exv10w6





Exhibit
10.6




HOME FEDERAL BANK




Description of the Key Features of the Loan Officer Incentive Plan (LOIP)




for




Fiscal Year 2011




Prepared in August of 2010














 









 








HOME FEDERAL BANK




Loan Officer Incentive Compensation Plan (LOIP) Description for Fiscal 2011



I. Plan Purpose — The LOIP is an annual, cash-based variable incentive compensation
plan. It is specifically designed to encourage participants (selected Loan Officers) to produce
results that enable the Bank to reach targeted levels of financial performance for the fiscal year.
The LOIP provides participants with an opportunity to earn variable rewards that are contingent on
the net income (interest and fee income less interest expense) produced from their identified loan
portfolios.




The CEO and the President will use the LOIP as a part of their overall management strategy to
provide direction and encouragement to participants. The LOIP will help control the escalation in
fixed compensation costs and provide participants with an opportunity to enhance their overall
level of compensation. This should better enable the Bank to attract, motivate and retain the
kinds of Loan Officers needed to ensure financial success. It should also create incremental
shareholder value through the generation of enhanced earnings.




The LOIP is administered by the Compensation Committee of the Board of Directors. Under normal
circumstances the plan remains in effect for the current performance period, the fiscal year.
However, the Compensation Committee may discontinue or modify the plan in its sole discretion
subject to the anticipated benefits created thereby.



II.
Performance Period — This is a 12-month plan that is linked with portfolio performance
and loan production targets established for each fiscal year. However, there are semi-annual
payouts. Each year the LOIP is reviewed and modified to ensure it is consistent with the financial
measures in the annual business plan. Any financial measures that are related to lending
performance in the LOIP are reviewed each year and adjusted to coincide with changes in
participants, their compensation and the LOIP formula.











2









 







III.
Plan Participants — The LOIP is intended for certain Loan Officers. The CEO and the
President will review the Loan Officers at the beginning of each fiscal year and select those who
they propose to participate in the LOIP. Recommended participants are presented to the
Compensation Committee for approval. The list of participating Loan Officers will be maintained in
the records of the Compensation Committee. Participants who join the bank during the targeted
fiscal year may have special arrangement during the time they are developing their portfolios.



IV.
Participation Levels — For FY 2011 participants will receive 4.00% of the net interest
income (interest income less interest expense) from loans identified as having been originated by
the particular Loan Officer prior to the beginning of the current fiscal year. Participants also
receive 6.00% of the net interest income (interest income less interest expense) plus fee income
from loans originated during the performance period. The CEO and the President will review the
participation percentages at the beginning of each fiscal year and recommend any needed
modifications to the Compensation Committee.



V.
Plan Formula — For fiscal 2011 portfolio performance is calculated for each
participating Loan Officer to ensure an accurate determination of portfolio performance. A sample
calculation is provided on an attached spreadsheet.




Cumulative interest income from loans existing at the beginning of the performance period is
calculated. Interest expense, equal to loan volume times the most recently available average cost
of funds for the Bank, is deducted from interest income to determine Loan Officer contribution.
Loan Officer contribution is multiplied by the portfolio rating to calculate the income base. The
income base is multiplied by 4.00% to determine the incentive award from existing loans.




Cumulative interest income from new loans (those originated during the performance period) is
calculated. Interest expense, equal to loan volume times the most recently available average cost
of funds for the Bank, is deducted from interest income to determine net interest income.
Origination fee income is also added to determine Loan Officer contribution. Loan Officer
contribution is multiplied by the portfolio rating to calculate the income base. The income base
is multiplied by 6.00% to determine the incentive award from new loans.




The incentive awards from existing loans and new loans are added to determine the total award
payment.




VI.
Loan Portfolio Performance — Loan portfolio performance is calculated to help ensure
that asset quality targets are met. The portfolio quality guidelines are established by the CEO
and the President with input from the Senior Loan Officer.






3









 







VII. Plan Communications — Following approval of the LOIP by the Compensation Committee,
the CEO and the President will ensure that all participants are notified of their participation,
target awards, the plan formula, how incentive awards are calculated and what they may do to
positively influence the size of their awards. During the performance period the CEO and the
President will ensure that all participants are provided with periodic updates on the status of the
LOIP. This enables participants to project the formula awards for which they are potentially
eligible.




VIII.
Award Determination — Awards are calculated on a semi-annual basis. The first
calculation is made in January, for the period from July 1 through December 31. The second
calculation is made in July, for the period from January 1 through June 30. The award for the
first six month is based on portfolio performance for that period. The calculation for the second
six months is made for the performance period, the fiscal year, less the calculation for the first
six months.



IX. Award Payments — As soon as practical, following approval by the Compensation
Committee, incentive awards are paid. The first payment is normally made in February, following
approval by the Compensation Committee. The second payment is normally made in August, following
approval by the Compensation Committee. The payments are made by separate check and specifically
designated as incentive awards. In order to receive award payments, participants must be employed
in good standing when the payments are made.



X. LOIP Review —  In June of each year in which the LOIP is in effect, the CEO and the
President, with input from the CFO, will review the LOIP and determine whether modifications should
be proposed for the fiscal year commencing on July 1. Any modifications are reviewed and approved
by the Compensation Committee. The CEO and the President ensure that all participants are informed
about any changes in the plan.



XI,
CEO, President and Compensation Committee Discretion — The guidelines for the LOIP
build structure into the incentive compensation determination process. Along with the guidelines,
a certain amount of common sense and discretion are frequently needed. The CEO and the President
have the discretion to recommend certain awards to the Compensation Committee, should they be
warranted. Similarly, members of the Compensation Committee may recommend certain discretionary
awards. This is in keeping with good compensation management practices.





4