FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-18993
WINTON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-1303854
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5511 Cheviot Road
Cincinnati, Ohio 45247
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (513) 385-3880
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No ____
As of August 3, 1998, the latest practicable date, 4,014,304 shares of the
registrant's common stock, no par value, were issued and outstanding.
Page 1 of 17 pages
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Winton Financial Corporation and Subsidiary
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial
Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 16
SIGNATURES 17
<PAGE>
<TABLE>
Winton Financial Corporation
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
June 30, September 30,
ASSETS 1998 1997
<S> <C> <C>
Cash and due from banks $ 1,671 $ 1,367
Interest-bearing deposits in other financial institutions 362 1,419
------- -------
Cash and cash equivalents 2,033 2,786
Investment securities available for sale - at market 5,462 3,631
Investment securities - at cost (approximate market value of
$13,956 and $12,679 at June 30, 1998 and September 30, 1997) 13,851 12,585
Mortgage-backed securities available for sale - at market 626 799
Mortgage-backed securities - at cost (approximate market value of
$13,003 and $14,345 at June 30, 1998 and September 30, 1997) 13,167 14,614
Loans receivable - net 306,821 276,334
Loans held for sale - at lower of cost or market 5,529 4,210
Office premises and equipment - net 2,662 2,627
Real estate acquired through foreclosure 533 513
Federal Home Loan Bank stock - at cost 3,960 2,998
Accrued interest receivable on loans 2,394 2,185
Accrued interest receivable on mortgage-backed securities 98 109
Accrued interest receivable on investments 248 241
Prepaid expenses and other assets 710 393
Intangible assets - net 417 463
Prepaid federal income taxes 62 -
------- ------
Total assets $358,573 $324,488
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $253,903 $240,317
Advances from the Federal Home Loan Bank 74,916 57,425
Accounts payable on mortgage loans serviced for others 821 842
Advance payments by borrowers for taxes and insurance 138 412
Other liabilities 1,434 1,137
Accrued federal income taxes - 85
Deferred federal income taxes 1,319 993
------- -------
Total liabilities 332,531 301,211
Shareholders' equity
Preferred stock - 2,000,000 shares without par value
authorized; no shares issued - -
Common stock - 5,000,000 shares without par value authorized;
4,014,304 and 1,986,152 shares outstanding - -
Additional paid-in capital 6,775 6,501
Retained earnings - substantially restricted 18,742 16,474
Unrealized gains on securities designated as available for sale, net
of related tax effects 525 302
------- -------
Total shareholders' equity 26,042 23,277
------- -------
Total liabilities and shareholders' equity $358,573 $324,488
======= =======
</TABLE>
3
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<TABLE>
Winton Financial Corporation
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share data)
Nine months ended Three months ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income
Loans $18,403 $16,273 $6,460 $5,630
Mortgage-backed securities 675 824 215 261
Investment securities 815 622 280 230
Interest-bearing deposits and other 194 146 73 52
------ ------ ----- -----
Total interest income 20,087 17,865 7,028 6,173
Interest expense
Deposits 9,705 8,836 3,276 3,051
Borrowings 2,639 2,194 1,063 796
------ ------ ----- -----
Total interest expense 12,344 11,030 4,339 3,847
------ ------ ----- -----
Net interest income 7,743 6,835 2,689 2,326
Provision for losses on loans 8 - 8 -
------ ------ ----- ----
Net interest income after provision
for losses on loans 7,735 6,835 2,681 2,326
Other income
Gain on sale of mortgage loans 1,022 469 389 197
Mortgage-servicing fees 105 233 30 79
Gain on sale of investment securities designated as
available for sale - 36 - -
Gain on sale of real estate acquired through
foreclosure - 32 - -
Other operating 314 285 108 104
------ ------ ----- -----
Total other income 1,441 1,055 527 380
General, administrative and other expense
Employee compensation and benefits 2,239 2,129 784 769
Occupancy and equipment 969 905 328 312
Franchise taxes 224 197 78 67
Federal deposit insurance premiums 112 170 38 36
Amortization of intangible assets 46 46 15 15
Advertising 182 114 73 36
Other operating 797 763 274 255
------ ------ ----- -----
Total general, administrative and other expense 4,569 4,324 1,590 1,490
------ ------ ----- -----
Earnings before income taxes 4,607 3,566 1,618 1,216
Federal income taxes
Current 1,374 412 473 289
Deferred 211 807 85 131
------ ------ ----- -----
Total federal income taxes 1,585 1,219 558 420
------ ------ ----- -----
NET EARNINGS $ 3,022 $ 2,347 $1,060 $ 796
====== ====== ===== =====
EARNINGS PER SHARE
Basic $.75 $.59 $.26 $.20
=== === === ===
Diluted $.72 $.58 $.25 $.20
=== === === ===
Dividends per share $.1875 $.1675 $.0625 $.0575
===== ===== ===== =====
</TABLE>
4
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<TABLE>
Winton Financial Corporation
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended June 30,
(In thousands)
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 3,022 $ 2,347
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of premiums on investments and
mortgage-backed securities 20 9
Amortization of deferred loan origination fees (183) (182)
Depreciation 312 290
Amortization of intangible assets 46 46
Gain on sale of mortgage loans (793) (259)
Gain on sale of investment securities designated as available for sale - (36)
Provision for losses on loans 8 -
Loans disbursed for sale in the secondary market (68,895) (21,603)
Proceeds from sale of loans in the secondary market 68,369 24,597
Gain on sale of real estate acquired through foreclosure - (32)
Federal Home Loan Bank stock dividends (175) (134)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans (209) (221)
Accrued interest receivable on mortgage-backed securities 11 14
Accrued interest receivable on investments (7) (60)
Prepaid expenses and other assets (317) (121)
Accounts payable on mortgage loans serviced for others (21) 79
Other liabilities 297 (1,343)
Federal income taxes
Current (147) (96)
Deferred 211 807
------ ------
Net cash provided by operating activities 1,549 4,102
Cash flows from investing activities:
Principal repayments on mortgage-backed securities 1,605 2,218
Proceeds from maturity of mortgage-backed securities - 1,335
Proceeds from maturity of investment securities 5,900 3,000
Proceeds from sale of investment securities designated as available for sale - 122
Purchase of investment securities designated held to maturity (7,169) (4,988)
Purchase of investment securities designated as available for sale (1,495) (1,742)
Loan principal repayments 63,337 47,881
Loan disbursements (99,978) (80,765)
Sale of loan participations 6,329 7,135
Proceeds from the sale of real estate acquired through foreclosure - 94
Purchase of office premises and equipment (333) (158)
Additions to real estate acquired through foreclosure (34) (13)
Purchase of Federal Home Loan Bank stock (787) (451)
------ ------
Net cash used in investing activities (32,625) (26,332)
------ ------
Net cash used in operating and investing
activities (balance carried forward) (31,076) (22,230)
------ ------
</TABLE>
5
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<TABLE>
Winton Financial Corporation
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months ended June 30,
(In thousands)
1998 1997
<S> <C> <C>
Net cash used in operating and investing
activities (balance brought forward) $(31,076) $(22,230)
Cash flows from financing activities:
Net increase in deposit accounts 13,586 12,607
Proceeds from Federal Home Loan Bank advances 62,039 26,064
Repayment of Federal Home Loan Bank advances (44,548) (14,543)
Advances by borrowers for taxes and insurance (274) (174)
Proceeds from exercise of stock options 274 -
Dividends paid on common stock (754) (665)
------- -------
Net cash provided by financing activities 30,323 23,289
------- -------
Net increase (decrease) in cash and cash equivalents (753) 1,059
Cash and cash equivalents at beginning of period 2,786 1,504
------- -------
Cash and cash equivalents at end of period $ 2,033 $ 2,563
======= =======
Supplemental disclosure of cash flow information: Cash paid during the year for:
Federal income taxes $ 1,460 $ 507
======= =======
Interest on deposits and borrowings $ 12,087 $ 10,960
======= =======
Supplemental disclosure of noncash investing activities:
Transfers from loans to real estate acquired through foreclosure $ 52 $ 200
======= ========
Unrealized gains on securities designated as available for sale,
net of related tax effects $ 223 $ 44
======= ========
Recognition of mortgage servicing rights in accordance with
SFAS No. 125 $ 229 $ 210
======= ========
</TABLE>
6
<PAGE>
Winton Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine month periods ended June 30, 1998 and 1997
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and,
therefore, do not include information or footnotes necessary for a
complete presentation of financial position, results of operations, and
cash flows in conformity with generally accepted accounting principles.
Accordingly, these financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of Winton
Financial Corporation (the "Corporation" or "Winton Financial")
included in the Annual Report on Form 10-KSB for the year ended
September 30, 1997. However, all adjustments (consisting of only normal
recurring accruals) which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements have
been included. The results of operations for the three and nine month
periods ended June 30, 1998 and 1997, are not necessarily indicative of
the results which may be expected for the entire fiscal year.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Winton Financial and The Winton Savings and Loan Co. (the "Company"
or "Winton Savings"). All significant intercompany items have been
eliminated.
3. Effects of Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," that provides accounting guidance on
transfers of financial assets, servicing of financial assets, and
extinguishment of liabilities. SFAS No. 125 introduces an approach to
accounting for transfers of financial assets that provides a means of
dealing with more complex transactions in which the seller disposes of
only a partial interest in the assets, retains rights or obligations,
makes use of special purpose entities in the transaction, or otherwise
has continuing involvement with the transferred assets. The new
accounting method, the financial components approach, provides that the
carrying amount of the financial assets transferred be allocated to
components of the transaction based on their relative fair values. SFAS
No. 125 provides criteria for determining whether control of assets has
been relinquished and whether a sale has occurred. If the transfer does
not qualify as a sale, it is accounted for as a secured borrowing.
Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements, securitizations of
financial assets, loan participations, factoring arrangements, and
transfers of receivables with recourse.
7
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Winton Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine month periods ended June 30, 1998 and 1997
3. Effects of Recent Accounting Pronouncements (continued)
An entity that undertakes an obligation to service financial assets
recognizes either a servicing asset or liability for the servicing
contract (unless related to a securitization of assets, and all the
securitized assets are retained and classified as held-to-maturity). A
servicing asset or liability that is purchased or assumed is initially
recognized at its fair value. Servicing assets and liabilities are
amortized in proportion to and over the period of estimated net
servicing income or net servicing loss and are subject to subsequent
assessments for impairment based on fair value.
SFAS No. 125 provides that a liability is removed from the balance
sheet only if the debtor either pays the creditor and is relieved of
its obligation for the liability or is legally released from being the
primary obligor.
SFAS No. 125 is effective for transfers and servicing of financial
assets and extinguishment of liabilities occurring after December 31,
1997, and is to be applied prospectively. Earlier or retroactive
application is not permitted. Management adopted SFAS No. 125 effective
January 1, 1998, as required, without material effect on the
Corporation's consolidated financial position or results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. SFAS
No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income
for the period in that financial statement.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided
for comparative purposes is required. SFAS No. 130 is not expected to
have a material impact on the Corporation's financial statements.
8
<PAGE>
Winton Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three and nine month periods ended June 30, 1998 and 1997
3. Effects of Recent Accounting Pronouncements (continued)
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 significantly
changes the way that public business enterprises report information
about operating segments in annual financial statements and requires
that those enterprises report selected information about reportable
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information
about the way that management organizes the segments within the
enterprise for making operating decisions and assessing performance.
For many enterprises, the management approach will likely result in
more segments being reported. In addition, SFAS No. 131 requires
significantly more information to be disclosed for each reportable
segment than is presently being reported in annual financial statements
and also requires that selected information be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 is not expected to have
a material impact on the Corporation's financial statements.
4. Earnings Per Share
Basic earnings per share for the nine and three month periods ended
June 30, 1998 is computed based on 4,012,033 and 4,014,304
weighted-average shares outstanding during the respective periods.
Basic earnings per share for each of the nine and three month periods
ended June 30, 1997, is computed based on 3,972,304 weighted-average
shares outstanding.
Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares to be issued
under the Corporation's stock option plan. Weighted-average common
shares deemed outstanding for purposes of computing diluted earnings
per share totaled 4,205,105 and 4,245,864 for the nine and three month
periods ended June 30, 1998, and 4,007,898 and 4,021,397 for the nine
and three month periods ended June 30, 1997, respectively.
Basic and diluted earnings per share for the nine and three month
periods ended June 30, 1997 have been restated to give effect to the
Corporation's two-for-one stock split which was effected on March 31,
1998.
9
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Winton Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
In the following pages, management presents an analysis of the Corporation's
financial condition as of June 30, 1998, and the results of operations for the
three and nine month periods ended June 30, 1998, compared to the same periods
in 1997. In addition to this historical information, the following discussion
contains forward-looking statements that involve risks and uncertainties.
Economic circumstances, Winton Financial's operations and Winton Financial's
actual results could differ significantly from those discussed in the
forward-looking statements. Some of the factors that could cause or contribute
to such differences are discussed herein but also include changes in the economy
and interest rates in the nation and in Winton Financial's general market area.
Without limiting the foregoing, some of the statements in the following
referenced sections of this discussion and analysis are forward looking and are,
therefore, subject to such risks and uncertainties.
1. Management's determination of the amount and adequacy of the allowance for
loan losses as set forth under "Discussion of Changes in Financial
Condition from September 30, 1997 to June 30, 1998" and "Comparison of
Results of Operations for the Nine Months Ended June 30, 1998 and 1997."
2. Management's determination of the potential effects of the year 2000 on its
information technology systems as set forth under "Other Matters."
Discussion of Financial Condition Changes from September 30, 1997 to June 30,
1998
At June 30, 1998, the Corporation had total assets of $358.6 million, an
increase of approximately $34.1 million, or 10.5%, over the level at September
30, 1997. The growth in assets was funded primarily by deposit growth of $13.6
million, an increase in Federal Home Loan Bank advances of $17.5 million and
undistributed net earnings of $2.3 million.
Investment securities totaled approximately $19.3 million at June 30, 1998, an
increase of approximately $3.1 million, or 19.1%, over September 30, 1997
levels, as purchases of $8.7 million exceeded maturities of $5.9 million during
the period.
Mortgage-backed securities totaled approximately $13.8 million at June 30, 1998,
a decrease of approximately $1.6 million, or 10.5%, since September 30, 1997,
primarily attributable to regular principal repayments during the period.
Loans receivable and loans held for sale totaled $312.4 million at June 30,
1998, an increase of approximately $31.8 million, or 11.3%, over the level at
September 30, 1997. Proceeds from loan sales increased by $43.8 million during
the current period to $68.4 million, loan originations totaled $168.9 million,
principal repayments amounted to $63.3 million and sales of participations
totaled $6.3 million.
10
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Winton Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from September 30, 1997 to June 30,
1998 (continued)
At June 30, 1998, the allowance for loan losses of Winton Savings totaled
$814,000, a decrease of $13,000 from the level maintained at September 30, 1997.
At June 30, 1998, the allowance represented approximately .25% of the total loan
portfolio and 82% of total nonperforming loans. At June 30, 1998, the ratio of
total nonperforming loans to total loans amounted to .30% as compared to .16% at
September 30, 1997. Although management believes that its allowance for loan
losses at June 30, 1998 is adequate based on the available facts and
circumstances, there can be no assurance that additions to such allowance will
not be necessary in future periods, which could adversely affect Winton
Financial's results of operations.
Deposits totaled $253.9 million at June 30, 1998, an increase of $13.6 million,
or 5.7%, over September 30, 1997 levels. During fiscal 1997, management elected
to employ a strategy to achieve growth in the deposit portfolio that included
acquisition of brokered certificates of deposit. Such brokered deposits totaled
$27.6 million and $16.3 million at June 30, 1998 and September 30, 1997,
respectively.
Advances from the Federal Home Loan Bank totaled $74.9 million at June 30, 1998,
an increase of $17.5 million, or 30.5%, over September 30, 1997 levels. Proceeds
from such advances have generally been utilized to fund the growth in the loan
portfolio.
The Company is required to meet minimum capital standards promulgated by the
Office of Thrift Supervision (the "OTS"). At June 30, 1998, the Company's
regulatory capital was well in excess of such minimum capital requirements.
Comparison of Operating Results for the Nine Month Periods ended June 30, 1998
and 1997
General
Net earnings totaled $3.0 million for the nine months ended June 30, 1998,
compared to $2.3 million for the same period in 1997, an increase of $675,000,
or 28.8%. The increased earnings resulted primarily from a $908,000 increase in
net interest income and a $386,000 increase in other income, which were
partially offset by an increase of $8,000 in the provision for losses on loans,
a $245,000 increase in general, administrative and other expense, and a $366,000
increase in the provision for federal income taxes.
Net Interest Income
Interest income on loans and mortgage-backed securities increased by $2.0
million, or 11.6%, for the nine months ended June 30, 1998, compared to the same
period in 1997. The increase resulted primarily from a $29.5 million increase in
the weighted-average portfolio outstanding year to year and a 7 basis point
increase in yield, to 8.29% for the nine months ended June 30, 1998.
11
<PAGE>
Winton Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Nine Month Periods ended June 30, 1998
and 1997 (continued)
Net Interest Income (continued)
Interest income on investment securities and interest-bearing deposits and other
increased by $241,000, or 31.4%, for the nine months ended June 30, 1998,
compared to the comparable period in 1997. The increase resulted from a $5.5
million increase in the average balance outstanding, which was partially offset
by a decrease in yields due to replacement of called securities at a lower
yield.
Interest expense on deposits increased by $869,000, or 9.8%, for the nine months
ended June 30, 1998 compared to the comparable period in 1997. The increase was
primarily attributable to a $21.6 million increase in weighted-average deposits
outstanding year to year. The weighted-average cost of deposits remained stable
during the periods, amounting to 5.21% and 5.20% for the nine months ended June
30, 1998 and 1997, respectively.
Interest expense on borrowings increased by $445,000, or 20.3%, during the nine
months ended June 30, 1998, compared to the same period in 1997, primarily due
to an increase of $10.0 million in the weighted-average balances of Federal Home
Loan Bank advances outstanding, while the weighted-average cost of Federal Home
Loan Bank advances remained stable at 5.85% and 5.84% during the nine month
periods ended June 30, 1998 and 1997, respectively.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $908,000, or 13.3%, to a total of $7.7 million
for the nine months ended June 30, 1998, compared to the same period in 1997.
The interest rate spread increased by two basis points, to 2.82% for the nine
months ended June 30, 1998, while the net interest margin increased by four
basis points, to 3.14% for the nine months ended June 30, 1998, compared to
3.10% for the comparable period in 1997.
Provision for Losses on Loans
A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical experience, the volume and type of lending conducted by the
Company, the status of past due principal and interest payments, and general
economic conditions, particularly as such conditions relate to the Company's
loan portfolio. As a result of such analysis, management elected to record an
$8,000 provision for loan losses during the nine-month period ended June 30,
1998. There can be no assurance that the allowance for loan losses of the
Company will be adequate to cover losses on nonperforming assets in the future.
Other Income
Other income increased by $386,000, or 36.6%, for the nine months ended June 30,
1998, compared to the 1997 period, primarily due to an increase of $553,000 in
gain on sale of mortgage loans and a $29,000 increase in other income, which
were partially offset by a $128,000 decrease in mortgage servicing fees and the
absence of a $36,000 gain on sale of real estate acquired through foreclosure
and a $32,000 gain on sale of investment securities designated as available for
sale recorded in 1997.
12
<PAGE>
Winton Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Nine Month Periods ended June 30, 1998
and 1997 (continued)
General, Administrative and Other Expense
General, administrative and other expense increased by $245,000, or 5.7%, for
the nine months ended June 30, 1998, compared to the same period in 1997. The
increase consisted primarily of a $110,000, or 5.2%, increase in employee
compensation and benefits, a $64,000, or 7.1%, increase in occupancy and
equipment, a $27,000, or 13.7%, increase in franchise tax expense, a $68,000, or
59.6%, increase in advertising expense and a $34,000, or 4.5%, increase in other
operating expenses, which were partially offset by a $58,000, or 34.1%, decrease
in federal deposit insurance premiums. The increase in employee compensation and
benefits resulted primarily from increased staffing levels coupled with normal
merit increases, which were partially offset by an increase in deferred loan
origination costs due to the increased lending volume. The decline in federal
deposit insurance premiums resulted from lower premium rates following the
recapitalization of the Savings Association Insurance Fund in November 1996.
Increases in general, administrative and other expenses generally reflects the
Corporation's overall growth year to year.
Federal Income Taxes
The provision for federal income taxes amounted to $1.6 million for the nine
months ended June 30, 1998, an increase of $366,000, or 30.0%, over the same
period in 1997. The increase resulted primarily from a $1.0 million, or 29.2%,
increase in pretax earnings. The effective tax rates were 34.4% and 34.2% for
the nine month periods ended June 30, 1998 and 1997, respectively.
Comparison of Operating Results for the Three Month Periods ended June 30, 1998
and 1997
General
Net earnings totaled $1.1 million for the three months ended June 30, 1998,
compared to $796,000 for the same period in 1997, an increase of $264,000, or
33.2%. The increase in earnings resulted primarily from a $363,000 increase in
net interest income and a $147,000 increase in other income, which were
partially offset by an $8,000 increase in provision for losses on loans, a
$100,000 increase in general, administrative and other expense and a $138,000
increase in the provision for federal income taxes.
Net Interest Income
Interest income on loans and mortgage-backed securities increased by $784,000,
or 13.3%, for the three months ended June 30, 1998, compared to the comparable
1997 quarter. The increase resulted primarily from an increase in
weighted-average portfolio balances outstanding year to year.
Interest income on investments and interest-bearing deposits increased by
$71,000, or 25.2%, for the three months ended June 30, 1998, compared to the
same quarter in 1997. The increase resulted primarily from an increase in
weighted-average portfolio balances outstanding.
13
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Winton Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three Month Periods ended June 30, 1998
and 1997 (continued)
Net Interest Income (continued)
Interest expense on deposits totaled $3.3 million for the three months ended
June 30, 1998, an increase of $225,000 or 7.4%, over the comparable quarter in
1997. The increase was primarily attributable to an increase in the
weighted-average cost of deposits and an increase in the average balance of
deposits outstanding.
Interest expense on borrowings totaled $1.1 million for the three months ended
June 30, 1998, an increase of $267,000, or 33.5%, over the 1997 period. The
increase was primarily attributable to an increase in the weighted-average cost
of advances and an increase in the average balance of borrowings outstanding.
As a result of the foregoing changes in interest income and interest expense,
the Corporation's net interest income increased by $363,000, or 15.6%, for the
three months ended June 30, 1998, compared to the three months ended June 30,
1997.
Other Income
Other income increased by $147,000, or 38.7%, for the 1998 quarter, compared to
the same period in 1997, primarily due to an increase of $192,000 in gain on
sale of mortgage loans and a $4,000 increase in other income, which was
partially offset by a $49,000 decrease in mortgage servicing fees.
General, Administrative and Other Expense
General, administrative and other expense totaled $1.6 million for the quarter
ended June 30, 1998, an increase of $100,000, or 6.7%, over the 1997 quarter.
The increase was comprised primarily of a $15,000, or 2.0%, increase in employee
compensation and benefits, a $16,000, or 5.1%, increase in occupancy and
equipment expense, a $2,000 increase in federal deposit insurance premiums, an
$11,000, or 16.4%, increase in franchise taxes, a $37,000, or 102.8%, increase
in advertising and a $19,000, or 7.5%, increase in other operating expense.
These increases resulted primarily from an increase in operating costs due to
the Corporation's overall growth year to year.
Federal Income Taxes
The provision for federal income taxes totaled $558,000 for the three months
ended June 30, 1998, an increase of $138,000, or 32.9%, over the comparable
quarter in 1997. The increase resulted primarily from a $402,000, or 33.1%,
increase in pretax earnings. The Corporation's effective tax rates amounted to
34.5% for each of the three month periods ended June 30, 1998 and 1997.
14
<PAGE>
Winton Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Other Matters
As with all providers of financial services, Winton Savings' operations are
heavily dependent on information technology systems. The Company is addressing
the potential problems associated with the possibility that the computers that
control or operate the Company's information technology system and
infrastructure may not be programmed to read four-digit date codes and, upon
arrival of the year 2000, may recognize the two-digit code "00" as the year
1900, causing systems to fail to function or to generate erroneous data. The
Company is working with the companies that supply or service its information
technology systems to identify and remedy any year 2000 related problems.
As of the date of this Form 10-QSB, the Company has not identified any specific
expenses that are reasonably likely to be incurred by the Company in connection
with this issue and does not expect to incur significant expense to implement
the necessary corrective measures. No assurance can be given, however, that
significant expense will not be incurred in future periods. In the event that
the Company is ultimately required to purchase replacement computer systems,
programs and equipment, or incur substantial expense to make the Company's
current systems, programs and equipment year 2000 compliant, the Company's net
earnings and financial condition could be adversely affected.
In addition to possible expense related to its own systems, the Company could
incur losses if loan payments are delayed due to year 2000 problems affecting
any major borrowers in the Company's primary market area. Because the Company's
loan portfolio is highly diversified with regard to individual borrowers and
types of businesses and the Company's primary market area is not significantly
dependent upon one employer or industry, the Company does not expect any
significant or prolonged difficulties that will affect net earnings or cash
flow.
15
<PAGE>
Winton Financial Corporation
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
Not applicable
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
Any proposals of shareholders intended to be included in the
Corporation's proxy statement and proxy card for the 1999 Annual
Meeting of Shareholders should be sent to the Corporation by certified
mail and must be received by the Corporation not later than September
7, 1998. In addition, if a shareholder intends to present a proposal
at the 1999 Annual Meeting without including the proposal in the proxy
materials related to that meeting, and if the proposal is not received
by November 20, 1998, then the proxies designated by the Board of
Directors of the Corporation for the 1999 Annual Meeting of
Shareholders of the Corporation may vote in their discretion on any
such proposal any shares for which they have been appointed proxies
without mention of such matter in the proxy statement or on the proxy
card for such meeting.
ITEM 6. Exhibits and Reports on Form 8-K
There were no Form 8-K's filed by Winton Financial Corporation during
the quarter ended June 30, 1998.
Exhibits
10.1: Employment Agreement between Winton Financial
Corporation, The Winton Savings and Loan Co.
and Gregory J. Bollin.
10.2: Employment Agreement between Winton Financial
Corporation, The Winton Savings and Loan Co.
and Robert L. Bollin.
10.3 Severance Agreement between Winton Financial
Corporation, The Winton Savings and Loan Co.
and Jill M. Burke.
27.1: Financial Data Schedule for the Nine Months
Ended June 30, 1998.
27.2: Restated Financial Data Schedule for the Nine
Months Ended June 30, 1997.
16
<PAGE>
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.
Date: August 10, 1998 By: /s/Robert L. Bollin
------------------- -------------------
Robert L. Bollin
President
Date: August 10, 1998 By: /s/Jill M. Burke
------------------- ----------------
Jill M. Burke
Chief Financial Officer
17
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as this
"AGREEMENT"), entered into this 22d day of May, 1998, by and between Winton
Financial Corporation, a savings and loan holding company incorporated under
Ohio law (hereinafter referred to as "WFC"), The Winton Savings and Loan Co., a
savings and loan association incorporated under Ohio law and a wholly-owned
subsidiary WFC (hereinafter referred to as "WINTON"), and Gregory J. Bollin, an
individual (hereinafter referred to as the "EMPLOYEE");
WITNESSETH:
WHEREAS, the EMPLOYEE is an employee of WFC and WINTON (hereinafter
collectively referred to as the "EMPLOYERS");
WHEREAS, as a result of the skill, knowledge and experience of the
EMPLOYEE, the Boards of Directors of the EMPLOYERS desire to retain the services
of the EMPLOYEE as the Executive Vice President of WINTON and the Vice President
of WFC;
WHEREAS, the EMPLOYEE desires to continue to serve as the Executive
Vice President of WINTON and the Vice President of WFC; and
WHEREAS, the EMPLOYEE and the EMPLOYERS desire to enter into this
Agreement to set forth the terms and conditions of the employment relationship
between the EMPLOYERS and the EMPLOYEE;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the EMPLOYERS and the EMPLOYEE hereby agree as follows:
Section l. Employment and Term. Upon the terms and subject to the
conditions of this AGREEMENT, the EMPLOYERS hereby employ the EMPLOYEE, and the
EMPLOYEE hereby accepts employment, as the Executive Vice President of WINTON
and the Vice President of WFC. The term of this AGREEMENT shall commence on the
date hereof and shall end on April 30, 2001 (hereinafter referred to as the
"TERM").
Section 2. Duties of EMPLOYEE.
(a) General Duties and Responsibilities. As an officer of each of the
EMPLOYERS, the EMPLOYEE shall perform the duties and responsibilities customary
for such office to the best of his ability and in accordance with the policies
established by the Boards of Directors of the EMPLOYERS and all applicable laws
and regulations. The EMPLOYEE shall perform such other duties not inconsistent
with his position as may be assigned to him from time to time by the Boards of
Directors of the EMPLOYERS; provided, however, that the EMPLOYERS shall employ
the EMPLOYEE during the TERM in a senior executive capacity without diminishment
of the importance or prestige of his position.
<PAGE>
(b) Devotion of Entire Time to the Business of the EMPLOYERS. The
EMPLOYEE shall devote his entire productive time, ability and attention during
normal business hours throughout the TERM to the faithful performance of his
duties under this AGREEMENT. The EMPLOYEE shall not directly or indirectly
render any services of a business, commercial or professional nature to any
person or organization without the prior written consent of the Boards of
Directors of the EMPLOYERS; provided, however, that the EMPLOYEE shall not be
precluded from (i) vacations and other leave time in accordance with Section
3(e) hereof; (ii) reasonable participation in community, civic, charitable or
similar organizations; or (iii) the pursuit of personal investments which do not
interfere or conflict with the performance of the EMPLOYEE'S duties to the
EMPLOYERS.
Section 3. Compensation, Benefits and Reimbursements.
(a) Salary. The EMPLOYEE shall receive during the TERM an annual salary
payable in equal installments not less often than monthly. The amount of such
annual salary shall be $134,000 until changed by the Boards of Directors of the
EMPLOYER in accordance with Section 3(b) of this AGREEMENT.
(b) Annual Salary Review. In December of each year throughout the TERM,
the annual salary of the EMPLOYEE shall be reviewed by the Boards of Directors
of the EMPLOYERS and shall be set, effective January l of the following year, at
an amount not less than $134,000, based upon the EMPLOYEE'S individual
performance and the overall profitability and financial condition of the
EMPLOYERS (hereinafter referred to as the "ANNUAL REVIEW"). The results of the
ANNUAL REVIEW shall be reflected in the minutes of the Boards of Directors of
the EMPLOYERS.
(c) Expenses. In addition to any compensation received under Section
3(a) or (b) of this AGREEMENT, the EMPLOYERS shall pay or reimburse the EMPLOYEE
for all reasonable travel, entertainment and miscellaneous expenses incurred in
connection with the performance of his duties under this AGREEMENT. Such
reimbursement shall be made in accordance with the existing policies and
procedures of the EMPLOYERS pertaining to reimbursement of expenses to senior
management officials.
(d) Employee Benefit Program. (i) During the TERM, the EMPLOYEE shall
be entitled to participate in all formally established employee benefit, bonus,
pension and profit-sharing plans and similar programs that are maintained by the
EMPLOYERS from time to time, including programs in respect of group health,
disability or life insurance, reimbursement of membership fees in civic, social
and professional organizations and all employee benefit plans or programs
2
<PAGE>
hereafter adopted in writing by the Boards of Directors of the EMPLOYERS, for
which senior management personnel are eligible, including any employee stock
ownership plan, stock option plan or other stock benefit plan (hereinafter
collectively referred to as the "BENEFIT PLANS"). Notwithstanding the foregoing
sentence, the EMPLOYERS may discontinue or terminate at any time any such
BENEFIT PLANS, now existing or hereafter adopted, to the extent permitted by the
terms of such plans and shall not be required to compensate the EMPLOYEE for
such discontinuance or termination.
(ii) After the expiration of the TERM or the termination of the
employment of the EMPLOYEE for any reason other than JUST CAUSE (as defined
hereinafter), the EMPLOYERS shall provide a group health insurance program in
which the EMPLOYEE and his spouse will be eligible to participate and which
shall provide substantially the same benefits as are available to retired
employees of the EMPLOYERS on the date of this AGREEMENT until both the EMPLOYEE
and his spouse become 65 years of age; provided, however that all premiums for
such program shall be paid by the EMPLOYEE and/or his spouse after the
EMPLOYEE's retirement; provided further, however, that the EMPLOYEE may only
participate in such program for as long as the EMPLOYERS make available an
employee group health insurance program which permits the EMPLOYERS to make
coverage available for retirees.
(e) Vacation and Sick Leave. The EMPLOYEE shall be entitled, without
loss of pay, to be absent voluntarily from the performance of his duties under
this AGREEMENT, subject to the following conditions:
(i) The EMPLOYEE shall be entitled to an annual vacation in
accordance with the policies periodically established by the Boards of
Directors of the EMPLOYERS for senior management officials of the
EMPLOYERS, the duration of which shall not be less than four weeks each
calendar year;
(ii) Vacation time shall be scheduled by the EMPLOYEE in a
reasonable manner and shall be subject to approval by the Boards of
Directors of the EMPLOYERS. The EMPLOYEE shall not be entitled to
receive any additional compensation from the EMPLOYERS in the event of
his failure to take the full allotment of vacation time in any calendar
year; provided, however, that a maximum of one week of unused vacation
time in any calendar year may be carried over into any succeeding
calendar year; and
(iii) The EMPLOYEE shall be entitled to annual sick leave as
established by the Boards of Directors of the EMPLOYERS for senior
management officials of the EMPLOYERS. In the event that any sick leave
time shall not have been used during any calendar year, such leave
shall accrue to subsequent calendar years, only to the extent
authorized by the Boards of Directors of the EMPLOYERS. Upon
termination of employment, the EMPLOYEE shall not be entitled to
receive any additional compensation from the EMPLOYERS for unused sick
leave.
3
<PAGE>
Section 4. Termination of Employment.
(a) General. In addition to the termination of the employment of the
EMPLOYEE upon the expiration of the TERM, the employment of the EMPLOYEE shall
terminate at any other time during the TERM upon the delivery by the EMPLOYERS
of written notice of employment termination to the EMPLOYEE. Without limiting
the generality of the foregoing sentence, the following subparagraphs (i), (ii)
and (iii) of this Section 4(a) shall govern the obligations of the EMPLOYERS to
the EMPLOYEE upon the occurrence of the events described in such subparagraphs:
(i) Termination for JUST CAUSE. In the event that the
EMPLOYERS terminate the employment of the EMPLOYEE during the TERM
because of the EMPLOYEE'S personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure or refusal to perform the duties and
responsibilities assigned in this AGREEMENT, willful violation of any
law, rule, regulation or final cease-and-desist order (other than
traffic violations or similar offenses), conviction of a felony or for
fraud or embezzlement, or material breach of any provision of this
AGREEMENT (hereinafter collectively referred to as "JUST CAUSE"), the
EMPLOYEE shall not receive, and shall have no right to receive, any
compensation or other benefits for any period after such termination.
(ii) Termination after CHANGE OF CONTROL. In the event that,
before the expiration of the TERM and in connection with or within one
year of a CHANGE OF CONTROL (as defined hereinafter) of either one of
the EMPLOYERS, (A) the employment of the EMPLOYEE is terminated for any
reason other than JUST CAUSE before the expiration of the TERM, (B) the
present capacity or circumstances in which the EMPLOYEE is employed is
changed before the expiration of the TERM, or (C) the EMPLOYEE'S
responsibilities, authority, compensation or other benefits provided
under this AGREEMENT are materially reduced, then the following shall
occur:
(I) The EMPLOYERS shall promptly pay to the EMPLOYEE
or to his beneficiaries, dependents or estate an amount equal
to the sum of (l) the amount of compensation to which the
EMPLOYEE would be entitled for the remainder of the TERM under
this AGREEMENT, plus (2) the difference between (x) the
product of three, multiplied by the greater of the annual
salary set forth in Section 3(a) of this AGREEMENT or the
annual salary payable to the EMPLOYEE as a result of any
ANNUAL REVIEW, less (xx) the amount paid to the EMPLOYEE
pursuant to clause (l) of this subparagraph (I);
(II) The EMPLOYEE, his dependents, beneficiaries and
estate shall continue to be covered under all BENEFIT PLANS of
the EMPLOYERS at the EMPLOYERS' expense as if the EMPLOYEE
were still employed under this AGREEMENT until the earliest of
the expiration of the TERM or the date on which the EMPLOYEE
is included in another employer's benefit plans as a full-time
employee; and
4
<PAGE>
(III) The EMPLOYEE shall not be required to mitigate
the amount of any payment provided for in this AGREEMENT by
seeking other employment or otherwise, nor shall any amounts
received from other employment or otherwise by the EMPLOYEE
offset in any manner the obligations of the EMPLOYERS
hereunder, except as specifically stated in subparagraph (II).
In the event that payments pursuant to this subsection (ii) would
result in the imposition of a penalty tax pursuant to Section 280G(b)
(3) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (hereinafter collectively referred
to as "SECTION 280G"), such payments shall be reduced to the maximum
amount which may be paid under SECTION 280G without exceeding such
limits.
(iii) Termination Without CHANGE OF CONTROL. In the event that
the employment of the EMPLOYEE is terminated before the expiration of
the TERM for any reason other than JUST CAUSE or in connection with or
within one year of a CHANGE OF CONTROL, the EMPLOYERS shall be
obligated to continue (A) to pay on a monthly basis to the EMPLOYEE,
his designated beneficiaries or his estate, his annual salary provided
pursuant to Section 3(a) or (b) of this AGREEMENT until the expiration
of the TERM and (B) to provide to the EMPLOYEE at the EMPLOYERS'
expense, health, life, disability, and other benefits substantially
equal to those being provided to the EMPLOYEE at the date of
termination of his employment until the earliest to occur of the
expiration of the TERM or the date the EMPLOYEE becomes employed
full-time by another employer. In the event that payments pursuant to
this subsection (iii) would result in the imposition of a penalty tax
pursuant to SECTION 280G, such payments shall be reduced to the maximum
amount which may be paid under SECTION 280G without exceeding those
limits.
(b) Death of the EMPLOYEE. The TERM automatically terminates upon the
death of the EMPLOYEE. In the event of such death, the EMPLOYEE'S estate shall
be entitled to receive the compensation due the EMPLOYEE through the last day of
the calendar month in which the death occurred, except as otherwise specified
herein.
(c) "Golden Parachute" Provision. Any payments made to the EMPLOYEE
pursuant to this AGREEMENT or otherwise are subject to and conditioned upon
their compliance with 12 U.S.C. ss.1828(k) and any regulations promulgated
thereunder.
(d) Definition of "CHANGE OF CONTROL". A "CHANGE OF CONTROL" shall be
deemed to have occurred in the event that, at any time during the TERM, either
any person or entity obtains "conclusive control" of the EMPLOYERS within the
meaning of 12 C.F.R. ss.574.4(a), or any person or entity obtains "rebuttable
control" within the meaning of 12 C.F.R. ss.574.4(b) and has not rebutted
control in accordance with 12 C.F.R. ss.574.4(c).
5
<PAGE>
Section 5. Special Regulatory Events. Notwithstanding Section 4 of
this AGREEMENT, the obligations of the EMPLOYERS to the EMPLOYEE shall be as
follows in the event of the following circumstances:
(a) If the EMPLOYEE is suspended and/or temporarily prohibited from
participating in the conduct of the EMPLOYERS' affairs by a notice served under
section 8(e) (3) or (g) (1) of the Federal Deposit Insurance Act (hereinafter
referred to as the "FDIA"), the EMPLOYERS' obligations under this AGREEMENT
shall be suspended as of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
EMPLOYERS may, in its discretion, pay the EMPLOYEE all or part of the
compensation withheld while the obligations in this AGREEMENT were suspended and
reinstate, in whole or in part, any of the obligations that were suspended.
(b) If the EMPLOYEE is removed and/or permanently prohibited from
participating in the conduct of the EMPLOYERS' affairs by an order issued under
Section 8(e) (4) or (g) (l) of the FDIA, all obligations of the EMPLOYERS under
this AGREEMENT shall terminate as of the effective date of such order; provided,
however, that vested rights of the EMPLOYEE shall not be affected by such
termination.
(c) If the EMPLOYERS are in default, as defined in section 3(x) (1) of
the FDIA, all obligations under this AGREEMENT shall terminate as of the date of
default; provided, however, that vested rights of the EMPLOYEE shall not be
affected.
(d) All obligations under this AGREEMENT shall be terminated, except to
the extent of a determination that the continuation of this AGREEMENT is
necessary for the continued operation of the EMPLOYERS, (i) by the Director of
the Office of Thrift Supervision (hereinafter referred to as the "OTS"), or his
or her designee at the time that the Federal Deposit Insurance Corporation or
the Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the EMPLOYERS under the authority contained in Section 13(c)
of the FDIA or (ii) by the Director of the OTS, or his or her designee, at any
time the Director of the OTS, or his or her designee, approves a supervisory
merger to resolve problems related to the operation of the EMPLOYERS or when the
EMPLOYERS are determined by the Director of the OTS to be in an unsafe or
unsound condition. No vested rights of the EMPLOYEE shall be affected by any
such action.
Section 6. Consolidation, Merger or Sale of Assets. Nothing in this
AGREEMENT shall preclude the EMPLOYERS from consolidating with, merging into, or
transferring all, or substantially all, of their assets to another corporation
that assumes all of the EMPLOYERS' obligations and undertakings hereunder. Upon
such a consolidation, merger or transfer of assets, the term "EMPLOYERS" as used
herein, shall mean such other corporation or entity, and this AGREEMENT shall
continue in full force and effect.
6
<PAGE>
Section 7. Confidential Information. The EMPLOYEE acknowledges that
during his employment he will learn and have access to confidential information
regarding the EMPLOYERS and their customers and businesses. The EMPLOYEE agrees
and covenants not to disclose or use for his own benefit, or the benefit of any
other person or entity, any confidential information, unless or until the
EMPLOYERS consent to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
EMPLOYEE shall not knowingly disclose or reveal to any unauthorized person any
confidential information relating to the EMPLOYERS, their subsidiaries or
affiliates, or to any of the businesses operated by them, and the EMPLOYEE
confirms that such information constitutes the exclusive property of the
EMPLOYERS. The EMPLOYEE shall not otherwise knowingly act or conduct himself (a)
to the material detriment of the EMPLOYERS, their subsidiaries, or affiliates,
or (b) in a manner which is inimical or contrary to the interests of the
EMPLOYERS.
Section 8. Nonassignabilitv. Neither this AGREEMENT nor any right or
interest hereunder shall be assignable by the EMPLOYEE, his beneficiaries, or
legal representatives without the EMPLOYERS' prior written consent; provided,
however, that nothing in this Section 8 shall preclude (a) the EMPLOYEE from
designating a beneficiary to receive any benefits payable hereunder upon his
death, or (b) the executors, administrators, or other legal representatives of
the EMPLOYEE or his estate from assigning any rights hereunder to the person or
persons entitled thereto.
Section 9. No Attachment. Except as required by law, no right to
receive payment under this AGREEMENT shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
Section l0. Binding Agreement. This AGREEMENT shall be binding upon,
and inure to the benefit of, the EMPLOYEE and the EMPLOYERS and their respective
permitted successors and assigns.
Section 11. Amendment of AGREEMENT. This AGREEMENT may not be modified
or amended, except by an instrument in writing signed by the parties hereto.
Section 12. Waiver. No term or condition of this AGREEMENT shall be
deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this AGREEMENT, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver, unless specifically stated therein, and each waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
7
<PAGE>
Section 13. Severability. If, for any reason, any provision of this
AGREEMENT is held invalid, such invalidity shall not affect the other provisions
of this AGREEMENT not held so invalid, and each such other provision shall, to
the full extent consistent with applicable law, continue in full force and
effect. If this AGREEMENT is held invalid or cannot be enforced, then any prior
AGREEMENT between the EMPLOYERS (or any predecessor thereof) and the EMPLOYEE
shall be deemed reinstated to the full extent permitted by law, as if this
AGREEMENT had not been executed.
Section 14. Headings. The headings of the paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this AGREEMENT.
Section 15. Governing Law. This AGREEMENT has been executed and
delivered in the State of Ohio and its validity, interpretation, performance,
and enforcement shall be governed by the laws of this State of Ohio, except to
the extent that federal law is governing.
Section 16. Effect of Prior Agreements. This AGREEMENT contains the
entire understanding between the parties hereto and supersedes any prior
employment agreement between the EMPLOYERS and the EMPLOYEE, each of which is
hereby terminated and is of no further force or effect.
Section 17. Notices. Any notice or other communication required or
permitted pursuant to this AGREEMENT shall be deemed delivered if such notice or
communication is in writing and is delivered personally or by facsimile
transmission or is deposited in the United States mail, postage prepaid,
addressed as follows:
If to Winton Financial Corporation and/or The Winton Savings & Loan
Company:
Winton Financial Corporation
5511 Cheviot Road
Cincinnati, Ohio 45247-7095
With copies to:
John C. Vorys, Esq.
Vorys, Sater, Seymour and Pease
Atrium Two, Suite 2100
221 East Fourth Street
Cincinnati, Ohio 45201-0236
If to the EMPLOYEE to:
Gregory J. Bollin
4440 Hubble Road
Cincinnati, Ohio 45247
8
<PAGE>
IN WITNESS WHEREOF, the EMPLOYERS have caused this AGREEMENT to be
executed by its duly authorized officer, and the EMPLOYEE has signed this
AGREEMENT, each as of the day and year first above written.
Attest: WINTON FINANCIAL CORPORATION
_____________________________ By ________________________________
________________________________
its ____________________________
Attest: THE WINTON SAVINGS AND LOAN CO.
_____________________________ By ________________________________
________________________________
its ____________________________
Attest:
_____________________________ ________________________________
Gregory J. Bollin
9
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as this
"AGREEMENT"), entered into this 22d day of May, 1998, by and between Winton
Financial Corporation, a savings and loan holding company incorporated under
Ohio law (hereinafter referred to as "WFC"), The Winton Savings and Loan Co., a
savings and loan association incorporated under Ohio law and a wholly-owned
subsidiary WFC (hereinafter referred to as "WINTON"), and Robert L. Bollin, an
individual (hereinafter referred to as the "EMPLOYEE");
WITNESSETH:
WHEREAS, the EMPLOYEE is an employee of WFC and WINTON (hereinafter
collectively referred to as the "EMPLOYERS");
WHEREAS, as a result of the skill, knowledge and experience of the
EMPLOYEE, the Boards of Directors of the EMPLOYERS desire to retain the services
of the EMPLOYEE as the President of WINTON and of WFC;
WHEREAS, the EMPLOYEE desires to continue to serve as the President of
WINTON and of WFC; and
WHEREAS, the EMPLOYEE and the EMPLOYERS desire to enter into this
Agreement to set forth the terms and conditions of the employment relationship
between the EMPLOYERS and the EMPLOYEE;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the EMPLOYERS and the EMPLOYEE hereby agree as follows:
Section l. Employment and Term. Upon the terms and subject to the
conditions of this AGREEMENT, the EMPLOYERS hereby employ the EMPLOYEE, and the
EMPLOYEE hereby accepts employment, as the President of WINTON and of WFC. The
term of this AGREEMENT shall commence on the date hereof and shall end on April
30, 2001 (hereinafter referred to as the "TERM").
Section 2. Duties of EMPLOYEE.
(a) General Duties and Responsibilities. As an officer of each of the
EMPLOYERS, the EMPLOYEE shall perform the duties and responsibilities customary
for such office to the best of his ability and in accordance with the policies
established by the Boards of Directors of the EMPLOYERS and all applicable laws
<PAGE>
and regulations. The EMPLOYEE shall perform such other duties not inconsistent
with his position as may be assigned to him from time to time by the Boards of
Directors of the EMPLOYERS; provided, however, that the EMPLOYERS shall employ
the EMPLOYEE during the TERM in a senior executive capacity without diminishment
of the importance or prestige of his position.
(b) Devotion of Entire Time to the Business of the EMPLOYERS. The
EMPLOYEE shall devote his entire productive time, ability and attention during
normal business hours throughout the TERM to the faithful performance of his
duties under this AGREEMENT. The EMPLOYEE shall not directly or indirectly
render any services of a business, commercial or professional nature to any
person or organization without the prior written consent of the Boards of
Directors of the EMPLOYERS; provided, however, that the EMPLOYEE shall not be
precluded from (i) vacations and other leave time in accordance with Section
3(e) hereof; (ii) reasonable participation in community, civic, charitable or
similar organizations; or (iii) the pursuit of personal investments which do not
interfere or conflict with the performance of the EMPLOYEE'S duties to the
EMPLOYERS.
Section 3. Compensation, Benefits and Reimbursements.
(a) Salary. The EMPLOYEE shall receive during the TERM an annual salary
payable in equal installments not less often than monthly. The amount of such
annual salary shall be $182,000 until changed by the Boards of Directors of the
EMPLOYER in accordance with Section 3(b) of this AGREEMENT.
(b) Annual Salary Review. In December of each year throughout the TERM,
the annual salary of the EMPLOYEE shall be reviewed by the Boards of Directors
of the EMPLOYERS and shall be set, effective January l of the following year, at
an amount not less than $182,000, based upon the EMPLOYEE'S individual
performance and the overall profitability and financial condition of the
EMPLOYERS (hereinafter referred to as the "ANNUAL REVIEW"). The results of the
ANNUAL REVIEW shall be reflected in the minutes of the Boards of Directors of
the EMPLOYERS.
(c) Expenses. In addition to any compensation received under Section
3(a) or (b) of this AGREEMENT, the EMPLOYERS shall pay or reimburse the EMPLOYEE
for all reasonable travel, entertainment and miscellaneous expenses incurred in
connection with the performance of his duties under this AGREEMENT. Such
reimbursement shall be made in accordance with the existing policies and
procedures of the EMPLOYERS pertaining to reimbursement of expenses to senior
management officials.
(d) Employee Benefit Program. (i) During the TERM, the EMPLOYEE shall
be entitled to participate in all formally established employee benefit, bonus,
pension and profit-sharing plans and similar programs that are maintained by the
EMPLOYERS from time to time, including programs in respect of group health,
disability or life insurance, reimbursement of membership fees in civic, social
and professional organizations and all employee benefit plans or programs
hereafter adopted in writing by the Boards of Directors of the EMPLOYERS, for
which senior management personnel are eligible, including any employee stock
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<PAGE>
ownership plan, stock option plan or other stock benefit plan (hereinafter
collectively referred to as the "BENEFIT PLANS"). Notwithstanding the foregoing
sentence, the EMPLOYERS may discontinue or terminate at any time any such
BENEFIT PLANS, now existing or hereafter adopted, to the extent permitted by the
terms of such plans and shall not be required to compensate the EMPLOYEE for
such discontinuance or termination.
(ii) After the expiration of the TERM or the termination of the
employment of the EMPLOYEE for any reason other than JUST CAUSE (as defined
hereinafter), the EMPLOYERS shall provide a group health insurance program in
which the EMPLOYEE and his spouse will be eligible to participate and which
shall provide substantially the same benefits as are available to retired
employees of the EMPLOYERS on the date of this AGREEMENT until both the EMPLOYEE
and his spouse become 65 years of age; provided, however that all premiums for
such program shall be paid by the EMPLOYEE and/or his spouse after the
EMPLOYEE's retirement; provided further, however, that the EMPLOYEE may only
participate in such program for as long as the EMPLOYERS make available an
employee group health insurance program which permits the EMPLOYERS to make
coverage available for retirees.
(e) Vacation and Sick Leave. The EMPLOYEE shall be entitled, without
loss of pay, to be absent voluntarily from the performance of his duties under
this AGREEMENT, subject to the following conditions:
(i) The EMPLOYEE shall be entitled to an annual vacation in
accordance with the policies periodically established by the Boards of
Directors of the EMPLOYERS for senior management officials of the
EMPLOYERS, the duration of which shall not be less than four weeks each
calendar year;
(ii) Vacation time shall be scheduled by the EMPLOYEE in a
reasonable manner and shall be subject to approval by the Boards of
Directors of the EMPLOYERS. The EMPLOYEE shall not be entitled to
receive any additional compensation from the EMPLOYERS in the event of
his failure to take the full allotment of vacation time in any calendar
year; provided, however, that a maximum of one week of unused vacation
time in any calendar year may be carried over into any succeeding
calendar year; and
(iii) The EMPLOYEE shall be entitled to annual sick leave as
established by the Boards of Directors of the EMPLOYERS for senior
management officials of the EMPLOYERS. In the event that any sick leave
time shall not have been used during any calendar year, such leave
shall accrue to subsequent calendar years, only to the extent
authorized by the Boards of Directors of the EMPLOYERS. Upon
termination of employment, the EMPLOYEE shall not be entitled to
receive any additional compensation from the EMPLOYERS for unused sick
leave.
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Section 4. Termination of Employment.
(a) General. In addition to the termination of the employment of the
EMPLOYEE upon the expiration of the TERM, the employment of the EMPLOYEE shall
terminate at any other time during the TERM upon the delivery by the EMPLOYERS
of written notice of employment termination to the EMPLOYEE. Without limiting
the generality of the foregoing sentence, the following subparagraphs (i), (ii)
and (iii) of this Section 4(a) shall govern the obligations of the EMPLOYERS to
the EMPLOYEE upon the occurrence of the events described in such subparagraphs:
(i) Termination for JUST CAUSE. In the event that the
EMPLOYERS terminate the employment of the EMPLOYEE during the TERM
because of the EMPLOYEE'S personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure or refusal to perform the duties and
responsibilities assigned in this AGREEMENT, willful violation of any
law, rule, regulation or final cease-and-desist order (other than
traffic violations or similar offenses), conviction of a felony or for
fraud or embezzlement, or material breach of any provision of this
AGREEMENT (hereinafter collectively referred to as "JUST CAUSE"), the
EMPLOYEE shall not receive, and shall have no right to receive, any
compensation or other benefits for any period after such termination.
(ii) Termination after CHANGE OF CONTROL. In the event that,
before the expiration of the TERM and in connection with or within one
year of a CHANGE OF CONTROL (as defined hereinafter) of either one of
the EMPLOYERS, (A) the employment of the EMPLOYEE is terminated for any
reason other than JUST CAUSE before the expiration of the TERM, (B) the
present capacity or circumstances in which the EMPLOYEE is employed is
changed before the expiration of the TERM, or (C) the EMPLOYEE'S
responsibilities, authority, compensation or other benefits provided
under this AGREEMENT are materially reduced, then the following shall
occur:
(I) The EMPLOYERS shall promptly pay to the EMPLOYEE
or to his beneficiaries, dependents or estate an amount equal
to the sum of (l) the amount of compensation to which the
EMPLOYEE would be entitled for the remainder of the TERM under
this AGREEMENT, plus (2) the difference between (x) the
product of three, multiplied by the greater of the annual
salary set forth in Section 3(a) of this AGREEMENT or the
annual salary payable to the EMPLOYEE as a result of any
ANNUAL REVIEW, less (xx) the amount paid to the EMPLOYEE
pursuant to clause (l) of this subparagraph (I);
(II) The EMPLOYEE, his dependents, beneficiaries and
estate shall continue to be covered under all BENEFIT PLANS of
the EMPLOYERS at the EMPLOYERS' expense as if the EMPLOYEE
were still employed under this AGREEMENT until the earliest of
the expiration of the TERM or the date on which the EMPLOYEE
is included in another employer's benefit plans as a full-time
employee; and
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(III) The EMPLOYEE shall not be required to mitigate
the amount of any payment provided for in this AGREEMENT by
seeking other employment or otherwise, nor shall any amounts
received from other employment or otherwise by the EMPLOYEE
offset in any manner the obligations of the EMPLOYERS
hereunder, except as specifically stated in subparagraph (II).
In the event that payments pursuant to this subsection (ii) would
result in the imposition of a penalty tax pursuant to Section 280G(b)
(3) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (hereinafter collectively referred
to as "SECTION 280G"), such payments shall be reduced to the maximum
amount which may be paid under SECTION 280G without exceeding such
limits.
(iii) Termination Without CHANGE OF CONTROL. In the event that
the employment of the EMPLOYEE is terminated before the expiration of
the TERM for any reason other than JUST CAUSE or in connection with or
within one year of a CHANGE OF CONTROL, the EMPLOYERS shall be
obligated to continue (A) to pay on a monthly basis to the EMPLOYEE,
his designated beneficiaries or his estate, his annual salary provided
pursuant to Section 3(a) or (b) of this AGREEMENT until the expiration
of the TERM and (B) to provide to the EMPLOYEE at the EMPLOYERS'
expense, health, life, disability, and other benefits substantially
equal to those being provided to the EMPLOYEE at the date of
termination of his employment until the earliest to occur of the
expiration of the TERM or the date the EMPLOYEE becomes employed
full-time by another employer. In the event that payments pursuant to
this subsection (iii) would result in the imposition of a penalty tax
pursuant to SECTION 280G, such payments shall be reduced to the maximum
amount which may be paid under SECTION 280G without exceeding those
limits.
(b) Death of the EMPLOYEE. The TERM automatically terminates upon the
death of the EMPLOYEE. In the event of such death, the EMPLOYEE'S estate shall
be entitled to receive the compensation due the EMPLOYEE through the last day of
the calendar month in which the death occurred, except as otherwise specified
herein.
(c) "Golden Parachute" Provision. Any payments made to the EMPLOYEE
pursuant to this AGREEMENT or otherwise are subject to and conditioned upon
their compliance with 12 U.S.C. ss.1828(k) and any regulations promulgated
thereunder.
(d) Definition of "CHANGE OF CONTROL". A "CHANGE OF CONTROL" shall be
deemed to have occurred in the event that, at any time during the TERM, either
any person or entity obtains "conclusive control" of the EMPLOYERS within the
meaning of 12 C.F.R. ss.574.4(a), or any person or entity obtains "rebuttable
control" within the meaning of 12 C.F.R. ss.574.4(b) and has not rebutted
control in accordance with 12 C.F.R. ss.574.4(c).
5
<PAGE>
Section 5. Special Regulatory Events. Notwithstanding Section 4 of
this AGREEMENT, the obligations of the EMPLOYERS to the EMPLOYEE shall be as
follows in the event of the following circumstances:
(a) If the EMPLOYEE is suspended and/or temporarily prohibited from
participating in the conduct of the EMPLOYERS' affairs by a notice served under
section 8(e) (3) or (g) (1) of the Federal Deposit Insurance Act (hereinafter
referred to as the "FDIA"), the EMPLOYERS' obligations under this AGREEMENT
shall be suspended as of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
EMPLOYERS may, in its discretion, pay the EMPLOYEE all or part of the
compensation withheld while the obligations in this AGREEMENT were suspended and
reinstate, in whole or in part, any of the obligations that were suspended.
(b) If the EMPLOYEE is removed and/or permanently prohibited from
participating in the conduct of the EMPLOYERS' affairs by an order issued under
Section 8(e) (4) or (g) (l) of the FDIA, all obligations of the EMPLOYERS under
this AGREEMENT shall terminate as of the effective date of such order; provided,
however, that vested rights of the EMPLOYEE shall not be affected by such
termination.
(c) If the EMPLOYERS are in default, as defined in section 3(x) (1) of
the FDIA, all obligations under this AGREEMENT shall terminate as of the date of
default; provided, however, that vested rights of the EMPLOYEE shall not be
affected.
(d) All obligations under this AGREEMENT shall be terminated, except to
the extent of a determination that the continuation of this AGREEMENT is
necessary for the continued operation of the EMPLOYERS, (i) by the Director of
the Office of Thrift Supervision (hereinafter referred to as the "OTS"), or his
or her designee at the time that the Federal Deposit Insurance Corporation or
the Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the EMPLOYERS under the authority contained in Section 13(c)
of the FDIA or (ii) by the Director of the OTS, or his or her designee, at any
time the Director of the OTS, or his or her designee, approves a supervisory
merger to resolve problems related to the operation of the EMPLOYERS or when the
EMPLOYERS are determined by the Director of the OTS to be in an unsafe or
unsound condition. No vested rights of the EMPLOYEE shall be affected by any
such action.
Section 6. Consolidation, Merger or Sale of Assets. Nothing in this
AGREEMENT shall preclude the EMPLOYERS from consolidating with, merging into, or
transferring all, or substantially all, of their assets to another corporation
that assumes all of the EMPLOYERS' obligations and undertakings hereunder. Upon
such a consolidation, merger or transfer of assets, the term "EMPLOYERS" as used
herein, shall mean such other corporation or entity, and this AGREEMENT shall
continue in full force and effect.
6
<PAGE>
Section 7. Confidential Information. The EMPLOYEE acknowledges that
during his employment he will learn and have access to confidential information
regarding the EMPLOYERS and their customers and businesses. The EMPLOYEE agrees
and covenants not to disclose or use for his own benefit, or the benefit of any
other person or entity, any confidential information, unless or until the
EMPLOYERS consent to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
EMPLOYEE shall not knowingly disclose or reveal to any unauthorized person any
confidential information relating to the EMPLOYERS, their subsidiaries or
affiliates, or to any of the businesses operated by them, and the EMPLOYEE
confirms that such information constitutes the exclusive property of the
EMPLOYERS. The EMPLOYEE shall not otherwise knowingly act or conduct himself (a)
to the material detriment of the EMPLOYERS, their subsidiaries, or affiliates,
or (b) in a manner which is inimical or contrary to the interests of the
EMPLOYERS.
Section 8. Nonassignabilitv. Neither this AGREEMENT nor any right or
interest hereunder shall be assignable by the EMPLOYEE, his beneficiaries, or
legal representatives without the EMPLOYERS' prior written consent; provided,
however, that nothing in this Section 8 shall preclude (a) the EMPLOYEE from
designating a beneficiary to receive any benefits payable hereunder upon his
death, or (b) the executors, administrators, or other legal representatives of
the EMPLOYEE or his estate from assigning any rights hereunder to the person or
persons entitled thereto.
Section 9. No Attachment. Except as required by law, no right to
receive payment under this AGREEMENT shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
Section l0. Binding Agreement. This AGREEMENT shall be binding upon,
and inure to the benefit of, the EMPLOYEE and the EMPLOYERS and their respective
permitted successors and assigns.
Section 11. Amendment of AGREEMENT. This AGREEMENT may not be modified
or amended, except by an instrument in writing signed by the parties hereto.
Section 12. Waiver. No term or condition of this AGREEMENT shall be
deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this AGREEMENT, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver, unless specifically stated therein, and each waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
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<PAGE>
Section 13. Severability. If, for any reason, any provision of this
AGREEMENT is held invalid, such invalidity shall not affect the other provisions
of this AGREEMENT not held so invalid, and each such other provision shall, to
the full extent consistent with applicable law, continue in full force and
effect. If this AGREEMENT is held invalid or cannot be enforced, then any prior
AGREEMENT between the EMPLOYERS (or any predecessor thereof) and the EMPLOYEE
shall be deemed reinstated to the full extent permitted by law, as if this
AGREEMENT had not been executed.
Section 14. Headings. The headings of the paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this AGREEMENT.
Section 15. Governing Law. This AGREEMENT has been executed and
delivered in the State of Ohio and its validity, interpretation, performance,
and enforcement shall be governed by the laws of this State of Ohio, except to
the extent that federal law is governing.
Section 16. Effect of Prior Agreements. This AGREEMENT contains the
entire understanding between the parties hereto and supersedes any prior
employment agreement between the EMPLOYERS and the EMPLOYEE, each of which is
hereby terminated and is of no further force or effect.
Section 17. Notices. Any notice or other communication required or
permitted pursuant to this AGREEMENT shall be deemed delivered if such notice or
communication is in writing and is delivered personally or by facsimile
transmission or is deposited in the United States mail, postage prepaid,
addressed as follows:
If to Winton Financial Corporation and/or The Winton Savings & Loan
Company:
Winton Financial Corporation
5511 Cheviot Road
Cincinnati, Ohio 45247-7095
With copies to:
John C. Vorys, Esq.
Vorys, Sater, Seymour and Pease
Atrium Two, Suite 2100
221 East Fourth Street
Cincinnati, Ohio 45201-0236
If to the EMPLOYEE to:
Robert L. Bollin
3358 Kuliga Park Drive
Cincinnati, Ohio 45248
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IN WITNESS WHEREOF, the EMPLOYERS have caused this AGREEMENT to be
executed by its duly authorized officer, and the EMPLOYEE has signed this
AGREEMENT, each as of the day and year first above written.
Attest: WINTON FINANCIAL CORPORATION
_____________________________ By ________________________________
________________________________
its ____________________________
Attest: THE WINTON SAVINGS AND LOAN CO.
_____________________________ By ________________________________
________________________________
its ____________________________
Attest:
_____________________________ ________________________________
Robert L. Bollin
9
Exhibit 10.3
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (hereinafter referred to as this "AGREEMENT"),
entered into this 22d day of May, 1998, by and between Winton Financial
Corporation, a savings and loan holding company incorporated under Ohio law
(hereinafter referred to as "WFC"); The Winton Savings and Loan Co., a savings
and loan association incorporated under Ohio law and a wholly-owned subsidiary
of WFC (hereinafter referred to as "WINTON"); and Jill M. Burke, an individual
(hereinafter referred to as the "EMPLOYEE");
WITNESSETH:
WHEREAS, the EMPLOYEE is an employee of WFC and WINTON (hereinafter
collectively referred to as the "EMPLOYERS");
WHEREAS, as a result of the skill, knowledge and experience of the
EMPLOYEE, the Boards of Directors of the EMPLOYERS desire to retain the services
of the EMPLOYEE as Treasurer of the EMPLOYERS;
WHEREAS, the EMPLOYEE desires to continue to serve as Treasurer of the
EMPLOYERS; and
WHEREAS, the EMPLOYEE and the EMPLOYERS desire to enter into this
AGREEMENT to set forth their understanding as to their respective rights and
obligations in the event of the termination of EMPLOYEE'S employment under the
circumstances set forth in this AGREEMENT;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the EMPLOYERS and the EMPLOYEE hereby agree as follows:
Section l. Term. This AGREEMENT shall commence on the date hereof
and shall terminate on May 22, 2000 (hereinafter referred to as the "TERM").
Section 2. Termination of Employment.
(a) Termination for JUST CAUSE. In the event that the
EMPLOYERS terminate the employment of the EMPLOYEE during the TERM
because of the EMPLOYEE'S personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure or refusal to perform the duties and
responsibilities assigned in this AGREEMENT, willful violation of any
law, rule, regulation or final cease-and-desist order (other than
<PAGE>
traffic violations or similar offenses), conviction of a felony or for
fraud or embezzlement, or material breach of any provision of this
AGREEMENT (hereinafter collectively referred to as "JUST CAUSE"), the
EMPLOYEE shall not receive, and shall have no right to receive, any
compensation or other benefits for any period after such termination.
(b) Termination after CHANGE OF CONTROL. In the event that,
before the expiration of the TERM and in connection with or within one
year of a CHANGE OF CONTROL (as defined hereinafter) of either one of
the EMPLOYERS, (i) the employment of the EMPLOYEE is terminated for any
reason other than JUST CAUSE before the expiration of the TERM, (ii)
the present capacity or circumstances in which the EMPLOYEE is employed
is changed before the expiration of the TERM, or (iii) the EMPLOYEE'S
responsibilities, authority, compensation or other benefits provided
under this AGREEMENT are materially reduced, then the following shall
occur:
(A) The EMPLOYERS shall promptly pay to the EMPLOYEE
or to his beneficiaries, dependents or estate an amount equal
to the sum of (I) the amount of compensation to which the
EMPLOYEE would be entitled for the remainder of the TERM under
this AGREEMENT, plus (II) the difference between (x) the
product of two, multiplied by the annual base salary payable
to the EMPLOYEE at the time of such termination, less (xx) the
amount paid to the EMPLOYEE pursuant to clause (I) of this
subparagraph (A);
(B) The EMPLOYEE, her dependents, beneficiaries and
estate shall continue to be covered under all benefit plans of
the EMPLOYERS at the EMPLOYERS' expense as if the EMPLOYEE
were still employed under this AGREEMENT until the earliest of
the expiration of the TERM or the date on which the EMPLOYEE
is included in another employer's benefit plans as a full-time
employee; and
(C) The EMPLOYEE shall not be required to mitigate
the amount of any payment provided for in this AGREEMENT by
seeking other employment or otherwise, nor shall any amounts
received from other employment or otherwise by the EMPLOYEE
offset in any manner the obligations of the EMPLOYERS
hereunder, except as specifically stated in subparagraph (B).
In the event that payments pursuant to this subsection (b) would result
in the imposition of a penalty tax pursuant to Section 280G(b) (3) of
the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (hereinafter collectively referred to as
"SECTION 280G"), such payments shall be reduced to the maximum amount
which may be paid under SECTION 280G without exceeding such limits.
(c) Termination Without CHANGE OF CONTROL. In the event that
the employment of the EMPLOYEE is terminated before the expiration of
the TERM by the EMPLOYERS or by the EMPLOYEE for any reason other than
JUST CAUSE or in connection with or within one year of a CHANGE OF
CONTROL, the EMPLOYERS shall pay to the EMPLOYEE the amount of
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<PAGE>
compensation earned by the EMPLOYEE up to the date of such termination.
After the date of such termination, all benefits under any benefit
plans of the EMPLOYERS shall terminate and the EMPLOYEE shall have no
right to receive, and shall not receive, any benefit for any period
after the date of such termination.
(d) Death of the EMPLOYEE. The TERM automatically terminates upon the
death of the EMPLOYEE. In the event of such death, the EMPLOYEE'S estate shall
be entitled to receive the compensation due the EMPLOYEE through the last day of
the calendar month in which the death occurred, except as otherwise specified
herein.
(e) "Golden Parachute" Provision. Any payments made to the EMPLOYEE
pursuant to this AGREEMENT or otherwise are subject to and conditioned upon
their compliance with 12 U.S.C. ss.1828(k) and any regulations promulgated
thereunder.
(f) Definition of "CHANGE OF CONTROL". A "CHANGE OF CONTROL" shall be
deemed to have occurred in the event that, at any time during the TERM, either
any person or entity obtains "conclusive control" of the EMPLOYERS within the
meaning of 12 C.F.R. ss.574.4(a), or any person or entity obtains "rebuttable
control" within the meaning of 12 C.F.R. ss.574.4(b) and has not rebutted
control in accordance with 12 C.F.R. ss.574.4(c).
Section 3. Special Regulatory Events. Notwithstanding Section 2
of this AGREEMENT, the obligations of the EMPLOYERS to the EMPLOYEE shall be as
follows in the event of the following circumstances:
(a) If the EMPLOYEE is suspended and/or temporarily prohibited from
participating in the conduct of the EMPLOYERS' affairs by a notice served under
section 8(e) (3) or (g) (1) of the Federal Deposit Insurance Act (hereinafter
referred to as the "FDIA"), the EMPLOYERS' obligations under this AGREEMENT
shall be suspended as of the date of service of such notice, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
EMPLOYERS may, in its discretion, pay the EMPLOYEE all or part of the
compensation withheld while the obligations in this AGREEMENT were suspended and
reinstate, in whole or in part, any of the obligations that were suspended.
(b) If the EMPLOYEE is removed and/or permanently prohibited from
participating in the conduct of the EMPLOYERS' affairs by an order issued under
Section 8(e) (4) or (g) (l) of the FDIA, all obligations of the EMPLOYERS under
this AGREEMENT shall terminate as of the effective date of such order; provided,
however, that vested rights of the EMPLOYEE shall not be affected by such
termination.
(c) If the EMPLOYERS are in default, as defined in section 3(x) (1) of
the FDIA, all obligations under this AGREEMENT shall terminate as of the date of
default; provided, however, that vested rights of the EMPLOYEE shall not be
affected.
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<PAGE>
(d) All obligations under this AGREEMENT shall be terminated, except to
the extent of a determination that the continuation of this AGREEMENT is
necessary for the continued operation of the EMPLOYERS, (i) by the Director of
the Office of Thrift Supervision (hereinafter referred to as the "OTS"), or his
or her designee at the time that the Federal Deposit Insurance Corporation
enters into an agreement to provide assistance to or on behalf of the EMPLOYERS
under the authority contained in Section 13(c) of the FDIA or (ii) by the
Director of the OTS, or his or her designee, at any time the Director of the
OTS, or his or her designee, approves a supervisory merger to resolve problems
related to the operation of the EMPLOYERS or when the EMPLOYERS are determined
by the Director of the OTS to be in an unsafe or unsound condition. No vested
rights of the EMPLOYEE shall be affected by any such action.
Section 4. Consolidation, Merger or Sale of Assets. Nothing in this
AGREEMENT shall preclude the EMPLOYERS from consolidating with, merging into, or
transferring all, or substantially all, of their assets to another corporation
that assumes all of the EMPLOYERS' obligations and undertakings hereunder. Upon
such a consolidation, merger or transfer of assets, the term "EMPLOYERS" as used
herein, shall mean such other corporation or entity, and this AGREEMENT shall
continue in full force and effect.
Section 5. Confidential Information. The EMPLOYEE acknowledges that
during his employment she will learn and have access to confidential information
regarding the EMPLOYERS and her customers and businesses. The EMPLOYEE agrees
and covenants not to disclose or use for her own benefit, or the benefit of any
other person or entity, any confidential information, unless or until the
EMPLOYERS consent to such disclosure or use or such information becomes common
knowledge in the industry or is otherwise legally in the public domain. The
EMPLOYEE shall not knowingly disclose or reveal to any unauthorized person any
confidential information relating to the EMPLOYERS, their subsidiaries or
affiliates, or to any of the businesses operated by them, and the EMPLOYEE
confirms that such information constitutes the exclusive property of the
EMPLOYERS. The EMPLOYEE shall not otherwise knowingly act or conduct herself (a)
to the material detriment of the EMPLOYERS, their subsidiaries, or affiliates,
or (b) in a manner which is inimical or contrary to the interests of the
EMPLOYERS.
Section 6. Nonassignability. Neither this AGREEMENT nor any right or
interest hereunder shall be assignable by the EMPLOYEE, her beneficiaries, or
legal representatives without the EMPLOYERS' prior written consent; provided,
however, that nothing in this Section 6 shall preclude (a) the EMPLOYEE from
designating a beneficiary to receive any benefits payable hereunder upon her
death, or (b) the executors, administrators, or other legal representatives of
the EMPLOYEE or her estate from assigning any rights hereunder to the person or
persons entitled thereto.
Section 7. No Attachment. Except as required by law, no right to
receive payment under this AGREEMENT shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge or
hypothecation or to execution, attachment, levy, or similar process of
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
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<PAGE>
Section 8. Binding Agreement. This AGREEMENT shall be binding upon,
and inure to the benefit of, the EMPLOYEE and the EMPLOYERS and their respective
permitted successors and assigns.
Section 9. Amendment of AGREEMENT. This AGREEMENT may not be modified
or amended, except by an instrument in writing signed by the parties hereto.
Section 10. Waiver. No term or condition of this AGREEMENT shall be
deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this AGREEMENT, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver, unless specifically stated therein, and each waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
Section 11. Severability. If, for any reason, any provision of this
AGREEMENT is held invalid, such invalidity shall not affect the other provisions
of this AGREEMENT not held so invalid, and each such other provision shall, to
the full extent consistent with applicable law, continue in full force and
effect. If this AGREEMENT is held invalid or cannot be enforced, then any prior
AGREEMENT between the EMPLOYERS (or any predecessor thereof) and the EMPLOYEE
shall be deemed reinstated to the full extent permitted by law, as if this
AGREEMENT had not been executed.
Section 12. Headings. The headings of the paragraphs herein are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this AGREEMENT.
Section 13. Governing Law. This AGREEMENT has been executed and
delivered in the State of Ohio and its validity, interpretation, performance,
and enforcement shall be governed by the laws of this State of Ohio, except to
the extent that federal law is governing.
Section 14. Effect of Prior Agreements. This AGREEMENT contains the
entire understanding between the parties hereto and supersedes any prior
employment agreement between the EMPLOYERS and the EMPLOYEE, each of which is
hereby terminated and is of no further force or effect.
Section 15. Notices. Any notice or other communication required or
permitted pursuant to this AGREEMENT shall be deemed delivered if such notice or
communication is in writing and is delivered personally or by facsimile
transmission or is deposited in the United States mail, postage prepaid,
addressed as follows:
5
<PAGE>
If to Winton Financial Corporation and/or The Winton Savings & Loan
Company:
Winton Financial Corporation
5511 Cheviot Road
Cincinnati, Ohio 45247-7095
With copies to:
John C. Vorys, Esq.
Vorys, Sater, Seymour and Pease
Atrium Two, Suite 2100
221 East Fourth Street
Cincinnati, Ohio 45201-0236
If to the EMPLOYEE to:
Jill M. Burke
IN WITNESS WHEREOF, the EMPLOYERS have caused this AGREEMENT to be
executed by its duly authorized officer, and the EMPLOYEE has signed this
AGREEMENT, each as of the day and year first above written.
Attest: WINTON FINANCIAL CORPORATION
_____________________________ By ________________________________
________________________________
its ____________________________
Attest: THE WINTON SAVINGS AND LOAN CO.
_____________________________ By ________________________________
________________________________
its ____________________________
Attest:
_____________________________ ________________________________
Jill M. Burke
6
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