be held April 27, 1999, or any adjournment
thereof, on each of the following matters:
1. Election of directors:
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY TO VOTE FOR
THOSE INDICATED BELOW
Frank Armstrong, III; William H. Clement; Charles E. Curtis; W. M. Feltner;
John R. Fernstrom; William R. Harris; L. David Horner, III; Jack R. Huyett;
George L. Romine; J. D. Shockey, Jr.; Ronald W. Tydings; Fred G. Wayland,
Jr., and Alfred B. Whitt
INSTRUCTIONS: To withhold authority to vote for an individual
Nominee, print the name of the Nominee in the space
provided below.
--------------------------------------------------------------------------
2. 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 1999:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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 herein
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 hereon. 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 & RETURN THIS PROXY PROMPTLY IN ENCLOSED ENVELOPE.
<PAGE>
(804) 343-4089
2994.001
March 23, 1999
BY ELECTRONIC SUBMISSION
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
ATTN: Filing Desk
F&M NATIONAL CORPORATION/
DEFINITIVE PROXY MATERIALS
Ladies and Gentlemen:
On behalf of F&M National Corporation, Winchester, Virginia ("F&M"), and
pursuant to Regulation S-T under the Securities Act of 1933, as amended, we are
transmitting one copy of F&M's definitive proxy statement and form of proxy for
its annual meeting of shareholders to be held on April 27, 1999.
Seven paper copies of F&M's 1997 Annual Report to Shareholders have been
filed under separate cover.
Any questions or comments concerning this filing should be directed to
the undersigned at (804) 783-2003.
Sincerely,
George P. Whitley
Enclosures
cc: Mr. Alfred B. Whitt
