SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: O-18847
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HOME FEDERAL BANCORP
--------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1807839
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(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Origination) Identification No.)
222 West Second Street, Seymour, Indiana 47274-0648
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (812) 522-1592
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for 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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of February 13, 1998:
Common Stock, no par value - 5,120,024 shares outstanding
<PAGE>
HOME FEDERAL BANCORP
FORM 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(unaudited) ............................................. 3
Consolidated Statements of Income
(unaudited) ............................................. 4
Consolidated Statements of Cash Flows
(unaudited) ............................................. 5
Forward looking statement .................................... 6
Notes to Consolidated Financial
Statements .............................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................................. 8
PART II. OTHER INFORMATION
Item 3. Quantitative and Qualitative Analysis of Financial
Condition and Results of Operations .......................... 13
Item 6. Exhibits and Reports on Form 8-K ................................. 13
Signatures ................................................................ 14
Exhibit 3.(I) Articles of Incorporation
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<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) December 31, June 30,
1997 1997
--------- ---------
ASSETS:
Cash ................................................. $ 18,803 $ 16,274
Interest-bearing deposits ............................ 12,012 3,498
--------- ---------
Total cash and cash equivalents .................... 30,815 19,772
--------- ---------
Securities available for sale at
fair value (amortized cost $44,350 and $40,208) ..... 44,413 40,119
Securities held to maturity
(fair value $15,251 and $13,012) .................... 15,263 13,115
Loans held for sale (fair value $9,441 and $4,688) ... 9,320 4,629
Loans receivable, net of allowance for
loan losses of $3,958 and $3,649..................... 579,187 575,624
Investments in joint ventures ........................ 3,046 3,084
Federal Home Loan Bank stock ......................... 5,210 4,260
Accrued interest receivable, net ..................... 4,420 4,272
Premises and equipment, net .......................... 8,555 8,171
Real estate owned .................................... 115 139
Prepaid expenses and other assets .................... 1,654 2,284
Cash surrender value of life insurance ............... 5,667 5,529
Goodwill ............................................. 1,747 1,798
--------- ---------
TOTAL ASSETS ...................................... $ 709,412 $ 682,796
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits ............................................. $ 538,229 $ 527,788
Advances from Federal Home Loan Bank ................. 95,445 79,945
Senior debt .......................................... 4,475 7,800
Other borrowings ..................................... 3,657 4,648
Advance payments by borrowers
for taxes and insurance ............................. 356 296
Accrued expenses and other liabilities ............... 4,809 4,402
--------- ---------
Total liabilities ................................. 646,971 624,879
--------- ---------
Shareholders' equity:
No par common stock;
Authorized: 9,500,000 shares
Issued and outstanding: ............................ 7,662 7,549
5,112,963 shares at December 31, 1997
5,094,493 shares at June 30, 1997
Retained earnings, restricted ....................... 54,696 50,421
Unrealized gain (loss) on securities available
for sale, net of deferred taxes .................... 83 (53)
--------- ---------
Total shareholders' equity ........................ 62,441 57,917
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........ $ 709,412 $ 682,796
========= =========
See notes to consolidated financial statements
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<PAGE>
<TABLE>
<CAPTION>
HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited) Six Months Ended
December 31
-----------------------------------------------------
1997 1996 1997 1996
---------- ----------- ----------- -----------
Interest income:
<S> <C> <C> <C> <C>
Loans receivable .......................................... $ 12,972 $ 11,875 $ 25,806 $ 23,513
Securities available for sale and held to maturity ........ 900 842 1,751 1,621
Other interest income ..................................... 71 102 125 176
----------- ----------- ----------- -----------
Total interest income ...................................... 13,943 12,819 27,682 25,310
Interest expense:
Deposits .................................................. 6,218 5,819 12,402 11,518
Advances and borrowings ................................... 1,667 1,339 3,148 2,668
----------- ----------- ----------- -----------
Total interest expense ..................................... 7,885 7,158 15,550 14,186
Net interest income ........................................ 6,058 5,661 12,132 11,124
Provision for loan losses .................................. 341 267 634 434
----------- ----------- ----------- -----------
Net interest income after provision for loan losses ........ 5,717 5,394 11,498 10,690
Other income:
Gain on sale of loans ..................................... 791 352 1,162 738
Gain(loss) on sale of securities .......................... 14 -- -- 20
Income from joint ventures ................................ 124 145 164 242
Insurance, annuity income, other fees ..................... 414 300 829 663
Service fees on NOW accounts .............................. 519 427 965 831
Net gain (loss) on real estate owned and repossessed assets 4 (19) 9 (16)
Loan servicing income ..................................... 242 241 492 505
Miscellaneous ............................................. 352 310 784 677
----------- ----------- ----------- -----------
Total other income ......................................... 2,460 1,756 4,405 3,660
Other expenses:
Compensation and employee benefits ........................ 2,049 1,906 4,008 3,700
Occupancy and equipment ................................... 594 500 1,167 988
Service bureau expense .................................... 194 190 388 379
Federal insurance premium ................................. 83 280 164 3,553
Marketing ................................................. 143 103 319 233
Goodwill amortization ..................................... 25 25 50 50
Miscellaneous ............................................. 693 599 1,305 1,229
----------- ----------- ----------- -----------
Total other expenses ....................................... 3,781 3,603 7,401 10,132
Income before income taxes ................................. 4,396 3,547 8,502 4,218
Income tax provision ....................................... 1,709 1,381 3,354 1,621
----------- ----------- ----------- -----------
Net Income ................................................. $ 2,687 $ 2,166 $ 5,148 $ 2,597
Basic earnings per common share ............................ $ 0.53 $ 0.43 $ 1.01 $ 0.52
Dilutive earnings per common share ......................... $ 0.49 $ 0.42 $ 0.95 $ 0.50
Basic weighted average number of shares .................... 5,107,567 5,021,436 5,101,697 5,015,286
Dilutive weighted average number of shares ................. 5,446,562 5,218,929 5,411,259 5,188,749
Dividends per share ........................................ $ 0.088 $ 0.067 $ 0.171 $ 0.122
</TABLE>
See notes to consolidated financial statements
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<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Six Months Ended
(unaudited) December 31,
--------------------
1997 1996
--------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................... $ 5,148 $ 2,597
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Accretion of discounts, amortization and depreciation 424 589
Provision for loan losses ........................... 634 434
Net gain from sale of loans ......................... (1,162) (499)
Net (gain)/loss from sale of investment securities .. -- --
Net gain from joint ventures; real estate owned ..... (173) (205)
Loan fees deferred (recognized), net ................ 38 (321)
Proceeds from sale of loans held for sale ........... 76,426 42,466
Origination of loans held for sale .................. (68,548) (42,076)
Decrease in accrued interest and other assets ...... 2,116 2,527
Increase in other liabilities ....................... 467 (435)
-------- --------
Net cash provided by operating activities ................ 15,370 5,077
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net principal disbursed on loans ......................... (13,738) (25,031)
Proceeds from:
Maturities/Repayments of:
Securities held to maturity ...................... 1,249 154
Securities available for sale .................... 3,500 4,108
Sales of:
Securities available for sale .................... 7,226 6,572
Real estate owned and other asset sales .......... 484 128
Purchases of:
Loans ............................................... (3,634) (501)
Securities available for sale ....................... (13,905) (8,987)
Securities held to maturity ......................... (4,285) (3,633)
Federal Home Loan Bank stock ........................ (950) (300)
Increase in cash surrender value of life insurance ....... (138) (134)
Acquisition of property and equipment, net ............... (1,001) (270)
-------- --------
Net cash used in investing activities .................... (25,192) (27,894)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net ..................... 10,441 16,869
Proceeds from borrowings ................................. 51,200 28,500
Repayment of borrowings .................................. (39,025) (23,150)
Net repayment of overnight borrowings .................... (991) (3,775)
Common stock options exercised ........................... 113 182
Payment of dividends on common stock ..................... (873) (615)
-------- --------
Net cash provided by (used in) financing activities ...... 20,865 18,011
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................ 11,043 (4,806)
Cash and cash equivalents, beginning of period ........... 19,772 25,628
-------- --------
Cash and cash equivalents, end of period ................. $ 30,815 $ 20,822
======== ========
Supplemental information:
Cash paid for interest ................................... $ 15,340 $ 14,090
Cash paid for income taxes ............................... $ 3,236 $ 1,186
Assets acquired through foreclosure ...................... $ 316 $ 122
See notes to consolidated financial statements
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<PAGE>
Forward Looking Statements
This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements
which constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of the Company (as defined below), its
directors or its officers primarily with respect to future events and the future
financial performance of the Company. Readers of this Form 10-Q are cautioned
that any such forward looking statements are not guarantees of future events or
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. The accompanying information contained in this Form 10-Q
identifies important factors that could cause such differences. These factors
include changes in interest rates, loss of deposits and loan demand to other
savings and financial institutions, substantial changes in financial markets;
changes in real estate values and the real estate market; regulatory changes, or
unanticipated results in pending legal proceedings.
Notes to Consolidated Financial Statements
1. Basis of Presentation
- -------------------------
The consolidated financial statements include the accounts of Home Federal
Bancorp (the "Company") and its wholly-owned subsidiary, Home Federal Savings
Bank (the "Bank"). These consolidated interim financial statements at December
31, 1997, and for the three and six month periods ended December 31, 1997, have
not been examined by independent auditors, but reflect, in the opinion of the
Company's management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position and results of
operations for such periods, including elimination of all significant
intercompany balances and transactions.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended June 30, 1997.
2. Reclassifications
- ---------------------
Some items in the financial statements of previous periods have been
reclassified to conform to the current period presentation.
3. Adoption of Statement of Financial Accounting Standards No. 128
- --------------------------------------------------------------------
The Company adopted SFAS No. 128, "Earnings per Share," effective December 31,
1997. This statement established new accounting standards for the calculation of
basic earnings per share as well as diluted earnings per share. The adoption of
the statement did not have a material effect on the Company's calculation of
earnings per share. The following is a reconciliation of the weighted average
common shares for the basic and diluted earnings per share computations:
Three months ended Six months ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
Basic EPS:
Weighted average common shares 5,107,567 5,021,436 5,101,697 5,015,286
========= ========= ========= =========
Diluted EPS:
Weighted average common shares 5,107,567 5,021,436 5,101,697 5,015,286
Dilutive effect of stock options 338,995 197,493 309,562 173,463
Weighted average common and --------- --------- --------- ---------
incremental shares............. 5,446,562 5,218,929 5,411,259 5,188,749
========= ========= ========= =========
-6-
<PAGE>
4. Recent Accounting Pronouncements
- -------------------------------------
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Comprehensive
Income", was issued in June 1997 and becomes effective for fiscal periods
beginning after December 15, 1997. SFAS 130 requires reclassification of earlier
financial statements for comparative purposes. SFAS No. 130 requires that
changes in the amounts of certain items, including foreign currency translation
adjustments and gains and losses on certain securities be shown in the financial
statements. SFAS No. 130 does not require a specific format for the financial
statement in which comprehensive income is reported, but does require that an
amount representing total comprehensive income be reported in that statement.
Management has not yet quantified the effect of the new standard on the
consolidated financial statements.
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures
about Segments of an Enterprise and Related Information," was issued in June
1997 and is effective for fiscal periods beginning after December 15, 1997. This
statement will change the way public companies report information about segments
of their business in their annual financial statements and requires them to
report selected segment information in their quarterly reports issued to
shareholders. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues, and its major customers. Management has not yet quantified the
effect of this new standard on the consolidated financial statements.
5. Stock split
- --------------
On October 28, 1997 Home Federal Bancorp declared a three for two stock split,
under which every two shares of its common stock outstanding at the close of
business on November 10, 1997 were converted into three shares of common stock.
No fractional shares were issued. Cash in lieu of fractional shares, based on
the market price of a share of Home Federal Bancorp's common stock on November
10, 1997, was paid to shareholders. All per share information has been restated
to give effect to the stock split. Concurrently with the stock split the Company
increased the number of authorized shares of no par common stock to 9,500,000.
-7-
<PAGE>
Part I, Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Home Federal Bancorp (the "Company") is organized as a unitary savings and loan
holding company and owns all the outstanding capital stock of Home Federal
Savings Bank (the "Bank"). The business of the Bank and therefore, the Company,
is to provide consumer and business banking services to certain markets in the
south-central portions of the State of Indiana. The Bank does business through
16 full service banking branches.
RESULTS OF OPERATIONS:
Quarter Ended December 31, 1997 Compared to Quarter Ended December 31, 1996
- ---------------------------------------------------------------------------
General
The Company reported net income of $2,687,000 for the quarter ended December 31,
1997, compared to $2,166,000 for the quarter ended December 31, 1996, an
increase of $521,000 or 24.1%. Basic earnings per common share for the current
quarter were $0.53 compared to $0.43 for the quarter ended December 31, 1996.
Net Interest Income
Net interest income before provision for loan losses increased by $397,000 for
the quarter ended December 31, 1997, compared to the quarter ended December 31,
1996. The increase is primarily due to the total interest sensitive assets
growing faster than interest bearing liabilities. The increase in net interest
income due to volume growth was offset by a slight decline in the interest rate
spread.
Net interest income after provision for loan losses increased by $323,000 or
6.0% for the quarter ended December 31, 1997, compared to the quarter ended
December 31, 1996. The provision for loan losses increased $74,000 due to
several factors. These factors include higher loans outstanding, increased
activity in commercial loans, as well as an increase in the ratio of the loan
loss allowance to total loans outstanding in the quarter ended December 31, 1997
to .66%. At December 31, 1997, the loan loss allowance covered 101% of
non-performing loans, real estate owned and other repossessed assets. To the
best of management's knowledge, and in its opinion, classified assets do not
represent material credits which would cause management to have serious doubts
as to the ability of such borrowers to comply with their loan repayment terms.
Based on management's analysis of classified assets, loss histories and current
future projections, the allowance balance appears adequate at December 31, 1997.
Quarter ending December 31: (in thousands) 1997 1996
------------------------------------------ ---- ----
Allowance beginning balance ....................... $ 3,760 $ 3,122
Provision for loan losses ......................... 341 267
Charge-offs ....................................... (165) (161)
Recoveries ........................................ 22 23
------- -------
Loan Loss Allowance ............................... $ 3,958 $ 3,251
Allowance to Total Loans .......................... .66% .60%
Allowance to Nonperforming Assets ................. 101% 93%
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<PAGE>
Interest Income
Total interest income for the three-month period ended December 31, 1997,
increased $1,124,000, or 8.8%, over the same period of the prior year. The
increase is due primarily to a corresponding increase in the average balance of
loans receivable, net for the quarter ended December 31, 1997 as compared to the
quarter ended December 31, 1996.
Interest Expense
Total interest expense for the three-month period ended December 31, 1997
increased $727,000, or 10.2%, as compared to the same period a year ago. The
increase in interest expense for the three month period ended December 31, 1997,
compared to the same period ended December 31, 1996, was due to increased
deposit and borrowing balances outstanding.
Other Income
Total other income for the three-month period ended December 31, 1997, increased
$704,000 or 40.1% over the same period a year ago. This increase was due to
several factors. Gain on sale of loans increased $439,000 for the three month
period ended December 31, 1997, compared to the same period ended December 31,
1996. The $791,000 gain on sale for the quarter ended December 31, 1997 reflects
increased refinance activity as well as the gain from the sale of $11,407,000 of
seasoned adjustable rate mortgages. Insurance, annuity income and other fees
increased $114,000 primarily due to an increase in annuity commissions of
$109,000, for the quarter ended December 31, 1997, versus the quarter ended
December 31, 1996. Service fees on NOW accounts increased $92,000 or 21.6% due
primarily to three factors: 1) the introduction of an ATM surcharge fee in
fiscal 1998; 2) an increase in the number of checking accounts and 3) a decrease
in the write off of uncollectible fees.
Other Expenses
Total other expenses for the three-month period ended December 31, 1997,
increased $178,000 over the same period ended December 31, 1996. Compensation
and employee benefits increased $143,000. Increases in compensation were due to
normal salary increases. Occupancy and equipment expenses increased $94,000
primarily due to increased depreciation charges associated with the purchases of
a new building, software and computers. Miscellaneous expenses increased $94,000
due to a variety of expense categories. Offsetting the above increases in other
expenses is a $197,000 decrease in federal insurance premium expense reflecting
a lower rate being charged in the quarter ended December 31, 1997 as compared to
the quarter ended December 31, 1996.
Six-months Ended December 31, 1997 Compared to Six-months Ended December 31,
1996:
General
The Company reported net income of $5,148,000, or $1.01 per common share, for
the six-months ended December 31, 1997, compared to $2,597,000, or $.52 per
basic common share, for the same period a year ago, an increase of $2,551,000,
or $0.49 per basic common share. The six month period ended December 31, 1996
included an after tax charge of $1,726,000 to help recapitalize the Federal
Deposit Insurance Corporation's Savings Association Insurance Fund (SAIF).
Comparing the current six month period to the same period last year, without the
SAIF charge, net income increased $825,000 or 19.1%.
Net Interest Income
Net interest income before provision for loan losses increased $1,008,000 for
the six-month period ended December 31, 1997, compared to the same period ended
December 31, 1996. The reasons for this increase were primarily the same as for
the three-month period ended December 31, 1997.
Net interest income after provision for loan losses increased by $808,000 for
the six-month period ended December 31, 1997. Again, the reasons for this
increase were primarily the same as for the three-month period ended December
31, 1997.
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<PAGE>
The change to the loan loss allowance for the six-month period ended December
31, 1997 is as follows:
Six months ending December 31: (in thousands) 1997 1996
--------------------------------------------- ---- ----
Allowance beginning balance ...................... $ 3,649 $ 3,061
Provision for loan losses ........................ 634 434
Charge-offs ...................................... (367) (287)
Recoveries ....................................... 42 43
------- -------
Loan Loss Allowance .............................. $ 3,958 $ 3,251
Allowance to Total Loans ......................... .66% .60%
Allowance to Nonperforming Assets ................ 101% 93%
Interest Income
Total interest income for the six-month period ended December 31, 1997 increased
$2,372,000, compared to the six-month period ended December 31, 1996. The
increase was due primarily to the same reasons as discussed in the three-month
period ended December 31, 1997. These reasons include a changing mix of loan
products and an increase in loans outstanding.
Interest Expense
Total interest expense for the six-months ended December 31, 1997 increased
$1,364,000, compared to the six-month period ended December 31, 1996. The
increase was due primarily to the same reasons as discussed in the three-month
period ended December 31, 1997. These reasons include increased deposits and
borrowings outstanding.
Other Income
Total other income for the six-month period ended December 31, 1997 increased
$745,000 as compared to the same period one year ago. The increases in gain on
sale of loans, insurance, annuity income and other fees and service fees on NOW
accounts are reflective of the second quarter increases detailed above.
Miscellaneous income increased in the sixth month period ended December 31, 1997
compared to the same period ended December 31, 1996 $107,000, due primarily from
the sale of a Salem branch building which was relocated.
Other Expenses
Total other expenses for the six-month period ended December 31, 1997 decreased
$2,731,000. This decrease reflects the previously mentioned SAIF insurance
charge of $3,001,000 assessed in the six month period ended December 31, 1996,
as well as a lower deposit assessment rate in the six months ended December 31,
1997. Without the SAIF assessment in 1996 other expenses would have increased
$270,000 or 3.8%. Compensation and occupancy expense accounted for the majority
of the increase. The increased compensation expense was the result of the same
factors discussed in the three month period.
FINANCIAL CONDITION:
Total assets increased by $26,616,000 from June 30, 1997, to December 31, 1997.
Net loans receivable increased by $3,563,000 with loans held for sale increasing
$4,691,000. Cash and cash equivalents increased $11,043,000 and securities
available for sale and held to maturity (including mortgage-backed securities)
increased $6,442,000.
Total liabilities increased $22,092,000 from June 30, 1997, to December 31,
1997. Senior debt decreased $3,325,000, while deposits from customers and
advances from the Federal Home Loan Bank increased $10,441,000 and $15,500,000
million, respectively.
Shareholders' equity increased $4,524,000 during the same period. Retained
earnings increased $5,148,000 million from net income and decreased $873,000 for
dividends paid. Common stock increased $117,000 for stock options exercised
during the period and decreased $4,000 for fractional shares redeemed resulting
from the 3 for 2 stock split. In accordance with Statement of Accounting
Standards 115, "Accounting for Certain Investments in Debt and Equity
Securities", the Company had unrealized gains in its available for sale
portfolio of $83,000, or a $136,000 increase in shareholders' equity from the
June 30, 1997 loss position of $53,000.
-10-
<PAGE>
At December 31, 1997, the Bank exceeded all current OTS regulatory capital
requirements as follows (in thousands):
<TABLE>
<CAPTION>
To Be Categorized
As "Well Capitalized"
Under Prompt
For Capital Corrective Action
(dollars in thousands) Actual Adequacy Purposes Provisions
--------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------------------------------
As of December 31, 1997
<S> <C> <C> <C> <C> <C> <C>
Tangible capital ( to total assets) $58,216 8.20% $10,640 1.50% N/A N/A
Core capital (to total assets) .... $58,216 8.20% $21,280 3.00% N/A N/A
Total risk-based capital
(to risk-weighted assets) ...... $61,804 12.41% $39,845 8.00% $49,806 10.00%
Tier 1 risk-based capital
(to risk-weighted assets) ...... $58,216 11.69% N/A N/A $29,884 6.00%
Tier 1 leverage capital
(to average assets) ............ $58,216 8.34% N/A N/A $34,906 5.00%
</TABLE>
Liquidity and Capital Resources
The OTS amended the regulatory liquidity requirements in the second quarter of
fiscal 1998. The minimum liquidity level was reduced to 4%, the lowest amount
allowed by law, from 5%. In addition to reducing the percentage of liquidity
required, the OTS eliminated the 1% short term liquidity requirement, as well as
changing the definition of liquid assets to include all maturities of Fannie
Mae, Freddie Mac and Ginnie Mae obligations which were formally limited to
obligations with maturities of five years or less. Institutions were also given
the option of excluding all deposits with unexpired maturities exceeding one
year from the liquidity base or continuing the previous liquidity base
calculations. At December 31, 1997, the Bank's average liquidity ratio was
12.56%. Historically, the Bank has maintained its liquid assets which qualify
for purposes of the OTS liquidity regulations above the minimum requirements
imposed by such regulations and at a level believed adequate to meet
requirements of normal daily activities, repayment of maturing debt and
potential deposit outflows. Cash flow projections are regularly reviewed and
updated to assure that adequate liquidity is maintained. Cash for these purposes
is generated through the sale or maturity of investment securities and loan
sales and repayments, and may be generated through increases in deposits. Loan
payments are a relatively stable source of funds, while deposit flows are
influenced significantly by the level of interest rates and general money market
conditions. Borrowings may be used to compensate for reductions in other sources
of funds such as deposits. As a member of the FHLB system, the Bank may borrow
from the FHLB of Indianapolis. At December 31, 1997, the Bank had $95.4 million
in such borrowings. As of that date, the Bank had commitments to fund loan
originations and purchases of approximately $41.9 million and commitments to
sell loans of $23.1 million. In the opinion of management, the Bank has
sufficient cash flow and borrowing capacity to meet current and anticipated
funding commitments.
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<PAGE>
<TABLE>
<CAPTION>
Supplemental Data: Three Months Ended 6 Months Ended
December 31, December 31,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average interest rate earned
on total interest-earning assets ........... 8.41% 8.47% 8.44% 8.49%
Weighted average cost of total
interest-bearing liabilities ............... 4.93% 4.89% 4.92% 4.91%
Interest rate spread during period ............. 3.48% 3.58% 3.52% 3.58%
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) 3.65% 3.74% 3.70% 3.73%
Total interest income divided by average
total assets (on annualized basis) ......... 7.92% 7.99% 7.93% 7.95%
Total interest expense divided by
average total assets (on annualized basis) . 4.44% 4.42% 4.42% 4.42%
Net interest income divided by average
total assets (on annualized basis) ......... 3.44% 3.53% 3.48% 3.49%
Return on assets (net income divided by
average total assets on annualized basis) .. 1.53% 1.35% 1.47% 0.82%
Return on equity (net income divided by
average total equity on annualized basis) .. 17.58% 16.41% 17.15% 9.89%
</TABLE>
At December 31,
------------------
1997 1996
------------------
Book value per share outstanding ........... $12.21 $10.73
Interest rate spread ....................... 3.52% 3.58%
Nonperforming Assets:
Loans: Non-accrual ................... $3,787 $3,260
Past due 90 days or more ...... 6 1
Restructured .................. 1 1
------
Total nonperforming loans ............. 3,794 3,262
Real estate owned, net ................ 58 122
Other repossessed assets, net ......... 57 116
------ ------
Total Nonperforming Assets ............ $3,909 $3,500
Nonperforming assets divided by total assets 0.55% 0.54%
Nonperforming loans divided by total loans . 0.64% 0.59%
Balance in Provision for Loan Losses ....... $3,958 $3,251
-12-
<PAGE>
PART II. OTHER INFORMATION
Item 3. Quantitative and Qualitative Analysis of Financial Condition
and Results of Operations.
In the opinion of management the results for the quarter ended December 31, 1997
will not be materially different from the results presented on page 11 of the
annual report for fiscal year 1997.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 28, 1997 the Annual Meeting of Shareholders was held, the results of
which were as follows:
For Votes Withheld
--- --------------
Election of Lewis W. Essex as Director
for term expiring in 2000................ 2,621,665 37,159
Election of Harvard W. Nolting, Jr. as
Director for term expiring in 2000....... 2,623,911 34,913
Item 5. Other information
N/A
Item 6. Exhibits and Reports on Form 8-K
(a) N/A
(b) Reports on Form 8-K.
Registrant filed no reports on Form 8-K during the fiscal
quarter ended December 31, 1997.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on behalf of
the undersigned thereto duly authorized.
Home Federal Bancorp
DATE: February 12, 1998 /S/ Lawrence E. Welker
-------------------------- -----------------------
Lawrence E. Welker,
Executive Vice President,
Treasurer, and Chief Financial Officer
-14-
ARTICLES OF INCORPORATION
OF
HOME FEDERAL BANCORP
ARTICLE 1
Name
The name of the Corporation is Home Federal Bancorp.
ARTICLE 2
Purposes and Powers
Section 2.01. Purposes. The purposes for which the Corporation is
formed are the transaction of any or all lawful business for which corporations
may be incorporated under the Indiana Business Corporation Law, as the same may,
from time to time, be amended (the "Act").
Section 2.02. Powers. The Corporation shall have the same powers as an
individual to do all things necessary or convenient to carry out its business
and affairs, including without limitation, all the powers specifically
enumerated in the Act.
ARTICLE 3
Term of Existence
The period during which the Corporation shall continue is perpetual.
ARTICLE 4
Registered Office and Resident Agent
The street address of the registered office of the Corporation is:
222 West Second Street
Seymour, Indiana 47274
and the name and business office address of its registered agent in charge of
such office are:
John K. Keach, Jr. 501 Washington Street
Columbus, Indiana 47201
<PAGE>
ARTICLE 5
Number of Shares
Each issued and unissued authorized share of common stock, without par
value ("Common Stock"), of the Corporation as of November 10, 1997 shall be
changed into one and a half (1.5) shares of Common Stock. As such, the total
number of shares which the Corporation shall have authority to issue is Nine
Million Five Hundred Thousand (9,500,000) shares, all of which are without par
value.
ARTICLE 6
Terms of Shares
Section 6.01. Designation of Classes, Number and Par Value of Shares.
As of November 24, 1997, the shares of authorized capital shall be divided into
Two Million (2,000,000) shares of Preferred Stock, without par value ("Preferred
Stock"), as hereinafter provided, and Seven Million Five Hundred Thousand
(7,500,000) shares of Common Stock, as hereinafter provided.
Section 6.02. Rights, Privileges, Limitations and Restrictions of
Preferred Stock. The Board of Directors of the Corporation is vested with
authority to determine and state the designations and the relative preferences,
limitations, voting rights, if any, and other rights of the Preferred Stock and
of each series of Preferred Stock by the adoption and filing in accordance with
the Act, before the issuance of any shares of such Preferred Stock or series of
Preferred Stock, of an amendment or amendments to these Articles of
Incorporation as the same may, from time to time, be amended, determining the
terms of such Preferred Stock or series of Preferred Stock ("Preferred Stock
Designation"). All shares of Preferred Stock of the same series shall be
identical with each other in all respects. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the voting power of all of the then outstanding shares of die
capital stock of the Corporation entitled to vote generally in the election of
Directors, after giving effect to the provisions in Article II hereof ("Voting
Stock"), voting as a single class, without a separate vote of the holders of the
Preferred Stock or any series thereof, unless a vote of any such holders is
required pursuant to the Preferred Stock Designation.
Section 6.03. Rights, Privileges, Limitations and Restrictions
of Common Stock.
Clause 6.031. Single Class. The shares of Common Stock shall
constitute a separate and single class and shall not be issued in
series. All shares of Common Stock shall be identical with each other
in all respects.
<PAGE>
Clause 6.032. Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation,
the holders of the shares of Common Stock shall be entitled, after
payment or provision for payment of the debts and other liabilities of
the Corporation and of all shares of stock having priority over the
Common Stock, in the event of voluntary or involuntary liquidation,
dissolution or winding up, to share ratably in the remaining net assets
of the Corporation.
Clause 6.033. Voting Rights. Every holder of shares of Common
Stock shall have the right, at every Shareholders' meeting, to one vote
for each share of Common Stock standing in his name on the books of the
Corporation, except as otherwise provided in the Act.
Section 6.04. Issuance of Shares. The Board of Directors has authority
to authorize and direct the issuance by the Corporation of shares of Preferred
Stock and Common Stock at such times, in such amounts, to such persons, for such
considerations and upon such terms and conditions as it may, from time to time,
determine upon, subject only to the restrictions, limitations, conditions and
requirements imposed by the Act, other applicable laws and these Articles of
Incorporation, as the same may, from time to time, be amended.
Section 6.05. Distribution Upon Shares. The Board of Directors has
authority to authorize and direct the payment of dividends and die making of
other distributions by the Corporation in respect of the issued and outstanding
shares of Preferred Stock and Common Stock (i) at such times, in such amount and
forms, from such sources and upon such terms and conditions as it may, from time
to time, determine upon, subject only to the restrictions, limitations,
conditions and requirements imposed by the Act, other applicable laws and these
Articles of Incorporation, as the same may, from time to time, be amended, and
(ii) in shares of the same class or series or in shares of any other class or
series without obtaining the affirmative vote or the written consent of the
holders of the shares of the class or series in which the payment or
distribution is to be made.
Section 6.06. Acquisition of Shares. The Board of Directors has
authority to authorize and direct the acquisition by the Corporation of the
issued and outstanding shares of Preferred Stock and Common Stock at such times,
in such amounts, from such persons, for such considerations, from such sources
and upon such terms and conditions as it may, from time to time, determine upon,
subject only to the restrictions, limitations, conditions and requirements
imposed by the Act, other applicable laws and these Articles of Incorporation,
as the same may, from time to time, be amended.
Section 6.07. Recognition Procedure for Beneficial Ownership of Shares
or Rights. The Board of Directors may establish in the Code of By-Laws of the
Corporation a recognition procedure by which the beneficial owner of any share
or right of the Corporation that is registered on the books of the Corporation
in the name of a nominee is recognized by the Corporation, to the extent
provided in any such recognition procedure, is the owner thereof.
<PAGE>
Section 6.08. Disclosure Procedure for Beneficial Ownership of Shares
or Rights. The Board of Directors may establish in the Corporation's Code of
By-Laws a disclosure procedure by which the name of the beneficial owner of any
share or right of the Corporation that is registered on the books of the
Corporation in the name of a nominee shall, to the extent not prohibited by the
Act or other applicable laws, be disclosed to the Corporation. Any disclosure
procedure established by the Board of Directors may include reasonable sanctions
to ensure compliance therewith, including without limitation (i) prohibiting the
voting of, (ii) providing for mandatory or optional reacquisition by the
Corporation of, and (iii) the withholding or payment into escrow of any dividend
or other distribution in respect of, any share or right of the Corporation as to
which the name of the beneficial owner is not disclosed to the Corporation as
required by such disclosure procedure.
Section 6.09. No Pre-emptive Rights. The holders of the Common Stock
and the holders of the Preferred Stock or any series of the Preferred Stock
shall have no pre-emptive rights to subscribe to or purchase any shares of
Common Stock, Preferred Stock or other securities of the Corporation.
Section 6.10. Record Ownership of Shares or Rights. The Corporation, to
the extent permitted by law, shall be entitled to treat the person in whose name
any share or right of the Corporation is registered on the books of the
Corporation as the owner thereof for all purposes, and shall not be bound to
recognize any equitable or any other claim to, or interest in, such share or
right on the part of any other person, whether or not the Corporation shall have
notice thereof.
ARTICLE 7
Directors
Section 7.01. Number. The number of Directors of the Corporation shall
not be less than five (5) nor more than fifteen (15), as may be specified from
time to time by resolution adopted by a majority of the total number of the
Corporation's Directors. If and whenever the Board of Directors has not
specified the number of Directors, the number shall be seven (7). The Directors
elected by the Shareholders at the first Shareholder Annual Meeting in 1993
shall be divided into three (3) classes, as nearly equal in number as possible,
with the term of office of the first class to expire at the 1994 Annual Meeting
of Shareholders, the term of office of the second class to expire at the 1995
Annual Meeting of Shareholders, and the term of office of the third class to
expire at the 1996 Annual Meeting of Shareholders. At each Annual Meeting of
Shareholders following such initial classification, Directors elected by the
Shareholders to succeed those Directors whose term expires shall be elected for
a term of office to expire at the third succeeding Annual Meeting of
Shareholders after their election. Each Director shall hold office until his
<PAGE>
successor is chosen and qualified. Directors need not be Shareholders of the
Corporation. There shall be no cumulative voting by Shareholders of any class or
series in the election of Directors of the Corporation.
Section 7.02. Vacancies. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, newly-created directorships
resulting from any increase in the authorized number of Directors or any
vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the Continuing Directors, as defined in Section 11.02 of
Article II hereof, although less than a quorum of the Board of Directors.
Directors so chosen shall hold office for a term expiring at the Annual Meeting
of Shareholders at which the term of the class to which they have been elected
expires. No decrease in the number of authorized Directors constituting the
entire Board of Directors shall shorten the term of any incumbent Director.
Section 7.03. Removal. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any Director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 80% of the voting power of D
of the shares of the Corporation entitled to vote generally in the election of
Directors, voting together is a single class. For purposes of this section,
removal for cause shall be limited to the grounds then specifically enumerated
in 12 C.F.R. ss. 563.39 (or any successor provision) with respect to termination
for cause.
Section 7.04. Shareholder Nomination of Director Candidates and
Introduction of Business. Advance notice of Shareholder nominations for the
election of Directors and of business to be brought by Shareholders before any
meeting of the Shareholders of the Corporation shall be given in the manner
provided in the Corporation's Code of By-Laws.
Section 7.05. Calling of Special Shareholder Meetings. Special meetings
of the Shareholders of the Corporation may only be called by the Chairman of the
Board of Directors or by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of Directors of the Corporation.
Section 7.06. Code of By-Laws. The Board of Directors of the
Corporation shall have power, without the assent or vote of the Shareholders, to
make, alter, amend or repeal the Code of By-Laws of the Corporation by the
affirmative vote of a number of Directors equal to a majority of the number who
constitute a full Board of Directors at the time of such action. Shareholders
shall not have any power to make, alter, amend or repeal the Corporation's Code
of By-Laws.
Section 7.07. Factors to he Considered by Board. In addition to any
other considerations which the Board of Directors may lawfully take into
account, in determining whether to take or to refrain from taking corporate
<PAGE>
action on any matter, including making or declining to make any recommendation
to the Shareholders of the Corporation, the Board of Directors may in its
discretion consider the long-term is well as short-term best interests of the
Corporation (including the possibility that these interests may be best served
by the continued independence of the Corporation), taking into account, and
weighing as the Directors deem appropriate, the social and economic effects of
such action on present and future employees, suppliers, customers of the
Corporation and its subsidiaries (including account holders and borrowers of any
of the Corporation's subsidiaries), the effect upon communities in which offices
or other facilities of the Corp oration are located, and the effect on the
Corporation's ability to fulfill its corporate obligations as a savings and loan
holding company and on the ability of any of its subsidiary savings associations
to fulfill the objectives of a stock form savings association under applicable
statutes and regulations, and any other factors the Directors consider
pertinent.
Section 7.08. Authorized Board Actions. In furtherance and not in
limitation of the powers conferred by law or in these Articles of Incorporation,
as the same may, from time to time, be amended, the Board of Directors (and any
committee of the Board of Directors) is expressly authorized, to the extent
permitted by law, to take such action or actions as the Board or such committee
may determine to be reasonably necessary or desirable to (A) encourage any
person (as defined in Section 12.03, Clause 12.031 hereof) to enter into
negotiations with the Board of Directors and management of the Corporation with
respect to any transaction which may result in a change in control of the
Corporation which is proposed or initiated by such person or (B) contest or
oppose any such transaction which the Board of Directors or such committee
determines to be unfair, abusive or otherwise undesirable with respect to the
Corporation and its business, assets or properties or the Shareholders of the
Corporation, including, without limitation, the adoption of such plans or the
issuance of such rights, options, capital stock, notes, debentures or other
evidences of indebtedness or other securities of the Corporation (which issuance
may be with or without consideration, and may (but need not) be issued pro
rata), which rights, options, capital stock, notes, evidences of indebtedness
and other securities (i) may be exchangeable for or convertible into cash or
other securities on such terms and conditions as may be determined by the Board
or such committee and (ii) may provide for the treatment of any holder or class
of holders thereof designated by the Board of Directors or any such committee in
respect of the terms, conditions, provisions and rights of such securities which
is different from, and unequal to, the terms, conditions, provisions and rights
applicable to all other holders thereof.
Section 7.09. Amendment, Repeal. Notwithstanding anything contained in
the Articles of Incorporation or the Code of By-Laws of the Corporation to the
contrary and notwithstanding that a lesser percentage or no vote may be
specified by law, but in addition to any affirmative vote of the holders of any
particular class or series of capital stock of the Corporation required by law
or any Preferred Stock Designation, the affirmative vote of the holders of at
least 80% of the voting power of all of the then-outstanding shares of Voting
Stock, voting together is a single class, shall be required to alter, amend,
change or repeal this Article 7.
<PAGE>
ARTICLE 8
Initial Directors
The names and post office addresses of the initial Board of Directors of the
Corporation are as follows:
Name Post Office Address
John K. Keach, Sr. 222 West Second Street
Seymour, Indiana 47274
Francis P. Myers 222 West Second Street
Seymour, Indiana 47274
Robert Weber 222 West Second Street
Seymour, Indiana 47274
John K. Keach, Jr. 222 West Second Street
Seymour, Indiana 47274
Lewis W. Essex 222 West Second Street
Seymour, Indiana 47274
Harvard W. Nolting, Jr. 222 West Second Street
Seymour, Indiana 47274
David W. Laitinen 222 West Second Street
Seymour, Indiana 47274
ARTICLE 9
Incorporator
The name and post office address of the Incorporator of the Corporation are as
follows:
Claudia V. Swhier, Esq.
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana 46204
ARTICLE 10
Provisions for Regulation of Business and Conduct
of Affairs of Corporation
<PAGE>
Section 10.01. Amendments of Articles of Incorporation. Except as
otherwise provided in Articles 7, 11, and 12 hereof, the Corporation reserves
die right to increase or decrease the number of its authorized shares, or any
class or series thereof, and to reclassify the same, and to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, or any
amendment hereto, or to add any provision to these Articles of Incorporation or
to any amendment hereto, in any manner now or hereafter prescribed or permitted
by the Act or any other applicable laws, and all fights and powers conferred
upon Shareholders, Directors and/or Officers in these Articles of Incorporation,
or any amendment hereto, are granted subject to this reserve power. No
Shareholder his a vested property right resulting from any provision in these
Articles of Incorporation, or any amendment hereto, or authorized to be in the
Code of By-Laws of the Corporation or these Articles of Incorporation by the
Act, including, without limitation, provisions relating to management, control,
capital structure, dividend entitlement, or purpose or duration of the
Corporation.
Section 10.02. Action by Shareholders. Meetings of the Shareholders of
the Corporation shall be held at such place, within or without the State of
Indiana, as may be specified in the Code of By-Laws of the Corporation or in the
respective notices, or waivers of notice, thereof. Any action required or
permitted to be taken at any meeting of the Shareholders may be taken without a
meeting if a consent in writing setting forth the action so taken is signed by
all the Shareholders entitled to vote with respect thereto, and such written
consent is filed with the minutes of the proceedings of the Shareholders.
Section 10.03. Action by Directors. Meetings of the Board of Directors
of the Corporation or any committee thereof shall be held at such place, within
or without the State of Indiana, as may be specified in the Code of By-Laws of
the Corporation or in the respective notices, or waivers of notice, thereof. Any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all members of
the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of such Board or
committee.
Section 10.04. Places of Keeping of Corporate Records. The Corporation
shall keep at its principal office a copy of (1) its Articles of Incorporation,
and all amendments thereto currently in effect; (2) its Code of By-Laws, and all
amendments thereto currently in effect; (3) minutes of all meetings of the
Shareholders and records of all actions taken by the Shareholders without a
meeting (collectively, "Shareholders Minutes") for the prior three years; (4)
all written communications by the Corporation to the Shareholders including the
financial statements furnished by the Corporation to the Shareholders
("Shareholder Communications") for the prior three years; (5) a list of the
names and business addresses of the current Directors and the current Officers
of the Corporation; and (6) the most recent Annual Report of the Corporation as
filed with the Secretary of State of Indiana. The Corporation shall also keep
and maintain at, its principal office, or at such other place or places within
<PAGE>
or without the State of Indiana as may be provided, from time to time, in the
Code of By-Laws, (1) minutes of all meetings of the Board of Directors and of
each committee of such Board, and records of all actions taken by the Board of
Directors and by each committee without a meeting; (2) appropriate accounting
records of the Corporation; (3) a record of the Shareholders in a form that
permit, preparation of a list of the names and addresses of all the
Shareholders, in alphabetical order, stating the number of shares held by each
Shareholder; and (4) Shareholders Minutes for periods preceding the prior three
years. All of the records of the Corporation described in this Section 10.04
(collectively, the "Corporate Records") shall be maintained in written form or
in another form capable of conversion into written form within a reasonable
time.
Section 10.05. Limitation of Liability and Reliance on Corporate
Records and Other Information.
Clause 10.051. General Limitation. No Director, member of any
committee of the Board of Directors, or of another committee appointed
by the Board, Officer, employee or agent of the Corporation ("Corporate
Person") shall be liable for any loss or damage if, in taking or
omitting to take any action causing such loss or damage, either (1)
such Corporate Person acted (A) in good faith, (B) with the care an
ordinarily prudent person in a like position would have exercised under
similar circumstances, and (C) in a manner such Corporate Person
reasonably believed was in the best interests of the Corporation, or
(2) such Corporate Person's breach of or failure to act in accordance
with the standards of conduct set forth in Clause 10.051(l) above (the
"Standards of Conduct") did not constitute willful misconduct or
recklessness.
Clause 10.052. Reliance on Corporate Records and Other
Information. Any "Corporate Person" shall be fully protected, and shall
he deemed to have complied with the Standards of Conduct, in relying in
good faith, with respect to any information contained therein, upon (1)
the Corporate Records, or (2) information, opinions, reports or
statements (including financial statements and other financial data)
prepared or presented by (A) one or more other Corporate Persons whom
such Corporate Person reasonably believes to be competent in the
matters presented, (B) legal counsel, public accountants or other
persons as to matters that such Corporate Person reasonably believes
are within such person's professional or expert competence, (C) a
committee of the Board of Directors or other committee appointed by the
Board of Directors, of which such Corporate Person is not a member, if
such Corporate Person reasonably believes such committee of the Board
of Directors or such appointed committee merits confidence, or (D) the
Board of Directors, if such Corporate Person is not a Director and
reasonably believes that the Board merits confidence.
Section 10.06. Interest of Directors in Contracts. Any contract or
other transaction between the Corporation and (i) any Director, or (ii) any
corporation, unincorporated association, business trust, estate, partnership,
<PAGE>
trust, joint venture, individual or other legal entity ("Legal Entity") (A) in
which any Director has a material financial interest or is a general partner, or
(B) of which any Director is a director, officer, or trustee (collectively, a
"Conflict Transaction"), shall be valid for all purposes, if the material facts
of the Conflict Transaction and the Director's interest were disclosed or known
to the Board of Directors, a committee of the Board of Directors with authority
to act thereon, or the Shareholders entitled to vote thereon, and the Board of
Directors, such committee or such Shareholders authorized, approved or ratified
the Conflict Transaction. A Conflict Transaction is authorized, approved or
ratified:
(1) By the Board of Directors or such committee, if it receives the
affirmative vote of a majority of the Directors who have no interest in
the Conflict Transaction, notwithstanding the fact that such majority
may not constitute a quorum or a majority of the Board of Directors or
such committee or a majority of the Directors present at the meeting,
and notwithstanding the presence or vote of any Director who does have
such an interest; provided, however, that no Conflict Transaction may
be authorized, approved or modified by a single Director; and
(2) By such Shareholders, if it receives the vote of a majority of the
shares entitled to be counted, in which vote shares owned or voted
under the control of any Director who, or of any Legal Entity that, has
an interest in the Conflict Transaction may be counted; provided,
however, that a majority of such shares, whether or not present, shall
constitute a quorum for the purpose of authorizing, approving or
ratifying a Conflict Transaction.
This Section 10.06 shall not be construed to require authorization,
ratification or approval by the Shareholders of any Conflict Transaction, or to
invalidate any Conflict Transaction that would otherwise be valid under the
common and statutory law applicable thereto.
Section 10.07. Compensation of Directors. The Board of Directors is
hereby specifically authorized, in and by the Code of By-Laws of the
Corporation, or by resolution duly adopted by such Board, to make provision for
reasonable compensation to its members for their services is Directors, and to
fix the basis and conditions upon which such compensation shall be paid. Any
Director of the Corporation may also serve the Corporation in any other capacity
and receive compensation therefor in any form.
Section 10.08. Direction of Purposes and Exercise of Powers by
Directors. The Board of Directors, subject to any specific limitations or
restrictions imposed by the Act or these Articles of Incorporation, as the same
may, from time to time, be amended, shall direct the carrying out of the
purposes and exercise the powers of the Corporation, without previous
authorization or subsequent approval by die Shareholders of the Corporation.
<PAGE>
ARTICLE 11
Section 11.01. Certain Provisions Applicable for Five Years.
Notwithstanding anything contained in these Articles of Incorporation or the
Corporation's Code of By-Laws to the contrary, for a period extending from the
date hereof and ending on January 14, 1993, the following provisions shall
apply:
No person shall directly or indirectly offer to acquire or acquire the
beneficial ownership of more than ten percent (10%) of any class of equity
security of the Corporation. This limitation shall not apply to the purchase of
shares by underwriters in connection with a public offering or to the purchase
of shares by a defined benefit or defined contribution employee benefit plan
such is an employee stock ownership plan, stock bonus plan, profit-sharing plan
or other plan, which, with its related trust, meets the requirements to be
qualified" under Section 401 of the Internal Revenue Code of 1986, is amended.
In the event shares are acquired in violation of this Section 11.01,
all shares beneficially owned by any person in excess of 10% shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the Shareholders for a vote.
For purposes of this Section 11.01, the term "person" shall have the
meaning set forth in Section 12.03, Clause 12.031 hereof. `Me term "offer"
includes every offer to buy or otherwise acquire, solicitation of an offer to
sell, tender offer for, or request or invitation for tenders of, a security or
interest in a security for value. The term "acquire" includes every type of
acquisition, whether effected by purchase, exchange, operation of law or
otherwise. The term "acting in concert" means (a) knowing participation in a
joint activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise.
For purposes of determining the beneficial ownership limitation imposed
by this Section 11.01, warrants, options, obligations or securities convertible
into such equity securities of the Corporation and other similar interests shall
be treated as having been exercised or converted into such equity securities.
Section 11.02. Amendment of Article 11. Notwithstanding anything
elsewhere in these Articles of Incorporation or in the Corporation's Code of
By-Laws to the contrary and notwithstanding that a lesser percentage or no vote
may be specified by law, but in addition to any affirmative vote of the holders
of any particular class or series of capital stock of the Corporation required
by law or any Preferred Stock Designation, the affirmative vote of the holders
of at least 80% of the total voting power of all of the then outstanding shares
of Voting Stock, voting is a single class, shall be required to alter, amend or
repeal this Article 11, unless at least two-thirds of the Continuing Directors
<PAGE>
(as defined below in this Section 11.02) shall have approved the proposed
changes prior to their submission to Shareholders for their vote (in which case
a favorable vote of the percentage of the total votes eligible to be cast
required by the Act or other applicable law shall be required). For purposes of
this Section 11.02, a "Continuing Director" shall mean any Director then serving
as such who was a member of the Corporation's Board of Directors on August 29,
1990, or was recommended for appointment or election (before such person's
initial assumption of office as a Director) by a majority of the Continuing
Directors then on the Board.
ARTICLE 12
Provisions for Certain Business Combinations
Section 12.01. Vote Required.
Clause 12.01 . Higher Vote for Certain Business Combinations.
In addition to any affirmative vote required by law or these Articles
of Incorporation, and except as otherwise expressly provided in Section
12.02 of this Article 12:
1. any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter
defined) with (A) any Interested Shareholder (as
hereinafter defined), or (B) any other corporation
(whether or not itself an Interested Shareholder)
which is, or after such merger or consolidation would
be, an Affiliate (as hereinafter defined) of an
Interested Shareholder; or
2. any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with
any Interested Shareholder or any Affiliate of any
Interested Shareholder, of any assets of the
Corporation or any Subsidiary having an aggregate
Fair Market Value equaling or exceeding 25% or more
of the combined assets of the Corporation and its
Subsidiaries; or
3. the issuance or transfer by the
Corporation or any Subsidiary (in one transaction or
a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested
Shareholder or any Affiliate of any Interested
Shareholder in exchange for cash, securities or other
property (or a combination thereof) having an
aggregate Fair Market Value equaling or exceeding 25%
of the combined assets of the Corporation and its
Subsidiaries except pursuant to an employee benefit
plan of the Corporation or any Subsidiary thereof; or
<PAGE>
4. the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested Shareholder
or any Affiliate of any Interested Shareholder; or
5. any reclassification of securities
(including any reverse stock split) or
recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not
with or into or otherwise involving any Interested
Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of
the outstanding shares of any class or series of
equity or convertible securities of the Corporation
or any Subsidiary which is Beneficially Owned (as
hereinafter defined) directly or indirectly by any
Interested Shareholder or any Affiliate of any
Interested Shareholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of 0 of the then-outstanding shares of Voting Stock, voting together as a
single class. Such affirmative vote shall be required notwithstanding that any
other provisions of these Articles of Incorporation, or any provision of law, or
any Preferred Stock Designation, or any agreement with any national securities
exchange or otherwise might otherwise permit a lesser vote or no vote.
Clause 12.012. Definition of "Business Combination. The term
"Business Combination" as used in this Article 12 shall mean any
transaction which is referred to in any one or more of paragraphs (1)
through (5) of Clause 12.01 1 of this Section 12.01.
Section 12.02. When Higher Vote is Not Required. The provisions of
Section 12.01 of this Article 12 shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law, and any other provision of these
Articles of Incorporation, and any Preferred Stock Designation, if, in the case
of a Business Combination that does not involve any cash or other consideration
being received by the Shareholders of the Corporation, solely in their capacity
as Shareholders of the Corporation, the condition specified in the following
Clause 12.021 is met or, in the case of any other Business Combination, the
conditions specified in either of the following Clause 12.021 or 12.022 are met:
Clause 12.021. Approval by Continuing Directors. The Business
Combination shall have been approved by a majority of the Continuing
Directors (as hereinafter defined); provided, however, that this
condition shall not be capable of satisfaction unless there are at
least three Continuing Directors.
<PAGE>
Clause 12.022. Price and Procedure Requirements. All of the
following conditions shall have been met:
1. The consideration to be received by
holders of shares of a particular class (or series)
of outstanding capital stock (including Common Stock)
shall be in cash or in the same form as the
Interested Shareholder or any of its Affiliates has
previously paid for shares of such class (or series)
of capital stock. If the Interested Shareholder or
any of its Affiliates have paid for shares of any
class (or series) of capital stock with varying forms
of consideration, the form of consideration to be
received per share by holders of shares of such class
(or series) of capital stock shall be either cash or
the form used to acquire the largest number of shares
of such class (or series) of capital stock previously
acquired by the Interested Shareholder.
2. The aggregate amount of (x) the cash and
(y) the Fair Market Value as of the date (the
"Consummation Date") of the consummation of the
Business Combination, of the consideration other than
cash to be received per share by holders of Common
Stock in such Business Combination shall be at least
equal to the higher of the following (in each case
appropriately adjusted in the event of any stock
dividend, stock split, combination of shares or
similar event):
A. (if applicable) the
highest per share price (including any
brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the
Interested Shareholder or any of its
Affiliates for any shares of Common Stock
acquired by them within the two-year period
immediately prior to the date of the first
public announcement of the proposal of the
Business Combination (the "Announcement
Date") or in any transaction in which the
Interested Shareholder became an Interested
Shareholder, whichever is higher; and
B. The Fair Market Value
per share of Common Stock on the
Announcement Date or on the date on which
the Interested Shareholder became an
Interested Shareholder (the "Determination
Date"), whichever is higher.
3. The aggregate amount of (x) the cash and
(y) the Fair Market Value, as of the Consummation
Date, of the consideration other than cash to be
received per share by holders of shares of any class
(or series), other than Common Stock, of outstanding
capital stock of the Corporation shall be at least
equal to the highest of the following (in each case
<PAGE>
appropriately adjusted in the event of any stock
dividend, stock split, combination of shares or
similar event), it being intended that the
requirements of this subparagraph (3) shall be
required to be met with respect to every such class
(or series) of outstanding capital stock whether or
not the Interested Shareholder or any of its
Affiliates have previously acquired any shares of a
particular class (or series) of capital stock:
A. (if applicable) die
highest per share price (including any
brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the
Interested Shareholder or any of its
Affiliates for any shares of such class (or
series) of capital stock acquired by them
within the two-year period immediately prior
to the Announcement Date or in any
transaction in which it became an Interested
Shareholder, whichever is higher;
B. the Fair Market Value
per share of such class (or series) of
capital stock on the Announcement Date or on
the Determination Date, whichever is higher;
and
C. (if applicable) the
highest preferential amount per share, if
any, to which the holders of shares of such
class (or series) of capital stock would be
entitled in the event of any voluntary or
involuntary liquidation, dissolution or
winding up of the Corporation.
4. After such Interested Shareholder has
become an Interested Shareholder and prior to the
consummation of such Business Combination: (a) except
as approved by a majority of the Continuing
Directors, there shall have been no failure to
declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on
any outstanding Preferred Stock; (b) there shall have
been (1) no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except
as approved by a majority of the Continuing
Directors, and (11) an increase in such annual rate
of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar
transaction which his the effect of reducing the
number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors;
and (c) neither such Interested Shareholder nor any
<PAGE>
of its Affiliates shall have become the beneficial
owner of any additional shares of Voting Stock except
as part of the transaction which results in such
Interested Shareholder becoming an Interested
Shareholder; provided, however, that no approval by
Continuing Directors shall satisfy the requirements
of this subparagraph (4) unless at the time of such
approval there are at least three Continuing
Directors.
5. After such Interested Shareholder his
become an Interested Shareholder, such Interested
Shareholder and any of its Affiliates shall not have
received the benefit, directly or indirectly (except
proportionately, solely in such Interested
Shareholder's or Affiliate's capacity as a
Shareholder of the Corporation), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or
otherwise.
6. A proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and
regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be
mailed to all Shareholders of the Corporation at
least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act or subsequent provisions).
7. Such Interested Shareholder shall have
provided the Corporation with such information as
shall have been requested pursuant to Section 12.05
of this Article 12 within the time period set forth
therein.
Section 12.03. Certain Definitions.For the purposes of this Article 12:
Clause 12.031. A "person" shall include an individual, a group
acting in concert, a corporation, a partnership, an association, a
joint venture, a pool, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing
of securities.
Clause 12.032. "Interested Shareholder" means any, person
(other than the Corporation or any Subsidiary)
who or which:
<PAGE>
1. is the beneficial owner (as hereinafter
defined), directly or indirectly, of ten percent or
more of the voting power of the outstanding Voting
Stock; or
2. is an Affiliate or an Associate of the
Corporation and at any time within the two-year
period immediately prior to the date in question was
the beneficial owner, directly or indirectly, of ten
percent or more of the voting power of the then
outstanding Voting Stock; or
3. is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at
any time within the two-year period immediately prior
to the date in question beneficially owned by any
Interested Shareholder, if such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a
public offering within the meaning of the Securities
Act of 1933, as amended.
Clause 12.033. A person shah be a "beneficial owner" of, or
shall "Beneficially Own," any Voting stock:
1. which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly within the
meaning of Rule 13d-3 under the Securities Exchange
Act of 1934, as in effect on August 29, 1990; or
2. which such person or any of its
Affiliates or Associates has (a) the right to acquire
(whether such right is exercisable immediately or
only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right
to vote pursuant to any agreement., arrangement or
understanding (but neither such person nor any such
Affiliate or Associate shall be deemed to be the
beneficial owner of any shares of Voting Stock solely
by reason of a revocable proxy granted for a
particular meeting of Shareholders, pursuant to a
public solicitation of Proxies for such meeting, and
with respect to which shares neither such person nor
any such Affiliate or Associate is otherwise deemed
the beneficial owner); or
3. which are beneficially owned, directly or
indirectly, within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934, as in effect on
August 29, 1990, by any other person with which such
person or any of its Affiliates or Associates has any
<PAGE>
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (other than
solely by reason of a revocable proxy as described in
subparagraph (2) of this Clause 12.033) or disposing
of any shares of Voting Stock; provided, however,
that in the case of any employee stock ownership or
similar plan of the Corporation or of any Subsidiary
in which the beneficiaries thereof possess the right
to vote any shares of Voting Stock held by such plan,
no such plan nor any trustee with respect thereto
(nor any Affiliate of such trustee), solely by reason
of such capacity of such trustee, shall be deemed,
for any purpose hereof, to beneficially own any
shares of Voting Stock held under any such plan.
Clause 12.034. For the purposes of determining whether a
person is an Interested Shareholder pursuant to Clause 12.032 of this
Section 12.03, the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through application of
Clause 12.033 of this Section 12.03 but shall not include any other
unissued shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
Clause 12.035. "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, is in
effect on August 29, 1990.
Clause 12.036. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Interested Shareholder set forth in
Clause 12.032 of this Section 12.03, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity security
is owned, directly or indirectly, by the Corporation.
Clause 12.037. "Continuing Director" for purposes of this
Article 12 means any member of the Board of Directors of the
Corporation who is unaffiliated with the Interested Shareholder and was
a member of the Board prior to the time that the Interested Shareholder
became an Interested Shareholder, and any director who is thereafter
chosen to fill any vacancy on the Board of Directors or who is elected
and who, in either event, is unaffiliated with the Interested
Shareholder and in connection with his or her initial assumption of
office is recommended for appointment or election by a majority of
Continuing Directors then on the Board.
Clause 12.038. "Fair Market Value" means: (i) in the case of
stock, the highest closing sale price during the 30-day period
<PAGE>
immediately preceding the date in question of a share of such stock on
the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, on which such stock is
listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the
fair market value on the date in question of a share of such stock as
determined by the Board in accordance with Section 12.04 of this
Article 12, in each case with respect to any class of stock,
appropriately adjusted for any dividend or distribution in shares of
such stock or any combination or reclassification of outstanding shares
of such stock into a smaller number of shares of such stock; and (ii)
in the case of property other than cash or stock, the fair market value
of such property on the date in question as determined by the Board in
accordance with Section 12.04 of this Article 12.
Clause 12.039. Reference to "highest per share price" shall in
each case with respect to any class of stock reflect on appropriate
adjustment for any dividend or distribution in shares of such stock or
any stock split or reclassification of outstanding shares of such stock
into a greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller
number of shares of such stock.
Clause 12.310. In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other than
cash to he received" as used in Clauses 12.022(2) and 12.022(3) of
Section 12.02 of this Article 12 shall include the shares of Common
Stock and/or the shares of any other class (or series) of outstanding
capital stock retained by the holders of such shares.
Section 12.04. Powers of the Board of Directors. A majority of the
total number of Directors of the Corporation, but only if a majority of such
Directors shall then consist of Continuing Directors or, if a majority of the
total number of Directors shall not then consist of Continuing Directors, a
majority of the then Continuing Directors, shall have the power and duty to
determine, on the basis of information known to them after reasonable inquiry,
all facts necessary to determine compliance with this Article 12, including,
without limitation, (a) whether a person is an Interested Shareholder, (b) the
number of shares of Voting Stock beneficially owned by any person, (c) whether a
person is an Affiliate or Associate of another, (d) whether the applicable
conditions set forth in Clause 12.022 of Section 12.02 have been met with
respect to any Business Combination, (e) the Fair Market Value of stock or other
property in accordance with Clause 12.038 of Section 12.03 of this Article 12,
and (f) whether the assets which are the subject of any Business Combination
referred to in Clause 12.011(2) of Section 12.01 have, or the consideration to
be received for the issuance of transfer of securities by the Corporation or any
<PAGE>
Subsidiary in any Business Combination referred to in Clause 12.011(3) of
Section 12.01 has, an aggregate Fair Market Value equaling or exceeding 25% of
the combined assets of the Corporation and its Subsidiaries.
Section 12.05. Information to be Supplied to the Corporation. A
majority of the total number of Directors of the Corporation, but only if a
majority of such Directors shall then consist of Continuing Directors or, if a
majority of the total number of Directors shall not then consist of Continuing
Directors, a majority of the then Continuing Directors, shall have the right to
demand that any person who it is reasonably believed is an Interested
Shareholder (or holds of record shares of Voting Stock Beneficially Owned by any
Interested Shareholder) supply the Corporation with complete information as to
(i) the record owner(s) of all shares Beneficially Owned by such person who it
is reasonably believed is an Interested Shareholder, (ii) the number of, and
class or series of, shares Beneficially Owned by such person who it is
reasonably believed is an Interested Shareholder and held of record by each such
record owner and the number(s) of the stock certificate(s) evidencing such
shares, and (iii) any other factual matter relating to the applicability or
effect of this Article 12, as may be reasonably requested of such person, and
such person shall furnish such information within 10 days after receipt of such
demand.
Section 12.06. No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article 12 shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
Section 12.07. Amendment, Repeal, Etc. Notwithstanding any other
provisions of these Articles of Incorporation or the Code of By-Laws of the
Corporation to the contrary and notwithstanding that a lesser vote or no vote
may be specified by law, but in addition to any affirmative vote of the holders
of any particular class or series of the Corporation's capital stock required by
law or any Preferred Stock Designation, the affirmative vote of the holders of
at least 80 percent of the voting power of all of the then outstanding shares of
Voting Stock, voting together as a single class, shall be required to alter,
amend or repeal this Article 12.
ARTICLE 13
Indemnification
Section 13.01. General. The Corporation shall, to the fullest extent to
which it is empowered to do so by the Act, or any applicable laws, as from time
to time in effect, indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal, by reason of the fact that he is or was a Director, Officer,
employee or agent of the Corporation, or who, while serving as such Director,
<PAGE>
Officer, employee or agent of the Corporation is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, whether for profit or not, other than any direct or
indirect federal savings association subsidiary of the Corporation, against
expenses (including counsel fees), judgments, settlements, penalties and fines
(including excise taxes assessed with respect to employee benefit plans)
actually or reasonably incurred by him in accordance with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed, in
the case of conduct in his official capacity, was in the best interest of the
Corporation, and in all other cases, was not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, he
either had reasonable cause to believe his conduct was lawful or no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not meet the prescribed standard of conduct.
Section 13.02. Authorization of Indemnification. To the extent that a
Director, Officer, employee or agent of the Corporation has been successful, on
the merits or otherwise, in the defense of any action, suit or proceeding
referred to in Section 13.01 of this Article, or in the defense of any claim,
issue or matter therein, the Corporation shall indemnify such person against
expenses (including counsel fees) actually and reasonably incurred by such
person in connection therewith. Any other indemnification under Section 13.01 of
this Article (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case, upon a determination that indemnification of
the Director, Officer, employee or agent is permissible in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (1) by the Board of Directors by a majority vote of a quorum consisting
of Directors who were not at the time parties to such action, suit or
proceeding; or (2) if a quorum cannot be obtained under subdivision (1), by a
majority vote of a committee duly designated by the Board of Directors (in which
designation Directors who are parties may participate), consisting solely of two
or more Directors not at the time parties to such action, suit or proceeding; or
(3) by special legal counsel: (A) selected by the Board of Directors or its
committee in the manner prescribed in subdivision (1) or (2), or (B) if a quorum
of the Board of Directors cannot be obtained under subdivision (1) and a
committee cannot be designated under subdivision (2), selected by a majority
vote of the full Board of Directors (in which selection Directors who are
parties may participate); or (4) by the Shareholders, but shares owned by or
voted under the control of Directors who are at the time parties to such action,
suit or proceeding may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner is the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (3)
to select counsel.
<PAGE>
Section 13.03. Good Faith Defined. For purposes of any determination
under Section 13.01 of this Article 13, a person shall be deemed to have acted
in good faith and to have otherwise met the applicable standard of conduct set
forth in Section 13.01 if his action is based on information, opinions, reports,
or statements, including financial statements and other financial data, if
prepared or presented by (1) one or more Officers or employees of the
Corporation or another enterprise whom he reasonably believes to be reliable and
competent in the matters presented; (2) legal counsel, public accountants,
appraisers or other persons as to matters he reasonably believes are within the
person's professional or expert competence; or (3) a committee of the Board of
Directors of the Corporation or another enterprise of which the person is not a
member if he reasonably believes the committee merits confidence. The term
"another enterprise" as used in this Section 13.03 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent. The
provisions of this Section 13.03 shall not be deemed to he exclusive or to limit
in any way the circumstances in which a person may be deemed to have met the
applicable standards of conduct set forth in Section 13.01 of this Article 13.
Section 13.04. Payment of Expenses in Advance. Expenses incurred in
connection with any civil or criminal action, suit or proceeding may be paid for
or reimbursed by the Corporation in advance of the final disposition of such
action, suit or proceeding, as authorized in the specific case in the same
manner described in Section 13.02 of this Article, upon receipt of a written
affirmation of the Director, Officer, employee or agent's good faith belief that
he has met the standard of conduct described in Section 13.04 of this Article
and upon receipt of a written undertaking by or on behalf of the Director,
Officer, employee or agent to repay such amount if it shall ultimately be
determined that he did not meet the standard of conduct set forth in this
Article 13, and a determination is made that the facts then known to those
making the determination would not preclude indemnification under this Article
13.
Section 13.05. Provisions Not Exclusive. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which a
person seeking indemnification may be entitled under these Articles of
Incorporation, the Corporation's Code of By-Laws, any resolution of the Board of
Directors or Shareholders, any other authorization, whenever adopted, after
notice, by a majority vote of all Voting Stock then outstanding, or any
contract, both as to action in his official capacity and a-, to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, Officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 13.06. Vested Right to Indemnification. The right of any
individual to indemnification under this Article shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
action, suit or proceeding of the nature referred to in Section 13.01 of this
Article 13 and, once vested, shall not later be impaired as a result of any
<PAGE>
amendment, repeal, alteration or other modification of any or all of these
provisions. Notwithstanding the foregoing, the indemnification afforded under
this Article shall be applicable to all alleged prior acts or omissions of any
individual seeking indemnification hereunder, regardless of the fact that such
alleged acts or omissions may have occurred prior to the adoption of this
Article. To the extent such prior acts or omissions cannot be deemed to be
covered by this Article 13, the right of any individual to indemnification shall
be governed by the indemnification provisions in effect at the time of such
prior acts or omissions.
Section 13.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee or
agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability asserted against or incurred by the
individual in that capacity or arising from the individual's status as a
Director, Officer, employee or agent, whether or not the Corporation would have
power to indemnify the individual against the same liability under this Article.
Section 13.08. Additional Definitions. For purposes of this Article,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
For purposes of this Article, serving an employee benefit plan at the
request of the Corporation shall include any service as a Director, Officer,
employee or agent of the Corporation which imposes duties on, or involves
services by such Director, Officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries. A person who acted in
good faith and in a manner he reasonably believed to be in the best interests of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interest of the Corporation"
referred to in this Article.
For purposes of this Article, "party" includes any individual who is or
was a plaintiff, defendant or respondent in any action, suit or proceeding, or
who is threatened to be made a named defendant or respondent in any action, suit
or proceeding.
For purposes of this Article, "official capacity," when used with
respect to a Director, shall mean the office of director of the Corporation; and
when used with respect to an individual other than a Director, shall mean the
office in the Corporation held by the Officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the Corporation.
"Official capacity" does not include service for any other foreign or domestic
corporation or any partnership, joint venture, trust, employee benefit plan, or
other enterprise, whether for profit or not.
<PAGE>
Section 13.09. Payments a Business Expense. Any payments made to any
indemnified party under this Article under any other right to indemnification
shall be deemed to be an ordinary and necessary business expense of the
Corporation, and payment thereof shall not subject any person responsible for
the payment, or the Board of Directors, to any action for corporate waste or to
any similar action.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial
information extracted from the registrant's
unaudited consolidated financial statements
and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000867493
<NAME> Home Federal Bancorp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 18,803
<INT-BEARING-DEPOSITS> 12,012
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,413
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0
0
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</TABLE>
