SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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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 under Rule 14a-12
FNB Corp.
-----------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than Registrant)
Payment of Filing Fee (Check the appropriate box):
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22(a)(2) of Schedule 14A
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
O-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
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FNB CORP.
101 Sunset Avenue
Asheboro, North Carolina 27203
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 14, 2002
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Notice is hereby given that the regular Annual Meeting of Shareholders of
FNB Corp. (the "Corporation") will be held at the AVS Banquet Centre, 2045
North Fayetteville Street, Asheboro, North Carolina, on Tuesday, the 14th day
of May, 2002, at one o'clock p.m., preceded by a buffet luncheon beginning at
12:15 p.m., for the following purposes:
1. To elect three Class I Directors to serve for three-year terms expiring
at the Annual Meeting in 2005.
2. To consider approval of an amendment to the Articles of Incorporation to
modify the supermajority shareholder vote requirement for business
combinations.
3. To consider and act upon any other business as may come before the
meeting or any adjournment thereof.
All shareholders are invited to attend the meeting. Only those shareholders
of record at the close of business on March 28, 2002, shall be entitled to
notice of the meeting and to vote at the meeting.
Information relating to the activities and operations of FNB Corp. during
the fiscal year ended December 31, 2001, is contained in the Corporation's
Annual Report, which is enclosed.
By Order of the Board of Directors
/s/ Jerry Little
JERRY A. LITTLE
Treasurer and Secretary
April 12, 2002
Your Board of Directors urges you to mark, date, sign and return the enclosed
proxy as promptly as possible whether or not you plan to attend the meeting in
person. The proxy may be revoked at any time by notifying the Secretary of FNB
Corp. in writing prior to the voting of the proxy.
FNB CORP.
101 Sunset Avenue
Asheboro, North Carolina 27203
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PROXY STATEMENT
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GENERAL INFORMATION
The following information is furnished in connection with the solicitation
of proxies by the Board of Directors of FNB Corp. (the "Corporation" or "FNB")
for use at the Annual Meeting of Shareholders to be held on May 14, 2002. The
principal executive offices of the Corporation are located at its wholly owned
subsidiary, First National Bank and Trust Company (the "Bank"), 101 Sunset
Avenue, Asheboro, North Carolina 27203 (Telephone: 336-626-8300). This proxy
statement and the enclosed form of proxy were first sent to shareholders on or
about April 12, 2002.
A proxy may be revoked by the person giving it by delivering a written
notice to the Corporation prior to the meeting or by personally requesting that
it be returned. The shares represented by all properly executed proxies
received by the Corporation in time to be taken to the meeting will be voted;
and, if a choice is specified on the proxy, the shares represented thereby will
be voted in accordance with such specification. If a specification is not made,
the proxy will be voted for the proposals set forth in the Notice of Annual
Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail or telephone by
directors, officers and regular employees of the Corporation or the Bank
without additional compensation therefor. The Corporation may also request
banking institutions, brokerage firms, custodians, nominees and fiduciaries to
forward solicitation material to the beneficial owners of FNB Common Stock held
of record by such person, and the Corporation will reimburse such forwarding
expenses. The Corporation will pay the costs of solicitation of proxies.
VOTING SECURITIES OUTSTANDING AND PRINCIPAL SHAREHOLDERS
Only holders of record of FNB Common Stock at the close of business on March
28, 2002 (the "Record Date"), are entitled to a notice of and to vote on
matters to come before the Annual Meeting or any adjournment thereof. On the
Record Date, there were 4,750,447 shares of FNB Common Stock issued and
outstanding.
Each share is entitled to one vote on all matters. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of FNB
Common Stock entitled to vote is necessary to constitute a quorum.
The Corporation is not aware of any holders of more than 5% of the
outstanding shares of FNB Common Stock as of March 28, 2002.
1
EXECUTIVE OFFICERS
The following table sets forth the current executive officers of the
Corporation and also shows their positions with the Bank:
Name Age Position in Corporation Position in Bank
---- --- ----------------------- -------------------------
Michael C. Miller 51 Chairman and President Chairman and President
R. Larry Campbell 57 Vice President Senior Vice President
Jerry A. Little.. 58 Treasurer and Secretary Senior Vice President and
Secretary
The above officers have held executive positions with the Corporation and
the Bank for at least the past five years, except for Mr. Campbell who was the
President and Chief Executive Officer of Carolina Fincorp, Inc. and Richmond
Savings Bank, Inc., SSB from 1990 to 2000. Officers are elected annually by the
Board of Directors.
ELECTION OF DIRECTORS
The bylaws of the Corporation provide that the number of directors shall
consist of not less than nine nor more than twenty-five, with the exact number
of directors within such maximum and minimum limits to be fixed and determined
from time to time by resolution adopted by a majority of the full Board of
Directors or by resolution of the shareholders at any annual or special meeting
thereof. The Board of Directors has set the total number of directors at 11,
all of whom either will be elected at the 2002 Annual Meeting or were
previously elected and will remain in office after that meeting.
The Board of Directors is divided into three classes: Class I, Class II and
Class III. In accordance with this classification, the members of Class I of
the Board of Directors are to be elected at this Annual Meeting. It is intended
that the persons named in the accompanying form of proxy will vote for the
three nominees listed below for directors of the Corporation in Class I, unless
authority so to vote is withheld. Each nominee is at present a member of the
Board of Directors. Class I directors will serve for three-year terms expiring
at the 2005 Annual Meeting or until their successors shall be elected and shall
qualify. Directors are elected by a plurality of the votes cast. Abstentions
and broker nonvotes will not affect the election results if a quorum is present.
The following information is furnished with respect to the nominees for
election as directors of the Corporation in Class I, and for the directors in
Classes II and III whose terms expire at the Annual Meetings occurring in 2003
and 2004, respectively. Each nominee for Class I director and each director
presently serving in Classes II and III also serves as a director of the Bank.
Nominees for Class I Directors to Serve for Three-Year Terms Expiring at the
Annual Meeting in 2005
Director
Name Age Principal Occupation During the Past Five Years Since
---- --- ----------------------------------------------- --------
Darrell L. Frye....... 56 Vice President of Finance, Harriss & 1999
Covington Hosiery (Manufacturer of
men's and ladies' athletic socks)
J. M. Ramsay III...... 54 President, Elastic Therapy, Inc. 1989
(Manufacturer of medical and specialty
hosiery)
Charles W. Stout, M.D. 69 Retired; Family Physician (in active 1989
practice until 1996)
2
Class II Directors with Continuing Terms Expiring at the Annual Meeting in 2003
Principal Occupation Director
Name Age During the Past Five Years Since
---- --- ----------------------------------------- --------
W. L. Hancock......... 66 President and Treasurer, Hancock Farms, 1973
Inc. (Purebred cattle)
Cooper M. McLaurin.... 58 Vice President, McLaurin Industries (Real 2001
estate holding company)
R. Reynolds Neely, Jr. 48 Planning Director, City of Asheboro 1980
Planning Department
Richard K. Pugh....... 67 Retired; Chairman (until retirement in 1988
1999), Pugh Oil Company, Inc.
(Convenience stores and petroleum
products distribution)
Class III Directors with Continuing Terms Expiring at the Annual Meeting in 2004
Principal Occupation Director
Name Age During the Past Five Years Since
---- --- ------------------------------------------ --------
James M. Campbell, Jr. 63 President and Treasurer, Sew Special, Inc. 1984
(Manufacturer of private label apparel)
R. Larry Campbell..... 57 Vice President of FNB Corp. (effective 2000
2002) and Senior Vice President of First
National Bank and Trust Company
(effective 2000); formerly President and
Chief Executive Officer, Carolina
Fincorp, Inc and Richmond Savings
Bank, Inc., SSB (1990-2000)
Thomas A. Jordan...... 62 President, Michael Thomas Furniture 1984
Company (Manufacturer of upholstered
furniture)
Michael C. Miller..... 51 Chairman and President of FNB Corp. 1992
and First National Bank and Trust
Company (Chairman effective 1999)
In the event that any nominee should not be available to serve for any
reason (which is not anticipated), it is intended that the persons acting under
the proxy will vote for the election, in his stead, of such other persons as
the Board of Directors of the Corporation may recommend.
Committees of the Board
The Board of Directors holds regular monthly meetings to conduct the normal
business of the Corporation and meets on other occasions when required for
special circumstances. In addition, certain board members serve on standing
committees. Among these committees are the Audit and Compliance, Compensation
and Nominating Committees, whose members and principal functions are as follows:
Audit and Compliance Committee. The Audit and Compliance Committee reviews
significant audit and accounting principles, policies and practices and meets
with the audit manager relative to internal audit functions
3
and with the independent auditors to review the performance of the audit
manager and internal controls and accounting procedures. The committee also
reviews significant regulatory compliance matters and meets with the compliance
officer relative to the compliance management function. Additionally, the
committee reviews regulatory reports filed with the Federal Reserve Board and
Comptroller of the Currency. Members of this committee are Directors Neely,
Frye, Hancock and Stout. The Audit and Compliance Committee met five times
during the 2001 fiscal year.
Compensation Committee. The Compensation Committee deals in broad terms
with personnel matters and reviews the compensation of the senior officers of
the Corporation and the Bank. Members of this committee are Directors J.
Campbell, Neely and Pugh. The Compensation Committee met three times during the
2001 fiscal year.
Nominating Committee. The Board of Directors, as a group, serves as the
Nominating Committee and in that capacity recommends nominees for election to
the Board. Qualified candidates recommended by shareholders will be considered
by the Board. In order for a candidate recommended by a shareholder to be
considered as a nominee at the next annual meeting, the name of the candidate,
together with a written description of the candidate's qualifications, must be
received by the Secretary of FNB Corp., 101 Sunset Avenue, Asheboro, North
Carolina 27203, no later than December 13, 2002.
During the fiscal year ended December 31, 2001, the Board of Directors held
a total of 13 meetings. Each incumbent Director attended 75% or more of the
total number of meetings of the Board and of the committees of the Board on
which he or she served, except for Cooper M. McLaurin who attended 73% of such
meetings.
EXECUTIVE COMPENSATION
Except as otherwise noted, the following table shows for the fiscal years
ended December 31, 2001, 2000 and 1999, the cash and certain other compensation
paid to or received or deferred by persons who were at December 31, 2001 the
chief executive officer of the Corporation and the other executive officers of
the Corporation whose total salary and bonus in 2001 exceeded $100,000.
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------- -------------
Securities
Underlying
Name and Principal Position Stock Options All Other
on December 31, 2001 Year Salary Bonus (#) Compensation
--------------------------- ---- -------- ------- ------------- ------------
Michael C. Miller,............................... 2001 $216,875 $52,229 -- $6,930(2)
Chairman and President of the Corporation 2000 192,500 47,888 25,000 6,930
and the Bank 1999 192,500 34,192 7,500 6,680
R. Larry Campbell,............................... 2001 $102,917 $16,366 -- $3,610(3)
Senior Vice President of the Bank 2000(1) 72,500 6,700 3,000 1,778
Jerry A. Little,................................. 2001 $ 92,000 $19,125 -- $5,442(4)
Senior Vice President and Secretary of the Bank, 2000 87,305 22,215 10,000 5,391
Treasurer and Secretary of the Corporation 1999 84,788 11,726 3,000 4,999
- --------
(1) Mr. Campbell became an employee of the Bank in April 2000.
(2) Amount shown consists of $1,680 paid by the Bank pursuant to a Split Dollar
Insurance Program for executives and $5,250 contributed by the Corporation
to a 401(k) plan.
4
(3) Amount shown consists of a contribution by the Corporation to a 401(k) plan.
(4) Amount shown consists of $2,073 paid by the Bank pursuant to a Split Dollar
Insurance Program for executives and $3,369 contributed by the Corporation
to a 401(k) plan.
Stock Options
The Corporation did not grant any stock options in the 2001 fiscal year.
The following table shows the number of shares covered by exercisable and
unexercisable options held by the executive officers named in the Summary
Compensation Table as of December 31, 2001. No options were exercised by these
executive officers in 2001.
Option Values at December 31, 2001
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 2001 (#) December 31, 2001 (1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Michael C. Miller 48,000 24,500 $175,550 $73,325
R. Larry Campbell 25,090 2,400 133,324 8,232
Jerry A. Little.. 16,200 9,800 64,680 29,330
- --------
(1) The closing price of the Corporation's Common Stock on December 31, 2001,
the last trading day of 2001, was $15.18.
Pension Plan Table
The following table shows the estimated annual retirement benefits payable
at the normal retirement age of 65 to participants in the Corporation's
qualified and nonqualified defined benefit plans with salaries in the
classifications indicated.
Pension Plan Table
Approximate Annual Benefit Upon Retirement
Assumed Average For Years of Service Indicated
Compensation for -----------------------------------------------------
Final Ten Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
--------------- -------- -------- -------- -------- -------- --------
$100,000.... 45,046 50,046 50,046 50,046 50,046 53,776
125,000.... 58,796 65,046 65,046 65,046 65,046 69,464
150,000.... 72,546 80,046 80,046 80,046 80,046 85,151
175,000.... 86,296 95,046 95,046 95,046 95,046 100,839
200,000.... 100,046 110,046 110,046 110,046 110,046 116,526
225,000.... 113,796 125,046 125,046 125,046 125,046 132,214
250,000.... 127,546 140,046 140,046 140,046 140,046 147,901
300,000.... 155,046 170,046 170,046 170,046 170,046 179,276
350,000.... 182,546 200,046 200,046 200,046 200,046 210,651
The Corporation's defined benefit plans include a noncontributory, qualified
Pension Plan and a noncontributory, nonqualified supplemental executive
retirement plan ("SERP"). The Pension Plan covers substantially all full-time
employees who qualify as to age and length of service. Benefits under the
Pension Plan are based on the employee's compensation, which is comprised of
total annual salary and bonus, total years of
5
service, age at retirement and the employee's covered compensation under the
Social Security laws. As of January 1, 2002, the individuals named in the
Summary Compensation Table had the following credited years of service under
the Pension Plan: Mr. Miller, 16 years; Mr. Campbell, 2 years and Mr. Little,
17 years.
The SERP applies to certain executive employees, including the individuals
named in the Summary Compensation Table other than Mr. Campbell. Annual
benefits payable under the SERP are based on factors similar to those for the
Pension Plan and are limited to 60% of Average Compensation, offset by amounts
payable under the Pension Plan and by 50% of Social Security benefits. Average
Compensation for purposes of both the Pension Plan and the SERP means the
average annual compensation during the final ten years of employment.
The benefit amounts listed in the above Pension Plan Table reflect a
straight life annuity. Due to limitations on benefits payable under the SERP,
the annual benefits in the table for 40 years of service result from
application of the Pension Plan. Annual retirement benefits over $160,000
exceed the current maximum benefits allowable for qualified plans under the
Internal Revenue Code.
In connection with the acquisition by the Corporation of Carolina Fincorp,
Inc. in 2000, the Bank assumed the obligations of Richmond Savings Bank, Inc.,
SSB under its Nonqualified Supplemental Retirement Plan with Mr. R. Larry
Campbell. Under that plan, Mr. Campbell is entitled to a retirement benefit of
$30,000 per year payable for 10 years commencing at age 65. The plan also
provides for a $300,000 death benefit payable to Mr. Campbell's beneficiaries
if his employment is terminated by his death prior to age 65.
Director Compensation
Directors who are not also employees of the Corporation or the Bank are paid
$500 for each Board meeting they attend and receive an additional $250 for each
committee meeting attended. In addition, each nonemployee director is paid a
monthly retainer of $500. Directors may elect to defer receipt of their fees
and monthly retainers until their retirement from the Board. Any deferred fees
and retainers become a general obligation of the Corporation to be credited
with interest at the Bank's deposit rate applied to individual retirement
accounts with a two-year term and priced on a monthly variable-rate basis,
subject to a minimum rate of 5.5% per annum.
Employment Agreements
The Bank has entered into employment agreements with Michael C. Miller and
R. Larry Campbell to assure their continuing services to the Bank.
Mr. Miller's employment under his employment agreement may be terminated by
either Mr. Miller or the Bank upon 60 days' prior written notice to the other.
The employment agreement provides that Mr. Miller's salary and benefits will be
as mutually agreed upon by Mr. Miller and the Board of Directors. The
employment agreement also provides that if following a change in control of the
Bank or the Corporation Mr. Miller terminates his employment either voluntarily
within 90 days of the change of control or because his authority or
responsibilities are substantially reduced or his salary or benefits are
reduced to a level below that in effect immediately prior to the change of
control or because he is advised to change his residence or principal place of
business from Asheboro, North Carolina, then Mr. Miller will be entitled to
receive in three equal annual installments commencing on the date of
termination an aggregate amount equal to 2.99 times his average total cash
compensation for the five fiscal years immediately preceding the change of
control. This amount may be reduced to the extent necessary to avoid the
disallowance of a deduction to the Bank or the existence of an "excess
parachute payment" under the Internal Revenue Code. Mr. Miller may forfeit this
payment if he solicits or encourages a change of control without the prior
approval of the Board of Directors of the Bank or the Corporation. The
agreement also contains provisions that prohibit Mr. Miller from competing with
the Bank during and for a period of time following his employment with the Bank.
6
The Bank entered into an employment agreement with Mr. Campbell in
connection with the acquisition in 2000 of Carolina Fincorp, Inc. The agreement
has an annually renewing three-year term, unless either the Bank or Mr.
Campbell notifies the other of its intent not to renew, but the term is not to
continue automatically for more than nine years. The employment agreement
provides that Mr. Campbell will receive an annual base salary initially set at
$100,000 with increases as determined in accordance with the Bank's policies
and practices for employee compensation. The employment agreement also provides
that it may be terminated by the Bank with cause or as a result of Mr.
Campbell's death or disability. Mr. Campbell may terminate the agreement upon
60 days' notice to the Bank. In the event the Bank terminates Mr. Campbell's
employment other than by reason of death, disability or "cause," Mr. Campbell
would continue to receive his then annual base salary for the otherwise then
remaining term of the employment agreement. The Bank would also continue to
provide Mr. Campbell with the benefits to which he is entitled under the
agreement, or their economic equivalent, for the remaining term. If Mr.
Campbell's employment is terminated by reason of continued disability, he would
continue to receive his then annual base salary for the otherwise then
remaining term of the agreement, less any disability payments to him from any
disability plan of the Bank or FNB. The agreement contains confidentiality
provisions as well as provisions prohibiting Mr. Campbell from competing with
the Bank during and for a period of time following his employment with the Bank.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for setting the compensation for
the members of senior management of the Corporation and the Bank. The Committee
determines the compensation level of the President, which is reviewed and
ratified by the full Board of Directors, and acts upon the recommendations of
the President as to the compensation of the other senior management employees.
Three nonemployee directors currently serve as members of the Committee: James
M. Campbell, Jr., Chairman, R. Reynolds Neely, Jr. and Richard K. Pugh.
Compensation Philosophy
The Corporation's compensation policies are designed to attract and retain
competent management. The Board's goal is to provide competitive base salaries
to the Corporation's and the Bank's management employees and to give them, as
well as all other employees of the Corporation and the Bank, performance
incentives to motivate superior performance on behalf of the Corporation and
its shareholders. The Corporation has generally used two types of incentive
compensation: annual cash bonuses based on the overall performance of the Bank
and long-term compensation in the form of stock options. The Committee believes
that linking long-term compensation to the value of the Corporation's Common
Stock is especially effective because it aligns the interests of management
with those of the Corporation's shareholders.
Executive Officer Compensation
Annual Compensation. The Committee's recommendations for base salary for
the President and other management employees are based on information available
through industry sources regarding the compensation of executives of other
institutions similar in size and in other respects to the Bank. The Committee
considers annual cash bonuses as an integral part of the Corporation's
financial incentive package to achieve the Corporation's goals. Bonuses are
paid to all employees of the Bank based on the Bank's operating results for the
year in a number of specific areas, with each employee receiving the same
percentage of his or her base salary as every other employee. The Committee
generally adopts the goals for the year at the beginning of the year. Goals are
generally established for the growth in loans and deposits, profit margins,
noninterest income, loan quality and productivity. Senior management employees
generally receive an additional bonus based on similar criteria in the
discretion of the Board, based on the Committee's recommendations.
7
Long-Term Compensation. The Corporation's long-term incentive compensation
awards are designed to encourage the retention of key executives and to align
their interests with the interests of shareholders. Long-term compensation for
the President and other management employees consists principally of stock
options. The Corporation currently has a Stock Compensation Plan (the "Plan"),
which provides for the grant of incentive and nonqualified options, stock
bonuses and restricted stock. The Corporation believes that stock options
granted under the Plan are performance-based and, therefore, deductible by the
Corporation under Section 162(m) of the Internal Revenue Code. The Plan
provides for other types of compensation, such as stock bonuses and restricted
stock, which will be performance-based only if performance goals are
established by the Committee in compliance with Section 162(m); no substantial
stock bonuses of restricted stock have ever been granted by the Committee. The
Committee administers the Plan and determines, in its discretion, what stock
grants will be made. Stock options have been granted to the President and to
other management employees on an annual basis, except in 2001, since 1994. For
further information regarding the options granted to the President and other
executive officers, see "Executive Compensation--Stock Options" above. The
Committee believes that all grants to the President under the Plan are
performance-based for purposes of Section 162(m).
CEO Compensation. In setting Mr. Miller's 2001 base salary as President and
Chief Executive Officer of FNB, the Compensation Committee considered the
Bank's and the Corporation's achievement of various performance goals and
reviewed the compensation paid to chief executive officers of comparable
financial institutions of similar asset size. Return on assets and return on
equity were considered, as well as such factors as loan quality and
productivity, growth in loans and deposits, and profitability. The Committee
also reviewed national, regional, statewide and local peer group salary data to
determine a competitive and reasonable base salary. Mr. Miller's base salary
and total bonuses in 2001 are shown in the Summary Compensation Table above.
The Committee and the Board of Directors considered this base salary and these
bonuses appropriate in view of their overall assessment of the performance of
the President, the Corporation and the Bank.
Submitted by the Compensation
Committee of the Board of Directors:
James M. Campbell, Jr., Chairman
R. Reynolds Neely, Jr.
Richard K. Pugh
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has ever been an officer
or employee of the Corporation or any of its subsidiaries or performs services
for the Corporation or its subsidiaries other than as a director.
8
PERFORMANCE GRAPH
The following graph and table compare the cumulative total shareholder
return of FNB Common Stock for the five-year period ended December 31, 2001
with the SNL Southeast Bank Index and the Standard and Poor's 500 Stock Index,
assuming an investment of $100 at the beginning of the period and the
reinvestment of dividends.
[CHART]
FBN Corp. SNL Southeast Bank Index S&P 500 Index
--------- ------------------------ -------------
1996 $100.00 $100.00 $100.00
1997 136.39 151.59 133.37
1998 197.74 161.38 171.44
1999 114.04 127.00 207.52
2000 89.86 127.52 188.62
2001 117.32 158.86 166.22
As of December 31,
-----------------------------------------------
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
FNB Corp................ $100.00 $136.39 $197.74 $114.04 $ 89.86 $117.32
SNL Southeast Bank Index 100.00 151.59 161.38 127.00 127.52 158.86
S&P 500 Index........... 100.00 133.37 171.44 207.52 188.62 166.22
INDEBTEDNESS OF OFFICERS AND DIRECTORS
Certain of the directors and officers of the Corporation and the Bank and
companies with which they are affiliated were customers of and borrowers from
the Bank in the ordinary course of business in 2001. Similar banking
transactions are expected to take place in the future. In the opinion of
management, all outstanding loans and commitments included in such transactions
were made substantially on the same terms, including rate and collateral, as
those prevailing at the time in comparable transactions with other customers
and did not involve more than normal risk of collectibility or contain other
unfavorable features.
9
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 28, 2002, certain information
with respect to the beneficial ownership of FNB Common Stock by directors, by
the executive officers named in the Summary Compensation Table and by directors
and executive officers as a group.
Amount and Nature of
Beneficial Ownership Percent
Name and Address March 28, 2002 (1) (2) of Class
---------------- ---------------------- --------
James M. Campbell, Jr., Director............................. 58,193 1.22
Randleman, NC
R. Larry Campbell, Director and Vice President............... 57,091 1.20
Rockingham, NC
Darrell L. Frye, Director.................................... 2,800 *
Archdale, NC
W. L. Hancock, Director...................................... 115,439 2.43
Franklinville, NC
Thomas A. Jordan, Director................................... 34,661 *
Liberty, NC
Cooper M. McLaurin, Director................................. 14,581 *
Rockingham, NC
Michael C. Miller, Chairman and President.................... 62,124(3) 1.29
Asheboro, NC
R. Reynolds Neely, Jr., Director............................. 160,440(4) 3.37
Asheboro, NC
Richard K. Pugh, Director.................................... 11,600 *
Asheboro, NC
J. M. Ramsay III, Director................................... 32,630 *
Asheboro, NC
Charles W. Stout, M.D., Director............................. 28,140 *
Asheboro, NC
Jerry A. Little, Treasurer and Secretary..................... 16,979 *
Asheboro, NC
Directors and executive officers as a group (12 persons)..... 594,678(3)(4) 12.14
- --------
* Less than one percent.
(1) Includes shares held by directors' and executive officers' immediate
families, including spouse and/or children residing in same household. Does
not include 4,620 shares owned by the Ferree Educational and Welfare Fund,
of which Mr. Miller is a trustee and treasurer.
(2) Includes shares subject to stock options exercisable as of March 28, 2002
or within 60 days thereafter for Mr. J. Campbell (8,600 shares), Mr. R.
Campbell (25,090 shares), Mr. Frye (1,600 shares), Mr. Hancock (8,000
shares), Mr. Jordan (8,600 shares), Ms. McLaurin (4,701 shares, subject to
options granted to her husband, Joe M. McLaurin, a former director of the
Corporation), Mr. Miller (48,000 shares), Mr. Neely (8,600 shares), Mr.
Pugh (8,600 shares), Mr. Ramsay (8,600 shares), Dr. Stout (3,200 shares),
Mr. Little (16,200 shares) and all directors and executive officers as a
group (149,791 shares).
(3) Includes 1,725 shares held of record by the estate of Mr. Miller's mother
and over which Mr. Miller has voting and dispository control as executor of
the estate.
10
(4) Includes 82,292 shares held of record by Mr. Neely's mother and over which
Mr. Neely and his sister have joint voting and dispository control pursuant
to a revocable power of attorney.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Corporation's directors,
its executive officers, and any persons holding more than 10 percent of the
Corporation's stock are required to report their ownership of the Corporation's
stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established and the
Corporation is required to report in this proxy statement any failure to file
by these dates during 2001. All of these filing requirements were satisfied by
its directors, executive officers and 10 percent holders. In making these
statements, the Corporation has relied on the written representations of its
directors, executive officers and 10 percent holders and copies of the reports
that they have filed with the Commission.
INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG LLP independent
auditors for the Corporation for the 2002 fiscal year. A representative of KPMG
LLP is expected to be present at the Annual Meeting of Shareholders. The
representative will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions,
including those relating to the 2001 audit of the Corporation's financial
statements.
Disclosure of Auditor Fees
The following is a description of the fees billed to FNB by KPMG LLP during
or for the year ended December 31, 2001:
Audit Fees: Audit fees billed to the Corporation by KPMG LLP in
connection with KPMG's audit of the Corporation's annual financial
statements for the year ended December 31, 2001 and KPMG's review of the
interim financial statements included in the Corporation's quarterly reports
on Form 10-Q for the year ended December 31, 2001 totaled $65,000.
Financial Information Systems Design and Implementation Fees: The
Corporation did not engage KPMG LLP to provide advice to the Corporation
regarding financial information systems design and implementation during
fiscal year 2001.
All Other Fees: Fees billed to the Corporation by KPMG LLP during the
Corporation's 2001 fiscal year for all other services totaled $88,080. This
amount included audit-related fees of $56,600, consisting principally of
audits of employee benefit plans and implementation of FDICIA reporting, and
non-audit fees of $31,480, consisting of tax compliance and tax consulting
fees.
11
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Corporation's Board of Directors is comprised of
four directors who are not officers or employees of the Corporation. All
current members of the Committee are independent for purposes of the National
Association of Securities Dealers' listing standards. In accordance with its
written charter, which was approved in its current form by the Board of
Directors on June 22, 2000, the Audit Committee assists the Board in fulfilling
its oversight responsibilities by reviewing the financial information that will
be provided to the shareholders of the Corporation and others, the systems of
internal controls established by management and the Board of Directors, and the
audit process.
In performing its oversight function, the Audit Committee reviewed and
discussed the audited consolidated financial statements of the Corporation as
of and for the year ended December 31, 2001 with management and KPMG LLP, the
Corporation's independent accountants. The Audit Committee also discussed with
the Corporation's independent auditors all matters required by generally
accepted auditing standards, including those described in Statement on Auditing
Standards No. 61, as amended, "Communication with Audit Committees" and
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Corporation
that might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." The Audit Committee discussed with the auditors any relationships
that may have an impact on their objectivity and independence and satisfied
itself as to the auditors' independence. The Audit Committee also determined
that the provision of the other non-audit services described under "Independent
Auditors--Disclosure of Audit Fees" by KPMG LLP to the Corporation is
compatible with maintaining KPMG's independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the Corporation's audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2001,
for filing with the Securities and Exchange Commission.
Audit Committee
R. Reynolds Neely, Jr., Chairman
Darrell L. Frye
W. L. Hancock
Charles W. Stout, M.D.
12
PROPOSAL--APPROVAL OF AMENDMENT TO
ARTICLES OF INCORPORATION TO MODIFY
SUPERMAJORITY SHAREHOLDER VOTE
REQUIREMENT FOR BUSINESS COMBINATIONS
The Board of Directors proposes that the shareholders approve an amendment
to the Corporation's Articles of Incorporation, as amended, to modify the
requirement that the shareholders of the Corporation approve by a supermajority
vote any merger or consolidation of the Corporation with another entity, the
sale, lease or exchange of substantially all of the Corporation's assets or the
dissolution of the Corporation. The amendment would replace Article IX of the
Corporation's Articles of Incorporation with a new Article IX, a copy of which
is set forth in Appendix A to this proxy statement. You are urged to read the
full text of the proposed new Article IX carefully.
The proposed amendment has the effect of making the 75% shareholder vote
requirement applicable for business transactions involving the merger or
consolidation of the Corporation with another entity, the sale, lease or
exchange of substantially all of the Corporation's assets or the dissolution of
the Corporation only if the transaction has not been approved by the
Corporation's Board of Directors. Where the transaction does not involve a
related party, meaning a holder of 15% or more of the outstanding FNB Common
Stock or that holder's affiliate, and the transaction is approved by
three-fourths of the members of the Board of Directors, the 75% shareholder
vote requirement does not apply. If a related party is involved, the
supermajority shareholder vote will not be required if the transaction has been
approved by three-fourths of the "disinterested" members of the Corporation's
Board of Directors. "Disinterested" directors are directors who are neither
affiliated with nor a nominee of the related party, but only if they were
members of the Board of Directors of the Corporation prior to the time the
related party became such or were recommended by a majority of the
disinterested directors then in office.
If the requisite Board approval for the transaction is obtained, the North
Carolina Business Corporation Act would govern, generally requiring the
affirmative vote of the holders of a majority of the outstanding shares of FNB
Common Stock then entitled to vote to approve such transactions. If the
proposed new Article IX is approved, the affirmative vote of the holders of at
least 75% of the outstanding FNB Common Stock would be required to amend its
provisions.
Like the existing Article IX, the proposed amendment could make it more
difficult for a third party to acquire control of the Corporation. The proposed
amendment, however, makes it easier for the Corporation to acquire other
entities than does the present Article IX. A part of the Corporation's
strategic plan to enhance shareholder value and to promote growth is to acquire
other financial institutions. Fulfilling this plan is made more difficult by
the 75% supermajority shareholder vote requirement that must be complied with
even if the Corporation is the acquiror and the Corporation's directors approve
the proposed acquisition. Although the Corporation may make acquisitions
without satisfying the high vote requirement through how it structures the
transaction, such as by using a specially created merger subsidiary or
effecting a share exchange, the structure employed to avoid the 75% vote
requirement may add unnecessary complexity and expense to the transaction.
The proposed amendment does not make it more difficult for an unfriendly
suitor to take over the Corporation than does existing Article IX. A proposed
transaction that is approved by of the Corporation's Board of Directors in the
manner described above would not have to satisfy any supermajority shareholder
vote requirement under the amendment. If that approval is not given, the
acquiror would need to obtain under the amendment the same affirmative vote of
75% of the outstanding FNB Common Stock to approve and complete the proposed
acquisition as is presently required under the Corporation's Articles of
Incorporation.
The amendment is not being proposed in response to any takeover proposal.
The Corporation is not aware of any existing or proposed takeover proposal for
the Corporation and the proposed amendment is not being submitted to the
shareholders in anticipation of a takeover proposal. Rather, the proposed
amendment is being
13
submitted to the shareholders to continue anti-takeover protection similar to
that afforded by existing Article IX but to couple that protection with
flexibility that would permit the Corporation to acquire other financial
institutions.
Vote Required and Board Recommendation
The affirmative vote of holders of 75% of the shares of FNB Common Stock
entitled to vote at the meeting is required to approve the proposed amendment.
If the shareholders do not approve the amendment, the Corporation's Articles of
Incorporation, which require the affirmative vote of 75% of the Corporation's
shares to approve various business transactions in all instances, will continue
in effect. The Board of Directors recommends a vote "FOR" the proposal.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Secretary of FNB Corp., 101
Sunset Avenue, Asheboro, North Carolina 27203, no later than December 13, 2002
for inclusion in the Corporation's proxy statement and form of proxy relating
to such meeting. If a shareholder notifies the Corporation any later than
February 26, 2003 of an intent to present a proposal at the next Annual Meeting
of Shareholders, the Corporation will have the right to exercise its
discretionary voting authority with respect to such proposal without including
information regarding such proposal in its proxy materials related to such
meeting.
OTHER MATTERS
There is no business other than as set forth, so far as now known, to be
presented for action by the shareholders at the meeting. It is intended that
the proxies will be exercised by the persons named therein upon matters that
may properly come before the meeting or any adjournment thereof, in accordance
with the recommendations of management.
By Order of the Board of Directors:
/s/ Michael Miller
Michael C. Miller
Chairman and President
Date: April 12, 2002
14
Appendix A
FNB CORP.
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
ARTICLE IX
The vote of shareholders of the corporation required to approve any Business
Combination (as defined in paragraph (c)(2) of this Article) shall be as set
forth in this Article IX.
(a) Vote Required for Certain Business Combinations. In addition to any
vote required by law or these Articles of Incorporation, and except as
otherwise expressly provided in paragraph (b) of this Article IX:
(A) Any merger or consolidation of the corporation with, or any share
exchange providing for the acquisition of any class of capital stock of the
corporation entitled to vote generally in the election of directors by, any
person; or
(B) Any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of transactions) to or with any person, whether as
part of a dissolution or otherwise, of substantially all of the assets of
the corporation or any subsidiary of the corporation; or
(C) The adoption of any plan or proposal for the dissolution of the
corporation proposed by or on behalf of any person;
shall require the affirmative vote of the holders of at least three-fourths
(75%) of the outstanding shares of capital stock of the corporation entitled to
vote generally in the election of directors, considered for this purpose as one
class or voting group ("Voting Stock"). Such affirmative vote shall be required
notwithstanding that no vote may be required, or that some lesser percentage
may be permitted, by law or the Articles of Incorporation or Bylaws of the
corporation, or permitted in any agreement with any national securities
exchange or otherwise.
(b) When Higher Vote Is Not Required. The provisions of paragraph (a) of
this Article IX shall not be applicable to any Business Combination that shall
have been approved by three-fourths (75%) of the Disinterested Directors of the
corporation.
(c) Definitions. For the purposes of this Article IX:
(1) A "person" shall mean any individual, firm, corporation or other entity.
(2) "Business Combination" shall mean any transaction that is referred to in
one or more of the clauses (A) through (C) of paragraph (a) of this Article.
(3) "Related Party" shall mean any person (other than the corporation or any
subsidiary of the corporation) who or which:
(A) is the beneficial owner, directly or indirectly, of fifteen percent
(15%) or more of the then outstanding shares of Voting Stock; or
(B) is an Affiliate or Associate of the corporation and at any time
within the three-year period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of fifteen percent (15%) or
more of the then outstanding shares of Voting Stock; or
(C) is an assignee or has otherwise succeeded to the beneficial ownership
of any shares of Voting Stock that were at any time within the three-year
period immediately prior to the date in question beneficially owned by any
Related Party, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933, as amended.
A-1
(4) A person shall be a "beneficial owner" of any Voting Stock:
(A) that such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; or
(B) that such person or any of its Affiliates or Associates has (i) the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants, options or otherwise, or (ii) the right to vote, or to direct the
vote of any other person, pursuant to any agreement, arrangement or
understanding; or
(C) that are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(5) For the purpose of determining whether a person is a Related Party
pursuant to paragraph (c)(3) of this Article IX, the number of shares of Voting
Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph (c)(4) of this Article, but shall not include any
other shares of Voting Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants,
options or otherwise.
(6) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
(7) A "subsidiary of the corporation" means any corporation of which a
majority of any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended) is owned, directly or indirectly, by the corporation or by a
subsidiary of the corporation or by the corporation and one or more
subsidiaries of the corporation; provided, however, that for the purposes of
the definition of Related Party set forth in paragraph (c)(3) of this Article
IX, the term "subsidiary of the corporation" shall mean only a corporation of
which a majority of each class of equity security is owned, directly or
indirectly, by the corporation.
(8) "Disinterested Director" with respect to any Business Combination
involving a Related Party means (i) any member of the Board of Directors of the
corporation who is unaffiliated with, and not a nominee of, any Related Party
and who was a member of the Board prior to the time that the Related Party
became a Related Party, and (ii) any successor of a Disinterested Director (or
any other member of the Board who became a director after the time any Related
Party became a Related Party) who is unaffiliated with, and not a nominee of,
any Related Party and who was recommended by a majority of Disinterested
Directors then on the Board of Directors. With respect to any Business
Combination not involving a Related Party, "Disinterested Director" means any
member of the Board of Directors of the corporation.
(d) Powers of the Disinterested Directors. Three-fourths (75%) of the
Disinterested Directors of the corporation shall have the power and duty to
determine, on the basis of information known to them after reasonable inquiry,
all facts necessary to determine compliance with this Article IX, including,
without limitation, (i) whether a person is a Related Party, (ii) the number of
shares of Voting Stock beneficially owned by any person, (iii) whether a person
is an Affiliate or Associate of another person, and (iv) whether the
requirement of paragraph (b) of this Article IX has been met with respect to
any Business Combination. The good faith determination of three-fourths (75%)
of the Disinterested Directors on such matters shall be conclusive and binding
for all purposes of this Article IX.
(e) No Effect on Fiduciary Obligations of Related Party. Nothing contained
in this Article IX is to be construed to relieve any Related Party from any
fiduciary obligation imposed by law.
A-2
FNB CORP.
101 Sunset Avenue
Asheboro, North Carolina 27203
Proxy for Annual Meeting of Shareholders - May 14, 2002
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints W. L. Hancock and R. Reynolds Neely, Jr., or
either of them, proxies with full power of substitution to vote all shares of
FNB Corp. standing in the name of the undersigned at the above Annual Meeting of
Shareholders, and all adjournments thereof:
1. ELECTION OF CLASS I DIRECTORS TO SERVE FOR THREE-YEAR TERMS EXPIRING
AT THE ANNUAL MEETING IN 2005: Darrell L. Frye, J. M. Ramsay III and
Charles W. Stout, M.D.
_____ With authority to vote for all nominees listed above, except as
designated below.
_____ Withhold authority to vote for all nominees listed above.
-----------------------------------------------------------------------
To withhold authority to vote for any individual nominee, write the
nominee's name in the space above.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION to
modify the supermajority shareholder vote requirement for business
combinations.
_____ FOR _____ AGAINST _____ ABSTAIN
3. With discretionary authority upon such other matters as may come before
the meeting.
The Board of Directors recommends a vote for authorization to vote for the
nominees and the amendment to the Articles of Incorporation. The proxy will be
voted accordingly unless otherwise specified.
Dated: _____________________, 2002 __________________________________
Signature of Shareholder
__________________________________
Signature of Shareholder
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title. If more than
one trustee, all should sign. All joint
owners must sign.