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.
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(Name of Registrant as Specified in Its Charter)
BEDFORD BANCSHARES, INC.
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO] BEDFORD BANCSHARES, INC.
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125 West Main Street
Bedford, Virginia 24523
Phone: 540-586-2590
December 15, 1998
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 Wednesday, January 27, 1999, 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.
The matters to be considered by stockholders at the Annual Meeting are
described in the accompanying Notice of Annual Meeting and Proxy Statement. The
Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its stockholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
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>
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BEDFORD BANCSHARES, INC.
125 W. MAIN STREET
BEDFORD, VIRGINIA 24523
(540) 586-2590
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 27, 1999
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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 27, 1999, at
2:00 p.m.
The Meeting is for the purpose of considering and acting upon:
1. The election of two directors of the Company for terms of
three 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, 1999.
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 8, 1998, 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 15, 1998
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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.
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<PAGE>
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PROXY STATEMENT
OF
BEDFORD BANCSHARES, INC.
125 W. MAIN STREET
BEDFORD, VIRGINIA 24523
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ANNUAL MEETING OF STOCKHOLDERS
JANUARY 27, 1999
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GENERAL
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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 27, 1999, 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 15, 1998. The Company is the parent company of Bedford Federal Savings
Bank (the "Savings Bank")
At the Meeting, stockholders will consider and vote upon (i) the
election of two 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, 1999. 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.
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REVOCABILITY OF PROXIES
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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 ratification of B.D.O. Seidman, LLP as independent
auditors of the Company. 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.
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VOTING SECURITIES AND CERTAIN PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on December 8, 1998
("Voting Record Date"), are entitled to one vote for each share of Common Stock
of the Company then held. As of the Voting
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<PAGE>
Record Date, the Company had 2,297,900 shares of Common Stock issued and
outstanding. The number of shares of Common Stock reflects the two-for-one stock
split paid in the form of a 100% stock dividend on June 15, 1998 ("the
two-for-one stock split").
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 act upon 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. 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 (Proposal II), 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. 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.
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<PAGE>
<TABLE>
<CAPTION>
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding(%)
- ------------------------------------ -------------------- --------------
<S> <C> <C>
Bedford Federal Savings Bank
Employee Stock Ownership Plan Trust ("ESOP")
125 W. Main Street
Bedford, Virginia 154,646 (1) 6.73
All Directors and Executive Officers as a Group
(11 persons) 415,897 (2) 17.66
</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. The Board of Directors has appointed Messrs Bond,
Cooper, Garrett, and Putney to serve on the ESOP Committee (the "ESOP
Committee") and to serve as ESOP trustees ( the "ESOP Trustees"). The
Board of Directors also appointed Mr. Neal and Ms. Snyder to serve on
the ESOP Committee. 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 8, 1998, 66,666 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 voting and investment
power, unless otherwise indicated. Includes options to purchase 140,015
shares of Common Stock that may be exercised within 60 days of the
Record Date to purchase shares of Common Stock under the 1994 Stock
Option Plan (the "1994 Stock Option Plan"). Excludes 15,540 shares of
Common Stock previously awarded under the Recognition and Retention
Plan ("RRP") which are subject to forfeiture and for which the
individuals in the group exercise no voting control and excludes
134,209 shares held by the ESOP (154,646 shares minus 20,437 shares
allocated to executive officers) over which certain directors, as
trustees to the ESOP and the RRP, exercise shared voting and investment
power. Such individuals serving as trustees disclaim beneficial
ownership with respect to such shares. See Proposal I Information with
Respect to Nominees for Director; Directors Whose Terms Continue; and
Executive Officers.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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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, 1998.
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<PAGE>
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PROPOSAL I - INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR;
DIRECTORS WHOSE TERMS CONTINUE; AND EXECUTIVE OFFICERS
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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.
Two directors will be elected at the Meeting, to serve for a three-year term or
until his successor has been elected and qualified.
Harry W. Garrett, Jr. and Harold K. Neal have been nominated by the
Board of Directors to serve as directors for three-year terms to expire in 2002.
Messrs. Garrett and Neal 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 names, ages, the year they first became directors of
the Company or the Savings Bank, the Company's wholly-owned subsidiary, the
expiration date of their current terms as directors, 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.
<TABLE>
<CAPTION>
Common Stock
Year First Current Beneficially Owned Percent
Elected or Term to As of of Class
Name Age(1) Appointed(2) Expire December 8, 1998(3) (%)
- ---- ------ ------------ ------- ------------------- ----
<S> <C> <C> <C> <C> <C>
Board Nominee for Term to Expire in 2002
Harry W. Garrett, Jr. 62 1970 1999 35,226(4)(6) 1.53
Harold K. Neal 61 1972 1999 100,050(4)(7) 4.26
THE BOARD OF DIRECTORS RECOMMENDS
THAT THE NOMINEES BE ELECTED AS DIRECTORS
Directors Continuing In Office
George N. Cooper 70 1988 2000 42,062(4)(5) 1.82
William P. Pickett 65 1986 2000 41,516(5) 1.80
W. Henry Walton, Jr. 73 1955 2000 32,909(4)(5) 1.43
Hugh H. Bond 66 1963 2001 31,858(4)(5) 1.38
William T. Powell 67 1996 2001 400 -- (8)
Macon C. Putney 63 1977 2001 42,062(4)(5) 1.82
</TABLE>
(footnotes on next page)
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<PAGE>
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(1) At September 30, 1998.
(2) Refers to the year the individual first became a director of the
Savings Bank. All directors of the Savings Bank (except for Mr. Powell)
became directors of the Company when it was incorporated in March 1994.
(3) As adjusted for the two-for-one stock split.
(4) Excludes 154,646 shares of common stock held by the ESOP of the Savings
Bank for which such individuals (except for Mr. Neal) serve as a member
of the ESOP Committee or Trustee Committee and exercise shared voting
and investment power. For Mr. Neal, excludes 146,563 shares of common
stock for which such individual serves as a member of the ESOP
Committee. Such individuals disclaim beneficial ownership with respect
to shares held in a fiduciary capacity. See "Voting Securities and
Certain Principal Holders Thereof."
(5) Excludes 860 restricted shares granted to such individual pursuant to
the Savings Bank's RRP which remain subject to forfeiture and for which
such individual does not exercise voting control. Such shares will
continue to vest at a rate of one-fifth of the total initially granted
(4,306) each year beginning January 25, 1996. Also includes 8,615
shares which may be acquired pursuant to the exercise of options which
are exercisable within 60 days of the Record Date. See "-- Directors'
Compensation."
(6) Excludes 860 restricted shares granted to such individual pursuant to
the Savings Bank's RRP which remain subject to forfeiture and for which
such individual does not exercise voting control. Such shares will
continue to vest at a rate of one-fifth of the total initially granted
(4,306) each year beginning January 25, 1996. Also includes 5,615
shares which may be acquired pursuant to the exercise of stock options
which are exercisable within 60 days of the Record Date. See "--
Directors' Compensation."
(7) Excludes 5,024 restricted shares granted to such individual pursuant to
the Savings Bank's RRP which remain subject to forfeiture and for which
such individual does not exercise voting control. Such shares will
continue to vest at a rate of one-fifth of the total initially granted
(25,126) each year beginning January 25, 1996. Also includes 50,255
shares which may be acquired pursuant to the exercise of stock options
which are exercisable within 60 days of the Record Date. See
"Management Remuneration and Other Information - Executive
Compensation."
(8) Less than 1% of outstanding shares of Common Stock.
Executive Officers of the Company
The following table sets forth information with respect to the
executive officers of the Company.
Age at
September
Name 30, 1998 Position
- ---- -------- --------
Harold K. Neal 61 President and Chief Executive Officer
Russell E. Millner 56 Vice President
James W. Smith 53 Vice President, Treasurer and Comptroller
Nancy T. Snyder 36 Corporate Secretary
Biographical Information
Set forth below is certain information with respect to the directors
including each director, nominees and executive officers of the Company. All
directors and executive officers have held their present positions for five
years except for Mr. Powell who was appointed to the board in 1996.
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<PAGE>
Hugh H. Bond served as President of the Savings Bank from 1970 to 1996.
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 & 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.
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.
Harold K. Neal was 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 has
served three terms on the Board of Directors and the Executive Committee of the
America's Community Bankers. He is currently serving on the Board of Directors
and Executive Committee of the Virginia Bankers Association. Mr. Neal is active
in various community and civic affairs. Past directorships include the 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.
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, CPA, retired in 1997 as 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 had 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
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<PAGE>
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.
W. Henry Walton, Jr. is a realtor with the firm of Scott & Bond, Inc.
In February 1998, Mr. Walton retired as real estate appraiser with Scott & Bond,
Inc. Mr. Walton currently serves as Secretary- Treasurer of the Bedford County
Industrial Development Corporation and on the board of the Bedford Chapter of
the American Heart Association.
Executive Officers Who Are Not Directors
Russell E. Millner was employed by the Savings Bank in 1977 as Vice
President. Prior to joining the Savings Bank, Mr. Millner was Vice President of
Liberty Bank of Bedford. His current responsibilities include overseeing the
Savings Bank's lending departments and branch operations.
James W. Smith was employed by the Savings Bank in 1979 as Comptroller.
Prior to joining the Savings Bank, 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.
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 a past President and current Treasurer of
the Bedford Junior Women's Club, past president of the local chapter of the
Institute for Financial Education, and is active in the Bedford Area Chamber of
Commerce.
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, 1998, the Board of Directors held twelve regular meetings and two
special meetings. 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, 1998.
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 1998.
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<PAGE>
The Personnel Committee consists of Messrs. Powell, 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 1998.
The Company's full Board of Directors acts as a nominating committee
("Nominating Committee") for selecting the management's nominees for election of
directors in accordance with the Company's Bylaws. Nomination to the Board of
Directors made by stockholders must be made in writing to the Secretary of the
Company and received by the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company. Notice to the Company of such nominations must include certain
information required pursuant to the Company's Bylaws. This standing committee
met once during the 1998 fiscal year.
Directors' Compensation
The Company does not presently compensate its directors for meetings
held immediately preceding or following a Board of Directors meeting of the
Savings Bank. Directors are paid $250.00 per meeting attended for meetings held
on days that the Savings Bank's board does not meet. 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. Aggregate director fees paid during fiscal 1998
totalled $69,700.
In addition, non-employee Directors of the Company received awards of
restricted stock under the RRP (the "RRP awards"). Each such Director then in
office received 4,306 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 then in office received stock
options to purchase 10,768 shares of Common Stock at $5.50 per share. Such
options were first exercisable at the rate of 20% annually on and after January
25, 1996. The RRP awards and the stock options were adjusted to reflect the
two-for-one stock split. See "Management Remuneration and Other Information
Executive Compensation," for information regarding the RRP awards and stock
options received by the chief executive officer, who is also a member of the
Board of Directors.
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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 two years ended September 30, 1998. No other executive
officer of the Savings Bank had a salary and bonus during such periods that
exceeded $100,000 for services rendered in all capacities to the Savings Bank or
the Company in the aggregate.
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<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------------------------------- ------------------------
Securities
Restricted Underlying
Name and Bonus Other Annual Stock Options All Other
Principal Position Year Salary($) ($) Compensation($)(1) Awards($)(2) (#)(3) Compensation($)(4)(5)(6)
- ------------------- ------ --------- ----- ------------------ ------------ ------ ------------------------
Harold K. Neal
<S> <C> <C> <C> <C> <C> <C> <C>
President and 1998 112,000 500 8,400 -- -- 29,544
Chief Executive 1997 107,200 500 9,600 -- -- 32,509
Officer
</TABLE>
- ------------------------
(1) Includes fees for service on the board of directors of the Savings
Bank. For perquisites and other personal benefits, aggregate value does
not exceed the lessor of $50,000 or 10% of the named executive
officer's total salary and bonus for the year. For the periods
presented, there were no (a) payments of above market or preferential
earnings on deferred compensation; (b) payments of earnings with
respect to long term incentive plans prior to settlement or maturation;
(c) tax payment reimbursements; or (d) preferential discounts on stock.
(2) 25,126 shares of Common Stock were awarded on January 25, 1995. The
closing market price of the Common Stock on the date of grant was
$5.625 per share. The RRP awards and the closing market price were
adjusted for the two-for-one stock split. The RRP 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, 1998, 10,048 shares with a market value
of $110,528 at such date (based on the closing price of the Common
Stock at September 30, 1998) remain unvested.
(3) Effective January 25, 1995, options to purchase 62,818 shares (as
adjusted for the two-for-one stock split) of Common Stock were granted
under the 1994 Stock Option Plan and 50,255 of the options are
exercisable within 60 days of the Voting Record Date. Such options by
their term are exercisable at the rate of 20% per year beginning on the
anniversary date of the date that the option plan was approved by
stockholders (January 25, 1995).
(4) Represents employer contributions of $2,256 and $2,154 to the Savings
Bank's 401(k) Savings Plan for fiscal years 1998 and 1997, and
respectively.
(5) Includes employer contributions to the Savings Bank's Money Purchase
Plan of $5,640 and $5,385 in fiscal years 1998 and 1997, respectively.
(6) Includes 1,968 and 1,004, shares of Common Stock allocated to Mr.
Neal's account pursuant to the ESOP during fiscal 1998 and 1997,
respectively. Such allocated stock had a fair market value of $21,648,
and $24,970 at September 30, 1998 and 1997, respectively.
Employment Agreement. The Savings Bank has entered into an employment
agreement with Harold K. Neal, President and Chief Executive Officer. The
employment agreement has a term of three years. Mr. Neal's base compensation
under the agreement for fiscal 1998 was $112,000 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
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 prior five year taxable compensation. In the event of a change in control
at September 30, 1998, Mr. Neal would have been entitled to a lump sum payment
of approximately $334,880. 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.
-9-
<PAGE>
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 Savings 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, 251,274 shares (as adjusted for the two-for-one stock split) 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. Options vest over a five year period. 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. No options to purchase shares of Common Stock were granted in
fiscal 1998.
The following table sets forth additional information concerning
options granted under the Option Plan.
<TABLE>
<CAPTION>
Option/SAR Exercises and Fiscal Year End Value Table
-------------------------------------------------------------
Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Options/SARs Options
at FY-End (#)(1) at FY-End ($)(2)
---------------- ----------------
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Harold K. Neal -- -- 37,691 / 25,127 207,301 / 138,199
</TABLE>
- ------------------------------
(1) No stock appreciation awards ("SARs") are authorized under the Option Plan.
(2) Based upon an exercise price of $5.50 per share (as adjusted for the
two-for-one stock split) and an estimated price of $11.00 as of September
30, 1998.
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
- --------------------------------------------------------------------------------
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.
-10-
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
B.D.O. Seidman, LLP, Richmond, Virginia, was the Company's independent
public accountant for the 1998 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, 1999. 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 1999 fiscal year.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
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. If
the Company did not have notice of a matter on or before November 29, 1998, it
is expected that the persons named in the accompanying proxy will exercise
discretionary authority when voting on that matter.
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 material
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.
The Company's 1998 Annual Report to Stockholders has been mailed to all
stockholders of the Voting Record Date. Any stockholder who has not received a
copy of the annual report may obtain a copy 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, 1999.
In the event the Company receives notice of a stockholder proposal to
take action at next year's annual meeting of stockholders that is not submitted
for inclusion in the Company's proxy material, or is submitted for inclusion but
is properly excluded from the proxy material, the persons named in the proxy
sent by the Company to its stockholders intend to exercise their discretion to
vote on the
-11-
<PAGE>
stockholder proposal in accordance with their best judgment if notice of the
proposal is not received at the Company's main office by November 28, 1999.
- --------------------------------------------------------------------------------
FORM 10-KSB
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1998 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, BEDFORD BANCSHARES, INC., 125
W. MAIN STREET, BEDFORD, VIRGINIA 24523.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Nancy T. Snyder
----------------------------------
Nancy T. Snyder
Corporate Secretary
Bedford, Virginia
December 15, 1998
-12-
<PAGE>
Appendix A
- --------------------------------------------------------------------------------
BEDFORD BANCSHARES, INC.
125 W. MAIN STREET
BEDFORD, VIRGINIA 24523
(540) 586-2590
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 27, 1999
- --------------------------------------------------------------------------------
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 27, 1999, at 2:00 p.m. and at any and all adjournments thereof, as
follows:
FOR WITHHELD
--- --------
1. The election as director of all nominees,
each for a 3 year term: |_| |_|
Harry W. Garrett, Jr.
Harold K. Neal
The Board of Directors recommends a vote "FOR" the nominees.
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
----------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of B.D.O. Seidman, LLP
as independent auditors of Bedford
Bancshares, Inc. for the fiscal year
ending September 30, 1999. |_| |_| |_|
The Board of Directors recommends a vote "FOR" the ratification of
auditors. ---
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 STATED ABOVE. 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 15, 1998, and a 1998 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.
- --------------------------------------------------------------------------------
