FIRST FARMERS AND MERCHANTS CORPORATION
816 South Garden Street, Columbia, Tennessee 38402-1148
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on the 21st day of April, 1998
To the Stockholders of First Farmers and Merchants Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of First
Farmers and Merchants Corporation will be held at the Memorial Building, 308
West 7th Street, Columbia, Tennessee 38401, on the 21st day of April, 1998
at 4:00 o'clock P.M., local time, for the following purposes:
1. Election of Directors: Election of sixteen (16) persons listed in the
Proxy Statement dated March 30, 1998, accompanying the notice of said
meeting.
2. Proposed Charter Amendment and Stock Dividend: To consider an amendment
to the charter of incorporation to increase the authorized common stock,
par value $10.00 per share, from 4,000,000 shares to 8,000,000 shares, and
to pay to present stockholders a one hundred percent (100%) stock dividend
by the issuance of one (1) share of additional stock for each one (1) share
presently held. Under this proposal the number of issued shares of stock
would become 2,800,000. The remaining 5,200,000 proposed shares of
unissued stock are being proposed in order to facilitate possible
acquisitions or other appropriate corporate purposes. The Corporation does
not have any specific acquisitions presently proposed nor does it have any
specific understandings or agreements in effect with respect to the
acquisition of any other bank or other business.
3. Transacting such other business as may properly be brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 6, 1998, are
entitled to notice of and to vote at the meeting.
To assure that your shares are represented at the meeting, please mark,
date, sign and promptly return the enclosed proxy. The proxy is revocable
and will not affect your right to vote in person in the event you are able
to attend the meeting.
By order of the Board of Directors
John P. Tomlinson, III
Secretary
March 30, 1998
<PAGE>
FIRST FARMERS AND MERCHANTS CORPORATION
816 South Garden Street
Columbia, Tennessee 38402-1148
PROXY
March 30, 1998
KNOW ALL PERSONS BY THESE PRESENTS, that I, the undersigned Stockholder
of First Farmers and Merchants Corporation of Columbia, Tennessee do
nominate, constitute, and appoint Robin Courtney, Bettye Cornwell, and
C. Allan Kerley or any of them with full power to act alone, my true and
lawful representative with respect to all shares of Common Stock of First
Farmers and Merchants Corporation which the undersigned would be entitled to
vote, at the Annual Meeting of Stockholders to be held on April 21, 1998, a
e at the office of the Memorial Building, 308 West 7th Street, Columbia,
Tennessee 38401, or any adjournment thereof, with all the powers the
undersigned would possess if personally present, as follows:
1. Election of the sixteen (16) persons listed below as Directors:
FOR all nominees listed below [ ] AGAINST all nominees listed below [ ]
(Except as marked to the contrary)
<TABLE>
<C> <C> <C> <C>
Kenneth A. Abercrombie Hulet M. Chaney Edwin W. Halliday T. Randy Stevens
James L. Bailey, Jr. H. Terry Cook, Jr. Waymon L. Hickman Dan C. Wheeler
Flavius A. Barker W. J. Davis, Jr. Tillman Knox David I. Wise
Harlan D. Bowsher Thomas Napier Gordon Joe E. Lancaster W. Donald Wright
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED ABOVE, LINE
THROUGH OR STRIKE OUT THE NOMINEE'S NAME.
2. Proposed Charter Amendment and Stock Dividend: To amend the charter of
incorporation to increase the authorized common stock, par value $10.00 per
share, from 4,000,000 shares to 8,000,000 shares, and to pay to present
stockholders a one hundred percent (100%) stock dividend by the issuance of
one (1) share of additional stock for each one (1) share presently held.
Under this proposal the number of issued shares of stock would become
2,800,000. The remaining 5,200,000 proposed shares of unissued stock are
being proposed in order to facilitate possible acquisitions or other
appropriate corporate purposes. The Corporation does not have any
specific acquisitions presently proposed nor does it have any other specific
understandings or agreements in effect with respect to the acquisition of any
other bank or other business.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. At their discretion, Robin Courtney and/or Bettye Cornwell and/or C. Allan
Kerley are authorized to vote upon such other business as may properly come
before the meeting.
Management at present knows of no other business to be presented by or on
behalf of its management at the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY MAY
BE REVOKED PRIOR TO ITS EXERCISE.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full
title. If more than one trustee, all should sign. All joint owners must
sign. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
Dated the __________ day of __________, 1998
_________________________________________
_________________________________________
(Signature of Shareholder)
No. of Shares ______________ PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY.
_________ I will attend the Business Meeting.
_________ I will attend the Reception.
<PAGE>
FIRST FARMERS AND MERCHANTS CORPORATION
816 South Garden Street
Columbia, Tennessee 38402-1148
BALLOT
March 30, 1998
1. Election of the sixteen (16) persons listed below as Directors:
FOR all nominees listed below [ ] AGAINST all nominees listed below [ ]
(Except as marked to the contrary)
<TABLE>
<C> <C> <C> <C>
Kenneth A. Abercrombie Hulet M. Chaney Edwin W. Halliday T. Randy Stevens
James L. Bailey, Jr. H. Terry Cook, Jr. Waymon L. Hickman Dan C. Wheeler
Flavius A. Barker W. J. Davis, Jr. Tillman Knox David I. Wise
Harlan D. Bowsher Thomas Napier Gordon Joe E. Lancaster W. Donald Wright
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE LISTED ABOVE,
LINE THROUGH OR STRIKE OUT THE NOMINEE'S NAME.
2. Proposed Charter Amendment and Stock Dividend: To amend the charter of
incorporation to increase the authorized common stock, par value $10.00
per share, from 4,000,000 shares to 8,000,000 shares, and to pay to
present stockholders a one hundred percent (100%) stock dividend by the
issuance of one (1) share of additional stock for each one (1) share
presently held. Under this proposal the number of issued shares of stock
would become 2,800,000. The remaining 5,200,000 proposed shares of
unissued stock are being proposed in order to facilitate possible
acquisitions or other appropriate corporate purposes. The Corporation
does not have any specific acquisitions presently proposed nor does it
have any other specific understandings or agreements in effect with
respect to the acquisition of any other bank or other business.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated the _________ day of ____________, 1998
______________________________________
______________________________________
(Signature of Stockholder)
No. of Shares ____________
PLEASE MARK, SIGN, DATE AND RETURN THIS BALLOT PROMPTLY.
I will attend the Business Meeting.
I will attend the Reception.
<PAGE>
FIRST FARMERS AND MERCHANTS CORPORATION
816 South Garden Street
Columbia, Tennessee 38402-1148
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on The 21st day of April, 1998
The accompanying proxy is solicited by and on behalf of the Board of
Directors of First Farmers and Merchants Corporation (the "Corporation") for
use at the Sixteenth Annual Meeting of Stockholders to be held on the 21st
day of April, 1998, and any adjournment thereof. The time and place of the
meeting are set forth in the accompanying Notice of Meeting. All expenses of
preparing, printing, and mailing the proxy and all materials used in the
solicitation thereof will be borne by the Corporation. In addition to the use
of the mails, proxies may be solicited by personal interview, telephone and
telegraph by directors, officers, and other personnel of the Corporation or
its affiliate, none of whom will receive additional compensation for such
services. The Corporation will also request custodians and nominees to
forward soliciting materials to the beneficial owners of stock held of record
by them and will pay reasonable expenses of such persons for forwarding such
material. The date on which this Proxy Statement and the accompanying proxy
are first being mailed to stockholders of the Corporation is the 30th day of
March, 1998.
PURPOSES OF THE MEETING
The Annual Stockholders' Meeting will be held for the purposes of (i)
electing directors; (ii) amending the charter of incorporation to increase
the authorized common stock; and (iii) transacting whatever business may
properly be brought before the meeting or any adjournment thereof.
QUORUM AND VOTING
At the closing of business on March 6, 1998, the Corporation had issued
and outstanding 1,400,000 shares of its common stock. Only holders of record
of Common Stock of the Corporation at the close of business on March 6, 1998,
(the "Record Date"), are entitled to notice of and to vote on matters to come
before the Annual Meeting or any adjournment thereof.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock of the Corporation entitled to vote at the
Annual Meeting is necessary to
<PAGE>
constitute a quorum at the Annual Meeting or any adjournment thereof. A
stockholder is entitled to one vote in person or by proxy at the Annual
Meeting for each share of Common Stock of the Corporation held of record in
his/her name.
In each case where the stockholder has appropriately specified how the proxy
is to be voted, it will be voted in accordance with his/her specifications.
Stockholders may designate a person or persons other than those named in the
enclosed proxy to vote their shares at the Annual Meeting or any adjournment
thereof. As to any other matters of business which may be brought before the
Annual Meeting or any adjournment thereof, a vote may be cast pursuant to the
accompanying proxy in accordance with the judgment of the person or persons
voting the same in the best interests of the Corporation, but management does
not know of any other matter of business. Any stockholder has the power to
revoke his/her proxy at any time, insofar as it has not been exercised, by
written notice or subsequently dated proxy, received by the Corporation,
or by revocation given by the stockholder in person at the Annual Meeting
or any adjournment thereof.
PRINCIPAL HOLDERS OF VOTING SECURITIES
As of March 6, 1998, no individual or corporation owned beneficially,
directly or indirectly, more than 5% of the Corporation's voting securities.
As of March 6, 1998, the First Farmers and Merchants National Bank of
Columbia (the "Bank"), the Corporation's subsidiary held, of record in a
fiduciary capacity as trustee, executor, agent or otherwise, 120,375 shares
or approximately 8.60% of the Corporation's outstanding Common Stock, and has
the sole right to vote all of these shares. The trust shares will be voted
in a manner consistent with the best interest of the beneficiaries as
determined by the Bank as fiduciary.
The following tabulation sets forth the amount and percentage of the
Corporation Common Stock owned beneficially (as determined in accordance with
the rules and regulations of the Securities and Exchange Commission) as of
March 6, 1998, by all directors and executive officers of the Corporation as
a group. For tabulation of beneficial ownership of Corporation by individual
directors, see ELECTION OF DIRECTORS.
Number of shares owned Beneficially Percentage of
by Directors and Executive Officers Common Stock
as a Group (a total of 19 persons) 1,400,000 shares
285,900 20.42%
ELECTION OF DIRECTORS
At the meeting, sixteen (16) nominees will be proposed for election as
directors to serve until the next Annual Meeting of Stockholders or until
their successors are elected and qualified. The Corporation's Bylaws provide
in Article III, Section 2, that there shall be at least five (5) and not
more than twenty-five (25) Directors. The Board of Directors believes it
advisable that there be sixteen (16) Directors of the Corporation at this
time. Proxies cannot be voted for a greater number than sixteen (16)
nominees.
<PAGE>
The Board of Directors proposes the election of the nominees listed below
to serve until the next Annual Meeting or until their successors are duly
elected and qualified. These sixteen nominees are presently serving as
Directors. Unless contrary instructions are received, it is intended that
the shares represented by proxies solicited by the Board of Directors will be
voted in favor of the election as Directors of all of the nominees named
below. If for any reason any one of such nominees is not available for
election, the person named in the form of proxy have advised that they will
vote for such substitute nominees as the Board of Directors of the Corporation
may propose. The Board of Directors has no reason to expect that any of these
nominees will fail to be candidates at the meeting, and, therefore, does not at
this time have any substitute nominee under consideration. The names and
certain information relating to the sixteen (16) nominees set forth below has
been furnished to the Corporation by the individuals named.
The following information is furnished with respect to the nominees on the
next three pages:
<PAGE>
<TABLE>
<CAPTION>
Position &
Office Held Position & Director Business Experience Shares of Corporation
With Office Held of Bank During Last Beneficially Owned Percent
Name Age Corporation With Bank Since Five (5) Years as of 3/06/98/1 of Class
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth A. Abercrombie 55 Director Director 1988 President, Loretto Casket 1,200 .086%
Co., Inc.
James L. Bailey, Jr. 55 Director Director 1973 Pharmacist 4,146 .296%
Flavius A. Barker 66 Director Director 1996 President, Tennessee 209/2 .015%
Farm Bureau Federation
Harlan D. Bowsher 69 Director Director 1974 Plant Manager, 9,031/3 .645%
General Electric (retired)
Hulet M. Chaney 53 Director Director 1997 CEO, Tennessee Farmers 3,059/4 .219%
Insurance Companies
H. Terry Cook, Jr. 57 Director Director 1980 President, Cook Properties, 11,677/5 .834%
Inc.
W. J. Davis, Jr. 51 Director Director 1982 Chairman and CEO, 44,400/6 3.171%
Davis Group, Inc.
Thomas Napier Gordon 46 Director Director 1986 Managing Partner, 34,162/7 2.440%
Gordon Brothers
Properties
Edwin W. Halliday 65 Director Director 1974 Farmer 4,224/8 .302%
Waymon L. Hickman 63 Director, Director, 1967 Chairman & Chief 36,292/9 2.592%
Chairman & Chairman & Executive Officer
CEO CEO of Bank
Tillman Knox 69 Director Director 1966 President, Hall & Knox 14,050/10 1.000%
Mining Company, Inc.
Joe E. Lancaster 68 Director Director 1968 CEO, Emeritus 34,000/11 2.429%
Tennessee Farmers
Insurance Companies
T. Randy Stevens 46 Director, Director, 1991 President & Chief 18,400/12 1.314%
President President Operating Officer
& COO & COO of Bank
Dan C. Wheeler 55 Director Director 1993 Commissioner TN Department 3,067/13 .219%
of Agriculture
David I. Wise 66 Director Director 1967 Senior Exec.VP 21,600/14 1.543%
of Bank
(Retired)
W. Donald Wright 58 Director Director 1992 Partner H & S Pharmacies 508 .036%
240,025 7.145%
</TABLE>
<PAGE>
Footnotes
[FN]
<F1>
/1 Unless otherwise indicated, all shares are owned of record.
<F2>
/2 209 shares are registered to Flavius A. Barker or Naomi Barker, Mr.
Barker's wife.
<F3>
/3 224 shares are registered to Barbara J. Bowsher, Mr. Bowsher's wife.
<F4>
/4 1,940 shares are registered to Hulet M. Chaney and Joyce A. Chaney,
Mr. Chaney's wife.
<F5>
/5 3,677 shares are registered to Griffitha G. Cook, Mr. Cook's wife.
<F6>
/6 6,300 shares are registered to Wayne Pressnell Testamentary Trust number one.
800 shares are registered to Estate of W. J. Davis, Sr.
6,300 shares are registered to Winfred J. Davis & Starling Pressnell
Davis, Co-Trustees.
8,268 shares are registered to W. J. Davis, Jr., Trustee, the Davis Group
4,212 shares are registered to Starling Pressnell Davis.
320 shares are registered to Mrs. W. J. Davis.
<F7>
/7 4,530 shares are registered to Thomas Napier Gordon, Jr., minor son of
Mr. Gordon.
4,530 shares are registered to Edward Bradshaw Gordon, minor son of
Mr. Gordon.
200 shares are registered to Teri Hasenour Gordon, wife of Mr. Gordon.
<F8>
/8 3,640 shares are registered to Polly Ann Halliday, Mr. Halliday's wife.
<F9>
/9 19,022 shares are registered to Waymon L. Hickman and Carey B. Hickman,
Mr. Hickman's wife, joint tenants.
<F10>
/10 6,292 shares are registered to Hall and Knox Mining Company.
<F11>
/11 19,000 shares are registered to Betty L. Lancaster, Mr. Lancaster's wife.
<F12>
/12 200 shares are registered to T. Randy Stevens, custodian for Branson
James Stevens.
200 shares are registered to T. Randy Stevens, custodian for Rebecca
Lynn Stevens.
6,000 shares are registered to Leesa M. Stevens, Mr. Stevens' wife.
</FN>
<PAGE>
[FN]
<F13>
/13 300 shares are registered to Dan C. Wheeler and Mary Carol Wheeler, wife of
Mr. Wheeler.
<F14>
/14 1,000 shares are registered to Mary Neil P. Wise, wife of Mr. Wise.
</FN>
******************************************************************************
COMMITTEES OF THE BOARD
There are no standing committees of the Board of Directors of the
Corporation. The Board of Directors of the Corporation met four (4) times
during 1997.
The Board of Directors of the Bank has designated nine (9) standing
committees. They are as follows:
Audit Committee (4 members)
Compensation Committee (7 members)
Deferred Profit Sharing Benefit Committee (5 members)
Executive Committee (7 members)
Trust Audit Committee (4 members)
Trust Committee (5 members)
Risk Management Committee (8 members)
Business Development Committee (9 members)
Compliance/CRA Committee (7 members)
Audit Committee
Functions: The Committee recommends the certified public accounting
firm to be employed by the Corporation and the Bank for audit purposes and
recommends the areas of responsibility of the CPA firm. The Committee also
meets with the CPA firm to receive the auditors' evaluation of the conditions
of the Corporation and the Bank, and brings those reports
<PAGE>
to the Board of Directors for their consideration. The Committee also meets
with internal auditors for periodic review of the audit program of the
Corporation and the Bank.
Number of 1997 meetings: 5
Membership: The Committee membership is made up of four (4) directors who
are not officers of the Bank. They are Harlan D. Bowsher, Chairman, James L.
Bailey, Jr., Edwin W. Halliday and Dan C. Wheeler.
Compensation Committee
Functions: The Committee recommends to the Board of Directors fees for
board meetings and fees for committee meetings for directors. The Committee
reviews, evaluates and recommends to the Boards of the Corporation and the
Bank officers' compensation program and deferred profit sharing contributions
for all eligible employees. See compensation committee report on executive
compensation on pages 10, 11, 12, and 13.
Number of 1997 meetings: 2
Membership: The membership of the Committee is made up of one (1) director
who is an officer of the Corporation and of the Bank and six (6) directors
who are not officers of the Corporation or the Bank. They are Tillman Knox,
Chairman, Kenneth A. Abercrombie, Harlan D. Bowsher, H. Terry Cook, Jr.,
W. J. Davis, Jr., Joe E. Lancaster, and Waymon L. Hickman.
Deferred Profit Sharing Benefit Committee
Functions: The Committee determines the eligibility of employees to
participate in the Profit Sharing Plan; it also supervises records pertaining
to continuity of service, acts on applications for retirement benefits,
applications for leaves of absence and request for distribution of
participants' accounts. The Committee is also responsible for preparing
annual reports, financial statements, disclosing benefits to participants,
and reporting to the IRS and the Department of Labor.
Number of 1997 meetings: 1
Membership: The membership of the Committee is made up of one (1) director
who is an officer of the Corporation and the Bank, one (1) director who is
not an officer of the Corporation or the Bank, two (2) advisory directors who
are not directors of the Corporation or the Bank, and one (1) employee who is
not a director of the Corporation or the Bank. They are T. Randy Stevens,
Chairman, Thomas Napier Gordon, Robert E. Boruff (Advisory), Dr. O. Rebecca
Hawkins (Advisory) and Amy B. Slagle (Employee).
<PAGE>
Executive Committee
Functions: The Committee reviews and recommends to the Board of Directors
for its approval selected actions with regard to the general direction and
conduct of the Corporation and the Bank. The Committee acts on loan
applications and reviews overdrafts, cash items, loans, lines of credit, and
loan reviews in accordance with Bank's policies which have been approved by
the Board of Directors.
Number of 1997 meetings: 45
Membership: The membership of the Committee is made up of one (1) director
who is an officer of the Corporation and the Bank, five (5) other directors,
none of whom is an officer of the Corporation or the Bank and one (1)
Honorary Director of the Bank, who is not an officer of the Corporation.
They are Waymon L. Hickman, Chairman, Virgil H. Moore, Jr., Honorary
Chairman, Harlan D. Bowsher, H. Terry Cook, Jr., Tillman Knox, Joe E.
Lancaster, and David I. Wise.
Trust Audit Committee
Functions: The Committee recommends the certified public accounting firm to be
employed by the Bank for auditing the Trust Department. The Committee
recommends the areas of responsibility of the CPA firm and meets with the
firm to receive the auditors evaluation of the condition of the Trust
Department and brings those reports to the Board of Directors for its
consideration. The Committee meets with the internal auditor for periodic
review of audit program.
Number of 1997 meetings: 0
Membership: The membership of the Committee is made up of four (4)
directors who are not officers of the Corporation or the Bank. They are
Harlan D. Bowsher, Chairman, James L. Bailey, Jr., Edwin W. Halliday, and
Dan C. Wheeler.
Trust Committee
Functions: The Committee supervises the Trust Department. Its duties
include establishing and reviewing the investment strategy of the Trust
Department, its major equity commitments and collective funds performances,
and reviewing the earnings and operations of the Trust Department.
Number of 1997 meetings: 12
Membership: The membership of the Committee is made up of two (2) directors
who are officers of the Corporation and the Bank, and three (3) directors who
are not officers of the Corporation or the Bank. They are Waymon L. Hickman,
Chairman, T. Randy Stevens, Vice Chairman, Tom Napier Gordon, Hulet M.
Chaney, and Joe E. Lancaster.
<PAGE>
Risk Management Committee
Functions: The purpose of the Committee is to study areas of risk within
the bank with emphasis on insurance coverage and bonding requirements.
Number of 1997 meetings: 0
Membership: The membership of the Committee is made up of two (2) directors
who are officers of the Corporation and the Bank, four (4) directors who are
not officers of the Corporation or the Bank and one (1) Advisory Director of
the Bank. They are T. Randy Stevens, Chairman, Flavius A. Barker,
W. J. Davis, Jr., Waymon L. Hickman, David I. Wise, Dan C. Wheeler and
Clarence A. Powell, (Advisory). John P. Tomlinson, III serves as Secretary
of the Committee.
Business Development Committee
Functions: The purpose of the Committee is to oversee and advise bank
management in the development and execution of its marketing and business
development plans.
Number of 1997 meetings: 1
Membership: The membership of the Committee is made up of two (2) directors
who are officers of the Corporation and the Bank, five (5) directors who are
not officers of the Corporation or the Bank, and three (3) advisory directors
of the bank. They are W. J. Davis, Jr., Chairman, Kenneth Abercrombie,
Robert E. Boruff (Advisory), H. Terry Cook, Jr., Waymon L. Hickman, Joseph W.
Remke, III (Advisory), Hulet M. Chaney , T. Randy Stevens, and W. Donald
Wright. Nancy Bohannon serves as Committee Coordinator.
Compliance/CRA Committee
Functions: The purpose of the Committee is to oversee and advise bank
management and the Board of Directors in all areas dealing with Compliance
and Community Reinvestment Act.
Number of 1997 meetings: 2
Membership: The membership of the committee is made up of one (1) director
who is an officer of the Corporation and the Bank, four (4) directors who are
not officers of the Corporation or the Bank, one (1) Advisory Director of the
Bank, and one (1) officer of the Bank. They are T. Randy Stevens, Chairman,
Revis Harris, Jr. (Advisory), James L. Bailey, Flavius A. Barker, Edwin W.
Halliday, and W. Donald Wright. John T. Cotham serves as Committee
Coordinator.
<PAGE>
Director Attendance
During fiscal year 1997, there were four (4) meetings of the Board of
Directors of the Corporation and twelve (12) meetings of the Board of
Directors of the Bank. Each member of the Board, attended at least 75% of
the aggregate meetings of the Boards and committees of which they were
members.
COMPENSATION OF DIRECTORS AND OFFICERS
During the fiscal year 1997, each director and officer of the Corporation
received an annual retainer of $1,500.00 and was paid a fee of $325.00 for each
Board meeting attended up to four meetings. Each Active and Honorary Bank
Director received $375.00 for each Bank Board of Directors' meeting attended.
Each Bank Advisory Director received $225.00 for each Bank Board of
Directors' meeting attended. Each member of the Bank's Executive Committee
received a $6,250.00 annual retainer. Each Active, Honorary, and Advisory Bank
Director (excluding salaried officers) received $200.00 for attendance at any
scheduled or officially called Committee meeting of any standing or specially
appointed committee. Active Corporation and Bank Directors may defer fees
payable to them under the Corporation's and Bank's Directors Deferred
Compensation Plans. During the fiscal year 1997, the Corporation and the
Bank paid total cash directors' fees of $102,415.00, and directors' fees
were deferred in the amount of $124,750.00.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
Decisions on compensation of the Bank's executives are made by the seven
member Compensation Committee of the Board. The Compensation Committee
believes that the actions of each executive officer have the potential to
impact the short-term and long-term profitability of the Corporation and the
Bank. Consequently, the Compensation Committee places considerable
importance on its task of designing and administering an executive
compensation program.
The Bank has an executive compensation program that is focused on
Corporation shareholder value and the overall performance of the Corporation
and the Bank. The two main components of the executive compensation program
are base salary and bonus.
Compensation
The Compensation Committee's executive compensation program is designed to
provide competitive levels of compensation that are integrated with the
Corporation's and Bank's annual and long-term goals. Executive compensation
is reviewed by the Committee relative to peer group executive compensation
based on national and state survey information. The peer group
<PAGE>
used from the national and state surveys utilized institutions in the asset
size range from $500,000,000.00 to $750,000,000.00. The national survey also
includes data on adjoining states.
The Compensation Committee approved cash compensation opportunities for
executive officers in 1997 that are consistent with the Compensation
Committee's executive compensation program.
<PAGE>
Base Salary
Base salary represents a fixed labor cost and is designed so that senior
management receives acceptable salaries, thereby helping the Corporation and
Bank keep the talent needed to meet the challenges in the financial service
industry. Many factors are included in determining base salaries, such as
the responsibilities borne by the executive officer, the scope of the
position, length of service with the Corporation and Bank; and individual
performance; and what companies in the Peer Group are paying for similar
positions. The Compensation Committee believes that executive officer base
salaries should be slightly above the median of a market-competitive range.
Salaries are reviewed annually.
Bonus "REAP"
The second component in the executive compensation program is the bonus plan
referred to as the Reserve for Employee Action Payments, "REAP". An earnings
per share after taxes goal is established for the Bank on an annual basis.
If that goal is achieved, eligible employees receive an end of the year
payment at the rate of 5% of the employees salary for the entire year. If
the goal is not reached, the REAP account is reduced in proportion to the
shortage in the net earnings. There is no ceiling or maximum amount that may
be placed in the REAP account; therefore, employees share proportionally in
the amount that the net earnings exceed the predetermined annual goal.
During fiscal year 1997, the bank exceeded its goal and paid to 262 eligible
employees $370,918 (equivalent to 7.20% of salaries for eligible employees).
Executive officers received REAP payments as follows: Waymon L. Hickman -
$13,932, T. Randy Stevens - $7,603, and John P. Tomlinson III - $5,810
(see Summary Compensation Table on page 13).
Chief Executive Officer Compensation
The executive compensation program described above is applied in setting
Mr. Hickman's compensation. Mr. Hickman participates in the same executive
compensation program available to the other executive officers. The
Compensation Committee reviews the executive compensation program in
relationship to the performance of the Corporation's net income and stock
value. Net income for the Corporation and the Bank totaled $7,053,952 for
fiscal year 1997, representing a 2.7% increase above the previous year.
Stock value increased from $65.00 per share at December 31, 1996 to $78.00
per share at December 31, 1997 representing a $13.00 per share increase. The
increase represents an annualized gain of 20.00%, plus a $1.09 per share cash
dividend declared in 1997. Based upon these and other factors the 1997 cash
compensation of Mr. Hickman was $212,457. Mr. Hickman had a base salary of
$193,500.00 which is slightly above the median salary in comparison to his
peers in the national
<PAGE>
and state surveys indicated above. Mr. Hickman earned a bonus (REAP) in
the amount of $18,957 that was due to the corporation's excellent financial
results in 1997.
Conclusion
The Compensation Committee believes that this mix of market-based salaries
and bonus represents a balance that will motivate the management team to
continue to produce strong returns. The Compensation Committee further
believes this program strikes an appropriate balance between the interests
and needs of the Corporation and the Bank in operating its business.
Submitted by the Compensation Committee of the Company's Board of Directors.
Tillman Knox, Chairman
Kenneth A. Abercrombie
Harlan D. Bowsher
H. Terry Cook, Jr.
W. J. Davis, Jr.
Joe E. Lancaster
Waymon L. Hickman
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the aggregate remuneration accrued or paid by
the Bank or the Corporation during the fiscal years ending December 31, 1997,
1996, and 1995, to the highest compensated officers or directors whose
aggregate remuneration exceeds $100,000.00.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
Name of Individual Other Annual All Other
and Principal Position Year Salary/1 Bonus/2 Compensation/3 Compensation/4
Waymon L. Hickman, 1997 $ 193,500 $ 23,199 $ 24,000 $ 46,490
Chairman of the Board, 1996 180,100 20,834 22,500 42,055
Chief Executive Officer & 1995 170,700 14,612 22,500 38,140
Director of Bank
and Corporation
T. Randy Stevens, 1997 $ 105,600 $ 7,603 $ 15,840 $ 10,874
President, Chief 1996 96,100 7,536 14,415 9,732
Operating Officer & 1995 86,400 6,057 12,960 8,827
Director of Bank
and Corporation
David I. Wise, Director 1997 $ 0 $ 0 $ 0 $ 46,030
of Bank and Director of 1996 81,910 6,422 12,287 29,450
Corporation (Retired) 1995 77,760 5,451 11,664 49,619
John P. Tomlinson,
Executive Vice President 1997 $ 83,500 $ 5,810 $ 12,105 $ 0
of Bank and Secretary of 1996 0 0 0 0
Corporation 1995 0 0 0 0
</TABLE>
<F15>
/1 Salaries, cash bank and corporation committee fees.
<F16>
/2 Bonus includes REAP, group term replacement insurance provided, and use of
auto.
<F17>
/3 Other annual compensation is the bank's contribution to the Deferred
Profit Sharing Plan. This benefit provided by the Bank does not
discriminate in favor of officers and directors and is available generally
to all salaried employees.
<F18>
/4 Deferred Salary Continuation Plan, Deferred Corporation and and Committee
Fees.
</FN>
Shareholder Return
Set forth below is a graph comparing the yearly change in the cumulative
total shareholder return on the Company Common Stock against the cumulative
total return of the S&P Composite-500 Stock Index and the S&P Major Regional
Bank Composite Index for the period of five years commencing December 31,
1992 and ending December 31, 1997.
The graph displaying the contents of the table below will be mailed to our
stockholders.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
VALUE OF $100 INVESTED ON DECEMBER 31, 1992 AT:
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
FF&M 100.00 110.14 130.43 156.52 188.40 229.25
Regional Banks 100.00 102.81 93.71 146.16 198.85 298.04
S&P 500 100.00 110.06 111.51 153.36 188.56 251.44
</TABLE>
[FN]
<F19>
* Assumes that the value of the investment in Company Common Stock and each
index was $100 on December 31, 1992 and that all dividends were reinvested.
</FN>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Knox, Abercrombie, Bowsher, Cook, Davis, Lancaster, and Hickman,
served as members of the Compensation Committee throughout 1997. During
1997, the Corporation's bank subsidiary engaged in customary banking
transactions and had outstanding loans to certain of the Corporation's and
Bank's directors, including Messrs. Knox, Bowsher, Davis, and Lancaster, and
members of the immediate families of such directors and executive officers.
Messrs. Knox, Bowsher, Davis, and Lancaster, their affiliates, families
DEFERRED PROFIT SHARING PLAN
The Bank has a Deferred Profit Sharing Plan and Trust which has been
approved by the Internal Revenue Service for deferral of income tax. This
plan includes all eligible employees. All employees who attain age twenty
(20) years, and who complete one (1) year of service with the Bank are
eligible to participate. Participants receive a vested percentage of 25%
after two (2) years of service and 15% each year thereafter until 100% vested
at the end of seven (7) years of participation in the plan. The Bank's
contribution to the Plan and Trust is determined by the annual performance of
the Bank and is subject to approval by the Board of Directors of the Bank
annually. The aggregate amount placed in Trust for the two hundred sixteen
(216) participants during the fiscal year 1997 was $684,227. At December 31,
1997, the total ending value of Mr. Waymon L. Hickman's account in the Profit
Sharing Plan was $1,263,785, Mr. T. Randy Steven's account was $460,471 and John
P. Tomlinson's account was $433,785.
Deferred Profit Sharing Plan
Years of Service Amount Vested
1 No Participation
More than 1 but
less than 2 0%
2 25%
3 40%
4 55%
5 70%
6 85%
7 100%
<PAGE>
CERTIFIED PUBLIC ACCOUNTING FIRM
Upon the recommendation of the Audit Committee of the Bank, the firm of
Kraft Bros., Esstman, Patton & Harrell has been selected by the Board of
Directors of both the Corporation and the Bank to serve as principal
accountants for the Corporation and the Bank for the current year. The firm
of Kraft Bros., Esstman, Patton & Harrell and its predecessors has served as
principal accountants for more than 38 years. A representative of the firm
will be present at the stockholders meeting and will have the opportunity to
make a statement if he/she so desires.
OTHER MATTERS
As of the date of this Proxy Statement, the management of the Corporation
and the Bank knows of no other business that will be presented at this meeting.
ITEMS OF BUSINESS FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
Any proposals by stockholders to be included in the Proxy Statement and
Proxy Form for consideration at the next Annual Meeting of Stockholders must
be received by management at 816 South Garden Street, Columbia, Tennessee
38402-1148, no later than November 28, 1998.
ANNUAL REPORTS
The annual report of the Corporation to stockholders for the calendar
year 1997 is enclosed, but is not intended to be part of this Proxy Statement.
COPIES OF THE CORPORATION'S ANNUAL REPORT TO SECURITIES AND EXCHANGE
COMMISSION (FORM 10-K) WILL BE MAILED TO STOCKHOLDERS WITHOUT CHARGE UPON
WRITTEN REQUEST MADE TO: PATRICIA N. MCCLANAHAN, TREASURER, FIRST FARMERS AND
MERCHANTS CORPORATION, P. O. BOX 1148, COLUMBIA, TENNESSEE 38402-1148.
By the order of the Board of Directors
John P. Tomlinson, III
Secretary
March 30, 1998
