<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{Mark One}
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
COMMISSION FILE NUMBER: 0-25348
FED ONE BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 55-0736264
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
21 TWELFTH STREET, WHEELING, WV 26003-3295
(Address of principal executive offices)
Registrant's telephone number, including area code: (304) 234-1100
Former name, former address, and former fiscal year, if changed since last
report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
------ ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ________ No _____________
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: Common Stock, $.10 par value--2,373,769 shares as of August
1, 1997.
<PAGE> 2
FED ONE BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at June 30, 1997 (unaudited) 1
and December 31, 1996
Consolidated Statements of Income for the Three and Six Months ended June 2
30, 1997 and 1996 (unaudited)
Consolidated Statement of Changes in Shareholders' Equity for the Six 3
Months ended June 30, 1997 (unaudited)
Consolidated Statements of Cash Flows for the Six Months ended June 30, 4
1997 and 1996 (unaudited)
Notes to Unaudited Consolidated Financial Statements 5
Financial Highlights 9
Item 2. Management's Discussion and Analysis of Financial Condition and 10
Results of Operations
PART II. OTHER INFORMATION 15
</TABLE>
<PAGE> 3
FED ONE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
ASSETS (Dollars In Thousands Except For Shares)
<S> <C> <C>
CASH ON HAND AND NONINTEREST-EARNING
DEPOSITS IN OTHER INSTITUTIONS $ 1,129 $ 1,043
SHORT-TERM INVESTMENTS:
INTEREST-EARNING DEPOSITS IN OTHER INSTITUTIONS 4,909 8,896
CERTIFICATES OF DEPOSIT 1,290 595
INVESTMENT SECURITIES HELD TO MATURITY
(market value of $38,400 and $39,045) 38,504 39,195
INVESTMENT SECURITIES AVAILABLE FOR SALE
(cost of $16,897 and $17,824) 17,022 17,888
MORTGAGE-BACKED SECURITIES HELD TO MATURITY
(market value of $127,378 and $131,224) 126,304 130,173
LOANS RECEIVABLE, NET OF ALLOWANCE FOR LOAN
LOSSES OF $1,460 AND $1,434 156,354 133,401
REAL ESTATE OWNED 80 56
PREMISES AND EQUIPMENT, NET 5,919 5,543
ACCRUED INTEREST RECEIVABLE:
INVESTMENT SECURITIES 881 962
MORTGAGE-BACKED SECURITIES 881 882
LOANS RECEIVABLE 1,233 1,026
PREPAID EXPENSES AND OTHER ASSETS 2,212 2,237
----------- ------------
TOTAL ASSETS $ 356,718 $ 341,897
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
DEPOSITS $ 256,024 $ 249,685
BORROWED FUNDS 59,045 50,319
ADVANCES BY BORROWERS FOR TAXES AND INSURANCE 904 633
ACCRUED INTEREST PAYABLE 414 314
INCOME TAXES PAYABLE 64 100
ACCRUED EXPENSES AND OTHER LIABILITIES 795 872
----------- ------------
TOTAL LIABILITIES 317,246 301,923
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
PREFERRED STOCK: 5,000,000 SHARES AUTHORIZED --
NONE ISSUED - -
COMMON STOCK, $.10 PAR VALUE: 15,000,000 SHARES
AUTHORIZED - 2,818,762 ISSUED AT JUNE 30, 1997
AND DECEMBER 31, 1996 282 282
ADDITIONAL PAID-IN CAPITAL 19,435 19,384
UNEARNED EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) SHARES (847) (903)
RETAINED EARNINGS - SUBSTANTIALLY RESTRICTED 28,096 27,226
TREASURY STOCK AT COST: 445,655 AND 360,063 SHARES
AT JUNE 30, 1997 AND DECEMBER 31, 1996, RESPECTIVELY (7,047) (5,440)
UNEARNED COMMON STOCK HELD BY THE RECOGNITION
AND RETENTION PLAN (RRP) (521) (613)
NET UNREALIZED GAIN ON INVESTMENT SECURITIES
AVAILABLE FOR SALE 74 38
----------- ------------
TOTAL SHAREHOLDERS' EQUITY 39,472 39,974
----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 356,718 $ 341,897
=========== ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE> 4
FED ONE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands except per share data)
<S> <C> <C> <C> <C>
INTEREST INCOME:
LOANS RECEIVABLE $ 3,367 $ 2,893 $ 6,420 $ 5,735
MORTGAGE-BACKED SECURITIES 2,069 2,024 4,193 4,036
INVESTMENT SECURITIES 874 1,097 1,757 2,183
SHORT-TERM INVESTMENTS 74 111 204 270
-------- -------- -------- --------
TOTAL INTEREST INCOME 6,384 6,125 12,574 12,224
INTEREST EXPENSE:
DEPOSITS 2,658 2,503 5,211 4,978
BORROWED FUNDS 784 666 1,471 1,314
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 3,442 3,169 6,682 6,292
NET INTEREST INCOME 2,942 2,956 5,892 5,932
PROVISION FOR LOAN LOSSES 50 30 80 50
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,892 2,926 5,812 5,882
NON-INTEREST INCOME:
FEES AND SERVICE CHARGES 134 149 267 290
NET GAIN ON SALE OF INVESTMENT
SECURITIES - AVAILABLE FOR SALE - 3 - 3
OTHER 7 5 24 16
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME 141 157 291 309
NON-INTEREST EXPENSE:
SALARIES AND EMPLOYEE BENEFITS 942 920 1,927 1,864
PREMISES AND EQUIPMENT EXPENSE 338 354 667 698
DATA PROCESSING 50 48 95 110
FEDERAL INSURANCE PREMIUMS 41 138 80 273
AMORTIZATION EXPENSE 71 71 141 141
OTHER 310 274 575 567
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE 1,752 1,805 3,485 3,653
INCOME BEFORE INCOME TAXES 1,281 1,278 2,618 2,538
PROVISION FOR INCOME TAXES 463 460 979 917
-------- -------- -------- --------
NET INCOME $ 818 $ 818 $ 1,639 $ 1,621
======== ======== ======== ========
PRIMARY/FULLY DILUTED
EARNINGS PER SHARE $ 0.34 $ 0.32 $ 0.67 $ 0.62
DIVIDENDS DECLARED PER SHARE $ 0.145 $ 0.135 $ 0.29 $ 0.27
AVERAGE NUMBER OF SHARES
OUTSTANDING (000's OMITTED):
PRIMARY 2,407 2,554 2,433 2,597
FULLY DILUTED 2,412 2,555 2,444 2,597
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE> 5
FED ONE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
UNREALIZED
UNEARNED GAIN ON
COMMON INVESTMENT
ADDITIONAL UNEARNED STOCK SECURITIES
COMMON PAID-IN ESOP RETAINED TREASURY HELD AVAILABLE
STOCK CAPITAL SHARES EARNINGS STOCK BY THE RRP FOR SALE TOTAL
------- ----------- ---------- ---------- --------- ----------- ---------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1996 $ 282 $ 19,384 $ (903) $ 27,226 $(5,440) $ (613) $ 38 $39,974
NET INCOME - - - 1,639 - - - 1,639
AMORTIZATION OF
RECOGNITION AND
RETENTION PLAN - - - - - 92 - 92
COMMON STOCK ISSUED
UPON EXERCISE OF STOCK
OPTIONS - 9,508 SHARES - 3 - (97) 140 - - 46
CASH DIVIDEND DECLARED - 6 - (672) - - (666)
PRINCIPAL REPAYMENT OF
ESOP DEBT - 42 56 - - - - 98
PURCHASE OF TREASURY
STOCK - 95,100 SHARES - - - - (1,747) - - (1,747)
CHANGE IN NET UNREALIZED GAIN
ON INVESTMENT
SECURITIES AVAILABLE
FOR SALE - $ - - - - - 36 36
------ ---------- -------- --------- ------- ------- ----- -------
BALANCE AT
JAN 30, 1997 $ 282 $ 19,435 $ (847) $ 28,096 $(7,047) $ (521) $ 74 $39,472
====== ========== ======== ========= ======= ======= ===== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
<PAGE> 6
FED ONE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $ 1,639 $ 1,621
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
PROVISION FOR LOAN LOSSES 80 50
DEPRECIATION AND AMORTIZATION 470 460
NON-CASH COMPENSATION EXPENSE RELATED TO ESOP BENEFIT 98 81
NET GAIN ON SALE OF:
INVESTMENT SECURITIES - (3)
REAL ESTATE OWNED - (2)
INCREASE IN ACCRUED INTEREST RECEIVABLE (125) (127)
INCREASE (DECREASE) IN ACCRUED EXPENSES 35 (85)
DECREASE IN TAXES PAYABLE (63) (178)
OTHER, NET (110) (220)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,024 1,597
INVESTING ACTIVITIES:
PURCHASES OF:
CERTIFICATES OF DEPOSIT (695) -
INVESTMENT SECURITIES HELD TO MATURITY (691) (18,992)
INVESTMENT SECURITIES AVAILABLE FOR SALE (1,710) (6,493)
MORTGAGE-BACKED SECURITIES HELD TO MATURITY (6,525) (17,602)
LOANS (27,774) (12,857)
PREMISES AND EQUIPMENT, NET (625) (377)
PROCEEDS FROM SALES OF:
INVESTMENT SECURITIES AVAILABLE FOR SALE - 5,000
LOANS - 94
REAL ESTATE OWNED - 12
PRINCIPAL REPAYMENTS AND MATURITIES OF:
CERTIFICATES OF DEPOSIT - 2,994
INVESTMENT SECURITIES HELD TO MATURITY 1,384 7,721
INVESTMENT SECURITIES AVAILABLE FOR SALE 2,639 14,363
MORTGAGE-BACKED SECURITIES HELD TO MATURITY 10,401 10,980
NET PRINCIPAL REPAYMENTS ON LOANS 4,714 1,526
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (18,882) (13,631)
FINANCING ACTIVITIES:
INCREASE IN DEPOSITS, NET 6,339 4,807
INCREASE IN BORROWINGS, NET 8,726 4,974
INCREASE IN ADVANCES BY BORROWERS
FOR TAXES AND INSURANCE 271 161
PROCEEDS FROM ISSUANCE OF COMMON STOCK 46 39
PURCHASE OF TREASURY STOCK (1,747) (1,948)
CASH DIVIDENDS PAID (678) (694)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,957 7,339
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (3,901) (4,695)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,939 11,698
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,038 $ 7,003
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 7
FED ONE BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions for Form 10-Q and,
therefore, do not include all the information or footnotes necessary for a
complete presentation of financial condition, results of operations and
cash flows in conformity with generally accepted accounting principles.
However, all adjustments, consisting only of normal recurring accruals
which, in the opinion of management, are necessary for a fair presentation
have been included. The results of operations for the three and six months
ended June 30, 1997 are not necessarily indicative of the results which may
be expected for the entire fiscal year.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Fed One
Bancorp, Inc. (the "Company"), and its wholly owned subsidiary, Fed One
Bank (the "Bank"). All significant intercompany balances and transactions
have been eliminated in consolidation.
3. RECLASSIFICATION OF PRIOR YEAR'S STATEMENTS
Certain items previously reported have been reclassified to conform with
the current year's reporting format.
4. EARNINGS PER SHARE
Earnings for the three and six months ended June 30, 1997 were $.34 per
share and $.67 per share, respectively, compared to $.32 per share and $.62
per share for the three and six months ended June 30, 1996, respectively.
Earnings per share were computed by dividing net income for the three and
six months ended June 30, 1997 and 1996 by the weighted average number of
common shares and common stock equivalents outstanding. Shares outstanding
for the three and six months ended June 30, 1997 and 1996 do not include
ESOP shares that have not been committed to be released in accordance with
SOP 93-6 "Employers' Accounting for Employee Stock Ownership Plans."
Reported primary per share amounts are based on 2,406,722 and 2,432,541
common shares and common stock equivalents for the three and six months
ended June 30, 1997, and 2,553,795 and 2,597,200 common shares and common
stock equivalents for the three and six months ended June 30, 1996,
respectively. Reported fully diluted per share amounts are based on
2,412,171 and 2,444,116 common shares and common stock equivalents for the
three and six months ended June 30, 1997 and 2,554,581 and 2,597,207 common
shares and common stock equivalents for the three and six months ended June
30, 1996, respectively. Shares granted but not yet issued under the
Company's stock option plan are considered common stock equivalents for
earnings per share calculations.
5
<PAGE> 8
5. DIVIDENDS ON COMMON STOCK
On June 18, 1997, the Company declared a quarterly cash dividend of $.145
per share payable on July 21, 1997 to shareholders of record on June 30,
1997.
6. INCOME TAXES
Income taxes are accounted for under the asset and liability method
pursuant to Statement of Financial Accounting Standards No. 109 ("SFAS No.
109"), "Accounting for Income Taxes."
Total income tax expense through the six months ended June 30, 1997 consists
of (in thousands):
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $ 1,006 $ (90) $ 916
State 89 (26) 63
------------ ----------- ------------
$ 1,095 $ (116) $ 979
============ =========== ============
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at June 30, 1997 are
presented below (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for loan losses $ 259
Deposit-based intangibles 48
Other 95
----------
Total gross deferred tax assets $ 402
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation and capitalized interest (119)
Net unrealized gain on securities
available for sale (50)
Deferred loan fees (199)
----------
Total gross deferred tax liabilities (368)
----------
Net deferred tax asset $ 34
==========
</TABLE>
6
<PAGE> 9
The effective tax rate computed pursuant to SFAS No. 109 and the items
which cause differences between the effective tax rate and the statutory
U.S. Federal income tax rate of 34% are not significantly different from
such amounts disclosed in prior years' audited financial statements.
The Company has determined that it is not required to establish a valuation
allowance for deferred tax assets since it is management's belief that it
is more likely than not that the deferred tax assets will be realized.
7. CONTINGENCIES:
The Company is involved in various claims and legal actions arising in the
ordinary course of business. The outcome of these claims and actions are
not presently determinable; however, in the opinion of the Company's
management after consulting with legal counsel, the ultimate disposition of
these matters will not have a material adverse effect on the accompanying
consolidated financial statements.
8. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
In connection with the 1995 Conversion and Reorganization, the Company
formed an ESOP. The ESOP covers employees which have completed at least
one year of service and have attained the age of 21. The ESOP Trust
borrowed $1.1 million from the Company and purchased 112,868 shares, equal
to 7% of the total number of shares issued in the 1995 offering. The Bank
makes scheduled discretionary contributions to the ESOP sufficient to
service the debt. The cost of shares not committed to be released and
unallocated (suspense shares) is reported as a reduction in shareholders'
equity. Dividends on allocated and unallocated shares are used for debt
service. Shares are released to participants based on a compensation
formula.
In connection with the formation of the ESOP, the Company adopted SOP 93-6.
SOP 93-6 requires that (1) compensation expense be recognized based on the
average fair value of the ESOP shares committed to be released; (2)
dividends on unallocated shares used to pay debt service be reported as a
reduction of debt or of accrued interest payable and that dividends on
allocated shares be charged to retained earnings; and (3) ESOP shares which
have not been committed to be released not be considered outstanding for
purposes of computing earnings per share and book value per share.
Compensation expense related to the ESOP amounted to $52,000 and $98,000
for the three and six months ended June 30, 1997, respectively, compared
to $41,000 and $83,000 for the three and six months ended June 30, 1996,
respectively. The fair value of unearned ESOP shares at June 30, 1997
totaled $1.8 million. At June 30, 1997, there were 5,641 ESOP shares
committed to be released and 84,655 suspense shares. ESOP shares totaling
22,572 were allocated as of June 30, 1997.
7
<PAGE> 10
9. RECENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board ("FASB") released Statement of
Financial Accounting Standard No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS
125") in June 1996. SFAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be applied prospectively. SFAS 125 establishes
standards for resolving issues related to the circumstances under which the
transfer of financial assets should be considered as sales of all or part
of the assets or as secured borrowings and about when a liability should be
considered extinguished. The FASB released Statement of Financial
Accounting Standard No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125" ("SFAS 127") which deferred the
effective date of SFAS 125 until January 1, 1998 for certain transactions
including repurchase agreements, dollar roll, securities lending and
similar transactions. The Company has not yet determined the effect, if
any, that the adoption of SFAS 127 will have on its financial position or
results of operations.
The FASB released Statement of Financial Accounting Standard No. 128,
"Earnings Per Share" ("SFAS 128") in February 1997. SFAS 128 is effective
for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. SFAS 128 establishes standards for
computing and presenting earnings per share. SFAS 128 supersedes APB
Opinion No. 15 and replaces primary and fully diluted earnings per share
with basic and diluted earnings per share for all companies with complex
capital structures and requires a reconciliation of the numerator and
denominator of the diluted earnings per share computation. Under SFAS 128,
basic earnings per share would have been $.36 and $.72 for the three and
six months ended June 30, 1997, respectively, compared to $.34 and $.66 for
the three and six months ended June 30, 1996, respectively. Under SFAS 128
diluted earnings per share would have been $.34 and $.68 for the three and
six months ended June 30, 1997, respectively, compared to $.33 and $.64 for
the three and six months ended June 30, 1996, respectively. This
information was calculated after reviewing the components of SFAS 128.
Further evaluation or subsequent opinions on the disclosure of SFAS 128
could change the earnings per share numbers presented above as calculated
under SFAS 128.
8
<PAGE> 11
FED ONE BANCORP, INC. AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
----------------- ----------------
FINANCIAL CONDITION DATA: (Dollars In Thousands)
<S> <C> <C>
AVERAGE INTEREST-EARNING ASSETS $335,963 $327,778
AVERAGE INTEREST-BEARING LIABILITIES 296,985 287,604
NET AVERAGE EARNING ASSETS 38,978 40,174
NON-PERFORMING ASSETS 1,443 1,068
NON-PERFORMING LOANS 1,363 1,011
ALLOWANCE FOR LOAN LOSSES 1,460 1,434
AVERAGE INTEREST-EARNING ASSETS TO
AVERAGE INTEREST-BEARING LIABILITIES 113.12% 113.97%
ALLOWANCE FOR LOAN LOSSES TO
NON-PERFORMING LOANS 107.12% 141.84%
ALLOWANCE FOR LOAN LOSSES TO
TOTAL LOANS 0.93% 1.07%
NON-PERFORMING LOANS TO TOTAL LOANS 0.86% 0.75%
NON-PERFORMING ASSETS TO TOTAL ASSETS 0.40% 0.31%
CUMULATIVE ONE-YEAR GAP 1.73% 11.68%
SHAREHOLDERS' EQUITY TO ASSETS 11.07% 11.69%
EFFICIENCY RATIO 54.08% 67.76%
COVERAGE RATIO 169.07% 135.72%
NUMBER OF BANKING FACILITIES 9 9
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ---------------------
1997 (1) 1996 (1) 1997 (1) 1996 (1)
---- ---- ---- ----
<S> <C> <C> <C> <C>
SELECTED OPERATING ACTIVITIES:
RETURN ON AVERAGE ASSETS 0.93% 0.96% 0.94% 0.96%
RETURN ON AVERAGE EQUITY 8.36% 7.99% 8.29% 7.85%
NET INTEREST MARGIN 3.46% 3.59% 3.51% 3.64%
(1) AMOUNTS ARE ANNUALIZED
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------ ----------------
PER SHARE DATA:
<S> <C> <C>
PRIMARY/FULLY DILUTED EARNINGS PER SHARE (2) $ 0.34 $ 0.67
BOOK VALUE PER SHARE (3) 17.25 17.25
TANGIBLE BOOK VALUE PER SHARE (3) 16.42 16.42
MARKET PRICE PER SHARE:
HIGH FOR THE QUARTER/YEAR 21.25 21.25
LOW FOR THE QUARTER/YEAR 17.50 15.75
CLOSE 06/30/97 20.25 20.25
CASH DIVIDENDS DECLARED PER SHARE .145 0.29
AVERAGE NUMBER OF SHARES OUTSTANDING (2):
PRIMARY 2,406,722 2,432,541
FULLY DILUTED 2,412,171 2,444,116
</TABLE>
(2) Amounts calculated exclude ESOP shares not committed to be released and
include common stock equivalents.
(3) Amounts calculated exclude ESOP shares not committed to be released.
9
<PAGE> 12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
Total assets increased $14.8 million or 4.3% to $356.7 million at June 30, 1997
compared to $341.9 million at December 31, 1996. Short-term investments and
investment securities held to maturity decreased to $6.2 million and $38.5
million, respectively, at June 30, 1997 compared to $9.5 million and $39.2
million, respectively at December 31, 1996. The $3.3 million decrease in
short-term investments was the result of the use of available cash to purchase
loans and the $692,000 decrease in investment securities was the result of
maturities. At June 30, 1997, the Company had $17.0 million of investment
securities classified as available for sale compared to $17.9 million at
December 31, 1996. The after-tax net unrealized gain on these securities
amounted to $74,000 at June 30, 1997, which is reflected as a separate
component of shareholders' equity. The reduction in available for sale
securities was the result of maturities for which the proceeds were used to
purchase loans. Mortgage-backed securities decreased $3.9 million to $126.3
million at June 30, 1997 compared to $130.2 million at December 31, 1996 as the
result of maturities and repayments used to purchase loans. Loans receivable
increased $23.0 million or 17.2% to $156.4 million at June 30, 1997 compared to
$133.4 million at December 31, 1996, as originations and purchases exceeded
principal repayments. Management invested available funds and borrowed from
the FHLB in an effort to increase loans outstanding. The Company purchased
approximately $27.8 million of loans during the first six months of 1997 of
which $23.9 million were adjustable rate residential mortgage loans. The
majority remaining were the guaranteed portion of Small Business Administration
("SBA") and Farmers Home Administration ("FMHA") loans.
Total liabilities increased by $15.3 million or 5.1% to $317.2 million at June
30, 1997 compared to $301.9 million at December 31, 1996. Deposits increased
$6.3 million or 2.5% to $256.0 million at June 30, 1997 compared to $249.7
million at December 31, 1996. Deposits increased primarily due to the Company
being competitively priced in certificates of deposit during the first six
months of 1997. Borrowed funds increased $8.7 million to $59.0 million at June
30, 1997 compared to $50.3 million at December 31, 1996. Advances from the
FHLB were used to fund the purchased loans.
Total shareholders' equity decreased $502,000 to $39.5 million at June 30, 1997
compared to $40.0 million at December 31, 1996. This decrease was primarily
the result of the Company repurchasing $1.7 million of its common stock during
the first six months of this year. In July 1996 the Company announced a 5%
stock repurchase program representing 127,567 shares to be repurchased, of
which there were 19,100 shares purchased at an average price of $17.87 during
the first quarter of 1997. There were 13,591 shares not bought back under
this program. In April 1997 the Company announced another 5% program
representing 122,155 shares to be repurchased, of which 76,000 shares were
purchased at an average price of $18.51 per share during the second quarter of
1997. These repurchased shares are held as treasury shares. An additional
reduction in equity was caused by the Company declaring quarterly cash
dividends of approximately $338,000 and $328,000 for the quarters ended March
31, 1997 and June 30, 1997, respectively. These decreases were partially
offset by net income of $1.6 million and an increase of $36,000 in the
unrealized gain on investment securities available for sale.
10
<PAGE> 13
RESULTS OF OPERATIONS
Net Income
Net income was $818,000 or $.34 per share for the three months ended June 30,
1997 compared to $818,000 or $.32 per share for the three months ended June 30,
1996. For the three months ended June 30, 1997 compared to the same period in
1996, net interest income decreased $14,000, non-interest income decreased
$16,000, non-interest expense decreased $53,000 and provision for loan losses
increased $20,000. Net income was $1.6 million or $.67 per share for the six
months ended June 30, 1997 compared to $1.6 million or $.62 per share for the
same period in 1996. An $18,000 increase for the six month period ended June
30, 1997 compared to the year-earlier period was primarily the result of a
decrease in total non-interest expense of $168,000, offset by a $40,000
decrease in net interest income, an $18,000 decrease in non-interest income, an
increase of $30,000 in the provision for loan losses and an increase of $62,000
in the provision for income taxes. The increase in earnings per share for the
three and six months ended June 30, 1997 compared to the year-earlier period
was primarily the result of the Company repurchasing its common stock which has
the effect of reducing shares outstanding. See Note 4 Earnings Per Share for
an explanation of common stock outstanding during the periods represented
above.
Interest Income
Interest income amounted to $6.4 million for the three month period ended June
30, 1997, compared to $6.1 million during the same period in 1996. The
$259,000 increase was due to an increase in average interest-earning assets of
$11.4 million and an increase of 5 basis points in the weighted average yield
on interest-earning assets. The increase in average balances occurred in loans
receivable and mortgage-backed securities and was partially offset by
reductions in short-term investments and investment securities held to maturity
and available for sale. The increase in the weighted average yield occurred in
investment securities, which was partially offset by decreases in the yields on
short-term investments, loans and mortgage-backed securities. Interest income
amounted to $12.6 million for the six months ended June 30, 1997 compared to
$12.2 million for the same time period in 1996. The $350,000 increase was due
to an increase in average interest-earning assets of $9.8 million partially
offset by a decrease of 1 basis point in the weighted average yield on
interest-earning assets. The increase in the balances of average
interest-earning assets was the result of a $19.4 million increase in the
average balance of loans receivable and a $8.2 million increase in the average
balance of mortgage-backed securities. The majority of the increase in the
average balance of loans receivable was due to the purchase of adjustable rate
residential mortgage loans partially offset by principal repayments. The
increase in the average balance of mortgage-backed securities was due to the
purchase of adjustable rate securities partially offset by principal
repayments. These increases were partially offset by a $2.2 million decrease
in short-term investments and a $15.6 million aggregate decrease in average
investment securities held to maturity and investment securities available for
sale. These decreases occurred due to available funds being used to purchase
loans. The decrease in the weighted average yield occurred in short-term
investments, loans and mortgage-backed securities with an offsetting increase
in the weighted average yield on investment securities held to maturity and
investment securities available for sale.
11
<PAGE> 14
Interest Expense
Interest expense amounted to $3.4 million for the three month period ended June
30, 1997, compared to $3.2 million during the same period in 1996. This
$273,000 increase in interest expense was due to a $13.2 million increase in
the balance of average interest-bearing liabilities and an increase of 17 basis
points in the weighted average cost of funds. Average balances of certificates
of deposit and borrowed funds increased, which were partially offset by a
decrease in the balance of passbook accounts. The cost of funds increase was a
result of increases in the cost of funds in certificates of deposit and
borrowed funds offset by a decrease in the cost of funds in passbook accounts.
Interest expense amounted to $6.7 million for the six month period ended June
30, 1997 compared to $6.3 million for the same period in 1996. This $390,000
increase in interest expense was due to a $11.7 million increase in the balance
of average interest-bearing liabilities and an increase of 9 basis points in
the average cost of funds. Average deposits increased $7.1 million for the six
month period ended June 30, 1997 compared to the same period in 1996 as a
result of the Company being competitively priced in certificates of deposit
which increases were partially offset by decreases in the average balance of
passbook accounts. Average borrowed funds increased $4.6 million for the six
month period ended June 30, 1997 compared to the same period in 1996 due to the
Company increasing its FHLB advances.
Net Interest Income
Net interest income amounted to $2.9 million and $5.9 million for the three and
six months ended June 30, 1997, respectively compared to $3.0 million and $5.9
million during the same time periods in 1996. Net interest income decreased
mainly because of the increases in average balances of interest-bearing
liabilities exceeding the increase in average balances of interest-earning
assets. Average interest-earning assets increased $11.4 million and $9.8
million during the three and six months ended June 30, 1997, respectively
compared to the year-earlier period. Average interest-bearing liabilities
increased $13.2 million and $11.7 million during the same comparative time
periods. Average interest-earning assets did not increase at the same levels
as average interest-bearing liabilities because the Company repurchased $3.3
million of its common stock since the six month period ended June 30, 1996, of
which $1.7 million was repurchased during the first six months of this year. A
shift from lower yielding assets into higher yielding assets for the six months
ended June 30, 1997 compared to the year-earlier period was offset by a
corresponding shift from lower yielding deposits into higher yielding deposits
and borrowings during the same comparative time period. The net interest
margin declined 5 and 13 basis points to 3.46% and 3.51% for the three and six
months ended June 30, 1997, respectively, from 3.51% and 3.64% for the
year-earlier periods. The decline in the net interest margin for the six
months ended June 30, 1997 compared to the year-earlier period was mainly due
to an increase in the cost of funds during this time period and a decrease in
the net average earning assets due to the use of funds to repurchase stock.
Also, loans purchased during the period were purchased at yields that were
lower than the yields in the existing portfolio.
12
<PAGE> 15
Provision for Loan Losses
The provision for loan losses increased to $80,000 for the six month period
ended June 30, 1997 compared to $50,000 during the same time period in 1996.
This reflected management's evaluation of the underlying credit risk of the
loan portfolio and the level of allowance for loan losses to total loans
receivable, which were increasing in balances outstanding.
The allowance for loan losses amounted to $1.5 million or .93% and 107.12% of
total loans and total non-performing loans, respectively, at June 30, 1997, as
compared to $1.4 million or 1.07% and 141.84% , respectively, at December 31,
1996.
Non-performing loans (non-accrual loans and accruing loans 90 days or more
overdue) were $1.4 million and $1.0 million at June 30, 1997 and December 31,
1996, respectively, which represented .86% and .75% of the Company's total
loans, respectively. This increase was due to one loan secured by commercial
real estate which has a history of delinquency during the borrower's off-season
business cycle. The Company's real estate owned, which consists of real estate
acquired through foreclosure or by deed-in-lieu thereof, amounted to $80,000 and
$56,000 at June 30, 1997 and December 31, 1996, respectively. As a percentage
of total assets, the Company's total non-performing assets amounted to $1.4
million or .40% at June 30, 1997 and $1.1 million or .31% at December 31, 1996.
Non-Interest Income
Non-interest income amounted to $141,000 and $291,000 for the three and six
month periods ended June 30, 1997, as compared to $157,000 and $309,000 for the
same time periods in 1996. The decrease of $18,000 or 5.8% for the six month
period ended June 30, 1997 compared to the same period in 1996 was due
primarily to a decrease in deposit charges.
Non-interest Expense
Non-interest expense decreased $53,000 for the three month period ended June
30, 1997 compared to the same time period in 1996, primarily as a result of
decreases in federal insurance premiums of $97,000 and a decrease in premises
and equipment expense of $16,000. These decreases were partially offset by
increases in salaries and employee benefits of $22,000 and other expenses of
$34,000. Non-interest expense decreased $168,000 for the six month period
ended June 30, 1997 compared to the same period in 1996 primarily as a result
of decreases in federal insurance premiums of $193,000, premises and equipment
expense of $31,000 and data processing expense of $15,000 offset by an increase
in salaries and employee benefits of $63,000. Decreases in federal insurance
premiums were due to a lower assessment rate to approximately 6.5 cents per
$100 of deposits in 1997 compared to 23 cents per $100 of deposits in 1996 as a
result of the SAIF being recapitalized in the third quarter of 1996. Decreases
in premises and equipment were primarily the result of expenses related to the
renovation of a branch office and expenses caused by severe weather conditions
in the first quarter of 1996. Decreases in data processing expenses were due to
decreases in ATM processing charges. Increases in salaries and employee
benefits were the result of normal salary adjustments.
13
<PAGE> 16
Provision for Income Taxes
Provision for income taxes was $463,000 and $979,000 for the three and six
months ended June 30, 1997, respectively, and $460,000 and $917,000 for the
three and six month periods ended June 30, 1996, respectively. The Company's
effective tax rate amounted to 36.1% and 36.0% during the three months ended
June 30, 1997 and 1996, respectively, and 37.4% and 36.1% during the six months
ended June 30, 1997 and 1996, respectively. Income tax expense increased
primarily due to an increase in pre-tax income.
Liquidity
Office of Thrift Supervision ("OTS") regulations require the Bank to maintain
an average daily balance of liquid assets (cash, certain time deposits,
banker's acceptances and specified United States Government, state or federal
agency obligations) equal to a monthly average of not less than 5% of its net
withdrawable deposits plus short-term borrowings. For the month of June 1997,
the Bank's average liquidity position was $37.0 million or 13.1% compared to
$45.4 million or 15.8% for the month of December 1996.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators, that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain amounts and ratios of tangible and core capital to
adjusted total assets and of total risk-based capital to risk-weighted assets
of 1.5%, 3.0%, and 8.0%, respectively. As of June 30, 1997, the Bank meets all
capital adequacy requirements to which it is subject.
As of June 30, 1997, the most recent notification from the OTS categorized the
Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized the Bank must maintain minimum
tangible, core and total risk-based capital ratios of 5.0%, 6.0%, and 10.0%,
respectively. At June 30, 1997, the Bank's tangible, core and risk-based
capital ratios amounted to 9.87%, 9.87% and 24.43%, respectively. There are no
conditions or events since that notification that management believes have
changed the Bank's category.
14
<PAGE> 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are various claims and lawsuits in which the Company is periodically
involved incidental to the Company's business. In the opinion of management,
no material loss is expected from any of such pending claims or lawsuits.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.6 Employment agreement between the Company and Alan E. Groover, dated
June 10, 1997
10.7 Employment agreement between the Bank and Alan E. Groover, dated June
10, 1997
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K dated June 10, 1997 to
report, under item 5, its plans to open three full service branch offices
in Kroger supermarkets.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
FED ONE BANCORP, INC.
Date: August 11, 1997 By: /s/Alan E. Groover
----------------------------- -----------------------------------------
Alan E. Groover
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 1997 By: /s/Lisa K. DiCarlo
----------------------------- -----------------------------------------
Lisa K. DiCarlo
Senior Vice President
and Treasurer
(Principal Financial and
Accounting Officer)
16
<PAGE> 1
EXHIBIT 10.6
AGREEMENT
AGREEMENT, dated this 10th day of June 1997, between Fed One Bancorp,
Inc. (the "Corporation"), a Delaware corporation and Alan E. Groover (the
"Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of the Corporation and
Fed One Bank (the "Bank") (together, the "Employers");
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers, and the Bank
currently has an agreement with the Executive dated October 8, 1992, which is
being concurrently amended;
WHEREAS, in accordance with Office of Thrift Supervision ("OTS")
Regulatory Bulletin 27a, the Corporation and the Bank desire to enter into
separate agreements with the Executive with respect to his employment by each
of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive by the Corporation in the event that his
employment with the Corporation is terminated under specified circumstances;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. DEFINITIONS. The following words and terms shall have the
meanings set forth below for the purposes of this Agreement:
(a) AVERAGE ANNUAL COMPENSATION. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the
average level of compensation paid to the Executive by the Employers or any
subsidiary thereof during the most recent five taxable years preceding the Date
of Termination and included in the Executive's gross income for tax purposes,
including but not limited to Base Salary, bonuses and amounts paid or accrued
on behalf of the Executive under any employee benefit plans of the Employers.
(b) BASE SALARY. "Base Salary" shall have the meaning set forth
in Section 3(a) hereof.
(c) CAUSE. Termination of the Executive's employment for "Cause"
shall mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of
<PAGE> 2
2
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order or material
breach of any provision of this Agreement.
(d) CHANGE IN CONTROL OF THE CORPORATION. "Change in Control of
the Corporation" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or any successor thereto, whether or not the Corporation is
registered under the Exchange Act; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination
is given or as specified in such Notice.
(g) DISABILITY. Termination by the Corporation of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits
under the applicable long-term disability plan maintained by the Employers or
any subsidiary or, if no such plan applies, which would qualify the Executive
for disability benefits under the Federal Social Security System.
(h) GOOD REASON. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following
a Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, the
failure to elect or to re-elect or to appoint or to
re-appoint the Executive to the offices of President
and Chief Executive Officer of the Employers or a
material adverse change made by the Employers in the
Executive's functions, duties or responsibilities as
President and Chief Executive Officer of the
Employers;
<PAGE> 3
3
(ii) Without the Executive's express written consent, a
reduction by either of the Employers in the
Executive's Base Salary as the same may be increased
from time to time or, except to the extent permitted
by Section 3(b) hereof, a reduction in the package of
fringe benefits provided to the Executive, taken as a
whole;
(iii) The principal executive office of either of the
Employers is relocated outside of the Wheeling, West
Virginia area or, without the Executive's express
written consent, either of the Employers require the
Executive to be based anywhere other than an area in
which the Employers' principal executive office is
located, except for required travel on business of
the Employers to an extent substantially consistent
with the Executive's present business travel
obligations;
(iv) Any purported termination of the Executive's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (j) below;
or
(v) The failure by the Corporation to obtain the
assumption of and agreement to perform this Agreement
by any successor as contemplated in Section 9 hereof.
(i) IRS. IRS shall mean the Internal Revenue Service.
(j) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by the Corporation for any reason, including without
limitation for Cause, Disability or Retirement, or by the Executive for any
reason, including without limitation for Good Reason, shall be communicated by
written "Notice of Termination" to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a dated notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated, (iii) specifies a Date of Termination, which shall be
not less than thirty (30) nor more than ninety (90) days after such Notice of
Termination is given, except in the case of the Corporation's termination of
the Executive's employment for Cause, which shall be effective immediately; and
(iv) is given in the manner specified in Section 10 hereof.
(k) RETIREMENT. "Retirement" shall mean voluntary termination by
the Executive in accordance with the Employers' retirement policies, including
early retirement, generally applicable to their salaried employees.
<PAGE> 4
4
2. TERM OF EMPLOYMENT.
(a) The Corporation hereby employs the Executive as President and
Chief Executive Officer and the Executive hereby accepts said employment and
agrees to render such services to the Corporation on the terms and conditions
set forth in this Agreement. The term of employment under this Agreement shall
be for three years, commencing on the date of this Agreement and, upon approval
of the Board of Directors of the Corporation, shall extend for an additional
year on each annual anniversary of the date of this Agreement such that at any
time the remaining term of this Agreement shall be from two to three years.
Prior to the first annual anniversary of the date of this Agreement and each
annual anniversary thereafter, the Board of Directors of the Corporation shall
consider and review (with appropriate corporate documentation thereof, and
after taking into account all relevant factors, including the Executive's
performance hereunder) an extension of the term of this Agreement, and the term
shall continue to extend each year if the Board of Directors approves such
extension unless the Executive gives written notice to the Employers of the
Executive's election not to extend the term, with such written notice to be
given not less than thirty (30) days prior to any such anniversary date. If the
Board of Directors elects not to extend the term, it shall give written notice
of such decision to the Executive not less than thirty (30) days prior to any
such anniversary date. If any party gives timely notice that the term will not
be extended as of any annual anniversary date, then this Agreement shall
terminate at the conclusion of its remaining term. References herein to the
term of this Agreement shall refer both to the initial term and successive
terms.
(b) During the term of this Agreement, the Executive shall perform
such executive services for the Corporation as may be consistent with his
titles and from time to time assigned to him by the Corporation's Board of
Directors.
3. COMPENSATION AND BENEFITS.
(a) The Employers shall compensate and pay the Executive for his
services during the term of this Agreement at a minimum base salary of $180,000
per year ("Base Salary"), which may be increased from time to time in such
amounts as may be determined by the Boards of Directors of the Employers and
may not be decreased without the Executive's express written consent. In
addition to his Base Salary, the Executive shall be entitled to receive during
the term of this Agreement such bonus payments as may be determined by the
Boards of Directors of the Employers.
(b) During the term of this Agreement, the Executive shall be
entitled to participate in and receive the benefits of any pension or other
retirement benefit plan, profit sharing, stock option, employee stock
ownership, or other plans, benefits and privileges given to employees and
executives of the Employers, to the extent commensurate with his then duties
and responsibilities, as fixed by the Boards of Directors of the Employers.
The Corporation shall not make any changes in such plans, benefits or
privileges which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs
<PAGE> 5
5
pursuant to a program applicable to all executive officers of the Corporation
and does not result in a proportionately greater adverse change in the rights
of or benefits to the Executive as compared with any other executive officer of
the Corporation. Nothing paid to the Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Executive pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, the Executive shall be
entitled to paid annual vacation in accordance with the policies as established
from time to time by the Boards of Directors of the Employers, which shall in
no event be less than four weeks per annum. The Executive shall not be
entitled to receive any additional compensation from the Employers for failure
to take a vacation, nor shall the Executive be able to accumulate unused
vacation time from one year to the next, except to the extent authorized by the
Boards of Directors of the Employers.
(d) During the term of this Agreement, in keeping with past
practices, the Employers shall continue to provide the Executive with the
automobile he presently drives. The Employers shall be responsible and shall
pay for all costs of insurance coverage, repairs, maintenance and other
incidental expenses, including license, fuel and oil. The Employers shall
provide the Executive with a replacement automobile of a similar type as
selected by the Executive at approximately the time that his present automobile
reaches (3) years of age and approximately every three (3) years thereafter,
upon the same terms and conditions.
(e) In the event the Executive's employment is terminated by the
Corporation for any reason other than Cause, the Employers shall provide
continued life, medical, dental and disability coverage substantially identical
to the coverage maintained by the Employers for the Executive immediately prior
to his termination. Such coverage shall cease upon the expiration of the
remaining term of this Agreement.
(f) In the event of the Executive's death during the term of this
Agreement or if the Executive is terminated due to Disability, his spouse,
estate, legal representative or named beneficiaries (as directed by the
Executive in writing) shall be paid on a monthly basis the Executive's annual
compensation from the Employers at the rate in effect at the time of the
Executive's death or termination due to Disability for the remainder of the
term of this Agreement, as well as the benefits specified in Section 3(e)
hereof.
(g) The Executive's compensation, benefits and expenses shall be
paid by the Corporation and the Bank in the same proportion as the time and
services actually expended by the Executive on behalf of each respective
Employer.
4. EXPENSES. The Employers shall reimburse the Executive or
otherwise provide for or pay for all reasonable expenses incurred by the
Executive in furtherance of or in connection with the business of the
Employers, including, but not by way of limitation, automobile expenses
described in Section 3(d) hereof, and traveling expenses, and all
<PAGE> 6
6
reasonable entertainment expenses (whether incurred at the Executive's
residence, while traveling or otherwise), subject to such reasonable
documentation and other limitations as may be established by the Boards of
Directors of the Employers. If such expenses are paid in the first instance by
the Executive, the Employers shall reimburse the Executive therefor.
5. TERMINATION.
(a) The Corporation shall have the right, at any time upon prior
Notice of Termination, to terminate the Executive's employment hereunder for
any reason, including without limitation termination for Cause, Disability or
Retirement, and the Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
(b) In the event that (i) the Executive's employment is terminated
by the Corporation for Cause or (ii) the Executive terminates his employment
hereunder other than for Disability, Retirement, death or Good Reason, the
Executive shall have no right pursuant to this Agreement to compensation or
other benefits for any period after the applicable Date of Termination.
(c) In the event that the Executive's employment is terminated as
a result of Disability, Retirement or the Executive's death during the term of
this Agreement, the Executive shall have no right pursuant to this Agreement to
compensation or other benefits for any period after the applicable Date of
Termination, except as provided for in Sections 3(e) and 3(f) hereof.
(d) In the event that (i) the Executive's employment is terminated
by the Corporation for other than Cause, Disability, Retirement or the
Executive's death or (ii) such employment is terminated by the Executive (a)
due to a material breach of this Agreement by the Corporation, which breach has
not been cured within fifteen (15) days after a written notice of
non-compliance has been given by the Executive to the Employers, or (b) for
Good Reason, then the Corporation shall
(A) pay to the Executive, in either thirty-six (36) equal
monthly installments beginning with the first business day of the
month following the Date of Termination or in a lump sum within five
business days of the Date of Termination (at the Executive's
election), a cash severance amount equal to three (3) times that
portion of the Executive's Average Annual Compensation paid by the
Corporation, and
(B) maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term of employment
pursuant hereto prior to the Notice of Termination or (ii) the date of
the Executive's full-time employment by another employer (provided
that the Executive is entitled under the terms of such employment to
benefits substantially similar to those described in this subparagraph
(B)), at no cost to the Executive, the Executive's continued
participation in all group
<PAGE> 7
7
insurance, life insurance, health and accident, disability and other
employee benefit plans, programs and arrangements offered by the
Corporation in which the Executive was entitled to participate
immediately prior to the Date of Termination (other than stock option
and restricted stock plans of the Employers), provided that in the
event that the Executive's participation in any plan, program or
arrangement as provided in this subparagraph (B) is barred, or during
such period any such plan, program or arrangement is discontinued or
the benefits thereunder are materially reduced, the Corporation shall
arrange to provide the Executive with benefits substantially similar
to those which the Executive was entitled to receive under such plans,
programs and arrangements immediately prior to the Date of
Termination.
6. PAYMENT OF ADDITIONAL BENEFITS UNDER CERTAIN CIRCUMSTANCES.
(a) If the payments and benefits pursuant to Section 5 hereof,
either alone or together with other payments and benefits which the Executive
has the right to receive from the Employers (including, without limitation, the
payments and benefits which the Executive would have the right to receive from
the Bank pursuant to Section 5 of the Agreement between the Bank and the
Executive dated June 10, 1997 ("Bank Agreement"), before giving effect to any
reduction in such amounts pursuant to Section 6 of the Bank Agreement), would
constitute a "parachute payment" as defined in Section 280G(b)(2) of the Code
(the "Initial Parachute Payment," which includes the amounts paid pursuant to
clause (A) below), then the Corporation shall pay to the Executive, in
thirty-six (36) equal monthly installments beginning with the first business
day of the month following the Date of Termination or in a lump sum within five
business days of the Date of Termination (at the Executive's election), a cash
amount equal to the sum of the following:
(A) the amount by which the payments and benefits that
would have otherwise been paid by the Bank to the Executive pursuant
to Section 5 of the Bank Agreement are reduced by the provisions of
Section 6 of the Bank Agreement;
(B) twenty (20) percent (or such other percentage equal
to the tax rate imposed by Section 4999 of the Code) of the amount by
which the Initial Parachute Payment exceeds the Executive's "base
amount" from the Employers, as defined in Section 280G(b)(3) of the
Code, with the difference between the Initial Parachute Payment and
the Executive's base amount being hereinafter referred to as the
"Initial Excess Parachute Payment";
(C) such additional amount (tax allowance) as may be
necessary to compensate the Executive for the payment by the Executive
of state and federal income and excise taxes on the payment provided
under clause (B) above and on any
<PAGE> 8
8
payments under this clause (C). In computing such tax allowance, the
payment to be made under clause (B) above shall be multiplied by the
"gross up percentage" ("GUP"). The GUP shall be determined as
follows:
Tax Rate
GUP = ----------------
1- Tax Rate
The Tax Rate for purposes of computing the GUP shall be the highest
marginal federal and state income and employment-related tax rate,
including any applicable excise tax rate, applicable to the Executive
in the year in which the payment under clause (B) above is made.
(b) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which the Executive is a party that the actual excess parachute
payment as defined in Section 280G(b)(1) of the Code is different from the
Initial Excess Parachute Payment (such different amount being hereafter
referred to as the "Determinative Excess Parachute Payment"), then the
Corporation's independent tax counsel or accountants shall determine the amount
(the "Adjustment Amount") which either the Executive must pay to the
Corporation or the Corporation must pay to the Executive in order to put the
Executive (or the Corporation, as the case may be) in the same position the
Executive (or the Corporation, as the case may be) would have been if the
Initial Excess Parachute Payment had been equal to the Determinative Excess
Parachute Payment. In determining the Adjustment Amount, the independent tax
counsel or accountants shall take into account any and all taxes (including any
penalties and interest) paid by or for the Executive or refunded to the
Executive or for the Executive's benefit. As soon as practicable after the
Adjustment Amount has been so determined, the Corporation shall pay the
Adjustment Amount to the Executive or the Executive shall repay the Adjustment
Amount to the Corporation, as the case may be.
(c) In each calendar year that the Executive receives payments of
benefits under this Section 6, the Executive shall report on his state and
federal income tax returns such information as is consistent with the
determination made by the independent tax counsel or accountants of the
Corporation as described above. The Corporation shall indemnify and hold the
Executive harmless from any and all losses, costs and expenses (including
without limitation, reasonable attorneys' fees, interest, fines and penalties)
which the Executive incurs as a result of so reporting such information. The
Executive shall promptly notify the Corporation in writing whenever the
Executive receives notice of the institution of a judicial or administrative
proceeding, formal or informal, in which the federal tax treatment under
Section 4999 of the Code of any amount paid or payable under this Section 6 is
being reviewed or is in dispute. The Corporation shall assume control at its
expense over all legal and accounting matters pertaining to such federal tax
treatment (except to the extent necessary or appropriate for the Executive to
resolve any such proceeding with respect to any matter unrelated to amounts
paid or payable pursuant to this Section 6) and the
<PAGE> 9
9
Executive shall cooperate fully with the Corporation in any such proceeding.
The Executive shall not enter into any compromise or settlement or otherwise
prejudice any rights the Corporation may have in connection therewith without
the prior consent of the Corporation.
7. MITIGATION; EXCLUSIVITY OF BENEFITS.
(a) The Executive shall not be required to mitigate the amount of
any benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended
to exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
8. WITHHOLDING. All payments required to be made by the
Corporation hereunder to the Executive shall be subject to the withholding of
such amounts, if any, relating to tax and other payroll deductions as the
Corporation may reasonably determine should be withheld pursuant to any
applicable law or regulation.
9. ASSIGNABILITY. The Corporation may assign this Agreement and
its rights and obligations hereunder in whole, but not in part, to any
corporation, bank or other entity with or into which the Corporation may
hereafter merge or consolidate or to which the Corporation may transfer all or
substantially all of its assets, if in any such case said corporation, bank or
other entity shall by operation of law or expressly in writing assume all
obligations of the Corporation hereunder as fully as if it had been originally
made a party hereto, but may not otherwise assign this Agreement or its rights
and obligations hereunder. The Executive may not assign or transfer this
Agreement or any rights or obligations hereunder.
10. NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Corporation: Secretary
Fed One Bancorp, Inc.
21 Twelfth Street
Wheeling, West Virginia 26003-3295
To the Bank: Secretary
Fed One Bank
21 Twelfth Street
Wheeling, West Virginia 26003-3295
<PAGE> 10
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To the Executive: Alan E. Groover
19 Highland Park
Wheeling, West Virginia 26003
11. AMENDMENT; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer or officers as
may be specifically designated by the Board of Directors of the Corporation to
sign on its behalf. No waiver by any party hereto at any time of any breach by
any other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United
States where applicable and otherwise by the substantive laws of the State of
West Virginia.
13. NATURE OF OBLIGATIONS. Nothing contained herein shall create
or require the Corporation to create a trust of any kind to fund any benefits
which may be payable hereunder, and to the extent that the Executive acquires a
right to receive benefits from the Corporation hereunder, such right shall be
no greater than the right of any unsecured general creditor of the Corporation.
14. HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement between the Corporation and the Executive with respect to the matters
agreed to herein. All prior agreements between the Corporation and the
Executive with respect to the matters agreed to herein, including without
limitation the Agreement between the Employers and the Executive dated October
8, 1992, are hereby superseded and shall have no force or effect.
Notwithstanding the foregoing, nothing contained in this Agreement shall affect
the agreement of even date being entered into between the Bank and the
Executive.
<PAGE> 11
11
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: FED ONE BANCORP, INC.
/s/ Jean E. Huff By: /s/ George J. Anetakis
- -------------------------------------- ---------------------------------
Jean E. Huff, Corporate Secretary George J. Anetakis, Director and
Member of the Compensation
Committee of the Board
of Directors
EXECUTIVE
By: /s/Alan E. Groover
---------------------------------
Alan E. Groover
<PAGE> 1
EXHIBIT 10.7
AGREEMENT
AGREEMENT, dated this 10th day of June 1997, between Fed One Bank (the
"Bank"), a federally chartered savings bank and Alan E. Groover (the
"Executive").
WITNESSETH
WHEREAS, the Executive is presently an officer of Fed One Bancorp,
Inc. (the "Corporation") and the Bank (together, the "Employers");
WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers, and the Bank
currently has an agreement with the Executive dated October 8, 1992, which is
being concurrently amended;
WHEREAS, in accordance with Office of Thrift Supervision ("OTS")
Regulatory Bulletin 27a, the Corporation and the Bank desire to enter into
separate agreements with the Executive with respect to his employment by each
of the Employers; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive by the Bank in the event that his employment
with the Bank is terminated under specified circumstances;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. DEFINITIONS. The following words and terms shall have the
meanings set forth below for the purposes of this Agreement:
(a) AVERAGE ANNUAL COMPENSATION. The Executive's "Average Annual
Compensation" for purposes of this Agreement shall be deemed to mean the
average level of compensation paid to the Executive by the Employers or any
subsidiary thereof during the most recent five taxable years preceding the Date
of Termination and included in the Executive's gross income for tax purposes,
including but not limited to Base Salary, bonuses and amounts paid or accrued
on behalf of the Executive under any employee benefit plans of the Employers.
(b) BASE SALARY. "Base Salary" shall have the meaning set forth
in Section 3(a) hereof.
(c) CAUSE. Termination of the Executive's employment for "Cause"
shall mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of
<PAGE> 2
2
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order or material
breach of any provision of this Agreement.
(d) CHANGE IN CONTROL OF THE CORPORATION. "Change in Control of
the Corporation" shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act"), or any successor thereto, whether or not the Corporation is
registered under the Exchange Act; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(e) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) DATE OF TERMINATION. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination
is given or as specified in such Notice.
(g) DISABILITY. Termination by the Bank of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits
under the applicable long-term disability plan maintained by the Employers or
any subsidiary or, if no such plan applies, which would qualify the Executive
for disability benefits under the Federal Social Security System.
(h) GOOD REASON. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive following
a Change in Control of the Corporation based on:
(i) Without the Executive's express written consent, the
failure to elect or to re-elect or to appoint or to
re-appoint the Executive to the offices of President
and Chief Executive Officer of the Employers or a
material adverse change made by the Employers in the
Executive's functions, duties or responsibilities as
President and Chief Executive Officer of the
Employers;
<PAGE> 3
3
(ii) Without the Executive's express written consent, a
reduction by either of the Employers in the
Executive's Base Salary as the same may be increased
from time to time or, except to the extent permitted
by Section 3(b) hereof, a reduction in the package of
fringe benefits provided to the Executive, taken as a
whole;
(iii) The principal executive office of either of the
Employers is relocated outside of the Wheeling, West
Virginia area or, without the Executive's express
written consent, either of the Employers require the
Executive to be based anywhere other than an area in
which the Employers' principal executive office is
located, except for required travel on business of
the Employers to an extent substantially consistent
with the Executive's present business travel
obligations;
(iv) Any purported termination of the Executive's
employment for Cause, Disability or Retirement which
is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (j) below;
or
(v) The failure by the Bank to obtain the assumption of
and agreement to perform this Agreement by any
successor as contemplated in Section 9 hereof.
(i) IRS. IRS shall mean the Internal Revenue Service.
(j) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment by the Bank for any reason, including without limitation
for Cause, Disability or Retirement, or by the Executive for any reason,
including without limitation for Good Reason, shall be communicated by written
"Notice of Termination" to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a dated notice which (i)
indicates the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision
so indicated, (iii) specifies a Date of Termination, which shall be not less
than thirty (30) nor more than ninety (90) days after such Notice of
Termination is given, except in the case of the Bank's termination of
Executive's employment for Cause, which shall be effective immediately; and
(iv) is given in the manner specified in Section 10 hereof.
(k) RETIREMENT. "Retirement" shall mean voluntary termination by
the Executive in accordance with the Employers' retirement policies, including
early retirement, generally applicable to their salaried employees.
<PAGE> 4
4
2. TERM OF EMPLOYMENT.
(a) The Bank hereby employs the Executive as President and Chief
Executive Officer and the Executive hereby accepts said employment and agrees
to render such services to the Bank on the terms and conditions set forth in
this Agreement. The term of employment under this Agreement shall be for three
years, commencing on the date of this Agreement and, upon approval of the Board
of Directors of the Bank, shall extend for an additional year on each annual
anniversary of the date of this Agreement such that at any time the remaining
term of this Agreement shall be from two to three years. Prior to the first
annual anniversary of the date of this Agreement and each annual anniversary
thereafter, the Board of Directors of the Bank shall consider and review (with
appropriate corporate documentation thereof, and after taking into account all
relevant factors, including the Executive's performance hereunder) an extension
of the term of this Agreement, and the term shall continue to extend each year
if the Board of Directors approves such extension unless the Executive gives
written notice to the Employers of the Executive's election not to extend the
term, with such written notice to be given not less than thirty (30) days prior
to any such anniversary date. If the Board of Directors elects not to extend
the term, it shall give written notice of such decision to the Executive not
less than thirty (30) days prior to any such anniversary date. If any party
gives timely notice that the term will not be extended as of any annual
anniversary date, then this Agreement shall terminate at the conclusion of its
remaining term. References herein to the term of this Agreement shall refer
both to the initial term and successive terms.
(b) During the term of this Agreement, the Executive shall perform
such executive services for the Bank as may be consistent with his titles and
from time to time assigned to him by the Bank's Board of Directors.
3. COMPENSATION AND BENEFITS.
(a) The Employers shall compensate and pay the Executive for his
services during the term of this Agreement at a minimum base salary of $180,000
per year ("Base Salary"), which may be increased from time to time in such
amounts as may be determined by the Boards of Directors of the Employers and
may not be decreased without the Executive's express written consent. In
addition to his Base Salary, the Executive shall be entitled to receive during
the term of this Agreement such bonus payments as may be determined by the
Boards of Directors of the Employers.
(b) During the term of this Agreement, the Executive shall be
entitled to participate in and receive the benefits of any pension or other
retirement benefit plan, profit sharing, stock option, employee stock
ownership, or other plans, benefits and privileges given to employees and
executives of the Employers, to the extent commensurate with his then duties
and responsibilities, as fixed by the Boards of Directors of the Employers.
The Bank shall not make any changes in such plans, benefits or privileges which
would adversely affect the Executive's rights or benefits thereunder, unless
such change occurs pursuant to a
<PAGE> 5
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program applicable to all executive officers of the Bank and does not result
in a proportionately greater adverse change in the rights of or benefits to the
Executive as compared with any other executive officer of the Bank. Nothing
paid to the Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of the salary payable to
the Executive pursuant to Section 3(a) hereof.
(c) During the term of this Agreement, the Executive shall be
entitled to paid annual vacation in accordance with the policies as established
from time to time by the Boards of Directors of the Employers, which shall in
no event be less than four weeks per annum. The Executive shall not be
entitled to receive any additional compensation from the Employers for failure
to take a vacation, nor shall the Executive be able to accumulate unused
vacation time from one year to the next, except to the extent authorized by the
Boards of Directors of the Employers.
(d) During the term of this Agreement, in keeping with past
practices, the Employers shall continue to provide the Executive with the
automobile he presently drives. The Employers shall be responsible and shall
pay for all costs of insurance coverage, repairs, maintenance and other
incidental expenses, including license, fuel and oil. The Employers shall
provide the Executive with a replacement automobile of a similar type as
selected by the Executive at approximately the time that his present automobile
reaches (3) years of age and approximately every three (3) years thereafter,
upon the same terms and conditions.
(e) In the event the Executive's employment is terminated by the
Bank for any reason other than Cause, the Employers shall provide continued
life, medical, dental and disability coverage substantially identical to the
coverage maintained by the Employers for the Executive immediately prior to his
termination. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.
(f) In the event of the Executive's death during the term of this
Agreement or if the Executive is terminated due to Disability, his spouse,
estate, legal representative or named beneficiaries (as directed by the
Executive in writing) shall be paid on a monthly basis the Executive's annual
compensation from the Employers at the rate in effect at the time of the
Executive's death or termination due to Disability for the remainder of the
term of this Agreement, as well as the benefits specified in Section 3(e)
hereof.
(g) The Executive's compensation, benefits and expenses shall be
paid by the Corporation and the Bank in the same proportion as the time and
services actually expended by the Executive on behalf of each respective
Employer.
4. EXPENSES. The Employers shall reimburse the Executive or
otherwise provide for or pay for all reasonable expenses incurred by the
Executive in furtherance of or in connection with the business of the
Employers, including, but not by way of limitation, automobile expenses
described in Section 3(d) hereof, and traveling expenses, and all reasonable
entertainment expenses (whether incurred at the Executive's residence, while
<PAGE> 6
6
traveling or otherwise), subject to such reasonable documentation and other
limitations as may be established by the Boards of Directors of the Employers.
If such expenses are paid in the first instance by the Executive, the Employers
shall reimburse the Executive therefor.
5. TERMINATION.
(a) The Bank shall have the right, at any time upon prior Notice
of Termination, to terminate the Executive's employment hereunder for any
reason, including without limitation termination for Cause, Disability or
Retirement, and the Executive shall have the right, upon prior Notice of
Termination, to terminate his employment hereunder for any reason.
(b) In the event that (i) the Executive's employment is terminated
by the Bank for Cause or (ii) the Executive terminates his employment hereunder
other than for Disability, Retirement, death or Good Reason, the Executive
shall have no right pursuant to this Agreement to compensation or other
benefits for any period after the applicable Date of Termination.
(c) In the event that the Executive's employment is terminated as
a result of Disability, Retirement or the Executive's death during the term of
this Agreement, the Executive shall have no right pursuant to this Agreement to
compensation or other benefits for any period after the applicable Date of
Termination, except as provided for in Sections 3(e) and 3(f) hereof.
(d) In the event that (i) the Executive's employment is terminated
by the Bank for other than Cause, Disability, Retirement or the Executive's
death or (ii) such employment is terminated by the Executive (a) due to a
material breach of this Agreement by the Bank, which breach has not been cured
within fifteen (15) days after a written notice of non-compliance has been
given by the Executive to the Employers, or (b) for Good Reason, then the Bank
shall, subject to the provisions of Section 6 hereof, if applicable
(A) pay to the Executive, in either thirty-six (36) equal
monthly installments beginning with the first business day of the
month following the Date of Termination or in a lump sum within five
business days of the Date of Termination (at the Executive's
election), a cash severance amount equal to three (3) times that
portion of the Executive's Average Annual Compensation paid by the
Bank, and
(B) maintain and provide for a period ending at the
earlier of (i) the expiration of the remaining term of employment
pursuant hereto prior to the Notice of Termination or (ii) the date of
the Executive's full-time employment by another employer (provided
that the Executive is entitled under the terms of such employment to
benefits substantially similar to those described in this subparagraph
(B)), at no cost to the Executive, the Executive's continued
participation in all group insurance, life insurance, health and
accident, disability and other employee benefit
<PAGE> 7
7
plans, programs and arrangements offered by the Bank in which the
Executive was entitled to participate immediately prior to the Date of
Termination (other than stock option and restricted stock plans of the
Employers), provided that in the event that the Executive's
participation in any plan, program or arrangement as provided in this
subparagraph (B) is barred, or during such period any such plan,
program or arrangement is discontinued or the benefits thereunder are
materially reduced, the Bank shall arrange to provide the Executive
with benefits substantially similar to those which the Executive was
entitled to receive under such plans, programs and arrangements
immediately prior to the Date of Termination.
6. LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES. If the
payments and benefits pursuant to Section 5 hereof, either alone or together
with other payments and benefits which the Executive has the right to receive
from the Bank, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits payable by the Bank pursuant to Section 5
hereof shall be reduced, in the manner determined by the Executive, by the
amount, if any, which is the minimum necessary to result in no portion of the
payments and benefits payable by the Bank under Section 5 being non-deductible
to the Bank pursuant to Section 280G of the Code and subject to the excise tax
imposed under Section 4999 of the Code. The parties hereto agree that the
payments and benefits payable pursuant to this Agreement to the Executive upon
termination shall be limited to three times the Executive's Average Annual
Compensation in accordance with OTS Regulatory Bulletin 27a. The determination
of any reduction in the payments and benefits to be made pursuant to Section 5
shall be based upon the opinion of independent tax counsel selected by the
Bank's independent public accountants and paid by the Bank. Such counsel shall
be reasonably acceptable to the Bank and the Executive; shall promptly prepare
the foregoing opinion, but in no event later than thirty (30) days from the
Date of Termination; and may use such actuaries as such counsel deems necessary
or advisable for the purpose. Nothing contained herein shall result in a
reduction of any payments or benefits to which the Executive may be entitled
upon termination of employment under any circumstances other than as specified
in this Section 6, or a reduction in the payments and benefits specified in
Section 5 below zero.
7. MITIGATION; EXCLUSIVITY OF BENEFITS.
(a) The Executive shall not be required to mitigate the amount of
any benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.
(b) The specific arrangements referred to herein are not intended
to exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.
<PAGE> 8
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8. WITHHOLDING. All payments required to be made by the Bank
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.
9. ASSIGNABILITY. The Bank may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Bank may hereafter merge or
consolidate or to which the Bank may transfer all or substantially all of its
assets, if in any such case said corporation, bank or other entity shall by
operation of law or expressly in writing assume all obligations of the Bank
hereunder as fully as if it had been originally made a party hereto, but may
not otherwise assign this Agreement or its rights and obligations hereunder.
The Executive may not assign or transfer this Agreement or any rights or
obligations hereunder.
10. NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by certified
or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Bank: Secretary
Fed One Bank
21 Twelfth Street
Wheeling, West Virginia 26003-3295
To the Corporation: Secretary
Fed One Bancorp, Inc.
21 Twelfth Street
Wheeling, West Virginia 26003-3295
To the Executive: Alan E. Groover
19 Highland Park
Wheeling, West Virginia 26003
11. AMENDMENT; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and such officer or officers as
may be specifically designated by the Board of Directors of the Bank to sign on
its behalf. No waiver by any party hereto at any time of any breach by any
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
<PAGE> 9
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12. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United
States where applicable and otherwise by the substantive laws of the State of
West Virginia.
13. NATURE OF OBLIGATIONS. Nothing contained herein shall create
or require the Bank to create a trust of any kind to fund any benefits which
may be payable hereunder, and to the extent that the Executive acquires a right
to receive benefits from the Bank hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Bank.
14. HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. REGULATORY ACTIONS. The following provisions shall be
applicable to the parties to the extent that they are required to be included
in employment agreements between a savings bank and its employees pursuant to
Section 563.39(b) of the Regulations Applicable to all Savings Associations, 12
C.F.R. Section 563.39(b), or any successor thereto, and shall be controlling in
the event of a conflict with any other provision of this Agreement, including
without limitation Section 5 hereof.
(a) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs pursuant to
notice served under Section 8(e)(3) or Section 8(g)(1) of the Federal Deposit
Insurance Act ("FDIA")(12 U.S.C. Sections 1818(e)(3) and 1818(g)(1)), the
Bank's obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Bank may, in its discretion: (i) pay the Executive
all or part of the compensation withheld while its obligations under this
Agreement were suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
(b) If the Executive is removed from office and/or permanently
prohibited from participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C. Sections
1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
Executive and the Bank as of the date of termination shall not be affected.
<PAGE> 10
10
(c) If the Bank is in default, as defined in Section 3(x)(1) of
the FDIA (12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement
shall terminate as of the date of default, but vested rights of the Executive
and the Bank as of the date of termination shall not be affected.
(d) All obligations under this Agreement shall be terminated
pursuant to 12 C.F.R. Section 563.39(b)(5) (except to the extent that it is
determined that continuation of the Agreement for the continued operation of
the Bank is necessary): (i) by the Director of the OTS, or his/her designee, at
the time the Federal Deposit Insurance Corporation ("FDIC") or Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of the FDIA (12 U.S.C.
Section 1823(c)); or (ii) by the Director of the OTS, or his/her designee, at
the time the Director or his/her designee approves a supervisory merger to
resolve problems related to operation of the Bank or when the Bank is
determined by the Director of the OTS to be in an unsafe or unsound condition,
but vested rights of the Executive and the Employers as of the date of
termination shall not be affected.
18. REGULATORY PROHIBITION. Notwithstanding any other provision
of this Agreement to the contrary, any payments made to the Executive pursuant
to this Agreement, or otherwise, are subject to and conditioned upon their
compliance with Section 18(k) of the FDIA (12 U.S.C. Section 1828(k)) and any
regulations promulgated thereunder.
19. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement between the Bank and the Executive with respect to the matters agreed
to herein. All prior agreements between the Bank and the Executive with
respect to the matters agreed to herein, including without limitation the
Agreement between the Employers and the Executive dated October 8, 1992, are
hereby superseded and shall have no force or effect. Notwithstanding the
foregoing, nothing contained in this Agreement shall affect the agreement of
even date being entered into between the Corporation and the Executive.
<PAGE> 11
11
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Attest: FED ONE BANK
/s/ Jean E. Huff By: /s/ George J. Anetakis
- -------------------------------------- --------------------------------
Jean E. Huff, Corporate Secretary George J. Anetakis, Director and
Member of the Compensation
Committee of the Board
of Directors
EXECUTIVE
By: /s/ Alan E. Groover
--------------------------------
Alan E. Groover
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