SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
of the Commission
Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-
12
FNB Financial Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FNB FINANCIAL CORPORATION
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 29, 1997
GENERAL
________________________________
Introduction, Day, Date, Time and Place of Meeting
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of FNB FINANCIAL CORPORATION
(the "Corporation"), a Pennsylvania business corpora-tion, of
proxies to be voted at the Annual Meeting of Shareholders of the
Corporation to be held at the main office of The First National
Bank of McConnellsburg, 101 Lincoln Way West, McConnellsburg,
Pennsylvania, 17233, on Tuesday, April 29, 1997, at 1:00 p.m.,
prevailing time, and at any adjournment or postponement of the
Annual Meeting.
The principal executive office of the Corporation is located
at 101 Lincoln Way West, McConnellsburg, Pennsylvania 17233. The
telephone number for the Corporation is (717) 485-3123. All
inquiries should be directed to Daniel E. Waltz, Treasurer of the
Corporation. The First National Bank of McConnellsburg is a
wholly-owned subsidiary of the Corporation.
Solicitation and Voting of Proxies
This Proxy Statement and the enclosed form of proxy (the
"Proxy") are first being sent to shareholders of the Corporation on
or about March 21, 1997.
Shares represented by proxies on the accompanying Proxy, if
properly signed and returned, will be voted in accordance with the
specifications made thereon by the shareholder(s). Any Proxy not
specifying to the contrary will be voted FOR the election of the
four (4) nominees for Class 1 Director named below and FOR the
ratification of the selection of Smith Elliott Kearns and Company,
Certified Public Accountants, of Chambersburg, Pennsylvania, as the
independent auditors for the Corporation for the year ending
December 31, 1997. Execution and return of the enclosed Proxy will
not affect a shareholder's right to attend the Annual Meeting and
vote in person, after giving written notice to the Secretary of the
Corporation. The cost of preparing, assembling, printing, mailing,
and soliciting proxies, and any additional material which the
Corporation may furnish shareholders in connection with the Annual
Meeting, will be borne by the Corporation. In addition to the use
of the mails, certain directors, officers and employees of the
Corporation may solicit proxies personally by telephone and tele-
copier. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy solicitation
material to the beneficial owners of stock held of record by these
persons, and, upon request therefor, the Corporation will reimburse
them for their reasonable forwarding expenses.
Revocability of Proxy
A shareholder who returns a Proxy may revoke the Proxy at any
time before it is voted only: (1) by giving written notice of
revocation to George S. Grissinger, Secretary, FNB Financial
Corporation, 101 Lincoln Way West, McConnellsburg, Pennsylvania,
17233; (2) by executing a later-dated Proxy and giving written
notice thereof to the Secretary of the Corporation; or (3) by
voting in person after giving written notice to the Secretary of
the Corporation.
Voting Securities and Quorum
At the close of business on Monday, March 10, 1997, the
Corporation had issued and outstanding 400,000 shares of common
stock, par value $0.63 per share, the only authorized class of
stock (the "Common Stock").
Only shareholders of Common Stock of record at the close of
business on Monday, March 10, 1997 will be entitled to notice of
and to vote at the Annual Meeting. Cumulative voting rights do not
exist with respect to the election of directors. On all matters to
come before the Annual Meeting, each share of common stock is
entitled to one vote.
Quorum
Under Pennsylvania law and the By-laws of the Corporation, the
presence in person or by proxy, of shareholders entitled to cast at
least a majority of the votes that all shareholders are entitled to
cast shall constitute a quorum for the transaction of business at
the Annual Meeting. Votes withheld and abstentions will be counted
in determining the presence of a quorum for the particular matter.
Broker non-votes will not be counted in determining the presence
of a quorum for the particular matter as to which the broker
withheld authority.
Assuming the presence of a quorum, the four (4) nominees for
director receiving the highest number of votes cast by shareholders
entitled to vote for the election of directors shall be elected.
Votes withheld from a nominee and broker non-votes will not be cast
for such nominee.
Assuming the presence of a quorum, the affirmative vote of a
majority of all votes cast by shareholders is required for the
ratification of the selection of independent auditors. Abstentions
and broker non-votes are not deemed to constitute "votes cast" and
therefore do not count either for or against such ratification.
Abstentions and broker non-votes, however, have the practical
effect of reducing the number of affirmative votes required to
achieve a majority for such matter by reducing the total number of
shares voted from which the required majority is calculated.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
The following table sets forth, as of March 10, 1997, the name
and address of each person who owns of record or who is known by
the Board of Directors to be the beneficial owner of five percent
(5%) or more of the Corporation's outstanding Common Stock, the
number of shares beneficially owned by such person and the
percentage of the outstanding Common Stock so owned. The footnotes
to this table are set forth below the "Beneficial Ownership by
Officers, Directors and Nominees" table, immediately following.
Unless otherwise indicated, all shares are individually owned by
the reporting person.
<TABLE>
<S> <C> <C>
Amount and Nature
Of Beneficial Percent of
Name and Address Ownership(1)(2) Class
Forrest R. Mellott 27,357 6.84%
HCR 80 Box 1
Big Cove Tannery, PA 17212
</TABLE>
Beneficial Ownership by Officers, Directors and Nominees
The following table sets forth as of March 10, 1997, the
amount and percentage of the Common Stock of the Corporation
beneficially owned by each director, each nominee, and all officers
and directors of the Corporation as a group. Unless otherwise
indicated, all shares are individually owned by the reporting
person.
<TABLE>
<S> <C> <C>
Name of Individual or Amount and Nature of Percent of
Identity of Group (1) Beneficial Ownership (2)(3) Class (4)
Nominees for Class 1 Director (to serve until 2000)
and Current Class 1 Directors (to serve until 1997)
Patricia A. Carbaugh 270 ---
Harry D. Johnston, D.O. 17,194 (10) 4.30%
Paul C. Mellott, Sr. 10,196 (11) 2.55%
Paul T. Ott 4,620 (12) 1.16%
Class 2 Directors (to serve until 1998)
Harvey J. Culler 19,929 (5) 4.98%
John C. Duffey 1,223 (8) ---
George S. Grissinger 12,100 (9) 3.03%
Class 3 Directors (to serve until 1999)
Henry W. Daniels 11,000 (6) 2.75%
H. Lyle Duffey 4,160 (7) 1.04%
David A. Washabaugh, III 5,000 (13) 1.25%
Daniel E. Waltz 364 ---
All Officers and Directors as a
Group (11 persons) 85,877 21.47%
</TABLE>
(1) Each named individual has full authority to vote those
securities beneficially owned.
(2) The securities "beneficially owned" by an individual are
determined in accordance with the definitions of "beneficial
ownership" set forth in the General Rules and Regulations of the
Securities and Exchange Commission and may include securities owned
by or for the individual's spouse and minor children and any other
relative who has the same home, as well as securities to which the
individual has, or shares, voting or investment power or has the
right to acquire beneficial ownership within 60 days after March
10, 1997. Beneficial ownership may be disclaimed as to certain
securities.
(3) Information furnished by the directors and the Corporation.
(4) Less than 1% unless otherwise indicated.
(5) Includes 100 Shares held individually by Mr. Culler and
19,829 Shares held in trust for the benefit of his children.
Mr. Culler has sole power to vote the shares held in trust
and to revoke the trust.
(6) Includes 7,750 Shares held individually by Mr. Daniels and
3,250 Shares held individually by his spouse.
(7) Includes 3,160 Shares held individually by Mr. Duffey; 750
shares held jointly and equally with his three sons; and 250 shares
held jointly with his granddaughter.
(8) Includes 1,218 Shares held individually by Mr. Duffey and 5
Shares held by his daughter over which he has voting power.
(9) Includes 2,000 Shares held individually by Mr. Grissinger and
10,100 Shares held jointly with his spouse.
(10) Includes 6,074 Shares held individually by Dr. Johnston; 9,760
Shares held individually by his spouse; 710 shares held in trust,
and 650 Shares over which Dr. Johnston has voting power.
(11) Includes 3,383 Shares held individually by Mr. Mellott; 4,150
Shares held jointly with his spouse; 332 shares held individually
by his spouse; and 2,331 Shares over which Mr. Mellott has voting
power.
(12) Includes 1,600 Shares held individually by Mr. Ott and 3,020
Shares held jointly with his spouse.
(13) Includes 289 Shares held individually by Mr. Washabaugh; 542
Shares held individually by his spouse; and 4,169 Shares held
jointly with his spouse.
ELECTION OF DIRECTORS
In accordance with the By-laws of the Corporation, at the 1997
Annual Meeting of Shareholders, four (4) Class 1 Directors shall be
elected to serve for a three-year term and until their successors
are elected and qualified.
Therefore, the By-laws provide for a classified Board of
Directors with staggered three-year terms of office.
Unless otherwise instructed, the Proxyholders' will vote the
Proxies received by them for the election of the four (4) nominees
for Class 1 Director named below. If any nominee should become
unavailable for any reason, Proxies will be voted in favor of a
substitute nominee as the Board of Directors of the Corporation
shall determine. The Board of Directors has no reason to believe
that, if elected, the nominees named will be unable to serve. Any
vacancy occurring on the Board of Directors of the Corporation for
any reason may be filled by a majority vote of the directors then
in office until the expiration of the term of the vacancy.
In addition, there is no cumulative voting for the election of
the directors. Each share of Common Stock is entitled to cast only
one vote for each nominee. For example, if a shareholder owns ten
(10) shares of Common Stock, he or she may cast up to ten votes for
each of the named four Class 1 directors to be elected.
INFORMATION AS TO NOMINEES, DIRECTORS AND OFFICERS
The following table contains certain information with respect
to the Corporation's executive officers, corporate nominees for
Class 1 Director whose term expires in 2000 and the
current Class 1 Directors whose term expires in 1997, and the Class
2 Directors and Class 3 Directors whose terms expire in 1998 and
1999, respectively, and Bank Directors who are appointed annually
by the Corporation's Board of Directors:
Principal Occupation for
Past Five Years and Position
Held with the Corporation and Bank
________________________________
NOMINEE FOR CLASS 1 DIRECTOR
WHOSE TERM EXPIRES IN 2000
AND
CURRENT CLASS 1 DIRECTORS
WHOSE TERM EXPIRES IN 1997
________________________________
<TABLE>
<S> <C> <C> <C>
Director of
Corporation/
Name Age Occupation Bank Since
Harry D. Johnston, D.O. 60 Physician; VP of 1987/1980
(2)(4)(8)(9)(10)(12) of the Corporation
Paul C. Mellott, Sr. 70 Chairman Emeritus, 1987/1959
(5)(9)(10)(11) H.B. Mellott Estates
Paul T. Ott 74 Retired 1987/1980
(1)(3)(7)(8)(11)
Patricia A. Carbaugh 53 Former Administrative NA/1990
(9) Assistant to the Chairman
JLG Industries, Inc.
</TABLE>
___________________________
CLASS 2 DIRECTORS
WHOSE TERM EXPIRES IN 1998
____________________________
<TABLE>
<S> <C> <C> <C>
Director of
Corporation/
Name Age Occupation Bank Since
Harvey J. Culler 71 Chairman of the Board, 1987/1960
(2)(4)(6)(9)(11)(12) H.J. Culler Inc.
John C. Duffey 43 President and CEO of 1988/1988
(2)(3)(4)(6)(7)(9)(11)* the Corporation and
of the Bank
George S. Grissinger 80 Secretary of the 1987/1959
(1)(5)(7)(10)(11) Corporation; Retired
___________________________
CLASS 3 DIRECTORS
WHOSE TERM EXPIRES IN 1999
____________________________
Director of
Corporation/
Name Age Occupation Bank Since
Henry W. Daniels 75 Retired 1987/1956
(1)(3)(5)(6)(7)(9)(12)
H. Lyle Duffey 74 Chairman of the Board 1987/1956
(2)(3)(4)(6)(9)(11)(12)* of the Corporation;
Retired Minister
David A. Washabaugh III 61 Chairman of the Board 1987/1980
(3)(4)(7)(8)(9)(11) of the Bank;
Chairman-Fulton Motor Sales
Daniel E. Waltz 34 Treasurer of the 1995/1990
(1)(2)(3)(4)(11) Corporation; Sr VP/CFO
and Secretary of the Bank
</TABLE>
_________________________________
BANK DIRECTORS
WHO ARE APPOINTED ANNUALLY
_________________________________
All of the above named Corporate Directors also serve as
Directors on the Board of Directors of The First National Bank of
McConnellsburg. In addition, the following person serves as a Bank
Director, and is appointed annually by the Board of Directors.
There is no reason to believe this persons will not be re-
appointed:
<TABLE>
<S> <C> <C> <C>
Director
Of Bank
Name Age Occupation Since
Lonnie W. Palmer 44 Dairy Farmer 1994
(7)
</TABLE>
* H. Lyle Duffey, Chairman of the Board of the Corporation and John
C. Duffey, Director and President of the Corporation and the Bank,
are father and son, respectively.
(1) Member of the Bank's Audit Committee. The Audit Committee met
2 times in 1996 to supervise the internal audit activities of the
Bank and to supervise and direct the Bank and Corporation's
internal and external auditors.
(2) Member of the Bank's Asset/Liability Committee. The Asset/
Liability Committee met 9 times during 1996 to assist in the
allocation of funds within the guidelines established by Bank
policy based upon such matters as interest rate sensitivity,
deposit structures, liquidity, loans, investments and policy
adequacy. The committee also makes recommendations on dividends
and capital adequacy.
(3) Member of the Bank's Loan Committee. The Loan Committee met
50 times during 1996 to review and approve loans within the limits
set forth in the Bank's Loan Policy.
(4) Member of the Bank's Investment Committee. The Investment
Committee met 3 times during 1996. The committee reviews and
recommends investment strategies in line with the Bank's Investment
Policy.
(5) Member of the Corporation's Nominating Committee. The
Nominating Committee met 1 time during 1996 to set nominations for
directors at the Annual Meeting of Shareholders.
(6) Member of the Bank's Executive Committee. The Executive
Committee met 3 times in 1996 to discuss and review matters which
needed immediate action beyond the scope of daily management.
(7) Member of the Bank's Appraisal Committee. The Appraisal
Committee met 1 time during 1996 to assess real estate property
lending standards.
(8) Member of the Bank's Public Relations Committee. The Public
Relations Committee met 4 times during 1996 to discuss public
relations and marketing matters.
(9) Member of the Bank's Personnel Committee. The Personnel
Committee met 2 times during 1996 to oversee personnel and
employment matters of the Bank.
(10) Member of the Bank's Security Committee. The Security
Committee met 1 time during 1996 to discuss matters regarding the
Bank's physical and employee security.
(11) Member of the Bank's Building Committee. The Building
Committee met 4 times during 1996 to oversee the Corporation's and
Bank's physical facilities.
(12) Member of the Compensation Committee. The Compensation
Committee met 1 time during 1996 to review, discuss and set salary
schedules for the Bank's executive officers.
______________________________________________
A shareholder who desires to propose an individual for
consideration by the Board of Directors as a nominee for director
should submit a proposal in writing to the Secretary of the
Corporation in accordance with Section 202 of the By-laws of the
Corporation.
During 1996, the Bank's Board of Directors held twenty-three
(23) meetings. The Corporation's Board of Directors met six (6)
times in 1996. Each of the Directors of the Corporation who is also
a Director of the Bank attended at least 75% of the combined total
number of meetings of the Board of Directors and the committees of
which he is a member except Mr. Mellott.
EXECUTIVE COMPENSATION
Shown below is information concerning the annual compensation
for services in all capacities to the Corporation and the Bank for
the fiscal years ended December 31, 1996, 1995 and 1994 for the
Chief Executive Officer. There was no executive officer of the
Corporation or the Bank whose total annual salary and bonus during
that time frame exceeded $100,000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
(a) (b) (c) (d) (e) (f) (g) (h)
Other All
Annual Other
Compen- Stock Option/ Compen-
Salary Bonus sation Awards SARs sation
Name Year ($) ($) ($) ($) (#) ($)(1)
John C. 1996 78,998 4,645 -- -- -- 3,975
Duffey, 1995 73,890 5,625 -- -- -- 3,107
CEO 1994 70,110 3,125 -- -- -- 2,650
</TABLE>
(1) Represents $204 in insurance premiums paid by the Bank for
straight term life insurance for Mr. Duffey in the following
amounts: $204 in 1996, $204 in 1995, and $204 in 1994. This figure
also includes the Bank's share of the contribution to Mr. Duffey's
401-K Plan of $3,771 in 1996, $2,903 in 1995 and $2,446 in 1994.
Compensation Committee Report
The Corporation's overall compensation philosophy which is
carried out by the Compensation Committee is to:
* Attract and retain quality talent, which is critical to
both the short-term and long-term success of the
Corporation.
* Reinforce strategic performance objectives through the use
of incentive compensation programs.
* Create a mutuality of interest between executive officers
and shareholders through compensation structures that
share the rewards and risks of strategic decision-making.
Base Compensation - The Committee's approach to base
compensation is to offer competitive salaries in comparison with
market practices. The Committee annually examines market
compensation levels and trends observed in the labor market. For
its purposes, the Committee has defined the labor market as the
pool of executives who are employed in financial institutions of
similar asset size and geographic region as the First National
Bank. Market information is used as a frame of reference for
annual salary adjustments and starting salaries. The base
compensation for the named executive officer listed on the summary
compensation table, as compared to survey information of the base
compensation paid to similar executives within the same asset size
and regional grouping, places the executive at the weighted
average salary of related peers, reflecting the Bank's relative
position within the industry.
The Committee makes salary decisions utilizing an annual
review process with input from the CEO. The annual review process
considers the decision-making responsibilities of each executive
management position and the experience, work performance, and
related skills of position incumbents. Review factors are
utilized, and weighted in accordance with the particular job
position. To help quantify these measures the Committee has, from
time to time, solicited the assistance of compensation and benefit
consultants.
The Compensation Committee consists of Directors Harvey J.
Culler, Henry W. Daniels, H. Lyle Duffey, and Harry D. Johnston.
Annual Bonus Plan - The Bank does provide for bonus payments
to reward executive officers for accomplishing certain annual goals
and objectives. Individual officer goals and objectives are
established in December of the preceding fiscal year by the Board
of Directors utilizing a strategic plan approach.
The average bonus earned in 1996 by the four executive
officers other than the CEO (which appeared in the summary
compensation table) was 5.07% of base salary, compared with 6.25%
in 1995. The decrease is due largely to a slight decrease in
financial performance of the organization in 1996.
Employment and Severance Agreements - The executive named in
the Summary Compensation Table has entered into an Employment
Agreement with the Corporation. This agreement specifies a term of
employment of five (5) years beginning August 1, 1995 and ending
July 31, 2000. This agreement provides that the executive shall
serve as the Chief Executive Officer of the Corporation and the
Bank and as a board member of the Corporation and the Bank. During
this employment term, the executive has agreed to devote
substantially all his working time to the business of the
Corporation and the Bank and has agreed not to enter any business
arrangement which would be deemed competitive to the Corporation or
the Bank. The Employment Agreement provides for a minimum
guaranteed base salary as described in the above section entitled
"Base Compensation". The Employment Agreement also provides for an
incentive compensation bonus plan as described in the above section
entitled "Annual Bonus Plan".
The Employment Agreement provides fringe benefits equal to
those of other employees of the bank. In addition, the Employment
Agreement provides for the use of a Bank purchased or leased
automobile and reimbursement for all operating expenses of this
said automobile. The Agreement also provides for reimbursement of
all expenses for the executive and the executive's spouse to attend
Pennsylvania trade association conventions. The Agreement also
provides for payment of physical examinations of the Executive on
an every other year basis by a physician chosen by the Executive.
The Employment Agreement provides that employment shall be at
will, but if employment is terminated without cause, or the
executive resigns for good reason, the executive can receive the
greater of twenty-four (24) months' salary or an amount equal to
the remaining time of the Employment Agreement. The Corporation
may also be required to pay certain additional benefits. The
Employment Agreement also provides that the executive whose
employment has terminated shall keep certain information
confidential and shall not compete with the Corporation or its
subsidiaries for a period of one year.
The Employment Agreement does contain a "Change of Control"
clause which provides for a Severance Allowance for the Executive
in the event of a "Change in Control" equal to the greater of
twenty-four (24) months' salary or an amount equal to the remaining
time of the Employment Agreement. The Employment Agreement defines
"Change of Control" as (a) the acquisition of the beneficial
ownership of at least twenty five (25%) of the Corporation's voting
securities or all or substantially all of the assets of the
Corporation by a single person or entity or a group of affiliated
persons or entities other than the Corporation or a person or
persons who are officers or directors of the Corporation, (b) the
merger, consolidation or combination of the Corporation or Bank
with an unaffiliated corporation in which the Directors of the
Corporation or Bank, as a result of such merger, consolidation or
combination constitute less than a majority of the corporate Board
of Directors of the surviving, new or combined entity, unless such
reason results from a catastrophic accident, (c) during any period
of two (2) consecutive terms of this Agreement, individuals who at
the beginning of such period constitute the Board of Directors of
the Corporation cease, for any reason, to constitute at least a
majority thereof, unless the election of each director who was not
a director at the beginning of such period has been approved in
advance by directors representing at least two-thirds (2/3) of the
directors then in office who were directors at the beginning of the
period; and (d) any other reason which would be deemed a "Change of
Control" by any federal or state regulatory body.
401-K Plan and Cash Bonus Policy
The Corporation does not have a retirement or pension plan.
The Bank, however, maintains a 401-K Plan (the "Plan") covering all
eligible employees who have attained the age of 20 years and
completed six months of service. Employees become fully vested
after six (6) years of service. Normal retirement is at sixty-five
(65) years of age, with a provision for early retirement at age
fifty-five (55). The Bank's total contribution to the plan for the
year ending December 31, 1996 was $ 57,320.26.
The Bank also has a cash bonus policy (the "Policy") for all
non-exempt and non-executive officer employees. The Policy is based
upon the Bank's return on average assets. Under the Policy the
Bank declares a bonus from profits or earnings based on a schedule
ranging from a return on average assets of 1.00% to over 3.00%.
Pursuant to the Policy, the Bank declares a bonus from profits or
earnings based on the following schedule:
<TABLE>
<S> <C> <C>
Return On
Average Assets Bonus
0 - .99% 0%
1.00 - 1.25% 1.25%
1.26 - 1.50% 1.50%
1.51 - 1.75% 1.75%
1.76 - 2.00% 2.00%
2.01 - 2.25% 2.25%
2.26 - 2.50% 2.50%
2.51 - 2.75% 2.75%
2.76 - 3.00% 3.00%
3.01 - Over 3.25%
</TABLE>
The bonus is distributed to this group of employees based on
their gross wages as a percentage of total wages.
Compensation of Directors
During 1996, the Bank's Board of Directors received $125 for
each meeting attended, $25 per hour for each committee meeting
attended, and a $2,000 annual fee. The Directors of the
Corporation do not receive renumeration for attendance at the
Corporation's Board of Director meetings. In the aggregate, the
Bank paid $63,531 in 1996 to all Directors for attending all
meetings of the Board of Directors and the committees of the Board
of Directors.
CERTAIN TRANSACTIONS
There have been no material transactions between the Corp-
oration and the Bank, nor any material transactions proposed, with
any Director or executive officer of the Corporation and the Bank,
or any associate of any of the foregoing persons. The Corporation
and the Bank have had and intend to continue to have banking and
financial transactions in the ordinary course of business with
directors and officers of the Corporation and the Bank and their
associates on comparable terms and with similar interest rates and
collateral, as those prevailing at the time for other customers of
the Corporation and the Bank.
Total loans outstanding from the Corporation and the Bank as
of December 31, 1996, to the Corporation's and Bank's officers and
directors as a group and members of their immediate families and
companies in which they had ownership interest of 10% or more was
$918,427 or 9.16% of the Bank's total equity capital. Loans to such
persons were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than the
normal risk of collection or present other unfavorable features.
The largest aggregate amount of indebtedness outstanding at any
time during fiscal year 1996 to officers and directors of the
Corporation and the Bank was $1,135,238. The aggregate amount of
indebtedness outstanding as of the latest practicable date, January
31, 1997, to the above described group was $1,766,289.
PRINCIPAL OFFICERS OF THE CORPORATION
The following tables set forth selected information about the
principal officers of the Corporation, each of whom is elected by
the Board of Directors and each of whom holds office at the
discretion of the Board of Directors:
<TABLE>
<S> <C> <C> <C> <C> <C>
Age
Bank # of Shares as of
Office and Held Employee Beneficially Mar 10
Name Position Held Since Since Owned 1997
H. Lyle Chairman of
Duffey the Board 1987 (1) 4,160 74
Henry W.
Daniels Vice Chairman 1987 (1) 11,000 75
John C.
Duffey President 1995 1982 1,223 43
Harry D.
Johnston Vice President 1987 (1) 17,194 60
George S.
Grissinger Secretary 1987 (1) 12,100 80
Daniel E.
Waltz Treasurer 1994 1983 364 34
</TABLE>
_______________________
(1) Messrs. H.L. Duffey, Daniels, Johnston and Grissinger are not
employees of the Bank.
<TABLE>
<S> <C> <C> <C> <C> <C>
PRINCIPAL OFFICERS OF THE BANK
Age
Bank # of Shares as of
Office and Held Employee Beneficially Mar 10
Name Position Held Since Since Owned 1997
John C. President and 1993 1982 1,223 43
Duffey Chief Executive
Officer
Daniel E. Sr V President 1993 1983 364 34
Waltz and Chief
Financial Officer
Thomas H. Vice President 1993 1971 200 45
DeShong and Cashier
Brenda Vice President 1993 1972 260 46
Gordon and Sr. Loan Officer
Mary Anne Vice President 1993 1983 977 56
Garland and Customer Service
Officer
</TABLE>
LEGAL PROCEEDINGS
The nature of the Corporation's and the Bank's business
generates a certain amount of litigation involving matters arising
in the ordinary course of business. However, in the opinion of
management of the Corporation and Bank, there are no proceedings
pending to which the Corporation and Bank is a party or to which
their property is subject, which, if determined adversely to the
Corporation and Bank, would be material in relation to the
Corporation's and Bank's undivided profits or financial condition,
nor are there any proceedings pending other than ordinary routine
litigation incident to the business of the Corporation and Bank.
In addition, no material proceedings are pending or are known to be
threatened or contemplated against the Corporation and Bank by
government authorities.
RATIFICATION OF INDEPENDENT AUDITORS
Unless instructed to the contrary, it is intended that votes
will be cast pursuant to the Proxies for the ratification of the
selection of Smith Elliott Kearns & Company, Certified Public
Accountants, of Chambersburg, Pennsylvania as the Corporation's
independent auditors for its 1997 fiscal year. The Corporation has
been advised by Smith Elliott Kearns & Company that none of its
members has any financial interest in the Corporation.
Ratification of Smith Elliott Kearns & Company will require the
affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting. Smith
Elliott Kearns & Company served as the Corporation's independent
auditors for the 1996 fiscal year. In addition to performing
customary audit services, Smith Elliott Kearns & Company assisted
the Corporation and the Bank with the preparation of their federal
and state tax returns, and provided assistance in connection with
regulatory matters, charging the Bank for such services at its
customary hourly billing rates. These non-audit services were
approved by the Corporation's and the Bank's Board of Directors
prior to the rendering of such services after due consideration of
the effect of the performance thereof on the independence of the
accountants and after the conclusions by the Corporation and the
Bank's Board of Directors that there was no effect on the
independence of the auditors. In the event that the shareholders do
not ratify the selection of Smith Elliott Kearns & Company, as the
Corporation's independent auditors for the 1997 fiscal year,
another accounting firm may be chosen to provide independent audit
services for the 1997 fiscal year.
The Board of Directors recommends that the shareholders vote
FOR the ratification of the selection of Smith Elliott Kearns &
Company as the independent auditors for the Corporation for the
year ending December 31, 1997.
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal year
ended December 31, 1996 is enclosed with this Proxy Statement. A
representative of Smith Elliott Kearns & Company, the accounting
firm which examined the financial statements in the Annual Report,
will attend the Annual Meeting. This representative of Smith
Elliott Kearns & Company will have the opportunity to make a
statement, if he/she desires to do so, and will be available to
respond to any appropriate questions presented by shareholders at
the Annual Meeting.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the
provisions of the proxy rules of the Securities and Exchange
Commission, wishes to submit a proposal for inclusion in the
Corporation's Proxy Statement for its 1998 Annual Meeting of
Shareholders must deliver such proposal in writing to the Chairman
of FNB Financial Corporation at the corporation's principal
executive offices at 101 Lincoln Way West, McConnellsburg,
Pennsylvania 17233, not later than Friday, November 14, 1997.
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented for consideration other than those matters described in
the Notice of Annual Meeting of Shareholders, but if any matters
are properly presented, it is the intention of the persons named in
the accompanying Proxy to vote on such matters in accordance with
their best judgement.
