HOME FEDERAL CORPORATION
122-128 West Washington Street
Hagerstown, Maryland 21740
(301) 733-6300
NOTICE OF ANNUAL MEETING
To Be Held on April 23, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Home
Federal Corporation, Hagerstown, Maryland (HFC or the Company), will be
held at the Four Points Hotel (formerly the Sheraton Inn), 1910 Dual Highway,
Hagerstown, Maryland 21740, on Tuesday, April 23, 1996 at 2:00 p.m., Eastern
Time, for the following
purposes, all of which are more completely set forth in the accompanying proxy
statement:
(1) To elect two directors for a term of five years and until their
successors have been elected and qualified;
(2) To ratify the appointment of Smith Elliott Kearns & Company as the
Company's independent auditors for the year ending December 31, 1996; and
(3) To transact such other business as may properly come before the
meeting. Except for procedural matters incident to the conduct of the meeting,
the Board is not aware of any other business which may properly come before
the meeting.
Stockholders of record of the Company at the close of business on March
15, 1996 are entitled to notice of and to vote at the Annual Meeting and at
any adjournment thereof.
By Order of the Board of Directors
/s/ Richard W. Phoebus, Sr.
Richard W. Phoebus, Sr.
President and Chief Executive Officer
Hagerstown, Maryland
April 1, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING YOU
MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY
YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEROF.
HOME FEDERAL CORPORATION
122-128 West Washington Street
Hagerstown, Maryland 21740
(301) 733-6300
_______________________________
PROXY STATEMENT
_______________________________
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to the holders of common stock, $1.00
par value per share (Common Stock) of Home Federal Corporation (HFC or the
Company) in connection with the solicitation of proxies on behalf of the Board
of Directors, to be used at the Annual Meeting of Stockholders (Annual
Meeting) to be held at the Four Points Hotel (formerly the Sheraton Inn), 1910
Dual Highway, Hagerstown, Maryland 21740, on Tuesday, April 23, 1996 at 2:00
p.m., Eastern Time, and at any adjournment thereof for the purposes set forth in
the Notice of Annual Meeting. This Proxy Statement is expected to be mailed to
stockholders on or about April 1, 1996.
HFC is a Maryland corporation and the savings and loan holding company of
Home Federal Savings Bank, Hagerstown, Maryland (Home Federal or the Bank).
The principal asset of the Company presently consists of all the issued and
outstanding capital stock of the Bank.
Each proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted in favor of each of the matters described below
and, upon the transaction of such other business as may properly come before
the meeting, in accordance with the best judgment of the persons appointed as
proxies.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company written
notice thereof (Celia S. Ausherman, Secretary, Home Federal Corporation, 122-
128 West Washington Street, Hagerstown, Maryland 21740), (ii) submitting a duly
executed proxy bearing a later date, or (iii) appearing at the Annual Meeting
and giving the Secretary notice of his or her intention to vote in person.
Proxies solicited hereby may be exercised only at the Annual Meeting and any
adjournment thereof and will not be used for any other meeting.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP THEREOF
Only stockholders of record at the close of business on March 15, 1996
(Voting Record Date) are entitled to vote at the Annual Meeting and at any
adjournment thereof. On the Voting Record Date, there were 2,519,010 shares of
Common Stock of the Company outstanding, and the Company had no other class of
equity securities outstanding. Each share of Common Stock is entitled to one
vote at the Annual Meeting on each matter properly presented thereat.
The following table sets forth information with respect to the beneficial
ownership of the Common Stock by the only persons or entities known to the
Company to be the beneficial owners of 5% or more of the Common Stock and by all
directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address Common Stock Beneficially Percent of
of Beneficial Owner Owned as of March 15, 1996<F1> Common Stock
<S> <C> <C>
Lois S. Harrison 157,275<F2> 6.2
12835 Fountain Head Road
Hagerstown, Maryland 21742
Directors and officers 236,618<F3> 9.4
as a group (20 persons)
__________________
<FN>
<F1> Based upon information provided by the respective beneficial owners and
filings made with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended (Exchange Act). Under Section
16(a) of the Exchange Act, the Company's directors, executive officers and
any persons holding more than 10% of the Common Stock are required to
report their ownership of the Common Stock and any changes in that
ownership to the SEC by specific dates. Based on representations of its
directors and officers and copies of the reports that they have filed with
the SEC, the Company believes that all of these filing requirements were
satisfied by the Company's directors and executive officers in 1995.
<F2> Mrs. Harrison disclaims beneficial ownership of 38,181 shares included
herein which are owned individually by her spouse and 101,565 shares
included herein which are held in her spouse's profit sharing plans.
<F3> The number of shares shown for all directors and officers as a group
includes ownership of options for 16,974 shares of Common Stock which
may be acquired within 60 days of the Voting Record Date pursuant to the
exercise of outstanding stock options under the Company's Key Employee
Stock Compensation Program and 1988 Stock Option and Stock Appreciation
Rights Plan. For information with respect to beneficial ownership of the
Common Stock by individual directors, see Information with Respect to
Nominees for Director, Directors Whose Terms Continue and Executive
Officers below.
</FN>
</TABLE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
Election of Directors
The Bylaws of the Company presently provide that the Board of Directors
shall consist of not less than seven nor more than 15 members. The Articles of
Incorporation and Bylaws of the Company provide that the Board of Directors
shall be divided into five classes as nearly equal in number as possible with
the members of each class to be elected for a term of five years and until
their successors are elected and qualified. One class of directors is to be
elected annually. The exact number of directors is established by Board
resolution and is currently set at nine, but upon Mr. William H. Gelbach, Jr.'s
retirement on April 23, 1996 will be set at eight.
The nominees for election at this meeting have previously served as
directors of the Company. There are no arrangements or understandings between
the Company and any person pursuant to which such person has been nominated or
appointed as a director. No director or officer is related to any other
director or officer of the Company by blood, marriage or adoption.
The Nominees
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees listed below. If any
person named as a nominee should be unable or unwilling to stand for election
at the time of the Annual Meeting, the Board of Directors, as proxies, will
nominate and vote for the replacement nominee or nominees recommended by the
Board of Directors. At this time, the Board of Directors knows of no reason
why any of the nominees listed below might be unavailable to serve. The
nominees for director will be elected by a plurality of the votes cast by the
shares of Common Stock entitled to vote in the election at the Annual Meeting.
Abstentions and broker non-votes will have no effect on the vote.
<TABLE>
<CAPTION>
Directors Whose Terms Expire in 2001
Common Stock
Principal Beneficially
Occupation Owned as of
During the Director March 15, 1996<F2>
Name Age Past Five Years Since<F1> Amount Percentage
<S> <C> <C> <C> <C> <C>
Howard B. Bowen 44 President of Ewing 1984 15,080 *
Oil Co., a local
petroleum
distributor, since
1989.
Ronald Z Sulchek 46 President of 1995 2,200<F3> *
Sulchek & Co., P.A.,
a local certified
public accounting
company, since 1984.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE ABOVE NOMINEES BE ELECTED AS
DIRECTORS.
Members of the Board of Directors Continuing in Office
<TABLE>
<CAPTION>
Directors Whose Terms Expire in 1997
Common Stock
Principal Beneficially
Occupation Owned as of
During the Director March 15, 1996<F2>
Name Age Past Five Years Since<F1> Amount Percentage
<S> <C> <C> <C> <C> <C>
J. Franklin Shank 70 Realtor, Coldwell 1971 1,130<F4> *
Banker, since 1988.
John J. McElwee, Jr. 45 Vice President, 1991 1,750 *
Corporate and
Government Services
of Washington
County Hospital
Association,
Hagerstown, Maryland,
an acute care hospital,
since 1979; President
and Chief Executive
Officer of Antietam
Health Services, Inc.,
Hagerstown, Maryland,
a diversified health
care provider, since
1985.
<CAPTION>
Director Whose Term Expires in 1998
Common Stock
Principal Beneficially
Occupation Owned as of
During the Director March 15, 1996<F2>
Name Age Past Five Years Since<F1> Amount Percentage
<S> <C> <C> <C> <C> <C>
Benjamin F. Kunkleman 72 Chairman of the 1979 7,734<F4> *
Board since March
1990; President, The
American Cedarworks,
Inc., Hagerstown,
Maryland, a wood
products manufacturer,
since 1995; President,
Maryland Classics,
Inc., Hagerstown,
Maryland, a furniture
manufacturer, since
1988.
<CAPTION>
Director Whose Terms Expire in 1999
Common Stock
Principal Beneficially
Occupation Owned as of
During the Director March 15, 1996<F2>
Name Age Past Five Years Since<F1> Amount Percentage
<S> <C> <C> <C> <C> <C>
Lois S. Harrison 71 Trustee, Board of 1984 157,275<F5> 6.2%
Trustees of Hood
College, Frederick,
Maryland, since 1974;
Trustee, Board of
Trustees of
Washington County
Hospital Association,
Hagerstown, Maryland,
an acute care hospital,
since 1976.
<CAPTION>
Directors Whose Terms Expires in 2000
Common Stock
Principal Beneficially
Occupation Owned as of
During the Director March 15, 1996<F2>
Name Age Past Five Years Since<F1> Amount Percentage
<S> <C> <C> <C> <C> <C>
Richard W. Phoebus, Sr. 57 President, Chief 1981 25,453<F6> *
Executive Officer
and Director of the
Company since 1987;
President, Chief
Executive Officer
and Director of the
Bank since 1981.
Salvatore M. Savino 52 Vice President and 1989 3,483<F7> *
Treasurer, Chief
Financial Officer
of the Company
since 1987; Senior
Vice President and
Treasurer, Chief
Financial Officer
of the Bank since
1983.
____________________
*Represents less than 1% of the outstanding Common Stock.
<FN>
<F1> Includes term as a director of the Bank. All directors of the Company
currently serve as directors of the Bank.
<F2> Information with respect to directors was furnished by the respective
directors. Beneficial ownership is direct except as otherwise indicated
by footnote. In accordance with Rule 13d-3 promulgated pursuant to the
Exchange Act, a person is deemed to be the beneficial owner of a security
if he or she has or shares voting power or investment power with respect
to such security or has the right to acquire such ownership within 60
days of the Voting Record Date.
<F3> Includes 1,000 shares owned jointly with Mr. Sulchek's spouse and 1,200
shares owned by Mr. Sulchek's children with Mr. Sulchek as custodian
under the Uniform Gifts to Minors Act of Maryland.
<F4> All shares are owned jointly with the individual's spouse.
<F5> Mrs. Harrison disclaims beneficial ownership of 38,181 shares included
herein which are owned individually by her spouse and 101,565 shares
included herein which are held in her spouse's profit sharing plans.
<F6> Includes 118 shares owned by Mr. Phoebus' children and currently
exercisable options to purchase 4,479 shares.
<F7> Includes 1,855 shares owned jointly with Mr. Savino's spouse and
currently exercisable options to purchase 1,628 shares.
</FN>
</TABLE>
Stockholder Nominations
Article IV, Section 4.14 of the Company's Bylaws governs nominations for
election to the Board of Directors and requires all nominations for election
to the Board of Directors, other than those made by the Board or a committee
appointed by the Board, to be made pursuant to timely notice in writing to the
Secretary of the Company. To be timely, with respect to an election to be held
at an annual meeting of stockholders, a stockholder's notice must be delivered
to, or mailed and received at, the principal executive offices of the Company
not later than 60 days prior to the anniversary date of the mailing of proxy
materials by the Company in connection with the immediately preceding annual
meeting of stockholders of the Company. Each written notice of a stockholder
nomination must set forth certain information specified in the Company's
Bylaws. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the procedures set forth
in the Company's Bylaws.
Executive Officers Who Are Not Directors
Set forth below is information with respect to the executive officers of
the Company and the Bank who are not directors of the Company. Other than
pursuant to employment agreements with the Company's President and Chief
Executive Officer, Richard W. Phoebus, Sr., Vice President, Treasurer and Chief
Financial Officer, Salvatore M. Savino, Executive Vice President, Steven G.
Hull, and Vice President and Secretary, Celia S. Ausherman, there are no
arrangements or understandings between the Company and any person pursuant to
which such person has been appointed an executive officer. No executive officer
is related to any other executive officer or director of the Company by blood,
marriage or adoption.
Celia S. Ausherman (age 59) - Ms. Ausherman is Vice President and
Secretary of the Company and Senior Vice President, Secretary and Chief Retail
Banking Officer of Home Federal. Ms. Ausherman has been employed by Home
Federal since 1954.
Steven G. Hull (age 38) - Mr. Hull is Executive Vice President of the
Company since March 1996 and Home Federal since November 1995 and was Senior
Vice President, Special Assets of Home Federal from November 1990. Prior to
November 1990, Mr. Hull served as Senior Vice President and Chief Lending
Officer of Home Federal and General Counsel from May 1988 to April 1989.
Board Meetings and Committees
During the year ended December 31, 1995, the Board of Directors of the
Company met 12 times. No director attended fewer than 75% of the meetings of
the Company's Board of Directors held during 1995.
The Board of Directors of the Bank meets monthly and may have additional
special meetings. During the year ended December 31, 1995, the Board met 12
times. No director attended fewer than 75% in the aggregate of both the total
number of Board meetings held during 1995 and the total number of meetings held
by committees on which he or she served during the year. The Board of Directors
of the Bank has standing executive, audit and personnel committees.
The Executive Committee is authorized to exercise all the authority of the
Board of Directors in the management of the Bank between Board meetings except
as otherwise provided in the Bank's Bylaws. The members of the Executive
Committee are Messrs. Phoebus, Bowen, Kunkleman, McElwee, Shank and Sulchek and
Mrs. Harrison. The Executive Committee met 12 times during the year ended
December 31, 1995.
The Audit Committee reviews and accepts reports prepared by the Bank's
independent auditors and reviews the Bank's internal audit procedures. The
members of the Audit Committee are Messrs. Kunkleman, Gelbach, McElwee, Shank
and Sulchek. The Audit committee met six times during the year ended December
31, 1995.
The Personnel Committee reviews salaries and benefits of the Bank's
employees and makes recommendations to the Board of Directors regarding
compensation. The members of the Personnel Committee are Messrs. Kunkleman and
Shank and Mrs. Harrison. The Personnel Committee met two times during the year
ended December 31, 1995.
In addition to the committees described above, the Bank has also
established an Asset Review Committee and an Ethics Committee which consists of
members of the Board and which meet as required.
MANAGEMENT REMUNERATION
Executive Compensation
Summary Compensation Table. The Summary Compensation Table below includes
individual compensation information on the Chief Executive Officer, who is the
only executive officer of the Company and its subsidiaries whose total
compensation exceeded $100,000 for services rendered in all capacities during
the fiscal years ended December 31, 1995, 1994 and 1993.
<TABLE>
Name and Annual Long Term All Other
Principal Position Year Compensation Compensation Compensation
Salary Bonus Number of Options
<S> <C> <C> <C> <C> <C>
Richard W. Phoebus, Sr. 1995 $109,411 $ --- 7,832<F1> $17,658<F2>
President and Chief 1994 105,911 --- --- 8,545<F2>
Executive Officer 1993 105,911 --- --- 6,658<F3>
<FN>
<F1> Consists of stock options granted in November 1995.
<F2> Consists of insurance premiums paid by the Bank with respect to term
life insurance for the benefit of Mr. Phoebus as well as the Bank's
contributions pursuant to its retirement savings plan on behalf of Mr.
Phoebus. Does not include amounts attributable to other miscellaneous
benefits received by Mr. Phoebus, incuding the use of an automobile
owned by the Bank along with the payment of operating expenses and
liability insurance for such automobile. In the opinion of management
of the Company, the cost to the Company and the Bank of providing such
benefits to the President during the year ended December 31, 1995 did
not exceed the lesser of $50,000 or 10% of the officer's cash
compensation.
<F3> Consists of insurance premiums paid by the Bank with respect to term
life insurance for the benefit of Mr. Phoebus as well as the Bank's
contributions pursuant to its retirement savings plan on behalf of Mr.
Phoebus.
</FN>
</TABLE>
Fiscal Year and Fiscal Year-End Option Values. Stock options for 39,181
shares were granted to all executive officers and certain employees of the Bank
on November 16, 1995 at $7.50 per share. The following table sets forth, with
respect to the executive officer named in the Summary Compensations Table,
information with respect to options granted during 1995.
<TABLE>
Individual Grants
-------------------------------------------
Percent
of Total Potential
Options Realizable Value
Granted at Assumed Rates
to of Stock Price
Employees Appreciation for
Options in Exercise Expiration Option Term <F3>
Name Granted 1995 Price Date 5% 10%
- ---- ------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard W. 7,832<F1> 19.9% $7.50<F2> Nov. 16, 2005 $36,967 $93,592
Phoebus, Sr.
<FN>
<F1> Options vest and become exercisable on May 16, 1996. None of the indicated
awards were accompanied stock appreciation rights.
<F2> The exercise price was based on the market price of the common stock on the
date of the grant.
<F3> Assumes future stock prices of $12.22 and $19.45 for options granted on
November 16, 1995, at compounded rates of return of 5% and 10%, respectively.
</FN>
</TABLE>
No options were exercised during 1995. The following table sets forth, with
respect to the executive officer named in the Summary Compensation Table,
information with respect to the number of unexercised options at the end of the
fiscal year (exercisable and unexercisable) and the value with respect thereto.
<TABLE>
Shares Value of Unexercised
Acquired Number of Unexercised in the Money Options
Name on Value Options at Fiscal Year End Fiscal Year End <F1>
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Richard -- -- 4,479<F2> 7,832<F3> --<F4> $5,874<F5>
W.
Phoebus,
Sr.
<FN>
<F1> Based on a per share market price of $7.75 at December 31, 1995.
<F2> Total shares include 1,102, 1,377 and 2,000 shares exercisable until 1997,
1999 and 2000 at $11.79, $9.98 and $9.25, respectively.
<F3> Exercisable between May 16, 1996 and November 16, 2005 at $7.50 per share.
<F4> Based upon the market price for the Company's common stock at December 31,
1995, the options were considered out-of-the-money. See footnote 2 hereof.
<F5> Based upon the closing price of the common stock of $8.25 on March 8,
1996.
</FN>
</TABLE>
Incentive Compensation Plan. On November 16, 1995, the Board of Directors
approved an incentive compensation plan (Plan) for designated officers and
employees of the Bank for the calendar year 1996. The Plan establishes
performance income levels at which a pool of dollars is created as each level is
reached. The dollars of compensation paid to an individual will be based on the
ratio of an individual participant's salary to the total of all the
participant's salaries and the attainment of agreed upon goals.
Compensation of Directors
Directors of the Company receive no fees for attending Board of Directors
meetings of the Company. Directors of the Bank receive a fee of $200 per Board
meeting attended. In addition, members of the Bank's committees receive a fee of
$100 per committee meeting attended. Mr. Phoebus and Mr. Savino do not receive
any fees for attending the Bank's Board or committee meetings. The Bank
maintains a director's deferred compensation program pursuant to which directors
of the Bank may elect to defer their fees in order to provide retirement
benefits.
Stock options for 12,446 shares were granted to directors on November 16,
1995 at $7.50 per share. In addition, stock options will be granted in 1996 and
1997 for 12,432 shares, respectively, at the per share exercise price equal to
the fair market value of a share of common stock on such grant dates.
Employment Agreements
The Company and the Bank (the "Employers") during March 1996 entered into
employment agreements with each of Messrs. Phoebus, Savino, Hull and Mrs.
Ausherman. The Employers have agreed to employ the officers for a term of three
years in each case and in their respective current positions. The executive's
compensation and expenses shall be paid by the Company and the Bank in the same
proportion as the time and services actually expended by the executives on
behalf of each respective Employer. The term of each employment agreement shall
be extended each year for a successive additional one-year period upon approval
of the Employers' Board of Directors unless the officer elects, not less than 30
days prior to the annual anniversary date, not to extend the employment term.
Each of the employment agreements are terminable with or without cause by
the Employers. The officer has no right to compensation or other benefits
pursuant to the employment agreements for any period after voluntary termination
or termination by the Employers for cause, disability or retirement, provided,
however, that in the event that (i) the officer terminates his employment
because of failure of the Employers to comply with any material provision of the
employment agreement or the Employers change the officer's title or duties or
(ii) the employment agreement is terminated by the Employers other than for
cause, disability, retirement or death,the employee will be entitle to a cash
severance amount equal to that portion of the employee's base salary which would
be payable to the employee over the remaining term of the employment agreement
or 18 months, whichever is longer. If the employment agreement is terminated by
the officer as a result of certain adverse actions which are taken with respect
to the officer's employment following a Change in Control of the Company, as
defined, the employee will be entitle to a cash severance amount equal to three
times the employee's base salary. If the employment of Messrs. Phoebus, Savino,
Hull and Mrs. Ausherman were presently terminated pursuant to such a Change in
Control, they would be entitled to receive severance payments amounting to
approximately $328,000, $246,000, $255,000 and $155,000, respectively. In
addition, the officer will be entitled to a continuation of benefits similar to
those he or she is receiving at the time of such termination for the remaining
term of the agreement or until the officer obtains full-time employment with
another employer.
The right to compensation or other benefits pursuant to the employment
agreement in the event of termination of employment, as described in the
preceeding paragraph, will be forfeited by the executive if he or she takes
employment with any other banking institution or affiliate thereof in the
Company and the Bank's market area, unless the officer terminates the employment
agreeement in connection with a Change in Control of the Company, as defined, or
as the result of the failure of the Employers to comply with any material
provision of the employment agreement.
A Change in Control is generally defined in the employment agreements to
include any change in control of the Company required to be reported under the
federal securities laws, as well as (i) the acquisition by any person of 25% or
more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any two-year period without the
approval of at least two-thirds of the persons who were directors of the Company
at the beginning of such period.
In the event of the executive's death during the term of the employment
agreements, his or her estate will receive monthly payments in an amount which
is determined to be the greater of (i) the death benefits available under one or
more policies of the Employers or (ii) the executive's base salary at the time
of death for a period of 18 months from the date of the executive's death. Upon
completion of the term of employment under the agreements, the executive is
entitled to receive a payment equal to one and one-half times the executive's
base salary in effect at such time. In addition to such payment, the Employers
will provide medical insurance to the executive, his or her spouse and
dependents, if any, for a period of 18 months following the date of the
termination of employment. The employment agreements with Mr. Phoebus provide
for certain additional benefits. Consistent with past Bank practice, Mr. Phoebus
is provided with the use of an automobile and the Employers provide the payment
of dues at certain private clubs.
The employment agreements between the Bank and each officer provide that in
the event that any of the payments to be made thereunder or otherwise upon
termination of employment are deemed to constitute a "parachute payment" under
Section 280G of the Internal Revenue Code of 1986 (the "Code"), as described
below, then such payments and benefits to be received thereunder shall be
reduced, by the amount, if any, which is the minimum necessary to result in no
portion of the payments and benefits being non-deductible by the Bank and
subject to excise tax pursuant to the Code. However, the employment agreements
between the Company and each officer provide that in the event that any of the
payments to be made thereunder, under the agreement between the Bank and the
officer (prior to the above-referenced reduction) or otherwise upon termination
of employment are deemed to constitute a "parachute payment" under Section 280G
of the Code, then the officer is to receive a cash amount equal to (i) the
reduction in payments and benefits under the agreement between the Bank and the
officer, (ii) the excise tax imposed by Section 4999 of the Code, described
below and (iii) such additional amounts equal to other state, federal and excise
taxes imposed on the officer as a result of certain payments and benefits
received by the officer upon termination of employment.
Parachute payments generally are payments in excess of three times the base
amount, which is defined to mean the recipient's average annual compensation
from an employer includible in the recipient's gross income during the most
recent five taxable years ending before the date on which a change in control of
the employer occurred. Recipients of parachute payments are subject to a 20%
excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
not deductible by the employer as compensation expense for federal income tax
purposes.
Although the above-described employment agreements could increase the cost
of any acquisition of control of the Company, management of the Company does not
believe that the terms thereof would have a significant anti-takeover effect.
Consulting Agreement
In connection with the Bank's acquisition of Waynesboro Savings in 1988,
Home Federal entered into a consulting agreement with William H. Gelbach, Jr.,
who was President and Chief Executive Officer of Waynesboro Savings. Under the
terms of the consulting agreement, which is still operational, Mr. Gelbach will
be paid $1,000 per month during his lifetime. The agreement prohibits Mr.
Gelbach from engaging in any activity which competes with the business or
activities of the Bank or its affiliates, and prohibits Mr. Gelbach from serving
as a director, officer or in any other capacity with a financial institution or
company that competes with the Bank or any of its affiliates.
Indebtedness of Management
The Bank offers home mortgage, consumer and business loans to its officers,
directors and employees. The mortgage loans are made for the financing of
primary residences and the other loans are made for specified purposes. These
loans are made in the ordinary course of business and, in the opinion of
management, do not involve more than normal risk of collectibility or present
other unfavorable features. Such loans are made on substantially the same terms
as those prevailing at the time for comparable transactions with nonaffiliated
persons, except that loan origination fees and fees for credit reports and
appraisals have in the past been reduced or waived for certain of these
borrowers. In addition, consumer loans have in the past been made at preferred
interest rates which are not below the Bank's current cost of funds and have in
the past generally been made at approximately 1% under the market interest
rate. Prior to the enactment of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (FIRREA), the preferred interest rates were made
available to directors, officers and employees of the Bank so long as they
continued in the employ of or service with the Bank.
As a result of the enactment of FIRREA in August 1989, which applies
Section 22(h) of the Federal Reserve Act to savings associations such as Home
Federal, any credit extended by the Bank to its executive officers, directors
and, to the extent otherwise permitted, principal stockholder(s), or any
related interest of the foregoing, must be (i) on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the Bank with non-affiliated parties, and (ii) not
involve more than the normal risk of repayment or present other unfavorable
features.
In response to such legislation, the Bank adopted a policy that it will
not make additional extensions of credit on a discount basis to its directors,
officers or employees; however, loans previously made by the Bank to such
persons remain in effect pursuant to their terms.
The following table sets forth information with respect to all directors
and executive officers of the Company and the Bank and their affiliates whose
aggregate indebtedness exceeded $60,000 during the year ended December 31, 1995.
Unless otherwise indicated, all of the mortgage loans set forth below are first
lien mortgages secured by the primary residences of the respective individuals
to whom the loans were made.
<TABLE>
Highest
Principal
Balance
from Unpaid Annual
January 1, Balance Interest
Year 1995 to at Rate at
Type Loan December December December
Name and Position of Loan Made 31, 1995 31, 1995 31, 1995
<S> <C> <C> <C> <C> <C>
Richard W. Phoebus, Sr., Mortgage 1994 $147,846 $145,984 7.750%<F1>
President and Chief Line of
Executive Officer of Credit 1984 832<F2> -- 18.000
the Companay and the
Bank
Salvatore M. Savino, Mortgage 1983 63,251 60,874 4.125 <F1>
Vice President and Home
Treasurer, Chief Equity 1987 28,702 27,926 10.000 <F1>
Financial Officer Line of
of the Company and Credit 1984 1,802<F3> -- 18.000
Senior Vice President
and Treasurer, Chief
Financial Officer
of the Bank
Howard V. Bowen, Mortgage 1983 229,778 226,312 11.750%<F1>
Director
<FN>
<F1> Adjustable rate loan.
<F2> The line of credit has been extended for an amount not to exceed $5,000.
<F3> The line of credit has been extended for an amount not to exceed $2,500.
</FN>
</TABLE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Smith Elliott Kearns &
Company as independent auditors of the Company for the year ending December 31,
1996, and has further directed that the selection of such auditors be submitted
for ratification by the stockholders at the Annual Meeting. The Company has
been advised by Smith Elliott Kearns & Company that neither that firm nor any
of its associates has any relationship with the Company or its subsidiaries
other than the usual relationship that exists between independent certified
public accountants and clients. Smith Elliott Kearns & Company will have a
representative at the Annual Meeting who will have an opportunity to make a
statement, if he or she so desires, and who will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF SMITH ELLIOTT KEARNS & COMPANY AS INDEPENDENT AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 1996.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in April 1997, must be received at
the principal executive offices of the Company, 122-128 West Washington Street,
Hagerstown, Maryland 21740, Attention: Celia S. Ausherman, Secretary, no later
than December 1, 1996. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the Exchange Act, it will be included in the
Company's proxy statement and set forth on the form of proxy issued for such
annual meeting of stockholders. It is urged that any such proposals be sent by
certified mail, return-receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Article II, Section 2.15 of the
Company's Bylaws, which provides that to be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Company. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Company not less than 60 days prior to the anniversary date of the mailing of
proxy materials by the Company in connection with the immediately preceding
annual meeting. A stockholder's notice must set forth as to each matter the
stockholder proposes to bring before an annual meeting certain information set
forth in the Company's Bylaws. No stockholder proposals were received by the
Company in connection with the Annual Meeting.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1995 accompanies this Proxy Statement. Additional copies of the
Company's Annual Report to Stockholders may be obtained by written request to
the Secretary of the Company at the address indicated below. Such Annual
Report is not part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE EXHIBITS THERETO REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT. SUCH
WRITTEN REQUEST SHOULD BE DIRECTED TO CELIA S. AUSHERMAN, SECRETARY, HOME
FEDERAL CORPORATION, 122-128 WEST WASHINGTON STREET, HAGERSTOWN, MARYLAND
21740. THE FORM 10-K IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described above in this Proxy Statement. Each proxy
solicited hereby confers discretionary authority upon the proxies to vote with
respect to the approval of the minutes of the last annual meeting of
stockholders, the election of any person as director if the nominee is unable to
serve or for good cause will not serve, matters incident to the conduct of the
meeting and upon such other business matters as may properly come before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, it is intended that the proxies solicited hereby will be voted
with respect to those other matters in accordance with the judgment of the
persons voting the proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Company's Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
By Order of the Board of Directors
Richard W. Phoebus, Sr.
President and Chief Executive Officer
April 1, 1996
<PAGE>
REVOCABLE PROXY
HOME FEDERAL CORPORATION
X PLEASE MARK VOTE
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
Annual Meeting of the Stockholders to be held April 23, 1996
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made this proxy will
be voted FOR Proposals 1 and 2.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the related Proxy Statement.
THE BOARD OF DIRECTORS UNAMIOUSLY RECOMMENDS A VOTE FOR:
For Withheld For All
Except
1. Election of two directors for a five
year term, as described in the
Company's proxy statement.
Howard B. Bowen Ronald Z. Sulchek
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the box "For All Except" and write that nominee's name in the space provided
below.)
_______________________________________________________________________
For Against Abstain
2. To ratify the appointment of Smith
Elliott Kearns & Company as the
Company's independent auditors for
the year ending December 31, 1996.
3. To transact such other business as may properly be brought before the
meeting. In their discretion, the proxies are authorized to vote upon
such other business as may be brought before the meeting.
Please be sure to sign and date Date
this Proxy in the box below.
Stockholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
HOME FEDERAL CORPORATION
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
