U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_________ TO __________
Commission file number - 0-21809
HOME CITY FINANCIAL CORPORATION
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
OHIO 34-1839475
----------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
63 West Main Street
Springfield, Ohio 45502
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(937) 324-5736
-----------------
(Issuer's telephone number)
N/A
-------
(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of April 29, 1998, 904,590 shares of common stock of the Registrant were
outstanding. There were no preferred shares outstanding.
<PAGE>
HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
FORM 10-QSB
INDEX
================================================================================
Page Number
PART I FINANCIAL INFORMATION
Item. 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- 3
March 31, 1998, and December 31, 1997
Condensed consolidated statements of income and 4
comprehensive income --
Three months ended March 31, 1998 and 1997
Condensed consolidated statements of cash flows -- 5
Three months ended March 31, 1998 and 1997
Notes to condensed consolidated financial 6
statements -- March 31, 1998, and December 31, 1997
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
<CAPTION>
HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
CONSOLIDATED BALANCE SHEETS
===========================================================================================
(Dollars in thousands)
(Unaudited) (Unaudited)
At March 31, At December 31,
------------ ---------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 880 $ 827
Interest-bearing demand deposits in other banks 767 591
Federal funds sold 100 100
------- -------
Total cash and cash equivalents 1,747 1,518
Time deposits with original maturities of 90 days or more 23 23
Investment securities available-for-sale, at fair value 4,132 5,018
Mortgage-backed and related securities available-for-sale,
at fair value 655 700
Loans, net 67,722 62,535
Accrued interest receivable 405 409
Properties and equipment 487 493
Cash surrender value of life insurance 1,092 1,085
Other assets 111 73
------- -------
TOTAL ASSETS $76,374 $71,854
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $55,545 $51,689
Advances from Federal Home Loan Bank 6,188 5,712
Accrued interest payable 100 79
Advance payments by borrowers for taxes and insurance 51 71
Deferred income taxes 91 68
Other liabilities 206 231
------- -------
TOTAL LIABILITIES 62,181 57,850
------- -------
Shareholders' equity:
Preferred shares of no par value; 1,000,000 shares
authorized; no shares issued and outstanding 0 0
Common shares of no par value; 5,000,000 shares
authorized; 952,200 shares issued 0 0
Additional paid-in capital 9,165 9,150
Retained earnings, substantially restricted 6,168 6,037
Treasury stock, 47,610 common shares; at cost (711) (711)
Accumulated other comprehensive income 375 332
Common shares purchased by:
Employee Stock Ownership Plan (686) (686)
Recognition and Retention Plan (118) (118)
------- -------
TOTAL SHAREHOLDERS' EQUITY 14,193 14,004
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $76,374 $71,854
======= =======
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
=================================================================================================
(Dollars in thousands)
(Unaudited) (Unaudited)
3 Months Ended 3 Months Ended
March 31, March 31,
--------- ---------
1998 1997
---- ----
<S> <C> <C>
INTEREST INCOME:
Loans $ 1,502 $ 1,203
Mortgage-backed securities 10 25
Investment securities 60 75
Federal funds sold 1 10
Time deposits 0 58
Interest-bearing demand deposits in other banks 7 17
------- -------
TOTAL INTEREST INCOME 1,580 1,388
------- -------
INTEREST EXPENSE:
Deposits 697 667
Advances from Federal Home Loan Bank 95 66
------- -------
TOTAL INTEREST EXPENSE 792 733
------- -------
NET INTEREST INCOME 788 655
Provision for loan losses 12 20
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 776 635
NON-INTEREST INCOME:
Service charges on deposits 3 2
Life insurance 13 15
Gain (loss) on sale of securities, net 0 (19)
Other income 2 5
------- -------
TOTAL NON-INTEREST INCOME 18 3
------- -------
NON-INTEREST EXPENSE:
Salaries and employee benefits 251 156
Supplies, telephone and postage 11 15
Occupancy and equipment 25 25
FDIC deposit insurance 8 8
Data processing 23 15
Legal, accounting and examination 71 53
Franchise taxes 45 45
Other expenses 48 54
------- -------
TOTAL NON-INTEREST EXPENSE 482 371
------- -------
NET INCOME BEFORE FEDERAL INCOME
TAX EXPENSE 312 267
Federal income tax expense 100 89
------- -------
NET INCOME 212 178
Other comprehensive income 43 (36)
------- -------
TOTAL COMPREHENSIVE INCOME $ 255 $ 142
======= =======
Earnings per common share based on net income figures:
Basic earnings per common share $ 0.26 $ 0.20
Diluted earnings per common share $ 0.23 $ 0.19
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
HOME CITY FINANCIAL CORPORATION
SPRINGFIELD, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
==============================================================================================
(Dollars in thousands)
(Unaudited) (Unaudited)
3 Months Ended 3 Months Ended
March 31, March 31,
--------- ---------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 212 $ 178
Adjustments to reconcile net income to net cash
provided by operating activities:
Premium amortization, net of discount accretion 3 5
Provision for loan losses 12 20
Depreciation 14 10
Deferred income taxes 31 (49)
Life insurance income, net of expenses (7) (13)
Employee Stock Ownership Plan compensation expense 15 0
FHLB stock dividend (8) (7)
Changes in operating assets and liabilities:
(Increase) decrease in accrued interest receivable 4 (42)
(Increase) decrease in other assets (38) 35
Increase (decrease) in accrued interest payable 21 (12)
Decrease in other liabilities (25) (77)
------- -------
Net cash provided by operating activities 234 48
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (70) (6,969)
Proceeds from maturities of available-for-sale securities 1,000 0
Proceeds from sales of mortgage-backed securities,
available-for-sale 0 1,891
Principal collections on mortgage-backed securities,
available-for-sale 41 39
Purchase of loans 0 (375)
Net increase in loans (5,199) (2,521)
Purchases of properties and equipment (8) (4)
------- -------
Net cash used in investing activities (4,236) (7,939)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 3,856 236
Net increase in short-term FHLB advances 200 0
Proceeds from new long-term FHLB advances 375 0
Payments on long-term FHLB advances (99) (96)
Net increase (decrease) in advance payments by borrowers
for taxes and insurance (20) (22)
Dividends paid (81) 0
------- -------
Net cash provided by financing activities 4,231 118
------- -------
Net increase (decrease) in cash and cash equivalents 229 (7,773)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,518 9,839
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,747 $ 2,066
======= =======
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HOME CITY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998, and December 31, 1997
(Unaudited)
================================================================================
NOTE 1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary for a fair presentation
of Home City Financial Corporation's ("Company" or "HCFC") financial condition
as of March 31, 1998, and December 31, 1997, and the results of operations for
the three months ended March 31, 1998 and 1997, and the cash flows for the
three months ended March 31, 1998 and 1997. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB. The results of operations for the
three months ended March 31, 1998, are not necessarily indicative of the
results which may be expected for the entire fiscal year.
NOTE 2. ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three months ended Six months ended
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Balance, beginning of period $452 $445
Provision for loan losses 12 23
Charge-offs (12) (16)
Recoveries 3 0
---- ----
Balance, end of period $455 $452
==== ====
</TABLE>
NOTE 3. ADVANCES FROM FEDERAL HOME LOAN BANK
Borrowings at March 31, 1998, consisted of seven short-term advances totaling
$ 2.2 million and nine long-term advances totaling $ 4.0 million from the
Federal Home Loan Bank of Cincinnati ("FHLB"). The advances are
collateralized by all shares of FHLB stock owned by the Home City Federal
Savings Bank of Springfield ("Bank") and by the Bank's qualified mortgage loan
portfolio.
6
<PAGE>
Scheduled maturities of advances from the FHLB were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
At March 31, 1998 At December 31, 1997
----------------------------------- -----------------------------------
Range of Weighted- Range of Weighted-
interest average interest average
Amount rates interest rate Amount rates interest rate
------ ----- ------------- ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Due within
one year $2,200 5.92% 5.92% $2,000 5.87% 5.87%
After one but
within five $ 886 5.46%-6.30% 5.83% $ 538 5.85%-6.30% 6.10%
years
After five years $3,102 3.30%-8.35% 6.49% $3,174 3.30%-8.35% 6.51%
</TABLE>
NOTE 4. REGULATORY CAPITAL
The following table illustrates the compliance by the Bank with currently
applicable regulatory capital requirements at March 31, 1998.
<TABLE>
<CAPTION>
(Dollars in thousands)
Categorized as "Well
Capitalized" Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Risk-Based Capital $10,933 22.9% $ 3,824 8.0% $ 4,780 10.0%
(To Risk-Weighted Assets)
Tier I Capital 10,479 21.9% N/A N/A 2,868 6.0%
(To Risk-Weighted Assets)
Tier I Capital
(To Total Assets) 10,479 13.9% 3,021 4.0% 3,776 5.0%
Tangible Capital
(To Total Assets) 10,479 13.9% 1,133 1.5% N/A N/A
</TABLE>
NOTE 5. EARNINGS PER SHARE
Earnings per share ("EPS") is computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
was adopted by HCFC as of December 31, 1997. Common stock equivalents include
shares held by the Company's Employee Stock Ownership Plan ("ESOP") that are
committed for release, shares awarded but not released under the Company's
Recognition and Retention Plan ("RRP"), and stock options granted under the
Stock Option Plan ("SOP"). Following is a reconciliation of the numerators
and denominators of the basic and diluted EPS calculations.
7
<PAGE>
<TABLE>
<CAPTION>
For the Quarter Ended March 31, 1998
--------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $211,864 829,232 $0.26
=====
Effect of dilutive securities:
RRP shares 0 23,802
ESOP shares 0 68,558
Stock options 0 9,586
-------- -------
Diluted EPS
Income available to
common shareholders +
assumed conversions $211,864 931,178 $0.23
======== ======= =====
<CAPTION>
For the Quarter Ended March 31, 1997
--------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $178,766 876,024 $0.20
=====
Effect of dilutive securities:
RRP shares 0 0
ESOP shares 0 76,176
Stock options 0 0
-------- -------
Diluted EPS
Income available to
common shareholders +
assumed conversions $178,766 952,200 $0.19
======== ======= =====
</TABLE>
NOTE 6. COMPREHENSIVE INCOME
HCFC adopted SFAS No. 130, "Reporting Comprehensive Income", effective January
1, 1998, which establishes standards for reporting comprehensive income and
its components (revenues, expenses, gains and losses). Components of
comprehensive income are net income and all other non-owner changes in
equity. SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement
of financial position. Reclassification of financial statements for earlier
periods provided for comparative purposes is required.
8
<PAGE>
HCFC has chosen to disclose comprehensive income. Components of comprehensive
income are displayed net of income taxes. The following table sets forth the
related tax effects allocated to each element of comprehensive income for the
three months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three months ended March 31, 1998
-------------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period $ 65 $ (22) $ 43
Less: reclassification adjustment
for (gains) losses realized in
net income 0 0 0
------- ------- -------
Net unrealized gains (losses) 65 (22) 43
------- ------- -------
Other comprehensive income $ 65 $ (22) $ 43
======= ======= =======
<CAPTION>
(Dollars in thousands)
Three months ended March 31, 1997
-------------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
------ ---------- ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period $ (71) $ 22 $ (49)
Less: reclassification adjustment
for (gains) losses realized in
net income 19 (6) 13
------- ------- -------
Net unrealized gains (losses) (52) 16 (36)
------- ------- -------
Other comprehensive income $ (52) $ 16 $ (36)
======= ======= =======
</TABLE>
The following table sets forth the components of accumulated other
comprehensive income for the three months ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three months ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Beginning balance $ 332 $ 216
Unrealized gains (losses) on securities, net 43 (36)
------ ------
Ending balance $ 375 $ 180
====== ======
</TABLE>
9
<PAGE>
NOTE 7. RECLASSIFICATIONS
Certain amounts in the prior period's financial statements have been
reclassified to be consistent with the current period's presentation. The
reclassifications have no effect on net income.
10
<PAGE>
HOME CITY FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
================================================================================
Safe Harbor Clause
This report contains certain "forward-looking statements." The Company
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and is including this statement for
the express purpose of availing itself of the protection of such safe harbor
with respect to all such forward-looking statements. These forward-looking
statements, which are included in Management's Discussion and Analysis,
describe future plans or strategies and include the Company's expectations of
future financial results. The words "believe," "expect," "anticipate,"
"estimate," "project," and similar expressions identify forward-looking
statements. The Company's ability to predict results or the effect of future
plans or strategies is inherently uncertain. Factors which could affect
actual results include interest rate trends, the general economic climate in
the Company's market area and the country as a whole, loan delinquency rates,
and changes in federal and state regulations. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements.
General
In September 1996, the Board of Directors of Home City Federal Savings
Bank of Springfield ("Bank") adopted a Plan of Conversion ("Plan") whereby the
Bank would convert to the stock form of ownership, followed by the issuance of
all the Bank's outstanding stock to a newly formed holding company, Home City
Financial Corporation ("Company"). Pursuant to the Plan, the Company offered
common shares for sale to certain depositors of the Bank and members of the
community. The conversion was completed on December 30, 1996, and resulted in
the issuance of 952,200 common shares of the Company which, after
consideration of offering expenses totaling approximately $447,000 and
$762,000 in shares purchased by the ESOP ("Employee Stock Ownership Plan"),
resulted in net capital proceeds of $8.3 million. Condensed consolidated
financial statements of the Company are presented herein. Future references
are made either to the Company or the Bank as applicable.
The Company is a unitary savings and loan holding company whose
activities are primarily limited to holding the stock of the Bank. The Bank
conducts a general banking business in west central Ohio which consists of
attracting deposits from the general public and applying those funds to the
origination of loans for residential, consumer and non- residential purposes.
The Bank also originates loans for the construction of residential real estate
and loans secured by multifamily real estate (over four units), commercial
loans and consumer loans. The Bank's profitability is significantly dependent
on net interest income which is the difference between interest income
generated from interest-earning assets (i.e., loans and investments) and the
interest expense paid on interest-bearing liabilities (i.e., customer deposits
and borrowed funds). Net interest income is affected by the relative amount
of interest-earning assets and interest-bearing liabilities and interest
received or paid on these balances. The level of interest rates paid or
received by the Bank can be significantly influenced by a number of
environmental factors, such as governmental monetary policy, that are outside
of management control.
Earnings per common share were computed by dividing net income by the
weighted-average number of shares outstanding for the three-month period ended
March 31, 1998. Unreleased ESOP shares are not considered to be outstanding
shares for the purpose of determining the weighted-average number of shares
used in the earnings per common share calculation.
The consolidated financial information presented herein has been prepared
in accordance with generally accepted accounting principles ("GAAP") and
general accounting practices within the financial services industry. In
preparing consolidated financial statements in accordance with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could differ from
such estimates.
11
<PAGE>
The Bank is regulated by the Office of Thrift Supervision ("OTS") and its
deposits are insured up to applicable limits under the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Bank is a member of the FHLB, conducting its business through its
office located in Springfield, Ohio. The primary market area of the Bank is
Clark County, Ohio, and contiguous counties.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 redefines how operating segments are determined
and requires disclosure of certain financial and descriptive information about
the Company's operating segments. This statement supercedes SFAS No. 14,
"Financial Reporting for Segments of Business Enterprises." The new standard
becomes effective for years beginning after December 15, 1997, and requires
that comparative information from earlier periods be restated to conform to
the requirements of this standard. The adoption of this statement is not
expected to be material to the Company.
Changes in Financial Condition
At March 31, 1998, the consolidated assets of the Company totaled $76.4
million, an increase of $4.5 million, or 6.29%, from $71.9 million at December
31, 1997. The increase in total assets was primarily the result of a $5.2
million increase in loans receivable funded primarily by a $3.9 million
increase in deposits.
Net loans receivable increased by $5.2 million, or 8.29%, to $67.7
million at March 31, 1998, compared to $62.5 million at December 31, 1997.
The increase was primarily in the non-residential real estate and commercial
loan portfolio and in the residential real estate loan and consumer loan
portfolio where the new loan demand continued to exceed loan repayments.
Investment securities decreased $886,000, or 17.66%, from $5.0 million at
December 31, 1997, to $4.1 million at March 31, 1998. The decrease was
primarily the result of scheduled maturities of short-term investments being
rolled into higher earning non-residential real estate and commercial loan
production.
During the three months ended March 31, 1998, $41,000 of principal
payments were received on mortgage- backed and related securities ("MBS"). No
other transactions, purchases or sales, occurred during the period.
Deposit liabilities increased $3.9 million, or 7.46%, from $51.7 million
at December 31, 1997, to $55.5 million at March 31, 1998. Management
attributes the increase to the maintenance of competitive rates in our market
area. Interest credited on accounts also contributed to the increase.
Advances from the FHLB increased $476,000, or 8.33%, from $5.7 million at
December 31, 1997, to $6.2 million at March 31, 1998. The funds obtained were
utilized to support the increased loan demand.
Total shareholders' equity increased $189,000, or 1.35%, from $14.0
million at December 31, 1997, to $14.2 million at March 31, 1998. This
increase was primarily the result of $212,000 in earnings for the first
quarter and a $43,000 increase in the unrealized gains on securities
available-for-sale during the three months ended March 31, 1998.
The Bank's liquidity, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. Principal
sources of funds are deposits, loan and mortgage-backed securities repayments,
maturities of securities and other funds provided by operations. The Bank
also has the ability to borrow from the FHLB. While scheduled loan repayments
and maturing investments are relatively predictable, deposit flows and early
loan and mortgage-backed security prepayments are more influenced by interest
rates, general economic conditions and competition. The Bank maintains
investments in liquid assets based upon management's assessment of (i) the
need for funds, (ii) expected deposit flows, (iii) the yields available on
short-term liquid assets and (iv) the objectives of the asset/liability
management program. In the ordinary course of business, part of such liquid
investments portfolio is composed of deposits at correspondent banks.
12
<PAGE>
Although the amount on deposit at such banks often exceeds the $100,000 limit
covered by FDIC insurance, the Bank monitors the capital of such institutions
to ensure that such deposits do not expose the Bank to undue risk of loss.
OTS regulations presently require the Bank to maintain an average daily
balance of liquid assets, which may include, but are not limited to,
investments in United States Treasury, federal agency obligations and other
investments having maturities of five years or less in an amount equal to 4%
of the sum of the Bank's average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less. The liquidity
requirement, which may be changed from time to time by the OTS to reflect
changing economic conditions, is intended to provide a source of relatively
liquid funds upon which the Bank may rely if necessary to fund deposit
withdrawals or other short-term funding needs. At March 31, 1998, the Bank's
regulatory liquidity ratio was 5.98%. At such date, the Bank had commitments
to originate loans totaling $3.3 million and no commitments to purchase or
sell loans. The Bank considers its liquidity and capital reserves sufficient
to meet its outstanding short- and long-term needs. Adjustments to liquidity
and capital reserves may be necessary, however, if loan demand increases more
than expected or if deposits decrease substantially.
The Bank is required by applicable law and regulation to meet certain
minimum capital standards. Such capital standards include a tangible capital
requirement, a core capital requirement or leverage ratio and a risk-based
capital requirement. See "Note 4 - Regulatory Capital." The Bank exceeded
all of its capital requirements at March 31, 1998.
Savings associations are required to maintain "tangible capital" of not
less than 1.5% of the association's adjusted total assets. Tangible capital
is defined in OTS regulations as core capital less intangible assets.
"Tier I (Core) capital" is comprised of common stockholders' equity
(including retained earnings), noncumulative preferred stock and related
surplus, minority interests in consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits of mutual associations. OTS
regulations require savings associations to maintain Tier I capital of at
least 4% of the association's total assets.
OTS regulations require that savings associations maintain "risk-based
capital" in an amount not less than 8% of risk-weighted assets. Assets are
weighted at percentage levels ranging from 0% to 100% depending on their
relative risk. Risk-based capital is defined as Tier I capital plus certain
additional items of capital, which in the case of Home City includes a general
loan loss allowance of $455,000 at March 31, 1998.
At March 31, 1998, the Bank had no material commitments for capital
expenditures.
On February 23, 1998, the Board of Directors of the Company declared a
quarterly cash dividend in the amount of $0.09 per share to each shareholder
of record on March 9, 1998, to be paid on March 16, 1998.
On April 22, 1998, the Board of Directors of the Company declared a
special cash distribution in the amount of $3.50 per share to each shareholder
of record on May 29, 1998, to be paid on June 15, 1998. Management of HCFC
expects that at least part of the distribution will be a non-taxable return of
capital, although the exact amount of the distribution that could be
considered non-taxable cannot be confirmed until the Company's operating
results for the 1998 tax year have been determined.
Results of Operations
Comparison of Three Months Ended March 31, 1998 and 1997
General. Net income increased $34,000, or 19.10%, from $178,000 for the
three months ended March 31, 1997, to $212,000 for the three months ended
March 31, 1998. This increase was primarily attributed to an increase in net
interest income and non-interest income partially offset by increases in
non-interest expense.
13
<PAGE>
Interest Income. The $6.0 million increase in average earning assets
contributed to an increase in interest income of $192,000, or 13.83%, for the
three months ended March 31, 1998 compared to 1997. The increase was
attributed to the additional loan income of $299,000 resulting from an
increase in loans receivable which was offset by a decrease of $107,000 in
interest income on other earning assets.
Interest Expense. Interest expense on deposit liabilities increased
$30,000 for the three months ended March 31, 1998, as compared to the same
period in 1997. Although total deposits increased by $3.9 million comparing
March 31, 1998 to 1997, the average interest paid on interest-bearing deposits
decreased by 15 basis points from 5.50% for the three months ended March 31,
1997, to 5.35% for the same period ended March 31, 1998. The average balance
of FHLB advances increased from $4.0 million for the three-month period ended
March 31, 1997, to $6.3 million for the same period ended March 31, 1998,
resulting in an increase in interest on FHLB advances of $29,000 for the three
months ended March 31, 1998, compared to the same period ended March 31, 1997.
Provision for Loan Losses. The provision for loan losses was $12,000 and
there were net charge-offs of $9,000 during the three months ended March 31,
1998, compared to a $20,000 provision and net recoveries of $48,000 during the
three months ended March 31, 1997. The provision was decreased based upon the
results of the ongoing loan reviews and composition of the loan portfolio,
primarily loans secured by one- to four-family residential properties, which
are considered to have less risk.
Non-Interest Income. Non-interest income increased $15,000, or 500%, to
$18,000 for the three months ended March 31, 1998, from $3,000 for the three
months ended March 31, 1997. The increase was primarily attributable to a
$19,000 loss recognized on the sale of mortgage-backed securities realized in
the three months ended March 31, 1997.
Non-Interest Expense. Non-interest expense increased $111,000, or
29.92%, to $482,000 for the three months ended March 31, 1998, from $371,000
in the comparable period in 1997. Of this increase, $95,000 was attributable
to an increase in compensation and benefit expense in 1998, reflecting the
addition of staff related to the non-residential real estate and commercial
lending function and an increase in compensation expense for the RRP and the
ESOP due to increases in the average stock price. Legal, accounting and
examination expenses increased from $53,000 for the quarter ended March 31,
1997, to $71,000 for the quarter ended March 31, 1998, due to the additional
costs related to the change in fiscal years from June 30 to December 31 during
the fourth quarter of 1997. The ratio of non-interest expense to average
total assets was 2.61% and 2.17% for the three months ended March 31, 1998 and
1997, respectively.
Income Taxes. The provision for income taxes increased $11,000 for the
three months ended March 31, 1998, compared with the prior year, primarily as
a result of higher income for the quarter.
14
<PAGE>
HOME CITY FINANCIAL CORPORATION
PART II - OTHER INFORMATION
================================================================================
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 29, 1998, the Company held its Annual Meeting
of Shareholders.
Each of the five directors nominated were elected to terms
expiring in 1999 by the following votes:
John D. Conroy For: 732,143 Withheld: 0
------- --------
P. Clark Engelmeier For: 732,143 Withheld: 0
------- --------
James Foreman For: 732,143 Withheld: 0
------- --------
Terry A. Hoppes For: 732,143 Withheld: 0
------- --------
Douglas L. Ulery For: 732,143 Withheld: 0
------- --------
Two other matters were submitted to the shareholders, for which
the following votes were cast:
<TABLE>
<CAPTION>
1. Approval of amendment of Section 1.01 of Company's Code of
Regulations:
<S> <C> <C> <C> <C>
For: 712,721 Against: 18,922 Abstain: 500 Broker Non-votes: 0
------- ------ ------ ------
<CAPTION>
2. Ratification of the selection of Robb, Dixon, Francis,
Davis, Oneson & Company as the auditors of the Company for
the current fiscal year:
<S> <C> <C> <C> <C>
For: 731,118 Against: 275 Abstain: 750 Broker Non-votes: 0
------- ------ ------ ------
</TABLE>
ITEM 5 - OTHER INFORMATION
None
15
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 3(ii): Code of Regulations as amended April 29, 1998.
b. Exhibit 27: Financial Data Schedule, March 31, 1998
c. Exhibit 27: Restated Financial Data Schedule, March 31, 1997
and September 30, 1997
d. No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1933, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HOME CITY FINANCIAL CORPORATION
Date: /s/May 13, 1998 /s/ Douglas L. Ulery
------------------ -------------------------------
Douglas L. Ulery
President
Date: /s/May 13, 1998 /s/ Charles A. Mihal
------------------ ------------------------------
Charles A. Mihal
Treasurer and Chief Financial Officer
17
CODE OF REGULATIONS
OF
HOME CITY FINANCIAL CORPORATION
AS AMENDED EFFECTIVE APRIL 29, 1998
INDEX
Section Caption Page No.
- ------- ------- --------
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
1.01 Annual Meetings........................................1
1.02 Calling of Meetings....................................1
1.03 Place of Meetings......................................1
1.04 Notice of Meetings.....................................1
1.05 Waiver of Notice.......................................2
1.06 Quorum.................................................2
1.07 Votes Required.........................................2
1.08 Order of Business......................................2
1.09 Shareholders Entitled to Vote..........................2
1.10 Cumulative Voting......................................3
1.11 Proxies................................................3
1.12 Inspectors of Election.................................3
ARTICLE TWO
DIRECTORS
2.01 Authority and Qualifications...........................3
2.02 Number of Directors and Term of Office.................4
2.03 Nomination and Election................................4
2.04 Election...............................................5
2.05 Removal................................................5
2.06 Vacancies..............................................5
2.07 Meetings...............................................6
2.08 Notice of Meetings.....................................6
2.09 Waiver of Notice ......................................6
2.10 Quorum ................................................6
2.11 Executive Committee ...................................7
2.12 Compensation ..........................................7
2.13 By-Laws ...............................................7
<PAGE>
ARTICLE THREE
OFFICERS
3.01 Officers ..............................................7
3.02 Tenure of Office ......................................8
3.03 Duties of the Chairman of the Board....................8
3.04 Duties of the President ...............................8
3.05 Duties of the Vice Presidents..........................8
3.06 Duties of the Secretary ...............................8
3.07 Duties of the Treasurer ...............................8
ARTICLE FOUR
SHARES
4.01 Certificates ..........................................9
4.02 Transfers .............................................9
4.03 Transfer Agents and Registrars........................10
4.04 Lost, Wrongfully Taken or Destroyed
Certificates........................................10
4.05 Uncertificated Shares.................................10
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
5.01 Mandatory Indemnification.............................10
5.02 Court-Approved Indemnification........................11
5.03 Indemnification for Expenses..........................11
5.04 Determination Required................................12
5.05 Advances for Expenses.................................12
5.06 Article Five Not Exclusive............................13
5.07 Insurance.............................................13
5.08 Certain Definitions...................................13
5.09 Venue.................................................14
ARTICLE SIX
MISCELLANEOUS
6.01 Amendments............................................14
6.02 Action by Shareholders or Directors
Without a Meeting...................................14
<PAGE>
CODE OF REGULATIONS
OF
HOME CITY FINANCIAL CORPORATION
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the
shareholders for the election of directors, for the consideration of reports
to be laid before such meeting and for the transaction of such other business
as may properly come before such meeting shall be held on the fourth Wednesday
of the fourth month following the end of the fiscal year of the corporation at
3:00 p.m., or on such other date and at such other time as may be fixed from
time to time by the directors.
Section 1.02. Calling of Meetings. Meetings of the shareholders
may be called only by the chairman of the board, the president, or, in case of
the president's absence, death, or disability, the vice president authorized
to exercise the authority of the president; the secretary; the directors by
action at a meeting, or a majority of the directors acting without a meeting;
or the holders of at least twenty-five percent of all shares outstanding and
entitled to vote thereat.
Section 1.03. Place of Meetings. All meetings of shareholders
shall be held at the principal office of the corporation, unless otherwise
provided by action of the directors. Meetings of shareholders may be held at
any place within or without the State of Ohio.
Section 1.04. Notice of Meetings. (A) Written notice stating the
time, place and purposes of a meeting of the shareholders shall be given
either by personal delivery or by mail not less than seven nor more than sixty
days before the date of the meeting (1) to each shareholder of record entitled
to notice of the meeting, (2) by or at the direction of the president or the
secretary. If mailed, such notice shall be addressed to the shareholder at
his address as it appears on the records of the corporation. Notice of
adjournment of a meeting need not be given if the time and place to which it
is adjourned are fixed and announced at such meeting. In the event of a
transfer of shares after the record date for determining the shareholders who
are entitled to receive notice of a meeting of shareholders, it shall not be
necessary to give notice to the transferee. Nothing herein contained shall
prevent the setting of a record date in the manner provided by law, the
Articles or the Regulations for the determination of shareholders who are
entitled to receive notice of or to vote at any meeting of shareholders or for
any purpose required or permitted by law.
1
<PAGE>
(B) Following receipt by the president or the secretary of a
request in writing, specifying the purpose or purposes for which the persons
properly making such request have called a meeting of the shareholders,
delivered either in person or by registered mail to such officer by any
persons entitled to call a meeting of shareholders, such officer shall cause
to be given to the shareholders entitled thereto notice of a meeting to be
held on a date not less than seven nor more than sixty days after the receipt
of such request, as such officer may fix. If such notice is not given within
fifteen days after the receipt of such request by the president or the
secretary, then, and only then, the persons properly calling the meeting may
fix the time of meeting and give notice thereof in accordance with the
provisions of the Regulations.
Section 1.05. Waiver of Notice. Notice of the time, place and
purpose or purposes of any meeting of shareholders may be waived in writing,
either before or after the holding of such meeting, by any shareholders, which
writing shall be filed with or entered upon the records of such meeting. The
attendance of any shareholder, in person or by proxy, at any such meeting
without protesting the lack of proper notice, prior to or at the commencement
of the meeting, shall be deemed to be a waiver by such shareholder of notice
of such meeting.
Section 1.06. Quorum. At any meeting of shareholders, the holders
of a majority of the voting shares of the corporation then outstanding and
entitled to vote thereat, present in person or by proxy, shall constitute a
quorum for such meeting. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, or the chairman
of the board, the president, or the officer of the corporation acting as
chairman of the meeting, may adjourn such meeting from time to time, and if a
quorum is present at such adjourned meeting any business may be transacted as
if the meeting had been held as originally called.
Section 1.07. Votes Required. At all elections of directors the
candidates receiving the greatest number of votes shall be elected. Any other
matter submitted to the shareholders for their vote shall be decided by the
vote of such proportion of the shares, or of any class of shares, or of each
class, as is required by law, the Articles or the Regulations.
Section 1.08. Order of Business. The order of business at any
meeting of shareholders shall be determined by the officer of the corporation
acting as chairman of such meeting unless otherwise determined by a vote of
the holders of a majority of the voting shares of the corporation then
outstanding, present in person or by proxy, and entitled to vote at such
meeting.
Section 1.09. Shareholders Entitled to Vote. Each shareholder of
record on the books of the corporation on the record date for determining the
shareholders who are entitled to vote at a meeting of shareholders shall be
entitled at such meeting to one vote for each share of the corporation
standing in his name on the books of the corporation on such record date. The
directors may fix a record date for the determination of the shareholders who
are entitled to receive notice of and to vote at a meeting of shareholders,
which record date shall not be a date earlier than the date on which the
record date is fixed and which record date may be a maximum of sixty days
preceding the date of the meeting of shareholders.
2
<PAGE>
Section 1.10. Cumulative Voting. No shareholder shall have the
right to vote cumulatively in the election of directors.
Section 1.11. Proxies. At meetings of the shareholders, any
shareholder of record entitled to vote thereat may be represented and may vote
by a proxy or proxies appointed by an instrument in writing signed by such
shareholder, but such instrument shall be filed with the secretary of the
meeting before the person holding such proxy shall be allowed to vote
thereunder. No proxy shall be valid after the expiration of eleven months
after the date of its execution, unless the shareholder executing it shall
have specified therein the length of time it is to continue in force.
Section 1.12. Inspectors of Election. In advance of any meeting of
shareholders, the directors may appoint inspectors of election to act at such
meeting or any adjournment thereof; if inspectors are not so appointed, the
officer of the corporation acting as chairman of any such meeting may make
such appointment. In case any person appointed as inspector fails to appear
or act, the vacancy may be filled only by appointment made by the directors
in advance of such meeting or, if not so filled, at the meeting by the officer
of the corporation acting as chairman of such meeting. No other person or
persons may appoint or require the appointment of inspectors of election.
ARTICLE TWO
DIRECTORS
Section 2.01. Authority and Qualifications. Except where the law,
the Articles or the Regulations otherwise provide, all authority of the
corporation shall be vested in and exercised by its directors. Directors need
not be shareholders of the corporation.
Section 2.02. Number of Directors and Term of Office.
(A) Until changed in accordance with the provisions of the
Regulations, the number of directors of the corporation shall be five.
Directors shall be elected for such terms that the terms of an equal number of
directors, as nearly as possible, will expire each year. A term may not
exceed three years. Directors shall serve until their successors are duly
elected and qualified or until their earlier resignation, removal from office,
or death.
(B) The number of directors may be fixed or changed at a meeting
of the shareholders called for the purpose of electing directors at which a
quorum is present, only by the affirmative vote of the holders of not less
than a majority of the voting shares which are represented at the meeting, in
person or by proxy, and entitled to vote on such proposal.
(C) The directors may fix or change the number of directors and
may fill any director's office that is created by an increase in the number of
3
<PAGE>
directors; provided, however, that the directors may not increase the number
of directors to greater than fifteen nor reduce the number of directors to
fewer than five.
(D) No reduction in the number of directors shall of itself have
the effect of shortening the term of any incumbent director.
Section 2.03. Nomination and Election.
(A) Any nominee for election as a director of the corporation
may be proposed only by the directors or by any shareholder entitled to vote
for the election of directors. No person, other than a nominee proposed by
the directors, may be nominated for election as a director of the corporation
unless such person shall have been proposed in a written notice, delivered or
mailed by first class United States mail, postage prepaid, to the Secretary of
the corporation at the principal offices of the corporation. In the case of a
nominee proposed for election as a director at an annual meeting of
shareholders, such written notice of a proposed nominee shall be received by
the Secretary of the corporation on or before the sixtieth (60th) day before
the first anniversary of the most recent annual meeting of shareholders of the
corporation held for the election of directors; provided, however, that if the
annual meeting for the election of director in any year is not held on or
before the thirty-first (31st) day next following such anniversary, then the
written notice required by this subparagraph (A) shall be received by the
Secretary within a reasonable time prior to the date of such annual meeting.
In the case of a nominee proposed for election as a director at a special
meeting of shareholders at which directors are to be elected, such written
notice of a proposed nominee shall be received by the Secretary of the
corporation no later than the close of business on the seventh day following
the day on which notice of the special meeting was mailed to shareholders.
Each such written notice of a proposed nominee shall set forth (1) the name,
age, business or residence address of each nominee proposed in such notice,
(2) the principal occupation or employment of each such nominee, and (3) the
number of common shares of the corporation owned beneficially and/or of record
by each such nominee and the length of time any such shares have been so
owned.
(B) If a shareholder shall attempt to nominate one or more
persons for election as a director at any meeting at which directors are to be
elected without having identified each such person in a written notice given
as contemplated by, and/or without having provided therein the information
specified in, subparagraph (A) of this Section, each such attempted nomination
shall be invalid and shall be disregarded unless the person acting as Chairman
of the meeting determines that the facts warrant the acceptance of such
nomination.
(C) The election of directors shall be by ballot whenever
requested by the person acting as Chairman of the meeting or by the holders of
a majority of the voting shares outstanding, entitled to vote at such meeting
and present in person or by proxy, but unless such request is made, the
election shall be by voice vote.
Section 2.04. Election. At each annual meeting of shareholders for
the election of directors, the successors to the directors whose term shall
4
<PAGE>
expire in that year shall be elected, but if the annual meeting is not held or
if one or more of such directors are not elected thereat, they may be elected
at a special meeting called for that purpose. The election of directors shall
be by ballot whenever requested by the presiding officer of the meeting or by
the holders of a majority of the voting shares outstanding, entitled to vote
at such meeting and present in person or by proxy, but unless such request is
made, the election shall be viva voce.
Section 2.05. Removal. A director or directors may be removed from
office, with or without assigning any cause, only by the vote of the holders
of shares entitling them to exercise not less than a majority of the voting
power of the corporation to elect directors in place of those to be removed,
provided that unless all the directors, or all the directors of a particular
class (if the directors of the corporation are divided into classes), are
removed, no individual director shall be removed in case the votes of a
sufficient number of shares are cast against his removal that, if cumulatively
voted at an election of all directors, or all the directors of a particular
class, as the case may be, would be sufficient to elect at least one
director. In case of any such removal, a new director may be elected at the
same meeting for the unexpired term of each director removed. Failure to
elect a director to fill the unexpired term of any director removed shall be
deemed to create a vacancy in the board.
Section 2.06. Vacancies. The remaining directors, though less than
a majority of the whole authorized number of directors, may, by the vote of a
majority of their number, fill any vacancy in the board for the unexpired
term. A vacancy in the board exists within the meaning of this Section 2.06
in case the shareholders increase the authorized number of directors but fail
at the meeting at which such increase is authorized, or an adjournment
thereof, to elect the additional directors provided for, or in case the
shareholders fail at any time to elect the whole authorized number of
directors.
Section 2.07. Meetings. A meeting of the directors shall be held
immediately following the adjournment of each annual meeting of shareholders
at which directors are elected, and notice of such meeting need not be given.
The directors shall hold such other meetings as may from time to time be
called, and such other meetings of directors may be called only by the
chairman of the board, the president, or any two directors. All meetings of
directors shall be held at the principal office of the corporation or at such
other place as the directors may from time to time determine by resolution.
Meetings of the directors may be held through any communications equipment if
all persons participating can hear each other, and participation in a meeting
pursuant to this provision shall constitute presence at such meeting.
Section 2.08. Notice of Meetings. Notice of the time and place of
each meeting of directors for which such notice is required by law, the
Articles, the Regulations or the By-Laws shall be given to each of the
directors by at least one of the following methods:
(A) In a writing mailed not less than three days before such
meeting and addressed to the residence or usual place of
business of a director, as such address appears on the records
of the corporation; or
5
<PAGE>
(B) By telegraph, cable, radio, wireless, or a writing sent or
delivered to the residence or usual place of business of a
director as the same appears on the records of the
corporation, not later than the day before the date on which
such meeting is to be held; or
(C) Personally or by telephone not later than the day before the
date on which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be
given only by the chairman of the board, the president or the secretary of the
corporation. Any such notice need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
Section 2.09. Waiver of Notice. Notice of any meeting of directors
may be waived in writing, either before or after the holding of such meeting,
by any director, which writing shall be filed with or entered upon the records
of the meeting. The attendance of any director at any meeting of directors
without protesting, prior to or at the commencement of the meeting, the lack
of proper notice, shall be deemed to be a waiver by him of notice of such
meeting.
Section 2.10. Quorum. A majority of the whole authorized number of
directors shall be necessary to constitute a quorum for a meeting of
directors, except that a majority of the directors in office shall constitute
a quorum for filling a vacancy in the board. The act of a majority of the
directors present at a meeting at which a quorum is present is the act of the
board, except as otherwise provided by law, the Articles or the Regulations.
Section 2.11. Executive Committee. The directors may create an
executive committee or any other committee of directors, to consist of not
less than three directors, and may authorize the delegation to such executive
committee or other committees of any of the authority of the directors,
however conferred, other than that of filling vacancies among the directors or
in the executive committee or in any other committee of the directors.
Such executive committee or any other committee of directors shall
serve at the pleasure of the directors, shall act only in the intervals
between meetings of the directors, and shall be subject to the control and
direction of the directors. Such executive committee or other committee of
directors may act by a majority of its members at a meeting or by a writing or
writings signed by all of its members.
Any act or authorization of any act by the executive committee or
any other committee within the authority delegated to it shall be as effective
for all purposes as the act or authorization of the directors. No notice of a
meeting of the executive committee or of any other committee of directors
shall be required. A meeting of the executive committee or of any other
committee of directors may be called only by the president or by a member of
6
<PAGE>
such executive or other committee of directors. Meetings of the executive
committee or of any other committee of directors may be held through any
communications equipment if all persons participating can hear each other and
participation in such a meeting shall constitute presence thereat.
Section 2.12. Compensation. Directors shall be entitled to receive
as compensation for services rendered and expenses incurred as directors such
amounts as the directors may determine.
Section 2.13. By-Laws. The directors may adopt, and amend from
time to time, By-Laws for their own government, which By-Laws shall not be
inconsistent with the law, the Articles or the Regulations.
ARTICLE THREE
OFFICERS
Section 3.01. Officers. The officers of the corporation to be
elected by the directors shall be a president, a secretary, a treasurer, and,
if desired, one or more vice presidents and such other officers and assistant
officers as the directors may from time to time elect. The directors may
elect a chairman of the board, who must be a director. Officers need not be
shareholders of the corporation and may be paid such compensation as the board
of directors may determine. Any two or more offices may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity if such instrument is required by law, the Articles,
the Regulations or the By-Laws to be executed, acknowledged or verified by two
or more officers.
Section 3.02. Tenure of Office. The officers of the corporation
shall hold office at the pleasure of the directors. Any officer of the
corporation may be removed, either with or without cause, at any time, by the
affirmative vote of a majority of all the directors then in office; such
removal, however, shall be without prejudice to the contract rights, if any,
of the person so removed.
Section 3.03. Duties of the Chairman of the Board. The chairman of
the board, if any, shall preside at all meetings of the directors. He shall
have such other powers and duties as the directors shall from time to time
assign to him.
Section 3.04. Duties of the President. The president shall be the
chief executive officer of the corporation, shall exercise supervision over
the business of the corporation and shall have, among such additional powers
and duties as the directors may from time to time assign to him, the power and
authority to sign all certificates evidencing shares of the corporation and
all deeds, mortgages, bonds, contracts, notes and other instruments requiring
the signature of the president of the corporation. It shall be the duty of
the president to preside at all meetings of shareholders.
7
<PAGE>
Section 3.05. Duties of the Vice Presidents. In the absence of the
president or in the event of his inability or refusal to act, the vice
president, if any (or in the event there be more than one vice president, the
vice presidents in the order designated, or in the absence of any designation,
then in the order of their election), shall perform the duties of the
president, and when so acting, shall have all the powers of and be subject to
all restrictions upon the president. The vice presidents shall perform such
other duties and have such other powers as the directors may from time to time
prescribe.
Section 3.06. Duties of the Secretary. It shall be the duty of the
secretary, or of an assistant secretary, if any, in case of the absence or
inability to act of the secretary, to keep minutes of all the proceedings of
the shareholders and the directors and to make a proper record of the same; to
perform such other duties as may be required by law, the Articles or the
Regulations; to perform such other and further duties as may from time to time
be assigned to him by the directors or the president; and to deliver all
books, paper and property of the corporation in his possession to his
successor, or to the president.
Section 3.07. Duties of the Treasurer. The treasurer, or an
assistant treasurer, if any, in case of the absence or inability to act of the
treasurer, shall receive and safely keep in charge all money, bills, notes,
choses in action, securities and similar property belonging to the
corporation, and shall do with or disburse the same as directed by the
president or the directors; shall keep an accurate account of the finances and
business of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, stated capital and shares, together
with such other accounts as may be required and hold the same open for
inspection and examination by the directors; shall give bond in such sum with
such security as the directors may require for the faithful performance of his
duties; shall, upon the expiration of his term of office, deliver all money
and other property of the corporation in his possession or custody to his
successor or the president; and shall perform such other duties as from time
to time may be assigned to him by the directors.
ARTICLE FOUR
SHARES
Section 4.01. Certificates. Certificates evidencing ownership of
shares of the corporation shall be issued to those entitled to them. Each
certificate evidencing shares of the corporation shall bear a distinguishing
number; the signatures of the chairman of the board, the president, or a vice
president, and of the secretary or an assistant secretary (except that when
any such certificate is countersigned by an incorporated transfer agent or
registrar, such signatures may be facsimile, engraved, stamped or printed);
and such recitals as may be required by law. Certificates evidencing shares
of the corporation shall be of such tenor and design as the directors may from
time to time adopt and may bear such recitals as are permitted by law.
8
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Section 4.02. Transfers. Where a certificate evidencing a share or
shares of the corporation is presented to the corporation or its proper agents
with a request to register transfer, the transfer shall be registered as
requested if:
(1) An appropriate person signs on each certificate so presented
or signs on a separate document an assignment or transfer of shares evidenced
by each such certificate, or signs a power to assign or transfer such shares,
or when the signature of an appropriate person is written without more on the
back of each such certificate; and
(2) Reasonable assurance is given that the indorsement of each
appropriate person is genuine and effective; the corporation or its agents may
refuse to register a transfer of shares unless the signature of each
appropriate person is guaranteed by a commercial bank or trust company having
an office or a correspondent in the City of New York or by a firm having
membership in the New York Stock Exchange; and
(3) All applicable laws relating to the collection of transfer
or other taxes have been complied with; and
(4) The corporation or its agents are not otherwise required or
permitted to refuse to register such transfer.
Section 4.03. Transfer Agents and Registrars. The directors may
appoint one or more agents to transfer or to register shares of the
corporation, or both.
Section 4.04. Lost, Wrongfully Taken or Destroyed Certificates.
Except as otherwise provided by law, where the owner of a certificate
evidencing shares of the corporation claims that such certificate has been
lost, destroyed or wrongfully taken, the directors must cause the corporation
to issue a new certificate in place of the original certificate if the owner:
(1) So requests before the corporation has notice that such
original certificate has been acquired by a bona fide purchaser; and
(2) Files with the corporation, unless waived by the directors,
an indemnity bond, with surety or sureties satisfactory to the corporation, in
such sums as the directors may, in their discretion, deem reasonably
sufficient as indemnity against any loss or liability that the corporation may
incur by reason of the issuance of each such new certificate; and
(3) Satisfies any other reasonable requirements which may be
imposed by the directors, in their discretion.
Section 4.05. Uncertificated Shares. Anything contained in this
Article Fourth to the contrary notwithstanding, the directors may provide by
resolution that some or all of any or all classes and series of shares of the
corporation shall be uncertificated shares, provided that such resolution
9
<PAGE>
shall not apply to (A) shares of the corporation represented by a certificate
until such certificate is surrendered to the corporation in accordance with
applicable provisions of Ohio law or (B) any certificated security of the
corporation issued in exchange for an uncertificated security in accordance
with applicable provisions of Ohio law. The rights and obligations of the
holders of uncertificated shares and the rights and obligations of the holders
of certificates representing shares of the same class and series shall be
identical, except as otherwise expressly provided by law.
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
Section 5.01. Mandatory Indemnification. The corporation shall
indemnify any officer or director of the corporation who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action threatened or
instituted by or in the right of the corporation), by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, trustee,
officer, employee or agent of another corporation (domestic or foreign,
nonprofit or for profit), partnership, joint venture, trust or other
enterprise, against expenses (including, without limitation, attorneys' fees,
filing fees, court reporters' fees and transcript costs), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. A
person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification,
to have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and with respect to any
criminal matter, to have had no reasonable cause to believe his conduct was
unlawful, and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
Section 5.02. Court-Approved Indemnification. Anything contained
in the Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or director
of the corporation who was a party to any completed action or suit instituted
by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or
other enterprise, in respect of any claim, issue or matter asserted in such
action or suit as to which he shall have been adjudged to be liable for acting
with reckless disregard for the best interests of the corporation or
10
<PAGE>
misconduct (other than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of Common Pleas of
Clark County, Ohio, or the court in which such action or suit was brought
shall determine upon application that, despite such adjudication of liability,
and in view of all the circumstances of the case, he is fairly and reasonably
entitled to such indemnity as such Court of Common Pleas or such other court
shall deem proper; and
(B) the corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by
this Section 5.02.
Section 5.03. Indemnification for Expenses. Anything contained in
the Regulations or elsewhere to the contrary notwithstanding, to the extent
that an officer or director of the corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to
in Section 5.01, or in defense of any claim, issue or matter therein, he shall
be promptly indemnified by the corporation against expenses (including,
without limitation, attorneys' fees, filing fees, court reporters' fees and
transcript costs) actually and reasonably incurred by him in connection
therewith.
Section 5.04 Determination Required. Any indemnification required
under Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney, or a firm having
associated with it an attorney, who has been retained by or who has performed
services for the corporation, or any person to be indemnified, within the past
five years, or (C) by the shareholders, or (D) by the Court of Common Pleas of
Clark County, Ohio, or (if the corporation is a party thereto) the court in
which such action, suit or proceeding was brought, if any; any such
determination may be made by a court under division (D) of this Section 5.04
at any time including, without limitation, any time before, during or after
the time when any such determination may be requested of, be under
consideration by or have been denied or disregarded by the disinterested
directors under division (A) or by independent legal counsel under division
(B) or by the shareholders under division (C) of this Section 5.04; and no
failure for any reason to make any such determination, and no decision for any
reason to deny any such determination, by the disinterested directors under
division (A) or by independent legal counsel under division (B) or by
shareholders under division (C) of this Section 5.04 shall be evidence in
rebuttal of the presumption recited in Section 5.01. Any determination made
by the disinterested directors under division (A) or by independent legal
counsel under division (B) of this Section 5.04 to make indemnification in
respect of any claim, issue or matter asserted in an action or suit threatened
or brought by or in the right of the corporation shall be promptly
communicated to the person who threatened or brought such action or suit, and
within ten (10) days after receipt of such notification such person shall have
the right to petition the Court of Common Pleas of Clark County, Ohio, or the
court in which such action or suit was brought, if any, to review the
reasonableness of such determination.
11
<PAGE>
Section 5.05. Advances for Expenses. Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer
or director promptly as such expenses are incurred by him, but only if such
officer or director shall first agree, in writing, to repay all amounts so
paid in respect of any claim, issue or other matter asserted in such action,
suit or proceeding in defense of which he shall not have been successful on
the merits or otherwise:
(A) if it shall ultimately be determined as provided in Section
5.04 that he is not entitled to be indemnified by the corporation as provided
under Section 5.01; or
(B) if, in respect of any claim, issue or other matter asserted
by or in the right of the corporation in such action or suit, he shall have
been adjudged to be liable for acting with reckless disregard for the best
interests of the corporation or misconduct (other than negligence) in the
performance of his duty to the corporation, unless and only to the extent that
the Court of Common Pleas of Clark County, Ohio, or the court in which such
action or suit was brought shall determine upon application that, despite such
adjudication of liability, and in view of all the circumstances, he is fairly
and reasonably entitled to all or part of such indemnification.
Section 5.06. Article Five Not Exclusive. The indemnification
provided by this Article Five shall not be deemed exclusive of any other
rights to which any person seeking indemnification may be entitled under the
Articles or the Regulations or any agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be an officer or director of
the corporation and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
12
<PAGE>
Section 5.07. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of another
corporation (domestic or foreign, nonprofit or for profit), partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article
Five.
Section 5.08. Certain Definitions. For purposes of this Article
Five, and as examples and not by way of limitation:
(A) A person claiming indemnification under this Article 5 shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or proceeding shall
be terminated as to such person, with or without prejudice, without the entry
of a judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based
upon a judicial or other determination of the lack of merit of the claims made
against him or otherwise results in a vindication of him); and
(B) References to an "other enterprise" shall include employee
benefit plans; references to a "fine" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties
on, or involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the best interests of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interests of the corporation" within the meaning of that term as used in
this Article Five.
13
<PAGE>
Section 5.09. Venue. Any action, suit or proceeding to determine a
claim for indemnification under this Article Five may be maintained by the
person claiming such indemnification, or by the corporation, in the Court of
Common Pleas of Clark County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Clark County, Ohio, in any
such action, suit or proceeding.
MISCELLANEOUS
Section 6.01. Amendments. The Regulations may be amended, or new
regulations may be adopted, at a meeting of shareholders held for such
purpose, only by the affirmative vote of the holders of shares entitling them
to exercise not less than a majority of the voting power of the corporation on
such proposal, or without a meeting by the written consent of the holders of
shares entitling them to exercise not less than a majority of the voting power
of the corporation on such proposal.
Section 6.02. Action by Shareholders or Directors Without a
Meeting. Anything contained in the Regulations to the contrary
notwithstanding, except as provided in Section 6.01, any action which may be
authorized or taken at a meeting of the shareholders or of the directors or of
a committee of the directors, as the case may be, may be authorized or taken
without a meeting with the affirmative vote or approval of, and in a writing
or writings signed by, all the shareholders who would be entitled to notice of
a meeting of the shareholders held for such purpose, or all the directors, or
all the members of such committee of the directors, respectively, which
writings shall be filed with or entered upon the records of the corporation.
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997, and the
related Consolidated Statements of Income and Comprehensive Income for the three
months ended March 31, 1998 and 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001022103
<NAME> HOME CITY FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 880
<INT-BEARING-DEPOSITS> 767
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,787
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 68,177
<ALLOWANCE> 455
<TOTAL-ASSETS> 76,374
<DEPOSITS> 55,545
<SHORT-TERM> 2,200
<LIABILITIES-OTHER> 448
<LONG-TERM> 3,988
0
0
<COMMON> 0
<OTHER-SE> 14,193
<TOTAL-LIABILITIES-AND-EQUITY> 76,374
<INTEREST-LOAN> 1,502
<INTEREST-INVEST> 77
<INTEREST-OTHER> 1
<INTEREST-TOTAL> 1,580
<INTEREST-DEPOSIT> 697
<INTEREST-EXPENSE> 95
<INTEREST-INCOME-NET> 788
<LOAN-LOSSES> 12
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 482
<INCOME-PRETAX> 312
<INCOME-PRE-EXTRAORDINARY> 212
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.23
<YIELD-ACTUAL> 4.39
<LOANS-NON> 475
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 280
<ALLOWANCE-OPEN> 452
<CHARGE-OFFS> 12
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 455
<ALLOWANCE-DOMESTIC> 455
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 144
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of March 31,1997 and 1996,and June 30, 1996,and
the related Consolidated Income Statements for the 3 and 9 months ended March
31,1997 and 1996,and the periods ended March 31,1997 and 1996,and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0001022103
<NAME> HOME CITY FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,136
<INT-BEARING-DEPOSITS> 1,091
<FED-FUNDS-SOLD> 200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,956
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 53,899
<ALLOWANCE> 468
<TOTAL-ASSETS> 68,235
<DEPOSITS> 49,795
<SHORT-TERM> 0
<LIABILITIES-OTHER> 374
<LONG-TERM> 4,055
0
0
<COMMON> 0
<OTHER-SE> 14,061
<TOTAL-LIABILITIES-AND-EQUITY> 68,235
<INTEREST-LOAN> 1,203
<INTEREST-INVEST> 117
<INTEREST-OTHER> 68
<INTEREST-TOTAL> 1,388
<INTEREST-DEPOSIT> 667
<INTEREST-EXPENSE> 66
<INTEREST-INCOME-NET> 655
<LOAN-LOSSES> 20
<SECURITIES-GAINS> (19)
<EXPENSE-OTHER> 371
<INCOME-PRETAX> 267
<INCOME-PRE-EXTRAORDINARY> 178
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 4.00
<LOANS-NON> 424
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 390
<ALLOWANCE-OPEN> 400
<CHARGE-OFFS> 0
<RECOVERIES> 48
<ALLOWANCE-CLOSE> 468
<ALLOWANCE-DOMESTIC> 468
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 315
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets as of September 30, 1997 and June 30, 1997, and the
related Consolidated Income Statements for the three months ended September 30,
1997 and 1996, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<CIK> 0001022103
<NAME> HOME CITY FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,013
<INT-BEARING-DEPOSITS> 925
<FED-FUNDS-SOLD> 300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,935
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 60,253
<ALLOWANCE> 442
<TOTAL-ASSETS> 70,110
<DEPOSITS> 51,632
<SHORT-TERM> 500
<LIABILITIES-OTHER> 417
<LONG-TERM> 3,811
0
0
<COMMON> 0
<OTHER-SE> 13,750
<TOTAL-LIABILITIES-AND-EQUITY> 70,110
<INTEREST-LOAN> 1,370
<INTEREST-INVEST> 132
<INTEREST-OTHER> 10
<INTEREST-TOTAL> 1,512
<INTEREST-DEPOSIT> 705
<INTEREST-EXPENSE> 771
<INTEREST-INCOME-NET> 741
<LOAN-LOSSES> 8
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 384
<INCOME-PRETAX> 367
<INCOME-PRE-EXTRAORDINARY> 243
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 243
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.26
<YIELD-ACTUAL> 4.36
<LOANS-NON> 572
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 417
<ALLOWANCE-OPEN> 445
<CHARGE-OFFS> 11
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 442
<ALLOWANCE-DOMESTIC> 442
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 94
</TABLE>
