UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10602
MID-AMERICA BANCORP
(Exact name of registrant as specified in its charter)
KENTUCKY 61-1012933
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
500 West Broadway, Louisville, Kentucky 40202
(Address of principal executive offices) (Zip Code)
(502) 589-3351
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for a 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
July 19, 1995: 8,816,725 shares of common stock, no par value
MID-AMERICA BANCORP
PART I. FINANCIAL INFORMATION
The consolidated financial statements of Mid-America Bancorp
(Corporation) and subsidiaries submitted herewith are unaudited.
However, in the opinion of management, all adjustments (consisting
only of adjustments of a normal recurring nature) necessary for a
fair presentation of the results for the interim periods have been
made.
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the
Corporation and subsidiaries are submitted herewith:
Consolidated balance sheets - June 30, 1995 and December 31,
1994
Consolidated statements of income - three and six months ended
June 30, 1995 and 1994
Consolidated statements of changes in shareholders' equity -
six months ended June 30, 1995 and 1994
Consolidated statements of cash flows - six months ended June
30, 1995 and 1994
Notes to consolidated financial statements
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data) (Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
----------- -------------
1995 1994
ASSETS ----------- -------------
<S> <C> <C>
Cash and due from banks $73,766 $64,215
Federal funds sold 73,000 5,300
Securities purchased under agreements to resell -- 65,000
Securities available for sale, amortized cost of $131,929 (1995)
and $134,656 (1994) (Note 4) 132,012 131,482
Securities held to maturity, market value of $191,753 (1995)
and $209,374 (1994) (Note 4) 190,880 214,313
Loans, net of unearned income of $27,913 (1995) and $29,642 (1994) 695,687 699,396
Allowance for loan losses (Note 5) 7,135 7,045
----------- -------------
Loans, net 688,552 692,351
Premises and equipment 19,437 19,098
Other assets 27,985 22,231
----------- -------------
TOTAL ASSETS $1,205,632 $1,213,990
=========== =============
LIABILITIES
Deposits:
Non-interest bearing $169,800 $96,590
Interest bearing 684,107 636,030
----------- -------------
Total deposits 853,907 732,620
Securities sold under agreements to repurchase 82,029 213,101
Federal funds purchased 5,100 5,800
Advances from the Federal Home Loan Bank 78,294 81,504
Money orders and similar payment instruments outstanding 45,973 47,818
Accrued expenses and other liabilities 9,604 8,095
----------- -------------
TOTAL LIABILITIES 1,074,907 1,088,938
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
authorized - 750,000 shares; issued - none -- --
Common stock, no par value, stated value $2.77 per
share; authorized - 12,000,000 shares; issued and outstanding -
8,816,725 shares (1995) and 8,803,759 shares (1994) 24,457 24,421
Additional paid-in capital 95,741 95,608
Retained earnings 10,473 7,086
Net unrealized securities gains (losses) (Note 4) 54 (2,063)
----------- -------------
TOTAL SHAREHOLDERS' EQUITY 130,725 125,052
----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,205,632 $1,213,990
=========== =============
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
-------------------------- --------------------------
1995 1994 1995 1994
INTEREST INCOME: ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest and fees on loans $17,491 $15,341 $34,478 $29,497
Interest on securities:
U.S.Treasury and agencies 3,472 2,718 6,675 5,406
States and political subdivisions 174 93 303 154
Corporate and other 750 685 1,438 1,458
Interest on federal funds sold 730 333 1,393 514
Interest on securities purchased under agreements to resell 170 337 604 788
----------- ----------- ----------- -----------
Total interest income 22,787 19,507 44,891 37,817
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits 7,312 5,789 14,282 11,398
Interest on federal funds purchased and
securities sold under agreements to repurchase 2,156 1,312 4,414 2,411
Interest on Federal Home Loan Bank advances 1,208 1,250 2,438 2,423
----------- ----------- ----------- -----------
Total interest expense 10,676 8,351 21,134 16,232
----------- ----------- ----------- -----------
Net interest income before provision for loan losses 12,111 11,156 23,757 21,585
Provision for loan losses (Note 5) 127 102 229 202
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 11,984 11,054 23,528 21,383
----------- ----------- ----------- -----------
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Cont'd)
(In thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
-------------------------- --------------------------
1995 1994 1995 1994
NON-INTEREST INCOME: ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income from trust department 222 295 453 678
Service charges on deposit accounts 1,097 1,137 2,207 2,179
Money order fees 923 703 1,778 1,395
Securities gains (37) -- (12) --
Other 649 572 1,190 1,146
----------- ----------- ----------- -----------
Total non-interest income 2,854 2,707 5,616 5,398
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 5,681 5,300 11,158 10,421
Occupancy expense 741 633 1,481 1,295
Furniture and equipment expenses 1,197 1,076 2,439 2,148
Other (Note 6) 2,568 2,585 5,317 5,014
----------- ----------- ----------- -----------
Total other operating expenses 10,187 9,594 20,395 18,878
----------- ----------- ----------- -----------
Income before income taxes 4,651 4,167 8,749 7,903
Income tax expense 1,440 1,279 2,718 2,368
----------- ----------- ----------- -----------
NET INCOME $3,211 $2,888 $6,031 $5,535
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE (Note 2) $0.36 $0.32 $0.68 $0.62
=========== =========== =========== ===========
Weighted Average Number of Shares Outstanding 8,884 8,915 8,885 8,912
=========== =========== =========== ===========
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
<TABLE>
<CAPTION> Six months ended
June 30
--------------------------
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES: ----------- -----------
<S> <C> <C>
Net income $6,031 $5,535
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation, amortization and accretion, net 2,334 2,786
Provision for loan losses 229 202
Federal Home Loan Bank stock dividend (414) (309)
Loss on sales of securities 12 --
Deferred taxes 846 718
Increase in interest receivable (234) (921)
Decrease (increase) in other assets (5,472) 2,138
Decrease in money orders and similar payment instruments outstanding (1,845) (9,952)
Decrease in accrued expenses and other liabilities (475) (1,133)
----------- -----------
Net cash provided by (used in) operating activities 1,012 (936)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (35,717) (8,890)
Proceeds from maturities of securities available for sale 24,722 5,232
Proceeds from sales of securities available for sale 13,591 --
Purchases of securities held to maturity (57,121) (22,433)
Proceeds from maturities of securities held to maturity 80,213 52,782
Net decrease (increase) in customer loans 3,505 (24,777)
Proceeds from sales of premises and equipment 291 45
Payments for purchases of premises and equipment (2,074) (2,220)
----------- -----------
Net cash provided by (used in) investing activities 27,410 (261)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 121,287 63,375
Net increase (decrease) in securities sold under agreements to repurchase (131,073) 8,162
Net decrease in federal funds purchased (700) (9,580)
Advances from the Federal Home Loan Bank -- 11,646
Repayment of advances from the Federal Home Loan Bank (3,209) (6,616)
Stock options exercised 168 377
Dividends paid (2,644) (2,559)
----------- -----------
Net cash provided by (used in) by financing activities (16,171) 64,805
----------- -----------
Net increase in cash and cash equivalents 12,251 63,608
Cash and cash equivalents at January 1 134,515 146,937
----------- -----------
Cash and cash equivalents at June 30 $146,766 $210,545
=========== ===========
Non-cash transactions during the three months ended June 30, 1994 included
a transfer of securities held to maturity to securities available for sale of $13,848.
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Balance, January 1 $125,052 $119,590
Net income 6,031 5,535
Cash dividends declared ($.15 per share) (2,644) (2,559)
Stock options exercised, including related tax benefits 170 404
Net unrealized gains (losses) on securities available for sale, net of tax 2,116 (1,488)
-------------- -------------
Balance, June 30 $130,725 $121,482
============== =============
See notes to consolidated financial statements.
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited)
1. The accounting and reporting policies of Mid-America Bancorp and
its subsidiaries (the Company) conform with generally accepted
accounting principles and general practices within the banking
industry. The accompanying unaudited consolidated financial statements
should be read in conjunction with the Summary of Significant Accounting
Policies footnote which appears in the Company's 1994 Annual Report and
Form 10-K filed with the Securities and Exchange Commission.
2. All per share information in the consolidated financial statements
has been adjusted for the 3% stock dividend on November, 1994.
3. On January 1, 1995, the Company adopted FASB Statement
No. 114, "Accounting By Creditors for Impairment of a Loan," as
amended by FASB No. 118, "Accounting By Creditors for Impairment
of a Loan - Income Recognition and Disclosures." When adopted,
applying provisions of these new accounting standards did not require
an increase in the allowance for loan losses. The recorded investment
in impaired loans at June 30, 1995 was approximately $3.7 million.
Of these impaired loans, loans aggregating $2.6 million had a valuation
allowance of $800,000.
4. The amortized cost and market value of securities available for
sale are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------------------ ------------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agencies $102,372 $102,455 $110,213 $107,039
Corporate obligations 14,595 14,595 9,915 9,915
Equity securities 14,962 14,962 14,528 14,528
----------- ----------- ----------- -----------
$131,929 $132,012 $134,656 $131,482
=========== =========== =========== ===========
</TABLE>
The book value and market value of securities held to maturity are
summarized as follows:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------------------ ------------------------
Book Market Book Market
Value Value Value Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and agencies $163,577 $164,360 $189,223 $184,865
Obligations of states and political subdivisions 13,826 13,964 7,877 7,665
Corporate obligations 13,127 13,079 16,863 16,495
Equity securities and other 350 350 350 349
----------- ----------- ----------- -----------
$190,880 $191,753 $214,313 $209,374
=========== =========== =========== ===========
/TABLE
<PAGE>
MID-AMERICA BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) (Unaudited)
4. Allowance for Loan Losses - Changes in the allowance for loan losses
are as follows:
<TABLE>
<CAPTION>
June 30 December 31,
1995 1994
----------- -----------
<S> <C> <C>
Balance, January 1 $7,045 $6,578
Provision for Loan Losses 229 712
Recoveries 143 248
Loans charged off (282) (493)
----------- -----------
Balance, end of period $7,135 $7,045
=========== ===========
</TABLE>
5. Other operating expense consists of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating supplies $494 $419 $1,031 $866
Professional fees 188 247 389 366
Taxes - Bank shares, property and other 376 349 731 673
Deposit insurance 404 401 808 802
Other 1,106 1,169 2,358 2,307
----------- ----------- ----------- -----------
$2,568 $2,585 $5,317 $5,014
=========== =========== =========== ===========
/TABLE
<PAGE>
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This item discusses the results of operations for Mid-America
Bancorp and its subsidiaries for the three and six months ended
June 30, 1995 and compares those periods with the same periods of
the previous year. In addition, the discussion describes the
significant changes in the financial condition of the Corporation
that have occurred between December 31, 1994 and June 30, 1995.
This discussion should be read in conjunction with the consolidated
financial statements and accompanying notes presented in Part I,
Item 1 of this report.
A. RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1995 was $3,211,000
or $0.36 per share compared to $2,888,000 or $0.32 per share for
the same period last year. Year to date earnings were $6,031,000
or $0.68 per share compared to $5,535,000 or $0.62 per share for
the first six months of 1994.
The results for the first six months of 1995 compared to the
comparable period in 1994 reflected increased net interest income,
as a result of higher interest rates and to a lesser extent,
increases in earning assets, and an increase in other operating
expenses, primarily salaries and benefits and equipment related
expenses.
Net interest income
Net interest income is the difference between interest earned
on earning assets and interest expensed on interest bearing
liabilities. The net interest spread is the difference between the
average yield on earning assets and the average rate on interest
bearing liabilities. The net yield on earning assets (interest
margin) is net interest income divided by average earning assets.
The following table summarizes the above for the three and six
months ending June 30, 1995 and 1994.
In thousands except percentages
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Total interest income $22,787 $19,507 $44,891 $37,817
Tax equivalent adjustment 321 246 639 436
Tax equivalent interest income 23,108 19,753 45,530 38,253
Total interest expense 10,676 8,351 21,134 16,232
Tax equivalent net interest income $12,432 $11,402 $24,396 $22,021
Average rate on earning assets 8.59% 7.50% 8.44% 7.30%
Average rate on interest
bearing liabilities 4.90% 3.82% 4.81% 3.74%
Net interest spread, annualized 3.69% 3.68% 3.63% 3.56%
Net interest margin, annualized 4.62% 4.33% 4.52% 4.20%
Average earning assets $1,078,646 $1,054,058 $1,085,820 $1,055,273
Average interest bearing liabilities $873,773 $877,583 $885,614 $875,364
</TABLE>
Net interest income and net interest spread and margin have
increased for both the three and six month periods ended June 30,
1995 compared to the comparable periods in 1994. The increases for
1995 compared to 1994 are primarily attributed to the effect of
rising interest rates. Over the last year, the Company's loan
portfolio, a significant portion of which is variable rate in
nature, and the short-term portion of the securities portfolio has
repriced faster than interest bearing liabilities. Volume
increases in earning assets also positively impacted these periods.
Provision for Loan Losses
The allowance for loan losses is maintained at a level
adequate to absorb estimated potential credit losses. Management
determines the adequacy of the allowance based upon reviews of
individual credits, evaluation of the risk characteristics of the
loan portfolio, including the impact of current economic conditions
on the borrowers' ability to repay, past collection and loss
experience and such other factors, which, in management's
judgement, deserve current recognition. The allowance for loan
losses is established by charges to operating earnings.
An analysis of the changes in the allowance for loan losses
and selected ratios follows:
Dollars In thousands
<TABLE>
<CAPTION>
Six Months Ended
June 30
1995 1994
<S> <C> <C>
Balance at January 1 $7,045 $6,578
Provision for loan losses 229 202
Net loan charge-offs, net of recoveries (139) (78)
Balance June 30 $7,135 $6,702
Average loans, net of unearned income $695,327 $669,319
Provision for loan losses to average loans * 0.07% 0.06%
Net loan charge-offs to average loans * 0.04% 0.02%
Allowance for loan losses to average loans 1.03% 1.00%
Allowance for loan losses to period-end loans 1.03% 0.98%
</TABLE>
* Amounts annualized
On January 1, 1995, the Company adopted FASB Statement No,
114, "Accounting By Creditors for Impairment of a Loan," as amended
by FASB No. 118, "Accounting By Creditors for Impairment of a Loan
- - Income Recognition and Disclosures." When adopted, applying
provisions of these new accounting standards did not require an
increase in the allowance for loan losses and was otherwise not
significant. As of June 30, 1995 the amount of impaired loans was
approximately $3.7 million.
Non-interest Income and Other Operating Expenses
The following table sets forth the major components of non-interest
income and other operating expenses for the three and six months
ending June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Three months ende Six months ended
In thousands June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Non-Interest Income:
Income from trust department $222 $295 $453 $678
Service charges on deposit accounts 1,097 1,137 2,207 2,179
Money order fees 923 703 1,778 1,395
Securities losses (37) -- (12) ---
Other 649 572 1,190 1,146
Total non-interest income $2,854 $2,707 $5,616 $5,398
Other Operating Expenses:
Salaries and employee benefits $5,681 $5,300 $11,158 $10,421
Occupancy expenses 741 633 1,481 1,295
Furniture and equipment expenses 1,197 1,076 2,439 2,148
Operating supplies 494 419 1,031 866
Professional fees 188 247 389 366
Taxes-Bank shares, property and oth 376 349 731 673
Deposit insurance 404 401 808 802
Other 1,106 1,169 2,358 2,307
Total other operating expenses $10,187 $9,594 $20,395 $18,878
</TABLE>
Non-interest income increased $218,000 or 4 % for the six
months ended June 30, 1995 and increased $147,000 or 5.4% for the
three months ended June 30, 1995 when compared to the same periods
in 1994. A favorable change for the three and six months periods
is attributed to continuing volume increases in the money order
company subsidiary's business, which caused money order fees to
increase 31% and 27%, respectively. The decrease in Trust
Department income for both the three and six month periods is
attributable primarily to lower stock transfer volume.
Other operating expenses increased $1,517,000 or 8% for the
six months ended June 30, 1995 and $593,000 or 6% for the three
months ended June 30, 1995 when compared to the same periods in
1994. The most significant portion of the increase for both
periods is related to increases in salaries and benefits which
increased just over 7% for both periods. The increase in salaries
is attributed to the annual salary increases that were effective at
the beginning of the year which averaged 7.25%. Other factors
influencing salaries and benefits were the slight decline in
average full-time equivalent employees for the six-month periods
and increases in health insurance costs. Furniture and equipment
related expenses increased 11.2% and 13.5%, for the three and
six-months ended June 30, 1995, respectively, when compared to the same
periods in 1994. These increases relate primarily to increased
depreciation and routine maintenance associated with technology
equipment and money order equipment additions. Occupancy expenses
increased approximately 17% and 14.4% for the three and six-month
periods, respectively and reflected additional rent associated with
expanded space at the Company's main office facility and at the
money order subsidiary's office location. All other categories of
other operating expenses increased 6% in the aggregate for the
six-months ended June 30, 1995 compared to the same period in 1994,
while they declined 1% for the comparable three-month periods.
Income Taxes
The Corporation had income tax expense of $1,440,000 for the
second quarter of 1995 compared to $1,279,000 for the same period
in 1994. The year-to-date tax expense and effective tax rate were
$2,718,000 and 31.1% for 1995, respectively and $2,368,000 and
30.0% for 1994, respectively.
B. FINANCIAL CONDITION
Total assets were relatively unchanged at June 30, 1995
compared to December 31, 1994, while average assets increased
$29,471,000 or 2.6% to $1,166,980,000 for the second quarter of
1995 compared to the last quarter of 1994. During the first six
months of 1995 there were minor changes in average loans and
securities, with the most significant asset increase in short-term
liquid assets. This earning asset growth was supported primarily
by increases in non-interest bearing sources of funds; demand
deposits and money orders and similar payment instruments
outstanding. During the first six months of 1995 average interest
bearing liabilities increased approximately 1%, while there was a
shift from transaction accounts to time deposits.
Nonperforming Loans and Assets
Nonperforming loans, which include nonaccrual and loans past
due over 90 days, totaled $8,241,000 at June 30, 1995 and
$3,511,000 at December 31, 1994. Impaired loans aggregated
approximately $3.7 million at June 30, 1995, including
approximately $116,000 of loans not on a nonaccrual basis.
Nonperforming loans represent 1.18% of total loans at June 30, 1995
compared to .50% at December 31, 1994. Included in non-performing
loans at June 30, 1995, in the past due over 90 days category, is
one loan of $2.3 million, that was in the process of routine
renewal at June 30, 1995 and was renewed on July 7, 1995.
Management expects no losses from this loan. Excluding this loan,
nonperforming loans to total loans were .85% at June 30, 1995
Nonperforming assets, which include nonperforming loans and
other real estate owned, totaled $10,127,000 at June 30, 1995 and
$5,896,000 at December 31, 1994. This represents 0.84% of total
assets at June 30, 1995 compared to 0.49% at December 31, 1994.
The Company considers the level of nonperforming loans in its
evaluation of the adequacy of the allowance for loan losses.
C. LIQUIDITY AND INTEREST SENSITIVITY
Liquidity represents the Company's ability to generate cash or
otherwise obtain funds at a reasonable price to satisfy commitments
to borrowers as well as demands of depositors. The loan and
securities portfolios are managed to provide liquidity through
maturity or payments related to such assets.
Interest rate sensitivity management is managing the
difference or gap between rate sensitive assets and rate sensitive
liabilities to minimize the impact of changing interest rates on
profitability and allow for adequate liquidity.
The Company's adjusted one year cumulative interest
sensitivity gap was 20.17% at June 30, 1995 compared to 15.92% at
December 31, 1994. The cumulative interest sensitivity gap through
90 days was 20.38% at June 30, 1995 compared to 11.70% at December
31, 1994. This asset and liability structure and related interest
sensitivity cause the Company's assets to reprice faster than
interest bearing liabilities. The early July 1995 .25% decrease in
the prime interest rate will cause minor negative impact on net
interest income for the remainder of 1995.
The parent company's liquidity depends primarily on the
dividends paid to it as the sole shareholder of the Mid-America
Bank of Louisville and Trust Company.
D. CAPITAL RESOURCES
At June 30, 1995 shareholders' equity totaled $130,725,000, an
increase of $5,673,000 or 4.5% since December 31, 1994. The
increase is attributed to net income less dividends, and
appreciation in the value of securities available for sale.
<TABLE>
<CAPTION>
Corporation Corporation Minimum
June 30, December Required
1995 31, 1994
<S> <C> <C> <C>
Leverage Ratio 10.82% 10.45% 3.00%
Tier I risk based capital ratio 17.14% 16.92% 4.00%
Total risk based capital ratio 18.08% 17.86% 8.00%
</TABLE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The regular annual meeting of shareholders of Mid-America
Bancorp was held on April 20, 1995.
(b) Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to management's
solicitations. All of management's nominees for directors
were elected.
(c) Three items were submitted to a vote of security holders
as follows:
(1) The shareholders approved the election of the following
persons as directors of Mid-America Bancorp.
For Withheld
Class I
Robert P. Adelberg 7,345,742 127,794
Stanley L. Atlas 7,381,838 121,698
Martha Layne Collins 7,338,561 164,975
Bruce J. Roth 7,381,839 121,697
Bertram W. Klein 7,376,962 126,574
(2) The shareholders approved a new Incentive Stock Option Plan
covering an aggregate of 1,000,000 shares of Common Stock of
the Company with 5,788,269 affirmative votes, 660,714 votes
against, 75,875 abstentions, and 978,678 shares not voted by
beneficial holders.
(3) The shareholders ratified the appointment of KPMG Peat
Marwick LLP as independent auditors for Mid-America Bancorp
for the year ending December 31, 1995, with 7,480,117
affirmative votes, 5,444 votes against, and 17,975
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 (l) Material Contracts-Employment Agreement between
Mid-America Bancorp and William J. Hornig
10 (m) Material Contracts-1995 Incentive Stock Option
Plan of Mid-America Bancorp
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Mid-America Bancorp
(Registrant)
Date: August 8, 1995 By:/s/Steven Small
Steven Small
Executive Vice President and
Chief Financial Officer
Date: August 8, 1995 By:/s/Orson Oliver
Orson Oliver
President
INDEX TO EXHIBITS
10 (l) Employment Agreement between Mid-America Bancorp and
William J. Hornig
10 (m) 1995 Incentive Stock Option Plan of Mid-America Bancorp
27 Financial Data Schedule
AGREEMENT
THIS AGREEMENT is made and entered into as of the 10th day
of February, 1995, by and between MID-AMERICA BANCORP, and its
wholly owned subsidiary, BANK OF LOUISVILLE AND TRUST COMPANY,
both Kentucky corporations with their principal places of
business at 500 West Broadway, Louisville, Kentucky 40202
(hereinafter "Bancorp" and the "Bank" respectively); and WILLIAM
J. HORNIG, residing at 505 Charles Lane, Lombard, Illinois 60148
(hereinafter "Employee").
RECITALS
Employee will begin his employment on or about April 1,
1995, and will assume substantial responsibilities as Executive
Vice President of both Bancorp and the Bank. He is expected to
act as an officer of the Bank as requested. Bancorp and its Board
of Directors (hereinafter the "Board") recognize that the
possibility exists of a Change in Control (as hereinafter
defined), and that the occurrence of a Change in Control could
result in an alteration of the terms and conditions of Employee's
employment, or otherwise create uncertainty and concern as to his
employment status. The Board has determined that it is in
Bancorp's best interest to maintain stability and continuity of
management both at Bancorp and the Bank. In this context, Bancorp
particularly wishes to retain the services of Employee and to
ensure his continued dedication and efforts on behalf of Bancorp
and the Bank in the event of a Change in Control, and eliminate
undue concern for his personal employment and financial security.
For this reason, Bancorp desires to provide Employee with certain
benefits and protections in his employment, particularly in the
event of a Change in Control.
NOW, THEREFORE, in consideration of the respective
agreements of the parties contained herein, it is agreed as
follows:
1. TERM OF AGREEMENT.
This Agreement shall commence and be effective as of April
1, 1995, and shall continue in effect through and including
December 31, 1996. Commencing on December 31, 1996, and on each
December 31 thereafter (hereinafter the "Anniversary Date"), the
term of this Agreement shall be automatically extended for a
period of one (1) year, and shall continue in effect from
year-to-year unless (i) not less than ninety (90) days prior to
an Anniversary Date, by written notice to
Employee, Bancorp elects not to extend, or (ii) otherwise
terminated or extended as hereinafter provided.
2 . EMPLOYMENT OF EMPLOYEES
A. Effective Date. Effective April 1, 1995, Bancorp
hereby agrees to employ Employee, and Employee accepts such
employment as Executive Vice President, with such duties as are
presently consistent with such title and office, and such
different or additional duties as may be assigned to Employee
from time to time by the Board including, without limitation,
acting as an officer of the Bank if elected by the Board of
Directors of the Bank; provided, however, that any additional
duties assigned to Employee shall be consistent with Employee's
status, title, position and responsibilities as in effect at the
time of execution of this Agreement.
B. Employee's Obligations. Employee agrees to devote his
full and exclusive time, attention and energies to the business
of Bancorp and as part of such duties shall serve in such
capacities for Bancorp and the Bank as may be required of him
during his employment pursuant to this Agreement. He shall not
engage in any other business activity, whether or not such
business activity is pursued for gain, profit or other pecuniary
advantage, except that Employee shall be entitled to engage in
civic and eleemosynary activities or in passive investment
activities so long as such activities do not compete or interfere
with his employment hereunder.
C. Compensation. As compensation for his services
hereunder, Employee shall receive from Bancorp, the Bank or a
combination thereof, an aggregate annual salary of One Hundred
Fifteen Thousand Dollars ($115,OOO), payable in twenty-six (26)
pay periods (hereinafter, as adjusted from time to time as herein
provided, the "Base Salary"). Employee's Base Salary shall be
reviewed annually for increases consistent with Bancorp's and the
Bank's executive compensation policies and Employee's duties and
contributions to Bancorp and the Bank. Notwithstanding anything
herein to the contrary, to the extent to which he shall qualify,
Employee shall be entitled to participate in any employee benefit
programs which may from time to time be in effect for Bancorp or
the Bank.
D. Cessation of Obligations. The obligations of
Bancorp and Employee hereunder shall continue throughout the
initial or any subsequent term of this Agreement, unless this
Agreement is terminated as provided herein.
3. CHANGE IN CONTROL.
A. Definition. As used in this Agreement, a Change in
Control of Bancorp shall be deemed to have occurred if, and only
if (i) Bertram W. Klein (hereinafter "Klein"), the current Chief
Executive Officer of Bancorp and the Bank, ceases for any reason
to hold the office of Chief Executive Officer of Bancorp; (ii)
Klein and/or members of his immediate family (including only
Klein and his spouse, children, parents, or any trusts
established for the benefit of any of them) cease to hold ten
percent (10%) or more of all outstanding voting shares of
Bancorp.
B. Effect of a Change in Control. In the event of a
Change in Control, if Bancorp's legal existence is terminated
(i.e. is dissolved), the Bank hereby assumes and becomes
severally obligated for the obligations of this Agreement to
Employee. If Bancorp's legal existence is continued through
merger or other combination with or consolidation into any new or
existing entity, the Bank hereby assumes and becomes jointly and
severally liable with such successor entity to Employee for all
the obligations of Bancorp hereunder. Upon a Change in Control,
the term of this Agreement shall be immediately and automatically
extended for a period of five (5) years from the effective date
of such Change in Control (hereinafter the "Five Year Term"). At
the end of the Five Year Term, and upon each subsequent
anniversary date of the Change in Control, this Agreement shall
be automatically extended for an additional one-year period as
provided in Paragraph 1 above, unless (i) Bancorp chooses not to
extend or (ii) this Agreement is otherwise terminated in
accordance with the provisions contained herein.
During the Five Year Term, Employee shall be retained in
Bank's employ (and in Bancorp's employ unless Bancorp is
dissolved after the Change in Control), and be provided with
compensation and benefits at least equal in the aggregate to that
received by Employee from Bancorp and the Bank immediately prior
to the effective date of the Change in Control, unless this
Agreement is otherwise terminated by Bancorp for Cause, or by
reason of the Death or Disability of Employee; provided, however,
Employee shall continue to fulfill his obligations pursuant to
paragraph 2B of this Agreement.
For a period of two (2) years following the effective date
of a Change in Control, Employee may terminate this Agreement at
any time by providing written notice of such voluntary
termination to Bancorp or to the Bank at least ninety (90) days
prior to the effective date of such voluntary termination, and,
in such event (i) all obligations of Bancorp and the Bank under
this Agreement shall immediately cease as of the effective date
of such voluntary termination; and (ii) Employee shall only be
entitled to receive payment of salary and benefits accrued as of
the effective date of such voluntary termination.
Should Employee continue in the employ of the Bank or
Bancorp for a period of at least two (2) years following the
effective date of a Change in Control, Employee may thereafter
terminate this Agreement by providing written notice of such
voluntary termination to Bancorp or the Bank at least ninety (90)
days prior to the effective date of such voluntary termination
and, in such event, Bancorp shall pay to the Employee (i) upon
the effective date of termination or at the next regular pay
period thereafter all salary and other benefits accrued and
unpaid as of the effective date of Employee's voluntary
termination; and (ii) thereafter, on a monthly basis, an amount
equal to one-twelfth (1/12) of Employee's then current Base
Salary from Bancorp and the Bank, such payments to continue for
the lesser of (a) three (3) years from the effective date of
Employee's voluntary termination; or (b) the greater of one year
or the remainder of the Five Year Term.
4. CHANGE IN CONTROL AND DIMINUTION IN DUTIES.
A. Definition. As used in this Agreement, a Diminution
in Duties shall mean any of the following events, occurring in
conjunction with or following a Change in Control:
(i) a change in Employee's status, position or
responsibilities with Bancorp (unless Bancorp's separate
existence ceases as a result of the Change in Control) or the
Bank (including without being limited to a material change in the
number or positions of those employees or officers to whom
Employee reports and who report to Employee) which, in Employee's
reasonable judgement, represents a significant and adverse change
in Employee's status, position or responsibilities as in effect
immediately prior to the effective date of a Change in Control,
or at any time thereafter;
(ii) the assignment to Employee of any duties or
responsibilities which, in Employee's reasonable judgement, are
inconsistent with Employee's status, position or responsibilities
as in effect immediately prior to the effective date of the
Change in Control or at any time thereafter;
(iii) any removal of Employee from, or failure to
reappoint or reelect Employee to any of his positions with the
Bank, unless such positions have been abolished as a result of a
reorganization of the Bank (such as a merger or consolidation)
resulting from the Change in Control, except in connection with
the termination of this Agreement (a) by Bancorp or the Bank for
Cause, (b) as a result of Employee's Death or Disability, or (c)
by Employee, other than as a result of a Diminution in Duties as
described hereunder. If Employee's position with the Bank has
been abolished as herein provided, the appointment of Employee to
such positions as have responsibilities, duties, and status
within the successor organization equal to or greater than (in
Employee's reasonable judgment) those of the office or position
abolished will be deemed to be reelection or reappointment as
required herein.
(iv) a reduction in Employee's aggregate Base
Salary or any failure to pay Employee within thirty (30) days of
the date due any compensation or benefits to which he is
entitled;
(v) the failure by Bancorp or the Bank to (a) continue
in effect (without reduction in benefit levels or reward
opportunities) any material compensation or benefit plan in which
Employee was participating through Bancorp or the Bank
immediately prior to the effective date of a Change in Control,
unless a substitute or replacement has been implemented which
provides substantially identical or greater compensation or
benefits to Employee, in Employee's reasonable judgment; or (b)
provide Employee with compensation and benefits equal or superior
in value to that received in the aggregate from Bancorp and the
Bank under each other compensation or employee benefit plan,
program and practices in effect immediately prior to a Change in
Control or at any time thereafter.
B. Effect of a Diminution in Duties. Should the Employee
suffer a Diminution in Duties in conjunction with or following a
Change in Control Employee may at any time thereafter, upon
written notice to Bancorp or the Bank at least ninety (90) days
prior to the effective date, voluntarily terminate this Agreement
and his employment with Bancorp and the Bank. Upon receipt of
such notice of voluntary termination, Bancorp may, in its sole
discretion, waive the ninety (90) day notice requirement for
Employee's voluntary termination and consider such voluntary
termination effective immediately upon Bancorp or the Bank's
receipt of Employee's written notice. Under either of such
circumstances, Bancorp shall pay to the Employee (i) upon the
effective date of termination, or at the next regular pay period
thereafter, the aggregate salary and other benefits accrued from
Bancorp and the Bank through the effective date of Employee's
voluntary termination; and (ii) thereafter on a monthly basis, an
amount equal to one twelfth (1/12) of Employee's then-current
aggregate Base Salary from Bancorp and the Bank, such payments to
continue for the lesser of (a) three (3) years from the effective
date of Employee's voluntary termination or (b) the greater of
one year or the remainder of the Five Year Term.
5. TERMINATION OF AGREEMENT.
A. By Employee. Employee may terminate this Agreement
and his employment with Bancorp and the Bank at any time, by
providing written notice of his voluntary termination to Bancorp
at least ninety (90) days prior to the effective date of such
voluntary termination. In such an event, other than in connection
with a Change in Control or Diminution in Duties (i) all
obligations of Bancorp and the Bank under this Agreement shall
immediately cease, as of the effective date of the voluntary
termination and (ii) Employee shall be entitled to receive only
payment of the aggregate salary and benefits accrued from Bancorp
and the Bank through the effective date of such voluntary
termination.
B. By Bancorp or the Bank. Bancorp may terminate this
Agreement and, at its option, Employee's employment (i)
immediately and at any time for Cause, as that term is
hereinafter defined, in which event all obligations of Bancorp
and the Bank under this Agreement shall cease immediately as of
the effective date of the termination, and Employee shall be
entitled to receive payment of only the aggregate salary and
benefits accrued from Bancorp and the Bank through the effective
date of the termination; or (ii) at any time prior to a Change in
Control, without cause and upon written notice to Employee, such
termination, at Bancorp's option, being effective immediately or
at some future date not to exceed ninety (90) days following date
of the notice of termination, in which event Bancorp shall
itself, or cause the Bank to, pay to Employee all salary and
benefits accrued from Bancorp or the Bank through the effective
date of the termination. In addition, Employee shall also be
entitled to receive a lump-sum payment in an amount equal to
Employee's then-current aggregate Base Salary from Bancorp and
the Bank (exclusive of any stock options, profit sharing, bonuses
or other benefits). An election by Bancorp not to renew or extend
Employee's employment as provided in Section 1 hereof, other than
for Cause, shall be deemed a termination of this Agreement by
Bancorp without Cause and shall give rise to rights to Employee
under this Subparagraph 5B.
As used in this Agreement, "Cause" for termination shall be
limited to the following: (i) Employee's conviction of a felony;
(ii) the issuance by any state or federal bank regulatory agency
of a request or demand for removal of Employee from employment
with Bancorp or the Bank or from any office which Employee then
holds with Bancorp or the Bank; (iii) Employee's material breach
of Paragraph 2B of this Agreement; (iv) Employee's gross
negligence in the performance of his duties hereunder; or (v)
failure of Employee to substantially perform his duties hereunder
(other than failure resulting from Employee's disability) after
demand for substantial performance is delivered to Employee by
Bancorp or the Bank, identifying specifically the manner in which
Employee has not substantially performed his duties, and a 7 day
period to cure has elapsed without substantial improvement in
performance to the reasonable standards set by Bancorp or the
Bank, respectively.
C. By Death or Disability. Notwithstanding anything
herein to the contrary, this Agreement shall terminate if (i)
Employee dies during the term of this Agreement or (ii) Bancorp
terminates this Agreement after Employee shall be absent from his
employment with Bancorp or the Bank for a continuous period of
more than six (6) months by reason of incapacity or illness which
Employee's physician determines has resulted in Employee's
permanent disability. In either of such events, all obligations
of Bancorp and the Bank hereunder shall cease upon such
termination except that from and after Employee's death or date
of termination as aforesaid Bancorp shall pay, or cause the Bank
to pay, on a monthly basis for a period of 6 months, an amount
equal to one-twelfth (1/12) of Employee's then-current aggregate
Base Salary from Bancorp and the Bank, such amount to be paid to
Employee if he be then living; if not, then to his surviving wife
or his heirs or personal representatives.
6. SUCCESSORS AND ASSIGNS.
The rights and obligations of Bancorp and the Bank under
this Agreement shall inure to the benefit of and be binding upon
their respective successors and assigns, but the rights of
Employee hereunder are personal to him and may not be assigned
and shall not inure to the benefit of his heirs, personal
representatives or assigns, except as specifically provided for
herein.
Bancorp will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Bancorp or
the Bank, expressly to assume and to agree to perform this
Agreement in the same manner and to the same extent that Bancorp
would have been required to perform if no such succession had
taken
7. CONFIDENTIALITY.
Employee agrees not to divulge to anyone, either during or
after the termination of his employment hereunder, any
information acquired by him by virtue of his employment with
Bancorp or the Bank. Upon the termination of his employment,
Employee agrees to immediately deliver to Bancorp all books,
papers documents and other materials or property of any nature
belonging to Bancorp or the Bank, including but not limited to
originals and all copies of any graphic or recorded materials of
any kind, whether handwritten, typewritten, printed,
electronically stored or recorded in any manner.
8. ATTORNEYS' FEES AFTER CHANGE IN CONTROL.
Bancorp agrees to pay to Employee in full and as they are
incurred all legal fees and court costs incurred by Employee as a
result of any litigation arising after a Change of Control and
from or in connection with this Agreement or the enforcement of
any rights or obligations created by this Agreement, whether such
litigation is initiated by Employee or Bancorp or the Bank and
regardless of the outcome of such litigation; provided, however
that Bancorp will be under no obligation to pay to Employee any
attorneys' fees or other expenses incurred in connection with
litigation initiated by Employee which is subsequently determined
by the Court in which such litigation is initiated, to have been
frivolous or filed in bad faith.
9. NOTICE.
Any notice required or permitted to be given under this
Agreement shall be in writing and shall be given or made by
certified or registered mail, postage pre-paid, or by hand
delivery, via courier or otherwise, as follows, or to such other
person or address as shall be hereafter designated by notice
given in accordance with this section:
If to Bancorp or Mid-America Bancorp or Bank of Louisville
Bank of Louisville: and Trust Company
500 West Broadway
Louisville, Kentucky 40202
Attn.: Chief Executive Officer
If to the Employee: William J. Hornig
c/o Bank of Louisville and Trust Co.
500 West Broadway
Louisville, Kentucky 40202
Any notice or other communication hereunder shall be
deemed to have been duly given or made (i) if made by hand, when
delivered or when attempted delivery shall be rejected; or (ii)
if made by letter, upon deposit thereof in the mail, postage
pre-paid, registered or certified, with return receipt requested.
Notwithstanding the foregoing, any notice or other communication
hereunder which is actually received by a party hereto shall be
deemed to have been duly given or made to such party.
10. ENTIRE AGREEMENT: MODIFICATION.
This Agreement contains the entire agreement of the parties.
It may not be changed, altered or modified in any manner except
by subsequent written agreement signed by Employee, Bancorp and
the Bank.
11. SEVERABILITY.
The provisions of this Agreement shall be deemed entirely
severable and the illegality, invalidity or unenforceability of
any provision shall not affect the validity or enforceability of
the other provisions hereof.
12. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
MID-AMERICA BANCORP ("BANCORP")
By:
_______________________________
Title:
______________________________
BANK OF LOUISVILLE and TRUST
COMPANY ("THE BANK")
By:______________________________
Title:_____________________________
WILLIAM J. HORNIG
_________________________________
1995 INCENTIVE STOCK OPTION PLAN
of
MID-AMERICA BANCORP
1. PURPOSE OF PLAN
The Mid-America Bancorp 1995 Incentive Stock Option Plan
("Plan") is for certain officers of Mid-America Bancorp ("Company")
and its wholly-owned banking subsidiary, Mid-America Bank of
Louisville and Trust Company ("Bank"). The Plan is intended to
provide an incentive to such officers in a manner which aligns
their interests with the long-term interests of the Company's
shareholders. The Plan is intended to advance the best interests
of the Company and the Bank, thereby also enhancing the value of
the Bank and the Company for the benefit of shareholders. The
availability and offering of stock options under the Plan is
further intended to support and increase the Company's and the
Bank's ability to attract and retain individuals of exceptional
managerial talent upon whom, in large measure, the sustained
progress, growth and profitability of the Company and the Bank
depend.
2. DEFINITIONS
For Plan purposes, except where the context might clearly
indicate otherwise, the following terms shall have the meanings set
forth below:
(a) "Bank" shall mean Mid-America Bank of Louisville and
Trust Company, the banking subsidiary of the Company.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the committee of the Board
designated by the Board to administer the Plan. The Committee
shall be composed of three or more members of the Board, each whom
(i) shall be appointed by and serve at the pleasure of the Board
and (ii) shall be a "disinterested person" as that terms is defined
in Rule 16b-3, as in effect from time to time, under the Securities
Exchange Act of 1934, as amended.
(e) "Common Stock" shall mean the no par value Common Stock
of the Company.
(f) "Company" shall mean Mid-America Bancorp.
(g) "Fair Market Value" shall mean, as of any given date,
with respect to any Options granted hereunder, the closing price of
Common Stock on the Composite Tape as published in the Midwest
Edition of The Wall Street Journal; provided, however, that if the
Committee shall reasonably believe that applicable laws or
regulations require a different method by which to determine Fair
Market Value, then the Committee may determine Fair Market Value by
such other method.
(h) "ISO" shall mean an Option which is intended to meet and
comply with the terms and conditions for an incentive stock option
as set forth in Section 422 of the Code.
(i) "Option" shall mean a stock option granted pursuant to
the Plan.
(j) "Optionee" shall mean an employee of the Company or the
Bank who has been granted and holds one or more Options under the
Plan.
(k) "Option Shares" shall mean shares subject to an Option.
(l) "Plan" shall mean this Incentive Stock Option Plan, as
the same may hereafter be amended.
(m) "Ten Percent Shareholder" shall mean an employee who owns
ten percent (10%) or more of the Common Stock as such amount is
calculated for purposes of Section 422(b)(6) of the Code.
3. ADMINISTRATION
(a) Committee: The Committee shall administer the Plan, and
accordingly, have full power to grant Options, construe and
interpret the Plan, establish rules and regulations, and perform
all other acts, including the delegation of administrative
responsibilities, it believes reasonable and proper. Any action of
the Committee with respect to the administration of the Plan shall
be taken pursuant to the vote of a majority of its members at a
meeting or the written consent of all its members in lieu of a
meeting. The Board may from time to time appoint eligible members
of the Board in substitution for or in addition to members
previously appointed and may fill vacancies in the Committee.
(b) Eligibility: The determination of those eligible to
receive Options, the amount, type and timing of each Option, and
the terms and conditions of the respective Option agreements shall
rest in the sole discretion of the Committee, subject to the
provisions of the Plan.
(c) Inconsistencies: The Committee may correct any defect,
supply an omission or reconcile any inconsistency in the Plan, or
in any granted Option, in the manner and to the extent it shall
deem necessary to carry it into effect.
(d) Final Decisions: Any decision made, or action taken, by
the Committee arising out of or in connection with the interpreta-
tion and administration of the Plan shall be final and conclusive.
(e) Limitation on Liability: No member of the Board or the
Committee, nor any officer or employee of the Company or the Bank
acting on behalf of the Board or the Committee, shall be liable for
any action, failure to act, determination or interpretation taken
or made in good faith with respect to the Plan or any transaction
hereunder. All members of the Board and the Committee and each and
any officer or employee of the Company or the Bank acting on their
behalf shall, to the extent permitted by law, be fully indemnified
and protected by the Company in respect of any such action, failure
to act, determination or interpretation.
4. SHARES SUBJECT TO THE PLAN
The total number of shares of Common Stock reserved and
available for issuance under the Plan shall be 1,000,000. Such
shares may consist, in whole or in part, of authorized and unissued
shares or issued shares which have been reacquired by the Company.
The number of shares of Common Stock available for grants of
Options under the Plan shall be decreased by the sum of the number
of shares with respect to which Options have been issued and are
then outstanding and the number of shares issued upon exercise of
Options, and shall be increased due to the expiration or termina-
tion of Options which have not been exercised.
5. TERM OF PLAN
No Option shall be granted pursuant to the Plan on or after
the tenth anniversary of the date on which the Plan is adopted by
the Board, but Options theretofore granted may extend beyond that
date.
6. ELIGIBILITY
(a) Eligibility: Consistent with the Plan's purpose, Options
may be granted to employees of the Company and the Bank holding the
following offices in either the Bank or the Company: all officers
holding the title of Executive Vice President or above; Senior Vice
President; Vice President; or Assistant Vice President. The
Committee shall determine the date(s) on which Options, if any,
will be granted for each calendar year, and the maximum number of
Option Shares subject to an Option(s) which may be granted during
any calendar year to an individual within a particular category of
officers.
7. OPTION TERMS AND CONDITIONS
All Options granted under the Plan shall be evidenced by
agreements which shall be subject to the applicable provisions of
the Plan, and such other provisions as the Committee may adopt,
including the following provisions:
(a) Price: The purchase price of Common Stock covered by
each Option shall be determined by the Committee but
shall not be less than 100% of the Fair Market Value of
such stock on the date of grant; provided, however, that
the purchase price of Common Stock covered by each Option
granted to a Ten Percent Shareholder shall be not less
than 110% of the Fair Market Value of such stock on the
date of grant.
(b) Term: Each Option and all rights or obligations thereun-
der shall expire on such date as the Committee shall
determine, but not later than the tenth anniversary of
the date on which the Option is granted (not later than
the fifth anniversary of the date on which the Option is
granted in the case of an Option granted to a Ten Percent
Shareholder), and shall be subject to earlier termination
as hereinafter provided.
(c) Exercisability: Each Option shall be exercisable at such
time or times and subject to such terms and conditions as
shall be determined by the Committee. If the Committee
provides, in its discretion, that any Option is exercis-
able only in installments, the Committee may waive such
installment exercise provisions at any time in whole or
in part based on such factors as the Committee may
determine in its sole discretion. If the Optionee shall
not in any given installment period purchase all of the
Option Shares which such Optionee is entitled to purchase
in such installment period, such Optionee's right to
purchase any Option Shares not purchased in such install-
ment period shall continue until the expiration or sooner
termination of such Optionee's Option.
(d) Method of Exercise: Each Option may be exercised in
whole or in part at any time during the option period, by
giving written notice of exercise to the Company specify-
ing the number of Option Shares to be purchased, accompa-
nied by payment in full of the purchase price in accor-
dance with paragraph (e) of this Section 7. Optionee
shall have no rights to dividends (other than the
adjustment rights in Section 8) or other rights of a
shareholder with respect to Option Shares unless and
until the Optionee has given written notice of exercise,
has paid in full for such shares and, if requested, has
given the representation described in paragraph (b) of
Section 12.
(e) Payment: The purchase price of any shares purchased upon
exercise of an Option shall be paid:
(i) in cash or by check at the time of each purchase,
or
(ii) at the discretion of the Committee, through the
delivery of shares of Common Stock which shall be
valued at their aggregate Fair Market Value on the
day of exercise of the Option or any portion there-
of, or
(iii) at the discretion of the Committee, by a combina-
tion of both (i) and (ii) above.
The Committee may determine acceptable methods for
tendering Common Stock as payment upon exercise of an
Option and may impose such limitations and prohibitions
on the use of Common Stock to exercise an Option as it
deems appropriate.
(f) Non-Transferability: An Option granted under this Plan
shall, by its terms, be non-transferable by the Optionee
other than by will or the laws of descent and distribu-
tion, and shall be exercisable during the Option holder's
lifetime only by the Optionee or duly appointed guardian
or personal representative.
(g) Termination of Employment: In the event an Optionee
shall cease to be employed by either the Bank or the
Company while he or she is holding one or more Options,
each Option held shall expire at the earlier of the
expiration of the Option's term or the following:
(i) three months after termination due to normal re-
tirement, or earlier retirement with Committee
consent, under a formal plan or policy of the
Company;
(ii) three months after an Optionee's resignation or
termination without cause;
(iii) one year after termination due to disability within
the meaning of Section 22(d)(4) of the Code, as
determined by the Committee;
(iv) one year after the Optionee's death; or
(v) coincident with the date of termination if due to
any other reason.
In the event of death following termination of employment
for any of the reasons set forth in clauses (i), (ii) and
(iii) above while any portion of an Option remains
exercisable, the Committee, in its discretion, may
provide for an extension of the exercise period of up to
one year after the Optionee's death, but not beyond the
expiration of the term of the Option.
(h) ISOs: Notwithstanding any other provisions of the Plan,
the following provisions will apply:
(i) Except as otherwise provided in (ii) below, or the
Committee specifically determines otherwise, all
Options granted hereunder shall be ISOs.
(ii) If the aggregate Fair Market Value of the shares of
Common Stock, determined as of the date an Option
is granted, with respect to which Options are
exercisable for the first time by an Optionee
during any calendar year under the Plan or any
other plan of the Company exceeds $100,000, then to
such extent such Options shall not be treated as
ISOs.
(iii) Any Optionee who disposes of shares of Common Stock
acquired on the exercise of an ISO by sale or
exchange either (i) within two years after the date
of the grant of the ISO under which the Common
Stock was acquired or (ii) within one year after
the acquisition of such shares, shall notify the
Company of such disposition and of the amount
realized upon such disposition.
8. ADJUSTMENTS
In the event of a stock dividend, stock split or other
subdivision, consolidation, reorganization or change in the shares
of Common Stock or capital structure of the Company, the number of
shares of Common Stock and kind of shares available for Options and
subject to outstanding options shall be adjusted proportionately.
Similarly, the Option price per share of outstanding Options shall
be appropriately adjusted. With respect to ISOs, all such
adjustments shall be made so as not to constitute a modification
within the meaning of Section 424 of the Code.
9. MERGER, CONSOLIDATION OR TENDER OFFER
(a) Reorganization: If the Company shall be a party to a
binding agreement to any merger, consolidation, reorgani-
zation or sale of substantially all the assets of the
Company, each outstanding Option shall pertain and apply
to the securities and/or property which a share owner of
the number of shares of Common Stock subject to the
Option would be entitled to receive pursuant to such
merger, consolidation, reorganization or sale of assets.
(b) Tender Offer, Exchange or Sale: In the event that:
(i) any person other than the Company shall acquire
more than 20% of the Common Stock through a tender
offer, exchange offer or otherwise; or
(ii) a change in the "control" of the Company occurs, as
such term is defined in Rule 405 under the Securi-
ties Act of 1933, as amended; or
(iii) there shall be a sale of all or substantially all
of the assets of the Company;
then any outstanding Option held by an Optionee, who is
deemed by the Committee to be a statutory officer
("insider") for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended, shall be entitled to
receive, subject to an entitlement as provided for below,
in lieu of exercise of such Option, to the extent that it
is then exercisable, a cash payment in an amount equal to
the difference between the aggregate exercise price of
such Option, or portion thereof, and (A) in the case of
an event covered by (i) above, the final offer price per
share paid for Common Stock, or such lower price as the
Committee may determine is necessary to preserve an
option's ISO status, multiplied by the number of shares
of Common Stock covered by the Option or portion thereof,
or (B) in the case of an event covered by (ii) or (iii)
above, the aggregate Fair Market Value of the shares
covered by the Option, as determined by the Committee at
such time.
Any payment which the Company is required to make under
this Section 9(b) shall be made within fifteen business
days following the event which results in the Optionee's
right to such payment. In the event of a tender offer in
which fewer than all the shares which are validly
tendered in compliance with such offer are purchased or
exchanged, then only that portion of the shares covered
by an Option as results from multiplying such shares by
a fraction, the numerator of which is the number of
shares of Common Stock acquired pursuant to the offer,
and the denominator of which is the number of shares of
Common Stock tendered in compliance with such offer,
shall be used to determine the payment thereupon. To the
extent that all or any portion of an Option shall be
affected by this provision, all or such portion of the
Option shall be terminated.
Notwithstanding the foregoing terms of this Section 9(b),
the Committee may, by unanimous vote and resolution,
unilaterally revoke the benefits of the above provisions;
provided, however, that such vote is taken no later than
ten business days following public announcement of the
tender offer or the change of control, whichever occurs
earlier.
10. AMENDMENT AND TERMINATION OF PLAN
(a) Right to Amend or Terminate: The Board, without further
approval of the shareholders, may at any time, and from
time to time, suspend or terminate the Plan in whole or
in part or amend it from time to time in such respects as
the Board may deem appropriate and in the best interests
of the Company and the Bank; provided, however, that no
such amendment shall be made without the approval of the
shareholders which would:
(i) materially modify the eligibility requirements for
receiving Options;
(ii) increase the total number of shares of Common Stock
which may be issued pursuant to Options, except as
is provided for in accordance with Section 8;
(iii) except as provided in the Plan, decrease the pur-
chase price of Common Stock covered by an Option to
less than that required by Section 7(a) of the
Plan;
(iv) extend the period of granting Options; or
(v) materially increase in any other way the benefits
accruing to Optionees.
(b) Effect: No amendment, suspension or termination of this
Plan shall, without an Optionee's consent, alter or
impair any of the rights or obligations under any Option
theretofore granted to her or him under the Plan.
(c) Change in Law or Regulations: The Board may amend the
Plan, subject to the limitations cited above, in such
manner as it deems necessary to permit the granting of
ISOs meeting the requirements of future amendments to the
Code or the regulations promulgated thereunder.
11. GOVERNMENT AND OTHER REGULATIONS
The obligation of the company to issue or transfer and deliver
Option Shares for Options exercised under the Plan shall be subject
to all applicable laws, regulations, rules, orders and approvals
which shall then be in effect and required by governmental entities
and the stock exchanges on which the Common Stock may be traded.
In addition, all transactions contemplated hereunder shall be
subject to, and may be limited by, the provisions of applicable law
including, but not limited to, federal and state securities laws.
12. MISCELLANEOUS PROVISIONS
(a) No Right to Continued Employment: No person shall have
any claim or right to be granted an Option under the
Plan, and the grant of an Option under the Plan shall not
be construed as giving an Optionee the right to be
retained in the employ of the Company or the Bank.
Further, the Company or the Bank, as the case may be,
expressly reserves the right, at any time, to dismiss an
Optionee with or without cause, free from any liability,
or any claim under the Plan, except as provided herein or
in an option agreement.
(b) The Committee may require each person purchasing Option
Shares pursuant to an Option to represent to and agree
with the Company in writing that such person is acquiring
the shares without a view to distribution thereof. The
certificates for such shares may include any legend which
the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for shares of
Common Stock delivered under the Plan shall be subject to
such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable federal or state
securities law, and the Committee may cause a legend(s)
to be put on any such certificates to make appropriate
reference to such restrictions.
(c) Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrange-
ments, subject to shareholder approval if such approval
is required; and such arrangements may be either general-
ly applicable or applicable only in specific cases.
(d) Each participant in the Plan shall, no later than the
date as of which the value of an award under the Plan
first becomes includable in the gross income of the
participant for federal income tax purposes, pay to the
Company or the Bank, as applicable, or make arrangements
satisfactory to the Committee regarding payment of, any
federal, state or local taxes of any kind required by law
to be withheld with respect to the award. The obliga-
tions of the Company under the Plan shall be conditional
on such payment or arrangements and the Company (and,
where applicable, the Bank) shall, to the extent permit-
ted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the participant.
(e) Plan Expenses: Any expenses of administering this Plan
shall be borne by the Company and/or the Bank as they may
agree.
(f) Use of Exercise Proceeds: The payment received from
Optionees from the exercise of Options under the Plan
shall be used for the general corporate purpose of the
Company.
(g) Construction of the Plan: The place of administration of
the Plan shall be in the Commonwealth of Kentucky, and
the validity, construction, interpretation, administra-
tion and effect of the Plan and of its rules and regula-
tions, and rights relating to the Plan, shall be deter-
mined solely in accordance with the laws of the Common-
wealth of Kentucky. All Options granted under the Plan
which are intended to qualify as ISOs shall be construed
in such a fashion so as to enable them to meet the
requirements of an ISO.
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