UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed by
the Registrant x
Filed by
a Party other than the Registrant ¨
Check the
appropriate box:
¨
Preliminary Proxy Statement
|
¨
CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E) (2))
|
|
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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) Tile
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. :
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
FRANKLIN
FINANCIAL SERVICES CORPORATION
20 South
Main Street
P.O. Box
6010
Chambersburg,
PA 17201-6010
(717)
264-6116
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 27, 2010
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 27, 2010, at 10:30 A.M. at The
Orchards Restaurant, 1580 Orchard Drive, Chambersburg, Pennsylvania, for
the purpose of considering and voting upon the following matters:
1. ELECTION
OF DIRECTORS. To elect the five nominees identified in the
accompanying Proxy Statement as directors to Class B for the term
specified.
2. RATIFICATION
OF THE SELECTION OF AUDITORS. To ratify the Audit Committee’s
selection of ParenteBeard LLC as Franklin Financial’s independent registered
public accounting firm for 2010.
3. OTHER
BUSINESS. To consider other business, if any, as may properly be
brought before the meeting and any adjournments thereof.
Your
Board of Directors recommends that you vote FOR the election as directors of the
five nominees identified in the accompanying Proxy Statement, and FOR the
ratification of the selection of ParenteBeard LLC as Franklin Financial’s
independent registered public accounting firm.
Only those shareholders of record at
the close of business on March 12, 2010, shall be entitled to notice of and to
vote at the Annual Meeting.
Please mark, date and sign 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 and the luncheon to be held following
the meeting. If you attend the meeting, 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
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CATHERINE
C. ANGLE
|
Secretary
|
Enclosures
March 30,
2010
TABLE
OF CONTENTS
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Page
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GENERAL INFORMATION
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1
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Date,
Time and Place of Meeting
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1
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Shareholders
Entitled to Vote
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1
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Purpose
of Meeting
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1
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Solicitation
of Proxies
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1
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Revocability
and Voting of Proxies
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1
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Voting
of Shares and Principal Holders Thereof
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2
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Electronic
Voting
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2
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Shareholder
Proposals
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2
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Important
Notice Regarding the Availability of Proxy Materials for the Shareholders
Meeting to be Held on April 27, 2010
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3
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Recommendation
of the Board of Directors
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3
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INFORMATION CONCERNING CORPORATE GOVERNANCE
POLICIES,
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3
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PRACTICES AND PROCEDURES
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INFORMATION CONCERNING THE ELECTION OF
DIRECTORS
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3
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General
Information
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3
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Nominations
for Election of Directors
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4
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Nominating
Committee Process for the Selection and Evaluation of
Nominees
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5
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Director
Independence
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5
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Information
about Nominees, Continuing Directors and Executive
Officers
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5
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Meetings
of the Board of Directors
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8
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Compensation
of Directors
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8
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COMMITTEES OF THE BOARD OF
DIRECTORS
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10
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Audit
Committee
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10
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Nominating
Committee
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11
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Personnel
Committee
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11
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Compensation
Committee Interlocks and Insider Participation
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11
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EXECUTIVE COMPENSATION
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11
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Compensation
Discussion and Analysis
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11
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Compensation
Committee Report
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17
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Compensation
Tables and Additional Compensation Disclosure
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17
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AUDIT COMMITTEE REPORT
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24
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RELATIONSHIP WITH INDEPENDENT PUBLIC
ACCOUNTANTS
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25
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General
Information
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25
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Information
About Fees
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25
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Audit
Committee Pre-Approval Policies and Procedures
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26
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INFORMATION CONCERNING SELECTION OF
INDEPENDENT
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REGISTERED PUBLIC ACCOUNTING
FIRM
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26
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ADDITIONAL INFORMATION
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27
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Executive
Officers
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27
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Transactions
with Related Persons
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27
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Compliance
with Section 16(a) of the Exchange Act
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28
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Shareholder
Communication with the Board of Directors
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28
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Householding
of Shareholder Mailings
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28
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Annual
Report on Form 10-K
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29
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OTHER MATTERS
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29
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GENERAL
INFORMATION
Date,
Time, and Place of Meeting
The Annual Meeting of the shareholders
of Franklin Financial Services Corporation (hereinafter, "Franklin Financial" or
the "Company") will be held on Tuesday, April 27, 2010, at 10:30 a.m. at The
Orchards Restaurant, 1580 Orchard Drive, Chambersburg,
Pennsylvania.
Shareholders
Entitled to Vote
Shareholders of record at the close of
business on March 12, 2010, 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; (i) the election of
five (5) directors to Class B; (ii) to ratify the Audit Committee’s selection of
ParenteBeard LLC as Franklin Financial’s independent registered public
accounting firm for 2010; and (iii) 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 and any
adjournments thereof.
The expense of soliciting proxies will
be borne by Franklin Financial. In addition to the use of the mails and the
Internet, the 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 Catherine C. Angle, 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 five nominees identified in this Proxy Statement as directors to
Class B and FOR the ratification of the Audit Committee’s selection of
ParenteBeard LLC as the company’s independent registered public accounting firm
for 2010. The enclosed proxy confers upon the persons named as
proxies therein discretionary authority to vote the shares represented thereby
on all matters that may come before the meeting in addition to the scheduled
items of business, including unscheduled shareholder proposals and matters
incident to the conduct of the meeting. 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, the shares represented by any
proxy given pursuant to this solicitation will be voted in accordance with the
recommendations of the Board of Directors and 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 December
31, 2009, Franklin Financial had issued and outstanding 3,863,066 shares of
common stock; there is no other class of stock outstanding.
A majority of the outstanding shares of
common stock present in person or by proxy will constitute a quorum for the
conduct of business at the Annual Meeting. Each share is entitled to one vote on
all matters submitted to a vote of the shareholders. In the case of
the election of directors, the five 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. A
majority of the votes cast by shareholders present in person or by proxy and
entitled to vote at a meeting at which a quorum is present is required to
approve any other matter submitted to a vote of the shareholders, including the
ratification of the selection of Franklin Financial’s independent registered
public accounting firm, unless a greater vote is required by law or
by the Articles of Incorporation or Bylaws. Abstentions 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.
To the knowledge of Franklin Financial,
no person owned of record or beneficially on December 31, 2009 more than five
percent of the outstanding shares of common stock of Franklin
Financial.
Electronic
Voting
If your shares are held in "street
name" by your bank or broker or other intermediary, you will receive voting
instructions from your intermediary which you must follow in order for your
shares to be voted in accordance with your directions. Many
intermediaries permit their clients to vote via the internet or by telephone.
Whether or not internet or telephone voting is available, you may vote your
shares by returning the voting instruction card which you will receive from your
intermediary.
Shareholder
Proposals
Pursuant to Rule 14a-8 promulgated by
the Securities and Exchange Commission (hereafter, the "SEC") and Section 2.4 of
the Bylaws of Franklin Financial, shareholder proposals intended to be presented
at the 2011 Annual Meeting of the shareholders of Franklin Financial must be
received at the executive offices of Franklin Financial no later than November
30, 2010, in order to be eligible for inclusion in the proxy statement and proxy
form to be prepared by Franklin Financial in connection with the 2011 Annual
Meeting. A shareholder proposal which does not satisfy the notice and
other requirements of SEC Rule 14a-8 and the Bylaws of Franklin Financial is not
required to be included in Franklin Financial’s proxy statement and proxy form
and may not be presented at the 2011 Annual Meeting. All shareholder
proposals should be sent to: Franklin Financial Services Corporation,
Attention: President, 20 South Main Street, P.O. Box 6010, Chambersburg,
Pennsylvania 17201-6010.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholders
Meeting to Be Held on April 27, 2010.
The Proxy Statement and the 2009 Annual
Report to Shareholders are available at:
http://www.snl.com/IRWebLinkX/GenPage.aspx?IID=100736&gKp=203121
Recommendations
of the Board of Directors
The Board of Directors recommends that
the shareholders vote FOR the election as directors to Class B of the five
nominees identified in this Proxy Statement.
The Board of Directors recommends that
the shareholders vote FOR the ratification of the Audit Committee’s selection of
ParenteBeard LLC as Franklin Financial’s independent registered public
accounting firm for 2010.
INFORMATION
CONCERNING CORPORATE
GOVERNANCE
POLICIES, PRACTICES AND PROCEDURES
Franklin Financial is and always has
been committed to the highest ideals in the conduct of its business and to
observing sound corporate governance policies, practices and
procedures.
In order to comply with the
requirements of the Sarbanes-Oxley Act and related SEC rules and regulations,
Franklin Financial has taken a number of actions which are intended to
strengthen and improve its commitment to sound corporate governance. These
actions include the following:
· The
Board of Directors has adopted formal Corporate Governance Guidelines, a copy of
which is posted on Franklin Financial's website at www.franklinfin.com.
· The
Board of Directors has adopted a Code of Business Conduct and Ethics for the
Chief Executive Officer and Senior Financial Officers of Franklin Financial.
This Code focuses specifically upon principles of ethical business conduct,
assuring the integrity of Franklin Financial's periodic reports and other public
communications, and compliance with all applicable government rules and
regulations, and is intended to comply with the requirements of the
Sarbanes-Oxley Act and related SEC rules and regulations. A copy of Franklin
Financial's Code of Business Conduct and Ethics for the Chief Executive Officer
and Senior Financial Officers is posted on Franklin Financial's website at www.franklinfin.com.
· The
Board of Directors has adopted written charters for its Audit, Personnel and
Nominating Committees, copies of which are posted on Franklin Financial's
website at www.franklinfin.com.
· Pursuant
to the terms of its Corporate Governance Guidelines, Franklin Financial’s
"independent directors" meet periodically in executive session (i.e., without
the presence of the Chief Executive Officer or other members of Franklin
Financial's management).
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 5 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 at which directors in his class are
elected.
The Board of Directors has determined
that the Board shall consist of 11 directors. There are 5 directors whose terms
of office will expire at the 2010 Annual Meeting and 6 continuing directors
whose terms of office will expire at the 2011 or 2012 Annual Meeting. The Board
of Directors has nominated the following persons for election to the Board of
Directors at the 2010 Annual Meeting for the term specified below:
CLASS
B
For a Term of Three
Years
Charles
S. Bender, II
Martin R.
Brown
Allan E.
Jennings, Jr.
Jeryl C.
Miller
Stephen
E. Patterson
In the event that any of the foregoing
nominees is unable to accept nomination or election, the shares represented by
any proxy given pursuant to this solicitation will be voted in favor of such
other persons as the Board of Directors 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.
Nominations
for Election of Directors
In accordance with Section 3.5 of the
Bylaws of Franklin Financial, any shareholder of record entitled to vote for the
election of directors who is a shareholder on the record date and on the date of
the meeting at which directors are to be elected may nominate a candidate for
election to the Board of Directors, provided that the shareholder has given
proper written notice of the nomination, which notice must contain certain
prescribed information and must be delivered to the President of Franklin
Financial not less than 90 days nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting. The Chairman of the meeting
must determine whether a nomination has been made in accordance with the
requirements of the Bylaws and, if he determines that a nomination is defective,
such nomination and any votes cast for the nominee shall be
disregarded.
Shareholders may also recommend
qualified persons for consideration by the Nominating Committee to be included
in Franklin Financial's proxy materials as a nominee of the Board of Directors.
A shareholder who wishes to make such a recommendation must submit his
recommendation in writing addressed to the Chairman of the Board, Franklin
Financial Services Corporation, P.O. Box 6010, Chambersburg, Pennsylvania
17201-6010. The recommendation must include the proposed nominee's name and
qualifications and must be delivered not less than 120 days prior to the
anniversary date of the immediately preceding annual meeting.
Nominating
Committee Process for the Selection and Evaluation of Nominees
Franklin Financial's Corporate
Governance Guidelines identify the qualifications expected of a member of the
Board of Directors and set forth the criteria to be applied by the Nominating
Committee in evaluating candidates who will be recommended to the Board of
Directors as nominees for election to the Board. A candidate must possess good
business judgment and must be free of any relationship which would compromise
his ability to properly perform his duties as a director. A candidate must have
sufficient financial background and experience to be able to read and understand
financial statements and to evaluate financial performance. A candidate should
have proven leadership skills and management experience and should be actively
involved in the community served by Franklin Financial and its subsidiaries. A
candidate must be willing and able to commit the time and attention necessary to
actively participate in Board affairs. In addition, a candidate must be a person
of integrity and sound character. A candidate's age, background, skills and
experience are also important considerations in terms of achieving appropriate
balance and diversity on the Board.
The Nominating Committee uses a variety
of methods for identifying and evaluating potential nominees for election to the
Board of Directors. The Nominating Committee regularly assesses the appropriate
size of the Board and whether any vacancies on the Board are expected due to
retirement or otherwise. In the event that a vacancy is anticipated or otherwise
arises, the Nominating Committee typically considers and interviews several
potential candidates for appointment to fill the vacancy. Candidates may come to
the attention of the Nominating Committee through current Board members,
shareholders and other persons. These candidates are evaluated by the Nominating
Committee and may be considered at any time during the year. In evaluating
potential nominees, the Nominating Committee seeks to achieve a balance of
knowledge, skills and experience on the Board. The Nominating Committee does not
engage third party consultants in connection with the identification or
evaluation of potential nominees.
The Nominating Committee will consider
persons recommended by shareholders as potential nominees for election to the
Board of Directors, provided that recommendations are made in accordance with
the procedures described above under the caption "Nominations for Election of
Directors." A potential nominee who is recommended by a shareholder will be
evaluated by the Nominating Committee in the same fashion as other persons who
are considered by the Committee as potential candidates for election to the
Board of Directors.
Director
Independence
The Board of Directors has determined
that each of the following directors is an "independent director," as such term
is defined in the NASDAQ Stock Market Rules: Charles S. Bender, II, Martin R.
Brown, G. Warren Elliott, Donald A. Fry, Allan E. Jennings, Jr., Stanley J.
Kerlin, Jeryl C. Miller, Stephen E. Patterson, Charles M. Sioberg and Martha B.
Walker.
Information
about Nominees, Continuing Directors and Executive Officers
Information concerning the five persons
nominated for election to the Board of Directors of Franklin Financial at the
2010 Annual Meeting and concerning the six continuing directors
follows.
CLASS
A DIRECTORS (Term expires 2011)
G. Warren Elliott, 55, has
been a director since 1994. He served as a Regional Representative of
General Code Publishers, a legal publications company, from 1981 to
2009. He is a former Franklin County, Pennsylvania, Commissioner
serving in 1987 and from 1996 to 2007. He is currently President of
Cardinal Crossings, Inc. and Vice President of Business Development of CGL
Engineering. From 1991 to 1995 Mr. Elliott served as an adjunct
faculty member at Shippensburg University, teaching state and local
government.
Stanley J. Kerlin, 56, has
been a director since 2006. Mr. Kerlin has served as a practicing
attorney for 30 years, currently with the Law Office of Stanley J. Kerlin in
McConnellsburg, Pennsylvania. Mr. Kerlin serves as President of the
Fulton County Bar Association and serves as solicitor of the Fulton County Board
of Commissioners.
William E. Snell, Jr., 61, has
been a director and has served as the President and Chief Executive Officer of
the Company and F&M Trust since 1995. Mr. Snell’s banking career
has spanned more than 40 years.
Martha B. Walker, 63, has been
a director since 1979. She has served as a practicing attorney for 38
years and currently is a partner in the law firm of Walker, Connor and Spang,
LLC, in Chambersburg, Pennsylvania. Ms. Walker has also worked as an
Assistant Professor for Wilson College and Penn State Mont Alto. She
has been a business owner and director of Baum Publishing Company, Inc., a
weekly newspaper in Bucks County, Pennsylvania, for 15 years.
CLASS
B NOMINEES (Term expires 2013)
Charles S. Bender II, 65, has
been a director since 1981. Mr. Bender was employed by F&M Trust
from 1975 until his retirement in 2002, serving as Executive Vice President of
F&M Trust and Franklin Financial at the time of his retirement.
Martin R. Brown, 58, has been
a director since 2006. Mr. Brown is President of M.R. Brown Funeral
Home, Inc. Mr. Brown also is President of M.R. Brown Management, Inc.
where he is the managing general partner of Marymart Family L.P., which owns
Sandy Ridge Station Mall and, along with his wife, is the owner of the Sandy
Ridge Market, a full service grocery store located at the Sandy Ridge Station
Mall.
Allan E. Jennings, Jr., 60,
has been a director since 2002. Mr. Jennings is President of Jennings
Chevrolet Oldsmobile Cadillac, Inc., and Vice President of Jennings Pontiac
Buick GMC, Inc. Mr. Jennings serves as a director for the
Chambersburg Area Development Corporation and is Chairman of the Pennsylvania
Automotive Association.
Jeryl C. Miller, 70, has been
a director since 1983. Mr. Miller is Vice-President and Secretary of
Charles W. Karper, Inc., a trucking company.
Stephen E. Patterson, 65, has
been a director since 1998. Mr. Patterson is a practicing attorney
with over 36 years of experience and a principal in the Waynesboro and
Chambersburg, Pennsylvania offices of Salzmann Hughes P.C. Mr.
Patterson currently serves on the Board of Directors of PenMar Development
Corporation.
CLASS
C DIRECTORS (Term expires 2012)
Donald A. Fry, 60, has been a
director since 1998. He is President of ANDOCO, Inc. which trades as
Cumberland Valley Rental, a uniform rental supply company.
Charles M. Sioberg, 69, has
been a director since 1982 and has served as Chairman since 2003. Mr.
Sioberg’s engineering career has spanned over 46 years. He is
currently a Vice President of Martin and Martin, Inc. where he directs the
firm’s environmental consulting, land development, and municipal planning
activities. Mr. Sioberg has also served as an instructor and guest
Lecturer at Pratt Institute and Shippensburg University and as a consultant to
the Pennsylvania Department of Community Affairs in preparation of planning
manuals for use by local municipalities.
The following table includes
information concerning shares of Franklin Financial common stock owned
beneficially by directors, nominees, and executive officers who are named in the
Summary Compensation Table appearing elsewhere in this Proxy Statement and by
all directors and executive officers as a group. There are no family
relationships between or among any of the Company's executive officers,
directors or nominees.
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Shares
of Stock of Franklin
|
|
|
Percentage
of Total
|
|
|
|
Beneficially
Owned as of
|
|
|
Outstanding
Shares as of
|
|
Name
|
|
12/31/09 (1)
|
|
|
12/31/09 (2)
|
|
|
|
|
|
|
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|
Charles
E. Bender, II
|
|
|
70,190 |
(3) |
|
|
1.81 |
% |
Martin
R. Brown
|
|
|
5,359 |
|
|
|
|
|
Ronald
L. Cekovich
|
|
|
12,775 |
(4) |
|
|
|
|
G.
Warren Elliott
|
|
|
2,786 |
|
|
|
|
|
Donald
A. Fry
|
|
|
4,788 |
(5) |
|
|
|
|
Mark
R. Hollar
|
|
|
9,489 |
(6) |
|
|
|
|
Allan
E. Jennings, Jr.
|
|
|
7,620 |
(7) |
|
|
|
|
Stanley
J. Kerlin
|
|
|
26,842 |
(8) |
|
|
|
|
Michael
E. Kugler
|
|
|
12,280 |
(9) |
|
|
|
|
Jeryl
C. Miller
|
|
|
24,551 |
(10) |
|
|
|
|
Stephen
E. Patterson
|
|
|
4,000 |
|
|
|
|
|
Sandra
G. Small
|
|
|
6,183 |
(11) |
|
|
|
|
William
E. Snell, Jr.
|
|
|
46,044 |
(12) |
|
|
1.19 |
% |
Charles
M. Sioberg
|
|
|
10,754 |
(13) |
|
|
|
|
Martha
B. Walker
|
|
|
3,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Directors and Executive
|
|
|
|
|
|
|
|
|
Officers
as a group (15 Persons)
|
|
|
247,396 |
|
|
|
6.36 |
% |
________________________
1.
Beneficial ownership of shares of the common stock of Franklin Financial is
determined in accordance with SEC Rule 13d-3, 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. A person is also deemed to
own any stock which he has the right to acquire within 60 days through the
exercise of an option or conversion right, through the revocation of a trust or
similar arrangement, or otherwise. Unless otherwise stated, each
director and executive officer has sole voting and investment power with respect
to the shares shown above or holds the shares jointly with his or her
spouse. Unless otherwise stated, the number of shares shown
represents less than one percent of the total number of shares of common stock
outstanding.
2. Less
than 1% unless otherwise indicated.
3.
Includes 26,250 shares held in the name of Mr. Bender’s spouse.
4. Includes
options issued under the Incentive Stock Option Plan to purchase 11,805 shares
and options issued under the Employee Stock Purchase Plan to purchase 370
shares.
5. Includes
244 shares held in the names of Mr. Fry’s children.
6.
Includes options issued under the Incentive Stock Option Plan to purchase 7,775
shares; options issued under the Employee Stock Purchase Plan to purchase 395
shares; and, 460 shares held by Mr. Hollar as custodian under Uniform Gift to
Minors Act accounts for the benefit of his children.
7. Includes
3,841 shares held in the name of Mr. Jennings’ spouse and 1,650 shares held by
Mr. Jennings as joint executor of his father’s estate.
8. Includes
400 shares held in the names of Mr. Kerlin’s children; 2,784 shares held by Mr.
Kerlin as co-trustee of the Kerlin Family Trust; and 21,158 shares with respect
to which Mr. Kerlin holds power of attorney.
9.
Includes options issued under the Incentive Stock Option Plan to purchase 7,675
shares; options issued under the Employee Stock Purchase Plan to purchase 376
shares; and 1,290 shares held in the name of Mr. Kugler’s spouse.
10.
Includes 6,428 shares held in the name of Mr. Miller’s spouse and 681 shares
held by Mr. Miller as custodian under Uniform Gift to Minors Act accounts for
the benefit of his grandchildren.
11. Includes
options issued under the Incentive Stock Option Plan to purchase 5,875 shares
and options issued under the Employee Stock Purchase Plan to purchase 303
shares.
12.
Includes options issued under the Incentive Stock Option Plan to purchase 19,062
shares and options issued under the Employee Stock Purchase Plan to purchase 791
shares.
13. Includes
3,000 shares held in the name of Mr. Sioberg’s spouse and 2,206 shares held by
Mr. Sioberg as custodian under Uniform Gift to Minors Act accounts for the
benefit of his grandchildren.
Meetings
of the Board of Directors
Franklin Financial's Corporate
Governance Guidelines provide that directors are expected to attend meetings of
the Board of Directors, meetings of the committees on which they serve, and the
annual meeting of shareholders. The Boards of Directors of the Company and of
F&M Trust met a total of 35 times during 2009. All directors
attended 75% or more of the aggregate number of meetings of the Boards of
Directors and of the various committees of the Boards of Directors on which they
served, and all directors attended the annual meeting of shareholders in
2009.
The following table provides certain
summary information concerning the total compensation paid or accrued by
Franklin Financial and F&M Trust in 2009 to each non-employee member of the
Board of Directors.
2009
DIRECTOR COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in
|
|
|
|
|
|
|
|
|
|
Fees
Earned
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Pension
Value and
|
|
|
|
|
|
|
|
|
|
or
Paid
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive
Plan
|
|
|
Nonqualified
Deferred
|
|
|
All
Other
|
|
|
|
|
|
|
in Cash (1)
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
Earnings
|
|
|
Compensation
|
|
|
Total (2)
|
|
Name
|
|
($)
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
($) (d)
|
|
|
(e)
|
|
|
($) (f)
|
|
|
($)
(g)
|
|
Charles
S. Bender, II
|
|
|
22,600 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,506 |
(3) |
|
|
32,106 |
|
Martin
R. Brown
|
|
|
23,750 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,486 |
(4) |
|
|
25,236 |
|
G.
Warren Elliott
|
|
|
28,775 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28,775 |
|
Donald
L. Fry
|
|
|
28,400 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
28,400 |
|
Allan
E. Jennings, Jr.
|
|
|
26,075 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26,075 |
|
Stanley
J. Kerlin
|
|
|
24,925 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
24,925 |
|
Jeryl
C. Miller
|
|
|
30,565 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,720 |
(5) |
|
|
46,285 |
|
Stephen
E. Patterson
|
|
|
27,250 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27,250 |
|
Charles
M. Sioberg
|
|
|
35,060 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,480 |
(5) |
|
|
50,540 |
|
Kurt
E. Suter
|
|
|
23,750 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
23,750 |
|
Martha
B. Walker
|
|
|
27,225 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,618 |
(
6) |
|
|
34,843 |
|
1 The
amount reported is the aggregate dollar value of all fees earned (even if
deferred) or paid in cash for services as a director in 2009, including annual
retainer fees, committee and/or chairmanship fees and meeting fees.
2 The
amount reported is the aggregate dollar value of total compensation earned in
2009 and is equal to the sum of the amounts reported in columns (a)
through (f).
3 The
amount reported includes the annual premium or $3,070 paid by Franklin Financial
on a split-dollar life insurance policy maintained for the benefit of the
director and $6,436 accrued in 2009 under a deferred compensation arrangement
known as the Brick Plan in effect from 1982 through 1988.
4 The
amount reported includes the annual premium paid by Franklin Financial on a
split-dollar life insurance policy maintained for the benefit of the
director.
5 The
amount reported is the benefit paid during 2009 under a deferred compensation
arrangement known as the Brick Plan in effect from 1982 through
1988.
6 The
amount reported includes amounts accrued in 2009 under a deferred compensation
arrangement known as the Brick Plan in effect from 1982 through
1988.
From January to June 2009, each
director of Franklin Financial who is not a salaried officer of Franklin
Financial or F&M Trust was paid by Franklin Financial $3,400 for the first
six months of 2009 and a fee of $375 for each committee meeting attended, and
beginning in July 2009, $3,500 for the remaining six months of 2009 and a fee of
$400 for each committee meeting attended, except that the Chairman of the Board
does not receive committee meeting attendance fees. Each director of
Franklin Financial is also a director of F&M Trust. Each Director
of F&M Trust who is not a salaried officer of Franklin Financial or F&M
Trust was paid by F&M Trust $6,000 for the first six months of 2009 and a
fee of $375 for each committee meeting attended, and beginning in July 2009,
$6,150 for the remaining six months of 2009 and a fee of $400 for each committee
meeting attended, except that the Chairman of the Board does not receive
committee meeting attendance fees. In addition to the foregoing annual retainer
fees and meeting attendance fees, the Chairman of the Audit Committee received a
retainer of $1,590 for the first six months of 2009 and $1,700 for the remaining
six months of 2009. The Chairman of the Board received an additional
retainer of $7,860 for the first six months of 2009 and $8,100 for the remaining
six months of 2009.
Director fees payable by F&M Trust
are eligible to be deferred pursuant to the Farmers and Merchants Trust Company
of Chambersburg Directors’ Deferred Compensation Plan (the “Director Deferred
Compensation Plan”). Participation in the Director Deferred
Compensation Plan is voluntary and each participant may elect each year to defer
all or a portion of their F&M Trust director’s fees. Each
participant directs the investment of their own account among various publicly
available mutual funds designated by the Bank’s Investment and Trust Services
department. Growth of each participant’s account is a result of
investment performance and is not the result of an interest factor or interest
formula established by the participant or the Bank. The balance in
such director’s deferred benefit account is payable to him or to his designated
beneficiary in a lump sum within 60 days upon the first to occur of his
retirement from the Board or death, except that F&M Trust may, at its
option, elect to pay such balance over a period of up to five
years. Directors participating in this plan and amounts deferred for
2009 include Ms. Walker $12,150, Mr. Brown $12,150, and Mr. Miller
$12,150.
In January of 2008, the Board of
Directors adopted the Director Pay for Performance Program (the "Pay for
Performance Program") under the terms of which non-employee directors are
eligible to receive an annual cash bonus if Franklin Financial achieves certain
financial targets established in advance by the Board. The financial targets are
expressed in terms of the average annual increase in diluted earnings per share
over rolling measurement periods of three calendar years each. (For example, for
2009 the three-year measurement period consisted of calendar years 2007, 2008
and 2009.) The target bonus payable under the Pay for Performance
Program is an amount equal to 10% of the retainer fees earned by a participant
during the third calendar year of a three-year measurement period. For example,
if a participating director earned retainer fees of $21,000 in 2009, his target
bonus would be $2,100. A participating director may receive a bonus which is
more or less than the target bonus, depending upon the extent to which Franklin
Financial meets or exceeds the financial target established by the Board for the
three-year measurement period involved. If the average increase in Franklin
Financial's diluted earnings per share during the three-year period ending on
December 31, 2009 is less than 5%, the director in this example would be
entitled to receive a cash bonus equal to 50% of his target bonus or $1,050
($21,000 x 10% x 50%). If the average increase in diluted earnings per share
during the measurement period is between 5 % and 7.99%, the director would be
entitled to receive a cash bonus equal to 100% of his target bonus or $2,100
($21,000 x 10% x 100%). If the average increase in diluted earnings
per share during the measurement period is 0% or less, no bonus is
earned. The amount of the cash bonus can be as much as 150% of the
director's target bonus, or $3,150 in this example, if the average increase in
diluted earnings per share during the measurement period is greater than 10%
($21,000 x 10% x 150%). Bonuses earned under the Pay for Performance Program are
paid in the second quarter of the calendar year next following the third
calendar year of the three-year measurement period.
Upon the
recommendation of management, in order to reduce the expense impact, all Pay for
Performance Programs, including the Directors’ Pay for Performance Program, were
suspended for 2009. Accordingly, there were no payments under the PFP
Program to be reported in the Directors’ Compensation Table for
2009.
The Personnel Committee met in February
2010 to establish financial targets applicable to payouts under the Pay for
Performance Program for 2010.
Director
fees payable by F&M Trust from 1982 to 1988 were eligible to be deferred
under a deferred compensation arrangement known as the Brick
Plan. The components of the plan were life insurance policies on the
lives of the participating directors with the Bank as beneficiary and an
individual agreement between the Bank and each director that outlined future
payments to the director commencing at age 65. The director is to be
paid a fixed amount monthly over a ten-year period beginning at age
65. Directors currently receiving payouts are Messrs. Bender, Miller
and Sioberg. Director Walker is currently accruing amounts that will
be paid out beginning at age 65.
COMMITTEES
OF THE BOARD OF DIRECTORS
The Board of Directors of Franklin
Financial has standing Audit, Nominating and Personnel Committees.
Audit
Committee
Members of the Audit Committee during
2009 were Jeryl C. Miller, Chairman, and Messrs. Brown, Elliott, Jennings,
Sioberg and Kurt E. Suter, who retired from the Board of Directors January 31,
2010. The Audit Committee assists the Board of Directors in
fulfilling its responsibilities in providing oversight over the integrity of
Franklin Financial's financial statements, Franklin Financial's compliance with
applicable legal and regulatory requirements and the performance of Franklin
Financial's internal audit function. The Audit Committee is responsible for the
appointment, compensation, oversight and termination of Franklin Financial's
independent auditors and regularly evaluates the independent auditors'
independence from Franklin Financial and Franklin Financial's management. The
Audit Committee reviews and approves the scope of the annual audit and is also
responsible for, among other things, reporting to the Board on the results of
the annual audit and reviewing the financial statements and related financial
and nonfinancial disclosures included in Franklin Financial's Annual Reports on
Form 10-K and Quarterly Reports on Form 10-Q. The Audit Committee also reviews
Franklin Financial's disclosure controls and procedures and internal controls.
The Audit Committee prepares the Audit Committee Report for inclusion in the
annual proxy statement and oversees investigations into complaints concerning
accounting and auditing matters. The Audit Committee also meets periodically
with Franklin Financial's independent auditors and with Franklin Financial's
internal auditors outside of the presence of management and has authority to
retain outside legal, accounting and other professionals to assist it in meeting
its responsibilities.
The Audit Committee operates under a
charter adopted by the Board of Directors, a copy of which is posted on Franklin
Financial's website at www.franklinfin.com.
All members of the Audit Committee were at all times during 2009 "independent
directors" as such term is defined in the NASDAQ Stock Market. The Board of
Directors has not designated an "audit committee financial expert" as such term
is defined in the Sarbanes-Oxley Act and applicable SEC rules and regulations
because it believes that each member of the Audit Committee is qualified in
terms of background and experience to perform his duties as a member of that
Committee and because it believes that an audit committee financial expert is
not necessary in light of Franklin Financial's size, the nature of its business
and the relative lack of complexity of its financial statements. The Audit
Committee met five times during 2009.
Nominating
Committee
Members of the Nominating Committee
during 2009 were Charles M. Sioberg, Chairman, Ms. Walker and Messrs. Bender and
Patterson. The Nominating Committee is responsible, among other things, for
recommending to the Board of Directors persons to be nominated for election to
the Board, persons to be appointed to fill vacancies on the Board and persons to
be elected as officers of the Board. The Nominating Committee operates under a
charter adopted by the Board of Directors, a copy of which is posted on Franklin
Financial's website at www.franklinfin.com.
All members of the Nominating Committee were at all times during 2009
“independent directors” as such term is defined in the NASDAQ Stock
Market. The Nominating Committee met two times in
2009.
Personnel
Committee
Members of the Personnel Committee
during 2009 were Charles M. Sioberg, Chairman, and Messrs. Brown, Elliott, Fry,
Jennings and Miller. The Personnel Committee assists the Board of Directors in
fulfilling its responsibilities in providing oversight over Franklin Financial's
compensation policies and procedures. The Personnel Committee is responsible
for, among other things, administering and making grants and awards under the
Incentive Stock Option Plan of 2002 and the Employee Stock Purchase Plan. The
Personnel Committee is also responsible for annually evaluating the compensation
of Franklin Financial's Chief Executive Officer. The Personnel Committee also
prepares the Compensation Committee Report on Executive Compensation for
inclusion in the annual proxy statement. The Personnel Committee operates under
a charter adopted by the Board of Directors, a copy of which is posted on
Franklin Financial's website at www.franklinfin.com.
All members of the Personnel Committee were at all times during 2009
"independent directors" as such term is defined in the NASDAQ Stock Market. The
Personnel Committee met seven times during 2009.
Compensation
Committee Interlocks and Insider Participation
No member of the Personnel Committee is
an employee or former employee of Franklin Financial or F&M Trust. There
were no compensation committee "interlocks" at any time during 2009, which in
general terms means that no executive officer or director of Franklin Financial
served as a director or member of the compensation committee of another entity
at the same time as an executive officer of such other entity served as a
director of Franklin Financial.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Introduction
The Personnel Committee of the
Company's Board of Directors administers the Company's executive compensation
program. The Company currently has eight senior officers (the President and
Chief Executive Officer and seven subordinate officers) who have been designated
as senior officers by the Board. The Personnel Committee, which is composed
entirely of independent directors, is responsible for reviewing and approving
senior officer compensation, for evaluating the President and Chief Executive
Officer, for overseeing the administration of the Company's compensation program
generally as it affects all other officers and employees, for administering the
Company's incentive compensation programs (including the Incentive Stock Option
Plan), for approving and overseeing the administration of the Company's employee
benefits programs, for providing insight and guidance to management with respect
to employee compensation generally, and for reviewing and making recommendations
to the Board with respect to director compensation.
The Personnel Committee operates under
a charter adopted by the Board of Directors. The Personnel Committee annually
reviews the adequacy of its charter and recommends changes to the Board for
approval. The Personnel Committee meets at scheduled times during the year and
on an "as necessary" basis, The Chairman of the Personnel Committee reports on
Committee activities and makes Committee recommendations at meetings of the
Board of Directors.
Compensation
Philosophy
The Personnel Committee believes that
executive compensation should be tied to individual performance, should vary
with the Company's performance in achieving its financial and non-financial
objectives, and should be structured so as to be closely aligned with the
interests of the Company's shareholders. The Committee also believes that the
compensation package of each senior officer should include an at-risk,
performance-based component and that this component should increase as an
officer's authority and responsibility increase. The Committee's philosophy is
reflected in the Company's compensation objectives for its senior officers,
which are as follows:
·
|
Create
a merit-based, pay for performance incentive-driven system which is linked
to the Company's financial results and other factors that directly and
indirectly influence shareholder
value;
|
·
|
Establish
a compensation system that enables the Company to attract and retain
talented executives who are motivated to advance the interests of the
Company's shareholders; and
|
·
|
Provide
a total compensation package that is fair in relation to the compensation
practices of comparable financial
institutions.
|
To the extent that established
performance goals are exceeded, the Committee believes that the Company's senior
executives should be financially rewarded. It should be noted that all
employees, including the Company's executive officers, are employed at will and
do not have employment contracts, severance pay agreements or "golden parachute"
arrangements that would be triggered upon the occurrence of a change in control
of the Company.
Components
of Compensation
The elements of total compensation paid
by the Company to its senior officers, including the President and Chief
Executive Officer (the "CEO") and the other executive officers identified in the
Summary Compensation Table which appears following this Compensation Discussion
and Analysis (the CEO and the other executive officers identified in the Summary
Compensation Table are sometimes referred to collectively as the "Named
Executive Officers"), include the following:
·
|
Short-term
incentive compensation in the form of cash awards granted under the
Company’s Management Group Pay for Performance
Program;
|
·
|
Long-term
incentive compensation in the form of stock options granted under the
Company’s Incentive Stock Option
Plan;
|
·
|
Benefits
under the Company’s pension plan;
and
|
·
|
Benefits
under the Company’s health and welfare benefits
plans.
|
Base
Salary
The base salaries of the Named
Executive Officers are reviewed by the Personnel Committee annually in December
of each year, as well as at the time of any promotion or significant change in
job responsibilities. Base salaries for our senior officers are established
based upon the scope of their responsibilities, taking into account compensation
paid by comparable financial institutions for similar positions. Specifically, a
salary range is determined for each position based upon published salary
surveys. These surveys report base salary ranges for comparable positions at
similar financial institutions (currently ranging in size from $500 million to
$1.0 billion in total assets) within central Pennsylvania. Data from financial
institutions of similar size located elsewhere within Pennsylvania and in
adjoining and other states is also analyzed for comparative
purposes.
The Committee then establishes a
"market value" for each position (defined as the mid-point of the approved
salary range, plus ten percent and minus ten percent) in order to insure that
the base salary for each senior executive falls within the market value for that
position. An adjustment to the executive's base salary, effective as of January
1 of each year, may (or may not) be approved by the Committee, based upon its
assessment of the market value of the position involved.
The Personnel Committee met in December
of 2008 and considered the base salaries of the Company's senior officers at
that meeting. The Committee applied the principles discussed above
and authorized 2009 base salary increases for the following named
Executive Officers, as follows: (a) Mr. Snell from $217,256 to $224,874; (b) Mr.
Hollar from $114,738 to $127,166; (c) Mr. Cekovich from $101,374 to $104,416;
(d) Mr. Kugler from $107,458 to $112,840; and (e) Ms. Small from $85,410 to
$88,842.
Base salary earned by each Named
Executive Officer during calendar year 2009 is reported in Column (a) of the
Summary Compensation Table which appears below following this Compensation
Discussion and Analysis.
The Personnel Committee met in December
2009 and considered the base salaries of the Company’s senior officers at that
meeting. The Committee applied the principles discussed above and
authorized 2010 base salary increases of the following named Executive Officers,
as follows: (a) Mr. Snell from $224,874 to $231,634; (b) Mr. Hollar from
$127,166 to $135,434; (c) Mr. Cekovich from $104,416 to $108,056; (d) Mr. Kugler
from $112,840 to $116,220; and Ms. Small from $88,842 to $92,404.
Short-Term
Incentive Compensation
The Company has adopted the Management
Group Pay for Performance Program (the "PFP Program") for purposes of linking a
portion of the compensation of its senior officers, including the Named
Executive Officers, to the success of the Company in meeting certain financial
targets which are established annually by the Personnel Committee. Under the
terms of the PFP Program, the Committee establishes in February of each year
eight distinct financial targets, including the following: (i) return on average
equity, (ii) return on average assets, (iii) tax equivalized net interest
income, (iv) tax equivalized operating income, (v) efficiency ratio (i.e.,
noninterest expense as a percentage of operating income), (vi) net loan
charge-offs as a percentage of average loans, (vii) non-performing assets as a
percentage of total assets, and (viii) net income. Targets (vi) and (vii) are
measured against national peer group loan quality data published by the Federal
Deposit Insurance Corporation (which we refer to as the "FDIC") for bank holding
companies with total assets between $500 million and $1.0 billion. The PFP
Program also incorporates a factor for the executive's annual performance
evaluation rating, which, in the case of the CEO, is determined by the Board of
Directors following consideration of a recommendation made by the
Committee.
Each PFP Program target is evaluated
separately and is assigned a payout range expressed as a percentage of annual
base salary. Payouts under the PFP Program are determined on the basis of the
Company's performance relative to the targets established by the Committee and
on the basis of each executive's annual performance evaluation. The aggregate
annual payout under the PFP Program ranges from 0 percent to 20 percent of an
executive's annual base salary. In order to earn a payout in any target
category, the established target must be met or exceeded. Because payout amounts
under certain of the PFP Program targets cannot be finally determined until peer
group loan quality data are released by the FDIC (which does not occur until
well after the close of a calendar year) and because these payout amounts are
dependent in part upon individual performance evaluations (which are conducted
in March of each year), the payout amounts earned under the Program in respect
of the Company's performance in a given calendar year are generally calculated
and paid in April of the following year.
Upon the recommendation of management,
in order to reduce the expense impact, all Pay for Performance Programs were
suspended for 2009. Accordingly, there will be no payments under the
PFP Program to be reported in the Summary Compensation Table for
2009.
The Personnel Committee met in February
2010 to establish financial targets applicable to payouts under the Pay for
Performance Program for 2010.
Long-Term
Incentive Compensation
The Company uses the grant of incentive
stock options under its Incentive Stock Option Plan as the primary vehicle for
providing long-term incentive compensation opportunities to its senior officers,
including the Named Executive Officers. The Plan was adopted by the shareholders
in 2002 and provides for the grant of incentive stock options to purchase shares
of Company common stock at a per share exercise price which is not less than
100% of the fair market value of such shares on the date that the option is
granted. Incentive stock options are the only form of award provided
for under the Plan.
The Personnel Committee has
historically granted stock options annually at its meeting in February of each
year. In administering the Plan, the Committee establishes an annual option
award target ranging from 500 to 2,500 shares for each of eight officer salary
grade levels. The Committee has also established a target range for the
Company's average annual increase in diluted earnings per share during the three
most recently ended calendar year periods. Options may be granted by
the Committee for more or fewer shares than the established option award target
for a given salary grade depending upon the Company's growth in fully diluted
earnings per share relative to the target range established by the Committee. If
the average annual increase in fully diluted earnings per share for the three
most recently ended calendar years falls within the target range established by
the Committee, each executive is granted an option for a number of shares equal
to his option award target. If the average increase falls below the
target range established by the Committee, but is greater than 0 percent, the
option granted to each executive is for a number of shares equal to 50 percent
of his option award target. If the average increase exceeds the target range
established by the Committee, the number of shares subject to each option can be
as much as 150 percent of his option award target.
Options are granted at an exercise
price equal to the fair market value per share of the Company's common stock on
the date of grant, which fair market value is determined in accordance with the
terms of the Plan on the basis of the average of the average of the closing bid
and asked quotations for the five trading days immediately preceding the
applicable date as reported by two brokerage firms selected by the Committee
which are then making a market in the Company's stock, except that if no closing
bid or asked quotation is available on one or more of such trading days, fair
market value is determined by reference to the five trading days immediately
preceding the applicable date on which closing bid and asked quotations are
available. Options granted under the Plan vest after the expiration of six
months from the date of grant or upon the occurrence of a change in control of
Franklin Financial if a change in control occurs prior to the expiration of such
six-month period. Neither the CEO nor any other Named Executive Officer has any
role in selecting the date of grant of any stock option granted under the
Plan.
The Committee's philosophy in utilizing
this performance measurement is that long term growth in fully diluted earnings
per share is the primary driver of both the market value of the Company's common
stock and of the Company's capacity to regularly increase the cash dividends
which it pays to its shareholders.
The Company's diluted earnings per
share for calendar years 2005 through 2008 were $1.81, $2.10, $2.40 and $2.24,
respectively, resulting in an average annual growth in diluted earnings per
share for the three years ended December 31, 2008 of approximately 7.73 percent.
This compared favorably to the target range established by the Committee and,
accordingly, the Committee authorized in 2009 the issuance of incentive stock
option awards to the Named Executive Officers in amounts ranging from 1,000
shares to 2,500 shares, in each case representing 100 percent of the option
award target. The number of shares underlying the option granted to each Named
Executive Officer in 2009, the fair value of each such option on the date of
grant (determined in accordance with FAS 123R) and the exercise price per share
of each such option is set forth in Columns (e), (f) and (g), respectively, of
the Grants of Plan Based Awards Table, which appears below following this
Compensation Discussion and Analysis.
Information concerning the number of
options held by each Named Executive Officer as of December 31, 2009 is set
forth in the Outstanding Equity Awards at Fiscal Year-End Table which appears
below following this Compensation Discussion and Analysis.
The Personnel Committee also addressed
option awards at its February 2010 meeting. The Company’s average
annual change in diluted earnings per share for calendar years 2006 through 2009
was approximately (5.37%) which was below the target range previously
established by the Committee. Accordingly, in accordance with the
principles discussed above, the Committee did not then grant any incentive stock
options to the Named Executive Officers.
Employee
Stock Purchase Plan
The Company established its Employee
Stock Purchase Plan to encourage its employees to acquire a stake in the future
of the Company by purchasing shares of its common stock. All persons
who are employed by the Company and its subsidiaries at the grant date and
December 31 of the preceding year in which the option is granted are eligible to
be granted options under the plan, except that the Personnel Committee may
exclude employees who customarily work twenty hours or less per
week. The number of shares subject to options each calendar year is
allocated uniformly among the eligible employees based upon each employee’s
qualifying compensation (base salary plus overtime pay) as compared to the
aggregate qualifying compensation of all plan participants. The
Personnel Committee determines the exercise price of each option, which may not
be less than 90 percent of the fair market value of the Company’s common stock
on the grant date. No option may have a term longer than one year
from the grant date. The options granted to the named executive
officers under the plan in 2009 are reported below in the Grants of Plan-Based
Awards in 2009 Table.
Retirement
Plan
The senior officers of the Company are
eligible to participate in the various retirement plans maintained by F&M
Trust for the benefit of its employees. The F&M Trust Pension Plan is a
defined benefit plan which provides retirement benefits based upon a
career-average compensation formula. In order to mitigate the adverse affects
applicable to certain Pension Plan participants as a consequence of the adoption
of a career-average compensation formula, F&M Trust adopted, effective
January 1, 2008, a Qualified Pension Supplemental Plan and a Nonqualified
Deferred Compensation Plan. The Pension Plan was closed to new employees as of
April 1, 2007 and such new employees are eligible to participate only in the
F&M Trust 401(k) Plan. The F&M Trust 401(k) Plan covers substantially
all employees of F&M Trust who have completed one year and 1,000 hours of
service. In 2008, employee contributions to the plan were matched at
100% up to 4% of each employee's deferrals, plus 50% of the next 2% of deferrals
from participants' eligible compensation. In addition, a 100% discretionary
profit sharing contribution of up to 2% of each employee's eligible compensation
is possible, provided net income targets are achieved. The Personnel Committee
of the Company's Board of Directors establishes the net income targets annually.
Additional information relating to the Company's retirement plans is set forth
in the Pension Benefits Table which appears below following this Compensation
Discussion and Analysis and in the narrative which accompanies that
Table.
Health
and Welfare Employee Benefits Plans
The Company provides healthcare, life
and disability insurance and other employee benefits programs to its employees,
including its senior officers. The Personnel Committee is responsible for
overseeing the administration of these programs and believes that its employee
benefits programs should be comparable to those maintained by Central
Pennsylvania financial institutions of comparable size so as to assure that the
Company is able to maintain a competitive position in terms of attracting and
retaining officers and other employees. The Company's employee benefits plans
are provided on a nondiscriminatory basis to all employees.
Procedure
Followed by the Personnel Committee in Determining Executive
Compensation
The Committee annually determines the
compensation of each senior officer (base salary, payout under the PFP Program
and stock option grant under the incentive Stock Option Plan) in accordance with
the factors discussed above. The CEO plays an important role in the compensation
process, particularly as it applies to the other Named Executive Officers.
Specifically, the CEO evaluates officer performance, provides input in
connection with establishing individual performance targets and objectives, and
makes recommendations as to base salary levels. The CEO participates in
Committee meetings at the Committee's request in connection with the evaluation
of the other Named Executive Officers and in order to provide background
information.
The Committee, meeting in executive
session, performs an annual performance evaluation of the CEO and determines his
compensation in accordance with the factors discussed above. Each
member of the Committee independently evaluates the CEO by using a written
performance evaluation form to prepare a formal evaluation. The evaluation form
includes ratings for key accountabilities, including strategic leadership,
business and organization knowledge, decision making, customer focus, personnel
selection and development, vision/direction setting, adaptability and community
involvement.
The Company has not in the past five
years employed compensation consultants in connection with the compensation
process and does not anticipate that it will do so in 2010.
Restatement
of Financial Statements
The Personnel Committee is of the view
that, to the extent permitted by law, it has authority to retroactively adjust
any cash or equity-based incentive award paid to any senior officer (including
any Named Executive Officer) where the award was based upon the achievement by
the Company of specified financial goals and it is subsequently determined
following a restatement of the Company's financial statements that the specified
goals were not in fact achieved.
Stock
Ownership Guidelines
The Board of Directors believes that
the interests of its senior officers and its shareholders should be aligned and
for this reason encourages its senior officers, including the Named Executive
Officers, to acquire a meaningful investment position in the Company's common
stock so as to have a meaningful personal financial stake in the success of the
Company. However, the Company has not adopted formal stock ownership
guidelines.
Compensation
Committee Report
In connection with the preparation of
the disclosures set forth in this Proxy Statement, the Personnel Committee of
the Board of Directors has reviewed and discussed the Compensation Discussion
and Analysis set forth above with the management of Franklin Financial. Based
upon this review and discussion, the Personnel Committee has recommended to the
Board of Directors that this Compensation Discussion and Analysis be included in
this Proxy Statement and that it be incorporated by reference in the Annual
Report on Form 10-K for the year ended December 31, 2009 filed by Franklin
Financial with the SEC.
This report is not intended to be
"soliciting material," is not intended to be "filed" with the SEC, and is not
intended to be incorporated by reference into any filing made by Franklin
Financial with the SEC under the Securities Act of 1933 or the Securities
Exchange Act of 1934, whether such filing is made before or after the date
hereof and notwithstanding any general incorporation language contained in any
such filing.
The foregoing report is submitted by
the Personnel Committee:
Charles
M. Sioberg, Chairman
|
Martin
R. Brown
|
G.
Warren Elliott
|
Donald
A. Fry
|
Allan
E. Jennings, Jr.
|
Jeryl
C. Miller
|
Compensation
Tables and Additional Compensation Disclosure
Total
Compensation
The following table provides certain
summary information concerning total compensation paid or accrued by Franklin
Financial and F&M Trust to William E. Snell, Jr., the President and Chief
Executive Officer of Franklin Financial, to Mark R. Hollar, Senior Vice
President and Chief Financial Officer of Franklin Financial, and to each of the
three most highly compensated executive officers other than Messrs. Snell and
Hollar whose total compensation in 2009 exceeded $100,000.
SUMMARY
COMPENSATION TABLE
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Change
in
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Pension
Value
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and
Nonqualified
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Non-Equity
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Deferred
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Name
and
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Stock
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Option
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Incentive
Plan
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Compensation
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All
Other
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Principal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Position
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Year
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($) (1)
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($) (2)
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($) (3)
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($) (4)
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($) (5)
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($) (6)
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($) (7), (8), (9),
(10)
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($) (11)
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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(i)
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(j)
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William
E. Snell
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President
&
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2009
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|
224,874 |
|
|
|
- |
|
|
|
- |
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4,873 |
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|
- |
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55,373 |
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27,894 |
|
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313,014 |
|
Chief
Executive
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2008
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217,256 |
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|
- |
|
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|
- |
|
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17,303 |
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13,035 |
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47,076 |
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31,356 |
|
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326,062 |
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Officer
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2007
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208,910 |
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|
- |
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|
- |
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17,100 |
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37,604 |
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20,772 |
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24,242 |
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308,628 |
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Mark
R. Hollar
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Senior
Vice
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2009
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127,166 |
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- |
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- |
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3,313 |
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- |
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11,047 |
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9,351 |
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150,877 |
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President
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2008
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114,738 |
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- |
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- |
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11,766 |
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6,884 |
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10,045 |
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11,452 |
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154,885 |
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&
Chief
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2007
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93,236 |
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- |
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- |
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11,628 |
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17,101 |
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2,787 |
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7,642 |
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132,394 |
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Financial
Officer
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Michael
E. Kugler
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Senior
Vice
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2009
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112,840 |
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- |
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- |
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3,313 |
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- |
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32,450 |
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16,968 |
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165,571 |
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President
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2008
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107,458 |
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- |
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- |
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11,766 |
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6,447 |
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42,059 |
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20,061 |
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187,791 |
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(F&M
Trust)
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2007
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95,836 |
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- |
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- |
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11,628 |
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17,250 |
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16,575 |
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8,204 |
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149,493 |
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Ronald
L. Cekovich
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Senior
Vice
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2009
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104,416 |
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- |
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- |
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2,924 |
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- |
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9,769 |
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6,058 |
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123,167 |
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President
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2008
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101,374 |
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- |
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- |
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10,382 |
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6,082 |
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9,183 |
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8,940 |
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135,961 |
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(F&M
Trust)
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2007
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99,398 |
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- |
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- |
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10,260 |
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17,892 |
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2,228 |
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7,186 |
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136,964 |
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Sandra
G. Small
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Senior
Vice
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2009
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88,842 |
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- |
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- |
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1,949 |
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- |
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19,225 |
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8,558 |
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118,574 |
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President
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2008
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85,410 |
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- |
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- |
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6,921 |
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5,125 |
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15,023 |
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10,442 |
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122,921 |
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(F&M
Trust)
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1 The
amounts reported in this column consist of base salary earned during the
indicated year.
2
The amounts reported in this column consist of bonus
compensation earned during the indicated year. Note that payouts earned under
the Management Group Pay for Performance Program are reported in this Table as
Non-Equity Incentive Plan Compensation.
3
The amounts reported in this column reflect the dollar amount
of the compensation expense recognized for financial statement reporting
purposes for the indicated year in accordance with FASB ASC Topic 718 in
connection with awards of stock. Franklin Financial did not make any awards of
stock in 2007, 2008 or 2009.
4
The amounts reported in this column reflect the dollar amount
of the compensation expense recognized for financial statement reporting
purposes for the indicated year in accordance with FASB ASC Topic 718 in
connection with awards of stock options made pursuant to the Incentive Stock
Option Plan. The Incentive Stock Option Plan is described under the heading
“Long-Term Incentive Compensation” in the Compensation Discussion and Analysis
which appears above. The assumptions used in the calculation of these amounts
are identified in a footnote to the audited year end financial statements of
Franklin Financial, which financial statements are included in the Annual Report
on Form 10-K filed by Franklin Financial with the Securities and Exchange
Commission.
5
The amounts reported in this column consist of payouts earned
in respect of the Company's performance for the indicated year under the
Management Group Pay for Performance Program, a non-equity incentive
compensation plan which is described under the heading "Short-Term Incentive
Compensation" in the Compensation Discussion and Analysis which appears above.
The Pay for Performance Program was suspended for 2009.
6
The amount reported in this column consists of the aggregate
change in the actuarial present value of accumulated benefits under the F&M
Trust Pension Plan from the plan measurement date used for financial statement
reporting purposes with respect to the prior completed fiscal year to the plan
measurement date used for financial statement reporting purposes with respect to
the indicated year. The F&M Trust Pension Plan is described in
the narrative which follows the Pension Benefits Table which appears
below.
7 Reported
amount includes matching and discretionary contributions made by the Company to
the Company 401(k) Plan in 2009 for Mr. Snell $6,731, Mr. Hollar $6,428, Mr.
Cekovich $5,448, Mr. Kugler $5,828, and Ms. Small $4,611.
8
Reported amount includes split-dollar life insurance policy
premiums paid by the Company in 2009 for Mr. Snell $7,043, Mr. Hollar $1,694,
Mr. Cekovich $610, Mr. Kugler $2,089, and Ms. Small $1,219.
9 Reported
amount includes club dues of $4,976 and amounts related to personal use of
company automobile of $4,463 paid by the Company in 2009 for Mr.
Snell.
10 Reported
amount includes contributions made by the Company in 2009 pursuant to the
Qualified Supplemental Plan, reported below in the Nonqualified Deferred
Compensation table, for Mr. Snell $4,861, Mr. Hollar $1,229, Mr. Kugler $9,051
and Ms. Small $2,728.
11 The
amounts reported in this column consist of the dollar value of total
compensation for the indicated year, equal to the sums of columns (a) through
(i).
Plan-Based
Compensation
The following table provides certain
information concerning awards granted in 2009 under incentive and under other
plans to the executive officers named in the Summary Compensation Table
appearing above.
GRANTS
OF PLAN-BASED AWARDS IN 2009
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All
Other
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All
Other
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Estimated
Possible Payouts
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Estimated
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Stock
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Stock
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Grant
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Under
Non-Equity Incentive
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Future
|
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Awards:
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Awards:
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Date
Fair
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Plan
Awards (2)
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Payouts
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Number
of
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Number
of
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Exercise
or
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Value
of
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Target
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Under Equity
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Shares
of
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Securities
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Base
Price
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Stock
and
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(Mid-Point)
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Incentive
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Stock
or
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Underlying
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of
Option
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Option
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Grant
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Threshold
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of
Range)
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Maximum
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Plan
Awards
|
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Units
|
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Options (3)
|
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Awards (4)
|
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Awards (5)
|
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Name
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Date (1)
|
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($)
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($)
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($)
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($)
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(#)
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(#)
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($/Sh)
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($/Sh)
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(a)
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(b)
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(b-1)
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(b-2)
|
|
|
(b-3)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
E. Snell, Jr.
|
|
2/26/09
|
|
|
0 |
|
|
|
22,487 |
|
|
|
44,975 |
|
|
|
- |
|
|
|
- |
|
|
|
2,500 |
|
|
|
16.11 |
|
|
|
4,873 |
|
|
|
7/01/09
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
791 |
|
|
|
16.61 |
|
|
|
- |
|
Mark
R. Hollar
|
|
2/26/09
|
|
|
0 |
|
|
|
12,717 |
|
|
|
25,433 |
|
|
|
- |
|
|
|
- |
|
|
|
1,700 |
|
|
|
16.11 |
|
|
|
3,313 |
|
|
|
7/01/09
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
395 |
|
|
|
16.61 |
|
|
|
- |
|
Ronald
L. Cekovich
|
|
2/26/09
|
|
|
0 |
|
|
|
10,442 |
|
|
|
20,883 |
|
|
|
- |
|
|
|
- |
|
|
|
1,500 |
|
|
|
16.11 |
|
|
|
2,924 |
|
|
|
7/01/09
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
370 |
|
|
|
16.61 |
|
|
|
- |
|
Michael
E. Kugler
|
|
2/26/09
|
|
|
0 |
|
|
|
11,284 |
|
|
|
22,568 |
|
|
|
- |
|
|
|
- |
|
|
|
1,700 |
|
|
|
16.11 |
|
|
|
3,313 |
|
|
|
7/01/09
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
376 |
|
|
|
16.61 |
|
|
|
- |
|
Sandra
G. Small
|
|
2/26/09
|
|
|
0 |
|
|
|
8,884 |
|
|
|
17,768 |
|
|
|
- |
|
|
|
- |
|
|
|
1,000 |
|
|
|
16.11 |
|
|
|
1,949 |
|
|
|
7/01/09
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
303 |
|
|
|
16.61 |
|
|
|
- |
|
1
The grant date for stock options and other equity-based
awards.
2 The
amounts shown in Columns (b-1) through (b-3) represent the range of possible
payouts in respect of the Company’s calendar year 2009 financial performance
under the Pay for Performance Program described in the Compensation Discussion
and Analysis above. Payouts are determined as a percentage of base salary, with
the range of possible payouts varying from -0- percent of base salary (if none
of the eight financial targets are met and if a poor personal performance
evaluation is received) to 20 percent of base salary (if all eight financial
targets are met and a top personal performance evaluation is
received).Column
(b-1)
shows the threshold result with a -0- percent payout at the low end of the
range; Column (b-2) shows a 10 percent payout at the mid point of the range; and
Column (b-3) shows a 20 percent payout at the maximum point of the range. The
Pay for Performance Program was suspended for 2009 and no payout was made
thereunder.
3
The number of shares of stock underlying options granted
February 26,2009 under the Franklin Financial Incentive Stock Option Plan and
July 1, 2009 under the Employee Stock Purchase Plan.
4
The per-share exercise price of the options granted during
2009.
5
Reported amount is the aggregate fair value of stock options
granted in 2009, determined as of the date of grant in accordance with FASB ASC
Topic 718. With respect to options granted under the Employee Stock
Purchase Plan, no fair value is recognized under FASB ASC Topic 718 as of the
date of grant. The assumptions used in the calculation of these
amounts are included in a footnote to the audited financial statements of
Franklin Financial for the fiscal year ended December 31, 2009, which financial
statements are included in the Annual Report on Form 10-K filed by Franklin
Financial with the Securities and Exchange Commission. No gain will be realized
by the officer unless the market price of Franklin Financial common stock
appreciates in value following the date of grant, which appreciation will
benefit all shareholders generally. The actual value, if any, that an officer
may realize upon the exercise of an option will depend upon the excess of the
market price of Franklin Financial common stock on the date of exercise over the
exercise price of the option. There can be no assurance that an officer will
realize all or any part of the value of any option as reported in this Table,
which value is merely an estimate determined in accordance with FASB ASC Topic
718.
Outstanding
Stock Option
and Other
Equity Awards at Fiscal Year End
The following table provides certain
information with respect to the executive officers named in the Summary
Compensation Table appearing above concerning stock options and other equity
awards which were outstanding on December 31, 2009.
OUTSTANDING EQUITY AWARDS AT DECEMBER
31, 2009
|
|
|
|
Option Awards (1)
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
Plan
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Number
of
|
|
|
Awards:
Number
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of
Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
Option
|
|
|
|
|
Exercisable(2)
|
|
|
Unexercisable(3)
|
|
|
Options
(4)
|
|
|
Price
(5)
|
|
Expiration
(6)
|
Name
|
|
Grant Date
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
Date
|
William
E. Snell, Jr.
|
|
4/23/2002(ISOP)
|
|
|
3,125 |
|
|
|
- |
|
|
|
- |
|
|
|
20.00 |
|
4/24/2012
|
|
|
2/12/2003(ISOP)
|
|
|
1,562 |
|
|
|
- |
|
|
|
- |
|
|
|
21.42 |
|
2/13/2013
|
|
|
2/12/2004(ISOP)
|
|
|
3,125 |
|
|
|
- |
|
|
|
- |
|
|
|
27.68 |
|
2/13/2014
|
|
|
2/10/2005(ISOP)
|
|
|
1,250 |
|
|
|
- |
|
|
|
- |
|
|
|
27.42 |
|
2/11/2015
|
|
|
2/09/2006(ISOP)
|
|
|
1,250 |
|
|
|
- |
|
|
|
- |
|
|
|
24.92 |
|
2/10/2016
|
|
|
2/08/2007(ISOP)
|
|
|
2,500 |
|
|
|
- |
|
|
|
- |
|
|
|
27.37 |
|
2/08/2017
|
|
|
2/14/2008(ISOP)
|
|
|
3,750 |
|
|
|
- |
|
|
|
- |
|
|
|
23.77 |
|
2/12/2018
|
|
|
2/26/2009(ISOP)
|
|
|
2,500 |
|
|
|
- |
|
|
|
- |
|
|
|
16.11 |
|
2/26/2019
|
|
|
7/01/2009(ESPP)
|
|
|
791 |
|
|
|
- |
|
|
|
- |
|
|
|
16.61 |
|
6/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
R. Hollar
|
|
2/12/2004(ISOP)
|
|
|
625 |
|
|
|
- |
|
|
|
- |
|
|
|
27.68 |
|
2/13/2014
|
|
|
2/10/2005(ISOP)
|
|
|
750 |
|
|
|
- |
|
|
|
- |
|
|
|
27.42 |
|
2/11/2015
|
|
|
2/09/2006(ISOP)
|
|
|
750 |
|
|
|
- |
|
|
|
- |
|
|
|
24.92 |
|
2/10/2016
|
|
|
2/08/2007(ISOP)
|
|
|
1,700 |
|
|
|
- |
|
|
|
- |
|
|
|
27.37 |
|
2/09/2017
|
|
|
2/14/2008(ISOP)
|
|
|
2,550 |
|
|
|
- |
|
|
|
- |
|
|
|
23.77 |
|
2/12/2018
|
|
|
2/26/2009(ISOP)
|
|
|
1,700 |
|
|
|
- |
|
|
|
- |
|
|
|
16.11 |
|
2/26/2019
|
|
|
7/01/2009(ESPP)
|
|
|
395 |
|
|
|
- |
|
|
|
- |
|
|
|
16.61 |
|
6/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
L. Cekovich
|
|
4/23/2002(ISOP)
|
|
|
1,875 |
|
|
|
- |
|
|
|
- |
|
|
|
20.00 |
|
4/24/2012
|
|
|
2/12/2003(ISOP)
|
|
|
937 |
|
|
|
- |
|
|
|
- |
|
|
|
21.42 |
|
2/13/2013
|
|
|
2/12/2004(ISOP)
|
|
|
1,875 |
|
|
|
- |
|
|
|
- |
|
|
|
27.68 |
|
2/13/2014
|
|
|
2/10/2005(ISOP)
|
|
|
750 |
|
|
|
- |
|
|
|
- |
|
|
|
27.42 |
|
2/11/2015
|
|
|
2/09/2006(ISOP)
|
|
|
750 |
|
|
|
- |
|
|
|
- |
|
|
|
24.92 |
|
2/10/2016
|
|
|
2/08/2007(ISOP)
|
|
|
1,500 |
|
|
|
- |
|
|
|
- |
|
|
|
27.37 |
|
2/08/2017
|
|
|
2/14/2008(ISOP)
|
|
|
2,250 |
|
|
|
- |
|
|
|
- |
|
|
|
23.77 |
|
2/12/2018
|
|
|
2/26/2009(ISOP)
|
|
|
1,500 |
|
|
|
- |
|
|
|
- |
|
|
|
16.11 |
|
2/26/2019
|
|
|
7/01/2009(ESPP)
|
|
|
370 |
|
|
|
- |
|
|
|
- |
|
|
|
16.61 |
|
6/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
E. Kugler
|
|
2/12/2004(ISOP)
|
|
|
625 |
|
|
|
- |
|
|
|
- |
|
|
|
27.68 |
|
2/13/2014
|
|
|
2/10/2005(ISOP)
|
|
|
250 |
|
|
|
- |
|
|
|
- |
|
|
|
27.42 |
|
2/11/2015
|
|
|
2/09/2006(ISOP)
|
|
|
850 |
|
|
|
- |
|
|
|
- |
|
|
|
24.92 |
|
2/10/2016
|
|
|
2/08/2007(ISOP)
|
|
|
1,700 |
|
|
|
- |
|
|
|
- |
|
|
|
27.37 |
|
2/08/2017
|
|
|
2/14/2008(ISOP)
|
|
|
2,550 |
|
|
|
- |
|
|
|
- |
|
|
|
23.77 |
|
2/12/2018
|
|
|
2/26/2009(ISOP)
|
|
|
1,700 |
|
|
|
- |
|
|
|
- |
|
|
|
16.11 |
|
2/26/2019
|
|
|
7/01/2009(ESPP)
|
|
|
376 |
|
|
|
- |
|
|
|
- |
|
|
|
16.61 |
|
6/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sandra
G. Small
|
|
2/14/2008(ISOP)
|
|
|
1,500 |
|
|
|
- |
|
|
|
- |
|
|
|
23.77 |
|
2/12/2018
|
|
|
2/26/2009(ISOP)
|
|
|
1.000 |
|
|
|
- |
|
|
|
- |
|
|
|
16.11 |
|
2/26/2019
|
|
|
7/01/2009(ESPP)
|
|
|
303 |
|
|
|
- |
|
|
|
- |
|
|
|
16.61 |
|
6/30/2010
|
_________________________________
1
Reported options were granted under the Incentive Stock
Option Plan or Employee Stock Purchase Plan, as indicated.
2
Reflects the number of shares of stock underlying unexercised
options that are exercisable as of December 31, 2009.
3 Reflects
the number of shares of stock underlying unexercised options that are not
exercisable as of December 31, 2009.
4
Reflects the total number of shares of stock underlying
unexercised options that were awarded under an equity incentive plan and that
have not been earned as of December 31, 2009.
5
Reflects the exercise price of each option reported in
columns (a), (b) and (c).
6
Reflects the expiration date of each option reported in
columns (a), (b) and (c).
Stock
Option Exercises and Vesting of Stock Awards
None of the Named Executive Officers
exercised any stock options in 2009. Franklin Financial has not made
any other stock awards.
Pension
Benefits
The following table provides certain
information with respect to the executive officers named in the Summary
Compensation Table appearing above concerning pension benefits paid during
calendar year 2009 or payable as of December 31, 2009 under tax qualified and
non-tax qualified defined benefit plans.
PENSION
BENEFITS AT AND FOR THE YEAR ENDED
DECEMBER
31, 2009
(MEASUREMENT
DATE IS DECEMBER 31, 2009)
|
|
|
|
Number
of Years of
|
|
|
Present
Value of
|
|
|
Payments
During
|
|
|
|
|
|
Credited Service (1)
|
|
|
Accumulated Benefit (2)
|
|
|
Last Fiscal Year (3)
|
|
|
|
Plan
Name
|
|
(#)
|
|
|
($)
|
|
|
($)
|
|
Name |
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
E. Snell, Jr.
|
|
Farmers
and Merchants Trust Company Pension Plan
|
|
|
14.7 |
|
|
|
331,037 |
|
|
|
- |
|
Mark
R. Hollar
|
|
Farmers
and Merchants Trust Company Pension Plan
|
|
|
15.9 |
|
|
|
49,392 |
|
|
|
- |
|
Ronald
L. Cekovich
|
|
Farmers
and Merchants Trust Company Pension Plan
|
|
|
8.3 |
|
|
|
41,849 |
|
|
|
- |
|
Michael
E. Kugler
|
|
Farmers
and Merchants Trust Company Pension Plan
|
|
|
31.3 |
|
|
|
225,194 |
|
|
|
- |
|
Sandra
G. Small
|
|
Farmers
and Merchants Trust Company Pension Plan
|
|
|
25.7 |
|
|
|
120,701 |
|
|
|
- |
|
1 Reflects
the number of years of service credited to the named executive officer under the
plan, computed as of the same pension plan measurement date used for financial
statement reporting purposes with respect to the registrant's audited financial
statements for 2009. The number of years of credited service is equal to the
number of years of actual service with Company.
2 Reflects
the actuarial present value of the named executive officer's accumulated benefit
under the plan, computed as of
the same
pension plan measurement date used for financial statement reporting purposes
with respect to the registrant's audited financial statements for 2009.
Actuarial present values are calculated using the assumptions described in a
footnote to the audited financial statements of Franklin Financial for the year
ended December 31, 2009 , which financial statements are included in the Annual
Report on Form 10-K filed by Franklin Financial with the Securities and Exchange
Commission. Benefits are assumed to be payable in each case at age 65 or, if
earlier, on the date upon which the sum of the participant's age and years of
service equals 100.
3
Reflects the dollar amount of the payments and benefits
(if any) paid to the named executive officer during 2009.
F&M Trust maintains the Farmers and
Merchants Trust Company of Chambersburg Pension Plan (the "Pension Plan"), a
defined benefit plan, for the benefit of its employees. Prior to 2002, the
retirement benefit under the Pension Plan was determined by reference to a
participant's highest five consecutive years' compensation in the ten years
preceding normal retirement. Compensation is defined generally as salary, bonus
and non-equity incentive plan compensation as reported in the Summary
Compensation Table appearing above, but excludes long-term disability payments,
taxable fringe benefits, moving expenses, housing expenses, non-cash taxable
amounts under any restricted stock program, restricted stock program cash
dividend payments, and tax equalization payments. Section 401(a) (17) of the
Internal Revenue Code of 1986, as amended (the "Code"), limits a participant's
compensation for each calendar year.
The Pension Plan was amended in
December of 2004 for the purpose of adopting a career-average benefit formula
which is applicable to employees who are hired on or after July 1, 2000. The
normal retirement benefit under the Pension Plan is a single-life annuity equal
to 1% of compensation for each year of service, plus 0.60% of compensation in
excess of the taxable wage base for each year of service up to a maximum of 35
years, with compensation determined over the participant's work history rather
than the previous method of 5-year final average compensation. For employees who
are hired or rehired on or after July 1, 2000 but before January 1, 2005, the
participant's accrued benefit as of December 31, 2005 is based on the retirement
benefit formula in effect before January 1, 2006, with subsequent accruals added
each year based upon the new career-average formula. However, the adoption of
this amendment will not affect the benefits payable under the Pension Plan to
Messrs. Snell, Hollar, Kugler and Ms. Small, each of whom was hired before July
1, 2000. Mr. Cekovich, who is affected by the amendment, began accruing benefits
under the new career-average benefit formula effective January 1, 2006.
Retirement benefits under the Pension Plan are limited by the maximum benefit
specified under Section 415 of the Code.
The Pension Plan was amended in August
2007 for the purpose of adopting a career-average benefit formula which is
applicable to all employees, regardless of date of hire. For employees hired
before July 1, 2000 and who were under the old final-average benefit formula,
this change is effective January 1, 2008. Employees who were hired on or after
July 1, 2000 were already under the career-average benefit formula and the
Pension Plan continues unchanged for them. In addition, the Pension Plan was
amended in December 2006 for the purpose of closing the plan to new employees.
Employees hired on or after April 1, 2007 will not be eligible to participate in
the Pension Plan and, instead, will participate only in the Company's 401(k)
Plan.
The change to the career average
benefit formula results in lower retirement plan expense for the Company and in
lower projected benefits for most participants. To minimize the adverse impact
on existing participants, several additional steps were taken, effective January
1, 2008:
1. The
matching contribution in the Company's 401(k) Plan was increased to 100% on the
first 4% of employee deferrals, plus 50% of the next 2% of deferrals. This
results in a potential 1% additional matching contribution made to participants
by F&M Trust.
2. A
new qualified supplemental retirement plan, the Farmers and Merchants Trust
Company of Chambersburg Pension Supplemental Plan (the "Qualified Supplemental
Plan"), was adopted in order to provide benefits to those Pension Plan
participants who were most severely affected by the recently adopted change to
the Pension Plan benefit formula. The Qualified Supplemental Plan is a defined
contribution plan. A contribution will be made on behalf of each participant in
the Qualified Supplemental Plan according to a schedule which was adopted as
part of this Plan. The contribution amounts vary according to how the
participant was impacted by the change to the Pension Plan benefit formula. The
contribution amounts under the Qualified Supplemental Plan range from 1% to 9%
of the participant's compensation. None of the executive officers named in the
Summary Compensation Table participate in the Qualified Supplemental
Plan.
3. Some individuals who were adversely
impacted by the change in the Pension Plan benefit formula cannot participant
in the Qualified
Supplemental Plan due to compliance testing issues under the Code and the fact
that these individuals are
(or could become) "highly compensated employees" as defined under the Code.
These participants will be covered under a new nonqualified plan,
the Farmers and Merchants Trust Company of Chambersburg Pension Supplemental Nonqualified Deferred
Compensation Plan (the "Nonqualified Supplemental Plan"), which has contribution provisions similar to the
Qualified Supplemental Plan described in Paragraph 2 above. Messrs. Snell,
Hollar and Kugler and Ms.
Small participate in this Plan. The Nonqualified Supplemental Plan is a defined
contribution plan. Annual contributions will be made by F&M
Trust on behalf of plan participants ranging between 1% and 9% of the
participant's
compensation, depending upon the impact that the change in the pension plan
benefit formula had on the participant's pension
benefit. Plan assets are invested as directed by each
executive officer in one or more publicly available investment funds made
available by the Bank’s Trust Department. Earnings are solely the result of fund
performance.
The following table provides certain
information with respect to the executive officers named in the Summary
Compensation Table appearing above concerning nonqualified deferred compensation
accrued during 2009 pursuant to the Nonqualified Supplemental Plan described
above.
NONQUALIFIED
DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Executive
Contributions
|
|
|
Employer
Contributions
|
|
|
Aggregate
earnings
|
|
|
withdrawals/
|
|
|
Aggregate
Balance
|
|
Name
|
|
in last FY (1)
($)
|
|
|
in last FY (2) ($)
|
|
|
in last FY (3) ($)
|
|
|
distributions (4)
($)
|
|
|
at last FYE (5) ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
E. Snell, Jr.
|
|
|
- |
|
|
|
4,681 |
|
|
|
1,472 |
|
|
|
- |
|
|
|
10,775 |
|
Mark
R. Hollar
|
|
|
- |
|
|
|
1,229 |
|
|
|
442 |
|
|
|
- |
|
|
|
2,678 |
|
Ronald
L. Cekovich
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Michael
E. Kugler
|
|
|
- |
|
|
|
9,051 |
|
|
|
3,998 |
|
|
|
- |
|
|
|
20,184 |
|
Sandra
G. Small
|
|
|
- |
|
|
|
2,728 |
|
|
|
943 |
|
|
|
- |
|
|
|
6,148 |
|
1
The dollar amount of aggregate executive contributions during
Franklin Financial’s last fiscal year.
2
The dollar amount of aggregate employer contributions during
Franklin Financial’s last fiscal year, reported in the “All Other Compensation”
column of the Summary Compensation Table above.
3
The dollar amount of aggregate interest or other earnings
accrued during Franklin Financial’s last fiscal year.
4
The aggregate dollar amount of all withdrawals by and
distributions to the executive during Franklin Financial’s last fiscal
year.
5
The dollar amount of total balance of the executive’s account
as of the end of Franklin Financial’s last fiscal year, includes amounts
reported as employer contributions in the “All Other Compensation” column of the
Summary Compensation Table for 2008 and 2009.
Mr. Snell is currently eligible for
early retirement under the Pension Plan. If early retirement is elected, the
early retirement benefit is payable on the first day of the month coincident
with or next following the attainment of age 55 and the completion of 10 years
of service. For each month the early retirement date precedes the normal
retirement age of 65, the normal retirement benefit is reduced by 0.7% for each
of the first 60 months and by 0.35% for each of the-next 60 months. Unreduced
benefits are provided for participants for whom the sum of age and service
equals or exceeds 100.
Employment
Agreements And Potential Payments
Upon
Termination Or Change In Control
All employees of the Company, including
the Company's executive officers, are employed at will and do not have
employment contracts, severance pay agreements or "golden parachute"
arrangements that would be triggered upon the occurrence of a change in control
of the Company.
Equity
Compensation Plan Information
The following table summarizes share
and exercise price information relating to Franklin Financial's equity
compensation plans as of December 31, 2009:
EQUITY
COMPENSATION PLAN INFORMATION AT DECEMBER 31, 2009
Plan
Category
|
|
Number of
Securities To Be
Issued Upon
Exercise Of
Outstanding
Options, Warrants
And Rights
|
|
|
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
And Rights
|
|
|
Number Of
Securities
Remaining Available
For Future Issuance
Under Plans
(Excluding
Securities
Reflected In The
First Column)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plans Approved By Security Holders
|
|
|
90,124 |
(1) |
|
$ |
23.46 |
|
|
|
148,127 |
(2) |
Equity
Compensation Plans Not Approved By Security Holders
|
|
|
- |
|
|
|
N/A |
|
|
|
- |
|
Total
|
|
|
90,124 |
|
|
$ |
23.46 |
|
|
|
148,127 |
|
1
Number of shares subject to issuance pursuant to the exercise
of outstanding options granted under the Incentive Stock Option Plan of
2002.
2
Number of shares available as of December 31, 2009 for future
issuance under the Incentive Stock Option Plan of 2002.
AUDIT
COMMITTEE REPORT
The Audit Committee has reviewed the
audited consolidated financial statements of Franklin Financial for the year
ended December 31, 2009 and has discussed these financial statements with
management and with Franklin Financial's independent registered public
accounting firm, ParenteBeard LLC ("ParenteBeard"). The Audit Committee also has
discussed with ParenteBeard the matters required to be discussed by Statement of
Auditing Standards No. 61, as amended.
The Audit Committee has received from
ParenteBeard the written disclosures and letter required by the applicable
requirements of the Public Company Accounting Oversight Board regarding, and has
discussed with ParenteBeard, its independence from Franklin Financial and its
management.
Based upon the review and discussions
described above, the Audit Committee recommended to the Board of Directors that
Franklin Financial's audited consolidated financial statements for the year
ended December 31, 2009 be included in Franklin Financial's Annual Report on
Form 10-K for that year.
In connection with the standards for
accountant's independence adopted by the SEC, the Audit Committee considers in
advance of the provision of any non-audit services by Franklin Financial's
independent accountants whether the provision of such services is compatible
with maintaining the independence of such accountants.
This report is not intended to be
"soliciting material," is not intended to be "filed" with the SEC, and is not
intended to be incorporated by reference into any filing made by Franklin
Financial with the SEC under the Securities Act of 1933 or the Securities
Exchange Act of 1934, whether such filing is made before or after the date
hereof and notwithstanding any general incorporation language contained in any
such filing.
The
foregoing report is submitted by the Audit Committee:
|
|
|
|
Jeryl
C. Miller, Chairman
|
|
Martin
R. Brown
|
|
G.
Warren Elliott
|
|
Allan
E. Jennings, Jr.
|
|
Charles
M. Sioberg
|
RELATIONSHIP
WITH INDEPENDENT PUBLIC ACCOUNTANTS
General
Information
For the year ended December 31, 2009,
Franklin Financial engaged ParenteBeard LLC to audit its consolidated financial
statements. Representatives of ParenteBeard LLC are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate
questions.
Beard Miller Company LLP (“Beard”), an
independent registered public accounting firm, audited Franklin Financial’s
consolidated financial statements for the years ended December 31, 2007 and 2008
and had been engaged to audit its consolidated financial statements for the year
ended December 31, 2009.
On October 1, 2009, Franklin Financial
was notified that the audit practice of Beard was combined with that of Parente
Randolph, LLC to form ParenteBeard LLC (“ParenteBeard”). On October
1, 2009, Beard resigned as the auditors of the Company and with the approval of
the Audit Committee, ParenteBeard was engaged as Franklin Financial’s
independent registered public accounting firm for the year ended December 31,
2009. Beard’s reports on the Company’s financial statements for the
years ended December 31, 2007 and 2008 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During such years and during
the interim period from December 31, 2008 to October 1, 2009, the date of
Beard’s resignation, there were no disagreements with Beard on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Beard, would have caused it to make reference to such disagreements in its
reports. In accordance with Regulations of the Securities and
Exchange Commission, the Company filed a Form 8-K with the SEC on October 5,
2009 reporting this change in the Company’s independent registered public
accounting firm. Attached to and incorporated by reference as an
exhibit to the Form 8-K report is a letter supplied by Beard stating that it had
been provided with and reviewed a copy of the Company’s report containing the
same statements as set forth in this disclosure and further stating that it
agreed with such statements.
Information
About Fees
Aggregate fees billed to Franklin
Financial by Beard Miller Company LLP and ParenteBeard LLC for services rendered
are presented below:
|
|
Year Ended December 31
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$ |
141,501 |
|
|
$ |
137,532 |
|
Audited
Related Fees
|
|
|
18,160 |
|
|
|
16,523 |
|
Tax
Fees
|
|
|
19,938 |
|
|
|
15,782 |
|
All
Other Fees
|
|
|
- |
|
|
|
- |
|
Total
Fees
|
|
$ |
179,599 |
|
|
$ |
169,837 |
|
Audit Fees include fees
billed for professional services related to the audit of Franklin Financial’s
annual consolidated financial statements, including audit of internal controls,
and the review of the unaudited financial statements included in Franklin
Financial’s Quarterly Reports on Form 10-Q.
Audit Related Fees include
fees billed for professional audit related services consisted principally of
employee benefit plan audits and consultation with respect to accounting
matters.
Tax Fees include fees billed
for professional tax related services consisted principally of the preparation
of state and federal tax returns and assistance with tax matters.
All Other Fees include fees
billed for services provided by Beard Miller Company LLP and ParenteBeard LLC,
other than the services reported under the Audit Fees, Audit Related Fees, or
Tax Fees sections of the table above. No other fees were billed to
Franklin Financial by Beard Miller Company LLP and ParenteBeard LLC during 2009
and 2008.
Audit
Committee Pre-Approval Policies and Procedures
The Audit Committee pre-approves all
audit and legally permissible non-audit services provided by the independent
auditors. These services may include audit services, audit-related services, tax
services and other services. The Audit Committee has adopted a policy for the
pre-approval of services provided by the independent auditors. Under the policy,
pre- approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is subject to
a specific budget. In addition, the Audit Committee may also pre-approve
particular services on a case-by-case basis. For each proposed service, the
independent auditor is required to provide detailed back-up documentation at the
time of approval or such other detailed information as the
Audit Committee deems appropriate. The Audit Committee may delegate
pre-approval authority to one or more of its members. Such a member must report
any decisions to the Audit Committee at the next scheduled meeting. All audit
and permissible non-audit services provided by Beard Miller Company LLP and
ParenteBeard LLC in 2009 were pre-approved by the Audit Committee and in no case
was such pre-approval waived under the de minimis exception set forth in the
applicable SEC rules and regulations.
INFORMATION
CONCERNING RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
Under the Audit Committee’s Charter,
the Audit Committee is responsible for selecting the Company’s independent
auditors. The Audit Committee evaluates and monitors the auditors’
qualifications, performance and independence. You can learn more
about the Audit Committee’s responsibilities with respect to the independent
auditors in the Audit Committee’s charter, which is posted on our website at
www.franklinfin.com.
On March 11, 2010, the Audit Committee
presented its conclusions regarding the independent auditors to our Board of
Directors. Following this presentation, the Board voted unanimously
to recommend that shareholders vote to ratify the Audit Committee’s selection of
ParenteBeard LLC as the Company’s independent registered public accounting firm
for 2010.
The Audit Committee and Board have
adopted a policy that if a majority of the votes cast at the annual meeting is
against ratification, the Audit Committee will reconsider its selection of
ParenteBeard LLC. The Audit Committee, however, will be under no
obligation to select new independent auditors. If the Audit Committee
does select new independent auditors for 2010, the Company will not seek
shareholder ratification of the Audit Committee’s new selection.
The Board of Directors recommends a
vote “FOR” the ratification of the Audit Committee’s selection of ParenteBeard
LLC, as the independent registered public accounting firm for
2010.
ADDITIONAL
INFORMATION
Executive
Officers
The following persons are the executive
officers of Franklin Financial (some of whom are officers of F&M
Trust):
Name
|
|
Age
|
|
Office Held
|
|
|
|
|
|
William
E. Snell, Jr.
|
|
61
|
|
President
and Chief Executive Officer of Franklin Financial and F&M Trust since
1996; President of Franklin Financial and F&M Trust since
1995
|
|
|
|
|
|
Mark
R. Hollar
|
|
48
|
|
Senior
Vice President and Chief Financial Officer since 2006; Treasurer and Chief
Financial Officer of Franklin Financial and Vice President/Finance of
F&M Trust since 2005; Vice President and Controller of F&M Trust
since 2000
|
|
|
|
|
|
Ronald
L. Cekovich
|
|
53
|
|
Senior
Vice President and Technology Service Manager of
F&M
|
|
|
|
|
Trust
since 2006; Vice President and Technology Services
Manager
|
|
|
|
|
of
F&M Trust since 2001
|
|
|
|
|
|
Michael
E. Kugler
|
|
53
|
|
Senior
Vice President and Commercial Services Market Manager of F&M Trust
since 2006; Vice President of F&M Trust since 1994
|
|
|
|
|
|
Sandra
G. Small
|
|
52
|
|
Senior
Vice President & Risk Management Officer since 2005;
Vice
|
|
|
|
|
President
& Credit Administration Manager since
1999
|
Transactions
with Related Persons
Some of the directors and executive
officers of Franklin Financial 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 2009. 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.
In accordance with the terms of
Franklin Financial's Corporate Governance Guidelines (a copy of which is posted
on Franklin Financial's website at www.franklinfin.com), any transaction
involving Franklin Financial or any direct or indirect subsidiary of Franklin
Financial and an executive officer, a director, a nominee for election to the
Board of Directors, or a five percent or greater shareholder (or a member of his
or her immediate family or a company or other entity in which he or she has,
directly or indirectly, a financial interest) must be submitted for review by
the Audit Committee, except that any proposed loan to any such person or entity
is submitted to the entire Board of Directors for review. It is the policy of
the Audit Committee to carefully review any such proposed transaction and to
grant a waiver of Franklin Financial's policy prohibiting transactions and
relationships that may involve a conflict of interest only if the proposed
transaction can be structured in such a way as to eliminate both any potential
financial disadvantage to Franklin Financial and any appearance of
impropriety.
Throughout
2009, F&M Trust , in the ordinary course of its business, engaged the firm
of Martin & Martin, Inc. to prepare engineering studies for various projects
throughout the bank’s branch network. Charles M. Sioberg , Chairman
of the Board of Directors, is a Vice President and stockholder of Martin &
Martin, Inc. and reported that payment for his firm’s services totaled $126,171
in 2009. These engagements were approved by the Audit Committee in
accordance with Franklin Financial’s Corporate Governance
Guidelines. In addition, the Board of Directors has considered these
engagements and the amounts paid to Martin & Martin, Inc. in
determining that Mr. Sioberg is independent, including the fact that the
aggregate amount paid was less than the threshold of 5 percent of Franklin
Financial’s consolidated gross revenues set forth in the NASDAQ Stock Market’s
independence rules.
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 SEC 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, 2009, all filing requirements
applicable to its directors and officers were complied with.
Shareholder
Communication with the Board of Directors
Shareholders and other interested
persons who wish to communicate with the Board of Directors (including,
specifically, the non-management directors) may do so by letter addressed to
Chairman of the Board, Franklin Financial Services Corporation, P.O. Box 6010,
Chambersburg, Pennsylvania 17201-6010.
Shareholders and other interested
persons who wish to express a concern relating to accounting or audit related
matters may do so by letter addressed to Chairman of the Audit Committee,
Franklin Financial Services Corporation, P.O. Box 6010, Chambersburg,
Pennsylvania 17201-6010.
Householding
of Shareholder Mailings
In accordance with a notice sent to all
shareholders with the same last name who share the same address, only one copy
of Franklin Financial's annual report and proxy statement will be sent to that
address, unless contrary instructions are given to Franklin Financial. This
practice, known as "householding," is designed to reduce Franklin Financial's
printing and postage costs. However, if any shareholder residing at such an
address wishes to receive a separate annual report and proxy statement in the
future, the shareholder may call Franklin Financial's Corporate Secretary at
(717) 261-3555 or write to Corporate Secretary, Franklin Financial Services
Corp., P.O. Box 6010, Chambersburg, Pennsylvania 17201-6010 or communicate the
request by E-mail addressed to [email protected].
If a shareholder is receiving multiple copies of Franklin Financial's annual
report and proxy statement, the shareholder may request to receive only a single
copy of these materials by contacting Franklin Financial's Corporate Secretary
in the same manner.
Annual
Report on Form 10-K
A copy of the annual report of Franklin
Financial for the year ended December 31, 2009 on Form 10-K as filed with the
SEC is available without charge to shareholders, depositors and other interested
persons upon request addressed to William E. Snell, Jr., President and Chief
Executive Officer, Franklin Financial Services Corporation, P.O. Box 6010,
Chambersburg, Pennsylvania 17201-6010. Franklin Financial's Form 10-K, as well
as its other periodic reports filed with the SEC pursuant to Section 15(d) of
the Securities Exchange Act of 1934, are available on Franklin Financial's
website at www.franklinfin.com.
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 2010 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
Board of Directors of Franklin Financial.
BY
ORDER OF THE BOARD OF DIRECTORS
|
|
CATHERINE
C. ANGLE, Secretary
|
Chambersburg,
Pennsylvania
March 30,
2010