<PAGE>
FARMERS NATIONAL BANCORP
5 CHURCH CIRCLE
ANNAPOLIS, MARYLAND 21401
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 1994
---------------------
The Annual Meeting of Stockholders of FARMERS NATIONAL BANCORP ("Bancorp")
will be held at the Bay Ridge Inn, Herndon Avenue, Annapolis, Maryland, on
Tuesday, April 26, 1994, at 11:00 a.m., for the following purposes:
1. To elect five Class II directors, each to hold office until his
successor is elected and qualified;
2. To ratify the selection of the accounting firm of Stegman & Company as
independent public accountants for Bancorp for 1994; and
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 18, 1994, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Norma K. Behlke
SECRETARY
Dated: March 25, 1993
YOU ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD SUBMITTED
HEREWITH IN THE RETURN ENVELOPE PROVIDED FOR YOUR USE. THE GIVING OF SUCH PROXY
WILL NOT AFFECT YOUR RIGHT TO REVOKE THE PROXY OR TO VOTE IN PERSON SHOULD YOU
LATER DECIDE TO ATTEND THE MEETING.
<PAGE>
------------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Farmers National Bancorp ("Bancorp") to be
used in voting at the Annual Meeting of Stockholders of Bancorp to be held April
26, 1994, and at any adjournment or adjournments thereof. This Proxy Statement
and the form of Proxy are being mailed on or about March 25, 1994. The principal
executive offices of Bancorp are located at 5 Church Circle, Annapolis, Maryland
21401.
Stockholders whose names appeared of record on the books of Bancorp at the
close of business on March 18, 1994 (the "Record Date"), will be entitled to
vote at the meeting and at any adjournment or adjournments thereof. On the
Record Date, there were 2,699,056 shares of Common Stock of Bancorp outstanding
and entitled to vote. Each share of Common Stock is entitled to one vote on each
matter submitted at the meeting.
ELECTION OF DIRECTORS
Five Class II directors will be elected to hold office for three years and
until their successors are elected and qualified. Unless otherwise specified,
shares represented by proxies in the form accompanying this Proxy Statement will
be voted for the election of the persons listed below, or if any such person
shall become unable or unwilling to accept nomination for election, for the
election of such other person as the Board of Directors may recommend in his or
her place. An affirmative vote of the holders of at least a majority of the
shares of Common Stock of Bancorp represented in person or by proxy and entitled
to vote at a meeting at which a quorum is present is required to elect
directors. The presence, in person or by proxy, of the holders of record of a
majority of the shares of common stock entitled to vote at the meeting will
constitute a quorum. Withholding authority to vote for one or more nominees will
have the same effect as a vote against those nominees.
The names of the nominees for election as directors, together with certain
information regarding them, are set forth below. All nominees are currently
directors of Bancorp and have consented to their names being placed in
nomination. Bancorp is not aware of any nominee being unwilling to serve as a
director, if elected.
The remaining members of the Board of Directors who are not standing for
election are Class III and Class I directors whose terms will expire in 1995 and
1996, respectively.
1
<PAGE>
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
AGE AT PRINCIPAL OCCUPATION DIRECTOR YEAR TERM
NAME 1/31/94 DURING PAST FIVE YEARS SINCE (1) WILL EXPIRE
- ------------------------------- ------------- ------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS II DIRECTORS:
John B. Melvin 69 Retired Chairman of the Board, Coca 1965 1997
Cola Bottling Co. of Annapolis, Md.,
Inc.
Charles L. Schelberg 68 Chairman of the Board and Director of 1965 1997
Farmers National Bank of Maryland;
Chairman of the Board and Director
of Bancorp
Donald S. Taylor 63 Associate, John M. Taylor Funeral 1970 1997
Home, Inc., a funeral chapel
William W. Simmons 68 Partner, Compromise Co. Limited 1978 1997
Partnership
Louis Hyatt (2) 65 President, Louis Hyatt, Inc. (real 1992 1997
estate)
</TABLE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
AGE AT PRINCIPAL OCCUPATION DIRECTOR YEAR TERM
NAME 1/31/94 DURING PAST FIVE YEARS SINCE (1) WILL EXPIRE
- ------------------------------- ------------- ------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS I DIRECTORS:
M. Virginia Meredith (3) 78 Former Administrative Assistant to 1981 1996
Director, Anne Arundel County
Department of Health (Retired)
Joseph S. Quimby 79 Farmer 1981 1996
W. Calvin Gray, Jr. 54 President, Gray & Smith Builders & 1985 1996
Developers Inc.; President, Gray
Developers, Inc.
John M. Suit, II 49 President and Chief Executive Officer 1989 1996
and Director, Farmers National Bank
of Maryland; President and Chief
Executive Officer and Director,
Bancorp; Former Executive Vice
President and Director, Annapolis
Banking & Trust Company
Alexander V. Sandusky (4) 61 Retired Director of Waterway 1992 1996
Improvement, Maryland Department of
Natural Resources; Operating officer
-- bowling lane
</TABLE>
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
AGE AT PRINCIPAL OCCUPATION DIRECTOR YEAR TERM
NAME 1/31/94 DURING PAST FIVE YEARS SINCE (1) WILL EXPIRE
- ------------------------------- ------------- ------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Raymond C. Shockley (5) 57 Attorney-at-Law, Williams, Hammond, 1992 1996
Moore, Shockley & Harrison, P.A.;
Director and Chairman of the Board
of Atlantic National Bank
CLASS III DIRECTORS:
Jesse L. Adams 79 President of Terrace Gardens Building 1960 1995
Corp., a real estate investment
company
Cary L. Meredith, Jr. (3) 69 Former Vice President of Basil Voges, 1960 1995
Inc., an insurance firm (Retired)
L. Tayloe Lewis, Jr. 78 Director and Chairman of the Board of 1976 1995
Caroline County Bank; Insurance
Broker (Retired)
Edward B. Lauer (6) 67 President, Riviera Beach Super 1989 1995
Market, Inc. and The Pasadena
Investment Corp. (supermarkets)
James D. Edwards (7) 60 President, J.D. Edwards, Inc. 1992 1995
(pharmacy) and Vice President,
SUMAD, Inc. (card & gift shop)
W. Robert Newnam (8) 71 Farmer (Retired) 1976 1995
<FN>
- ------------------------
(1) Includes service as a director of Farmers National Bank of Maryland (or,
in the case of Mr. Lewis, service as a director of The Caroline County
Bank) prior to the formation of Bancorp and its acquisition of Farmers
National Bank of Maryland and The Caroline County Bank on August 1, 1992.
(2) Mr. Hyatt has served as a director of Farmers National Bank of Maryland
since 1985.
(3) M. Virginia Meredith and Cary L. Meredith, Jr. are sister and brother.
(4) Mr. Sandusky has served as a director of Farmers National Bank of Maryland
since 1985.
(5) Mr. Shockley has served as a director of Atlantic National Bank since
1980, and was elected a director of Bancorp in 1992.
(6) Mr. Lauer has served as a director of Farmers National Bank of Maryland
since 1985.
(7) Mr. Edwards has served as a director of Farmers National Bank of Maryland
since 1988.
(8) Mr. Newnam has served as a member of the Board of Directors of the
Advisory Board of the Millington Branch of the Farmers National Bank since
1976 and as a Director of Farmers National Bank of Maryland since 1992.
</TABLE>
BOARD OF DIRECTORS
The Board of Directors held 13 meetings during 1993. With the exception of
Messrs. Adams and Sandusky each member of the Board of Directors attended 75% or
more of the total number of meetings of the Board and Board committee(s) held
during the period that he or she served.
The Board of Directors has an Audit Committee whose members are Messrs.
Lewis, Sandusky, Schelberg, Shockley, Simmons and Taylor. The Audit Committee is
appointed annually by the Board
3
<PAGE>
to make recommendations regarding the selection of independent public
accountants, review the scope and results of the audit by the independent public
accountants, review the adequacy of Bancorp's accounting, financial and
operating controls, and supervise special investigations. All members of the
Audit Committee with the exception of Mr. Sandusky attended 75% or more of the
five meetings held by the Committee during 1993.
The Board of Directors of Bancorp has no compensation or nominating
committees other than a committee comprised of Jesse L. Adams, John B. Melvin,
Cary L. Meredith, Jr. and Charles L. Schelberg that has been appointed to
administer The Farmers National Bancorp 1992 Stock Option Plan. Functions that
would be performed by a compensation or nominating committee, if appointed,
currently are performed by the Board as a whole. If a stockholder wishes to
recommend a person for nomination for election as a director, the candidate's
name and qualifications should be submitted in writing to the Secretary prior to
September 1 of each calendar year along with other relevant biographical data
and an indication of the consent of the proposed nominee. Recommendations of
proposed nominees received in this manner will be considered by the Board.
Directors of Bancorp who are not salaried officers of Bancorp or its
subsidiaries receive an annual retainer of $3,000 as well as a fee of $100 for
each meeting attended of the Board of Directors of Bancorp and a fee of $75 for
each committee meeting of Bancorp attended. With the exception of Mr. Schelberg,
a Director and Chairman of the Board of Bancorp, who receives benefits
associated with his former employment with Farmers National, Directors of
Bancorp who are not salaried officers of Bancorp or its subsidiaries do not
participate in the Profit Sharing Plan, the Pension Plan or the Supplemental
Plan.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires Bancorp's
officers and directors, and persons who own more than ten percent of a
registered class of Bancorp Common Stock, to file reports of beneficial
ownership and changes in beneficial ownership with the Securities and Exchange
Commission and to furnish copies of all Section 16(a) forms filed to Bancorp.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no such forms were
required for those persons, Bancorp believes that, during 1993, except as set
forth below all forms were filed in a timely manner. Bancorp believes that
during 1993, Mr. Gray, a Director of Bancorp, failed to file two reports
reporting three acquisitions of common stock of Bancorp in a timely manner.
4
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL BENEFICIAL OWNERS OF COMMON STOCK
As of February 18, 1994, Farmers National Bank of Maryland ("Farmers
National"), a wholly owned subsidiary of Bancorp, was deemed a "beneficial
owner" of a total of 211,363 shares (7.83%) of Common Stock of Bancorp under
regulations of the Securities and Exchange Commission because of voting power,
investment power or both, held or shared by Farmers National in a fiduciary
capacity. A breakdown of sole and shared voting and investment power held by
Farmers National over those shares is set forth below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNERSHIP CLASS
- ------------------ ------------------------------------------- ----------------------- ------------
<S> <C> <C> <C>
Common Stock Farmers National Bank of Maryland 152,399 Sole Voting and 5.65%
5 Church Circle Investment Power (2)
Annapolis, Maryland 21401
Common Stock Farmers National Bank of Maryland 58,964 Shared Voting 2.18%
5 Church Circle and Investment Power
Annapolis, Maryland 21401
<FN>
- ------------------------
(1) Farmers National acts in various fiduciary capacities with respect to
numerous trusts, estates and other fiduciary accounts holding shares of
Common Stock of Bancorp. Farmers National is deemed a "beneficial owner"
of certain of those shares under regulations of the Securities and
Exchange Commission because of its power to vote or direct the voting of,
or to dispose or direct the disposition of, such shares, even though in
some instances it shares those powers with co-fiduciaries and others.
(2) Includes certain revocable trusts and agency accounts in which the
grantors or principals have delegated full voting rights, but have the
right to rescind the delegation of voting rights or terminate the
accounts.
</TABLE>
------------------------
The voting power of Farmers National over the aforementioned shares is
exercised by Farmers National's Trust Committee consisting of Messrs. Adams,
Brudin, Melvin, Meredith, Schelberg, Suit and Taylor. Mr. Brudin is an officer
of Farmers National. The actions of the Trust Committee are reviewed and
ratified periodically by the Board of Directors of Farmers National.
Except as indicated above, to the best knowledge of Bancorp, no person owns
beneficially more than 5% of the outstanding shares of its Common Stock.
Under Maryland law, a corporate fiduciary is entitled to vote shares of
stock held by it as a fiduciary either in person or by proxy, unless the
instrument appointing the fiduciary directs otherwise. Farmers National intends
to vote those shares with respect to which it has sole voting authority and
those shares with respect to which it votes with a co-fiduciary, if such
co-fiduciary also executes a proxy, FOR election as directors the five persons
named as nominees in this Proxy Statement, and FOR ratification of the selection
of Stegman & Company as independent accountants for Bancorp for 1994 as
described in this Proxy Statement.
5
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK BY OFFICERS AND DIRECTORS
The following table sets forth, as of February 18, 1994, the number of
shares of Bancorp's Common Stock beneficially owned by each director and nominee
for director of Bancorp, by each named executive officer, and by all executive
officers and directors of Bancorp as a group.
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
NAME OF INDIVIDUALS SHARES BENEFICIALLY COMMON
OR IDENTITY OF GROUP OWNED STOCK
- ---------------------------------------- ------------------- -----------
<S> <C> <C>
Jesse L. Adams 59,868(2)(3) 2.21%
Cary L. Meredith, Jr. 51,084(3)(4) 1.89%
Donald S. Taylor 50,796(3)(5) 1.87%
M. Virginia Meredith 45,545 1.74%
Charles L. Schelberg 37,255(3)(6) 1.26%
William W. Simmons 14,978(7) (1)
Louis A. Supanek 14,000 (1)
John B. Melvin 13,880(3)(8) (1)
John M. Suit, II 12,630(3)(9) (1)
Alexander V. Sandusky 12,294(10) (1)
W. Calvin Gray, Jr. 11,408(11) (1)
Frank T. Lowman, III 8,756(15) (1)
Louis Hyatt 8,020(12) (1)
Edward B. Lauer 5,974(14) (1)
Raymond C. Shockley 5,858 (1)
Joseph S. Quimby 5,200(13) (1)
James D. Edwards 4,300(16) (1)
L. Tayloe Lewis, Jr. 4,100 (1)
W. Robert Newnam 1,536(17) (1)
All Officers and Directors
as a Group (21 persons) 374,389(3) 13.87%
<FN>
- ------------------------
(1) Represents less than 1%.
(2) Includes 48,640 shares with respect to which Mr. Adams has joint voting and
disposition powers with his wife.
(3) Does not include 211,363 shares over which Farmers National holds sole or
joint voting powers in a fiduciary capacity with respect to which the
director or officer shares voting power by reason of his position on
Farmers National's Trust Investment Committee. The director or officer
disclaims any beneficial interest in these shares.
(4) Includes 800 shares owned solely by Mr. Meredith's wife.
(5) Includes 5,564 shares with respect to which Mr. Taylor has joint voting and
disposition powers with his wife.
(6) Includes 19,298 shares which are held solely by Mr. Schelberg's wife.
(7) Includes 3,400 shares which are held solely by Mr. Simmons' wife.
(8) Includes 700 shares owned by Clark Melvin Profit Sharing Plan for the
benefit of Mr. Melvin and 100 shares held solely by Mr. Melvin's wife.
(9) The shares are owned jointly with Mr. Suit's wife.
(10) Includes 5,735 shares which are held solely by Mr. Sandusky's wife.
(11) Includes 6,408 shares with respect to which Mr. Gray has joint voting and
disposition powers with his wife, 1,300 shares held by a trust over which
Mr. Gray is the sole trustee, and 4,100 shares held by corporations of
which Mr. Gray is president.
(12) Includes 5,267 shares with respect to which Mr. Hyatt has joint voting and
disposition powers with his wife.
(13) Includes 4,000 shares with respect to which Mr. Quimby has joint voting and
disposition powers with his wife.
(14) Includes 2,620 shares which are held solely by Mr. Lauer's wife.
(15) Of the total number of shares shown, 50 shares are owned jointly with Mr.
Lowman's mother, 452 shares are owned jointly with Mr. Lowman's mother and
sister and 136 shares are owned by a trust of which Mr. Lowman is trustee.
(16) Includes 200 shares owned by J.D. Edwards Profit Sharing Plan for the
benefit of Mr. Edwards.
(17) Mr. Newnam has joint voting and disposition powers with his wife with
respect to the shares.
</TABLE>
6
<PAGE>
EXECUTIVE COMPENSATION
The following tables and related text summarize Bancorp's compensation of
its executive officers in accordance with the regulations of the Securities and
Exchange Commission.
SUMMARY COMPENSATION
The following table summarizes for the last three fiscal years certain
information regarding the Corporation's compensation of its chief executive
officer and other executive officers who had total annual salary and bonus for
fiscal year 1993 exceeding $100,000.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
NAME AND PRINCIPAL POSITION YEAR SALARY
- -------------------------------------------------- --------- --------------------
<S> <C> <C>
John M. Suit, II 1993 $ 179,280(2)
President and Director of Bancorp; 1992 164,785(2)
President and Director of Farmers National 1991 157,569(2)
Frank T. Lowman, III 1993 103,816(3)
Vice President of Bancorp 1992 93,750(3)
Executive Vice President of Farmers National 1991 90,265(3)
Louis A. Supanek 1993 105,526(4)
Vice President and Treasurer of Bancorp 1992 97,090(4)
Executive Vice President, Cashier and Chief 1991 93,416(4)
Financial Officer of Farmers National
<FN>
- ------------------------
(1) No other executive officer's total annual salary and bonus for 1993
exceeded $100,000. In addition, in accordance with the instructions to
Item 402 of Regulation S-K, columns have been deleted when no compensation
has been awarded to, earned by or paid to any of the named executive
officers that would be required to be reported in that column.
(2) Includes $21,280, $16,785 and $17,569 allocated to Mr. Suit's account
under the Farmers National Deferred Profit Sharing Plan in each of 1993,
1992 and 1991, respectively. (See Compensation Pursuant to Plans).
(3) Includes $12,316, $9,550 and $10,065 allocated to Mr. Lowman's account
under the Farmers National Deferred Profit Sharing Plan in each of 1993,
1992 and 1991, respectively.
(4) Includes $12,526, $9,890 and $10,416 allocated to Mr. Supanek's account
under the Farmers National Deferred Profit Sharing Plan in each of 1993,
1992 and 1991, respectively.
</TABLE>
STOCK OPTION GRANTS
The Farmers National Bancorp 1992 Stock Option Plan (the "Stock Option
Plan") was approved by the stockholders of Bancorp at the Annual Meeting of
Stockholders held on April 28, 1992. No stock options were granted pursuant to
the Stock Option Plan during 1993. Prior to the adoption of the Stock Option
Plan, Bancorp had no stock option plans in effect.
LONG TERM INCENTIVE PLAN
Bancorp has no long-term incentive compensation plans in effect other than
the Stock Option Plan discussed above.
EMPLOYMENT CONTRACTS
Bancorp has no written employment contracts with any of its executive
officers, and no executive officers are entitled to rights upon a change of
control or termination of employment.
7
<PAGE>
COMPENSATION PURSUANT TO PLANS
The Farmers National Deferred Profit Sharing Plan (the "Profit Sharing
Plan") provides each eligible employee with a percentage of the aggregate amount
allocated annually to the Profit Sharing Plan by the Board of Directors and
permits all participants to defer receipt of payments for investment of all or a
portion of the amounts allocated through a trust established under the Profit
Sharing Plan. The aggregate contribution of Farmers National to the Profit
Sharing Plan is determined by application of a formula based upon pre-tax
earnings of Farmers National and by other provisions limiting the maximum
amounts allocable to employees to 15% of salary in the case of employees who are
full participants and a lesser portion of salary in the case of employees with
less than two years of service, who are limited participants. Upon retirement or
death, a participant's interest is payable, at the election of a participant, in
a lump sum or in annual installments, and upon termination other than by
retirement or death, in a lump sum.
OTHER COMPENSATION
Group life, health and hospitalization insurance benefits are provided to
all full-time salaried employees of Bancorp and its subsidiaries pursuant to
plans which do not discriminate in favor of executive officers. Certain amounts
are expended by Bancorp or its subsidiaries for expenses (including dues for
certain clubs and professional affiliations, and depreciation, gasoline and
repair for automobiles owned by subsidiaries of Bancorp) paid by Bancorp or its
subsidiaries for the benefit of executive officers. Such expenditures are
considered to constitute ordinary and incidental business expenses reasonably
paid by Bancorp and its subsidiaries to attract and retain qualified personnel,
facilitate job performance and minimize work-related expenses incurred by those
persons. Although it is impossible for Bancorp to calculate the value of the
personal benefit of the payments, if any, to its executive officers, the cost to
Bancorp during 1993 of such benefits provided for Mr. Suit, Mr. Lowman and Mr.
Supanek did not exceed 10% of each of their cash compensation, respectively.
PENSION BENEFITS
The Farmers National Pension Plan (the "Pension Plan") covers substantially
all full-time employees. Benefits are computed under a formula based on the
average compensation received by a participant during the five highest paid
consecutive calendar years of employment preceding retirement. The amount of
contributions to the Pension Plan is not and cannot readily be calculated
separately for specific participants by the actuaries for the Pension Plan. For
1993, aggregate pension costs accrued and funded were $333,826. The following
table shows the maximum annual retirement benefit payable under the Pension Plan
for specified levels of compensation and credited years of service. The amounts
in this table are not subject to deduction for Social Security benefits.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT
-----------------------------------------------------------
YEARS OF SERVICE
-----------------------------------------------------------
COMPENSATION 15 20 25 30*
- ------------------------------------------ -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 75,000.................................. $ 18,787.50 $ 25,050.00 $ 31,312.50 $ 37,500.00
100,000.................................. 25,050.00 33,400.00 41,750.00 50,000.00
125,000.................................. 31,312.50 41,750.00 52,187.50 62,500.00
150,000.................................. 37,575.00 50,100.00 62,625.00 75,000.00
<FN>
- ------------------------
*Maximum number of years of service that can be credited under the Pension Plan.
</TABLE>
Mr. Schelberg, the Chairman of the Board of Bancorp and Farmers National, is
credited with the maximum possible number of years of service under the Pension
Plan (30), and is drawing his current monthly benefit of $6,311.22 under the
Pension Plan. Mr. Suit, Mr. Lowman and Mr. Supanek will be credited under the
Pension Plan with 20 years, 30 years and 25 years of service at age 65,
respectively. Current annual compensation for purposes of the Pension Plan is as
follows: Mr. Suit - $158,000; Mr. Lowman - $91,500; and Mr. Supanek - $93,000.
Estimated annual benefits based on this level of annual compensation are as
follows: Mr. Suit - $54,673; Mr. Lowman - $47,464; and Mr. Supanek - $40,228.
8
<PAGE>
Farmers National also maintains a Supplemental Retirement, Death and
Disability Plan (the "Supplemental Plan"), which provides benefits in addition
to those of the Pension Plan for certain officers designated by the Board of
Directors of Farmers National. Upon termination of employment, eligible
executive officers are paid a monthly benefit equal to a percentage of each
executive's final monthly compensation offset by amounts paid under the Pension
Plan, social security and other deductions particular to the executive officer.
At the present time, Messrs. Suit, Lowman and Supanek are covered under the
Supplemental Plan. The cost of the Supplemental Plan included in operating
expenses for the year ended December 31, 1993, was $185,938.
REPORT OF PERSONNEL COMMITTEE OF FARMERS NATIONAL
ON EXECUTIVE COMPENSATION
The Personnel Committee of Farmers National has furnished the following
report on executive compensation. This report shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing of Bancorp under the Securities Act of 1933, as
amended or under the Securities Exchange Act of 1934, except to the extent that
Bancorp specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The executive officers of Bancorp and Farmers National received all of their
compensation in 1993 from Farmers National. Accordingly, the Personnel Committee
of Farmers National (the "Committee") established the policies governing
compensation of the executive officers.
In establishing compensation of executive officers, the Committee recognizes
three primary policy considerations. First, compensation levels should reflect
Farmers National's performance. Second, compensation should provide incentives
for senior management to maximize stockholder value. Third, compensation levels
at other financial institutions of similar size in the Mid-Atlantic region are
considered in order to enable Farmers National to attract and retain key
employees. In addition, the Committee rejects the trend toward excessive
executive compensation found in some publicly held financial institutions and
companies, believing it is not in the best interests of the stockholders. By
establishing compensation in accordance with these criteria, the Committee seeks
to attract and retain qualified executive officers to achieve the business goals
of Farmers National and Bancorp and enhance stockholder value. The Committee has
not formulated an official policy regarding the qualification of compensation
paid to its executive officers for deductibility under Section 162(m) of the
Internal Revenue Code.
The compensation of the Chief Executive Officer and other executive officers
of Bancorp and Farmers National consists of annual cash salaries, participation
in the Profit Sharing Plan and Pension Plan, and certain other benefits
described above. Salaries of all members of senior management are reviewed
annually by the Committee. The Committee is made up of the following directors
of Farmers National: John B. Melvin (Chairman), Charles L. Schelberg, Cary L.
Meredith, Jr., John M. Suit, II, Donald S. Taylor, William W. Simmons and Edward
B. Lauer. The Committee also includes as non-voting members Louis A. Supanek and
Frank T. Lowman, III who are executive officers but not directors. Guided by the
compensation principles described above, in December of each year, the Committee
reviews the individual performance of members of senior management during the
past year in the context of the financial performance of Farmers National and
Bancorp. Upon consideration of these factors and competitive compensation levels
in the banking industry, the Committee formulates recommendations for the
amounts of annual salaries of executive officers for the coming year. These
recommendations are then presented to Farmers National's Board of Directors (the
"Board") for final ratification. Senior executives serving on the Committee or
the Board do not participate in deliberations concerning their own performance
or compensation. Mr. Schelberg, Chairman of the Board and a director of Bancorp
and a director of Farmers National, as well as a former executive officer of
Bancorp and Farmers National, participates in the deliberations of the Committee
and the Board concerning executive compensation.
9
<PAGE>
Following this procedure, in December 1992 the Board fixed the 1993 annual
salaries of executive officers (including the officer named in the summary
compensation table above) after considering the Committee's recommendations and
the performance of Farmers National and Bancorp in 1992. The Board approved all
recommendations of the Committee concerning executive salaries. No fixed targets
or formulas were utilized in determining salaries.
The Board ratified the Committee's recommendation to set the salary of the
Chief Executive Officer for 1993 at $158,000, an increase of approximately 6.76%
over 1992. This decision was based on the Committee's evaluation of the Chief
Executive Officer's performance, prevailing compensation levels in the banking
industry, and various measures of financial performance and stockholder value
for Farmers National and Bancorp in 1992. These measures included earnings per
share, return on equity, return on assets, and prevailing prices for Bancorp's
outstanding Common Stock.
Executive officer compensation is also linked to the performance of Farmers
National through participation in the Profit Sharing Plan. The aggregate annual
contribution of Farmers National to the Profit Sharing Plan is determined by
application of a formula based on pre-tax earnings of Farmers National and by
other provisions limiting the maximum amounts allocable to employees to 15% of
salary in the case of employees who are full participants and a lesser portion
of salary in the case of employees with less than two years of service, who are
limited participants. The Committee formulates annually a recommendation of the
aggregate amount of Farmers National's contribution to the Profit Sharing Plan,
for action by the Board. The Committee recommended, and the Board approved, an
aggregate contribution of $678,600 in 1993. During 1993, $21,280 was allocated
to the account of the Chief Executive Officer under the Plan.
No stock options were granted in 1993 under The Farmers National Bancorp
1992 Stock Option Plan (the "Stock Option Plan"). A committee of the Board of
Directors of Bancorp consisting of Jesse L. Adams, John B. Melvin, Cary L.
Meredith, Jr. and Charles L. Schelberg administers the Stock Option Plan. As
noted above, Mr. Schelberg is a former executive officer of Bancorp and Farmers
National.
PERSONNEL COMMITTEE
FARMERS NATIONAL BANK OF MARYLAND
John B. Melvin, CHAIRMAN
Donald S. Taylor
Charles L. Schelberg
Cary L. Meredith, Jr.
William W. Simmons
Edward B. Lauer
John M. Suit, II
NON-VOTING MEMBERS
Frank T. Lowman, III
Louis A. Supanek
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
The Personnel Committee of Farmers National acts as the compensation
committee for Bancorp. The following persons served on the Personnel Committee
of Farmers National during 1993: John B. Melvin, Charles L. Schelberg, Cary L.
Meredith, Jr., Donald S. Taylor, William W. Simmons, Edward B. Lauer and John M.
Suit, II. During 1993, Mr. Suit was an officer of Bancorp and of Farmers
National. Mr. Schelberg is Chairman of the Board of Bancorp and was formerly an
executive employee of Bancorp and Farmers National.
The following officers and employees of Bancorp and Farmers National also
participated in deliberations of the Personnel Committee of Farmers National
which made recommendations to the
10
<PAGE>
Board of Directors of Farmers National concerning executive compensation during
1993: Louis A. Supanek and Frank T. Lowman. Mr. Supanek and Mr. Lowman did not
participate in deliberations relating to the compensation paid to them or to Mr.
Suit.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FARMERS NATIONAL BANCORP, NASDAQ TOTAL MARKET, NASDAQ BANK INDEX (1)
The Comparison Chart of the 5 Year Cumulative Total Return (including
dividend reinvestment) has been filed with the SEC under cover of form SE (form
for submission of paper format exhibits).
[GRAPHIC]
(1) Assumes that the investment in Bancorp Common Stock and each index
was $100 on December 31, 1988 with quarterly reinvestment of
dividends.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of Bancorp's directors and officers, and organizations of which some of
Bancorp's directors are owners, officers, directors or trustees, have had
transactions in the ordinary course of business with Bancorp and subsidiaries of
Bancorp. Such transactions have included borrowings (all of which were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features), deposits, purchases of government and municipal
securities and other usual money market transactions.
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors of Bancorp has appointed the firm of Stegman &
Company, certified public accountants, as independent accountants for Bancorp
for 1994 subject to ratification by the stockholders. Stegman & Company, which
has served as independent accountants for Bancorp since it commenced operations
in 1982, has advised Bancorp that neither the accounting firm nor any of its
members or associates has any direct financial interest in or any connection
with Bancorp or any of its subsidiaries other than as independent public
accountants. Representatives of Stegman & Company are expected to be present at
the meeting and will be given the opportunity to make a statement if they desire
to do so and to respond to appropriate questions.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF STEGMAN & COMPANY AS BANCORP'S INDEPENDENT ACCOUNTANTS FOR 1994.
OTHER MATTERS
The Board of Directors does not know of any matters which may be presented
at the meeting other than those specifically set forth in the Notice of Annual
Meeting. If any other matters should come properly before the meeting or any
adjournment or adjournments thereof, the holders of the proxies will vote in
accordance with their best judgment with respect to such matters.
PROXY SOLICITATION
The expense of the Board of Directors' proxy solicitation will be borne by
Bancorp. In addition to the use of the mails, proxies may be solicited by
personal interview, by telephone or by telegraph. Banks, brokerage houses, and
other institutions, nominees and fiduciaries will be requested to forward the
soliciting materials to beneficial owners of Common Stock and to obtain
authorizations for the execution of proxies; and if they in turn so request,
Bancorp will reimburse such banks, brokerage houses and other institutions,
nominees and fiduciaries for their expenses in forwarding such material.
Directors, officers and regular employees of Bancorp and its subsidiaries may
also solicit proxies without additional remuneration therefor.
Stockholders are urged to sign the accompanying proxy, solicited on behalf
of the Board of Directors of Bancorp, and return it at once in the envelope
provided for that purpose. Proxies will be voted in accordance with the
stockholders' directions. If no directions are given, proxies will be voted FOR
election of the five nominees for director named in this Proxy Statement, and
FOR ratification of the selection of Stegman & Company as independent public
accountants for Bancorp for 1994. A stockholder giving a proxy has the power to
revoke it at any time prior to its exercise by executing another proxy bearing a
later date, by written notice to Bancorp or by oral or written statement at the
meeting.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders of Bancorp must be received by Bancorp not later than
November 24, 1994, in order to be included in the proxy statement and proxy
relating to such annual meeting.
Norma K. Behlke
SECRETARY
Dated: March 25, 1994
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FARMERS NATIONAL BANCORP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Cary L. Meredith, Jr., John B. Melvin, and
Donald S. Taylor, and each of them, Proxies of the undersigned, with power of
substitution, to vote all shares of Common Stock of Farmers National Bancorp
("Bancorp") which the undersigned could vote if personally present at the Annual
Meeting of Stockholders to be held April 26, 1994, or at any adjournment or
adjournments thereof.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS:
Class II / / FOR all nominees listed below / / WITHHOLD AUTHORITY
Directors (EXCEPT AS INDICATED TO THE CONTRARY TO VOTE FOR ALL NOMINEES LISTED
BELOW) BELOW
</TABLE>
(John B. Melvin, Charles L. Schelberg, Donald S. Taylor, William W. Simmons and
Louis Hyatt)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. PROPOSAL TO RATIFY THE SELECTION OF STEGMAN & COMPANY AS INDEPENDENT ACCOUNTANTS FOR BANCORP FOR
1994:
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
The undersigned further gives the Proxies authority to vote according to
their best judgment with respect to any other matters properly coming before the
meeting and any adjournment or adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES AS CLASS II DIRECTORS, AND FOR PROPOSAL 2.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and of a Proxy Statement, both dated March 25, 1994. Please sign
exactly as name appears below.
__________________________________
Signature
__________________________________
Signature, if held jointly
Date: ____________________________
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
