SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
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- or -
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission Number: 0-26570
HARRODSBURG FIRST FINANCIAL BANCORP, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 61-1284899
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
104 South Chiles Street, Harrodsburg, Kentucky 40330-1620
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (859) 734-5452
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
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(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based on the average bid and ask price of the Registrant's
Common Stock as quoted on the National Association of Securities Dealers, Inc.,
Automated Quotations System on December 6, 2000, was $14,998,000.
As of December 6, 2000 there were issued and outstanding 1,514,875
shares of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year Ended
September 30, 2000. (Parts I, II and IV)
2. Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders. (Part III)
1
PART I
Harrodsburg First Financial Bancorp (the "Company" or "Registrant") may
from time to time make written or oral "forward-looking statements," including
statements contained in the Company's filings with the Securities and Exchange
Commission (including this Annual Report on Form 10-K and the exhibits thereto),
in its reports to Stockholders and in other communications by the Company, which
are made in good faith by the Company pursuant to the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the willingness of users to substitute
competitors' products and services for the Company's products and services; the
success of the Company in gaining regulatory approval of its products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in consumer spending
and savings habits; and the success of the Company at managing the risks
involved in the foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the company.
Item 1. Business
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General
The Company is the holding company for First Financial Bank (the
"Bank") and as a unitary savings and loan holding company is generally not
restricted in the types of business activities in which it may engage provided
that the Bank retains a specified amount of its assets in housing-related
investments. The Company conducts no significant business or operations of its
own other than holding all of the outstanding stock of the Bank. References to
the Company or Registrant generally refers to the consolidated entity which
includes the main operating company, the Bank, unless the context indicates
otherwise.
The Bank is a federally chartered stock savings bank headquartered in
Harrodsburg, Kentucky. It is subject to examination and comprehensive regulation
by the Office of Thrift Supervision ("OTS") and its deposits are federally
insured by the Savings Association Insurance Fund ("SAIF"). The Bank is a member
of and owns capital stock in the Federal Home Loan Bank ("FHLB") in Cincinnati,
which is one of the 12 regional banks in the FHLB System.
1
The Bank operates a traditional savings bank business, attracting
deposit accounts from the general public and using those deposits, together with
other funds, primarily to originate and invest in loans secured by one- to
four-family residential real estate, non-residential real estate, and commercial
loans. To a lesser extent, the Bank also originates multi-family real estate
loans and consumer loans.
Competition
The competition for deposit products comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions, and
multi-state regional banks in the Registrant's market area of Mercer and
Anderson Counties, Kentucky. Deposit competition also includes a number of
insurance products sold by local agents and investment products such as mutual
funds and other securities sold by local and regional brokers. Loan competition
varies depending upon market conditions and comes from other insured financial
institutions such as commercial banks, thrift institutions, credit unions,
multi-state regional banks, and mortgage bankers.
Analysis of Loan Portfolio. The following table sets forth information
concerning the composition of the Registrant's loan portfolio in dollar amounts
and in percentages of the total loan portfolio (before deductions for loans in
process, deferred loan origination fees and costs and allowance for loan losses)
as of the dates indicated.
At September 30,
-----------------------------------------
2000 1999
-------------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Type of Loans:
- -------------
Real Estate:
One-to four-family residential....... $79,826 76.31% $70,639 76.88%
Multi-family......................... 2,941 2.81 3,720 4.05
Agricultural......................... 4,245 4.05 4,542 4.94
Commercial........................... 7,296 6.97 5,148 5.60
Construction......................... 6,319 6.04 4,122 4.49
Consumer:
Home equity.......................... 1,775 1.70 1,830 1.99
Other(1)............................. 1,658 1.59 1,399 1.52
Savings account...................... 551 .53 484 .53
-------- ------ ------- ------
Total loans receivable........... 104,611 100.00% 91,884 100.00%
====== ======
Less:
Loans in process..................... 2,947 2,042
Deferred loan origination fees
and costs, net...................... 411 410
Allowance for loan losses............ 372 370
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Loans receivable, net.................. $100,881 $89,062
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(1) Includes home improvement, personal loans, auto and commercial loans.
2
Loan Maturity Tables
The following table sets forth the maturity of the Bank's loan
portfolio at September 30, 2000. The table does not include prepayments or
scheduled principal repayments. Prepayments and scheduled principal repayments
on loans totaled $27.8 million for the year ended September 30, 2000.
Adjustable- rate mortgage loans are shown as maturing based on contractual
maturities.
Due Due after
within 1 through Due after
1 year 5 years 5 years Total
------ ------- ------- -----
(In Thousands)
One- to four-family residential...... $ 100 $1,231 $ 78,495 $ 79,826
Multi-family, agricultural and
commercial........................... 4 118 14,360 14,482
Construction......................... - - 6,319 6,319
Consumer............................. 1,207 677 2,100 3,984
------ ------ -------- --------
Total................................ $1,311 $2,026 $101,274 $104,611
====== ====== ======== ========
The following table sets forth as of September 30, 2000 the dollar
amount of all loans due after September 30, 2001, which have fixed rates of
interest and floating or adjustable interest rates.
Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- -----
(In Thousands)
One- to four-family residential.............. $22,260 $57,466 $ 79,726
Multi-family, agricultural and commercial.... 910 13,568 14,478
Construction................................. 1,070 5,249 6,319
Consumer..................................... 639 2,138 2,777
------- ------- --------
Total........................................ $24,879 $78,421 $103,300
======= ======= ========
One- to Four-Family Residential Loans. The Registrant's primary lending
activity consists of the origination of one- to four-family residential mortgage
loans secured by property located in the Registrant's primary market area. The
Registrant generally originates one- to four-family residential mortgage loans
without private mortgage insurance in amounts up to 85% of the lesser of the
appraised value or selling price of the mortgaged property. Loans in excess of
85% of the value of the mortgaged property typically require private mortgage
insurance in the amount of 25% to 30% of the loan amount.
The Registrant offers three types of residential ARM's, all of which
use the index value of the National Monthly Median Cost of Funds Ratio to
SAIF-Insured Institutions plus a set margin added to it. The interest rates on
these loans have an initial adjustment period of between one and five years, and
generally adjust annually thereafter, with a maximum adjustment of 2% per year
and a maximum increase of 5% over the life of the loan. The index margin on a
non owner-occupied one- to four-family property loan is 1% higher than on an
owner-occupied property loan. The Registrant's adjustable-rate one-to four-
family mortgage loans are for terms of up to 30 years, amortized on a monthly
basis, with principal and interest due each month. Borrowers may refinance or
prepay loans at their option without penalty. The Registrant originates, to a
limited extent, 10 year, 15 year, 20 and 30 year term fixed-rate mortgages on
one- to four-family, owner-occupied homes with loan to value ratios of 85% or
less.
3
Loan originations are generally obtained from existing and walk-in
customers, members of the local community, and referrals from realtors,
depositors and borrowers within the Bank's lending area. Mortgage loans
originated and held by the Registrant in its portfolio generally include
due-on-sale clauses which provide the Registrant with the contractual right to
deem the loan immediately due and payable in the event that the borrower
transfers ownership of the property without the Registrant's consent.
During periods of rising interest rates, the risk of default on
adjustable-rate loans may increase due to increases in interest costs to
borrowers. Further, adjustable-rate loans which provide for initial rates of
interest below the fully indexed rates may be subject to increased risk of
delinquency or default as the higher, fully indexed rate of interest
subsequently replaces the lower, initial rate.
Construction Loans. The Registrant engages in construction lending
involving loans to qualified borrowers for construction of one- to four-family
dwellings, multi-family residential units, commercial buildings and churches,
with the intent of such loans converting to permanent financing upon completion
of construction. All construction loans are secured by a first lien on the
property under construction. Loan proceeds are disbursed in increments as
construction progresses and as inspections warrant. Construction/permanent loans
generally have adjustable or fixed interest rates and are underwritten in
accordance with the same terms and requirements as the Registrant's permanent
mortgages, except the loans generally provide for disbursement in stages during
a construction period of up to twelve months, during which the borrower is not
required to make monthly payments. If construction improvements are not
completed at the end of six months, accrued interest must be paid to date.
Accrued interest must be paid at completion of construction to the first day of
the following month, and monthly payments start the first day of the following
month after the loan is converted to permanent financing. Borrowers must satisfy
all credit requirements which would apply to the Registrant's permanent mortgage
loan financing for the subject property and must execute a construction loan
agreement.
Construction financing generally is considered to involve a higher
degree of risk of loss than long term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction cost proves to be
inaccurate, the Registrant may be required to advance funds beyond the amount
originally committed to permit completion of the development. The Registrant has
sought to minimize this risk by requiring precise construction cost estimates,
specifications, and drawing plans from qualified borrowers in the Registrant's
market area.
Multi-Family and Commercial Real Estate Loans. In order to serve its
community and enhance yields on its assets, the Registrant originates loans
secured by commercial real estate and multi-family properties. The multi-family
and commercial real estate loans originated by the Registrant have generally
been made to individuals, small businesses and partnerships. They have primarily
been secured by first mortgages on apartment buildings, office buildings,
churches and other properties. The Registrant benefits from originating such
loans due to higher adjustable interest rates. Adjustable-rate loans for this
type of lending have a margin that is 1% higher than the margin added to single
family owner-occupied property loan. The Registrant's multi-family residential
and commercial real estate loans are adjustable-rate loans with terms of 25
years or less, with loan-to-value ratios not exceeding 80%. As of September 30,
2000, loans on multi-family residential and commercial real estate properties
constituted approximately $10.2 million, or 9.8% of the Registrant's total loan
portfolio.
4
Multi-family and commercial real estate lending entails significant
additional risks as compared to one- to four-family residential lending. For
example, such loans typically involve large loans to single borrowers or related
borrowers, the payment experience on such loans is typically dependent on the
successful operation of the project, and these risks can be significantly
affected by the supply and demand conditions in the market for commercial
property and multi-family residential units.
Loans secured by commercial real estate generally involve a greater
degree of risk than residential mortgage loans and carry larger loan balances.
This increased credit risk is a result of several factors, including the
concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by commercial real estate is
typically dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced, the borrower's ability to
repay the loan may be impaired. To minimize these risks, the Registrant
generally limits loans of this type to its market area and to borrowers with
which it has substantial experience or who are otherwise well known to the
Registrant. The Registrant's underwriting procedures require verification of the
borrower's credit history, income, financial statements, banking relationships,
credit references, and income projections for the property. It is the
Registrant's current practice to obtain personal guarantees from all principals
obtaining this type of loan. For the small total dollar amount of loans secured
by church real estate that are originated by the Registrant, repayment is
dependent upon the continuing financial support of the church's members. The
Registrant also obtains appraisals on each property. All appraisals on
commercial and multi-family real estate are reviewed by the Registrant's
management.
Agricultural Loans. The Registrant engages in lending on improved farm
land with no dwelling, building lots and building acreage sites. The Registrant
benefits from originating such loans due to higher origination fees and
adjustable interest rates. These properties must have good road access. The loan
to value ratio for this type of loan is 75% or less with a maximum loan term of
15 years. An adjustable- rate loan for this type of lending has a margin that is
1% higher than the margin added to one- to four-family owner-occupied property
loans.
The Registrant also engages in loans for improved farm land with
dwelling. The loan to value ratio for this type of loan is 80% or less with a
maximum term of 25 years. These loans can be set up with payment of interest
collected semi-annually and principal yearly as well as monthly principal and
interest payments.
Consumer Lending. The Registrant originates consumer loans on either a
secured or unsecured basis. These loans generally require a pre-existing
relationship with the Registrant. The Registrant generally makes certificate of
deposit loans for terms of up to six months in amounts up to the face amount of
the certificate. The interest rate charged on these loans is 1% higher than the
rate paid on the certificate, and interest is billed on a quarterly basis. These
loans are payable on demand and the account must be assigned to the Registrant
as collateral for the loan.
Consumer loans may entail greater risk than residential loans,
particularly in the case of consumer loans that are unsecured or secured by
assets that depreciate rapidly. Repossessed collateral for a defaulted consumer
loan may not be sufficient for repayment of the outstanding loan, and the
remaining deficiency may not be collectible.
5
Loan Approval Authority and Underwriting. The Registrant has
established various lending limits for its officers and maintains a loan
committee. The loan committee consists of Arthur L. Freeman, Chairman of the
Board and Chief Executive Officer, Jack D. Hood, President and Chief Operating
Officer, and Wickliffe T. Asbury, Executive Vice President, Charles W. Graves,
Jr., Senior Vice President, and Vice Presidents Gay Gaines and James Baxter.
Messrs. Freeman, Hood, and Asbury, each have the authority to approve secured
loan applications up to $300,000 and unsecured loans of up to $30,000. Messrs.
Graves and Gaines, each have the authority to approve secured loan applications
up to $200,000 and unsecured loans of $20,000, and Mr. Baxter has the authority
to approve secured applications up to $150,000 and unsecured loans of $15,000.
Any two officers may join together to approve loans, but only to the limit of
the higher authority of the two officers. The loan committee approves loans that
exceed the limits established for individual officers and may approve secured
loans of up to $500,000 and unsecured loans of $50,000. The Board of Directors
must approve all loans that exceed the lending limit of the loan committee.
For all loans originated by the Registrant, upon receipt of a completed
loan application from a prospective borrower, a credit report is generally
ordered, income and certain other information is verified and, if necessary,
additional financial information is requested. An appraisal of the real estate
intended to be used as security for the proposed loan is obtained. All
appraisals are reviewed by officers of the Registrant designated by the Board of
Directors. An independent appraiser designated and approved by the Board of
Directors of the Registrant is utilized for all real estate mortgage loans. For
construction/permanent loans, the funds advanced during the construction phase
are held in a loan-in- process account and disbursed based upon various stages
of completion in accordance with the results of inspection reports that are
based upon physical inspection of the construction by an independent contractor
hired by the Registrant or in some cases by an officer of the Bank. For real
estate loans the Registrant will require either title insurance or a title
opinion. Borrowers must also obtain fire and casualty, hazard or flood insurance
(for loans on property located in a flood zone, flood insurance is required)
prior to the closing of the loan.
Loan Commitments. The Registrant issues written commitments to
prospective borrowers on all approved real estate loans. Generally, the
commitment requires acceptance within 20 days of the date of issuance. At
September 30, 2000, the Registrant had $6.7 million of commitments to cover
originations, undisbursed funds for loans-in-process and unused lines of credit.
Non-Performing and Problem Assets
Loan Delinquencies. The Registrant monitors delinquencies on all types
of loans closely. If such loans later become delinquent, the Registrant contacts
and works with the borrower to resolve the delinquency before initiating
foreclosure proceedings. The Registrant's collection procedures provide that
when a mortgage loan is 10 days past due, a notice of nonpayment is sent.
Delinquent notices are sent if the loan becomes delinquent for more than 30
days. If payment is still delinquent after 60 days, the customer will receive a
letter and/or telephone call and may receive a visit from a representative of
the Registrant. If the delinquency continues, similar subsequent efforts are
made to eliminate the delinquency. If the loan continues in a delinquent status
for 90 days past due and no repayment plan is in effect, management will
generally initiate legal proceedings.
Loans are reviewed on a monthly basis by management and are generally
placed on a non-accrual status when the loan becomes more than 90 days
delinquent and, in the opinion of management, the collection of additional
interest is doubtful. Interest accrued and unpaid at the time a loan is placed
on non- accrual status is charged against interest income. Subsequent interest
payments, if any, are either applied
6
to the outstanding principal balance or recorded as interest income, depending
on the assessment of the ultimate collectibility of the loan.
Non-Performing Assets. The following table sets forth information
regarding non-accrual loans, real estate owned and certain other repossessed
assets and loans. As of the dates indicated, the Registrant had no loans
categorized as troubled debt restructuring within the meaning of SFAS 15 and no
impaired loans within the meaning of SFAS 114, as amended by SFAS 118.
At September 30,
-----------------------
2000 1999
---- ----
(In Thousands)
Loans accounted for on a non-accrual basis:
Total............................................. $ -- $ --
Accruing loans which are contractually past
due 90 days or more:
Mortgage loans:
Construction loans.............................. -- --
Permanent loans secured by 1 to 4 family
dwelling units................................ 446 214
All other mortgage loans........................ 16 23
Non-mortgage loans:
Commercial...................................... -- --
Consumer........................................ 55 44
---- ----
Total............................................. 517 281
---- ----
Total non-accrual and accrual loan................ 517 281
Real estate owned................................. -- --
---- ----
Total non-performing assets....................... $517 $281
==== ====
Total non-performing loans to net loans........... .51% .32%
==== ====
Total non-performing loans to total assets........ .44% .25%
==== ====
Total non-performing assets to total assets....... .44% .25%
==== ====
Classified Assets. OTS regulations provide for a classification system
for problem assets of insured institutions which covers all problem assets.
Under this classification system, problem assets of insured institutions are
classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Substandard assets
include those characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not corrected.
Assets classified as doubtful have all of the weaknesses inherent in those
classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions, and values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
7
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS, which may order the establishment of additional general or specific loss
allowances. A portion of general loss allowances established to cover possible
losses related to assets classified as substandard or doubtful may be included
in determining an institution's regulatory capital, while specific valuation
allowances for loan losses generally do not qualify as regulatory capital.
The following table sets forth the Registrant's classified assets in
accordance with its classification system:
At September 30, 2000
---------------------
(In Thousands)
Special Mention.................. $ 77
Substandard...................... 405
Doubtful......................... -
Loss............................. -
-----
Total............................ $ 482
=====
Allowance for Loan Losses. It is management's policy to provide for
losses on loans in its loan portfolio. A provision for loan losses is charged to
operations based on management's evaluation of the losses that may be incurred
in the Registrant's loan portfolio. Such evaluation, which includes a review of
all loans of which full collectibility of interest and principal may not be
reasonably assured, considers the Registrant's past loan loss experience, known
and inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, estimated value of any underlying collateral,
current economic conditions, and the relationship of the allowance for loan
losses to outstanding loans.
8
The following table sets forth information with respect to the
Registrant's allowance for loan losses at the dates and for the periods
indicated:
At or For the Year
Ended September 30,
-----------------------
2000 1999
-------- --------
(Dollars in Thousands)
Total loans outstanding ............................ $104,611 $ 91,884
======== ========
Average loans outstanding .......................... $ 95,726 $ 86,754
======== ========
Allowance balances (at beginning of period) ....... $ 370 $ 335
Provision (credit):
Residential ...................................... 15 15
Consumer ......................................... -- 20
Net Charge-offs (recoveries):
Residential ...................................... -- --
Consumer ......................................... 13 --
-------- --------
Allowance balance (at end of period) ............... $ 372 $ 370
======== ========
Allowance for loan losses as a percent
of total loans outstanding ....................... .36% .41%
Net loans charged off as a percent of
average loans outstanding ........................ .01% --
Management will continue to review the entire loan portfolio to
determine the extent, if any, to which further additional loss provisions may be
deemed necessary. There can be no assurance that the allowance for loan losses
will be adequate to cover losses which may in fact be realized in the future and
that additional provisions for losses will not be required.
9
Analysis of the Allowance for Loan Losses
The following table sets forth the allocation of the allowance by
category, which management believes can be allocated only on an approximate
basis. The allocation of the allowance to each category is not necessarily
indicative of future loss and does not restrict the use of the allowance to
absorb losses in any category.
At September 30,
-------------------------------------------
2000 1999
-------------------- --------------------
Percent of Percent of
Loans to Loans to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in Thousands)
Real estate mortgage:
One- to four-family residential......... $264 76.31% $264 76.88%
Multi-family........................... 10 2.81 15 4.05
Agricultural............................ 15 4.05 18 4.94
Commercial.............................. 26 6.97 21 5.60
Residential construction................ 22 6.04 17 4.49
Consumer(1)............................... 35 3.82 35 4.04
---- ------ ---- ------
Total allowance for loan
losses.............................. $372 100.00% $370 100.00%
==== ====== === ======
- -----------------------
(1) For 2000 and 1999, respectively, includes $21,000 and $20,000 of
specific reserves attributable to two particular loans and not
available for other loan losses.
Investment Activities
The Registrant is required under federal regulations to maintain a
minimum amount of liquid assets which may be invested in specified short-term
securities and certain other investments. The level of liquid assets varies
depending upon several factors, including: (i) the yields on investment
alternatives, (ii) management's judgment as to the attractiveness of the yields
then available in relation to other opportunities, (iii) expectation of future
yield levels, and (iv) management's projections as to the short-term demand for
funds to be used in loan origination and other activities. Investment
securities, including mortgage-backed securities, are classified at the time of
purchase, based upon management's intentions and abilities, as securities held
to maturity or securities available for sale. Debt securities acquired with the
intent and ability to hold to maturity are classified as held to maturity and
are stated at cost and adjusted for amortization of premium and accretion of
discount, which are computed using the level yield method and recognized as
adjustments of interest income. All other debt securities are classified as
available for sale to serve principally as a source of liquidity.
Current regulatory and accounting guidelines regarding investment
securities (including mortgage backed securities) require the Registrant to
categorize securities as "held to maturity," "available for sale" or "trading."
As of September 30, 2000, Registrant had securities (including mortgage-backed
securities) classified as "held to maturity" and "available for sale" in the
amount of $6.8 million and $4.2 million, respectively and had no securities
classified as "trading." Securities classified as "available for sale" are
10
reported for financial reporting purposes at the fair market value with net
changes in the market value from period to period included as a separate
component of stockholders' equity, net of income taxes. At September 30, 2000,
the Registrant's securities available for sale had an amortized cost of $75,000
and market value of $4.2 million. Changes in the market value of securities
available for sale do not affect the Company's income. In addition, changes in
the market value of securities available for sale do not affect the Bank's
regulatory capital requirements or its loan-to-one borrower limit.
At September 30, 2000, the Registrant's investment portfolio policy
allowed investments in instruments such as: (i) U.S. Treasury obligations, (ii)
U.S. federal agency or federally sponsored agency obligations, (iii) local
municipal obligations, (iv) mortgage-backed securities, (v) banker's
acceptances, (vi) certificates of deposit, and (vii) investment grade corporate
bonds, and commercial paper. The board of directors may authorize additional
investments.
As a source of liquidity and to supplement Registrant's lending
activities, the Registrant has invested in residential mortgage-backed
securities. Mortgage-backed securities can serve as collateral for borrowings
and, through repayments, as a source of liquidity. Mortgage-backed securities
represent a participation interest in a pool of single-family or other type of
mortgages. Principal and interest payments are passed from the mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the participation interests in the form of securities, to
investors, like us. The quasi-governmental agencies guarantee the payment of
principal and interest to investors and include the Federal Home Loan Mortgage
Corporation ("FHLMC"), Government National Mortgage Association ("GNMA"), and
Federal National Mortgage Association ("FNMA").
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the right
to call or prepay obligations with or without prepayment penalties.
Mortgage-backed securities issued by FHLMC, GNMA, and FNMA make up a majority of
the pass- through certificates market.
At September 30, 2000, the Registrant's securities portfolio did not
contain securities of any issuer, other than those issued by U.S. government or
its agencies, with an aggregate book value in excess of 10% of the Registrant's
equity.
11
Investment Portfolio. The following table sets forth the carrying value
of the Registrant's investment securities at the dates indicated.
At September 30,
2000 1999
------ -------
(In Thousands)
Investment Securities available for sale:
FHLMC securities................................ $ 4,167 $ 4,009
------- -------
Total......................................... 4,167 4,009
------- -------
Investment securities held to maturity:
FHLB Stock and bonds ......................... 6,801 7,191
------- -------
Mortgaged-backed securities................... 25 40
------- -------
Total.......................................... 6,826 7,231
------- -------
Total investment securities.................... 10,993 11,240
======= =======
12
Investment Portfolio Maturities. The following table sets forth
information regarding the scheduled maturities, carrying values, market value
and weighted average yields for the Registrant's investment securities portfolio
at September 30, 2000. The following table does not take into consideration the
effects of scheduled repayments or the effects of possible prepayments.
As of September 30, 2000
---------------------------------------------------------------------------------------------------
More Than One to More Than Five to More than Total
One Year or Less Five Years Ten Years Ten Years Investment Securities
----------------- ----------------- ---------------- ---------------- --------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
------- ------- -------- ------- ------- ------- -------- ------- -------- ------- -------
(Dollars in Thousands)
Investments securities
available for sale:
FHLMC Securities .............. $ 4,167 1.24% $ - -% $ - -% $ - -% $ 4,167 1.24% $ 4,167
------- ------ ------- ---- ------- ---- ------- ---- ------- ---- -------
Investment securities held to
maturity:
Bonds - U.S. Government and
Federal agencies ........... - - 5,000 6.30 - - - - 5,000 6.3 4,910
GNMA PC ....................... - - - - 25 7.26 - - 25 7.26 26
FHLB Stock .................... - - - - - - 1,587 7.16 1,587 7.16 1,587
Bonds - Municipal ............. 105 4.21 109 5.38 - - 214 4.81 209
------- ------ ------- ---- ------- ---- ------- ---- ------- ---- -------
Total ....................... - - 5,105 6.20 134 5.73 1,587 7.16 6,826 6.46 6,732
------- ------ ------- ---- ------- ---- ------- ---- ------- ---- -------
Total investment securities ... $ 4,167 1.24% $ 5,105 6.20% $ 134 5.73% $ 1,587 7.16% $10,993 4.48% $10,899
======= ====== ======= ==== ======= ==== ======= ==== ======= ==== =======
13
Sources of Funds
General. Deposits are the major external source of the Registrant's
funds for lending and other investment purposes. The Registrant derives funds
from amortization and prepayment of loans and, to a much lesser extent,
maturities of investment securities, borrowings, mortgage-backed securities and
operations. Scheduled loan principal repayments are a relatively stable source
of funds, while deposit inflows and outflows and loan prepayments are
significantly influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within the Registrant's primary market area through the offering of a
selection of deposit instruments including regular savings accounts, money
market accounts, and term certificate accounts. Deposit account terms vary
according to the minimum balance required, the time period the funds must remain
on deposit, and the interest rate, among other factors. At September 30, 2000,
the Registrant had no brokered accounts.
Jumbo Certificates of Deposit. The following table indicates the amount
of the Registrant's certificates of deposit of $100,000 or more by time
remaining until maturity as of September 30, 2000.
Certificates
of Deposit
----------
Maturity Period (In Thousands)
- ---------------
Three months or less............................. $1,625
More than three through six months............... 2,750
More than six through twelve months.............. 3,184
Over twelve months............................... 2,238
------
Total......................................... $9,797
======
The following table sets forth the average balances and interest rates
based on month-end balances for interest-bearing demand deposits and time
deposits as of the dates indicated.
Year Ended September 30,
-------------------------------------------
2000 1999
------------------- ---------------------
Average Average Average Average
Balance Rate Balance Rate
------- ---- ------- ----
(Dollars in Thousands)
Deposit Category:
Demand Accounts(1)............. $10,990 2.17% $ 9,645 2.27%
Passbook Accounts.............. 7,182 2.75 7,553 2.80
Certificates................... 67,215 5.47 63,824 5.32
------- -------
$85,387 4.86% $81,022 4.71%
======= ==== ======= =====
- ------------
(1) Includes non-interest bearing accounts, which represent less than 10% of
total deposits.
Borrowings. Deposits are the primary source of funds of the
Registrant's lending and investment activities and for its general business
purposes. The Registrant may obtain advances from the FHLB of Cincinnati to
supplement its supply of lendable funds. Advances from the FHLB of Cincinnati
are
14
typically secured by a pledge of the Registrant's stock in the FHLB of
Cincinnati and a portion of the Registrant's first mortgage loans and certain
other assets. The Registrant, if the need arises, may also access the Federal
Reserve Bank discount window to supplement its supply of lendable funds and to
meet deposit withdrawal requirements. At September 30, 2000, the Registrant
borrowings totaled $3.5 million, which was short-term.
Subsidiary Activity
The Bank has one wholly owned subsidiary, Harrodsburg Savings and Loan
Service Corporation (the "Service Corporation"). Incorporated in Kentucky in
1978, the Service Corporation has been inactive since its acquisition of the
stock.
Personnel
As of September 30, 2000, the Registrant had 21 full-time and no
part-time employees. None of the Registrant's employees are represented by a
collective bargaining group. The Registrant believes that its relationship with
its employees is good.
Recent Regulation
The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the "Act")
authorized qualifying bank holding companies to become financial holding
companies and thereby affiliate with securities firms and insurance companies
and engage in other activities that are financial in nature. The Act defines
"financial in nature" to include securities underwriting, dealing and market
making; sponsoring mutual funds and investment companies; insurance underwriting
and agency; merchant banking activities; and activities that the Board has
determined to be closely related to banking. A qualifying national bank also may
engage, subject to limitations on investment, in activities that are financial
in nature, other than insurance underwriting, insurance company portfolio
investment, real estate development, and real estate investment, through a
financial subsidiary of the bank.
The Act also prohibits new unitary thrift holding companies from
engaging in nonfinancial activities or from affiliating with an nonfinancial
entity. The Company, however, as a grandfathered unitary thrift holding company
under the Act will retain its authority to engage in nonfinancial activities.
In addition, the GLB Act imposes significant new financial privacy
obligations and reporting requirements on all financial institutions, including
federal savings associations. Specifically, the statute, among other things,
will require financial institutions (a) to establish privacy policies and
disclose them to customers both at the commencement of a customer relationship
and on an annual basis and (b) to permit customers to opt out of a financial
institution's disclosure of financial information to nonaffiliated third
parties. The federal financial regulators have promulgated final regulations
implementing these provisions, which will become effective July 1, 2001.
Regulation of the Company
General. The Company is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Company is required to
register and file reports with the OTS and is subject to regulation and
examination by the OTS. In addition, the OTS has enforcement authority over the
Company and its non-savings association subsidiaries, should such subsidiaries
be formed, which also permits the OTS to restrict or prohibit activities that
are determined to be a serious risk to the subsidiary
15
savings association. This regulation and oversight is intended primarily for the
protection of the depositors of the Bank and not for the benefit of stockholders
of the Company.
As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions, provided the Bank satisfies the Qualified
Thrift Lender ("QTL") test. The Act terminated the "unitary thrift holding
company exemption" for all companies that applied to acquire savings
associations after May 4, 1999. Since the Company is grandfathered under this
provision of the Act, its unitary holding company powers and authorities were
not affected. However, if the Company were to acquire control of an additional
savings association, its business activities would be subject to restriction
under the Home Owners' Loan Act. Furthermore, if the Company were in the future
to sell control of the Bank to any other company, such company would not succeed
to the Company's grandfathered status under the Act and would be subject to the
same business activity restrictions. See "- Regulation of the Bank - Qualified
Thrift Lender Test."
Regulation of the Bank
General. Set forth below is a brief description of certain laws that
relate to the regulation of the Bank. The description does not purport to be
complete and is qualified in its entirety by reference to applicable laws and
regulations. As a federally chartered, SAIF-insured savings association, the
Bank is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. The Bank is also subject to certain reserve
requirements promulgated by the Federal Reserve Board.
The OTS regularly examines the Bank and prepares reports for the
consideration of the Bank's Board of Directors on any deficiencies that are
found in the Bank's operations. The Bank's relationship with its depositors and
borrowers is also regulated to a great extent by federal and state law,
especially in such matters as the ownership of savings accounts and the form and
content of the Bank's mortgage documents.
The Bank must file reports with the OTS concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of other
savings institutions. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF and depositors. The regulatory
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes.
Insurance of Deposit Accounts. The deposit accounts held by the Bank
are insured by the SAIF to a maximum of $100,000 for each insured member (as
defined by law and regulation). Insurance of deposits may be terminated by the
FDIC upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the institution's primary regulator.
16
The Bank is required to pay insurance premiums based on a percentage of
its insured deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC also maintains another insurance fund, the Bank Insurance Fund ("BIF"),
which primarily insures commercial bank deposits. The FDIC has set the deposit
insurance assessment rates for SAIF-member institutions for 2000 at 0% to .027%
of insured deposits on an annualized basis, with the assessment rate for most
savings institutions set at 0%.
In addition, all FDIC-insured institutions are required to pay
assessments to the FDIC at an annual rate of approximately .0212% of insured
deposits to fund interest payments on bonds issued by the Financing Corporation
("FICO"), an agency of the Federal government established to recapitalize the
predecessor to the SAIF. These assessments will continue until the FICO bonds
mature in 2017.
Loans to One Borrower. A savings association may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of the
associations's unimpaired capital and surplus. An additional amount may be lent,
equal to 10% of the unimpaired capital and surplus, under certain circumstances.
At September 30, 2000, the Registrant's lending limit for loans to one borrower
was approximately $6.2 million and had no outstanding commitments that exceeded
the loans to one borrower limit at the time originated or committed.
Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) "Tier 1" or "core" capital equal to at
least 4% (3% if the institution has received the highest rating, "composite 1
CAMELS," on its most recent examination) of total adjusted assets, and (3)
risk-based capital equal to 8% of total risk-weighted assets.
Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including cash dividends.
A savings association that is a subsidiary of a savings and loan
holding company, such as the Bank must file an application or a notice with the
OTS at least 30 days before making a capital distribution. Savings associations
are not required to file an application for permission to make a capital
distribution and need only file a notice if the following conditions are met:
(1) they are eligible for expedited treatment under OTS regulations, (2) they
would remain adequately capitalized after the distribution, (3) the aggregate
annual amount of capital distributions does not exceed net income for that year
to date added to retained net income for the two preceding years, and (4) the
capital distribution would not violate any agreements between the OTS and the
savings association or any OTS regulations. Any other situation would require an
application to the OTS.
The OTS may disapprove an application or notice if the proposed capital
distribution would: (i) make the savings association undercapitalized,
significantly undercapitalized, or critically undercapitalized; (ii) raise
safety or soundness concerns; or (iii) violate a statue, regulation, or
agreement with the OTS (or with the FDIC), or a condition imposed in an
OTS-approved application or notice. Further, a federal savings association, like
the Bank, cannot distribute regulatory capital that is needed for its
liquidation account.
Qualified Thrift Lender Test. Federal savings institutions must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal Revenue Code by maintaining at least 60% of its total assets
in specified types of assets, including cash, certain government securities,
loans secured by and other assets related to residential real property,
educational loans and investments in premises of the
17
institution or (ii) satisfy the statutory QTL test set forth in the Home Owner's
Loan Act by maintaining at least 65% of its "portfolio assets" in
certain"Qualified Thrift Investments" (defined to include residential mortgages
and related equity investments, certain mortgage-related securities, small
business loans, student loans and credit card loans, and 50% of certain
community development loans). For purposes of the statutory QTL test, portfolio
assets are defined as total assets minus intangible assets, property used by the
institution in conducting its business, and liquid assets equal to 10% of total
assets. A savings institution must maintain its status as a QTL on a monthly
basis in at least nine out of every 12 months. A failure to qualify as a QTL
results in a number of sanctions, including the imposition of certain operating
restrictions and a restriction on obtaining additional advances from its FHLB.
At September 30, 2000, the Bank was in compliance with its QTL requirement.
Federal Home Loan Bank System. The Bank is a member of the FHLB of
Cincinnati, which is one of 12 regional FHLBs that administers the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Cincinnati in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year.
Liquidity Requirements. All savings associations are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations.
Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW, and Super
NOW checking accounts) and non-personal time deposits. The balances maintained
to meet the reserve requirements imposed by the Federal Reserve Board may be
used to satisfy the liquidity requirements that are imposed by the OTS. At
September 30, 2000, the Bank was in compliance with these Federal Reserve Board
requirements.
18
Item 2. Properties
- --------------------
The Registrant operates from its main office and two full service
branch offices. The following table sets forth information regarding the
Registrant's properties:
Original
Leased Date
Location or Owned Acquired
- -------- -------- --------
MAIN OFFICE:
104 South Chiles Street Owned 1964
Harrodsburg, Kentucky 40330
BRANCH OFFICE: Owned 1973
216 South Main Street
Lawrenceburg,Kentucky
BRANCH OFFICE: Owned 1998
1015 Cross Road Drive
Lawrenceburg, Kentucky
Item 3. Legal Proceedings
- --------------------------
The Registrant, from time to time, is a party to ordinary routine
litigation, which arises in the normal course of business, such as claims to
enforce liens, condemnation proceedings on properties in which the Registrant
holds security interests, claims involving the making and servicing of real
property loans, and other issues incident to the business of the Registrant.
There were no material lawsuits pending or known to be contemplated against the
Bank or the Company at September 30, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
- --------------------------------------------------------------------------------
The information contained under the section captioned "Market and
Dividends Information" in the 2000 Annual Report to Stockholders (the "Annual
Report") is incorporated herein by reference.
Item 6. Selected Financial Data
- --------------------------------
The information contained in the table captioned "Selected Financial
and Other Data" in the Annual Report is incorporated herein by reference.
19
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information contained in the section captioned "Market Risk" in the
Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Registrant's financial statements listed in Item 14 herein are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- --------------------------------------------------------------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information contained under the sections captioned "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Proposal I-- Election of
Directors" and "-- Biographical Information" in the 2000 Proxy Statement are
incorporated herein by reference.
Item 11. Executive Compensation
- --------------------------------
The information contained under the section captioned "Director and
Executive Compensation" in the Proxy Statement is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the Section captioned "Voting Securities and
Principal Holders Thereof -- Security Ownership of Certain
Beneficial Owners" of the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the sections captioned "Voting Securities and
Principal Holders Thereof -- Security Ownership of
20
Certain Beneficial Owners" and "Proposal I -- Election of
Directors" of the Proxy Statement.
(c) Management of the Company knows of no arrangements, including
any pledge by any person of securities of the Company, the
operation of which may at a subsequent date result in a change
in control of the registrant.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" and
"Voting Securities and Principal Holders Thereof" of the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K
- -----------------------------------------------------------------
(a) Listed below are all financial statements and exhibits filed
as part of this report, and are incorporated by reference.
1. The consolidated statements of financial conditions of
Harrodsburg First Financial Bancorp, Inc. as of September 30,
2000 and 1999, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for
each of the years in the three year period ended September 30,
2000, together with the related notes and the independent
auditors' report of Miller, Mayer, Sullivan & Stevens LLP,
independent accountants.
2. Schedules omitted as they are not applicable.
3 Exhibits
(a) The following exhibits are filed as part of this report.
3.1 Certificate of Incorporation of Harrodsburg First Financial
Bancorp, Inc.*
3.2 Bylaws of Harrodsburg First Financial Bancorp, Inc.*
10.1 1996 Stock Option Plan**
10.2 Restricted Stock Plan and Trust Agreement**
10.3 Form of Employment Agreement Jack D. Hood
10.4 Employment Agreement Arthur L. Freeman
13.0 Portions of the 2000 Annual Report to Stockholders
21.0 Subsidiary Information (See Item 1 - Description of Business)
27.0 Financial Data Schedule (in electronic filing only)
(b) Reports on Form 8-K.
None.
21
* Incorporated herein by reference into this document from the Exhibits
to Form S-1, Registration Statement, initially filed on June 14, 1995,
Registration No. 33-93458.
** Incorporated herein by reference into this document from the Exhibits
to the Form 10-K filed on December 29, 1997.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized as of December 20,
2000.
HARRODSBURG FIRST FINANCIAL BANCORP, INC.
By: /s/Arthur L. Freeman
------------------------------------------------
Arthur L. Freeman
Chief Executive Officer and Chairman
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this Report has been signed below by December 20, 2000, by the following persons
on behalf of the Registrant and in the capacities indicated.
By: /s/Arthur L. Freeman By: /s/Jack D. Hood
-------------------------------------- ------------------------------------------
Arthur L. Freeman Jack D. Hood
Chief Executive Officer and Chairman President and Director
(Duly Authorized Representative)
By: Wickliffe T. Asbury, Sr. By: /s/Thomas Les Letton
-------------------------------------- ------------------------------------------
Wickliffe T. Asbury, Sr. Thomas Les Letton
Vice President and Director Director
By: /s/Jack L. Coleman, Jr. By: /s/W. Dudley Shryock
-------------------------------------- ------------------------------------------
Jack L. Coleman, Jr. W. Dudley Shryock
Director Director
By: /s/Teresa W. Noel
--------------------------------------
Teresa W. Noel
Treasurer and Chief Financial Officer
(Chief Financial and Accounting Officer)
23