PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] 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 Section 240.14a-11(c)
or Section 240.14a-12
FRANKLIN FINANCIAL SERVICES CORPORATION
(Name of Registrant as Specified in its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
_________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
5) Total fee paid:
_________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________
3) Filing Party:
________________________________________________
4) Date Filed:
________________________________________________
FRANKLIN FINANCIAL SERVICES CORPORATION
20 South Main Street
P. O. Box T
Chambersburg, PA 17201-0819
(717)264-6116
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1997
TO THE SHAREHOLDERS OF FRANKLIN FINANCIAL SERVICES CORPORATION:
Notice is hereby given that, pursuant to the call of its
directors, the regular Annual Meeting of shareholders of FRANKLIN
FINANCIAL SERVICES CORPORATION, Chambersburg, Pennsylvania, will
be held on Tuesday, April 29, 1997, at 10:30 A.M. at the
Lighthouse Restaurant, 4301 Philadelphia Avenue, Chambersburg,
Pennsylvania, for the purpose of considering and voting upon the
following matters:
1. ELECTION OF DIRECTORS. To elect the four nominees
listed in the accompanying Proxy Statement for the term
specified.
2. OTHER BUSINESS. To consider such other business as may
properly be brought before the meeting and any
adjournments thereof.
Only those shareholders of record at the close of business
on March 14, 1997, shall be entitled to notice of and to vote at
the Annual Meeting.
It is requested that you promptly execute the enclosed Proxy
and return it in the enclosed postpaid envelope as soon as
possible, whether or not you plan to attend the meeting. You are
cordially invited to attend the meeting. If you attend, you may
withdraw your Proxy and vote your shares in person.
A copy of the Annual Report of Franklin Financial Services
Corporation is enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
APRIL E. ROSENBAUM
Secretary
Enclosures
April 1, 1997
PROXY STATEMENT
Dated and to be Mailed April 1, 1997
FRANKLIN FINANCIAL SERVICES CORPORATION
20 South Main Street
P. O. Box T
Chambersburg, PA 17201-0819
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1997
TABLE OF CONTENTS
GENERAL INFORMATION........................................... 1
Date, Time, and Place of Meeting......................... 1
Shareholders Entitled to Vote............................ 1
Purpose of Meeting....................................... 1
Solicitation of Proxies.................................. 1
Revocability and Voting of Proxies....................... 1
Voting of Shares and Principal Holders Thereof........... 2
Shareholder Proposals.................................... 3
Recommendations of the Board of Directors................ 3
INFORMATION CONCERNING THE ELECTION OF DIRECTORS.............. 3
General Information...................................... 3
Information about Nominees and Continuing Directors...... 4
Meetings and Committees of the Board of Directors........ 6
Compensation of Directors................................ 7
Executive Officers....................................... 7
Executive Compensation and Related Matters............... 8
Transactions with Directors and Executive Officers....... 14
Compliance with Section 16(a) of the Exchange Act........ 14
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS.............. 15
ADDITIONAL INFORMATION........................................ 15
OTHER MATTERS................................................. 15
GENERAL INFORMATION
Date, Time, and Place of Meeting
The regular Annual Meeting of the shareholders of Franklin
Financial Services Corporation (hereinafter, "Franklin
Financial") will be held on Tuesday, April 29, 1997, at
10:30 a.m. at the Lighthouse Restaurant, 4301 Philadelphia
Avenue, Chambersburg, Pennsylvania.
Shareholders Entitled to Vote
Shareholders of record at the close of business on March 14,
1997, are entitled to notice of and to vote at the meeting.
Purpose of Meeting
Shareholders will be asked to consider and vote upon the
following matters at the Annual Meeting: (1) the election of
four directors, and (2) such other business as may be properly
brought before the meeting and any adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the
solicitation of proxies, in the accompanying form, by the Board
of Directors of Franklin Financial for use at the Annual Meeting.
The expense of soliciting proxies will be borne by Franklin
Financial. In addition to the use of the mails, directors,
officers, and employees of Franklin Financial and of any
subsidiary may, without additional compensation, solicit proxies
personally or by telephone.
Farmers and Merchants Trust Company of Chambersburg
(hereinafter, "F&M Trust") is a wholly-owned subsidiary of
Franklin Financial. This Proxy Statement, while prepared in
connection with the Annual Meeting of Shareholders of Franklin
Financial, contains certain information relating to F&M Trust
which will be identified where appropriate.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not
affect a shareholder's right to attend the meeting and to vote in
person. Any proxy given pursuant to this solicitation may be
revoked by delivering written notice of revocation to April E.
Rosenbaum, Secretary of Franklin Financial, at any time before
the proxy is voted at the meeting. Unless revoked, any proxy
given pursuant to this solicitation will be voted at the meeting
in accordance with the instructions thereon of the shareholder
giving the proxy. In the absence of instructions, all proxies
will be voted FOR the election of the four nominees identified in
this Proxy Statement. Although the Board of Directors knows of
no other business to be presented, in the event that any other
matters are brought before the meeting, any proxy given pursuant
to this solicitation will be voted in accordance with the
recommendations of the management of Franklin Financial.
Shares held for the account of shareholders who participate
in the Dividend Reinvestment Plan will be voted in accordance
with the instructions of each shareholder as set forth in his
proxy. If a shareholder who participates in the Dividend
Reinvestment Plan does not return a proxy, the shares held for
his account under the Dividend Reinvestment Plan will not be
voted.
Voting of Shares and Principal Holders Thereof
At the close of business on January 31, 1997, Franklin
Financial had outstanding 1,890,345 shares of common stock; there
is no other class of stock outstanding. As of such date,
153,072 shares of Franklin Financial common stock were held by
the Trust Department of F&M Trust as fiduciary (representing
approximately 8.09% of such shares outstanding) and will be voted
FOR the election of the four nominees identified in this Proxy
Statement.
A majority of the outstanding common stock present in person
or by proxy will constitute a quorum for the conduct of business
at the Annual Meeting. Abstentions and broker non-votes will be
treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will not be
treated as votes cast. Each share is entitled to one vote on all
matters submitted to a vote of the shareholders. A majority of
the votes that all shareholders present in person or by proxy are
entitled to cast at a meeting at which a quorum is present is
required to approve any matter submitted to a vote of the
shareholders, unless a greater vote is required by law or by the
Articles of Incorporation or Bylaws. In the case of the election
of directors, the four candidates receiving the highest number of
votes shall be elected directors of Franklin Financial;
accordingly, in the absence of a contested election, votes
withheld from a particular nominee or nominees will not influence
the outcome of the election.
To the knowledge of Franklin Financial, no person owned of
record or beneficially on January 31, 1997 more than five percent
(5%) of the outstanding common stock of Franklin Financial,
except as set forth in the table which follows.
Common Stock, Farmers and Merchants 153,072 shares 8.09%
$1.00 par value Trust Company of
per share Chambersburg
Trust Department
20 South Main Street
Chambersburg, PA
17201-0819(1)
Footnote
1. Shares are held on behalf of various trusts, estates and
other accounts, with respect to which F&M Trust acts as
fiduciary.
Shareholder Proposals
Shareholder proposals intended to be presented at the 1998
Annual Meeting of the shareholders of Franklin Financial must be
received at the executive offices of Franklin Financial at
20 South Main Street, P.O. Box T, Chambersburg, Pennsylvania
17201-0819, no later than December 4, 1997, in order to be
included in the proxy statement and proxy form to be prepared by
Franklin Financial in connection with the 1998 Annual Meeting.
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote
FOR the election of the four nominees identified in this Proxy
Statement.
INFORMATION CONCERNING THE ELECTION OF DIRECTORS
General Information
The Bylaws of Franklin Financial provide that the Board of
Directors shall consist of not less than five nor more than
25 persons and that the directors shall be classified with
respect to the time they shall severally hold office by dividing
them into three classes, each consisting as nearly as possible of
one-third of the number of the whole Board of Directors. The
Bylaws further provide that the directors of each class shall be
elected for a term of three years so that the term of office of
one class of directors shall expire in each year. Finally, the
Bylaws provide that the number of directors in each class of
directors shall be determined by the Board of Directors.
A majority of the Board of Directors may increase the number
of directors between meetings of shareholders. Any vacancy
occurring in the Board of Directors, whether due to an increase
in the number of directors, resignation, retirement, death, or
any other reason, may be filled by appointment by the remaining
directors. Any director who is appointed to fill a vacancy shall
hold office until his successor is duly elected by the
shareholders at the next Annual Meeting or at a special meeting
called for that purpose.
The Board of Directors has fixed the number of directors at
thirteen. There are four directors whose terms of office will
expire at the 1997 Annual Meeting and nine continuing directors
whose terms of office will expire at the 1998 or 1999 Annual
Meeting. The Board of Directors proposes to nominate the
following four persons for election to the Board of Directors for
the term specified below:
CLASS C
For a Term of
Three Years
Jay L. Benedict, Jr.
John M. Hull, III
H. Huber McCleary
Charles M. Sioberg
In the event that any of the foregoing nominees is unable to
accept nomination or election, any proxy given pursuant to this
solicitation will be voted in favor of such other persons as the
management of Franklin Financial may recommend. However, the
Board of Directors has no reason to believe that any of its
nominees will be unable to accept nomination or to serve as a
director if elected.
Section 3.5 of Article III of the Bylaws of Franklin
Financial requires that nominations, other than those made by or
on behalf of the existing management of Franklin Financial, must
be made in writing and must be delivered or mailed to the
Secretary of Franklin Financial no later than the thirtieth
business day prior to the date of the Annual Meeting. The
chairman of the meeting must determine whether nominations have
been made in accordance with the requirements of the Bylaws and,
if he determines that a nomination is defective, the nomination
and any votes cast for the nominee shall be disregarded.
Information about Nominees and Continuing Directors
Information concerning the four persons to be nominated for
election to the Board of Directors of Franklin Financial at the
1997 Annual Meeting and concerning the nine continuing directors
and the executive officers of Franklin Financial named in the
Summary Compensation Table appearing elsewhere in this Proxy
Statement is set forth in the table which follows.
Shares of Stock of
Franklin Financial
Business Experience Beneficially Owned and
Including Principal Occupation Percentage of Total
for the Past 5 Years, and Director Outstanding Stock as of
Name and Age Other Directorships(1) Since(2) 1/31/97(3(4)
CLASS A - Continuing
Directors
(Term expires 1999)
Dennis W. Good, Jr. (61) Partner, McGuire, Woods, Battle & Boothe, LLP, (law 1988 24,768 1.31%
firm)
G. Warren Elliott (42) Franklin County Commissioner; Regional 1994 580 *
Representative, General Code Publishers (legal
publisher)
William E. Snell, Jr. (48) President and Chief Executive Officer, Franklin 1995 12,911 *
Financial and F&M Trust; formerly President and Chief
Executive Officer, Commonwealth Bank, and President
and Chief Operating Officer, Commonwealth Bancshares
Corporation (1990-1995)
Martha B. Walker (50) President, Walker, Van Horn & MacBride, P.C. (law firm) 1979 7,962 *
Robert G. Zullinger (64) Vice Chairman, Franklin Financial and F&M Trust; 1981 30,718 1.62%
formerly President and Chief Executive Officer,
Franklin Financial and F&M Trust (1981-1996)
CLASS B - Continuing
Directors
(Term expires 1998)
Charles S. Bender, II (52) Executive Vice President, Franklin Financial and F&M 1981 40,024 2.12%
Trust
Charles R. Diller (69) Owner, Diller's Plumbing and Heating (contractor) 1972 8,355 *
Omer L. Eshleman (63) Retired -- formerly President and Chief Executive 1992 12,369 *
Officer, Mont Alto State Bank
Jeryl C. Miller (56) Vice President and Secretary, Charles W. Karper, Inc. 1983 10,461 *
(trucking industry)
CLASS C - Nominees
Jay L. Benedict, Jr. (67) Attorney -- formerly partner, Benedict & Gabler (law 1969 12,082 *
firm); Chairman of the Board of Franklin Financial and
F&M Trust
John M. Hull, III (69) Retired--formerly President Noelker and Hull 1972 5,280 *
Associates, Inc. (architects)
H. Huber McCleary (58) President, McCleary Oil Co. (service station operator 1990 12,759 *
and fuel oil distributor)
Charles M. Sioberg (56) Vice President, Martin & Martin, Inc. (engineers) 1982 3,353 *
All directors and 219,000(5) 11.59%
executive officers as a
group (15 persons)
FOOTNOTES
* The number of shares listed represents less than one percent
of the total number of shares of common stock outstanding.
1. No nominee or continuing director is a director of any other
company which has one or more classes of securities
registered with the Securities and Exchange Commission
pursuant to Section 12 or which is required to file periodic
reports with the Securities and Exchange Commission pursuant
to Section 15(d) of the Securities Exchange Act of 1934.
2. Reflects service as a director of Franklin Financial and
service as a director of F&M Trust, predecessor of Franklin
Financial.
3. Beneficial ownership of shares of the common stock of
Franklin Financial is determined in accordance with
Securities and Exchange Commission Rule 13d-3d(1) which
provides that a person shall be deemed to own any stock with
respect to which he, directly or indirectly, through any
contract, arrangement, understanding, relationship, or
otherwise has or shares: (i) voting power, which includes
the power to vote or to direct the voting of the stock, or
(ii) investment power, which includes the power to dispose
or to direct the disposition of the stock.
4. Each director and executive officer has sole voting and
investment power with respect to the shares listed above,
except that voting and investment power with respect to a
total of 29,249 shares is shared with spouses, children or
other family members. The shares shown above include a
total of 65,898 shares which are held by spouses, children
or other family members or by trusts or estates with respect
to which a director or executive officer serves as trustee
or executor, beneficial ownership of which is in each case
disclaimed. Also included in the shares shown above are a
total of 18,836 shares of unvested restricted stock issued
under the Long-Term Incentive Plan of 1990 and a total of
714 shares issuable under the Employee Stock Purchase Plan.
5. Includes 30,029 shares of unvested restricted stock issued
under the Long-Term Incentive Plan of 1990 and 1,257 shares
issuable under the Employee Stock Purchase Plan.
Meetings and Committees of the Board of Directors
The Board of Directors of Franklin Financial has a standing
Audit Committee and a standing Incentive Compensation Committee,
but does not have a standing Nominating Committee.
Members of the Audit Committee during 1996 were Dennis W.
Good, Jr., Chairman, and Messrs. Eshleman, Hull, Miller, Sioberg
and Zullinger. Mr. Benedict is an ex-officio member of the Audit
Committee. The Audit Committee met four times during the past
year. The Audit Committee is responsible for overseeing the
internal accounting and auditing methods and procedures of
Franklin Financial and its subsidiaries and for recommending
annually to the Board of Directors the engagement of an
independent public accounting firm to examine the consolidated
financial statements of Franklin Financial.
Members of the Incentive Compensation Committee during 1996
were Jay L. Benedict, Chairman, and Messrs. Diller, Elliott and
Miller. The Incentive Compensation Committee met three times
during the past year. The Incentive Compensation Committee
currently administers the Long-Term Incentive Plan of 1990 and
the Employee Stock Purchase Plan and, in conjunction with the
Personnel Committee of the Board of Directors of F&M Trust,
oversees the administration of Franklin Financial's compensation
policies and employee benefits plans.
The Board of Directors of Franklin Financial met seven times
during 1996. All incumbent directors attended at least
75 percent of the meetings of the Board of Directors and the
committees on which they served.
Compensation of Directors
Directors of Franklin Financial who are not salaried
officers of Franklin Financial or one of its subsidiaries are
paid an annual retainer of $3,600 and receive a fee of $150 for
each committee meeting attended.
Executive Officers
The following persons are the executive officers of Franklin
Financial:
Name Age Office Held
William E. Snell, Jr. 48 President and Chief Executive
Officer of Franklin Financial and
F&M Trust since 1996; President of
Franklin Financial and F&M Trust
since 1995
Charles S. Bender, II 52 Executive Vice President of
Franklin Financial since 1983 and
of F&M Trust since 1981
Frank S. Elliott 55 Senior Vice President of Franklin
Financial and F&M Trust since 1988
Elaine G. Meyers 49 Treasurer and Chief Financial
Officer of Franklin Financial and
Vice President/Finance of F&M Trust
since 1988
Executive Compensation and Related Matters
Summary of Cash and Certain Other Compensation
The following table provides certain summary information
concerning compensation paid or accrued by Franklin Financial and
F&M Trust to William E. Snell, Jr., the current Chief Executive
Officer of Franklin Financial, to Robert G. Zullinger, who served
as Chief Executive Officer of Franklin Financial until March 7,
1996, and to each of the other most highly compensated executive
officers of Franklin Financial whose combined 1996 salary and
bonus compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securi-
ties
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Awards(1) SARs Payouts sation(2)
Position Year ($) ($) ($) ($) (#) ($) ($)
William E. Snell, Jr., 1996 $154,615 None None None None None $ 3,283
President and Chief
Executive Officer(3) 1995 $ 96,923 $20,000 None None None None None
Robert G. Zullinger, 1996 $ 92,904 None $41,552 None None None $36,367(5)
Chief Executive
Officer(4) 1995 $152,880 None $12,971 None None $11,112 $ 5,250
1994 $145,600 None $10,237 None None $ 9,260 $ 4,500
Charles S. Bender, II 1996 $114,450 None $16,366 None None None $ 4,648
Executive Vice
President 1995 $109,200 None $ 8,992 None None $ 7,702 $ 4,202
1994 $104,000 None $ 7,097 None None $ 6,418 $ 3,432
Footnotes
1. See Long Term Incentive Plan Award Table appearing below.
Messrs. Snell, Zullinger and Bender held 7,325, -0- and
10,476 shares, respectively, of restricted stock with an
aggregate value of $232,424, $-0- and $336,542,
respectively, as of December 31, 1996. Dividends are paid
on those shares if and to the extent paid on Franklin
Financial common stock generally.
2. Consists exclusively of matching contribution to
Section 401(k) Profit Sharing Plan, except as otherwise
described in Footnote 5 below.
3. Mr. Snell was employed by Franklin Financial on April 17,
1995 and became Chief Executive Officer on March 8, 1996.
4. Mr. Zullinger served as Chief Executive Officer of Franklin
Financial until March 7, 1996 and retired on June 30, 1996.
5. Consists of matching contribution to Section 401(k) Profit
Sharing Plan ($4,767), director fees ($6,600), and amounts
earned under a Consulting Agreement entered into by
Mr. Zullinger with Franklin Financial following his
retirement ($25,000). Under the terms of this Consulting
Agreement, Mr. Zullinger has agreed for a period of three
years to devote approximately 20 hours per week to business
development and retention activities on behalf of Franklin
Financial and F&M Trust and will receive a consulting fee of
$50,000 per year.
LONG TERM INCENTIVE PLAN AWARD TABLE
Number of Performance
Shares, or Other
Units or Period Until Estimated or Future Payouts Under
Other Monthly Non-Stock Price Based Plans
Name Rights or Payout Threshold Target Maximum
William E. Snell, Jr. 7,325 5 years Not Applicable Not Applicable Not Applicable
Robert G. Zullinger None Not Applicable Not Applicable Not Applicable Not Applicable
Charles S. Bender, II 5,171 5 years Not Applicable Not Applicable Not Applicable
The foregoing table sets forth shares of restricted stock
awarded in 1996 to the executive officers named in the Summary
Compensation Table appearing above, which awards were granted
pursuant to the Senior Management Incentive Program adopted under
the Long-Term Incentive Plan of 1990. The restricted shares are
subject to accelerated vesting if Franklin Financial meets or
exceeds certain predetermined annual net income performance goals
during the five year period beginning in 1996 and ending in 2000.
To the extent not previously vested, unvested restricted shares
will vest in full upon the expiration of ten years from the date
of grant, provided that the recipient is then an employee of
Franklin Financial or one of its subsidiaries and except that any
then unvested restricted shares will vest in full in the event of
the recipient's prior disability or death or in the event of the
occurrence of a change in control of Franklin Financial.
Defined Benefit Pension Plan
The following table shows, for the salary levels and years
of service indicated, the annual pension benefit, before a Social
Security offset of 0.6 percent (0.6%) of covered compensation for
each year of service to a maximum of 35 years (but without
reflecting the maximum pension benefit limitations established
under Section 415 of the Internal Revenue Code), payable under
the defined benefit pension plan maintained by F&M Trust
commencing at age 65 under the present pension benefit formula:
PENSION PLAN TABLE
YEARS OF SERVICE
Covered
Remuneration 5 10 15 20 25 30 35 40 45
$ 50,000 $ 4,375 $ 8,750 $13,125 $17,500 $21,875 $26,250 $30,625 $ 33,500 $ 36,375
75,000 6,563 13,125 19,688 26,250 32,813 39,376 45,938 50,250 54,563
100,000 8,750 17,500 26,250 35,000 43,750 52,500 61,250 67,000 72,750
125,000 10,938 21,875 32,813 43,750 54,688 65,625 76,563 83,750 90,938
150,000 and Over 13,125 26,250 39,375 52,500 65,625 78,750 91,876 100,500 109,125
A participant's remuneration covered by the Plan is the
average of the highest five consecutive year's compensation
(salary and bonus as reported in the Summary Compensation Table
appearing above) in the ten years preceding normal retirement.
Current compensation covered by the plan for the year ended
December 31, 1996 for Messrs. Snell and Bender was $150,000 and
$110,546, respectively. As of December 31, 1996, Messrs. Snell
and Bender were credited with 1.7 and 21.9 years of service,
respectively, for benefit accrual purposes under the Plan.
Mr. Zullinger retired on June 30, 1996 and is a vested terminee
under the Plan. The normal retirement benefit under the plan is
a single-life annuity equal to: (i) 1.15 percent (1.15%) of the
average of the highest five consecutive years' compensation in
the 10 years preceding normal retirement, multiplied by a
participant's number of years of service from the date of
employment to the retirement date, plus (ii) 0.6 percent (0.6%)
of such compensation in excess of Social Security covered
compensation (the taxable wage base averaged over the 35 year
period ending with the last day of the calendar year in which the
participant attains Social Security retirement age), multiplied
by a participant's number of years of service (up to a maximum of
35 years) from the date of employment to the retirement date.
This benefit is limited by the maximum benefit as specified under
Section 415 of the Internal Revenue Code of 1986, as amended.
Compensation Committee Report on Executive Compensation
The Incentive Compensation Committee of the Board of
Directors of Franklin Financial (the "Committee") administers the
executive compensation programs of Franklin Financial and its
subsidiaries. The Committee consists of four independent
directors.
Executive Compensation Policies
Executive compensation consists of two components: base
salary and long-term incentives. The Committee has established
an executive compensation policy to assist it in administering
these two components of executive compensation.
The policy is to provide executives of Franklin Financial
with a total compensation package that is fair in light of
competitive compensation practices, that attracts and retains
qualified executives, that places a portion of total pay at risk
(to be earned through the achievement of performance goals), and
that helps to align management's interests with those of
shareholders. Fair pay is defined as pay levels that are at or
approach the median of competitive compensation practices.
Competitive compensation practices are determined from time
to time, as follows. The Committee uses data from compensation
surveys of the banking industry to determine median pay practices
for similar positions at comparably sized organizations.
Compensation disclosures made by a peer group of comparably sized
Pennsylvania banks are also used to determine competitive pay
practices at the top management level. This group of
Pennsylvania banking organizations bears no direct relationship
to those companies represented in the Mid-Atlantic Banking Index
appearing in the stock performance graph set forth elsewhere in
this proxy statement because the companies represented in the
Index are too numerous and because some are too small and others
too large for appropriate and meaningful compensation
comparisons. Additionally, the Committee's understanding of
competitive salary increases is used in estimating competitive
pay levels.
The Committee uses a long-term incentive program to link
total pay to the performance of Franklin Financial. This program
provides participants the opportunity to earn a combination of
cash and stock awards contingent upon the achievement of long-
term corporate earnings objectives. The goals of this program
are to align an executive's financial interests with those of
shareholders by linking total pay to the achievement of long-term
corporate earnings objectives and to encourage a performance
focus that is longer-term in nature. The Committee attempts in
this connection to provide long-term incentive opportunities that
are fair in light of competitive compensation practices.
Relationship of Performance to Executive Compensation
The Committee administers a long-term incentive plan for
members of senior management, which includes Messrs. Snell and
Bender. Other senior officers also participate in this plan.
Under the plan, participants receive awards of restricted stock
and cash, which awards are subject to accelerated vesting if
Franklin Financial meets or exceeds certain five year annual net
income performance goals established at the time of grant of the
award. To the extent not previously vested, the restricted stock
portion of the award will vest in full upon the expiration of
10 years from the date of grant. The cash portion of an award,
to the extent not vested after the expiration of five years, is
forfeited.
Achievement of any one year's earnings objective results in
the vesting of a portion of the restricted stock award and a
distribution of a portion of the cash award. Failure to meet the
earnings objective in a given year results in the permanent
forfeiture of that year's portion of the cash award.
Furthermore, failure to meet the annual earnings objective means
that no restricted shares vest that year. After the expiration
of ten years from the date of the award, however, all unvested
shares of restricted stock will vest, provided that the
participant remains an employee of Franklin Financial or one of
its subsidiaries.
In 1996, Franklin Financial had net income of approximately
$4.127 million. This resulted in earnings per share of $2.20,
return on assets of 1.29%, and return on equity of 11.83%. This
level of earnings did not meet the annual earnings objective for
1996 established under the plan. Accordingly, no cash awards
were distributed and no accelerated vesting of restricted shares
occurred.
1996 Compensation of the Chief Executive Officer
Based upon its compensation policy as summarized above and
its understanding of competitive pay practices, (including its
recent experience in recruiting a chief executive officer), the
Committee at its December 1995 meeting approved: (i) a $10,000
annual salary increase for Mr. Snell, effective January 1, 1996,
resulting in an annual salary of $150,000 through June 30, 1996,
and (ii) an additional $10,000 annual salary increase effective
July 1, 1996, bringing Mr. Snell's annualized salary to $160,000
per year for the second half of 1996.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted in
1993, brought about a limitation on the deductibility for federal
income tax purposes of annual compensation in excess of
$1 million payable to certain senior officers of publicly held
companies. Qualifying performance-based compensation is not
subject to this limitation if certain conditions are met. The
Committee does not foresee current compensation arrangements
exceeding this level. Accordingly, the Committee has no plans to
modify the compensation policies of Franklin Financial in
response to the provisions of Section 162(m) of the Code. The
Committee will evaluate this matter on an ongoing basis.
The foregoing report is furnished by Jay L. Benedict,
Chairman of the Incentive Compensation Committee, and Messrs.
Diller, Elliott and Miller, who served as members of the
Incentive Compensation Committee during 1996.
Performance Graph
The Securities and Exchange Commission requires that a
publicly held company include in its proxy statement a stock
performance graph comparing its five-year cumulative total return
to shareholders with the returns generated by an industry-
specific index (or peer group index) and with the return
generated by a broad market index.
The following graph compares the cumulative total return to
shareholders of Franklin Financial with the NASDAQ Composite
Index (a broad market index prepared by Media General Financial
Services) and with the Mid-Atlantic Banking Index (also prepared
by Media General Financial Services) for the five year period
ended December 31, 1996, in each case assuming an initial
investment of $100 and the reinvestment of dividends.
1991 1992 1993 1994 1995 1996
Franklin Financial $100 $118.23 $180.91 $202.88 $246.39 $300.71
NASDAQ $100 $100.98 $121.13 $127.17 $164.96 $204.98
Mid-Atlantic Banks $100 $125.23 $155.57 $147.70 $224.28 $317.65
Transactions with Directors and Executive Officers
Some of the directors and executive officers of Franklin
Financial and F&M Trust and the companies with which they are
associated were customers of and had banking transactions with
F&M Trust in the ordinary course of business during 1996. All
loans and commitments to loan made to such persons and the
companies with which they are associated were made on
substantially the same terms, including interest rates,
collateral, and repayment terms, as those prevailing at the time
for comparable transactions with other persons and did not
involve more than a normal risk of collectibility or present
other unfavorable features. It is anticipated that F&M Trust
will enter into similar transactions in the future.
Martha B. Walker, a member of the Boards of Directors of
Franklin Financial and F&M Trust, is president of Walker, Van
Horn & MacBride, P.C. Walker, Van Horn & MacBride has provided
legal services to F&M Trust for many years and is expected to
continue to do so in the future.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires that the directors and certain officers of Franklin
Financial file with the Securities and Exchange Commission
reports of ownership and changes in ownership with respect to
shares of Franklin Financial common stock beneficially owned by
them. Based solely upon its review of copies of such reports
furnished to it and written representations made by its directors
and those officers who are subject to such reporting
requirements, Franklin Financial believes that during the
calendar year ended December 31, 1996, all filing requirements
applicable to its directors and officers were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the year ended December 31, 1996, Franklin Financial
engaged Arthur Andersen LLP, independent certified public
accountants, to examine its consolidated financial statements.
It is anticipated that Arthur Andersen LLP will be similarly
engaged for the year 1997. Representatives of Arthur Andersen
LLP are expected to be present at the 1997 Annual Meeting with
the opportunity to make a statement if they desire to do so and
to be available to respond to appropriate questions.
ADDITIONAL INFORMATION
A copy of the Annual Report of Franklin Financial on Form
10-K as filed with the Securities and Exchange Commission,
including financial statements and financial statement schedules,
is available without charge to shareholders upon written request
addressed to William E. Snell, Jr., President and Chief Executive
Officer, Franklin Financial Services Corporation, 20 South Main
Street, P.O. Box T, Chambersburg, Pennsylvania 17201-0819.
OTHER MATTERS
The Board of Directors of Franklin Financial knows of no
matters, other than those discussed in this Proxy Statement,
which will be presented at the 1997 Annual Meeting. However, if
any other matters are properly brought before the meeting, any
proxy given pursuant to this solicitation will be voted in
accordance with the recommendations of the management of Franklin
Financial.
BY ORDER OF THE BOARD OF DIRECTORS
April E. Rosenbaum
Secretary
Chambersburg, Pennsylvania
April 1, 1997
APPENDIX
PROXY
FRANKLIN FINANCIAL SERVICES CORPORATION ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints April E. Rosenbaum and Ruth
Ann Lesher, and each or either of them, as proxies, with full
power of substitution, to vote as directed below all of the
shares of Franklin Financial Services Corporation common stock
held of record on March 14, 1997, by the undersigned and by the
Plan Agent for the account of the undersigned under the Dividend
Reinvestment Plan at the Annual Meeting of Shareholders to be
held on Tuesday, April 29, 1997, at 10:30 a.m. at the Lighthouse
Restaurant, 4301 Philadelphia Avenue, Chambersburg, Pennsylvania,
and at any adjournment thereof, as follows:
1. ELECTION OF FOUR DIRECTORS FOR A TERM OF THREE YEARS
( ) FOR all nominees listed ( ) WITHHOLD AUTHORITY to vote
below (except as marked for all nominees listed
to the contrary below) below
Jay L. Benedict, Jr. H. Huber McCleary
John M. Hull, III Charles M. Sioberg
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name).
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED.
This proxy also confers authority as to any other business which
may be brought before the meeting or any adjournment thereof. If
any other business is presented at the meeting, the shares
represented by this proxy will be voted in accordance with the
recommendations of the management of Franklin Financial Services
Corporation.
Dated:_______________________, 1997
___________________________________
Signature
___________________________________
Signature
IMPORTANT: Please sign exactly as
your name or names appear hereon.
Joint owners should each sign. If
you sign as agent or in any other
representative capacity, please
state the capacity in which you
sign.