BEDFORD BANCSHARES, INC.
December 17, 1996
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Bedford Bancshares,
Inc., I cordially invite you to attend the Annual Meeting of Stockholders to be
held at the Olde Liberty Station, 515 Bedford, Avenue, Bedford, Virginia 24523
on January 22, 1997, at 2:00 p.m. The attached Notice of Annual Meeting and
Proxy Statement describe the formal business to be transacted at the Meeting.
During the Meeting, I will also report on the operations of the Company.
Directors and officers of the Company will be present to respond to any
questions stockholders may have.
Whether or not you plan to attend the Meeting, please sign and date the
enclosed Proxy Card and return it in the accompanying postage-paid return
envelope as promptly as possible. This will not prevent you from voting in
person at the Meeting, but will assure that your vote is counted if you are
unable to attend the Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/ Harold K. Neal
Harold K. Neal
President
<PAGE>
BEDFORD BANCSHARES, INC.
125 W. MAIN STREET
BEDFORD, VIRGINIA 24523
(540) 586-2590
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on January 22, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Bedford Bancshares, Inc. ("the Company"), will be held at the Olde
Liberty Station, 515 Bedford Avenue, Bedford, Virginia on January 22, 1997, at
2:00 p.m.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company for terms of three
years each and one director for a term of two years.
2. The ratification of the appointment of B.D.O. Seidman, LLP as
independent auditors of Bedford Bancshares, Inc. for the fiscal
year ending September 30, 1997;
3. The transaction of such other matters as may properly come before
the Meeting or any adjournments thereof. The Board of Directors
is not aware of any other business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Stockholders of record at the close
of business on December 6, 1996, are the stockholders entitled to vote at the
Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed Proxy Card which is
solicited by the Board of Directors and to return it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Nancy T. Snyder
Nancy T. Snyder
Corporate Secretary
Bedford, Virginia
December 17, 1996
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
OF
BEDFORD BANCSHARES, INC.
125 W. MAIN STREET
BEDFORD, VIRGINIA 24523
ANNUAL MEETING OF STOCKHOLDERS
January 22, 1997
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bedford Bancshares, Inc. (the "Company") to
be used at the Annual Meeting of Stockholders of the Company which will be held
at the Olde Liberty Station, 515 Bedford, Avenue, Bedford, Virginia on January
22, 1997, at 2:00 p.m. local time. The accompanying Notice of Meeting and this
Proxy Statement are being first mailed to stockholders on or about December 17,
1996. The Company acquired all of the outstanding stock of Bedford Federal
Savings Bank (the "Savings Bank"), issued in connection with the Savings Bank's
mutual-to-stock conversion on August 19, 1994.
At the Meeting, stockholders will consider and vote upon (i) the election
of four directors; and (ii) the ratification of the appointment of B.D.O.
Seidman, LLP as independent auditors of the Company for the fiscal year ending
September 30, 1997. The Board of Directors knows of no additional matters that
will be presented for consideration at the Meeting. Execution of a proxy,
however, confers on the designated proxy holder discretionary authority to vote
the shares represented by such proxy in accordance with their best judgment on
such other business, if any, that may properly come before the Meeting or any
adjournment thereof.
REVOCABILITY OF PROXIES
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors of the Company will
be voted in accordance with the directions given therein. Where no instructions
are indicated, signed proxies will be voted for the nominees for directors set
forth below and "FOR" the other listed proposals. The proxy confers
discretionary authority on the persons named therein to vote with respect to the
election of any person as a director where the nominee is unable to serve, or
for good cause will not serve, and matters incident to the conduct of the
Meeting.
-1-
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Stockholders of record as of the close of business on December 6, 1996
("Voting Record Date"), are entitled to one vote for each share of Common Stock
of the Company then held. As of the Voting Record Date, the Company had
1,143,669 shares of Common Stock issued and outstanding.
The Articles of Incorporation of the Company provide that in no event
shall any record owner of any outstanding Common Stock which is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the then outstanding shares of Common Stock (the "Limit") be entitled or
permitted to any vote with respect to the shares held in excess of the Limit.
Beneficial ownership is determined pursuant to the definition in the Articles of
Incorporation and includes shares beneficially owned by such person or any of
his or her affiliates or associates (as defined in the Articles of
Incorporation), shares which such person or his or her affiliates or associates
have the right to acquire upon the exercise of conversion rights or options and
shares as to which such person and his or her affiliates or associates have or
share investment or voting power, but shall not include shares beneficially
owned by any employee stock ownership or similar plan of the issuer or any
subsidiary.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. With respect to any matter, any shares for which a broker indicates on
the proxy that it does not have discretionary authority as to such shares to
vote on such matter (the "Broker Non-Votes") will be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to ratify any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the election of directors (Proposal I), the proxy card being
provided by the Board enables a stockholder to vote for the election of the
nominees proposed by the Board, or to withhold authority to vote for one or more
of the nominees being proposed. Under the Company's Bylaws, directors are
elected by a plurality of votes cast, without respect to either (i) Broker
Non-Votes or (ii) proxies as to which authority to vote for one or more of the
nominees being proposed is withheld.
As to the ratification of independent auditors as set forth in Proposal II
and all other matters that may properly come before the Meeting, by checking the
appropriate box, a stockholder may: (i) vote "FOR" the item, (ii) vote "AGAINST"
the item, or (iii) "ABSTAIN" with respect to the item. Under the Company's
Articles of Incorporation and Bylaws, unless otherwise required by law, all
other matters shall be determined by a majority of votes cast affirmatively or
negatively without regard to (a) Broker Non-Votes, or (b) proxies marked
"ABSTAIN" as to that matter. An affirmative vote of the holders of a majority of
Common Stock present at the Meeting, in person or by proxy, and entitled to
vote, is required to constitute stockholder approval.
Persons and groups owning in excess of 5% of the Company's Common Stock
are required to file certain reports regarding such ownership pursuant to the
1934 Act. The following table sets forth, as of Voting Record Date, certain
information as to the Common Stock beneficially owned by persons and groups in
excess of 5% of the Company's Common Stock and the ownership of all executive
officers and directors of the Company as a group. Management knows of no person
other than those set forth below who owns more than 5% of the Company's
outstanding shares of Common Stock at the Voting Record Date.
-2-
<PAGE>
<TABLE>
<CAPTION>
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership(2) Outstanding
- ------------------------------------ ----------------------- ---------------------
<S> <C> <C>
Bedford Federal Savings Bank 79,433 6.95%
Employee Stock Ownership Plan Trust ("ESOP")
125 W. Main Street
Bedford, Virginia
All Directors and Executive Officers as a Group 167,876 14.68%
(11 persons)
</TABLE>
- ----------------------------------
(1) The ESOP purchased such shares for the exclusive benefit of plan employee
participants with funds borrowed from the Company. These shares are held
in a suspense account and are allocated among ESOP participants annually
on the basis of total gross compensation as the ESOP debt is repaid.
Directors Bond, Cooper, Garrett, Neal and Putney and Nancy T. Snyder serve
as the ESOP administrative committee ("ESOP Committee") and Directors
Bond, Cooper, Garrett and Putney serve as the ESOP trustees ("ESOP
Trustees"). The ESOP Committee or the Board instructs the ESOP Trustees
regarding investment of ESOP plan assets. The ESOP Trustees must vote all
shares allocated to participant accounts under the ESOP as directed by
participants. Unallocated shares and shares for which no timely voting
directive is received are voted by the ESOP Trustees as directed by the
ESOP Committee. As of December 6, 1996, 17,333 shares have been allocated
under the ESOP to participant accounts.
(2) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole or shared voting and investment
power, unless otherwise indicated. Includes options to purchase an
additional 16,939 shares held by executive officers and directors granted
under the 1994 Stock Option Plan which are exercisable within 60 days of
the Voting Record Date. Includes 27,096 shares which were purchased and
awarded under the Recognition and Retention Plan ("RRP"). See "Information
with Respect to Nominees for Director; Directors Whose Terms Continue; and
Executive Officers."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Common Stock of the Company is registered pursuant to Section 12(g) of
the 1934 Act. The officers and directors of the Company and beneficial owners of
greater than 10% of the Company's Common Stock ("10% beneficial owners") are
required to file reports on Forms 3, 4 and 5 with the Securities and Exchange
Commission ("SEC") disclosing changes in beneficial ownership of the Common
Stock. Based on the Company's review of such ownership reports, no officer,
director or 10% beneficial owner of the Company failed to file such ownership
reports on a timely basis for the fiscal year ended September 30, 1996.
-3-
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR;
DIRECTORS WHOSE TERMS CONTINUE; AND EXECUTIVE OFFICERS
Election of Directors
The Company's Articles of Incorporation require that directors be divided
into three classes, as nearly equal in number as possible, each class to serve
for a three year period, with approximately one-third of the directors elected
each year. The Board of Directors currently consists of eight members. Three
directors will be elected at the Meeting, to serve for a three-year term, and
one director will be elected to serve for a two year term as noted below, or
until his successor has been elected and qualified.
Mr. William T. Powell has been nominated by the Board of Directors to serve
as a Director for a two year term to expire in 1998. Mr. Powell was elected by
the Board on November 20, 1996 to fill the vacancy created by the death of T.
Glenn Bradley. George N. Cooper, William P. Pickett and W. Henry Walton, Sr.
have been nominated by the Board of Directors to serve as directors for
three-year terms to expire in 2000. Messrs. Cooper, Pickett and Walton are
currently members of the Board. It is intended that the persons named in the
proxies solicited by the Board will vote for the election of the named nominees.
If the nominees are unable to serve, the shares represented by all valid proxies
will be voted for the election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate the vacancy. At
this time, the Board knows of no reason why the nominees might be unavailable to
serve.
The following table sets forth the nominees and the directors continuing in
office, their name, age, the year they first became a director of the Company or
the Savings Bank, the Company's wholly-owned subsidiary, the expiration date of
their current term as a director, and the number and percentage of shares of the
Company's Common Stock beneficially owned. Each director of the Company is also
a member of the Board of Directors of the Savings Bank.
-4-
<PAGE>
<TABLE>
<CAPTION>
Shares of
Year First Current Common Stock
Elected or Term to Beneficially Owned Percent
Name Age(1) Appointed(2) Expire (3)(4) of Class
- ---- ------ ------------ ------- -------- --------
Board Nominee for Term to Expire in 1998
<S> <C> <C> <C> <C> <C>
William T. Powell 65 1996 1997 200 .02%
Board Nominees for Term to Expire in 2000
George N. Cooper 68 1988 1997 19,307(5)(6)(7) 1.69%
William P. Pickett 63 1986 1997 19,441(6)(7) 1.70%
W. Henry Walton, Jr. 71 1955 1997 14,432(5)(6)(7) 1.26%
THE BOARD OF DIRECTORS RECOMMENDS
THAT THE NOMINEES BE ELECTED AS DIRECTORS
Directors Continuing In Office
Hugh H. Bond 64 1963 1998 14,307(5)(6)(7) 1.25%
Harry W. Garrett, Jr. 60 1970 1999 16,810(5)(6)(7) 1.47%
Harold K. Neal 59 1972 1999 38,816(5)(8) 3.39%
Macon C. Putney 61 1977 1998 19,307(5)(6)(7 1.69%
</TABLE>
- ---------------------------------
(1) At September 30, 1996.
(2) Refers to the year the individual first became a director of the Savings
Bank. All directors of the Savings Bank became directors of the Company
when it was incorporated in March 1994.
(3) Beneficial ownership as of the Voting Record Date.
(4) Pursuant to rules promulgated under the 1934 Act, a person or entity is
considered to beneficially own shares of Common Stock if he or she
directly or indirectly has or shares (1) voting power, which includes the
power to vote or to direct the voting of the shares; or (2) investment
power, which includes the power to dispose or direct the disposition of
the shares. Unless otherwise indicated, includes all shares held directly
by the named individuals as well as by spouses, minor children in trust
and other indirect ownership, over which shares the named individual
effectively exercises sole voting and investment power.
(5) Excludes 79,433 shares of Common Stock (6.95%) of the issued and
outstanding shares held by the ESOP of the Savings Bank for which such
individuals serve as a member of the ESOP Committee or Trustee Committee
and exercise shared voting and investment power. Shares which are
unallocated to participating employees (presently 62,667 shares) and
shares for which no voting directions are received are voted by the plan
trustee. Once allocated to participant accounts, such Common Stock will be
voted by the plan trustee as directed by the plan participant as the
beneficial owner of such Common Stock. The plan trustee acts as a
fiduciary within the meaning of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). The individuals serving as plan trustee
disclaim beneficial ownership of stock held under the ESOP for which they
serve as plan trustee.
(Footnotes continued on the next page.)
-5-
<PAGE>
(6) Includes 1,722 restricted shares granted to such individual pursuant to
the RRP which remain unvested and will continue to vest at a rate of
one-fifth of the total initially granted (2,153 shares) each year
beginning January 25, 1996. Each individual possesses sole voting power of
such shares, however, each recipient does not possess investment power
until such shares vest.
(7) Includes 2,154 shares which may be acquired pursuant to the exercise of
stock options which are exercisable within 60 days of the Voting Record
Date (thereby increasing the number of shares outstanding by an equal
amount).
(8) Includes 10,050 restricted shares granted to such individual pursuant to
the RRP which remain unvested and will continue to vest at a rate of
one-fifth of the total initially granted (12,563 shares) each year
beginning January 25, 1996. Each individual possesses sole voting power of
such shares, however, each recipient does not possess investment power
until such shares vest. Includes 12,564 shares which may be acquired
pursuant to the exercise of stock options which are exercisable within 60
days of the Voting Record Date (thereby increasing the number of shares
outstanding by an equal amount).
Director Biographical Information
The principal occupation of each director and each nominee for director of
the Company for the last five years is set forth below.
Hugh H. Bond served as President of the Savings Bank since 1970. On October
16, 1996, Mr. Bond was appointed Chairman of the Board to fill the vacancy
created by the death of Mr. T. Glynn Bradley. Mr. Bond has been associated with
Scott and Bond, Inc., an independent insurance and real estate firm for over
forty years and served as the firm's President and CEO until September 1994, at
which time he sold his interest in the corporation. Mr. Bond currently serves as
an Associate Real Estate Broker with Scott & Bond, Inc. He is a member of the
Board of Directors of Piedmont Label Co., Inc., and FFE, the Savings Bank's
wholly owned subsidiary.
George N. Cooper retired as an insurance agent of State Farm Insurance
Companies in January 1994 after 38 years of service. Currently, Mr. Cooper is
President and owns 25% of Montvale Car Wash, Inc. Mr. Cooper, a Shriner and past
Master of the Bedford Masonic Lodge in Moneta, Virginia, is involved in many
community and civic activities. He is a former Chairman of the Bedford County
Industrial Development Authority and currently serves as Vice Chairman of the
Board of Directors of the Moneta Medical Center.
Harry W. Garrett, Jr. is an attorney with the law firm of Garrett &
Garrett. He was admitted to the Bar in 1961 at which time he began to practice
in Bedford, Virginia. He is currently a member and past President of the Bedford
County Bar Association and a member of the Virginia and American Bar
Associations, Virginia Trial Lawyers Association and American Board of Trial
Advocates. Mr. Garrett served as Commonwealth's Attorney for Bedford County from
1968-1979. He has been active in community and civic organizations and is a past
President of the Bedford Lions Club and a member of the Board of Directors of
the Bedford Area Chamber of Commerce. Mr. Garrett is also a member of the Board
of Directors of FFE, the Savings Bank's wholly owned subsidiary.
Harold K. Neal was first employed by the Savings Bank in 1971 as Executive
Vice President and Chief Executive Officer. Mr. Neal became President on October
16, 1996. Prior to joining Bedford Federal, Mr. Neal was employed with First
Federal Savings Bank in Lynchburg, Virginia for 13 years. He is a past Chairman
of the Board of Governors of the Virginia League of Savings Institutions and
currently serves on the Board of Directors and the Executive Committee of the
America's Community Bankers. Mr. Neal is active in various community and civic
affairs. Past directorships include the
-6-
<PAGE>
Bedford Area YMCA, which he helped organize, Bedford Memorial Hospital, Bedford
Centertown Association, Bedford Country Club and the Lynchburg Home Builders
Association. He currently serves on the Board of the Bedford Chapter of the
American Heart Association, and the Bedford Community Health Foundation. Mr.
Neal is also a member of the Board of Directors and President of FFE.
William P. Pickett has been the Executive Director of the Elks National
Home since 1985. He retired from Armco, Inc., Butler, Pennsylvania prior to
assuming his position with the Elks National Home. Mr. Pickett is a past
President of the Bedford Chapter of the American Red Cross and a past member of
the Boards of Directors of the Bedford Area Chamber of Commerce, Bedford Main
Street, Inc., the Library Advisory Council and was a member of the Governor's
Task Force regarding Homes for Adults Legislation. He currently serves on the
Board of Directors of the Bedford Life Saving Crew, the Advisory Committee of
the Bedford County School of Practical Nursing and is a member of the City
Industrial Development Authority.
William T. Powell is a CPA and a partner in the Lynchburg office of Cherry,
Bekaert & Holland, L.L.P., a regional firm of public accountants and
consultants, where he has worked principally with financial institutions. He is
a member of various state and national professional associations, with five
years service on the American Institute of CPA's Committee on Savings and Loan
Accounting and Auditing. He is a past president of the Virginia society for
CPA's Committee on Financial Institutions, the Lynchburg Chapter of the
Institute of Management Accountants, and the Lynchburg Host Lions Club.
Macon C. Putney is an attorney and has been engaged in general practice
with the law firm of Putney & Putney since 1962. He is a member of the Bedford
County and Virginia State Bar Associations. Mr. Putney is active in the Bedford
Baptist Church and is a former member of the Zoning Appeals Board for the City
of Bedford. Mr. Putney is also a member of the Board of Directors of First
Financial Enterprises, Inc. ("FFE").
W. Henry Walton, Jr. is a realtor and real estate appraiser with the firm
of Scott & Bond, Inc. Prior to his real estate business, Mr. Walton operated a
general merchandise store and was an independent farmer. He is a former member
of the Bedford County Board of Supervisors, is a member and past President of
the Bedford Area Chamber of Commerce and currently serves as Secretary-
Treasurer of the Bedford County Industrial Development Corporation.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company conducts its business through
meetings of the Board and through activities of its committees. All committees
act for both the Company and the Savings Bank. During the fiscal year ended
September 30, 1996, the Board of Directors held 12 regular meetings and one
special meeting. No director attended fewer than 75% of the total meetings of
the Board of Directors of the Savings Bank and committees on which such director
served during the fiscal year ended September 30, 1996.
-7-
<PAGE>
The Audit Committee is comprised of Messrs. Bond, Cooper, Pickett, and
Putney. The Audit Committee annually selects the independent auditors and meets
with the accountants to discuss the annual audit. The Audit Committee is further
responsible for internal controls and financial reporting. The Committee met
once in fiscal 1996.
The Executive Committee consists of Messrs. Bond, Neal and Walton. The
Executive Committee meets on call. It offers guidance and sets policy for the
Savings Bank's management. When necessary, it performs functions of the full
Board during the intervals between meetings of the Board of Directors. The
Executive Committee met once in fiscal 1996.
The Personnel Committee consists of Messrs. Bond, Garrett, Putney and
Cooper. The Personnel Committee meets annually to review and recommend salary
adjustments for the Bank's senior management. The Personnel Committee met once
in fiscal 1996.
The Company's Board of Directors act as a nominating committee for
selecting the management nominees for election as directors in accordance with
the Company's Bylaws. In its deliberations, the Nominating Committee considers
the candidate's knowledge of the banking business and involvement in community,
business and civic affairs, and also considers whether the candidate would allow
the Board to continue its geographic diversity that provides for adequate
representation of each of its market areas. While the Board of Directors will
consider nominees recommended by stockholders, it has not actively solicited
recommendations from the Company's stockholders for nominees nor, subject to the
procedural requirements set forth in the Company's Bylaws, established any
procedures for this purpose. During fiscal year 1996, the Board of Directors met
once as the Nominating Committee.
Stockholder Nominations
Article 7, Section D of the Company's Articles of Incorporation provides
that stockholders entitled to vote for the election of directors may name
nominees for election to the Board of Directors. Any such nominations must be
submitted to the Secretary of the Company in writing, in a form as set forth in
the Articles, not less than 14 days nor more than 60 days prior to the
anniversary date of the immediately preceding annual meeting; provided, however,
if fewer than 21 days notice of the meeting is given to stockholders, such
written notice shall be received no later than the close of the tenth day
following the day on which notice of the meeting was mailed. The Company is not
required to include such nominations in its Proxy Statement. However, if such a
nomination is properly made, ballots will be provided for use by stockholders at
the Meeting bearing the name of such nominee or nominees.
Directors' Compensation
The Company does not presently compensate its directors. However, Chairman
Bond is paid $800 per meeting of the Board of Directors of the Savings Bank
attended and all other directors are paid $600 per meeting attended.
Non-salaried committee members are paid $100 per meeting attended. Director fees
paid during fiscal 1996 by the Savings Bank totalled $63,850.
In addition, non-employee Directors of the Company received awards of
restricted stock under the RRP. Each such Director received 2,153 shares of
restricted Common Stock as of January 25, 1995, which shall be non-forfeitable
at the rate of 20% annually on and after January 25, 1996. Further, each
non-employee Director received stock options to purchase 5,384 shares of Common
Stock at $11.00 per share. Such options shall be first exercisable at the rate
of 20% annually on and after January 25, 1996.
-8-
<PAGE>
See "Management Remuneration and Other Information -- Executive Compensation,"
for information regarding stock awards to the chief executive officer, who is
also a member of the Board of Directors.
Executive Officers
The following table sets forth information with respect to the executive
officers of the Company.
Directors Age (1) Position
Harold K. Neal 59 President and Chief Executive Officer(2)
Russell E. Millner 54 Vice President
James W. Smith 51 Vice President, Treasurer and Comptroller
Nancy T. Snyder 34 Corporate Secretary
- ---------------------
(1) At September 30, 1996.
(2) Mr. Neal was elected President on October 16, 1996, to fill the position
previously held by Mr. Bond, who was elected Chairman of the Board.
Since the formation of the Company, none of its executive officers,
directors or other personnel received remuneration from the Company. Executive
officers receive compensation from the Savings Bank. See "-- Executive
Compensation." The principal occupation of each non-director executive officer
of the Savings Bank is set forth below. All executive officers have held their
present positions for five years unless otherwise stated.
Russell E. Millner was first employed by the Savings Bank in 1977 as Vice
President. Prior to joining Bedford Federal, Mr. Millner was Vice President of
Liberty Bank of Bedford. His current responsibilities include overseeing the
Savings Bank's lending departments and branch operations. Mr. Millner is also a
member of the Board of Directors and Secretary of FFE.
James W. Smith was first employed by the Savings Bank in 1979 as
Comptroller. Prior to joining Bedford Federal, Mr. Smith was Regional Accounting
Manager for Macke Company and served as a staff accountant with two regional CPA
firms. He received his Public Accounting Certification in 1975. He was elected
Treasurer of Bedford Federal in 1987 and Vice President/Treasurer in 1992 and is
currently the Savings Bank's Chief Financial Officer. Mr. Smith is also
Treasurer of FFE.
Nancy T. Snyder was employed by the Savings Bank in 1987 as Executive
Secretary, was promoted to Administrative Assistant in 1993 and named Corporate
Secretary effective January 1, 1995. Her current responsibilities include human
resources, investor relations and various other duties related to the Savings
Bank's administration. Ms. Snyder is the President of the Bedford Junior Women's
Club and past president of the local chapter of the Institute for Financial
Education and is active in the Bedford Area Chamber of Commerce.
-9-
<PAGE>
MANAGEMENT REMUNERATION AND OTHER INFORMATION
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the Chief Executive Officer of the
Savings Bank for the years ended September 30, 1996, 1995 and 1994. No other
executive officer of the Savings Bank had a salary and bonus during such periods
that exceeded $100,000 for services rendered in all capacities to the Savings
Bank or the Company in the aggregate.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
- --------------------------------------------------------------- -----------------------------
Securities
Restricted Underlying
Name and Other Annual Stock Options/ All Other
Principal Position Year Salary Bonus Compensation(1) Awards($)(2) SARs(#)(3) Compensation(4)(5)
- ------------------ ---- ------ ----- --------------- ------------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harold K. Neal 1996 $100,000 $ 500 $7,600 $ -- -- $23,843(6)
President and 1995 $ 90,000 $ 500 $5,850 141,334 31,409 $25,127(6)
Chief Executive 1994 $ 83,500 $4,500 $7,300 -- -- $10,080
Officer
</TABLE>
- ------------------------
(1) Includes fees for service on the board of directors of Bedford Federal and
FFE. Excerpt as otherwise disclosed, for fiscal years ended 1996, 1995 and
1994, there were no (a) perquisites over the lessor of $50,000 or 10% of
the named executive officer's total salary and bonus for the year; (b)
payments of above market or preferential earnings on deferred compensation;
(c) payments of earnings with respect to long term incentive plans prior to
settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(2) 12,563 shares of Common Stock were awarded on January 25, 1995. The closing
market price of the Common Stock on the date of grant was $11.25 per share.
Awards are earned by participants at a rate of 20% per year for five years
(beginning January 25, 1996). Dividends received by the RRP are paid to the
participants. At September 30, 1996, 10,050 shares with a market value of
$169,594 at such date (based on the closing price of the Common Stock at
September 30, 1996) remain unvested.
(3) Effective January 25, 1994, options to purchase 31,409 shares of Common
Stock were granted under the 1994 Stock Option Plan and 12,564 options are
exercisable within 60 days of the Voting Record Date. Such options by their
term shall be first exercisable at the rate of 20% per year beginning on
the anniversary date of the date that the option was granted (January 25,
1995).
(4) Represents employer contributions of $2,010, $1,810 and $1,680 to the
Savings Bank's 401(k) Savings Plan for fiscal years 1996, 1995, and 1994,
respectively. See "--401(k) Savings Plan."
(5) Includes employer contributions to the Savings Bank's Money Purchase Plan
of $5,025, $4,525 and $8,400 in fiscal years 1996, 1995 and 1994,
respectively.
(6) Includes 996 shares of Common Stock allocated to Mr. Neal's account
pursuant to the ESOP. Such allocated stock had a fair market value of
$16,808 at September 30, 1996.
Employment Agreements. The Savings Bank has entered into an employment
agreement with Harold K. Neal, President and Chief Executive Officer of the
Savings Bank. The employment agreement has a term of three years. Mr. Neal's
base compensation under the agreement for fiscal 1996 is $100,000 and is
reviewed at least annually by the Board of Directors. The agreement may be
terminable by the Savings Bank for "just cause" as defined in the agreement. If
the Savings Bank terminates Mr. Neal without just cause, Mr. Neal will be
entitled to a continuation of his salary from the date of termination through
the remaining term of the agreement. In the event of involuntary termination of
employment in
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<PAGE>
connection with, or within one year after, any change in control of the Savings
Bank, Mr. Neal will be paid in a lump sum an amount equal to 2.99 times Mr.
Neal's salary. In the event of a change in control at September 30, 1996, Mr.
Neal would have been entitled to a lump sum payment of approximately $299,000.
The aggregate payments that would be made would be an expense to the Savings
Bank, thereby reducing net income and the Savings Bank's capital by that amount.
The agreements may be renewed annually by the Board of Directors upon a
determination of satisfactory performance within the Board's sole discretion.
Stock Option Plan. In connection with the Savings Bank's conversion from
mutual to stock form in August 1994 (the "Conversion") and acquisition of the
outstanding stock of the Bank by the Company, (the "Reorganization"), the
Company's Board of Directors adopted the 1994 Stock Option Plan (the "Option
Plan"), which was ratified by stockholders of the Company at the January 25,
1995, special meeting of stockholders. Pursuant to the Option Plan, 125,637
shares of Common Stock are reserved for issuance upon exercise of stock options
granted or to be granted to officers, directors and key employees of the Company
from time to time. The purpose of the Option Plan is to provide additional
incentive to certain officers, directors and key employees by facilitating their
purchase of a stock interest in the Company. The Option Plan, which became
effective upon the Reorganization, provides for a term of ten years, after which
no awards may be made, unless earlier terminated by the Board of Directors
pursuant to the Option Plan. Options become immediately vested in the event of
death, disability or a "change-in-control" of the Company or the Savings Bank.
Options to purchase 6,250 shares of Common Stock were granted in fiscal 1996.
The following table sets forth additional information concerning options
granted under the 1994 Stock Option Plan.
Option/SAR Exercises and Fiscal Year End Value Table
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Options/SARs Options/SARs
at FY-End (#) at-End ($) (1)
Shares Acquired Exercisable/ Exercisable
Name on Exercise (#) Value Realized ($) (1) Unexercisable Unexercisable
- ---- ---------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Harold K. Neal 0 0 12,564/18,845 $73,876/$110,809
</TABLE>
- ------------------------------
(1) Based upon the closing price of the Common Stock as of September 30, 1996,
of $16.88 per share.
Recognition and Retention Plan. The Savings Bank maintains a recognition
and retention plan (the "RRP") as a method of providing directors, officers, and
key employees of the Savings Bank with a proprietary interest in the Company in
a manner designed to encourage such persons to remain in the employment or
service with the Savings Bank. The RRP was ratified by stockholders of the
Company at the January 25, 1995 special meeting of stockholders. The Savings
Bank contributed sufficient funds to the RRP Trusts which enabled the RRP Trusts
to purchase Common Stock representing 4% of the aggregate number of shares
issued in the Conversion (i.e., 50,255 shares of Common Stock). Awards under the
RRPs were made in recognition of prior and expected future services to the Bank
of its trustees
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<PAGE>
and executive officers responsible for implementation of the policies adopted by
the Board of Directors, the profitable operation of the Savings Bank, and as a
means of providing a further retention incentive and direct link between
compensation and the profitability of the Savings Bank. Awards under the RRP
become immediately vested in the event of death, disability or a
"change-in-control" of the Company or the Savings Bank.
Long Term Incentive Plans
The Corporation does not presently sponsor any long-term incentive plans
nor did it make any payouts to Harold K. Neal under such plans during the fiscal
year ended September 30, 1996.
Performance Graph
The Company completed its initial stock offering of the Common Stock at a
price of $10.00 per share on August 19, 1994. The closing price of the Common
Stock as reported on the NASDAQ National Market on December 6, 1996 was $17.75.
The following graph compares the cumulative total shareholder return of
the Common Stock of the Company with that of (a) the total return index for
domestic companies listed on the Nasdaq Stock Market and (b) the total return
index for banks listed on the Nasdaq Stock Market. These total return indices of
the Nasdaq Stock Market are computed by the Center for Research in Securities
Prices ("CRSP") at the University of Chicago. All three investment comparisons
assume the investment of $100 at the market close on August 19, 1994 and the
reinvestment of dividends when paid. The graph provides comparisons at the end
of the fiscal years of the Company.
There can be no assurance that the Company's stock performance will
continue with the same or similar trends depicted in the graph below. The
Company will not make or endorse any predictions as to future stock performance.
-12-
<PAGE>
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
8/94 9/30/94 9/30/95 9/30/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total Market Index $100.00 $102.91 $142.30 $168.67
Bank Index 100.00 98.45 133.21 158.69
Bedford Bancshares,Inc. 100.00 120.00 180.00 175.00
</TABLE>
Other Benefits
Money Purchase Plan. The Savings Bank established a money purchase plan, a
form of tax-qualified retirement plan effective October 1, 1993. Such plan
initially provided a benefit allocation annually equal to 10% of a participant's
compensation. This annual allocation was reduced to 5% effective October 1,
1994. Contributions are 100% vested following the completion of six years of
service, with new employees becoming vested at 20% per year beginning the second
year of service. Benefits are payable upon termination of employment,
retirement, death, disability or plan termination.
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<PAGE>
Total contributions to the Money Purchase Plan by the Savings Bank for the
fiscal year ended September 30, 1996 were $40,527.
401(k) Savings Plan. The Savings Bank sponsors a tax-qualified defined
contribution savings plan, ("401(k) Plan"), for the benefit of its employees.
Employees become eligible to participate under the Plan after age 21 and
completing one year of service. Under the 401(k) Plan, employees may voluntarily
elect to defer up to 10% of compensation, not to exceed applicable limits under
the Code (i.e., $9,500 in 1996). The first 4% of employee compensation shall be
matched by a Savings Bank contribution of $.50 for each $1.00 of employee
contribution. Such matching contributions shall be 100% vested following
completion of six years of service.
Total contributions to the 401(k) Plan by the Savings Bank for all
employees for the fiscal years ended September 30, 1995 and 1996 were $15,479
and $15,957, respectively.
Employee Stock Ownership Plan. The Savings Bank has established an
employee stock ownership plan, the ESOP, for the exclusive benefit of
participating employees. Participating employees are employees who have
completed one year of service with the Savings Bank or its subsidiary and
attained age 21. On October 26, 1995, the Savings Bank submitted an application
to the Internal Revenue Service (the "IRS") for a letter of determination as to
the tax-qualified status of the ESOP. The Savings Bank subsequently received a
favorable letter of determination from the IRS concerning the tax-qualified
status of the ESOP.
The ESOP is funded by contributions made by the Savings Bank in cash or
Common Stock. Benefits may be paid either in shares of Common Stock or in cash.
The ESOP borrowed funds from the Company to acquire 80,000 shares of the Common
Stock issued in the Conversion, representing 6.37% of shares outstanding. This
loan is secured by the shares purchased and earnings of ESOP assets. The Company
financed the ESOP debt directly. Shares purchased with such loan proceeds will
be held in a suspense account for allocation among participants as the loan is
repaid. The Savings Bank anticipates contributing approximately $80,000 annually
to the ESOP to meet principal obligations and such other amounts to pay accrued
interest to the Company under the ESOP loan. This loan is expected to be fully
repaid in approximately 10 years. The Savings Bank accrued $146,000 and $135,000
to the ESOP for the fiscal years ended September 30, 1995 and 1996,
respectively. Benefits under the ESOP are allocated pro rata based upon
participant compensation paid during a plan year.
The Board of Directors has appointed Directors Bond, Cooper, Garrett, Neal
and Putney and Nancy T. Snyder to a committee (the "ESOP Committee") to
administer the ESOP. Directors Bond, Cooper, Garrett and Putney serve as the
ESOP Trustees (the "ESOP Trustees"). The Board of Directors or the ESOP
Committee may instruct the ESOP Trustees regarding investments of funds
contributed to the ESOP. The ESOP Trustees must vote all allocated shares held
in the ESOP in accordance with the instructions of the participating employees.
Unallocated shares and allocated shares for which no timely direction is
received will be voted by the ESOP Trustees as directed by the Board of
Directors or the ESOP Committee, subject to the Trustees fiduciary duties. As of
the Voting Record Date, 17,333 shares had been allocated to participants.
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<PAGE>
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
Director Garrett is a partner of Garrett & Garrett, a law firm that serves
as the Savings Bank's general counsel in connection with all matters of law. For
the fiscal year ended September 30, 1996, fees paid to Mr. Garrett's firm by the
Savings Bank were $9,000. The Savings Bank believes that transactions with Mr.
Garrett's firm are on terms substantially the same, or at least as favorable to
the Savings Bank, as those that would be provided by a non-affiliate.
Director Walton is an independent real estate appraiser who works on a fee
basis for Bedford Federal and other financial institutions through the firm of
Scott & Bond Insurance and Real Estate. The amount of appraisal fees earned by
Mr. Walton for appraisal work for the Bank in fiscal 1996 was $6,690. This
amount represented more than 5% of Mr. Walton's income. See also "--Director
Biographical Information."
No directors, executive officers or immediate family members of such
individuals were engaged in transactions with the Savings Bank or any subsidiary
involving more than $60,000 during the year ended September 30, 1996 except
those detailed above. Furthermore, the Savings Bank had no "interlocking"
relationships existing on or after September 30, 1996 in which (i) any executive
officer is a member of the Board of Directors/Trustees of another entity, one of
whose executive officers is a member of the Savings Bank's Board of Directors,
or where (ii) any executive officer is a member of the compensation committee of
another entity, one of whose executive officers is a member of the Savings
Bank's Board of Directors.
The Savings Bank, like many financial institutions, has followed a policy
of granting various types of loans to officers and directors. The loans have
been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the Savings Bank's other customers, and do not
involve more than the normal risk of collectibility, nor present other
unfavorable features. All loans by the Savings Bank to its directors and
executive officers are subject to OTS regulations restricting loans and other
transactions with affiliated persons of the Savings Bank. Loans to executive
officers and directors of the Savings Bank, and their affiliates, amounted to
$446,435, or 2.45% of the Savings Bank's retained earnings at September 30,
1996.
RATIFICATION OF APPOINTMENT OF AUDITORS
B.D.O. Seidman, LLP, Richmond, Virginia, was the Company's independent
public accountant for the 1996 fiscal year. The Board of Directors of the
Company presently intends to renew the Company's arrangement with B.D.O.
Seidman, LLP to be its auditors for the fiscal year ending September 30, 1997. A
representative of B.D.O. Seidman, LLP is expected to be present at the Meeting
to respond to stockholders' questions and will have the opportunity to make a
statement if the representative so desires.
Ratification of the appointment of the auditors requires the affirmative
vote of a majority of the votes cast by the stockholders of the Company at the
Meeting. The Board of Directors recommends that stockholders vote "FOR" the
ratification of the appointment of B.D.O. Seidman as the Company's auditors for
the 1997 fiscal year.
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<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the person or persons voting such proxies.
MISCELLANEOUS
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
ANNUAL REPORT
The Company's 1996 Annual Report to Stockholders, including financial
statements, will be mailed to all stockholders as of the Voting Record Date. Any
stockholder who has not received a copy of such Annual Report by December 30,
1996 may obtain a copy by writing to the Secretary of the Company. Such Annual
Report is not to be treated as a part of the proxy solicitation material or as
having been incorporated herein by reference. Stockholders may receive a copy of
the Company's Annual Report on Form 10-KSB by writing to the Secretary of the
Company.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive offices at
125 W. Main Street, Bedford, Virginia 24523, no later than August 17, 1997. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended.
BY ORDER OF THE BOARD OF DIRECTORS
Nancy T. Snyder
Corporate Secretary
Bedford, Virginia
December 17, 1996
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<PAGE>
Appendix A
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 ss. 240.14a-11(c) or ss. 240.14a-12
BEDFORD BANCSHARES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BEDFORD BANCSHARES, INC.
------------------------------------------------------------------------
(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)(1) 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:
<PAGE>
Appendix B
BEDFORD BANCSHARES, INC.
125 W. MAIN STREET
BEDFORD, VIRGINIA 24523
(540) 586-2590
ANNUAL MEETING OF STOCKHOLDERS
January 22, 1997
The undersigned hereby appoints the Board of Directors of Bedford
Bancshares, Inc. ("Corporation"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Corporation which the undersigned is entitled to
vote at the Annual Meeting of Stockholders ("Meeting"), to be held at the Olde
Liberty Station, 515 Bedford, Avenue, Bedford, Virginia 24523 on Wednesday,
January 22, 1997, at 2:00 p.m. and at any and all adjournments thereof, as
follows:
FOR WITHHELD
1. The election as director of Messrs. Cooper,
Pickett and Walton listed below each for a
3 year term and Mr. Powell for a 2 year term
(except as marked to the contrary):
George N. Cooper |_| |_|
William P. Pickett |_| |_|
W. Henry Walton, Jr. |_| |_|
William T. Powell |_| |_|
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY THE APPOINTMENT
OF B.D.O. SEIDMAN, LLP as independent
auditors of Bedford Bancshares, Inc.
for the fiscal year ending September 30, 1997. |_| |_| |_|
The Board of Directors recommends a vote "FOR" all of the above listed
propositions.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elects to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Corporation at the Meeting of the stockholder's decision to terminate this
proxy, the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. The undersigned may also revoke this proxy by
filing a subsequently dated proxy or by notifying the Secretary of the
Corporation of his or her decision to terminate this proxy.
Prior to the execution of this proxy, the undersigned acknowledges
receipt from the Corporation of a Notice of the Meeting, a Proxy Statement dated
December 17, 1996, and a 1996 Annual Report.
Dated: ___________, 199_ |_| Please check here if you plan to attend
the Meeting.
____________________________ _____________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
____________________________ _____________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
