Mimicking its larger competitors, Central Fidelity Banks Inc. said it has granted stock options to all of its full and part-time employees.
Under the plan, 3,547 full-time workers and 401 part-time employees received options to buy a total of 636,000 shares.
Once fully implemented, the plan would boost employee ownership in the Richmond, Va.-based company to 16% from its current 9.5%.
Charles W. Tysinger, Central Fidelity's chief financial officer, said the company sees the program as a competitive advantage.
"Any time we can give our employees an added incentive without materially impacting our shareholders or our bottom line, then it makes sense," he said.
"People who have an ownership in a company are more focused on its results than people who are detached."
Over the last few years, several large banking companies, including BankAmerica Corp. and NationsBank Corp., have introduced employee stock ownership plans to improve performance and profitability.
But the plans are less common at smaller regional bank holding companies like $10.5 billion-asset Central Fidelity, analysts said. This puts the company ahead of a trend, they added.
"For a bank of its size, Central Fidelity is probably one of the first to do it," said Darren R. Short, of The Robinson-Humphrey Co.
The Central Fidelity program grants employees options to purchase shares for $25.94 in an amount totaling up to 10% of each employee's 1996 annual salary. Shares recently traded on the Nasdaq at $28.75. A minimum award of 150 shares would be granted to each full-time employee, the company said. Part-time workers could buy a minimum of 75 shares.
Options can be exercised in three stages: One-third is exercisable on Jan. 8, 1998; one-third on Jan. 8, 1999; and one-third on Jan. 8, 2000. The options expire after 10 years.
The employee stock option program is part of a broad plan approved by Central Fidelity directors in 1995, which earmarked 1.75 million shares for incentive programs.
Of these shares, the company has authorized roughly 1.2 million for other such programs, officials said.
Employee stock ownership plans are generally viewed favorably by Wall Street, because restructurings and cutbacks are easier to sell to employees when they have an ownership stake in the company, said Robinson-Humphrey's Mr. Short.
"The mind-set of an owner is different than that of an employee," he said. "Creating an employee-owner mentality is definitely a positive."