<PAGE>
================================================================================
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.-14a-11(c) or 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter) FCNB Corp
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement) FCNB Corp
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:1
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(4) Proposed maximum aggregate value of transaction:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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1. Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
[GRAPHIC OMITTED]
POST OFFICE 240
FREDRICK, MARYLAND 21705-0240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1999
Notice is hereby given that the Annual Meeting of Shareholders of FCNB
Corp (the "Company") will be held at FREDERICK HOLIDAY INN, FSK, 5900 HOLIDAY
DRIVE, FREDERICK, MARYLAND 21703 on Tuesday, April 20, 1999 at 7:00 p.m. for the
following purposes:
1. To elect four directors of the Company to hold office until the
expiration of their terms or until their respective successors have
been duly elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
February 9, 1999 was fixed by the Board of Directors as the record
date for determining shareholders entitled to receive notice of and to vote at
the Annual Meeting. A plurality of votes cast by the shareholders of the
Company's outstanding Common Stock represented in person or by proxy at the
Annual Meeting is necessary to elect the directors.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Helen G. Hahn
----------------------------------------
Helen G. Hahn
Vice President and Secretary
Frederick, Maryland
March 22, 1999
You are urged to complete, sign, date and return the enclosed proxy promptly.
If you attend the Annual Meeting and decide that you wish to vote in person,
you may revoke your proxy at any time prior to its use.
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of FCNB Corp, a
Maryland corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company to be used at the Annual
Meeting of Shareholders to be held on Tuesday, April 20, 1999 at 7:00 p.m.,
local time, at the Frederick Holiday Inn, FSK, 5900 Holiday Drive, Frederick,
Maryland 21703, and at any adjournment or postponement thereof. The Company is
the holding company for its wholly-owned bank subsidiary, FCNB Bank, Frederick,
Maryland (the "Bank"). This proxy material is being mailed to shareholders on or
about March 22, 1999. The Company's mailing address is P.O. Box 240, Frederick,
Maryland 21705-0240.
PROXIES AND VOTING
Shareholders of record at the close of business on February 9, 1999
are entitled to notice of and to vote at the Annual Meeting. At that date there
were outstanding and entitled to vote 10,063,588 shares of Common Stock which
were held by approximately 3,954 holders of record. Each share is entitled to
one vote on all matters.
The cost of solicitation of proxies will be borne by the Company. The
solicitation of proxies generally will be by mail and by directors, officers,
and employees of the Company or its subsidiary, without additional compensation
to them. In some instances solicitation may be made by telephone. The Company
may also reimburse brokers, custodians, nominees, and other fiduciaries for
reasonable outofpocket and clerical expenses for forwarding proxy materials to
their principals.
All shares entitled to vote and represented by a properly executed and
unrevoked proxy received in time for the Annual Meeting will be voted at the
Annual Meeting in accordance with the instructions given thereon. In the absence
of instructions to the contrary, such shares will be voted FOR the election of
the designated nominees for directors. The persons appointed as proxies will
also be entitled to vote in their discretion on other matters that may properly
come before the Annual Meeting and any adjournment or postponement thereof.
Any proxy given by a shareholder may be revoked by the holder at any
time before it is voted at the Annual Meeting by (i) attending the Annual
Meeting and voting in person, (ii) filing a written notice of revocation with
the Secretary of the Company prior to the Annual Meeting, or (iii) duly
executing a proxy bearing a later date and delivering it to the Secretary of the
Company prior to the exercise of the proxy. Written notices of revocation of a
proxy should be addressed to Helen G. Hahn, Vice President and Secretary, FCNB
Corp, P.O. Box 240, Frederick, Maryland 21705-0240.
The presence, in person or by proxy, of a majority of the outstanding
shares of the Company's Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting. In the event that less than a
majority of the outstanding shares are present at the Annual Meeting, either in
person or by proxy, a majority of the shares present may vote to adjourn the
Annual Meeting from time to time without further notice. Directors receiving a
plurality of the votes cast will be elected in the order of the number of votes
received. The inspectors of election appointed for the meeting will determine
the existence of a quorum and will tabulate the votes cast at the Annual
Meeting. Abstentions will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted for a vote of
shareholders. If a broker indicates that he or she does not have discretionary
authority to vote on a particular matter as to certain shares, those shares will
be counted as present for general quorum purposes but will not be considered as
present and entitled to vote with respect to that matter.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has set the number of directors that constitute
the Board of Directors at thirteen. The Articles of Incorporation of the Company
provide that the directors shall be classified with respect to the time for
which they severally hold office into three classes. Each year all of the
directors in one class are elected to serve for a term of three years. The
shareholders will vote at this Annual Meeting for the election of four directors
for a three year term expiring at the Annual Meeting of Shareholders in 2002, or
at such time as their respective successors have been elected and qualified.
Unless otherwise directed in the enclosed form of proxy, the persons
named in such proxy intend to vote FOR the election of each of the following
nominees for the terms indicated, or until their respective successors have been
duly elected and have qualified. In the event that any nominee is unable to
serve, the persons named in the proxy will vote for such substitute nominee or
nominees as the Board of Directors, in their discretion, shall determine. At
this time, the Board knows of no reason why any nominee might be unavailable to
serve. Ms. Collier and Messrs. Grove, Rice and Weinberg are currently serving as
Directors of the 1999 class of directors and have been nominated by the Board of
Directors for election as directors to serve for a three year term to expire in
2002 (Class 2002). Ms. Remsberg, who is currently serving as a Director of the
1999 class of directors, is not eligible to seek reelection under the Company's
By-Laws.
The following table sets forth as to each nominee and director
continuing in office, his or her name, age, the year he or she first became a
director of the Company and the number of shares of Common Stock beneficially
owned at February 9, 1999.
<TABLE>
<CAPTION>
YEAR SHARES OF
FIRST YEAR COMMON STOCK PERCENT
ELECTED TERM BENEFICIALLY OF
NAME AGE(1) DIRECTOR EXPIRES OWNED(2) CLASS
- -------------------------------- -------- ---------- --------- ------------------ --------
<S> <C> <C> <C> <C> <C>
BOARD NOMINEES
Shirley D. Collier ............. 45 1997 2002 3,583(3) 0.04
Bernard L. Grove, Jr. .......... 65 1988 2002 13,736(4) 0.14
Kenneth W. Rice ................ 55 1988 2002 22,000(5) 0.22
Rand D. Weinberg ............... 42 1996 2002 13,717(6) 0.14
DIRECTORS CONTINUING IN OFFICE
George B. Callan Jr. ........... 67 1986 2000 19,564(7) 0.19
Clyde C. Crum .................. 63 1986 2000 69,879(8) 0.69
Frank L. Hewitt, III ........... 57 1996 2000 189,652(9) 1.88
DeWalt J. Willard, Jr. ......... 67 1986 2000 70,543(10) 0.70
Miles M. Circo ................. 52 1986 2001 10,682(11) 0.11
James S. Grimes ................ 59 1989 2001 12,837(12) 0.13
Gail T. Guyton ................. 58 1986 2001 85,933(13) 0.85
A. Patrick Linton .............. 49 1991 2001 138,591(14) 1.37
Jacob R. Ramsburg, Jr. ......... 62 1986 2001 415,446(15) 4.13
</TABLE>
- ----------
(1) At February 9, 1999.
(2) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
Common Stock with respect to which he or she has sole or shared voting
and/or investment power. The table includes shares owned by spouses, other
immediate family members in trust, shares held in retirement accounts or
retirement funds for the benefit of the named individuals, and other forms
of ownership, over which shares the persons named in the table possess
voting and investment power. Except as otherwise noted, each person has
sole voting and investment power with respect to all shares beneficially
owned.
2
<PAGE>
(3) Included in the total shares owned by Ms. Collier are options, currently
exercisable, to purchase 2,917 shares of the Company's Common Stock.
(4) Included in the total shares owned by Mr. Grove are options, currently
exercisable, to purchase 4,666 shares of the Company's Common Stock.
(5) The shares attributed to Mr. Rice include 2,203 shares owned by Mr. Rice's
wife as to which Mr. Rice disclaims beneficial ownership and 57 shares
owned in custody for his goddaughter as to which he has voting and
investment power. Also, included in the total shares owned are options,
currently exercisable, to purchase 4,666 shares of the Company's Common
Stock.
(6) The shares attributed to Mr. Weinberg include 1,766 shares as to which Mr.
Weinberg shares voting and investment power with his wife, 1,200 shares
held in a partnership as to which he has voting and investment power,
5,133 shares held in a pension trust as to which he has voting and
investment power and 586 shares held in custody by Mr. Weinberg and his
wife for their children as to which he shares voting and investment
powers. Also, included in the total shares owned are options, currently
exercisable, to purchase 4,666 shares of the Company's Common Stock.
(7) Included in the total shares owned by Mr. Callan are options, currently
exercisable, to purchase 4,666 shares of the Company's Common Stock.
(8) The shares attributed to Mr. Crum include 12,002 shares owned by Mr.
Crum's wife, as to which Mr. Crum disclaims beneficial ownership. Also,
included in the total shares owned are options, currently exercisable, to
purchase 4,666 shares of the Company's Common Stock.
(9) The shares attributed to Mr. Hewitt include 32,490 shares as to which he
shares voting and investment power with his wife, 18,805 shares owned by
Mr. Hewitt's children, as to which he has voting and investment power,
2,245 shares held in a trust as to which he shares voting and investment
power and 3,954 shares owned by Mr. Hewitt's wife. Also, included in the
total shares owned are options, currently exercisable, to purchase 4,666
shares of the Company's Common Stock.
(10) The shares attributed to Mr. Willard include 11,733 shares owned by a
corporation controlled by Mr. Willard, as to which he holds voting and
investment powers, and 1,194 shares held in trust as to which he has
voting and investment power. Also, included in the total shares owned are
options, currently exercisable, to purchase 4,666 shares of the Company's
Common Stock.
(11) Included in the total shares owned by Mr. Circo are options, currently
exercisable, to purchase 4,666 shares of the Company's Common Stock.
(12) Included in the total shares owned by Mr. Grimes are options, currently
exercisable, to purchase 4,666 shares of the Company's Common Stock.
(13) The shares attributed to Mr. Guyton include 3,758 shares owned by Mr.
Guyton's wife, as to which Mr. Guyton disclaims beneficial ownership.
Also, included in the total shares owned are options, currently
exercisable, to purchase 4,666 shares of the Company's Common Stock.
(14) The shares attributed to Mr. Linton include 37,956 shares as to which he
shares voting and investment power with his wife, 2,760 shares owned by
Mr. Linton's children, as to which he has voting and investment power and
586 shares owned by Mr. Linton's wife. Also, included in the total shares
owned are options, currently exercisable, to purchase 59,670 shares of the
Company's Common Stock and 5,576 shares of restricted stock to be received
when the underlying stock options are exercised. Mr. Linton also has been
granted the right to receive Reload Options to purchase an additional
31,784 shares of the Company's Common Stock, if the 1997 and 1998 stock
options are exercised within three years from the date of grant.
(15) The shares attributed to Mr. Ramsburg include 7,194 shares owned by Mr.
Ramsburg's wife, and 7,308 shares owned jointly by Mr. Ramsburg's wife and
son, as to which Mr. Ramsburg disclaims beneficial ownership. Also,
included in the total shares owned are options, currently exercisable, to
purchase 4,666 shares of the Company's Common Stock.
Set forth below is certain information with respect to the nominees
for director and the continuing directors of the Company. Unless otherwise
indicated, the principal occupation listed for each person below has been his or
her occupation for the past five years.
SHIRLEY D. COLLIER is president of Paragon Computer Services, Inc., a
computer consulting firm.
BERNARD L. GROVE, JR. is an advisor to Genstar Stone Products, Inc.,
after having served as a consultant and president for this firm.
KENNETH W. RICE is president of Donald B. Rice Tire Co., Inc., a tire
distribution firm.
RAND D. WEINBERG is a partner with Weinberg & Weinberg, a law firm in
Frederick, Maryland.
3
<PAGE>
GEORGE B. CALLAN, JR. is president of Associates in Management, a
company that specializes in historic preservation and museum management.
CLYDE C. CRUM, chairman of the board of the Bank and the Company since
January 1995, is president of Clyde C. Crum and Son, Inc., a dairy farm
operation.
FRANK L. HEWITT, III is president of the Frank L. Hewitt Company, a
real estate investing company. Mr. Hewitt was president of Laurel Bancorp, Inc.
("Laurel") and its subsidiary Laurel Federal Savings Bank until the merger of
Laurel with and into the Company in January 1996.
DEWALT J. WILLARD, JR. is president of Ideal Buick-GMC, an automobile
dealership.
MILES M. CIRCO is general manager of Patapsco Designs, Inc., an
electronic design and manufacturing firm.
JAMES S. GRIMES has been Mayor of the City of Frederick, Maryland
since 1994 and is president of James S. Grimes, Inc., a full service truck
transportation service operation.
GAIL T. GUYTON, vice chairman of the board of both the Bank and the
Company since January 1995, is chairman of the board of MorganKeller, Inc., a
commercial/industrial construction firm.
A. PATRICK LINTON is president and chief executive officer of the Bank
and the Company.
JACOB R. RAMSBURG, JR. is a consultant for Frederick Underwriters,
Inc., which is a general insurance agency and a wholly-owned subsidiary of the
Bank. Mr. Ramsburg was the former president of that company and its affiliated
insurance agencies until December 1998.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company has standing Audit and Human
Resources Committees, but does not have a standing nominating committee.
The Audit Committee, comprised of Directors Circo, Collier, Grimes,
Ramsburg and Willard, assists the Board of Directors of the Bank in exercising
its fiduciary responsibilities for oversight of audit and related matters,
including corporate accounting, internal controls and regulatory compliance. Its
duties include: monitoring the Bank's internal controls and procedures; meeting
with the internal auditors and reviewing their reports; recommending the
selection of independent auditors; reviewing the scope of audits conducted by
the independent auditors, as well as the results of their audits; and reviewing
policies relating to compliance with applicable banking and other laws.
The Human Resources Committee, comprised of Directors Callan, Grove,
Rice and Weinberg, reviews and recommends to the Board of Directors the overall
compensation policy for the Company. The Board of Directors of the Bank follows
this policy specifically related to the salaries and other benefits for senior
management thereof.
The Board of Directors of the Company held nineteen meetings, the
Audit Committee held seven meetings and the Human Resources Committees held six
meetings during 1998. Each of the directors of the Company attended at least 75%
of the meetings of the Board of Directors and all committees on which they
served during 1998.
COMPENSATION OF DIRECTORS
During 1998, the directors of the Company received an annual retainer
of $2,000 for attending meetings of the Company's Board of Directors. Members of
the Board of Directors of the Company who were members of the Board of Directors
of the Bank received an additional fee of $200 for each meeting attended.
Members of the Board of Directors of the Company who also served as members of
the Board of Directors of the Bank received an annual retainer of $5,000 and a
fee of $200 for each biweekly Board of Directors and committee meeting of the
Bank attended.
4
<PAGE>
Clyde C. Crum received a $50,000 annual fee for his services as
Chairman of the Board of both the Company and the Bank, along with the bi-weekly
Board of Directors meeting fees during 1998. However, he did not receive any
committee meeting fees. Mr. Crum also received a cash bonus of $20,000 in
January 1999. Effective in January 1999, the annual fee for the Chairman of the
Board of the Company and the Bank was increased to $55,000.
Directors may participate in an unfunded deferred compensation plan
maintained by the Bank. Under this plan, deferred amounts earn interest at the
rate of 10% per annum until they are paid to the director (or the beneficiary of
his death benefits) following the earlier of the director's termination of board
service or a board determination that the director has incurred a financial
hardship. Benefit distributions are made either in a lump sum or in installments
over a period up to 10 years, as selected by the director. In the event of a
director's death or disability or a change in corporate control, the director's
account will be credited with an amount that makes his account balance equal
what would have accrued by the director's retirement, with adjustment for
certain excise taxes.
The Company and the Bank paid a total of $169,000 in director and
committee fees for the fiscal year ended December 31, 1998.
The 1997 Stock Option Plan for Directors requires the Company to issue
options to each non-employee Director on the day after each annual meeting of
the Company's shareholders. Under this plan, each non-employee director of the
Company received options to purchase 2,333 shares of Common Stock in 1998 at an
exercise price of $24.47 per share. Participants under this plan will receive
reload options upon the exercise of options issued under this plan, if the
options are exercised within three years from the date of the original grant and
certain other conditions are met. A reload feature is one that provides for
grants of additional options whenever a participant exercises previously granted
options. The terms of the plan provides that the number of reload options
granted is the same as the number of original options exercised, and the
exercise price of the reload is the market price of the stock on the date the
reload option is granted.
5
<PAGE>
VOTING SECURITIES
All voting rights are vested exclusively in the holders of the Common
Stock of the Company. Each shareholder is entitled to one vote for each share of
Common Stock owned on all matters brought to a vote of the shareholders. The
Company had 10,063,588 shares of Common Stock outstanding on the record date for
the Annual Meeting. The Company has no other class of equity securities
outstanding.
Persons and groups beneficially owning in excess of 5% of the Common
Stock are required to file certain reports disclosing such ownership pursuant to
the Securities Exchange Act of 1934, as amended (hereinafter called the
"Exchange Act"). Management knows of no persons who beneficially owned more than
5% of the outstanding shares of Common Stock at February 9, 1999. The following
table sets forth, as of February 9, 1999, certain information as to the shares
of Common Stock beneficially owned by certain officers of the Company who are
not also directors of the Company, and all officers and directors of the Company
as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
NAME OF BENEFICIAL OWNERSHIP(1)(2) OF CLASS
- ------------------------------------------- ------------------------------- -----------
<S> <C> <C>
Martin S. Lapera .................... 56,700(3) 0.56
Mark A. Severson .................... 24,144(4) 0.24
Charles E. Weller ................... 18,793(5) 0.19
All Officers and Directors as a Group
(19 persons) ....................... 1,333,575(6) 13.23
</TABLE>
- ----------
(1) Unless otherwise indicated, all shares are owned directly by the named
individual or by the individual indirectly through a trust, corporation or
association, or by the individual or his/her spouse as custodian or
trustee for the shares of minor children. Except as otherwise indicated,
the named individual exercises sole voting and investment power over such
shares.
(2) Restricted stock to be received by officers of the Company or Bank is based
on the formula of one (1) restricted share for every five (5) shares of
Common Stock purchased pursuant to the exercise of stock options. The
restriction period is for three (3) years from the date of receipt, and if
the shares purchased pursuant to the exercise of stock options are sold
within this time period, a pro rata percentage of the restricted shares
are forfeited and must be returned to the Company.
(3) Mr. Lapera is executive vice president of the Company and is executive vice
president, chief operating officer and chief lending officer of the Bank.
The shares attributed to Mr. Lapera include 25,628 shares as to which Mr.
Lapera shares voting and investment power with his wife. Also, included in
the total shares owned are options, currently exercisable, to purchase
27,989 shares of the Company's Common Stock and 2,186 shares of restricted
stock to be received when the underlying stock options are exercised. Mr.
Lapera also has been granted the right to receive Reload Options to
purchase an additional 17,065 shares of the Company's Common Stock, if the
stock options granted in 1997 and 1998 are exercised within three years
from the date of grant.
(4) Mr. Severson is senior vice president and treasurer of the Company and is
senior vice president and chief financial officer of the Bank. The shares
attributed to Mr. Severson include 3,844 shares held in trust as to which
Mr. Severson has voting and investment powers. Also, included in the total
shares owned are options, currently exercisable, to purchase 16,120 shares
of the Company's Common Stock and 1,323 shares of restricted stock to be
received when the underlying stock options are exercised. Mr. Severson
also has been granted the right to receive Reload Options to purchase an
additional 9,508 shares of the Company's Common Stock, if the stock
options granted in 1998 and 1997 are exercised within three years from the
date of grant.
(5) Mr. Weller is senior vice president of the Company and senior vice
president of the Bank, having served as President of Elkridge Bank. The
shares attributed to Mr. Weller include 238 shares owned by Mr. Weller's
wife, as to which Mr. Weller disclaims beneficial ownership and 433 shares
held in joint ownership with Mr. Weller's daughter. Also, included in the
total shares owned are options, currently exercisable, to purchase 15,679
shares of the Company's Common Stock and 1,421 shares of restricted stock
to be received when the underlying stock options are exercised. Mr. Weller
also has been granted the right to receive Reload Options to purchase
additional 6,359 shares of the Company's Common Stock, if the stock
options granted in 1998 and 1997 are exercised within three years from the
date of grant.
(6) Includes an aggregate of 194,468 shares, which may currently be acquired by
certain of such officers and directors upon the exercise of stock options
and entitling such officers and directors to receive an aggregate of
12,295 shares of restricted stock to be received when the underlying stock
options are exercised. This group also has been granted the right to
receive Reload Options to purchase additional 132,969 shares of the
Company's Common Stock, if the stock options granted in 1998 and 1997 are
exercised within three years from the date of grant.
6
<PAGE>
EXECUTIVE OFFICERS' COMPENSATION AND CERTAIN TRANSACTIONS
COMPENSATION -- OVERVIEW
Set forth below are summarized tables of all compensation awarded to,
earned by, or paid to certain executive officers. It should be noted that no
cash compensation was paid to any executive officer of the Company in his or her
capacity as such. Each of the executive officers of the Company received
compensation from the Bank for services rendered in their capacities as
executive officers of the Bank.
The following table sets forth a comprehensive overview of the
compensation for the Company's Chief Executive Officer and the most highly
compensated executive officers for the year ended December 31, 1998. Comparative
data is also provided for the previous two fiscal years, in selected categories.
Except as disclosed below, no other executive officer of the Company or the Bank
received salary and bonus in excess of $100,000 during the year ended December
31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ---------------------------------
SECURITIES ALL
NAME AND FISCAL RESTRICTED UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) STOCK AWARDS(3)(4) OPTIONS(4) COMPENSATION(5)
- --------------------------------- -------- ----------- ---------- -------------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
A. Patrick Linton, 1998 $ 240,496 $62,160 -- 18,090 $ 45,335
Director, President and Chief 1997 220,787 78,750 -- 13,694 35,248
Executive Officer of the 1996 198,222 46,930 2,038 10,194 10,442
Company and the Bank
Martin S. Lapera, 1998 $ 150,496 $30,269 -- 11,011 $ 12,092
Executive Vice President 1997 140,628 39,000 -- 6,054 10,960
of the Company and Executive 1996 119,797 23,733 801 4,006 --
Vice President, Chief Operating
Officer and Chief Lending
Officer of the Bank
Charles E. Weller, 1998 $ 115,101 $13,132 -- 4,884 $ 10,186
Senior Vice President of the 1997 114,296 13,971 349 1,745 7,811
Company and Senior Vice 1996 112,579 14,925 530 2,654 1,427
President of the Bank(6)
Mark A. Severson, 1998 $ 113,413 $18,324 -- 5,840 $ 7,469
Senior Vice President and 1997 113,416 23,625 -- 3,668 7,560
Treasurer of the Company and 1996 101,194 15,169 478 2,389 --
Senior Vice President and Chief
Financial Officer of the Bank
</TABLE>
- ----------
(1) Includes contributions made by the Bank under its 401(k) Profit Sharing
Plan. Contributions made by the Bank in 1998, 1997, and 1996,
respectively, amounted to $10,496, $10,787 and $8,222 for Mr. Linton,
$10,496, $10,628 and $7,797 for Mr. Lapera, $8,413, $8,416 and $5,794 for
Mr. Severson, and $8,041, $7,236 and $6,579 for Mr. Weller.
(2) Annual bonuses accrued as of December 31, 1998, 1997 and 1996 were paid in
January 1999, 1998 and 1997, respectively.
(3) The awards of restricted stock received are based on the formula of a grant
of one (1) restricted share for every five (5) shares of Common Stock
purchased pursuant to the exercise of stock options. The restriction
period is for three (3) years from the date of receipt, and if the shares
purchased pursuant to the exercise of stock options are sold within this
time period, a pro rata percentage of the restricted shares are forfeited
and must be returned to the Company. The value of the restricted stock
grants as of the date of grant, determined by multiplying the number of
shares by the closing market price on the date of grant, were as follows:
Mr. Linton: 1996 - $28,485; Mr. Lapera: 1996 - $11,196; Mr. Weller: 1997 -
$7,493; 1996 - $7,408; Mr. Severson: 1996 - $6,681.
(4) The amounts for 1997 and 1996 have been restated to show the effect of a
four-for-three stock split effected in the form of a 33% stock dividend
declared in July and paid in August 1998.
7
<PAGE>
(5) Includes payments for vacation pay taken in lieu of vacation for Mr. Linton
in 1998, 1997 and 1996 in the amounts of $3,538, $2,423 and $2,192
respectively and $1,427 for Mr. Weller in 1996. Also included are
contributions made by the Bank under the Supplemental Executive Retirement
Plan ("SERP") in 1998 and 1997, respectively, that amounted to $41,797 and
$31,975 for Mr. Linton; $12,092 and $10,960 for Mr. Lapera; $7,469 and
$7,560 for Mr. Severson; and $10,186 and $7,811 for Mr. Weller. Included
in the 1997 and 1996 amounts for Mr. Linton are $850 and $8,250
respectively, of Elkridge Bank directors fees.
(6) Mr. Weller became an executive officer of the Company on March 24, 1995, as
a result of the merger of ENB Financial Corporation with and into the
Company. Until the merger of Elkridge Bank into the Bank on March 7, 1997,
Mr. Weller served as President at Elkridge Bank.
STOCK OPTION PLAN. The following table sets forth as to the executive
officers whose compensation is reported in the SUMMARY COMPENSATION TABLE
certain information relating to options to purchase Common Stock of the Company
granted during fiscal 1998 under the 1992 Employee Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
---------------------------------------------------- -----------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(#)(1) YEAR ($/SHARE) DATE 5%($) 10%($)
- --------------------------- --------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
A. Patrick Linton ......... 18,090 12% $ 22.25 12/31/08 $253,132 $641,485
Martin S. Lapera .......... 11,011 7% $ 22.25 12/31/08 $154,076 $390,459
Charles E. Weller ......... 4,884 3% $ 22.25 12/31/08 $ 68,341 $173,190
Mark A. Severson .......... 5,840 4% $ 22.25 12/31/08 $ 81,719 $207,091
</TABLE>
- ----------
(1) All options granted are immediately exercisable. Each of the above named
executives are entitled to Reload Options to purchase an equal number of
shares of the Company's Common Stock, if the original options are
exercised within three years from the date of grant.
(2) The assumed annual rates of appreciation in the table are shown for
illustrative purposes only pursuant to applicable SEC requirements. Actual
values realized on stock options are dependent on actual future
performance of the Company's stock, among other factors. Accordingly, the
amounts shown may not necessarily be realized.
The table set forth below presents the amount and potential value of
options held by each named executive at the end of fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
SECURITIES UNDERLYING OPTIONS
SHARES UNEXERCISED OPTIONS AT AT FY-END ($)
ACQUIRED VALUE FY-END(#) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(1)
- --------------------------- ------------- ------------- ------------------------ -----------------
<S> <C> <C> <C> <C>
A. Patrick Linton ......... 10,682 $254,070 59,670/-- $240,157/--
Martin S. Lapera .......... 4,044 $ 77,189 27,989/-- $ 94,599/--
Charles E. Weller ......... 4,032 $117,124 15,679/-- $ 96,221/--
Mark A. Severson .......... 2,560 $ 60,874 16,120/-- $ 57,281/--
</TABLE>
- ----------
(1) Does not include the value of restricted stock awards in conjunction with
the grant of options.
8
<PAGE>
PROFIT SHARING PLAN. The Company has a Section 401 (k) profit sharing
plan (the "Plan") covering employees meeting certain eligibility requirements as
to minimum age and years of service. Employees may make voluntary contributions
to the Plan through payroll deductions on a pretax basis. The Company makes
contributions to the Plan at its discretion, based on the Company's performance.
The Company's contributions are subject to a periodic vesting schedule (20% per
year), requiring the completion of five years of service with the Company,
before these benefits are fully vested. A participant's account under the Plan,
together with investment earnings thereon, is normally distributable, following
retirement, death, disability or other termination of employment, in a single
lumpsum payment.
The Company's annual contribution to the Plan totaled $686,000 in
1998, including an aggregate of $37,446 of contributions for the executive
officers named in the SUMMARY COMPENSATION TABLE.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank maintains a
Supplemental Executive Retirement Plan in order to provide retirement benefits
and long-term compensation to a select group of executives, determined by the
Board of Directors. Each Participant may elect to make contributions from his or
her salary or bonus (if any), on a pre-tax basis. Each Participant shall be
entitled to have his or her account receive the credit for a particular Plan
Year only if the Participant is both credited with a Year of Service during the
Plan Year and is employed on the last day of the Plan Year or terminates
employment during the Plan Year due to his or her (i) death, disability,
retirement, or (ii) acquisition or merger of the Bank. If the Participant
satisfies the requirements for a Plan Year, the Bank shall credit the
Participant's Account, with an amount equal to (i) sixty percent (60%) of the
Eligible Executive's Final Average Compensation commencing at age 65 (reduced
proportionately for less than 15 Years of Service), reduced by (ii) the combined
value of the following: (a) the Participant's estimated primary insurance amount
("PIA") at age 65 from Social Security, assuming the Participant is entitled to
the maximum PIA; and (b) the age 65 projected value of the Participant's accrued
benefits under the Bank's terminated defined benefit pension plan ; and (c) the
age 65 projected value of the Participant's profit-sharing contribution account
under the Company's 401(k) Retirement and Savings Plan; and (d) the age 65
projected value of the Participant's matching contribution account under the
Company's 401(k) Retirement and Savings Plan. The benefits related to this plan
will be paid out of the general assets of the Bank; and (e) the age 65 projected
value of the benefits transferred from the Frederick County National Bank
Executive Compensation Plan for Management Personnel.
HUMAN RESOURCES COMMITTEE REPORT
The Human Resources Committee of the Company is composed of four
outside directors, Messrs. George B. Callan, Jr., Bernard L. Grove, Jr., Kenneth
W. Rice and Rand D. Weinberg. None of the committee members has ever been an
employee of the Company or its subsidiary. The Committee makes recommendations
to the full Board of Directors regarding the adoption, extension, amendment and
termination of the Company's compensation plans. In conjunction with the
Company's Chairman and President/Chief Executive Officer ("CEO"), it reviews the
performance of senior management, recommends annual salary revisions and
administers the Company's compensation plans.
The Committee is guided by the following executive compensation philosophy
of the Company:
1. Enable the Company to attract and retain superior management by
providing a very competitive total compensation package.
2. Align the interests of shareholders and management by providing stock
options as a portion of the executive's total compensation package.
3. Base a portion of the executive's total compensation package upon the
attainment of defined performance goals that support the growth and
appreciation of the Company's value over time.
4. Balance objectives of short-term performance and long-term growth and
appreciation of the Company through a combination of an annual incentive
compensation program using annual cash bonuses, and the stock option plan
that rewards the executives through long-term growth and appreciation of
the Company.
9
<PAGE>
Executive compensation consists primarily of three components: Base
Salary, Annual Bonus, and Stock Options.
BASE SALARY
The Company's policy is to set base salaries for each executive
officer position, including that of the CEO, in a range commensurate for
equivalent banking jobs in the Mid-Atlantic region. The Company utilizes outside
consultants to monitor the Company's competitive compensation status. The Board
of Directors, based upon the Human Resources Committee's recommendations, sets
the base salaries of executive officers.
Executive officers, other than the CEO, are reviewed annually by their
superiors. The CEO is reviewed by the Executive Committee of the Board of
Directors of the Company, which evaluation is forwarded to the Human Resources
Committee. The quality of their individual performances and the relationship of
their salary to their established salary range determine salary adjustments for
executive officers.
Adjustments to the base salary of the CEO are governed by the same
factors as other executive officers, but also specifically take into account the
Company's current financial performance as measured by earnings, asset growth,
and overall financial soundness. The Committee also considers the CEO's
leadership in setting high standards for financial performance, motivating his
management colleagues, and representing the Company and its values to internal
and external constituencies.
ANNUAL BONUS
The Company has an Employee Performance Bonus Plan (the "Bonus Plan").
Annual bonuses are accrued as of the end of the fiscal year and are paid in
January. The Company's Bonus Plan has several components related to the
Company's performance. For 1998, these components consisted of the Company
achieving pre-determined return on average shareholder's equity, asset growth,
stock price appreciation and earnings per share growth. The CEO's, Chief
Operating Officer's and the Chief Financial Officer's annual cash bonuses are
strictly related to the Company's performance goals while the other named
executive officer's annual cash bonus was related 50% to the Company's
performance goals and 50% to the Bank's performance goals. The Human Resources
Committee approves goals for each component of the Bonus Plan at the beginning
of each year. Annual cash bonuses tied to Bank performance goals and/or the
Company's performance goals are evaluated on a point system. Points are awarded
for equaling or exceeding the predetermined base for each component. Target
goals are determined that exceed the threshold level, as well as maximum goals.
For each specific component, if the threshold level is not achieved, no bonus is
awarded for that component. The maximum potential annual bonus award for the
four named executive officers is 15.0% to 37.5% of base salary, depending on the
executive's position.
In 1998, the Company exceeded its target performance goals. Based on
these results, the CEO was awarded a bonus of $62,160 which constituted 27.0% of
his 1998 base salary. This annual bonus amount was accrued as of December 31,
1998 and paid in January 1999.
For the other named executive officers, Bank performance goals were
exceeded in addition to meeting the Company's target performance goals.
As of December 31, 1998, the total accrued annual bonus for the four
named executive officers in the Bonus Plan was $123,885, which was paid in
January 1999.
STOCK OPTIONS
The Company maintains a 1992 Stock Option Plan currently covering
606,376 shares of the Company's Common Stock. This Stock Option Plan provides
for grants by the Human Resources Committee of non-qualified stock options, as
well as incentive stock options, thus tying a portion of the executive's
compensation directly to the performance of the Company's stock price. The
exercise price of the option to purchase stock under the plan may not be less
than 100% of the fair market value of the
10
<PAGE>
Company's stock on the date of grant. Stock options are immediately exercisable
from the date of grant and expire five and ten years from the date of the
grant. Stock options for the four named executive officers typically are
granted each year for a number of shares, the aggregate market value of which
is in a range of 100% to 175% of the executive officer's base salary as of the
date of grant. The Stock Option Plan also provides that the Company may grant
one (1) share of restricted stock for every five (5) shares of Common Stock
purchased pursuant to the exercise of options under the plan. The Common Stock
purchased pursuant to the exercise of such options must be held for a period of
three years before the restricted stock granted by the Company will fully vest
to the recipient thereof. Stock options must be exercised in the sequence in
which they were granted. This Plan also allows the Company to grant Reload
Options, which allows the recipient to receive an Option to purchase, at an
exercise price per share equal to the fair market value of the Common Stock as
of that date, a number of shares of Common Stock equal to the number of shares
subject to the exercised Option, if the original Option is exercised within
three years of its date of grant.
In 1998, the CEO received options to purchase 18,090 shares with an
exercise price of $22.25 per share. The CEO now owns 73,345 shares of the
Company's Common Stock and holds options to purchase an additional 59,670
shares, all of which are presently exercisable, and 5,576 shares of restricted
stock to be received when the underlying stock options are exercised. In 1998,
the other named executive officers received options to purchase an aggregate of
21,735 shares of the Company's Common Stock with an exercise price of $22.25 per
share. The Human Resources Committee believes that significant equity interests
in the Company held by the Company's management align the interests of
shareholders and management.
Stock options are designed to align the interests of executives with
those of the shareholders. This approach is designed to provide incentives for
the creation of shareholder value over the long term since the full benefit of
the compensation package cannot be realized unless stock price appreciation
occurs over a number of years.
CONCLUSION
Through the programs described above, a moderate portion of the
Company's executive compensation is linked directly to individual and corporate
performance and stock price appreciation. In the case of the CEO, approximately
26% of his total 1998 compensation, including the accrued annual bonus as of
December 31, 1998, consisted of performance-based variable elements. The Human
Resources Committee intends to continue the policy of linking executive
compensation to corporate performance and returns to shareholders, recognizing
that ups and downs of the business cycle from time to time may result in an
imbalance for a particular period.
The Human Resources Committee of the Company has prepared this report.
George B. Callan, Jr., Bernard L. Grove, Jr., Kenneth W. Rice, Rand D.
Weinberg.
11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change
in cumulative total shareholder return on the Company's Common Stock from
January 1, 1994 to December 31, 1998. The Company's yearly percentage change in
cumulative total shareholder return as shown below is compared to the NASDAQ
Market Index and the published Industry Peer Group Index consisting of 109
middle Atlantic banks published by Media General Financial Services.
COMPARISON OF 5YR TOTAL RETURN
FCNB, NASDAQ INDEX, AND PEER INDEX
[GRAPHIC OMITTED]
FCNB CORP 5 YR TOTAL RETURN FOR PROXY
-------------------------------------
PEER
RECAP FCNB GROUP NASDAQ
----- ---- ----- ------
12/31/93 $100.00 $100.00 $100.00
12/31/94 $135.71 $ 99.03 $104.99
12/31/95 $136.15 $145.75 $136.18
12/30/96 $141.82 $194.10 $169.23
12/31/97 $220.89 $317.56 $207.00
12/31/98 $236.71 $349.55 $291.96
- ----------
Notes: 1. Total return assumes reinvestment of dividends.
2. Fiscal Year Ending December 31.
3. Return based on $100 dollars invested on January 1, 1994 in FCNB Corp
Common Stock, an index for NASDAQ Stock Market (U.S. Companies), and
Bank peer group.
12
<PAGE>
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS, AND ASSOCIATES
During the past year the Bank has had, and the Bank expects to have in
the future, banking transactions in the ordinary course of business with its
directors and officers as well as with their associates. These transactions have
been made on substantially the same terms, including interest rates, collateral,
and repayment terms, as those prevailing at the same time for comparable
transactions with unaffiliated parties. The extensions of credit to these
persons have not and do not currently involve more than the normal risk of
collectability or present other unfavorable features. At December 31, 1998,
loans to directors and officers and their respective associates, including loans
guaranteed by such persons, aggregated $8.4 million, which represented
approximately 9.3% of consolidated shareholders' equity.
Gail T. Guyton, a director of the Company and the Bank, is chairman of
the board and a principal shareholder of Morgan-Keller, Inc., a construction
firm. During 1998, the Company paid Morgan-Keller, Inc. a total of $192,000 in
construction payments, which related to various construction projects.
Jacob R. Ramsburg, Jr., a director of the Company and the Bank, is a
consultant for Frederick Underwriters, Inc., a wholly owned subsidiary of the
Bank. On December 31, 1998, the Company consummated the acquisition of Frederick
Underwriters, Inc. and its affiliated companies ("Underwriters"). The
compensation for this transaction was issuance of 413,317 shares of the
Company's Common Stock. Mr. Ramsburg was president and a principal shareholder
of Underwriters prior to the its acquisition by the Company. Underwriters, a
general insurance agency, received $103,000 in premiums during 1998 in
connection with the Company's purchase of certain types of insurance coverage.
Rand D. Weinberg, a director of the Company and the Bank, is a partner
with Weinberg & Weinberg, a law firm in Frederick which received $27,000 in
legal fees during 1998 for representation in various legal matters.
DeWalt J. Willard, Jr., a director of the Company and the Bank, is
president of Ideal Buick-GMC, an automobile dealership which received $22,000
for the purchase of an automobile and for automotive repairs in 1998.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission, and to provide the Company with copies of all Forms 3, 4, and 5 they
file.
Based solely upon the Company's review of the copies of the forms
which it has received in 1998 and written representations from the Company's
directors and executive officers, the Company is not aware of any failure to
comply with the requirements of Section 16(a) in 1998 or any prior year, except
that Mark A. Severson failed to file one report required by Section 16(a) on a
timely basis during 1998. The late report related to one transaction.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Keller Bruner and
Company, L.L.P., independent public accountants, to audit the Company's
financial statements for the year ending December 31, 1999. The Company has been
advised by Keller Bruner and Company, L.L.P. that neither that firm nor any of
its associates has any relationship with the Company or the Bank, other than the
usual relationship that exists between independent public accountants and
clients. That firm audited the Company's financial statements for 1998.
Representatives of Keller Bruner and Company, L.L.P. are expected to be present
at the Annual Meeting and will have an opportunity to make a statement if they
so desire and to respond to appropriate questions.
13
<PAGE>
OTHER MATTERS
SHAREHOLDER PROPOSALS
All shareholder proposals intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company at the Company's
principal office in writing not later than November 22, 1999 for inclusion in
the Company's proxy statement and form of proxy relating to that meeting. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934. The Company must receive written
notice of any shareholder proposal or nomination to be acted upon at the next
annual meeting, for which inclusion in the Company's proxy materials is not
sought, not less than 30 days nor more than 60 days prior to the 2000 Annual
Meeting of Shareholders, which will be held on or about April 18, 2000.
OTHER BUSINESS
The Board of Directors of the Company knows of no matters to be
presented for action at the meeting other than those mentioned above; however,
if any other matters properly come before the meeting, it is intended that the
persons named in the accompanying proxy will vote on such other matters in
accordance with their best judgment.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders, including audited
financial statements, has been mailed to all shareholders of record as of the
close of business on February 9, 1999. Any shareholder who has not received a
copy of such Annual Report may obtain a copy by writing to the Secretary of the
Company. Such Annual Report is not to be treated as part of the proxy
solicitation material or as having been incorporated herein by reference.
FORM 10-K
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL DELIVER, WITHOUT
CHARGE, TO ANY SHAREHOLDER OF RECORD ENTITLED TO VOTE AT THE ANNUAL MEETING OR
TO ANY BENEFICIAL OWNER OF COMMON STOCK, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT. SUCH WRITTEN REQUESTS
SHOULD BE DIRECTED TO MARK A. SEVERSON, SENIOR VICE PRESIDENT AND TREASURER,
FCNB CORP, P.O. BOX 240, FREDERICK, MARYLAND 21705-0240.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Helen G. Hahn
----------------------------------------
Helen G. Hahn
Vice President & Secretary
Frederick, Maryland
March 22, 1999
14
<PAGE>
- --------------------------------------------------------------------------------
FCNB CORP FORM OF PROXY
FCNB CORP
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of FCNB Corp hereby appoints Kenneth E.
Fogle and Edwin J. Reading, and each of them, the lawful attorneys and proxies
of the undersigned, with full power of substitution, to vote as designated below
all shares of Common Stock of FCNB Corp which the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held on April 20, 1999, and at
any and all adjournments or postponements thereof:
(1) ELECTION OF DIRECTORS:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to [ ] ABSTAIN
below (except as marked vote for all nominees
to the contrary) listed below
SHIRLEY D. COLLIER, BERNARD L. GROVE, JR., KENNETH W. RICE, RAND D.
WEINBERG
(INSTRUCTION: To withhold authority for any individual nominee strike
a line through the nominee's name in the list above.)
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares represented by all properly executed proxies will be voted (or
the vote on such matters will be withheld on specific matters) in accordance
with instructions appearing on the proxy. In the absence of specific
instructions to the contrary, proxies will be voted FOR the Election of
Directors.
Dated -----------------------1999
--------------------------------
(Signature)
--------------------------------
(Signature)
(PLEASE SIGN AS NAME(S) APPEARS AT RIGHT. IF JOINT ACCOUNT, BOTH JOINT OWNERS
MUST SIGN.)
---
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
BY THE PERSON(S) GRANTING IT PRIOR TO ITS EXERCISE.
- --------------------------------------------------------------------------------
