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, 1998
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 31, 1998: 9,929,510 shares of common stock, no par value
MIDAMERICA BANCORP
PART I. FINANCIAL INFORMATION
The consolidated financial statements of MidAmerica Bancorp and
subsidiaries (Company) 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 Company are
submitted herewith:
Consolidated balance sheets - June 30, 1998 and December 31,
1997
Consolidated statements of income - three and six months ended
June 30, 1998 and 1997
Consolidated statements of changes in shareholders' equity -
six months ended June 30, 1998 and 1997
Consolidated statements of comprehensive income - three and six
months ended June 30, 1998 and 1997
Consolidated statements of cash flows - six months ended June
30, 1998 and 1997
Notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
In thousands, except share and per share amounts
Unaudited
<TABLE>
<CAPTION>
June 30 December 31
----------- -----------
1998 1997
ASSETS ----------- -----------
<S> <C> <C>
Cash and due from banks $39,289 $29,002
Federal funds sold 25,600 16,900
Securities purchased under agreements to resell 95,000 --
Securities available for sale, amortized cost
of $297,199 (1998) and $409,497 (1997) 299,625 414,721
Securities held to maturity, market value
of $4,031 (1998) and $108,321 (1997) 4,028 108,178
Loans, net of unearned income 913,822 891,075
Allowance for loan losses (9,335) (9,209)
----------- -----------
Loans, net 904,487 881,866
Premises and equipment 22,244 21,757
Other assets 31,197 37,155
----------- -----------
TOTAL ASSETS $1,421,470 $1,509,579
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing $158,314 $140,092
Interest bearing 763,981 738,737
----------- -----------
Total deposits 922,295 878,829
Securities sold under agreements to repurchase 206,024 284,500
Federal funds purchased 1,050 --
Advances from the Federal Home Loan Bank 78,323 63,165
Gift certificates and money orders
outstanding 32,191 104,609
Accrued expenses and other liabilities 19,688 22,767
----------- -----------
TOTAL LIABILITIES 1,259,571 1,353,870
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
authorized - 750,000 shares; none issued -- --
Common stock, no par value, stated value $2.77 per
share; authorized - 12,000,000 shares; issued
and outstanding - 9,924,260 shares (1998)
and 9,878,803 shares (1997) 27,525 27,399
Additional paid-in capital 115,752 115,182
Retained earnings 17,046 9,773
Accumulated other comprehensive income 1,576 3,355
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 161,899 155,709
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,421,470 $1,509,579
=========== ===========
See notes to consolidated financial statements.
/TABLE
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share amounts
Unaudited
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $21,228 $19,040 $42,020 $37,878
Interest and dividends on:
Taxable securities 3,873 4,974 8,284 9,791
Tax-exempt securities 712 670 1,421 1,265
Interest on federal funds sold 202 378 346 668
Interest on securities purchased under
agreements to resell 1,526 1,558 3,486 3,409
-------- -------- -------- --------
Total interest income 27,541 26,620 55,557 53,011
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on deposits 8,632 7,935 17,162 15,835
Interest on federal funds purchased
and securities sold under
agreements to repurchase 3,069 3,418 6,886 6,962
Interest on Federal Home
Loan Bank advances 1,097 1,031 2,043 2,084
-------- -------- -------- --------
Total interest expense 12,798 12,384 26,091 24,881
-------- -------- -------- --------
Net interest income before
provision for loan losses 14,743 14,236 29,466 28,130
Provision for loan losses 500 -- 500 --
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 14,243 14,236 28,966 28,130
-------- -------- -------- --------
NON-INTEREST INCOME:
Income from trust department 574 240 1,114 525
Service charges on deposit accounts 1,339 1,206 2,607 2,415
Gift certificate and money order fees 71 636 121 1,310
Securities gains (losses) -- (8) 27 68
Other 5,594 946 8,064 2,050
-------- -------- -------- --------
Total non-interest income 7,578 3,020 11,933 6,368
-------- -------- -------- --------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 7,191 6,416 13,898 12,572
Occupancy expense 735 720 1,471 1,491
Furniture and equipment expenses 1,134 1,042 2,177 2,218
Other 3,704 2,408 7,002 4,997
-------- -------- -------- --------
Total other operating expenses 12,764 10,586 24,548 21,278
-------- -------- -------- --------
Income before income taxes 9,057 6,670 16,351 13,220
Income tax expense 2,749 2,065 4,918 4,098
-------- -------- -------- --------
NET INCOME $6,308 $4,605 $11,433 $9,122
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 9,914 9,778 9,901 9,757
Diluted 10,139 9,910 10,130 9,881
NET INCOME PER COMMON SHARE
Basic $0.64 $0.47 $1.15 $0.93
Diluted 0.62 0.46 1.13 0.92
See notes to consolidated financial statements.
/TABLE
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In thousands, except per share amounts
Unaudited
<TABLE>
<CAPTION>
Six months ended
June 30
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Balance, January 1 $155,709 $140,638
Net income 11,433 9,122
Other comprehensive income
(loss), net of tax (1,779) 368
Cash dividends declared (4,160) (3,601)
Stock options exercised, including
related tax benefits 696 1,336
--------- ---------
Balance, June 30 $161,899 $147,863
========= =========
See notes to consolidated financial statements.
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In Thousands
Unaudited
<TABLE>
<CAPTION>
Three months Six months
ended June 30 ended June 30
-------- --------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $6,308 $4,605 $11,433 $9,122
Other comprehensive income (loss), net of tax:
Unrealized gains (losses)
on securities available for sale:
Unrealized holding gains (losses)
arising during the period (1,098) 2,382 (1,801) 336
Less reclassification adjustment for
gains included in net income -- 4 (18) (45)
-------- -------- -------- --------
(1,098) 2,386 (1,819) 291
Pension liability adjustment -- -- 40 77
-------- -------- -------- --------
Other comprehensive income (loss) (1,098) 2,386 (1,779) 368
-------- -------- -------- --------
COMPREHENSIVE INCOME $5,210 $6,991 $9,654 $9,490
======== ======== ======== ========
See notes to consolidated financial statements.
/TABLE
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands
Unaudited
<TABLE>
<CAPTION> Six Months
ended June 30
----------------------
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES: ---------- ----------
<S> <C> <C>
Net income $11,433 $9,122
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization and accretion, net 2,545 2,159
Provision for loan losses 500 --
Federal Home Loan Bank stock dividend (560) (512)
Gain on sales of securities (27) (68)
Gain on sales of other real estate (814) (55)
Gain on sale of subsidiary (4,213) --
Deferred taxes (1,031) (434)
Decrease (increase) in interest receivable 53 (470)
Decrease (increase) in other assets 83 (7,033)
Increase (decrease) in other liabilities (537) 1,996
---------- ----------
Net cash provided by operating activities 7,432 4,705
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (41,558) (72,217)
Proceeds from maturities of
securities available for sale 145,192 49,767
Proceeds from sales of securities available for sale 7,103 22,710
Purchases of securities held to maturity (2,529) (9,386)
Proceeds from maturities of securities held to maturity 76,000 60,000
Net cash proceeds from sale of subsidiary 8,134 --
Increase in customer loans (23,647) (4,218)
Proceeds from sales of other real estate 2,718 745
Payments for purchases of premises and equipment (2,561) (661)
---------- ----------
Net cash provided by investing activities 168,852 46,740
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 43,466 80,936
Net decrease in securities sold
under agreements to repurchase (78,476) (54,446)
Net increase (decrease) in federal funds purchased 1,050 (3,000)
Advances from the Federal Home Loan Bank 20,000 --
Repayment of advances from the Federal Home Loan Bank (4,842) (2,441)
Decrease in gift certificates and money
orders outstanding (39,900) (22,185)
Stock options exercised 565 1,185
Dividends paid (4,160) (3,601)
---------- ----------
Net cash used in financing activities (62,297) (3,552)
---------- ----------
Net increase in cash and cash equivalents 113,987 47,893
Cash and cash equivalents at January 1 45,902 161,084
---------- ----------
Cash and cash equivalents at June 30 $159,889 $208,977
========== ==========
See notes to consolidated financial statements.
/TABLE
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.The accounting and reporting policies of MidAmerica 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 1997 Annual Report and
Form 10-K filed with the Securities and Exchange Commission. The
consolidated financial statements reflect all adjustments (consisting
only of adjustments of a normal recurring nature) which are, in the
opinion of management, necessary for a fair presentation of financial
condition and results of operating for the interim periods.
2.The Company adopted FASB Statement No. 130, "Reporting
Comprehensive Income", during the first quarter of 1998.
The statement establishes standards for reporting and
display of comprehensive income and its components.
Comprehensive income includes net income and other
comprehensive income, which for the Company includes
unrealized gains and losses on securities available for
sale and a minimum pension liability adjustment.
3.The following table presents the numerators (net income) and
denominators (average shares outstanding) for the basic and
diluted net income per share computations:
<TABLE>
<CAPTION>
In thousands, except per share amounts
Three Months Ended Six Months Ended
June 30 June 30
--------- ---------
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net income, basic and diluted $6,308 $9,778 $11,433 $9,122
========= ========= ========= ========
Average shares outstanding 9,914 9,778 9,901 9,757
Effect of dilutive securities 225 132 229 124
Average shares outstanding including --------- --------- --------- --------
dilutive securities 10,139 9,910 10,130 9,881
========= ========= ========= ========
Net income per share, basic $0.64 $0.47 $1.15 $0.93
========= ========= ========= ========
Net income per share, diluted $0.62 $0.46 $1.13 $0.92
========= ========= ========= ========
</TABLE>
Appropriate share information in the consolidated financial statements
has been adjusted for the 3% stock dividend of November 1997.
4.The amortized cost and market value of securities available for
sale are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------------- -------------------
In thousands Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- --------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. government agencies $49,279 $49,754 $156,040 $156,654
Collateralized mortgage obligations 175,165 174,044 183,792 185,474
States and political subdivisions 50,724 53,775 50,352 53,272
Corporate obligations 3,905 3,926 1,757 1,765
Equity securities 18,126 18,126 17,556 17,556
--------- --------- --------- --------
$297,199 $299,625 $409,497 $414,721
========= ========= ========= ========
</TABLE>
The amortized cost and market value of securities held to maturity are
summarized as follows:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------------- -------------------
In thousands Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- --------
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. government agencies $4,028 $4,031 $108,078 $108,221
Corporate obligations -- -- 100 100
--------- --------- --------- --------
$4,028 $4,031 $108,178 $108,321
========= ========= ========= ========
</TABLE>
5.Activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
June 30, December 31,
In thousands 1998 1997
--------- ---------
<S> <C> <C>
Balance, January 1 $9,209 $9,167
Loans charged-off (459) (621)
Recoveries 85 363
--------- ---------
($374) ($258)
Provision for loan losses 500 300
--------- ---------
Balance, end of period $9,335 $9,209
========= =========
</TABLE>
6.Significant components of other non-interest income and other operating
expenses are set forth below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
In thousands June 30 June 30
-------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Other non-interest income:
Gain on sale of money order subsid $3,777 -- $4,213 --
Gains on sales of other real estat 190 45 814 55
Other 1,627 901 3,037 1,995
--------- --------- --------- --------
$5,594 $946 $8,064 $2,050
========= ========= ========= ========
</TABLE>
During the second quarter of 1998, the Company recognized $3.8 million of
previously deferred income related to the earlier sale (January 1998) of its
money order operations and related processing agreement for money orders and
similar payment instruments of MoneyGram Payment Systems, Inc. (MoneyGram).
In May 1998, MoneyGram was acquired by Viad Corp., a company involved in the
money order business through its subsidairy, Travelers Express. Viad Corp.
and Travelers Express have notified the Company of their intention to no
longer process money orders though the Company subsequent to late 1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
In thousands June 30 June 30
-------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Other operating expenses:
Advertising and marketing $757 $521 $1,267 $882
Operating supplies 387 372 816 1,027
Legal and professional fees 973 302 1,678 503
Taxes - Bank, property and other 306 409 713 836
Other 1,281 804 2,528 1,749
--------- --------- --------- --------
$3,704 $2,408 $7,002 $4,997
========= ========= ========= ========
</TABLE>
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This item discusses the results of operations for MidAmerica Bancorp
and its subsidiaries for the three and six months ended June 30, 1998 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 Company that have occurred between December
31, 1997 and June 30, 1998. This discussion should be read in
conjunction with the consolidated financial statements and accompanying
notes presented in Part I, Item 1 of this report.
RESULTS OF OPERATIONS
Net income for the six months ended June 30, 1998 was $11,433,000
or $1.13 per share on a diluted basis, compared to $9,122,000 or $0.92
per share on a diluted basis for the six months ended June 30, 1997. Net
income for the second quarter of 1998 was $6,308,000 or $0.62 diluted net
income per share. Net income for the second quarter of 1997 was
$4,605,000 or $0.46 diluted net income per share.
Net income for the six months ended June 30, 1998, when compared to
the same period in 1997, increased 25.3% and diluted net income per share
increased 22.8%. For the second quarter of 1998 compared to the second
quarter of 1997, net income increased 36.9% and diluted net income per
share increased 34.8%.
As discussed further herein, 1998 operating results included non-
recurring revenue of $4 million for the second quarter of 1998 and $5
million for the six months ended June 30, 1998. Further, the Company has
incurred significant expenses related to the Year 2000 computer issue,
its new image campaign and legal costs, all of which are expected to be
significantly reduced by the beginning of next year. Excluding the
impact of these revenues and expenses, the Companys core net income
increased 1% in the second quarter of 1998 and increased 6% for the six
month period ended June 30, 1998.
During the second quarter of 1998, the Company recognized $3.8
million of previously deferred income related to the earlier sale of its
money order operations and related processing agreement for money orders
and similar payment instruments of MoneyGram Payment Systems, Inc.
(MoneyGram). On a diluted net income per share basis this represents
$0.22 per share for the three and six months ended June 30. 1998. In May
1998, MoneyGram was acquired by Viad Crop., a company involved in the
money order business through its subsidiary, Travelers Express. Via
Corp. and Travelers Express have notified the Company of their intention
to no longer process money orders through the Company subsequent to late
1998. As a result of the income recognition in 1998, there will be no
amortization over the remaining three year life of the above mentioned
processing agreement.
In addition, the Company believes that the refusal of Viad Corp.,
Travelers Express, MoneyGram and MidAmerica Money Order Company to use
a subsidiary of the Company for the agreed upon processing of money
orders is a material breach of the agreements resulting in damages and
it has recently filed a lawsuit against those parties.
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 ended June 30, 1998 and 1997.
In thousands except percentages
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
Total interest income $27,541 $26,620 $55,557 $53,011
Tax equivalent adjustment 452 446 901 872
------- ------- ------- -------
Tax equivalent interest income 27,993 27,066 56,458 53,883
Total interest expense 12,798 12,384 26,091 24,881
------- ------- ------- -------
Tax equivalent net interest income $15,195 $14,682 $30,367 $29,002
======= ======= ======= =======
Average rate on earning assets 8.40% 8.35% 8.37% 8.29%
Average rate on
interest bearing liabilities 4.77% 4.78% 4.81% 4.79%
Net interest spread, annualized 3.63% 3.57% 3.56% 3.50%
Net interest margin, annualized 4.56% 4.53% 4.50% 4.46%
Average earning assets $1,340,061 $1,300,442 $1,363,514 $1,312,102
Average interest
bearing liabilities $1,077,273 $1,038,485 $1,093,319 $1,047,533
Net interest income on a tax equivalent basis increased $513,000 or
3.5% for the quarter and $1,365,000 or 4.7% for the year-to-date,
resulting primarily from volume increases. During the three and six
month periods of 1998, average earning assets increased 3.1% and 3.9%,
respectively, compared to the prior years periods. The net interest
spread and margin both improved for the three month and year-to-date
periods as asset yields increased slightly while liability costs were
relatively stable.
Provision for Loan Losses
The allowance for loan losses is maintained at a level adequate to
absorb estimated probable 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. Based on this
process, a $500,000 provision for loan losses was recorded in the second
quarter of 1998.
An analysis of the changes in the allowance for loan losses and
selected ratios follows:
Dollars in thousands Six Months Ended
June 30
------------------
1998 1997
------- -------
Balance at January 1 $9,209 $9,167
Provision for loan losses 500 --
Loan charge-offs, net (374) (110)
------- -------
Balance June 30 $9,335 $9,057
======= =======
Average loans, net of unearned income $900,009 $797,150
Provision for loan losses to average loans 0.06% --
Allowance for loan losses to average loans 1.04% 1.14%
Allowance for loan losses to period-end loans 1.02% 1.12%
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 ended June 30,
1998 and 1997:
Three months ended Six months ended
Dollars in thousands June 30 June 30
---------------------- ----------------------
1998 1997 Incr 1998 1997 Incr
(Decr) (Decr)
------ ------ ------ ------ ------ ------
Non-Interest Income:
Income from trust department $574 $240 $334 $1,114 $525 $589
Service charges on
deposit accounts 1,339 1,206 133 2,607 2,415 192
Gift certificate and
money order fees 71 636 (565) 121 1,310 (1,189)
Gain on sale of money
order subsidiary 3,777 -- 3,777 4,213 -- 4,213
Gains on sale of
other real estate 190 3 187 814 55 759
Securities gains (losses) -- (8) 8 27 68 (41)
Other 1,627 943 684 3,037 1,995 1,042
------ ------ ------ ------ ------ ------
Total non-interest income $7,578 $3,020 $4,558 $11,933 $6,368 $5,565
====== ====== ====== ====== ====== ======
Other Operating Expenses:
Salaries and
employee benefits $7,191 $6,416 $775 $13,898 $12,572 $1,326
Occupancy expenses 735 720 15 1,471 1,491 (20)
Furniture and
equipment expenses 1,134 1,042 92 2,177 2,218 (41)
Advertising and marketing 757 521 236 1,267 882 385
Operating supplies 387 372 15 816 1,027 (211)
Legal and professional fees 973 279 694 1,678 503 1,175
Taxes-Bank, property
and other 306 409 (103) 713 836 (123)
Other 1,281 827 454 2,528 1,749 779
------ ------ ------ ------ ------ ------
Total other operating expenses $12,764 $10,586 $2,178 $24,548 $21,278 $3,270
====== ====== ====== ====== ====== ======
The core components of non-interest income increased 19.7% for the
quarter and 9.4% for the year-to-date period. These increases were
driven by sustainable sources of revenue. Trust income benefited from
the increased level of assets under management and increased 139% for the
second quarter and more than doubled from prior year levels to $1.1
million for the six months ended June 30, 1998. Deposit fees continued
to show steady gains of 11% and 8% for the quarter and six months,
respectively, as the retail customer base expanded. Bank card fees and
merchant fees increased $528,000 or 98% for the six-month period ended
June 30, 1998, and increased 109% for the second quarter, as the retail
card base expanded and the gift certificate operation expanded the
merchant business to its mall agent base. The decline in gift
certificate and money order fees is partially offset with processing
income from the purchaser of the money order subsidiary (included in
other non-interest income) and expense reductions. The absolute level
of non-interest income includes the money order subsidiary gain and gains
of real estate sales. For the June 30, 1998 quarter these gains
aggregated approximately $4 million and for the year-to-date period
aggregated $5 million.
Other operating expenses increased $2.2 million or 20% and $3.3
million or 15%, for the quarter and year-to-date periods, respectively.
These increases are significantly impacted by expenses attributed to
three major areas; the Companys Year 2000 project, the Companys new
image campaign and legal costs associated with intensive discovery
efforts in ongoing litigation. As of June 30, 1998, there had not been
any significant legal fees related to the previously discussed lawsuit
related to the MoneyGram processing agreement. These matters contributed
$1.1 million and $1.9 million to the increased level of other operating
expenses for the three and six months ended June 30, 1998. Excluding
these matters, other operating expenses, increased 10.9% for the second
quarter and 7% for the six month period. An increase in salaries and
employee benefits caused a substantial portion of this remaining increase
and is attributable primarily to annual compensation increases. The
level of full-time-equivalent employees averaged 618 in 1998 compared to
615 in 1997.
Income Taxes
The Company had income tax expense of $2,749,000 for the second
quarter of 1998 compared to $2,065,000 for the same period in 1997. The
year-to-date tax expense and effective tax rate were $4,918,000 and 30.1%
for 1998, respectively and $4,098,000 and 31.0% for 1997, respectively.
The decrease in the effective rate is attributable to the increased
level of tax free income resulting from an increase in tax free
securities, and tax credits related to low income housing interests.
FINANCIAL CONDITION
Total Assets
Total actual assets decreased approximately $88 million from
December 31, 1997 to June 30, 1998, while average assets increased $19
million or 1.4% to $1,413,067,000 for the second quarter of 1998 compared
to the last quarter of 1997. During the three and six month periods
ended June 30, 1998, average earning assets increased approximately $40
million and $51 million respectively, compared to the prior year periods.
Average earning asset growth was funded primarily from increases in
average retail deposit products during the periods. For the six months
ended June 30, 1998 compared to the first six months of 1997 average
asset growth included increases in average commercial loans of $61
million, increases in average retail loans of $42 million, and decreases
in the average securities portfolio of $38 million. For the second
quarter of 1998 compared to 1997, average retail loans increased $38
million, average commercial loans increased $76 million and the
securities portfolios average declined $57 million.
Nonperforming Loans and Assets
A summary of non-performing loans and assets follows:
Dollars in thousands June 30, 1998 December 31, 1997
Loans accounted for on a non-
accrual basis $2,190 $1,678
Loans contractually past due
ninety days or more as to
interest or principal
payments 1,106 788
Total non-performing loans 3,296 2,466
Other real estate held for sale 15,203 16,186
Total non-performing assets $18,499 $18,652
Non-performing loans to total
loans .36% .28%
Non-performing assets to total
assets 1.30% 1.24%
Allowance for loan losses to
non-performing loans 283% 373%
Loans classified as impaired at June 30, 1998 aggregated $2,190,000
and included all non-accrual loans. At December 31, 1997, impaired
loans aggregated $1,680,000.
Other real estate aggregated $15.2 million at June 30, 1998 and was
principally comprised of properties acquired in settlement of problem
real estate development loans in April 1996, and a completed condominium
project acquired in settlement of loans in November 1997. The carrying
value of real estate development property has been substantially reduced
through sales from the original carrying value of $15.2 million to $5.2
million at June 30, 1998. In January and June 1998, portions of this
property were sold and gains of $624,000 and $171,000, respectively, were
recognized. The Company has contracts for additional property sales,
expected to close later in 1998, that will further reduce the carrying
value by $2.6 million. The condominium project involves 32 (44
originally) completed and readily marketable units and 7.5 acres of
adjacent developed land. Three units are under contract and closings are
expected in the third quarter. This riverfront development has a
carrying value of $8.5 million. Management intends to continue to
provide for the orderly development and marketing of these properties in
a manner designed to maximize the value thereof to the Company.
The Company considers the level of non-performing loans in its
evaluation of the adequacy of the allowance for loan losses.
LIQUIDITY
Liquidity represents the Companys 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.
The parent Companys liquidity depends primarily on the dividends
paid to it as the sole shareholder of Bank of Louisville.
CAPITAL RESOURCES
At June 30, 1998 shareholders' equity totaled $161,899,000, an
increase of $6.2 million since December 31, 1997. Since December 31,
1997, the Companys available for sale securities portfolio had
unrealized losses, net of taxes, that decreased shareholders equity $1.8
million.
The Companys capital ratios exceed minimum regulatory requirements
and are as follows:
Company Company
June 30, December Minimum
1998 31, 1997 Required
Leverage Ratio 11.3% 11.1% 4.00%
Tier 1 risk based capital ratio 15.1% 13.8% 4.00%
Total risk based capital ratio 16.0% 14.7% 8.00%
YEAR 2000
The Company has established a comprehensive program to prepare
its computer systems and applications for the year 2000 and develop
appropriate contingency plans. Testing is scheduled to be
substantially complete by the end of 1998 and implementation is
planned by the end of the second quarter of 1999. Additionally, the
Company is reviewing Year 2000 issues with customers and vendors to
determine the impact, if any, on the Company.
The Company has incurred costs for new hardware and software, consulting and
other expenses related to this program. In addition, the Company has
incurred internal staff costs; a significant portion of these costs are not
incremental to the Company, but rather represent redeployment of existing
personnel resources. For the six months ended June 30, 1998, the Company
has incurred approximately $370,000 of incremental expenses, including
depreciation, related to this program. Costs for time spent by existing
personnel devoted to this program were approximately $470,000. Approximately
$630,000 has been spent on the purchase of hardware and software related to
the program; these costs are being depreciated over 3 and 4 year periods.
RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities (Statement 133) was
issued by the Financial Accounting Standards Board in June 1998.
Statement 133 standardizes the accounting for derivative instruments.
Statement 133 currently applies to the Companys interest rate swap
contracts. Under the standard, entities are required to carry all
derivative instruments on the balance sheet at fair value. The
accounting for changes in the fair value (i.e. gains or losses) of a
derivative instrument depends on whether it has been designated and
qualifies as part of a hedging relationship and, if so on the reason
for holding it. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge of exposures to changes
in fair value, cash flows, or foreign currencies. If the hedged
exposure is a fair value exposure, the gain or loss on the derivative
instrument is recognized in earnings in the period of change together
with the offsetting loss or gain on the hedged item attributable to
the risk being hedged. If the hedged exposure is a cash flow
exposure, the effective portion of the gain or loss on the derivative
instrument is reported initially as a component of other comprehensive
income (outside earnings) and subsequently reclassified into earnings
when the forecasted transaction affects earnings. Any amounts
excluded from the assessment of hedge effectiveness as well as the
ineffective portion of the gain or loss is reported in earnings
immediately. Accounting for foreign currency hedges is similar to the
accounting for fair value and cash flow hedges. If the derivative
instrument is not designated as a hedge, the gain or loss is
recognized in earnings in the period of change.
The Company has not determined the impact that Statement 133 will
have on its financial statements and believes that such determination
will not be meaningful until closer to the date of initial adoption
(January 1, 2000). It can not be determined presently whether the
Company will have any significant derivative instruments on the date
of initial adoption. Depending on asset / liability management
issues, the market interest rate situation and other relevant internal
and external factors, the Companys current interest rate swap
positions may be increased or reduced by the time that Statement 133
is adopted.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys June 30, 1998 analysis of the impact of changes in
interest rates on net interest income over the next 12 months
indicates no significant changes in the Companys exposure to interest
rate changes since March 31, 1998 or December 31 1997. The table
below illustrates the simulation analysis of the impact of a 50 or 100
basis point upward or downward movement in interest rates. The impact
of the rate movement was simulated as if rates changed immediately
from June 30, 1998 levels, and remained constant at those levels
thereafter.
Movement in interest
rates from June 30, 1998, rates
Increase Decrease
+50bp +100bp -50bp -100bp
Net interest income increase
(decrease) (in 1000's) $ (242) $ 236 $ (473) $ (717)
Net income per share increase
(decrease) $(0.02) $0.02 $(0.03) $(0.05)
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The regular annual meeting of shareholders of MidAmerica
Bancorp was held on April 16, 1998.
(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) The following items were submitted to a vote of security
holders as follows:
(1) Election of the following persons as directors of
MidAmerica Bancorp for terms expiring at the 2001
annual meeting of shareholders.
For Withhold
Robert P. Adelberg 8,321,341 83,484
Hon. Martha Layne Collins 8,325,013 79,812
R.K. Guillaume 8,335,459 69,366
David Jones, Jr. 8,340,360 64,465
Bertram W. Klein 8,360,029 44,796
Bruce Roth 8,359,880 44,945
(2) Amendment to Articles of Incorporation. To require
certain transactions involving fundamental changes in
corporate structure or the transfer of substantial
assets to be approved by a 75% super-majority vote of
shareholders.
For 6,250,769
Against 499,935
Abstain 31,865
Broker non-votes 1,622,256
(3) Amendment to Articles of Incorporation. To elect to
be governed by the board approval and super-majority
voting provisions of the Kentucky Business Combination
Act.
For 6,276,701
Against 480,379
Abstain 47,236
Broker non-votes 1,600,509
(4) Amendment to Articles of Incorporation. To require a
super-majority vote of shareholders to amend or repeal
the foregoing and certain other provisions of the
Articles of Incorporation.
For 6,243,756
Against 508,445
Abstain 30,368
Broker non-votes 1,622,256
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 Material Contracts - Employment agreement between
the Company and Steven A. Small, dated June 1,
1998.
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 12,1998 By:/s/Steven Small
Steven Small
Executive Vice President and
Chief Financial Officer
Date: August 12,1998 By:/s/R.K. Guillaume
R.K. Guillaume
Chief Executive Officer
INDEX TO EXHIBITS
10 Material Contracts - Employment agreement between the
Company and Steven A. Small, dated June 1, 1998
27 Financial Data Schedule
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of
June, 1998 by and between MIDAMERICA BANCORP, INC., a Kentucky
corporation and BANK OF LOUISVILLE, a Kentucky Combined Bank and
Trust Company, (together with their successors and assigns
permitted under this Agreement, the "Companies), and STEVEN A.
SMALL (the "Executive").
W I T N E S S E T H:
WHEREAS, the Companies and the Executive are parties to an
Agreement dated as of March 1, 1996, covering the employment
relationship of Executive with Companies, and
WHEREAS, the Parties desire to cancel that Agreement and
replace it in its entirety with this Employment Agreement (this
"Agreement").
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the receipt of which is mutually acknowledged, the
Companies and the Executive (individually a "Party" and together
the "Parties") agree as follows:
1. Definitions.
(a) "Affiliate" of a person or other entity shall mean a
person or other entity that directly or indirectly
controls, is controlled by, or is under common control
with the person or other entity specified.
(b) Except as provided otherwise in Section 8 hereof, "Base
Salary" shall mean the salary provided for in Section 5
below or any increased salary granted to the Executive
pursuant to Section 5.
(c) "Board" shall mean the Boards of Directors of the
Companies.
(d) "Cause" shall mean:
(i) The Executive is convicted of a felony; or
(ii) The Executive is guilty of willful gross neglect or
willful gross misconduct in carrying out his duties
under this Agreement, resulting, in either case, in
material economic harm to the Companies, unless the
Executive believed in good faith that such act or
nonact was in the best interests of such Company.
(e) A "Change of Control" shall mean the occurrence of any
one of the following events:
(i) Any "person," as such term is used in Sections
3(a)(9) and 13(d)of the Securities Exchange Act of
1923, becomes a "beneficial owner,"as such term is
used in Rule 13d-3 promulgated under that Act, of
20% or more of the Voting Stock of the Companies;
(ii) The majority of either Board consists of individuals
other than Incumbent Directors, which term means
the members of the Board on the date of this
Agreement; provided that any person becoming a
director subsequent to such date whose election or
nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent
Director;
(iii) The Companies adopt any plan of liquidation
providing for the distribution of all or
substantially all of its assets;
(iv) All or substantially all of the assets or business
of the Companies is disposed of pursuant to a
merger, consolidation or other transaction (unless
the shareholders of such Company immediately prior
to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in
substantially the same proportion as they owned the
Voting Stock of such Company, all of the Voting
Stock or other ownership interests of the entity
or entities, if any, that succeed to the business
of such Company); or
(v) The Companies combine with another company and is
the surviving corporation but, immediately after
the combination, the shareholders of such Company
immediately prior to the combination hold, directly
or indirectly, 50% or less of the Voting Stock of
the combined company (there being excluded from the
number of shares held by such shareholders, but not
from the Voting Stock of the combined company, any
shares received by Affiliates of such other company
in exchange for stock of such other company).
(f) "Constructive Termination Without Cause" shall mean a
termination of the Executive's employment at his
initiative as provided in Section 8 below following the
occurrence, without the Executive's prior written
consent, of one or more of the following events (except
in consequence of a prior termination):
(i) A reduction in the Executive's then current Base
Salary or the termination or material reduction of
any employee benefit or perquisite enjoyed by him;
(ii) The failure to elect or reelect the Executive to any
of the positions described in Section 4 below or
removal of him from any such position;
(iii) A material diminution in the Executive's duties
or the assignment to the Executive of duties which
are materially inconsistent with his duties or
which materially impair the Executive's ability to
function as the Executive Vice President and Chief
Financial Officer or any other office to which he
may be elected or appointed:
(iv) The failure to continue the Executive's
participation in any incentive compensation plan
unless a plan providing a substantially similar
opportunity is substituted;
(v) The relocation of a Companies' principal office, or
the Executive's own office location as assigned to
him by the Companies, to a location outside of the
metropolitan area of Louisville, Kentucky; or
(vi) The failure of the Companies to obtain the
assumption in writing of its obligation to perform
this Agreement by any successor to all or
substantially all of the assets of such Company
within 45 days after a merger, consolidation, sale
or similar transaction.
(g) "Disability" shall mean the Executive's inability to
substantially perform his duties and responsibilities
under this Agreement for a period of 180 consecutive
days.
(h) "Term of Employment" shall mean the period specified in
Section 3 below.
2. Cancellation of Old Agreement.
The Agreement between the Parties entered into as of March 1,
1996, is hereby revoked and canceled in its entirety.
3. Term of Employment.
The employment of the Executive will continue to the last day
of the month in which the Executive turns 55 years of age or until
the earlier termination of his employment in accordance with the
terms of this Agreement.
4. Position. Duties and Responsibilities.
(a) During the term of Employment, the Executive shall
continue to be employed as Executive Vice President and
Chief Financial Officer of the Companies with executive
duties commensurate with that position, including S.E.C.
reporting, internal financial reporting, financial
reporting to the Board of Directors, interest rate risk
management, deposit pricing, loan review, internal audit,
investment management, budgeting and forecasting, and
various operations functions. The Executive, in carrying
out his duties under this Agreement, shall report to the
Chairman of the Board.
(b) Anything herein to the contrary notwithstanding, nothing
shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other
corporations (except Executive will not serve on the
board of any other financial institution) or the boards
of a reasonable number of trade associations and/or
charitable organizations, (ii) engaging in charitable
activities and community affairs, and (iii) managing his
personal investments and affairs, provided that such
activities do not materially interfere with the proper
performance of his duties and responsibilities as the
Companies' Executive Vice President and Chief Financial
Officer or any other office to which he may be elected or
appointed.
5. Base Salary.
The Executive shall be paid an annualized Base Salary, payable
in accordance with the regular payroll practices of the Companies,
of $184,000.00. The Base Salary shall be reviewed no less
frequently than annually for increase at the sole discretion of the
Board and its Nominating and Executive Compensation Committee.
6. Employee Benefit Programs.
During the Term of Employment, the Executive shall be entitled
to participate in all employee incentive, pension and welfare
benefit plans and programs made available to the Companies' senior
level executives or to its employees generally, as such plans or
programs may be in effect from time to time, including without
limitation, annual stock option grant, ESOP, bonus, pension, profit
sharing, savings and other retirement plans or programs, medical,
dental, hospitalization, short-term and long-term disability and
life insurance plans, accidental death and dismemberment
protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee incentive
compensation plan, employee welfare benefit plans or programs that
may be sponsored by the Companies from time to time, including any
plans that supplement the above-listed types of plans or programs,
whether funded or unfunded.
7. Reimbursement of Business and Other Expenses.
The Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this agreement
and the Companies shall promptly reimburse him for all business
expenses incurred in connection with carrying out the business of
the Companies, subject to documentation in accordance with the
Companies' policy.
8. Termination of Employment.
(a) Termination for Cause. In the event the Companies
terminate the Executive's employment for Cause, he shall
be entitled to:
(i) The Base Salary through the date of the termination
of his employment for Cause;
(ii) Any incentive awards earned (but not yet paid);
(iii) Any pension benefit that may become due
pursuant to Section 6 above, determined as of the
date of such termination;
(iv) Other or additional benefits in accordance with
applicable plans or programs of the Companies to
the date of termination.
(b) Termination Without Cause. If the Executive's employment
is terminated without Cause other than due to Disability
or death, or there is a Constructive Termination without
Cause, the Executive shall be entitled to:
(i) The Base Salary through the date of termination of
the Executive's employment;
(ii) The Base Salary, at the annualized rate in effect on
the date of termination of the Executive's
employment for the unexpired term of this
Employment Agreement following such termination,
paid in installments in accordance with the regular
pay practices of the Companies; provided that at
the Executive's option the Companies shall pay him
the present value of such salary continuation
payments in a lump sum (using as the discount rate
the applicable Federal Rate for short term
Treasury obligations as published by the Internal
Revenue Service for the month in which such
termination occurs). For purposes of this
subsection (ii) Base Salary shall include an
annual bonus calculated by taking the highest bonus
of the three years preceding the year of
termination;
(iii) The balance of any incentive awards earned (but
not yet paid);
(iv) The right to exercise any stock option in full,
whether or not such right is vested or exercisable
pursuant to the terms of the grant.
(v) Any pension benefit that may become due pursuant to
Section 6 above;
(vi) Continued accrual of credited service for the
purpose of the pension benefit provided under
Section 6 above until his attainment of age 55;
(vii) Continued participation in all medical, dental,
hospitalization and life insurance coverage and in
other employee benefit plans or programs in which
he was participating on the date of the termination
of his employment until the earlier of:
(A) The end of the period during which he is
receiving salary continuation payments (or in
respect of which a lump-sum severance payment
is made);
(B) The date, or dates, he receives equivalent
coverage and benefits under the plans and
programs of a subsequent employer (such
coverages and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit,
basis); provided that (x) if the Executive is
precluded from continuing his participation in
any employee benefit plan or program as
provided in this clause (vii) of this Section
8(b), he shall be provided with the after-tax
economic equivalent of the benefit provided
under the plan or program in which he is
unable to participate for the period specified
in this clause (vii) of this Section 8(b), (y)
the economic equivalent of any benefit
foregone shall be deemed to be the lowest cost
that would be incurred by the Executive in
obtaining such benefit himself on an
individual basis, and (z) payment of such
after-tax economic equivalent shall be made
quarterly in advance; and
(viii) Immediate vesting of the Companies
contribution to his Employee Stock Option Plan
(ix) Other or additional benefits in accordance with
applicable plans and programs of the Companies to
the date of termination.
(c) Termination of Employment Following a Change in Control.
If following a Change in Control, the Executive's
employment is terminated without Cause or there is a
Constructive Termination Without Cause, the Executive
shall be entitled to the payments and benefits provided
in Section 8(b), provided that the salary continuation
payments shall be paid in a lump sum without any
discount. Also, immediately following a Change in
Control, all amounts, entitlements or benefits in which
he is not yet vested shall become fully vested. In
addition, if the Executive has completed less than
fifteen (15) years of service at the time of such
termination, the Executive will be entitled to a
supplemental pension benefit paid directly by the
Companies (and not as a part of the Pension Plan of the
Companies) equal to the benefit otherwise payable under
said Pension Plan based upon the completion of fifteen
(15) years of service, minus any amounts payable pursuant
to the said Pension Plan. This supplemental pension
benefit is an unfunded liability of the Companies, the
successors and assigns, and not part of any established
Plan of the Companies. In addition, if Executive
continues in the employ of the Companies for a period of
two years following the effective date of the Change of
Control, he may then voluntarily terminate his employment
and in such a case would receive, in addition to the
benefits provided for in Section 8(b), a lump sum equal
to three times Base Salary. A voluntary termination
under this Section 8(c) shall be effective upon 30 days
prior notice to the Companies and shall not be deemed a
breach of this Agreement. For purposes of this Section
8(c) Base Salary shall include an annual bonus
calculated by taking the highest bonus of the three years
preceding the year of termination;
(d) Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative other
than a termination pursuant to Section 8(b) above, death
or Disability, or a Constructive Termination without
Cause, the Executive shall have the same entitlements as
provided in Section 8(a) for a Termination for Cause.
(e) Effect of Internal Revenue Code Provisions on Payments
Following Change in Control. In the event that the
termination of the Executive's employment is covered by
Section 8(c) hereof, and all or any part of the payments
or benefits made or provided to the Executive under such
Section 8(c) above and any other plans and programs of
the Companies are determined to constitute a Parachute
Payment, as such term is defined in Section 280G(b)(2) of
the Internal Revenue Code of 1986, as amended, (1) the
obligation of the Companies to make such payments and
provide such benefits to the Executive shall not be
altered or diminished in any way, whether such payments
or benefits are deductible by Companies or not, and (2)
the Companies shall pay to Executive an amount sufficient
to cover any excise tax levied against Executive in
respect of such payments or benefits.
(f) Upon termination pursuant to Section 8(b) or (c), the
Executive will have the option of purchasing his Company
car for the value of such car on the books of the Company
at the time of termination, adjusted for value of the
Executives cash contribution to the purchase of the car.
(g) No Mitigation - No Offset. In the event of any
termination of employment under this Section 8, the
Executive shall be under no obligation to seek other
employment and there shall be no offset against amounts
due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment
that he may obtain except as specifically provided in
this Section 8.
(h) Nature of Payments. Any amounts due under this Section 8
are in the nature of severance payments considered to be
reasonable by the Companies and are not in the nature of
a penalty.
9. Indemnification.
(a) The Companies agree that if the Executive is made a
party, or is threatened to be made a party, to any
action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer
or employee of the Companies or is or was serving at the
request of the Companies as a director, officer, member,
employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether
or not the basis of such Proceeding is the Executive's
alleged action in an official capacity while serving as
a director, officer, member, employee or agent, the
Executive shall be indemnified and held harmless by the
Companies to the fullest extent permitted or authorized
by the Companies' certificates of incorporation or bylaws
or, if greater, by the laws of the State of Kentucky,
against all cost, expense, liability and loss (including,
without limitation, reasonable attorney's fees,
judgments, fines, ERISA fines, excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably
incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to
the Executive even if he has ceased to be a director,
member, employee or agent of the Companies or other
entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Companies shall
advance to the Executive all reasonable costs and
expenses incurred by him in connection with a Proceeding
within 20 days after receipt by the Companies of a
written request for such advance. Such request shall
include an undertaking by the Executive to repay the
amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified
against such costs and expenses.
(b) Neither the failure of the Companies (including its board
of directors, independent legal counsel or stockholders)
to have made a determination prior to the commencement of
any proceeding concerning payment of amounts claimed by
the Executive under Section 10(a) that indemnification of
the Executive is proper because he has met the applicable
standard of conduct, nor a determination by the Companies
(including its board of directors, independent legal
counsel or stockholders) that the Executive has not met
such applicable standard of conduct, shall create a
presumption that the Executive has not met the applicable
standard of conduct.
(c) The Companies agree to continue and maintain a directors'
and officers' liability insurance policy covering the
Executive to the extent either Company provides such
coverage for its other executive officers.
10. Representation.
The Companies represent and warrant that they are fully
authorized and empowered to enter into this Agreement and that the
performance of their obligations under this Agreement will not
violate any agreement between it and any other person, form or
organization.
11. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the
Parties with respect thereto.
12. Amendment or Waiver.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by the Executive and
an authorized officer of the Companies. No waiver by either Party
of any breach by the other Party of any condition or provision
contained in this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Executive or an authorized
officer of the Companies, as the case may be.
13. Severability.
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason,
in whole or in part, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.
14. Survivorship.
The respective rights and obligations of the Parties hereunder
shall survive any termination of the Executive's employment to the
extent necessary to the intended preservation of such rights and
obligations.
15. Resolution of Disputes.
Any disputes arising under or in connection with this
Agreement shall, at the election of the Executive or the Companies,
be resolved by binding arbitration, to be held in Kentucky in
accordance with the rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction
thereof. Costs of the arbitration or litigation, including, without
limitation, attorneys' fees of both Parties, shall be borne by the
Companies, provided that if the arbitrator(s) determine that the
claims or defenses of the Executive were without any reasonable
basis, each Party shall bear his or its own costs.
16. Notices.
Any notice given to a party shall be in writing and shall be
deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt
requested, duly addressed to the Party concerned at the address
indicated below or to such changed address as such Party may
subsequently give such notice of:
If to the Companies: MidAmerica Bancorp, Inc.
P.O. Box 1101
Louisville, KY 40201-1101
Attention: Bertram W. Klein
If to the Executive: STEVEN A. SMALL
7210 Leafland Place
Prospect, KY 40059
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
MIDAMERICA BANCORP, INC.
By:/s/ Bertram W. Klein
Title:Chairman
BANK OF LOUISVILLE
By:/s/ R. K. Guillaume
Title:Chief Executive Officer
/s/ Steven A. Small
STEVEN A. SMALL
<TABLE> <S> <C>
<ARTICLE> 9
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