FIRST FARMERS AND MERCHANTS CORPORATION
816 South Garden Street, Columbia, Tennessee 38402-1148
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on the 20th day of April, 1999
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 20th day of April, 1999 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 29, 1999, accompanying
the notice of said meeting.
2. 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
15, 1999, 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 29, 1999
<PAGE>
FIRST FARMERS AND MERCHANTS CORPORATION
816 South Garden Street
Columbia, Tennessee 38402-1148
PROXY
March 29, 1999
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 20, 1999, at 4:00 p.m., local time 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 H. Terry Cook, Jr. Dr. O. Rebecca Hawkins T. Randy Stevens
James L. Bailey, Jr. W. J. Davis, Jr. Waymon L. Hickman Dan C. Wheeler
Flavius A. Barker Thomas Napier Gordon Joe E. Lancaster David I. Wise
Hulet M. Chaney Edwin W. Halliday Dr. Joseph W. Remke, III 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. 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 PROPOSAL 1.
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 __________, 1999
_________________________________________
_________________________________________
(Signature of Shareholder)
No. of Shares ______________ PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY.
_________ I will attend the meeting/reception. _________ Number attending
_________ I will not attnd the meeting/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 20th day of April, 1999
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 Seventeenth Annual Meeting of
Stockholders to be held on the 20th day of April, 1999, 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
29th day of March, 1999.
PURPOSES OF THE MEETING
The Annual Stockholders' Meeting will be held for the
purposes of (i) electing directors and (ii) transacting whatever
business may properly be brought before the meeting or any
adjournment thereof.
QUORUM AND VOTING
At the closing of business on March 15, 1999, the
Corporation had issued and outstanding 2,920,000 shares of its
common stock. Only holders of record of Common Stock of the
Corporation at the close of business on March 15, 1999, (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 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.
<PAGE>
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 15, 1999, no individual or corporation owned
beneficially, directly or indirectly, more than 5% of the
Corporation's voting securities. As of March 15, 1999, 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,
265,385 shares or approximately 9.09% 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 interests 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 15, 1999, 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 26 persons) 2,920,000 shares
505,736 17.32%
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 to serve until the next Annual Meeting or until
their successors are duly elected and qualified. Fourteen of
the nominees are presently serving as Directors. Mr. Harlan D.
Bowsher and Mr. Tillman W. Knox, who are present members of the
Board, have attained mandatory retirement age. The new proposed
Directors are Dr. O. Rebecca Hawkins, President of Columbia
State Community College, and Dr. Joseph W. Remke, III, President
of Remke Eye Clinic, PC.
Dr. Hawkins is a native of Bristol, Tennessee, and
received her bachelor's degree from Virginia Commonwealth
University, master's degree from Virginia Polytechnic Institute
and State University and doctorate from the University of
Maryland where she received the College of Education
Distinguished Alumna Award in 1998. Dr. Hawkins served as Vice
President of Advancement and Planning at Prince George's
Community College, Largo, Maryland, before joining Columbia
State Community College as President in 1996. Dr. Hawkins is an
executive board member of the Tennessee College Association,
member of the American Association of Community Colleges and
Academy of Presidents and Commissioner for the Commission on
Colleges of the Southern Association of Colleges and Schools.
Active in many civic and community organizations, she is a
member of the board of the Maury County Chamber of Commerce,
Steering Committee of the Business/Community/Education
Partnership of Maury County, the Kiwanis Club of Columbia, and
the administrative Board of First United Methodist Church. She
also serves on the Advisory Board for First Farmers and
Merchants National Bank.
Dr. Remke is a native of Lawrence County, and resides
there with his wife, Kathy, and their two children. Dr. Remke
completed his undergraduate studies at Austin Peay State
University and received his Optometry degree from southern
College of Optometry. He is a past president of the Tennessee
Optometric Association and currently serves on their Board of
Trustees. Dr. Remke has been honored as Tennessee optometrist
of the Year and is a fellow of the Tennessee Academy of
Optometry. He serves on the City of Lawrenceburg Board of
Public Utilities and the Lawrenceburg Health Facilities
Commission. He also serves on the Board of the 21st Century
Council, the Columbia State Foundation Board, the Sacred Heart
School Endowment Fund Board of Directors and is a past president
of the Lawrence County Chamber of Commerce. Dr. Remke also
serves on the Advisory Board for First Farmers and Merchants
National Bank.
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. If for any reason any one of such
nominees is not available for election, the persons 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 two pages:
<PAGE>
<TABLE>
<CAPTION>
Position & Position & Director Business Experience Shares Owned
Office Held Office Held of Bank During Last Beneficially as Percent
Name Age With Corporation With Bank Since Five (5) Years of 3/15/99/1 of Class
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth A. Abercrombie 56 Director Director 1988 President, Loretto Casket 2,400 0.082%
Co., Inc.
James L. Bailey, Jr. 56 Director Director 1973 Pharmacist 8,460 0.290%
Flavius A. Barker 68 Director Director 1996 President, Tennessee 418/2 0.014%
Farm Bureau Federation
Harlan D. Bowsher 70 Director Director 1974 Plant Manager, 17,912/3 0.613%
(Retires 4/20/99) General Electric (retired)
Hulet M. Chaney 54 Director Director 1997 CEO, Tennessee Farmers 6,418/4 0.220%
Insurance Companies
H. Terry Cook, Jr. 58 Director Director 1980 President, Cook 24,154/5 0.827%
Properties,Inc.
W. J. Davis, Jr. 52 Director Director 1982 Chairman and CEO, 80,376/6 2.753%
Davis Group, Inc.
Thomas Napier Gordon 47 Director Director 1986 Managing Partner, 68,324/7 2.340%
Gordon Brothers
Properties
Edwin W. Halliday 66 Director Director 1974 Farmer 8,448/8 0.290%
O. Rebecca Hawkins 58 Director Director President, CSCC 400 0.014%
(Nominated to replace
retirees)
Waymon L. Hickman 64 Director, Director, 1967 Chairman & Chief 72,584/9 2.486%
Chairman & Chairman & Executive Officer
CEO CEO of Bank
Tillman Knox 70 Director Director 1966 President,Hall & Knox 28,100/10 0.962%
(Retires 4/20/99) Mining Company, Inc.
Joe E. Lancaster 69 Director Director 1968 CEO, Emeritus 68,000/11 2.329%
Tennessee Farmers
Insurance Companies
Joseph W. Remke, III 48 Director Director Optometrist 2,000 0.068%
(Nominated to replace
retirees)
T. Randy Stevens 47 Director, Director, 1991 President & Chief 36,800/12 1.260%
President President Operating Officer
& COO & COO of Bank
Dan C. Wheeler 56 Director Director 1993 Commissioner TN 6,634/13 0.227%
Department of Agriculture
David I. Wise 67 Director Director 1967 Senior Exec.VP/Security/ 44,096/14 1.510%
(Retired)
W. Donald Wright 59 Director Director 1992 Partner H & S Pharmacies 1,016 0.035%
476,540 16.320%
</TABLE>
<PAGE>
Footnotes
[FN]
<F1>
/1 Unless otherwise indicated, all shares are owned of record.
<F2>
/2 418 shares are registered to Flavius A. Barker or Naomi
Barker, Mr. Barker's wife.
<F3>
/3 448 shares are registered to Barbara J. Bowsher, Mr.
Bowsher's wife.
<F4>
/4 4,180 shares are registered to Hulet M. Chaney and Joyce
A. Chaney, Mr. Chaney's wife.
<F5>
/5 7,154 shares are registered to Griffitha G. Cook, Mr.
Cook's wife.
<F6>
/6 12,600 shares are registered to Wayne Pressnell
Testamentary Trust number one.
1,600 shares are registered to Estate of W. J. Davis, Sr.
12,600 shares are registered to Winfred J. Davis & Starling
Pressnell Davis, Co-Trustees.
16,536 shares are registered to W. J. Davis, Jr., Trustee,
the Davis Group
640 shares are registered to Mrs. W. J. Davis.
<F7>
/7 9,060 shares are registered to Thomas Napier Gordon, Jr.,
minor son of Mr. Gordon.
9,060 shares are registered to Edward Bradshaw Gordon,
minor son of Mr. Gordon.
400 shares are registered to Teri Hasenour Gordon, wife of
Mr. Gordon.
<F8>
/8 7,280 shares are registered to Polly Ann Halliday, Mr.
Halliday's wife.
<F9>
/9 38,044 shares are registered to Waymon L. Hickman and
Carey B. Hickman, Mr. Hickman's wife, joint tenants.
<F10>
/10 12,584 shares are registered to Hall and Knox Mining
Company.
<F11>
/11 38,000 shares are registered to Betty L. Lancaster, Mr.
Lancaster's wife.
<F12>
/12 400 shares are registered to T. Randy Stevens, custodian
for Branson James Stevens.
400 shares are registered to T. Randy Stevens, custodian
for Rebecca Lynn Stevens.
12,000 shares are registered to Leesa M. Stevens, Mr.
Stevens' wife.
<F13>
/13 1,100 shares are registered to Mary Carol Wheeler, wife
of Mr. Wheeler.
<F14>
/14 2,000 shares are registered to Mary Neil P. Wise, wife of
Mr. Wise.
</FN>
<PAGE>
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 six (6) times during 1998.
The Board of Directors of the Bank has designated eight
(8) standing committees. They are as follows:
Audit/Compliance/CRA Committee (5 members)
Compensation Committee (7 members)
Deferred Profit Sharing Benefit Committee (5 members)
Executive Committee (7 members)
Trust Audit Committee (5 members)
Trust Committee (5 members)
Risk Management Committee (9 members)
Business Development Committee (10 members)
Audit/Compliance/CRA 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
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. The
committee also oversees and advises Bank Management and the
Board of Directors in all areas dealing with Compliance and
Community Reinvestment Act.
Number of 1998 meetings: 8
Membership: The Committee membership is made up of five
(5) directors who are not officers of the Bank. They are Harlan
D. Bowsher, Chairman, James L. Bailey, Jr., Edwin W. Halliday,
Dan C. Wheeler and W. Donald Wright.
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 9 through 12.
Number of 1998 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.
<PAGE>
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 1998 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, two (2) directors who are not officers of the Corporation
or the Bank, one (1) advisory director who is not a director 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, Flavius A. Barker, Thomas Napier Gordon,
Bobby Sands (Advisory) and Amy B. Slagle (Employee).
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 1998 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
The functions of this 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, meets with the CPA 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 was combined into the
Audit/Compliance/CRA Committee.
Number of 1998 meetings: 1
<PAGE>
Membership: The membership of the Committee is made up of
five (5) directors who are not officers of the Corporation or
the Bank. They are Harlan D. Bowsher, Chairman, James L.
Bailey, Jr., Edwin W. Halliday, Dan C. Wheeler, and W. Donald
Wright
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 1998 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.
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 1998 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 two (2) Advisory Directors of the Bank. They
are T. Randy Stevens, Chairman, Flavius A. Barker, W. J. Davis,
Jr., Edwin W. Halliday, Dr. O Rebecca Hawkins (Advisory), 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 1998 meetings: 1
Membership: The membership of the Committee is made up of
two (2) directors who are officers of the Corporation and the
Bank, six (6) directors who are not officers of the Corporation
or the Bank, and two (2) advisory directors of the bank. They
are W. J. Davis, Jr., Chairman, Kenneth Abercrombie, James L.
Bailey, Jr., Hulet M. Chaney , H. Terry Cook, Jr., Revis
Harris (Advisory), Waymon L. Hickman, Joseph W. Remke, III
(Advisory), T. Randy Stevens, and W. Donald Wright. Nancy
Bohannon serves as Committee Coordinator.
<PAGE>
Director Attendance
During fiscal year 1998, there were six (6) 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 with the
exception of one director who attended an aggregate of 58% of
the Board meetings and Committee meetings to which he was
assigned.
COMPENSATION OF DIRECTORS AND OFFICERS
During the fiscal year 1998, each director and officer of the
Corporation received an annual retainer of $1,500.00 and was
paid a fee of $375.00 for each Board meeting attended up to four
meetings. Each Active and Honorary Bank Director received
$400.00 for each Bank Board of Directors' meeting attended.
Each Bank Advisory Director received $250.00 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
1998, the Corporation and the Bank paid total cash directors'
fees of $113,190.00, and directors' fees were deferred in the
amount of $131,500.00.
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 1998 that are consistent
with the Compensation Committee's executive compensation program.
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 1998, the bank exceeded its goal and paid to
262 eligible employees $280,420 (equivalent to 5.13% of salaries
for eligible employees). Executive officers received REAP
payments as follows: Waymon L. Hickman - $10,265, T. Randy
Stevens - $5,725, and John P. Tomlinson III - $4,387 (see
Summary Compensation Table on page 12).
<PAGE>
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 $7,340,612 for fiscal year 1998, representing a 4.0%
increase above the previous year. Stock value increased from
$39.00 per share at December 31, 1997* to $46.00 per share at
December 31, 1998 representing a $7.00 per share increase. The
increase represents an annualized gain of 17.95%, plus a $1.63
per share in cash dividends declared in 1998. Based upon these
and other factors the 1998 cash compensation of Mr. Hickman was
$216,380. Mr. Hickman had a base salary of $200,100 which is
slightly above the median salary in comparison to his peers in
the national and state surveys indicated above. Mr. Hickman
earned a bonus (REAP) in the amount of $19,762 that was due to
the corporation's excellent financial results in 1998.
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
[FN]
<F15>
*This is a restated December, 1997 number to give retroactive
effect to the 100% stock dividend paid to shareholders on April
21, 1998.
</FN>
<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, 1998, 1997, and 1996, to the highest
compensated officers or directors whose aggregate remuneration
exceeds $100,000.00.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name of Individual Other Annual All Other
and Principal Position Year Salary/1 Bonus/2 Compensation/3 Compensation/4
<S> <C> <C> <C> <C> <C>
Waymon L. Hickman, 1998 $ 200,100 $ 19,762 $ 24,000 $ 51,530
Chairman of the Board, 1997 193,500 23,199 24,000 46,490
Chief Executive Officer 1996 180,100 26,849 22,500 42,055
& Director of Bank
and Corporation
T. Randy Stevens, 1998 $ 111,600 $ 5,731 $ 16,741 $ 12,250
President, Chief 1997 105,600 7,603 15,840 10,874
Operating Officer & 1996 96,100 7,536 14,415 9,732
Director of Bank
and Corporation
David I. Wise, 1998 $ - $ - $ - $ 32,852
Director of Bank and 1997 - - - 31,030
Director of Corporation 1996 81,910 6,422 12,287 29,450
(Retired)
John P. Tomlinson, 1998 $ 85,500 $ 7,402 $ 12,827 $ -
Executive Vice President 1997 80,700 8,610 12,105 -
of Bank and Secretary 1996 - - - -
of Corporation
<FN>
<F16>
/1 Salaries, cash bank and corporation committee fees.
<F17>
/2 Bonus includes REAP, group term replacement insurance
provided, and use of auto.
<F18>
/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.
<F19>
/4 Deferred Salary Continuation Plan, Deferred Corporation
and Committee Fees.
</FN>
</TABLE>
<PAGE>
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, 1993 and ending December 31, 1998.
The graph displaying the contents of the table below will be
mailed to our stockholders.
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
VALUE OF $100 INVESTED ON DECEMBER 31, 1993 AT:
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
FF&M $ 100.00 $ 118.42 $ 142.11 $ 171.05 $ 208.14 $ 254.20
Regional Banks 100.00 91.15 143.04 195.49 294.02 324.94
S&P 500 100.00 101.32 140.06 170.98 228.03 293.20
<FN>
<F20>
* Assumes that the value of the investment in Company Common
Stock and each index was $100 on December 31, 1993 and that all
dividends were reinvested.
</FN>
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Knox, Abercrombie, Bowsher, Cook, Davis,
Lancaster, and Hickman, served as members of the Compensation
Committee throughout 1998. During 1998, 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, and companies in
which they hold ten percent or more ownership had outstanding
loan balances of $856,797 at December 31, 1998. These loans
were made in the ordinary course of business and were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with others. In the opinion of management, these
loans do not involve more than the normal risk of collectibility
or present other unfavorable features.
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 fifteen (215) participants
during fiscal year 1998 was $730,606. At December 31, 1998, the
total ending value of Mr. Waymon L. Hickman's account in the
Profit Sharing Plan was $1,462,890, Mr. T. Randy Stevens's
account was $541,152 and Mr. John P. Tomlinson's account was
$506,795.
<TABLE>
Deferred Profit Sharing Plan
<CAPTION>
Years of Service Amount Vested
<S> <C>
1 No Participation
More than 1 but
less than 2 0%
2 25%
3 40%
4 55%
5 70%
6 85%
7 100%
</TABLE>
<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 39 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, 1999.
ANNUAL REPORTS
The annual report of the Corporation to stockholders for
the calendar year 1998 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 29, 1999
