<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the quarterly period ended September 30,
1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0 - 20880
Filing Date: November 14, 1997
- --------------------------------------------------------------------------------
FRANKLIN BANCORPORATION, INC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52 - 1632361
- --------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer identification
incorporation or organization) Number)
1722 EYE STREET, N.W.
WASHINGTON, D.C. 20006 (202) 429 - 9888
- --------------------------------- -------------------------------
(Address of principal executive (Registrant's telephone number,
offices) including area code)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES (X) NO ( )
The total number of shares outstanding of the Registrant's common stock, par
value $0.10 per share, as of November 7, 1997 was 6,613,584.
1
<PAGE> 2
FRANKLIN BANCORPORATION, INC.
FORM 10-Q
September 30, 1997
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
(a) Consolidated Statements of Financial Condition............... 3
(b) Consolidated Statements of Income ........................... 4
(c) Consolidated Statements of Cash Flows........................ 5
Notes to Consolidated Financial Statements....................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................... 9
PART II. OTHER INFORMATION........................................ 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS
(a) Consolidated Statements of Financial Condition
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
- ------ ------------ -----------
<S> <C> <C>
Cash and due from banks $ 26,042 $ 22,468
Federal funds sold and securities purchased
under resale agreements 31,000 71,800
Securities available-for-sale 93,263 97,160
Securities held-to-maturity 83,429 66,956
--------- ---------
Securities 176,692 164,116
Loans, net of unearned income 266,379 232,581
Less: allowance for loan losses (3,990) (3,842)
--------- ---------
Loans, net 262,389 228,739
Accrued interest receivable 3,682 3,305
Premises and equipment, net 2,801 2,504
Goodwill, net 1,020 1,115
Other assets 3,453 3,770
--------- ---------
TOTAL ASSETS $507,079 $497,817
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
LIABILITIES:
- ------------
Non-interest bearing deposits $105,660 $123,197
Interest bearing deposits 244,766 240,230
--------- ---------
Total deposits 350,426 363,427
Securities sold under repurchase agreements 115,176 99,093
Accrued interest payable 1,386 997
Other liabilities 2,794 2,407
--------- ---------
Total liabilities 469,782 465,924
--------- ---------
STOCKHOLDERS' EQUITY:
- ---------------------
Common Stock, $0.10 par value, 25,000,000
shares authorized; 6,608,584 and 6,485,944
shares issued and outstanding, respectively 661 649
Capital surplus 21,587 20,960
Retained earnings 14,833 10,488
Unrealized gain (loss) on securities available-for-sale 216 (204)
--------- ---------
Total stockholders' equity 37,297 31,893
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $507,079 $497,817
========= =========
</TABLE>
The accompanying condensed notes are an integral part of these financial
statements.
3
<PAGE> 4
(b) Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $6,119 $4,880 $17,072 $13,718
Interest and dividends on securities 2,577 2,243 7,772 5,773
Interest on federal funds sold and securities
purchased under resale agreements 320 834 1,107 1,682
------- ------- -------- --------
Total interest income 9,016 7,957 25,951 21,173
------- ------- -------- --------
INTEREST EXPENSE:
- -----------------
Interest on deposits 2,559 2,115 7,366 6,235
Interest on securities sold under
repurchase agreements 962 824 2,873 1,671
------- ------- -------- --------
Total interest expense 3,521 2,939 10,239 7,906
------- ------- -------- --------
Net interest income 5,495 5,018 15,712 13,267
Provision for loan losses 100 ----- 285 27
------- ------- -------- --------
Net interest income after provision
for loan losses 5,395 5,018 15,427 13,240
------- ------- -------- --------
NON-INTEREST INCOME:
- --------------------
Service charges on deposits 382 276 1,053 767
Other fee income 256 161 692 418
Gains on sales of securities, net 25 ----- 25 31
------- ------- -------- --------
Total non-interest income 663 437 1,770 1,216
------- ------- -------- --------
NON-INTEREST EXPENSE:
- ---------------------
Compensation and employee benefits 1,814 1,736 5,313 4,796
Occupancy 501 475 1,453 1,257
Furniture and equipment 264 252 738 634
Goodwill amortization 32 37 95 129
Other 933 1,107 2,482 2,463
------- ------- -------- --------
Total non-interest expense 3,544 3,607 10,081 9,279
------- ------- -------- --------
Income before income tax expense 2,514 1,848 7,116 5,177
Income tax expense 973 627 2,771 1,940
------- ------- -------- --------
NET INCOME $1,541 $1,221 $ 4,345 $ 3,237
======= ======= ======== ========
PRIMARY EARNINGS PER SHARE:(1)
- ------------------------------
Net Income $ 0.22 $ 0.18 $ 0.63 $ 0.49
FULLY DILUTED EARNINGS PER SHARE:(1)
- ------------------------------------
Net Income $ 0.22 $ 0.18 $ 0.63 $ 0.49
</TABLE>
(1) See Exhibit 11 - Computation of Primary and Fully Diluted Earnings per
Share.
The accompanying condensed notes are an integral part of these financial
statements.
4
<PAGE> 5
(c) Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income $ 4,345 $ 3,237
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 285 27
Depreciation and amortization 579 647
Gains on sales of securities, net (25) (31)
Change in deferred tax valuation allowance ------ (233)
Change in accrued interest receivable and
other assets (352) 87
Change in accrued interest payable and other
liabilities 776 1,014
--------- ----------
Net cash provided by operating activities 5,608 4,748
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchases of securities available-for-sale (13,666) (67,122)
Proceeds from sales of securities available-for-sale 3,003 7,018
Proceeds from maturities/principal paydowns
of securities available for sale 15,432 13,894
Purchases of securities held-to-maturity (19,165) (9,315)
Proceeds from maturities/principal paydowns
of securities held-to-maturity 2,734 8,531
Net increase in loans receivable (33,935) (25,432)
Additions to premises and equipment, net (958) (783)
--------- -----------
Net cash used in investing activities (46,555) (73,209)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Net change in deposits (13,001) 39,584
Net increase in securities sold under
repurchase agreements 16,083 34,864
Proceeds from issuance of common stock 639 261
--------- ----------
Net cash provided by financing activities 3,721 74,709
--------- ----------
Net (decrease) increase in cash and cash equivalents (37,226) 6,248
Cash and cash equivalents at beginning
of period 94,268 69,686
--------- ----------
Cash and cash equivalents at end of period $57,042 $ 75,934
========= ==========
</TABLE>
The accompanying condensed notes are an integral part of these financial
statements.
5
<PAGE> 6
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT SEPTEMBER 30, 1997
(unaudited) (Dollars in tables in thousands)
1. Basis of Financial Statement Presentation.
The interim financial statements of Franklin Bancorporation, Inc. ("Franklin")
have been prepared pursuant to the requirements for reporting on Form 10-Q and
reflect all adjustments (consisting only of normal recurring adjustments) which
were, in the opinion of management, necessary for a fair statement of the
results of the periods presented. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Accordingly,
these unaudited statements should be read in conjunction with the audited
financial statements and related notes in Franklin's most current annual
report. The current period's results of operations are not necessarily
indicative of results which ultimately may be achieved for the year.
2. Securities.
The amortized cost and market value of securities are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
Amortized Market Amortized Market
SECURITIES AVAILABLE-FOR-SALE Cost Value Cost Value
- ----------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
U.S. treasury securities $18,761 $19,047 $19,712 $19,907
U.S. government agencies 59,456 59,658 67,393 67,070
Step-up and structured notes 5,944 5,806 5,928 5,717
Mortgage-backed securities 2,206 2,152 2,643 2,588
States and political subdivisions 4,348 4,387 ------ ------
Equity securities 2,213 2,213 1,878 1,878
------- -------- -------- --------
Total $92,928 $93,263 $97,554 $97,160
======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
Amortized Market Amortized Market
SECURITIES HELD-TO-MATURITY Cost Value Cost Value
- --------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
U.S. treasury securities $15,954 $15,945 $12,975 $12,840
U.S. government agencies 15,422 15,538 4,983 4,921
Mortgage-backed securities 34,532 33,514 37,248 36,014
States and political subdivisions 17,521 17,696 11,750 11,672
-------- -------- -------- --------
Total $83,429 $82,693 $66,956 $65,447
======== ======== ======== ========
</TABLE>
6
<PAGE> 7
3. Loans.
Major categories of loans are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Real Estate
Commercial $ 43,583 $ 44,136
Construction and development 19,843 15,243
Residential mortgage 31,180 18,768
--------- ---------
Total Real Estate 94,606 78,147
Commercial and Industrial 155,702 140,544
Consumer
Consumer 11,657 9,800
Home equity 4,831 4,526
--------- ---------
Total Consumer 16,488 14,326
Total 266,796 233,017
--------- ---------
Unearned income (417) (436)
--------- ---------
Loans, net of unearned income $266,379 $232,581
========= =========
</TABLE>
At September 30, 1997, impaired loans totaled $363,000 with a corresponding
valuation allowance of $138,000. Primarily all of the loans deemed to be
impaired are commercial loans.
For the nine months ended September 30, 1997, the average recorded investment
in impaired loans was approximately $666,000. Had all of these loans performed
in accordance with their original terms, interest income of approximately
$55,000 would have been recorded during the first nine months of 1997.
Franklin recognized $11,000 in interest on impaired loans during the first nine
months of 1997.
At September 30, 1997, Franklin had no other loans on non-accrual other than
those deemed to be impaired loans. Loans 90 days or more past due which were
still accruing interest totaled $128,000.
7
<PAGE> 8
Changes in the allowance for loan losses for the nine months ended September
30, 1997 are as follows:
<TABLE>
<S> <C>
Balance, January 1 $3,842
Charge-offs:
Real Estate -----
Commercial (299)
Consumer (18)
---------
Total (317)
---------
Recoveries:
Real Estate 56
Commercial 116
Consumer 8
--------
Total 180
--------
Net charge-offs (137)
Provision for loan losses 285
--------
Balance, September 30 $3,990
========
Net charge-offs to average loans 0.06%
</TABLE>
Franklin National Bank, in the normal course of business, makes loans to
executive officers, directors and stockholders, as well as to companies and
individuals affiliated with those officers and directors. In the opinion of
management, these loans are consistent with sound banking practices, are within
regulatory lending limits and do not involve more than normal risk of
collectibility.
Activity in such loans is summarized as follows:
<TABLE>
<S> <C>
Balance, January 1, 1997 $ 5,427
New loans 9,815
Repayments (3,310)
--------
Balance, September 30, 1997 $11,932
========
</TABLE>
There were no loans to directors, officers or related parties that were
impaired as of September 30, 1997.
8
<PAGE> 9
4. Time deposits, including IRA's, are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Certificates less than $100,000 $13,583 $14,673
Certificates of $100,000 or more 99,154 64,757
</TABLE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FINANCIAL SUMMARY
Net income for the nine months ended September 30, 1997 increased by 34% to
$4.35 million or $0.63 per share compared to $3.24 million or $0.49 per share
for the same period in 1996. Returns on average assets and average equity for
the first nine months of 1997 were 1.24% and 17.19%, respectively, compared to
1.12% and 15.71% for the same period in 1996.
Net income for the quarter ended September 30, 1997 increased by 26% to $1.54
million or $0.22 per share compared to $1.22 million or $0.18 per share for the
third quarter of 1996. Returns on average assets and average equity for the
third quarter of 1997 were 1.28% and 17.07%, respectively, compared to 1.11%
and 17.17% for the same period in 1996.
Contributing to the increase in earnings for the first nine months of 1997 were
improvements in net interest income and growth in service charges and other
fees. The earnings improvement was partially offset by increases in loan loss
provisions and in compensation and occupancy expenses as Franklin expanded its
branch network into Bethesda, Maryland. Earnings for the third quarter of 1997
increased to a lesser extent when compared to the third quarter of 1996
primarily due to increasing deposit costs.
9
<PAGE> 10
Franklin's total assets increased to $507.1 million at September 30, 1997
compared to $497.8 million at December 31, 1996 representing an increase of
$9.3 million or 2%. This nominal increase in assets is primarily attributable
to the large, short-term customer deposits and repurchase agreements which were
received and invested in Federal funds sold and securities purchased under
resale agreements at year-end 1996. Discounting for that year-end increase of
approximately $69 million, total assets as of September 30, 1997 would have
increased by 18%.
Cash, Federal funds sold and securities purchased under resale agreements
decreased by approximately $37 million, or 39%, from $94 million at December
31, 1996 to $57 million at September 30, 1997. That decline was used primarily
in funding loan growth as loan demand continued to be strong. Loans, net of
unearned income, increased by $33.8 million to $266.4 million at September 30,
1997 compared to $232.6 million at year-end 1996.
Total securities were $176.7 million as of September 30, 1997, an increase of
$12.6 million, or 8%, over total securities of $164.1 million at December 31,
1996. Additions were made primarily in the held-to-maturity securities
portfolio as the available-for-sale portfolio is deemed by management to be
more than adequate to provide required liquidity for future loan demand.
Total deposits and customer repurchase agreements were $465.6 million at
September 30, 1997 compared to $462.5 million at December 31, 1996,
representing an increase of 1%. Discounting for the year-end 1996 growth in
customer deposits and repurchase agreements, total 1997 growth would be 18%.
Franklin's deposit mix at September 30, 1997 included $105.7 million in
non-interest bearing deposits, representing 30% of total deposits as compared
to 34% of total deposits on December 31, 1996.
Stockholders' equity at September 30, 1997 totaled $37.3 million compared to
$31.9 million at December 31, 1996. Book value per share of common stock on
September 30, 1997 was $5.64 per share compared to $4.92 per share at December
31, 1996. The increase in equity was attributable to the retention of
earnings, the exercise of options and the improvement in the market value of
the available-for-sale securities portfolio.
10
<PAGE> 11
EARNINGS ANALYSIS
Net interest income
Net interest income is Franklin's primary source of earnings and represents the
difference between interest and fees earned on earning assets and the interest
paid on deposits and other interest bearing liabilities. Net interest income
totaled $15.7 million for the first nine months of 1997 compared to $13.3
million for the same period of 1996, an increase of 18%. The improvement in
net interest income was primarily attributable to a higher volume of earning
assets. Average earning assets increased 22% to $442.2 million for the nine
months ended September 30, 1997 as compared to $362.1 million for the nine
months ended September 30, 1996. Of that growth, 65% occurred in Franklin's
loan portfolio, its highest yielding asset.
Total interest income increased $4.8 million, or 23%, to $26 million for the
first nine months of 1997 as compared to $21.2 million for the same period of
1996, with 71%, or $3.4 million, of that increase occurring in interest and
fees on loans. Interest expense increased $2.3 million, or 29%, to $10.2
million for the first nine months of 1997 as compared to $7.9 million for the
same period of 1996. The increase is primarily due to volume increases in
average interest bearing liabilities which grew 27% to $333.1 million for the
nine months ended September 30, 1997 as compared to $263 million for the same
period in 1996.
As a result of competitive market pressures on loan and deposit rates,
Franklin's net interest margin declined to 4.84% for the nine months ended
September 30, 1997 as compared to 4.89% for the same period one year ago.
While Franklin's average earning assets for the first nine months of 1997
increased 22% over its earning assets for the same period in 1996, average
interest bearing liabilities increased 27% over the same period. At the same
time, the cost of those liabilities increased due to competitive market
pressure and a customer shift to higher yielding deposit products, such as
certificates of deposit and securities sold under repurchase agreements. For
the first nine months of 1997, Franklin's average earning assets consisted of
55% loans, 39% securities and 6% short-term investments as compared to 52%
loans, 36% securities and 12% short-term investments during the first nine
months of 1996. Management intends to continue to seek opportunities to
increase the volume of Franklin's highest yielding assets, loans, to sustain
and improve its margin.
11
<PAGE> 12
For the quarter ended September 30, 1997, net interest income totaled $5.5
million as compared to $5.0 million for the third quarter of 1996, an increase
of 10%. The rate of increase slowed in the third quarter due to the growth in
Franklin's higher cost interest bearing liabilities. Total interest income
increased $1.1 million, or 13%, to $9 million for the third quarter of 1997 as
compared to $7.9 million for the third quarter of 1996. Interest and fees on
loans represented all of that increase. Interest expense for the third quarter
of 1997 increased by 20%, or $582,000, from $2.9 million for the quarter ended
September 30, 1996 to $3.5 million for the current quarter.
Non-interest income
Non-interest income, excluding securities gains, increased $560,000, or 47%,
from $1.2 million for the nine months ending September 30, 1996 to $1.7 million
for the same period ending September 30, 1997. For the third quarter of 1997,
non-interest income, excluding securities gains, increased 46% to $638,000 from
$437,000 for the third quarter of 1996. The increases are a result of
Franklin's growing customer base as well as the continued expansion of
commercial deposit product offerings, such as cash management and payroll
processing services, and foreign currency exchange and ATM services.
Non-interest expense
Total non-interest expense of $10.1 million for the nine months ended September
30, 1997 increased $802,000, or 9%, compared to $9.3 million for the same
period in 1996. The components of this increase were as follows: compensation
and employee benefits $517,000, or 65% of the increase, occupancy expense
$196,000, or 24%, and other operating expense $89,000, or 11%. The increases
in personnel and occupancy expenses are due to Franklin's expansion into
Maryland with the opening of the Bethesda branch as well as overall increases
in personnel made to effectively manage Franklin's asset growth. The increase
in other operating expense is primarily due to equipment and other technology
improvements made to enhance customer service. For the third quarter of 1997,
non-interest expense decreased $63,000, or 2%, as compared to third quarter
1996 primarily due to cost containment efforts.
ASSET QUALITY
Asset quality continues to be strong, however, due to the growth of the loan
portfolio and the reductions in loan recoveries, Franklin has deemed it prudent
to increase provisions for loan losses to $285 thousand for the nine months
ended September 30, 1997 as compared to $27 thousand for the same period one
year ago.
12
<PAGE> 13
For the nine months ended September 30, 1997, Franklin recognized net loan
charge-offs of $137,000 as Franklin charged-off loans of $317,000 while
receiving recoveries of $180,000 on loans charged-off in prior years. This
compares to net recoveries of $544,000 during the nine month period ended
September 30, 1996. At September 30, 1997, the allowance for loan losses
represented 1.50% of total loans as compared to 1.65% at December 31, 1996.
Non-performing assets decreased to $363,000 at September 30, 1997 from $841,000
at September 30, 1996, representing only 0.14% of total loans on September 30,
1997 as compared to 0.40% of total loans on September 30, 1996. The allowance
for loan losses as a percentage of non-performing assets increased from 423% on
December 31, 1996 to 1,098% on September 30, 1997. Management believes that
all major loan portfolio deficiencies have been identified and adequate
reserves have been established.
13
<PAGE> 14
- -------------------------------------------------------------------------------
PART II - OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 1 - Pending Legal Proceedings
At the present time, there are no material legal proceedings to which Franklin
is a party or to which any of Franklin's property is subject. In addition, to
the best of Franklin's knowledge, no such proceedings are contemplated by
government authorities.
Item 2 - Changes in Securities
There were no changes in the rights of Franklin shareholders during the last
quarter.
Item 3 - Defaults Upon Senior Securities
There were no reportable occurrences during the last quarter.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no reportable occurrences during the last quarter.
Item 5 - Other Information
No other reportable information.
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibits:
10.19 Deferred Compensation Agreement between Franklin National Bank
of Washington, D.C. and Robert P. Pincus dated December 20,
1996.
10.20 Split-dollar Life Insurance Agreement between Franklin National
Bank of Washington, D.C. and The Robert P. Pincus Family Trust
dated December 20, 1996.
14
<PAGE> 15
10.21 Deferred Compensation Agreement between Franklin National Bank
of Washington, D.C. and Robert P. Pincus dated July 1, 1997,
amending and restating the Deferred Compensation Agreement
dated December 20, 1996 in its entirety.
11.1 Computation of primary and fully diluted earnings per share.
b. Reports on Form 8-K
Franklin filed the following current reports on Form 8-K during the quarter
ended September 30, 1997.
<TABLE>
<CAPTION>
DATE ITEM REPORTED
---- -------------
<S> <C>
July 1, 1997 A Press Release disclosing an accident involving Franklin's President and Chief
Executive Officer.
</TABLE>
15
<PAGE> 16
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRANKLIN BANCORPORATION, INC.
November 7, 1997 Robert P. Pincus
- ------------------ -------------------------------------
Date Robert P. Pincus
President and Chief Executive Officer
November 7, 1997 Diane M. Begg
- ------------------ -------------------------------------
Date Diane M. Begg
Senior Vice President and Chief
Financial Officer
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Number
------- ------
<S> <C> <C>
10.19 Deferred Compensation Agreement between 18
Franklin National Bank of Washington, D.C.
and Robert P. Pincus dated December 20,
1996.
10.20 Split-dollar Life Insurance Agreement between 28
Franklin National Bank of Washington, D.C.
and The Robert P. Pincus Family Trust dated
December 20, 1996.
10.21 Deferred Compensation Agreement between Franklin 42
National Bank of Washington, D.C. and Robert P.
Pincus dated July 1, 1997, amending and restating
the Deferred Compensation Agreement dated
December 20, 1996 in its entirety.
11.1 Computation of primary and fully diluted earnings 49
per share.
</TABLE>
17
<PAGE> 1
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made,
entered into and effective for all purposes this 20th day of December, 1996, by
and between FRANKLIN NATIONAL BANK OF WASHINGTON, D.C., a national banking
association (the "Corporation"), and ROBERT P. PINCUS ("Employee").
WHEREAS, Employee is the President and Chief Executive Officer of the
Corporation;
WHEREAS, Employee's past services to the Corporation have contributed
to the success of the Corporation;
WHEREAS, the Corporation desires to recognize the valuable and
meritorious services performed on behalf of the Corporation by Employee and to
offer him an incentive to remain as an employee of the Corporation; and
WHEREAS, the parties hereto desire to set forth in writing the terms
and conditions of their understandings and agreements.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants hereinafter set forth and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
1. Amount and Payment of Deferred Compensation.
A. For and in consideration of Employee's services to
the Corporation, upon the occurrence of a Triggering Event, the Corporation
shall pay to Employee, or (in the event of Employee's death) to Employee's
Designated Beneficiary, an amount of deferred compensation (the "Deferred
Compensation"), determined as follows:
(1) If the Triggering Event is Employee's death,
the amount of Deferred Compensation shall be equal to Fifty Thousand Dollars
($50,000), multiplied by the number of twelve (12)-month periods that have
elapsed from December 20, 1995 through the date of Employee's death.
<PAGE> 2
(2) If the Triggering Event is any event other
than Employee's death, the amount of Deferred Compensation shall be determined
in accordance with that certain Schedule of Deferred Compensation, a copy of
which is attached hereto and made a part hereof as Exhibit A. For purposes of
determining the amount of Deferred Compensation payable to Employee under
Exhibit A, "Years of Service" shall mean the number of twelve (12)-month
periods that have elapsed from December 20, 1995 through the date of the
Triggering Event.
B. The Deferred Compensation described in Section 1A
hereof, as reduced by any appropriate Federal income or other withholding
taxes, shall be paid as follows:
(1) If the Triggering event is Employee's death,
the Deferred Compensation shall be paid to Employee's Designated Beneficiary in
a single lump-sum payment within one hundred twenty (120) days after the date
of Employee's death.
(2) If the Triggering Event is any event other
than Employee's death, the Deferred Compensation shall be paid to Employee or
(in the event of Employee's death after the Triggering Event) to Employee's
Designated Beneficiary in that number of annual installments as is equal to the
number of twelve (12)-month periods that have elapsed from December 20, 1995
through the date of the Triggering Event. Such annual installments shall
include equal amounts of Deferred Compensation, plus interest on the unpaid
amount of Deferred Compensation at the prime rate of interest charged by the
Corporation on the date of the Triggering Event. The first such installment
shall be paid on the first day of the calendar quarter that is at least thirty
(30) days after the date of the Triggering Event. The remaining installments
shall be paid on successive anniversaries of the first installment payment.
C. For purposes of Section 1A and 1B hereof, a
"Triggering Event" shall mean the occurrence of any of the following:
(1) The death of Employee;
(2) The involuntary termination by the
Corporation of Employee's employment with Cause;
- 2 -
<PAGE> 3
(3) The voluntary termination by Employee of
Employee's employment; provided, that such a termination of employment shall
not constitute a Triggering Event if it occurs prior to December 20, 2002 and
is preceded by a Change of Control; or
(4) The involuntary termination by the
Corporation of Employee's employment without Cause; provided, that such a
termination of employment shall not constitute a Triggering Event if it occurs
prior to December 20, 2002 and is preceded by a Change of Control.
D. For purposes of Section 1C hereof, a termination of
Employee's employment by the Corporation shall be deemed to have been with
"Cause" if such termination shall occur after any one or more of the following
events:
(1) Employee's conviction of a crime that is a
felony and/or a crime that involves moral turpitude;
(2) Employee's use of alcohol, which materially
impairs the ability of Employee to effectively perform his duties to the
Corporation, or Employee's illegal use, possession or sale of a controlled
substance, or his materially impaired performance due to the illegal use of
such a substance, but only if the Corporation provides written notice of its
intention to terminate Employee for such use, possession or sale and Employee
is provided with a reasonable opportunity to cure;
(3) Employee's willful and intentional failure to
perform his duties to the Corporation, but only if the Corporation provides
written notice of such failure to Employee and Employee is provided with a
reasonable opportunity to correct such failure; or
(4) Conduct by Employee, which is unethical,
fraudulent or unlawful, and which is materially harmful to the business or
reputation of the Corporation, but only if the Corporation provides written
notice of such conduct by Employee and Employee is provided with a reasonable
opportunity to correct such conduct.
- 3 -
<PAGE> 4
E. For purposes of Section 1C hereof, a "Change of
Control" shall be deemed to have occurred if any of the following events shall
take place:
(1) The Corporation is merged, consolidated or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization, less than 50% of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of Voting Stock (as that term is defined in Section 6E(3) hereof) of
the Corporation immediately prior to such transaction;
(2) The Corporation sells or otherwise transfers
all or substantially all of its assets to any other corporation or other legal
person;
(3) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that any person as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 20%
or more of the combined voting power of the then-outstanding securities of the
Corporation entitled to vote generally in the election of members of the Board
of Directors of the Corporation ("Voting Stock"); or
(4) The Corporation files a report or proxy
statement with the Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a strategic transaction of the
Corporation has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction.
F. Employee shall complete and execute the Designation
of Beneficiary, attached hereto as Exhibit B, specifying who shall receive any
amounts of Deferred Compensation payable following the death of Employee.
- 4 -
<PAGE> 5
2. No Separate Fund.
A. The Corporation shall continue, at all times and for
all purposes, to have an interest in the amount of Deferred Compensation
payable to Employee hereunder, and such amount shall continue to be part of the
general assets of the Corporation and shall remain subject to the claims of the
general creditors of the Corporation, up until the time of actual payment by
the Corporation to Employee or Employee's Designated Beneficiary.
Notwithstanding the foregoing, the Corporation may establish, in its name, one
or more accounts earmarked as holding the Deferred Compensation.
B. No provisions or terms contained herein or the
establishment of any accounts or records on the books of the Corporation in
furtherance of carrying out the provisions of this Agreement shall be deemed to
create a trust or escrow arrangement of any kind, or to create a fiduciary
relationship, between the Corporation and Employee.
3. No Agreement to Be Employed. This Agreement is solely to
provide deferred compensation for services rendered by Employee to the
Corporation and is neither an agreement or commitment by the Corporation to
employ Employee nor an agreement or commitment of Employee to serve the
Corporation in any capacity.
4. Termination of Agreement.
A. The parties agree that at any time after December 20,
2002 the Corporation may terminate this Agreement upon written notice to
Employee. In the event of such a termination, the amount of Deferred
Compensation shall be determined in accordance with Section 1A(2) hereof, as if
the termination of this Agreement were a Triggering Event; provided, that, if
the date of the termination of this Agreement occurs between June 20th and
December 20th of a calendar year, the amount of Deferred Compensation shall be
determined under Section 1A(2) hereof as if a Triggering Event occurred on
December 20th of such year.
B. Any Deferred Compensation payable as a result of the
termination of this Agreement shall be distributed in accordance with Section
1B(2) hereof.
- 5 -
<PAGE> 6
5. Amendment of Agreement. This Agreement may not be amended,
altered or modified, except by a writing signed by each party to this
Agreement.
6. Payment of Benefits and Claims Procedure. Upon the
termination of employment of Employee, the Deferred Compensation shall be
payable by the Corporation in accordance with Section 1 hereof. In the event
that Employee desires to contest any decision of the Corporation regarding the
Deferred Compensation or any other matter arising hereunder, he shall file a
claim in accordance with the following procedure:
A. Such claim must be made in writing to the
Corporation.
B. If such claim is wholly or partially denied, the
Corporation shall, within ninety (90) days after receipt of such claim, notify
Employee in writing of the denial of the claim. Such notice of denial shall be
in writing, shall be expressed in a manner calculated to be understood by
Employee, and shall contain (i) the specific reason or reasons for denial of
the claim, (ii) a specific reference to the pertinent provisions of the
Agreement upon which the denial is based, (iii) a description of any additional
material or information necessary for Employee to perfect the claim and an
explanation of why such material or information is necessary, and (iv) a
description of the claim review procedure under this Agreement. If notice of
the denial of a claim is not furnished by the Corporation to Employee in
accordance with the provisions of this Section 6B, the claim shall nonetheless
be deemed denied and Employee shall be permitted to proceed to the review stage
provided in Section 6C hereof.
C. If a claim by Employee is denied, Employee may
request that the Corporation conduct a full and fair review of the denial of
the claim, review any documents pertinent to such request, and submit issues
and comments in writing. Such request shall be in writing and delivered to the
Corporation within sixty (60) days after the receipt by Employee of the written
notice of denial of the claim, or such later date as shall be reasonable,
taking into account the nature of the claim and any other attendant
circumstances.
- 6 -
<PAGE> 7
D. The Corporation shall deliver to Employee a written
decision on any claim filed hereunder within sixty (60) days after the receipt
of the aforesaid request for review. Such decision shall (i) be expressed in a
manner calculated to be understood by Employee, (ii) include specific reasons
for the decision, and (iii) contain specific references to the pertinent
provisions of the Agreement upon which the decision is based. If the
Corporation fails to furnish its decision on review within the applicable time
period to Employee, the claim shall nonetheless be deemed denied on review.
E. The Corporation shall have the right and power
reasonably to interpret and construe the provisions of this Agreement in good
faith and to decide all claims made hereunder.
7. No Assignment. The rights of Employee to any payments
hereunder are not subject to voluntary or involuntary transfer, alienation or
assignment and, to the fullest extent permitted by law, are not subject to
attachment, execution, garnishment, sequestration or other legal or equitable
process.
8. Benefits and Burdens. This Agreement shall be binding upon,
and shall inure to the benefit of, (i) the Corporation and its successors and
assigns, and (ii) Employee and his executors or administrators, heirs, legatees
and personal and legal representatives.
9. Notices. Any and all notices provided for herein shall be
sufficient if in writing, and sent by recognized overnight courier or hand
delivery (with receipt therefor) or by certified or registered mail (return
receipt requested and first-class postage prepaid), as follows: (i) in the case
of the Corporation, to its principal office, and (ii) in the case of Employee,
to his address as shown on the Corporation's records.
10. Severability. The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.
11. Headings. The headings or other captions contained in this
Agreement are for convenience of reference only and shall
- 7 -
<PAGE> 8
not be used in interpreting, construing or enforcing any of the provisions of
this Agreement.
12. Governing Law. This Agreement shall be governed by the laws
of the District of Columbia, except to the extent pre-empted by Federal law.
13. Entire Agreement. This Agreement sets forth all of the
promises, agreements and understandings of the parties hereto with respect to
the matters described herein, and there are no promises, agreements or
understandings, oral or written, express or implied, between them with respect
to such matters other than as set forth herein. Any and all prior promises,
agreements and understandings between the parties hereto with respect to the
matters described herein are hereby revoked.
IN WITNESS WHEREOF, the Corporation and Employee have executed this
Agreement as of the day and year first above written.
CORPORATION:
-----------
ATTEST: FRANKLIN NATIONAL BANK OF
WASHINGTON, D.C., a national
banking association
Linda B. Johnson By: Diane M. Begg
- --------------------------- ------------------------------
Linda B. Johnson, Secretary Diane M. Begg, Senior Vice
President and Chief Financial
Officer
[Corporate Seal]
WITNESS: EMPLOYEE:
--------
Carol A. Few Robert P. Pincus
- --------------------------- --------------------------------
Carol A. Few Robert P. Pincus
- 8 -
<PAGE> 9
EXHIBIT A
SCHEDULE OF DEFERRED COMPENSATION
FOR PURPOSES OF COMPUTING DEFERRED COMPENSATION
UNDER Section 1A(2)
<TABLE>
<CAPTION>
YEARS OF SERVICE AMOUNT PAYABLE
---------------- --------------
<S> <C>
1 0
2 12,493
3 60,715
4 110,636
5 162,342
6 216,039
7 274,024
8 336,642
9 404,132
10 476,722
11 550,000
12 600,000
13 650,000
14 700,000
15 750,000
</TABLE>
<PAGE> 10
EXHIBIT B
DESIGNATION OF BENEFICIARY
UNDER
DEFERRED COMPENSATION AGREEMENT
The undersigned, Robert P. Pincus, has entered into a Deferred
Compensation Agreement with Franklin National Bank (the "Bank"), effective
as of December 20, 1996 (the "Agreement"), which provides for the payment of
certain deferred compensation to me, subject to the terms and conditions of the
Agreement.
In accordance with the terms of the Agreement, I hereby designate
Roxanne Little as the sole primary beneficiary of any amounts payable by
reason of my death under the Agreement.
In the event that Roxanne Little shall predecease me, or shall die
before all of the deferred compensation that is payable under the terms of the
Agreement has been distributed, any such remaining deferred compensation shall
be payable to Liam Pincus .
If none of the beneficiaries designated above survives me, any
remaining deferred compensation payable under the Agreement at the time of my
death shall be paid to my executor or other legal representative. I further
understand that the designation of beneficiary set forth above may be changed
and revoked by me at any time, by delivering a new designation of beneficiary
to the Bank, at least ten (10) business days prior to the effective date of
such change.
WITNESS:
Carol A. Few Robert P. Pincus
- ---------------------------------- --------------------------------
Carol A. Few Robert P. Pincus
Dated: December 20, 1996
<PAGE> 1
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
THIS SPLIT-DOLLAR LIFE INSURANCE AGREEMENT (this "Agreement") is made,
entered into and effective for all purposes this 20th day of December, 1996, by
and between (i) FRANKLIN NATIONAL BANK OF WASHINGTON, D.C., a national banking
association (the "Corporation"), (ii) THE ROBERT P. PINCUS FAMILY TRUST, a
Maryland trust, acting by and through its Trustees, RONALD D. ABRAMSON and
HAROLD PINCUS (the "Owner"), and (iii) ROBERT P. PINCUS ("Employee").
WHEREAS, Employee is the President and Chief Executive Officer of the
Corporation;
WHEREAS, Employee's past services to the Corporation have contributed
to the success of the Corporation; and
WHEREAS, the Corporation desires to provide life insurance protection
for Employee's family in the event of Employee's death, subject to the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, do hereby agree as follows.
1. Description of Policy. The life insurance policy described in
and subject to the terms of this Agreement is that certain Policy attached
hereto and made a part hereof as Exhibit A.
2. Ownership of Policy. The Owner shall be the sole and absolute
owner of the Policy and shall retain all rights and privileges of ownership
with respect to the Policy, except as otherwise provided in this Agreement.
Notwithstanding the foregoing, the Owner shall not borrow against the cash
surrender value of the Policy, as defined therein (the "Cash Surrender Value").
3. Payment of Premiums.
A. On or before the due date of each premium on the
Policy, or within the grace period with respect thereto, the
<PAGE> 2
Corporation shall pay the full amount of such premium to the insurance company
issuing the Policy (the "Insurer").
B. In addition to the payment of premiums described in
Section 3A hereof, the Corporation shall furnish to Employee an annual
statement of the amount of income reportable by Employee for Federal and state
income tax purposes as a result of the Corporation's payment of such premiums.
4. Collateral Assignment of Policy. Simultaneously with the
execution of this Agreement, the Owner shall execute a Collateral Assignment of
the Policy to the Corporation (the "Collateral Assignment"), a copy of which
Collateral Assignment is attached hereto and made a part hereof as Exhibit B.
5. Death of Employee.
A. Upon the death of Employee, the Corporation and the
Owner shall promptly take all actions necessary in order to collect the death
benefits payable under the Policy. Such death benefits shall be distributable
as follows:
(1) Pursuant to the terms of the Collateral
Assignment, the Corporation shall be entitled to receive that portion of the
death benefits payable under the Policy which is equal to the aggregate amount
of premiums paid by it under this Agreement, determined as of the date of
Employee's death.
(2) The balance, if any, of the death benefits
provided under the Policy shall be paid directly to the beneficiary or
beneficiaries designated pursuant to the beneficiary designation provision of
the Policy.
B. The payment from the Insurer to the Corporation of
the amount described in Section 5A(1) hereof shall constitute full and complete
satisfaction of the obligations of the Owner under this Agreement. Upon
receipt of this amount, the Corporation shall execute any and all documents
required by the Insurer to effectuate a release of the Collateral Assignment.
- 2 -
<PAGE> 3
6. Termination of Agreement.
A. This Agreement shall terminate automatically upon the
occurrence of any of the following events:
(1) The bankruptcy, insolvency or receivership of
the Corporation.
(2) The cancellation or surrender of the Policy
by the Owner.
(3) The involuntary termination by the
Corporation of Employee's employment with Cause.
(4) The voluntary termination by Employee of
Employee's employment; provided, that such a termination of employment shall
not result in the termination of this Agreement if it occurs prior to December
20, 2002 and is preceded by a Change of Control.
(5) The involuntary termination by the
Corporation of Employee's employment without Cause; provided, that such a
termination of employment shall not result in the termination of this Agreement
if it occurs prior to December 20, 2002 and is preceded by a Change of Control.
(6) At any time by the Owner by giving written
notice of such termination to the Corporation. Such termination shall take
effect upon the date of such written notice.
(7) At any time after December 20, 2002 by the
Corporation by giving written notice of such termination to each of the Owner
and Employee, but only if such termination occurs after a termination by the
Corporation of the Deferred Compensation Agreement, dated December 20, 1996,
between Employee and the Corporation. Such termination of this Agreement shall
take effect upon the date of the written notice to Employee and the Owner.
B. Upon the termination of this Agreement, the
Corporation shall not be required to pay any further premiums on the
- 3 -
<PAGE> 4
Policy, other than premiums that are due and unpaid as of the effective date of
the termination.
C. If this Agreement is terminated pursuant to Section
6A(2), 6A(3), 6A(4), 6A(5) 6A(6) or 6A(7) hereof, the Corporation shall be
entitled to receive an amount from the Insurer, pursuant to the terms of the
Collateral Assignment, equal to the lesser of (i) the Cash Surrender Value or
(ii) the aggregate premiums paid by the Corporation on the Policy hereunder.
Upon the receipt thereof, the Corporation shall execute and deliver to the
Owner any and all documents required by Insurer to effectuate a release of the
Collateral Assignment.
D. For purposes of Section 6A hereof, a termination of
Employee's employment by the Corporation shall be deemed to have been with
"Cause" if such termination shall occur after any one or more of the following
events:
(1) Employee's conviction of a crime that is a
felony and/or a crime that involves moral turpitude;
(2) Employee's use of alcohol, which materially
impairs the ability of Employee to effectively perform his duties to the
Corporation, or Employee's illegal use, possession or sale of a controlled
substance, or his materially impaired performance due to the illegal use of
such a substance, but only if the Corporation provides written notice of its
intention to terminate Employee for such use, possession or sale and Employee
is provided with a reasonable opportunity to cure;
(3) Employee's willful and intentional failure to
perform his duties to the Corporation, but only if the Corporation provides
written notice of such failure to Employee and Employee is provided with a
reasonable opportunity to correct such failure; or
(4) Conduct by Employee, which is unethical,
fraudulent or unlawful, and which is materially harmful to the business or
reputation of the Corporation, but only if the Corporation provides written
notice of such conduct by Employee and Employee is provided with a reasonable
opportunity to correct such conduct.
- 4 -
<PAGE> 5
E. For purposes of Section 6A hereof, a "Change of
Control" shall be deemed to have occurred if any of the following events shall
take place:
(1) The Corporation is merged, consolidated or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization, less than 50% of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of Voting Stock (as that term is defined in Section 6E(3) hereof) of
the Corporation immediately prior to such transaction;
(2) The Corporation sells or otherwise transfers
all or substantially all of its assets to any other corporation or other legal
person;
(3) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that any person as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 20%
or more of the combined voting power of the then-outstanding securities of the
Corporation entitled to vote generally in the election of members of the Board
of Directors of the Corporation ("Voting Stock"); or
(4) The Corporation files a report or proxy
statement with the Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a strategic transaction of the
Corporation has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction.
7. Insurer Not a Party. Insurer shall be fully discharged from
any and all liability under the Policy upon payment of the death benefits
payable under the Policy or performance of its other obligations in accordance
with the terms and conditions of
- 5 -
<PAGE> 6
the Policy. In no event shall Insurer be deemed to be a party to this
Agreement, or any modification or amendment hereof.
8. Named Fiduciary and Funding Policy.
A. The Corporation is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall have the authority
to manage and control the operation and administration of this Agreement.
B. Consistent with the objectives of this Agreement, the
funding policy hereunder provides that all premiums on the Policy must be
remitted to Insurer when due.
9. Payment of Benefits and Claims Procedure. In the event of the
death of Employee prior to his termination of employment, benefits shall be
payable in accordance with Section 5A hereof. In the event that Employee
desires to contest any decision of the Corporation regarding any matter arising
hereunder, he shall file a claim in accordance with the following procedure:
A. Such claim must be made in writing to the
Corporation.
B. If such claim is wholly or partially denied, the
Corporation shall, within ninety (90) days after receipt of such claim, notify
Employee in writing of the denial of the claim. Such notice of denial shall be
in writing, shall be expressed in a manner calculated to be understood by
Employee, and shall contain (i) the specific reason or reasons for denial of
the claim, (ii) a specific reference to the pertinent provisions of the
Agreement upon which the denial is based, (iii) a description of any additional
material or information necessary for Employee to perfect the claim and an
explanation of why such material or information is necessary, and (iv) a
description of the claim review procedure under this Agreement. If notice of
the denial of a claim is not furnished by the Corporation to Employee in
accordance with the provisions of this Section 9B, the claim shall nonetheless
be deemed denied, and Employee shall be permitted to proceed to the review
stage provided in Section 9C hereof.
C. If a claim by Employee is denied, Employee may
request that the Corporation conduct a full and fair review of
- 6 -
<PAGE> 7
the denial of the claim, review any documents pertinent to such request, and
submit issues and comments in writing. Such request shall be in writing and
delivered to the Corporation within sixty (60) days after the receipt by
Employee of the written notice of denial of the claim, or such later date as
shall be reasonable, taking into account the nature of the claim and any other
attendant circumstances.
D. The Corporation shall deliver to Employee a written
decision on any claim filed hereunder within sixty (60) days after the receipt
of the aforesaid request for review. Such decision shall (i) be expressed in a
manner calculated to be understood by Employee, (ii) include specific reasons
for the decision, and (iii) contain specific references to the pertinent
provisions of the Agreement upon which the decision is based. If the
Corporation fails to furnish its decision on review within the applicable time
period to Employee, the claim shall nonetheless be deemed denied on review.
E. The Corporation shall have the right and power
reasonably to interpret and construe the provisions of this Agreement in good
faith and to decide all claims made hereunder.
10. Amendment of Agreement. This Agreement may not be amended,
altered or modified, except by a writing signed by all of the parties to this
Agreement.
11. Assignment of Agreement.
A. Subject to the Collateral Assignment and the
provisions of paragraph 2 hereof, the Owner shall have the right at any time to
assign or transfer any or all of its interest in the Policy and this Agreement
to any person or entity, by execution of a written assignment delivered to the
Corporation and to Insurer.
B. The Corporation shall not surrender or assign any of
its rights in the Policy to anyone other than the Owner.
12. Benefits and Burdens. This Agreement shall be binding upon,
and shall inure to the benefit of, (i) the Corporation and the Owner, and their
successors and assigns (pursuant to paragraph 11 hereof), and (ii) Employee,
and his executors or admin-
- 7 -
<PAGE> 8
istrators, heirs, legatees, assigns and personal and legal representatives.
13. Notices. Any and all notices provided for herein shall be
sufficient if in writing, and sent by recognized overnight courier or hand
delivery (with receipt therefor)or by certified or registered mail (return
receipt requested and first-class postage prepaid), as follows: (i) in the
case of the Corporation, to its principal office, (ii) in the case of Employee,
to his address as shown on the Corporation's records, and (iii) in the case of
the Owner, to Harold Pincus, Trustee, 11317 Burger Terrace, Potomac, Maryland
20854, and to Ronald D. Abramson, Trustee, 1776 K Street, N.W., Washington,
D.C. 20036.
14. Severability. The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.
15. Headings. The headings or other captions contained in this
Agreement are for convenience of reference only and shall not be used in
interpreting, construing or enforcing any of the provisions of this Agreement.
16. Governing Law. This Agreement shall be governed by the laws
of the District of Columbia, except to the extent preempted by Federal law.
17. Entire Agreement. This Agreement and the Exhibits hereto set
forth all of the promises, agreements and understandings of the parties hereto
with respect to the matters described herein, and there are no promises,
agreements or understandings, oral or written, express or implied, between them
with respect to such matters other than as set forth herein. Any and all prior
promises, agreements and understandings between the parties hereto with respect
to the matters described herein are hereby revoked.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the Corporation, the Owner and Employee have
executed this Agreement as of the day and year first above written.
CORPORATION:
-----------
ATTEST: FRANKLIN NATIONAL BANK OF
WASHINGTON, D.C., a national
banking association
Linda B. Johnson By:Diane M. Begg
- --------------------------- ---------------------------------
Linda B. Johnson, Secretary Diane M. Begg, Senior Vice
President and Chief Financial
Officer
[Corporate Seal]
WITNESS: OWNER:
-----
THE ROBERT P. PINCUS FAMILY TRUST
Parlena Johnson By:Ronald D. Abramson
- ------------------------- --------------------------------
ParLena Johnson Ronald D. Abramson, Trustee
By:Harold Pincus, Trustee
- ------------------------- ---------------------------------
Harold Pincus, Trustee
EMPLOYEE:
--------
Carol A. Few Robert P. Pincus
- ------------------------- ---------------------------------
Carol A. Few Robert P. Pincus
- 9 -
<PAGE> 10
EXHIBIT A
Life Insurance Policy
(To be attached.)
<PAGE> 11
COLLATERAL ASSIGNMENT AGREEMENT
THIS COLLATERAL ASSIGNMENT AGREEMENT (this "Agreement") is made,
entered into and effective for all purposes this 20th day of December, 1996, by
and between (i) FRANKLIN NATIONAL BANK OF WASHINGTON, D.C., a national banking
association (the "Assignee") and (ii) THE PINCUS FAMILY TRUST, a Maryland
trust, acting by and through its Trustees, RONALD D. ABRAMSON and HAROLD PINCUS
(the "Owner").
WITNESSETH:
WHEREAS, the Owner is the owner of that certain life insurance Policy
No. 9906841, issued by Massachusetts Mutual Life Insurance Company (the
"Insurer") and any supplemental contracts issued in connection therewith (such
policy and contracts being hereinafter collectively referred to as the
"Policy");
WHEREAS, the Owner and the Assignee have entered into a Split-Dollar
Life Insurance Agreement (the "Split-Dollar Agreement"), dated as of even date
herewith; and
WHEREAS, in consideration of the Assignee agreeing to pay the premiums
on the Policy and making certain other promises, the Owner agrees to grant the
Assignee an interest in the Policy as collateral security for the satisfaction
of the conditions contained in this Agreement and the Split-Dollar Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, do hereby agree as follows.
1. The Owner hereby assigns, transfers and sets over to the
Assignee, its successors and assigns, the following specific rights in the
Policy set forth in paragraph 3 hereof, subject to the terms and conditions
hereinafter set forth.
2. The assignment of the Policy is made, and the Policy is to be
held, as collateral security for any and all obligations of the Owner to the
Assignee, either now existing or hereafter
<PAGE> 12
arising, pursuant to this Agreement or pursuant to the terms of the
Split-Dollar Agreement.
3. It is understood and agreed that the Assignee shall have all
of the following rights:
A. The Assignee shall have the right to be repaid the
amount of its unreimbursed premium payments on the Policy or, if lesser, the
entire cash surrender value of the Policy, if the Policy is surrendered or
cancelled by the Owner or the Owner's transferee, or if the Split-Dollar
Agreement is terminated, as provided in paragraph 6 of the Split-Dollar
Agreement.
B. The Assignee shall have the right to be repaid the
amount of its unreimbursed premium payments on the Policy if the Owner dies, as
provided in Section 5A of the Split-Dollar Agreement.
4. The Owner hereby acknowledges and agrees that the Assignee's
right of repayment set forth in paragraph 3 of this Agreement shall not in any
way be reduced or offset by any obligation or liability which the Assignee
shall or may have to the Owner.
5. The Insurer is hereby authorized (and, in furtherance thereof,
is hereby absolved from any liability whatsoever) to recognize the Assignee's
claims to rights under this Agreement without in any manner investigating (a)
the reason for any action taken by the Assignee, (b) the validity or amount of
any of the liabilities of the Owner to the Assignee under the Split-Dollar
Agreement, (c) the existence of any default under the Split-Dollar Agreement,
(d) the giving of any notice required under the Split-Dollar Agreement, or (e)
the application to be made by the Assignee of the amounts received. A written
application by the Assignee shall be sufficient, in and of itself, for the
exercise of any rights under the Policy assigned under this Agreement to the
Assignee, and the written receipt of the Assignee for any sums received by it
shall constitute and be a full discharge and release therefor to the Insurer.
6. Except as expressly granted to the Assignee in this Agreement,
the Owner shall retain all incidents of ownership in the Policy, subject to the
provisions of the Split-Dollar Agreement.
- 2 -
<PAGE> 13
7. Upon full payment of the amounts due to the Assignee under
paragraph 3 of this Agreement and under the Split-Dollar Agreement, the
Assignee shall execute any and all documents required by the Insurer to
effectuate a release to the Owner of the Policy.
8. In the event of any conflict between the provisions of this
Agreement and the provisions of the Split-Dollar Agreement, the provisions of
this Agreement shall prevail.
9. This Agreement shall not be amended, altered or modified,
except by a writing signed by both of the parties hereto. This Agreement shall
be binding upon the Owner and the Insurer, and their respective successors and
assigns, and shall inure to the benefit of the Assignee, and its successors and
assigns.
10. This Assignment shall be governed by the laws of the District
of Columbia, except to the extent pre-empted by Federal law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ASSIGNEE:
--------
ATTEST: FRANKLIN NATIONAL BANK OF
WASHINGTON, D.C., a national
banking association
Linda B. Johnson By: Diane M. Begg
- --------------------------- ------------------------------
Linda B. Johnson, Secretary Diane M. Begg, Senior Vice
President and Chief Financial
Officer
[Corporate Seal]
- 3 -
<PAGE> 14
WITNESS: OWNER:
-----
THE PINCUS FAMILY TRUST
ParLena Johnson By: Ronald D. Abramson
- ------------------------- ------------------------------
ParLena Johnson Ronald D. Abramson, Trustee
By: Harold Pincus
- ------------------------- ------------------------------
Harold Pincus, Trustee
- 4 -
<PAGE> 1
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT (this "Agreement") is made,
entered into and effective for all purposes this 1st day of July, 1997, by and
between FRANKLIN NATIONAL BANK OF WASHINGTON, D.C., a national banking
association (the "Corporation"), and ROBERT P. PINCUS ("Employee").
WHEREAS, Employee is the President and Chief Executive Officer of the
Corporation;
WHEREAS, Employee's past services to the Corporation have contributed
to the success of the Corporation;
WHEREAS, the Corporation desires to recognize the valuable and
meritorious services performed on behalf of the Corporation by Employee and to
offer him an incentive to remain as an employee of the Corporation;
WHEREAS, Employee and the Corporation are parties to a Deferred
Compensation Agreement dated December 20, 1996; and
WHEREAS, Employee and the Corporation desire to amend and restate the
Deferred Compensation Agreement in its entirety.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants hereinafter set forth and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
1. Amount and Payment of Deferred Compensation.
A. For and in consideration of Employee's services to
the Corporation, upon the occurrence of a Triggering Event, the Corporation
shall pay to Employee, or (in the event of Employee's death) to Employee's
Designated Beneficiary, an amount of deferred compensation (the "Deferred
Compensation"), determined as follows:
(1) If the Triggering Event is Employee's death,
the amount of Deferred Compensation shall be equal to Fifty Thousand Dollars
($50,000), multiplied by the number of twelve
<PAGE> 2
(12)-month periods that have elapsed from December 20, 1995 through the date of
Employee's death.
(2) If the Triggering Event is any event other
than Employee's death, the amount of Deferred Compensation shall be determined
in accordance with that certain Schedule of Deferred Compensation, a copy of
which is attached hereto and made a part hereof as Exhibit A. For purposes of
determining the amount of Deferred Compensation payable to Employee under
Exhibit A, "Years of Service" shall mean the number of twelve (12)-month
periods that have elapsed from December 20, 1995 through the date of the
Triggering Event.
B. The Deferred Compensation described in Section 1A
hereof, as reduced by any appropriate Federal income or other withholding
taxes, shall be paid as follows:
(1) Unless the election described in Section
1B(2) hereof is made by Employee, the Deferred Compensation shall be paid to
Employee or Employee's Designated Beneficiary in a single lump-sum payment
within one hundred twenty (120) days after the date of the Triggering Event.
(2) At any time up until twelve (12) months prior
to the occurrence of a Triggering Event, Employee may irrevocably elect to have
the Deferred Compensation paid to Employee or Employee's Designated Beneficiary
in that number of annual installments as is equal to the number of twelve
(12)-month periods that have elapsed from December 20, 1995 through the date of
the Triggering Event. Such annual installments shall include equal amounts of
Deferred Compensation, plus interest on the unpaid amount of Deferred
Compensation at the prime rate of interest charged by the Corporation on the
date of the Triggering Event. The first such installment shall be paid on the
first day of the calendar quarter that is at least thirty (30) days after the
date of the Triggering Event. The remaining installments shall be paid on
successive anniversaries of the first installment payment.
C. For purposes of Section 1A and 1B hereof, a
"Triggering Event" shall mean the occurrence of any of the following:
(1) The death of Employee;
(2) The involuntary termination by the
Corporation of Employee's employment with Cause;
- 2 -
<PAGE> 3
(3) The voluntary termination by Employee of
Employee's employment; provided, that such a termination of employment shall
not constitute a Triggering Event if it occurs prior to December 20, 2002 and
is preceded by a Change of Control; or
(4) The involuntary termination by the
Corporation of Employee's employment without Cause; provided, that such a
termination of employment shall not constitute a Triggering Event if it occurs
prior to December 20, 2002 and is preceded by a Change of Control.
D. For purposes of Section 1C hereof, a termination of
Employee's employment by the Corporation shall be deemed to have been with
"Cause" if such termination shall occur after any one or more of the following
events:
(1) Employee's conviction of a crime that is a
felony and/or a crime that involves moral turpitude;
(2) Employee's use of alcohol, which materially
impairs the ability of Employee to effectively perform his duties to the
Corporation, or Employee's illegal use, possession or sale of a controlled
substance, or his materially impaired performance due to the illegal use of
such a substance, but only if the Corporation provides written notice of its
intention to terminate Employee for such use, possession or sale and Employee
is provided with a reasonable opportunity to cure;
(3) Employee's willful and intentional failure to
perform his duties to the Corporation, but only if the Corporation provides
written notice of such failure to Employee and Employee is provided with a
reasonable opportunity to correct such failure; or
(4) Conduct by Employee, which is unethical,
fraudulent or unlawful, and which is materially harmful to the business or
reputation of the Corporation, but only if the Corporation provides written
notice of such conduct by Employee and Employee is provided with a reasonable
opportunity to correct such conduct.
- 3 -
<PAGE> 4
E. For purposes of Section 1C hereof, a "Change of
Control" shall be deemed to have occurred if any of the following events shall
take place:
(1) The Corporation is merged, consolidated or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization, less than 50% of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of Voting Stock (as that term is defined in Section 6E(3) hereof) of
the Corporation immediately prior to such transaction;
(2) The Corporation sells or otherwise transfers
all or substantially all of its assets to any other corporation or other legal
person;
(3) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that any person as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 20%
or more of the combined voting power of the then-outstanding securities of the
Corporation entitled to vote generally in the election of members of the Board
of Directors of the Corporation ("Voting Stock"); or
(4) The Corporation files a report or proxy
statement with the Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a strategic transaction of the
Corporation has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction.
F. Employee shall complete and execute the Designation
of Beneficiary, attached hereto as Exhibit B, specifying who shall receive any
amounts of Deferred Compensation payable following the death of Employee.
- 4 -
<PAGE> 5
2. No Separate Fund.
A. The Corporation shall continue, at all times and for
all purposes, to have an interest in the amount of Deferred Compensation
payable to Employee hereunder, and such amount shall continue to be part of the
general assets of the Corporation and shall remain subject to the claims of the
general creditors of the Corporation, up until the time of actual payment by
the Corporation to Employee or Employee's Designated Beneficiary.
Notwithstanding the foregoing, the Corporation may establish, in its name, one
or more accounts earmarked as holding the Deferred Compensation.
B. No provisions or terms contained herein or the
establishment of any accounts or records on the books of the Corporation in
furtherance of carrying out the provisions of this Agreement shall be deemed to
create a trust or escrow arrangement of any kind, or to create a fiduciary
relationship, between the Corporation and Employee.
3. No Agreement to Be Employed. This Agreement is solely to
provide deferred compensation for services rendered by Employee to the
Corporation and is neither an agreement or commitment by the Corporation to
employ Employee nor an agreement or commitment of Employee to serve the
Corporation in any capacity.
4. Termination of Agreement.
A. The parties agree that at any time after December 20,
2002 the Corporation may terminate this Agreement upon written notice to
Employee. In the event of such a termination, the amount of Deferred
Compensation shall be determined in accordance with Section 1A(2) hereof, as if
the termination of this Agreement were a Triggering Event; provided, that, if
the date of the termination of this Agreement occurs between June 20th and
December 20th of a calendar year, the amount of Deferred Compensation shall be
determined under Section 1A(2) hereof as if a Triggering Event occurred on
December 20th of such year.
- 5 -
<PAGE> 6
B. Any Deferred Compensation payable as a result of the
termination of this Agreement shall be distributed in accordance with Section
1B(2) hereof.
5. Replacement of Prior Agreement; Future Amendments of
Agreement.
A. This Agreement amends, restates in its entirety and
supersedes the version of this Agreement entered into effective as of December
20, 1996.
B. This Agreement may not be amended, altered or
modified, except by a writing signed by each party to this Agreement.
6. Payment of Benefits and Claims Procedure. Upon the
termination of employment of Employee, the Deferred Compensation shall be
payable by the Corporation in accordance with Section 1 hereof. In the event
that Employee desires to contest any decision of the Corporation regarding the
Deferred Compensation or any other matter arising hereunder, he shall file a
claim in accordance with the following procedure:
A. Such claim must be made in writing to the
Corporation.
B. If such claim is wholly or partially denied, the
Corporation shall, within ninety (90) days after receipt of such claim, notify
Employee in writing of the denial of the claim. Such notice of denial shall be
in writing, shall be expressed in a manner calculated to be understood by
Employee, and shall contain (i) the specific reason or reasons for denial of
the claim, (ii) a specific reference to the pertinent provisions of the
Agreement upon which the denial is based, (iii) a description of any additional
material or information necessary for Employee to perfect the claim and an
explanation of why such material or information is necessary, and (iv) a
description of the claim review procedure under this Agreement. If notice of
the denial of a claim is not furnished by the Corporation to Employee in
accordance with the provisions of this Section 6B, the claim shall nonetheless
be deemed denied and Employee shall be permitted to proceed to the review stage
provided in Section 6C hereof.
- 6 -
<PAGE> 7
C. If a claim by Employee is denied, Employee may
request that the Corporation conduct a full and fair review of the denial of
the claim, review any documents pertinent to such request, and submit issues
and comments in writing. Such request shall be in writing and delivered to the
Corporation within sixty (60) days after the receipt by Employee of the written
notice of denial of the claim, or such later date as shall be reasonable,
taking into account the nature of the claim and any other attendant
circumstances.
D. The Corporation shall deliver to Employee a written
decision on any claim filed hereunder within sixty (60) days after the receipt
of the aforesaid request for review. Such decision shall (i) be expressed in a
manner calculated to be understood by Employee, (ii) include specific reasons
for the decision, and (iii) contain specific references to the pertinent
provisions of the Agreement upon which the decision is based. If the
Corporation fails to furnish its decision on review within the applicable time
period to Employee, the claim shall nonetheless be deemed denied on review.
E. The Corporation shall have the right and power
reasonably to interpret and construe the provisions of this Agreement in good
faith and to decide all claims made hereunder.
7. No Assignment. The rights of Employee to any payments
hereunder are not subject to voluntary or involuntary transfer, alienation or
assignment and, to the fullest extent permitted by law, are not subject to
attachment, execution, garnishment, sequestration or other legal or equitable
process.
8. Benefits and Burdens. This Agreement shall be binding upon,
and shall inure to the benefit of, (i) the Corporation and its successors and
assigns, and (ii) Employee and his executors or administrators, heirs, legatees
and personal and legal representatives.
9. Notices. Any and all notices provided for herein shall be
sufficient if in writing, and sent by recognized overnight courier or hand
delivery (with receipt therefor) or by certified or registered mail (return
receipt requested and first-class postage prepaid), as follows: (i) in the case
of the Corporation,
- 7 -
<PAGE> 8
to its principal office, and (ii) in the case of Employee, to his address as
shown on the Corporation's records.
10. Severability. The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any one or more of
the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof.
11. Headings. The headings or other captions contained in this
Agreement are for convenience of reference only and shall not be used in
interpreting, construing or enforcing any of the provisions of this Agreement.
12. Governing Law. This Agreement shall be governed by the laws
of the District of Columbia, except to the extent pre-empted by Federal law.
13. Entire Agreement. This Agreement sets forth all of the
promises, agreements and understandings of the parties hereto with respect to
the matters described herein, and there are no promises, agreements or
understandings, oral or written, express or implied, between them with respect
to such matters other than as set forth herein. Any and all prior promises,
agreements and understandings between the parties hereto with respect to the
matters described herein are hereby revoked.
IN WITNESS WHEREOF, the Corporation and Employee have executed this
Agreement as of the day and year first above written.
- 8 -
<PAGE> 9
CORPORATION:
-----------
ATTEST: FRANKLIN NATIONAL BANK OF
WASHINGTON, D.C., a national
banking association
Linda B. Johnson By:Diane M. Begg
- --------------------------- ------------------------------
Linda B. Johnson, Secretary Diane M. Begg, Senior Vice
President and Chief Financial
Officer
[Corporate Seal]
WITNESS: EMPLOYEE:
--------
Carol A. Few Robert P. Pincus
- --------------------------- -------------------------------
Robert P. Pincus
- 9 -
<PAGE> 10
EXHIBIT A
SCHEDULE OF DEFERRED COMPENSATION
FOR PURPOSES OF COMPUTING DEFERRED COMPENSATION
UNDER Section 1A(2)
<TABLE>
<CAPTION>
Years of Service Amount Payable
---------------- --------------
<S> <C>
1 0
2 12,493
3 60,715
4 110,636
5 162,342
6 216,039
7 274,024
8 336,642
9 404,132
10 476,722
11 550,000
12 600,000
13 650,000
14 700,000
15 750,000
</TABLE>
<PAGE> 11
EXHIBIT B
DESIGNATION OF BENEFICIARY
UNDER
DEFERRED COMPENSATION AGREEMENT
The undersigned, Robert P. Pincus, has entered into a Deferred
Compensation Agreement with Franklin National Bank ("Bank"), effective as of
December 20, 1996 (the "Agreement"), which provides for the payment of certain
deferred compensation to me, subject to the terms and conditions of the
Agreement.
In accordance with the terms of the Agreement, I hereby designate
Roxanne Little as the sole primary beneficiary of any amounts payable by
reason of my death under the Agreement.
In the event that Roxanne Little shall predecease me, or shall die
before all of the deferred compensation that is payable under the terms of the
Agreement has been distributed, any such remaining deferred compensation shall
be payable to Liam Pincus .
If none of the beneficiaries designated above survives me, any
remaining deferred compensation payable under the Agreement at the time of my
death shall be paid to my executor or other legal representative. I further
understand that the designation of beneficiary set forth above may be changed
and revoked by me at any time, by delivering a new designation of beneficiary
to the Bank, at least ten (10) business days prior to the effective date of
such change.
WITNESS:
Carol A. Few Robert P. Pincus
- -------------------------------- ---------------------------------------
Carol A. Few Robert P. Pincus
Dated: December 20, 1996
<PAGE> 1
FRANKLIN BANCORPORATION, INC.
EXHIBIT 11
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE:
(DOLLARS IN THOUSANDS - EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD FOR THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C>
Net earnings $ 1,541 $ 1,221 $ 4,345 $ 3,237
Primary earnings (A) 1,541 1,221 4,345 3,237
Fully diluted earnings (B) 1,541 1,221 4,345 3,237
Weighted average shares outstanding 6,538,702 6,343,411 6,504,845 6,329,166
Dilutive common stock equivalents for primary
earnings per share 406,144 258,676 361,797 266,856
---------- ---------- ----------- -----------
Weighted average shares and common equivalent shares
outstanding for primary earnings per share (C) 6,944,846 6,602,087 6,866,642 6,596,022
Equivalent shares assuming full dilution 435,210 277,419 432,217 276,587
----------- ---------- ----------- -----------
Weighted average shares and common equivalent
shares outstanding for fully diluted earnings
per share (D) 6,973,912 6,620,830 6,937,062 6,605,753
Earnings per share
Primary (A)/(C) $ 0.22 $ 0.18 $ 0.63 $ 0.49
Fully diluted (B)/(D) $ 0.22 $ 0.18 $ 0.63 $ 0.49
</TABLE>
49
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 25,413
<INT-BEARING-DEPOSITS> 629
<FED-FUNDS-SOLD> 31,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 93,263
<INVESTMENTS-CARRYING> 83,429
<INVESTMENTS-MARKET> 82,694
<LOANS> 266,379
<ALLOWANCE> (3,990)
<TOTAL-ASSETS> 507,079
<DEPOSITS> 350,426
<SHORT-TERM> 115,176
<LIABILITIES-OTHER> 4,180
<LONG-TERM> 0
0
0
<COMMON> 661
<OTHER-SE> 36,636
<TOTAL-LIABILITIES-AND-EQUITY> 507,079
<INTEREST-LOAN> 17,072
<INTEREST-INVEST> 7,772
<INTEREST-OTHER> 1,107
<INTEREST-TOTAL> 25,951
<INTEREST-DEPOSIT> 7,366
<INTEREST-EXPENSE> 10,239
<INTEREST-INCOME-NET> 15,712
<LOAN-LOSSES> 285
<SECURITIES-GAINS> 25
<EXPENSE-OTHER> 10,081
<INCOME-PRETAX> 7,116
<INCOME-PRE-EXTRAORDINARY> 4,345
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,345
<EPS-PRIMARY> $0.63
<EPS-DILUTED> $0.63
<YIELD-ACTUAL> 7.93
<LOANS-NON> 363
<LOANS-PAST> 128
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,842
<CHARGE-OFFS> 317
<RECOVERIES> 180
<ALLOWANCE-CLOSE> 3,990
<ALLOWANCE-DOMESTIC> 3,990
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 499
</TABLE>
