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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1999
REGISTRATION NO. 333-67435
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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CITIZENS FIRST CORPORATION
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
KENTUCKY 6712 61-0912615
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
1805 CAMPBELL LANE, BOWLING GREEN, KENTUCKY 42104
(502) 393-0700
(Address and telephone number of principal executive offices and intended
principal place of business)
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MARY D. COHRON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CITIZENS FIRST CORPORATION
1805 CAMPBELL LANE, BOWLING GREEN, KENTUCKY 42104
(502) 393-0700
(Name, address and telephone number of agent for service)
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COPIES TO:
<TABLE>
<S> <C>
J. DAVID SMITH, JR., ESQ. JAMES A. GIESEL, ESQ.
STOLL, KEENON & PARK, LLP BROWN, TODD & HEYBURN PLLC
201 E. MAIN STREET, SUITE 1000 400 WEST MARKET STREET, 32ND FLOOR
LEXINGTON, KENTUCKY 40507 LOUISVILLE, KENTUCKY 40202
(606) 231-3062 (502) 568-0307
</TABLE>
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value... 536,667(1) $15.00 $8,050,005(2) $2,237.90(3)
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</TABLE>
(1) Includes 70,000 shares that may be purchased pursuant to the over-allotment
option granted to the Underwriter.
(2) Estimated solely for the purpose of determining the registration fee.
(3) Previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THIS PRELIMINARY PROSPECTUS IS NOT YET COMPLETED. FEBRUARY 4, 1999
INITIAL PUBLIC OFFERING
PROSPECTUS
(CITIZENS FIRST CORPORATION LOGO)
466,667 SHARES OF COMMON STOCK
$15.00 PER SHARE
-------------------------
Citizens First Corporation
1805 Campbell Lane
Bowling Green, Kentucky 42104
(502) 393-0700
The Offering:
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Price......... $15.00 $7,000,005.00
Underwriting
Discounts.......... $ 1.05 $ 490,000.35
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Proceeds to Citizens
First
Corporation........ $13.95 $6,510,004.65
====== =============
</TABLE>
We are offering shares of common stock to fund the start-up of a new commercial
bank named Citizens First Bank, Inc. We will be the sole owner of Citizens First
Bank, which will have its headquarters in Bowling Green, Kentucky. Citizens
First Bank will provide a full range of commercial and consumer banking services
for small- to medium-sized businesses as well as individuals.
This is our initial public offering, and no public market currently exists for
our common stock. You should not invest in this offering unless you view your
investment as a long-term one.
The underwriter has a 30-day option to purchase an additional 70,000 shares to
cover over-allotments.
PROPOSED TRADING SYMBOL:
OTC BULLETIN BOARD -- CTZN
-------------------------
THIS IS A RISKY INVESTMENT. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
FACTORS THAT MAKE THIS INVESTMENT RISKY ARE DESCRIBED UNDER THE CAPTION "RISK
FACTORS" BEGINNING ON PAGE 6.
NONE OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION,
ANY BANK REGULATORY AUTHORITY, OR ANY OTHER GOVERNMENT AGENCY HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
J.J.B. HILLIARD, W.L. LYONS, INC.
February , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
(Citizens First Corporation Logo)
(MAP OF KENTUCKY WITH WARREN COUNTY BLOW UP)
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is a summary, it may not contain all of the information that you
should consider before investing in the common stock. You should read this
entire prospectus carefully.
1. WHO ARE WE?
Citizens First Corporation was incorporated under the laws of Kentucky in
1975 to conduct business as a private investment club with a small number of
shareholders. We are now becoming a bank holding company through the
organization of Citizens First Bank, Inc. in Bowling Green, Warren County,
Kentucky. We are organizing Citizens First Bank as a Kentucky chartered bank
with depository accounts to be insured by the Federal Deposit Insurance
Corporation. To complete the offering, we must receive all necessary regulatory
approvals and satisfy conditions that are customary in forming a bank.
As of the date of this prospectus, we have assets consisting of cash in the
approximate amount of $30,000, a building and other assets purchased for
Citizens First Bank and publicly traded securities having an approximate market
value of $1,600,000. Approximately two-thirds of the value of our securities
portfolio is invested in two companies: 42% in Dollar General Corporation and
25% in Firstar Corporation.
2. WHAT IS THE OFFERING?
Securities Offered for
Sale....................... Shares of common stock of Citizens First
Corporation. For a description of these shares,
see "Description of Capital Stock" on page 42.
Number of Shares Being
Offered.................... 466,667. No person, including his family members
and entities he controls, may purchase more than
14,000 shares. In addition, the underwriter has
a 30-day option to purchase up to 70,000
additional shares to cover over-allotments. For
a description of this option, see "Underwriting"
on page 56.
Price to the Public.......... $15.00 per share.
Number of Shares Outstanding
Before the Offering........ Our current shareholders hold 102,000 shares.
This number will likely be adjusted based upon
the market value of our securities portfolio
immediately before the offering. For a
description of this adjustment, see "Principal
Shareholders -- Adjustment to Shareholdings;
Dilution of Your Shares" on page 37.
Number of Shares to be
Outstanding After
the Offering............... 568,667 shares will be outstanding immediately
after the offering. This number assumes that the
underwriter does not exercise its option to
purchase 70,000 additional shares and that no
adjustment is required to the shares
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of our current shareholders based upon the value
of our securities portfolio.
Dividend Policy.............. We do not intend to pay any cash dividends in
the foreseeable future.
Use of Proceeds.............. We will use the net proceeds of the offering to
capitalize Citizens First Bank, pay
organizational expenses and repay loans incurred
in organizing and preparing Citizens First Bank
to begin business. For further details, see "Use
of Proceeds" on page 39.
Risk Factors................. You should read the "Risk Factors" section
beginning on page 6 before deciding to invest in
the offering.
3. WHY ARE WE STARTING A NEW COMMUNITY BANK?
A number of developments have led to substantial consolidation of the
banking industry in Kentucky. In many cases, in Bowling Green and elsewhere,
large regional bank holding companies have acquired previously locally owned or
managed banks and have consolidated them as branches into their banks. We
believe that, after consolidation, these banks no longer offer the same level of
personalized customer service.
Although the banking industry remains competitive, we believe that this
consolidation has created a favorable opportunity for a new locally owned and
managed commercial bank in our proposed market area. We want to take advantage
of this opportunity. We believe that a locally owned and managed bank dedicated
to, and actively interested in, the needs of local businesses and residents will
fill a need for service and convenience not being satisfied by the existing
financial institutions in Bowling Green.
4. WHAT WILL BE CITIZENS FIRST BANK'S MARKET AREA?
Citizens First Bank's primary market area will be Bowling Green-Warren
County, Kentucky, one of the fastest growing counties in Kentucky from 1990
through 1996. We believe this area has a significant banking market and an
expanding and diverse economic base, which includes a wide range of small- to
medium-sized businesses engaged in manufacturing, services and retail. In
addition to our primary market area, we anticipate offering our banking services
to individuals and businesses located in several Kentucky counties near Warren
County.
5. WHERE WILL CITIZENS FIRST BANK'S OFFICES BE LOCATED?
Citizens First Bank will open with a main office which will serve as our
corporate headquarters at 1805 Campbell Lane in the main retail trading area of
Warren County. A branch office of Citizens First Bank will be opened in March
1999 and will be closer to downtown Bowling Green at 901 Lehman Avenue. The
telephone number for both the main and branch offices will be (502) 393-0700.
6. WHAT WILL BE CITIZENS FIRST BANK'S BUSINESS STRATEGY?
Citizens First Bank will compete aggressively for banking business through
a systematic program of directly calling on both customers and referral sources
such as attorneys, accountants, mortgage brokers, insurance agents and other
business people, many
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of whom are already known to Citizens First Bank's officers and directors.
Citizens First Bank will be committed to developing strong customer
relationships by providing:
- customer access to executive management;
- continuity in officer and staff personnel;
- an active personal call program by officers;
- an understanding of customers' businesses and needs;
- prompt response to customer requests; and
- development of relationships that are durable and that grow as
Citizens First Bank and its customers continue in business.
We have hired and will continue to hire experienced staff to provide
personalized service and to generate competitively priced loans and deposits.
This experienced staff will have access to technology, software and database
systems selected to deliver high-quality products and provide responsive service
to clients. Through an agreement with a third-party service provider to provide
data processing services and customer accounts statement preparation, Citizens
First Bank will reduce the in-house personnel and equipment required to deliver
such services and products.
7. WHO IS OUR MANAGEMENT?
Mary D. Cohron is our President and Chief Executive Officer. Ms. Cohron
served as a director of Trans Financial, Inc., a bank holding company previously
located in Bowling Green. She headed the Tax and Revenue Anticipation Note
Program for the Kentucky School Boards Association, and provided strategic
planning and consultant services for small businesses. John T. Perkins is our
Vice-President/Chief Operating Officer. Mr. Perkins has owned a bank consulting
company and served for over twenty years with Trans Financial Bank in Bowling
Green, Kentucky, serving as Chief Operating Officer at the time he left Trans
Financial Bank in 1995. Gregg A. Hall is our Vice-President/Chief Financial
Officer. Mr. Hall was from August 1988 to August 1998 Auditor and Senior
Vice-President for Trans Financial, Inc. Barry D. Bray is our Chief Credit
Officer. Mr. Bray served as chief credit officer for Trans Financial, Inc. from
1982 to 1998.
We are assembling an experienced professional staff for Citizens First Bank
which will include 19 full-time and 5 part-time employees when it opens for
business.
Our Board of Directors is made up of individuals with broad backgrounds in
business, real estate, banking and government. Current directors include, in
addition to Ms. Cohron and Mr. Perkins,
- Jerry E. Baker who is Chairman of the Board of Directors of Airgas
Mid-America, Inc.;
- Billy J. Bell who is co-owner of Mid-South Feeds;
- Floyd H. Ellis who is President of Warren Rural Electric Cooperative
Corporation and former Vice-Chairman of Trans Financial, Inc.;
- James H. Lucas who is Of Counsel to English, Lucas, Priest & Owsley;
and
- Joe B. Natcher, Jr. who is President of Southern Foods, Inc.
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RISK FACTORS
There is a high degree of risk associated with an investment in the shares.
You should not invest any funds in shares unless you can afford to lose your
entire investment. You should view any purchase of shares as a long-term
investment. Our business, financial condition or results of operations could be
materially and adversely affected by any of the following risks. You should
carefully consider the following factors in addition to the other information
set forth in this prospectus before making an investment in the shares.
WE ARE A NEW BUSINESS WITH NO OPERATING HISTORY FOR YOU TO CONSIDER IN
MAKING AN INVESTMENT DECISION. We have no history of operations as a bank
holding company. You do not have information such as historical financial data
in assessing an investment in shares as would be available to the purchaser of
securities of a company with a history of operations.
WE EXPECT SIGNIFICANT LOSSES FOR AT LEAST TWO YEARS. For us to be
profitable, we will need to attract a large number of customers to deposit and
borrow money, among other things. This will take time. We expect to lose money
for at least two years. Based on our projections, we expect these losses to
accumulate to more than $1,000,000 before we are profitable. It is possible that
we may never be profitable and that you will lose part or all of your
investment.
DELAYS IN OPENING CITIZENS FIRST BANK WILL INCREASE OUR EXPECTED
LOSSES. Any delay in starting operations will increase our pre-operational
expenses, such as salaries and other administrative expenses, without the
ability to generate any revenues. We expect Citizens First Bank to start
business during February 1999 at its main office. However, there can be no
assurance as to when, if at all, such opening will occur. We will be unable to
begin operations until we have satisfied the conditions of all required
regulatory approvals.
WE MAY BE UNABLE TO IMPLEMENT OUR BUSINESS STRATEGY. We cannot assure you
that we will be successful in the implementation of our business strategy. See
"Business -- Business Strategy" on page 12. The growth and expansion of Citizens
First Bank's business will place significant demands on its management,
operational and financial resources. Successful implementation of our business
strategy requires continued growth and will depend on our ability to:
- attract a significant number of customers;
- manage profitably our assets, liabilities and capital;
- develop necessary business relationships to provide products and
services;
- implement and improve operational, financial and management
information systems and other technology; and
- hire and train additional qualified personnel.
WE MAY BE UNABLE TO PROVIDE NEW FINANCIAL PRODUCTS AND SERVICES DEMANDED BY
OUR CUSTOMERS. As the banking industry changes, our success will depend upon
Citizens First Bank's ability to offer new products and provide new financial
services that meet changing customer requirements. We cannot assure you that we
can successfully develop and bring new products and services to market in a
timely manner. See "Business -- Business Overview" and "Competition" on pages 12
and 18.
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OUR PROFITABILITY MAY SUFFER BECAUSE OF YEAR 2000 PROBLEMS. We could
experience interruptions in Citizens First Bank's business and significant
losses if we, a borrower or a vendor rely on computer information systems that
are unable to accurately process dates beginning on January 1, 2000. See
"Business -- Year 2000 Readiness" on page 23.
AN ECONOMIC DOWNTURN IN THE BOWLING GREEN-WARREN COUNTY ECONOMY WOULD
NEGATIVELY AFFECT US. The operations of Citizens First Bank will be materially
dependent upon and sensitive to the economy of the Bowling Green-Warren County
area. An economic downturn or a strike at an employer susceptible to labor
difficulties, such as the General Motors Corvette Plant, could have a
significant adverse effect upon our earnings and financial condition.
OUR PROFITABILITY MAY SUFFER BECAUSE OF THE INDEMNIFICATION OF OUR
DIRECTORS AND OFFICERS. Our Bylaws require the indemnification of our officers
and directors to the fullest extent permitted by law. These provisions could
result in expenses that would reduce our earnings. See
"Management -- Indemnification of Directors and Officers" on page 35.
WE ARBITRARILY DETERMINED THE $15.00 OFFERING PRICE WHICH MAY BE GREATER
THAN THE MARKET PRICE FOR THE COMMON STOCK FOLLOWING THE OFFERING. We
arbitrarily determined the offering price of $15.00 per share in consultation
with the underwriter. This price is not based upon our earnings or our history
of operations and may not be indicative of the value of the shares.
WE EXPECT A LIMITED TRADING MARKET FOR YOUR SHARES. No public trading
market for the common stock exists and there may never be one. The underwriter
has told us that it intends to make quotations of our common stock on the NASD
OTC Bulletin Board and to act as a market maker of the common stock following
the offering. The underwriter is not obligated to do this and the development of
a public trading market depends upon the existence of willing buyers and sellers
which is not within our control or that of the underwriter. Market makers are
not required to maintain a continuous two-sided market and are free to withdraw
firm quotations at any time.
Even with a market maker, the limited size of this offering, our lack of
earnings history and the absence of dividends in the foreseeable future will
impede the development of an active and liquid market for common stock. You
should carefully consider the limited liquidity of your investment in the
shares.
YOUR SHARES COULD BE DILUTED THROUGH THE ISSUANCE OF ADDITIONAL
STOCK. Subject to the adjustment of shares held by our current shareholders,
568,667 shares of common stock will be outstanding following this offering. Our
Board of Directors may issue additional shares up to the authorized maximum of
1,000,000 without prior shareholder approval and without allowing shareholders
the right to purchase their pro rata portion of such shares. The issuance of any
new shares of common stock for whatever purpose would cause dilution in your
percentage ownership of common stock and perhaps in the value of your shares.
See "Description of Capital Stock -- No Preemptive Rights" on page 43.
Our Board of Directors may issue, without shareholder approval, preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect your voting power or other rights as a holder of common stock.
Moreover, we could use the preferred stock as a method of discouraging, delaying
or preventing a change in control. See "Description of Capital
Stock -- Preferred Stock" on page 43.
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OUR NET WORTH WOULD DECLINE IN THE EVENT OF A DECLINE IN THE VALUE OF OUR
SECURITIES PORTFOLIO. Our securities portfolio may not retain its value until
such time as we sell the securities to provide additional capital for Citizens
First Bank. This volatility risk is increased by the fact that approximately
two-thirds of the value of our current securities portfolio is invested in
Dollar General Corporation and Firstar Corporation.
YOUR SHARES WILL BE DILUTED BY THE ADJUSTMENT TO THE SHARES HELD BY OUR
CURRENT SHAREHOLDERS. As explained in "Principal Shareholders -- Adjustment to
Shareholdings; Dilution of Your Shares" on page 37, we will adjust the common
stock ownership of our current shareholders immediately before the offering
based upon the $15.00 per share offering price. However, we will ignore in such
adjustment the deferred tax liability arising from the appreciation in the value
of our securities portfolio. If we were to take such deferred tax liability into
account in determining the shares to be held by our current shareholders, their
share ownership would be materially decreased and the percentage ownership
represented by shares sold in this offering would materially increase.
WE DEPEND ON MS. COHRON AND MESSRS. PERKINS AND HALL AND THEY WOULD BE
DIFFICULT TO REPLACE. We will be substantially dependent upon the continuing
services of Mary D. Cohron, John T. Perkins and Gregg A. Hall. We do not intend
to carry key man life insurance on any of our executives. The loss of the
services of any member of our senior management, or the inability to attract and
retain other experienced banking personnel, could have a material adverse effect
on our business. See "Management -- Directors and Executive Officers" on page
31.
OUR PROFITABILITY MAY SUFFER IF OUR THIRD-PARTY SERVICE PROVIDER FAILS TO
PROVIDE NEEDED SERVICES. We have a contract with a third party to provide
Citizens First Bank's electronic data processing services off-premises. Citizens
First Bank's operations could be disrupted by an interruption or default in such
services, in which case our business, operating results and financial condition
could be materially and adversely affected. See "Business -- Data Management and
Other Services" on page 17.
WE HAVE NO PLANS TO PAY CASH DIVIDENDS. We expect to pay no dividends on
the common stock in the foreseeable future. We do not expect Citizens First Bank
to generate sufficient net income during its initial years of operation to
permit the payment of any dividends. See "Business -- Dividends" on page 23 and
"Description of Capital Stock -- Dividend Rights and Limitations on Payment of
Dividends" on page 42. Moreover, our directors are not required to declare
dividends and state and federal banking laws restrict the payment of dividends.
See "Supervision and Regulation -- Citizens First Bank: Dividend Restrictions"
on page 51. You should not purchase shares if you are depending upon dividend
income from this investment.
WE CANNOT BE CERTAIN THAT THE CAPITAL OF CITIZENS FIRST BANK WILL BE
ADEQUATE. We anticipate that our existing capital resources, including the net
proceeds of the offering, will adequately satisfy the foreseeable capital
requirements of Citizens First Bank. Future capital requirements, however,
depend on many factors, including the ability to successfully attract new
customers and provide additional services. Any necessary future equity or debt
financing, if available at all, may be on terms which are not favorable to us
and, in the case of equity financing, could result in dilution to your share
ownership. If adequate capital is not available, Citizens First Bank will be
subject to an increased level of regulatory supervision and our business,
operating results and financial condition could be adversely affected. See
"Management's Discussion and Analysis of Financial Condition and
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Results of Operations" on page 26 and "Supervision and Regulation -- Citizens
First Bank: Prompt Corrective Action for Capital Deficiencies" on page 52.
CITIZENS FIRST BANK WILL FACE INTENSE COMPETITION FROM LARGER, MORE
ESTABLISHED INSTITUTIONS. Commercial banking is a highly competitive business.
We cannot assure you that Citizens First Bank will be able to compete
successfully or profitably in its primary market area. Citizens First Bank will
be competing for customers and employees with more established banks, as well as
with savings and loan associations, credit unions, brokerage firms and mutual
fund companies with greater financial resources and operating experience.
Larger, more experienced institutions will likely use economies of scale
available to them because of their greater size and offer customers greater
convenience through the number of branches and automated teller machines made
available by such entities. See "Business -- Competition" on page 18.
CITIZENS FIRST BANK'S LACK OF OPERATING HISTORY AND ANTICIPATED RELIANCE ON
COMMERCIAL LENDING INCREASES THE RISK OF DEFAULTS BY ITS BORROWERS. Credit
losses can cause the insolvency and failure of Citizens First Bank, and in such
event, you could lose your entire investment. The risk of nonpayment of loans is
inherent in commercial banking. Because Citizens First Bank has no operating
history, none of Citizens First Bank's customers will have an established credit
history with Citizens First Bank. Citizens First Bank will make various types of
loans, including commercial, consumer, residential mortgage and construction
loans. We anticipate that approximately 65% of Citizens First Bank's loans will
be commercial loans, although the actual percentage may vary. Commercial lending
is more risky than residential lending because loan balances are greater and the
borrower's ability to repay is dependent on the success of the borrower's
operation. We will try to limit our exposure to default risk by carefully
monitoring the amount of loans we make within specific industries and through
prudent lending practices, but will not be able to eliminate the risk.
CITIZENS FIRST BANK'S LENDING LIMITS WILL BE SIGNIFICANTLY LOWER THAN MOST
OF ITS COMPETITORS. Citizens First Bank's lending limit will be significantly
lower than most of its competitors and may affect its ability to seek
relationships with larger businesses in our market area. We expect that Citizens
First Bank's initial legal lending limit will be approximately $1.5 million
immediately following the offering. Because this limit is based upon a
percentage of Citizens First Bank's capital and surplus, the limit will likely
decrease until Citizens First Bank is profitable. We intend for Citizens First
Bank to accommodate loans in excess of its lending limit through the sale of
participations in those loans to other banks, but it may not be able to do so.
OUR PROFITABILITY MAY SUFFER IF WE ARE UNABLE TO SUCCESSFULLY MANAGE
INTEREST RATE RISK. Our profitability will depend in substantial part upon the
spread between the interest rates earned on investments and loans and the
interest rates paid on deposits and other interest-bearing liabilities. Changes
in interest rates will affect our operating performance and financial condition
in diverse ways. We intend to try to minimize our exposure to interest rate
risk, but we will be unable to eliminate it. Our net interest spread will depend
on many factors that are partly or entirely outside our control, including
competition, federal economic, monetary and fiscal policies, and economic
conditions generally.
OUR PROFITABILITY MAY SUFFER BECAUSE OF RAPID AND UNPREDICTABLE CHANGES IN
THE HIGHLY REGULATED ENVIRONMENT IN WHICH WE WILL OPERATE. We will be subject
to supervision by several governmental regulatory agencies. These regulations
are beyond our
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control, may change rapidly and unpredictably and can be expected to influence
our earnings and growth. Although these regulations impose costs upon us and
Citizens First Bank, they are intended to protect depositors and you should not
assume they protect your interests as a shareholder. See "Supervision and
Regulation -- Citizens First Bank: Effects of Governmental Policies and Economic
Conditions" on page 54.
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR VIEWS
ABOUT FUTURE EVENTS AND FINANCIAL PERFORMANCE. OUR ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN THESE
FORWARD-LOOKING STATEMENTS FOR VARIOUS REASONS, INCLUDING THOSE SET FORTH IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 6. THEREFORE, YOU SHOULD NOT PLACE
UNDUE RELIANCE UPON THESE FORWARD-LOOKING STATEMENTS.
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BUSINESS
BACKGROUND
We have operated since 1975 as a private investment club with a small
number of shareholders. We have decided to enter the banking business because,
in recent years, some Bowling Green banks have been acquired by regional
multi-bank holding companies headquartered outside Bowling Green. In many cases,
these acquisitions and consolidations have been accompanied by fee changes,
branch closings, the dissolution of local boards of directors, management and
personnel changes and, in the perception of our management, a decline in the
level of personalized customer service. In our opinion, this situation has
created a favorable opportunity for a new commercial bank that can attract those
customers who prefer to conduct business with a locally managed institution that
demonstrates an active interest in their businesses and personal financial
affairs. We further believe that a locally managed institution will be better
able to deliver more timely responses to customer requests, provide customized
financial products and services and offer the personal attention of its senior
banking officers.
Citizens First Bank was incorporated on January 14, 1999 as a Kentucky
corporation and has conducted no business. As preparation for the start of
banking activities, we have:
- acquired and renovated a building intended to serve as the main office
for Citizens First Bank;
- leased and are renovating office space for a branch office of Citizens
First Bank;
- acquired and installed necessary equipment in Citizens First Bank
premises;
- employed executive officers, senior officers and staff of Citizens
First Bank;
- formulated policies and procedures for Citizens First Bank;
- trained Citizens First Bank staff;
- negotiated a contract for the provision of data processing services
for Citizens First Bank; and
- pursued the establishment of correspondent banking relationships and
other arrangements for necessary services.
STATUS OF ORGANIZATION
On September 18, 1998 our directors filed as organizers an application with
the Kentucky Department of Financial Institutions for permission to operate a
state-chartered bank and an application with the Federal Deposit Insurance
Corporation for deposit insurance. We filed on November 25, 1998 an application
with the Federal Reserve Board for approval to become a bank holding company
through ownership of Citizens First Bank. On December 11, 1998, the Kentucky
Department issued an order approving the charter for Citizens First Bank with
conditions, including the receipt of federal deposit insurance and minimum
capital requirements. On December 28, 1998, the Federal Reserve Board approved
our application to become a bank holding company. On January 21, 1999, the
Federal Deposit Insurance Corporation approved Citizens First Bank's application
for federal deposit insurance with conditions, including minimum capital
requirements. We expect to be in a position to satisfy all conditions of our
regulatory approvals upon the completion of this offering.
11
<PAGE> 13
BUSINESS STRATEGY
Citizens First Bank intends to emphasize experienced local management with
a strong commitment to the communities located within its primary market area.
We believe that the individuals and small- to medium-sized industrial and
commercial businesses that will be the target customers of Citizens First Bank
are not being adequately served by existing financial institutions. We also
believe that our officers and directors are active in the community and that the
community and business leaders are anxious to welcome a locally managed bank
owned by a company with a broad base of local ownership. Citizens First Bank
will be committed to providing outstanding customer service and banking products
chiefly to individuals and small- to medium-sized businesses and will compete
aggressively for banking business through a systematic program of directly
calling on both customers and referral sources, such as attorneys, accountants,
mortgage brokers, insurance agents and other business people, many of whom are
already known to our officers and directors.
BUSINESS OVERVIEW
Citizens First Bank will conduct a general banking business and serve as a
full-service community financial institution offering a variety of products and
services consistent with the goal of attracting individuals and small- to
medium-sized businesses. These services will include the receipt of deposits,
making of loans, issuance of checks, acceptance of drafts, consumer and
commercial credit operations and mortgage lending. Citizens First Bank's deposit
products will include basic, specialty and low-cost checking accounts and
competitive savings and certificate of deposit accounts. Citizens First Bank's
loan products will include a variety of retail, commercial, mortgage and
consumer products.
BUSINESS FINANCIAL SERVICES. Citizens First Bank intends to offer products
and services consistent with the goal of attracting small- to medium-sized
business customers. Citizens First Bank will actively pursue business checking
accounts by offering competitive rates, telephone banking and other convenient
services to its business customers. In some cases, Citizens First Bank may
require business customers to maintain minimum balances. We also intend for
Citizens First Bank to establish relationships with one or more correspondent
banks and other independent financial institutions to provide other services
requested by customers, including cash management services and loan
participation where the requested loan amount exceeds the lending limits imposed
by law or by our policies.
CONSUMER FINANCIAL SERVICES. The retail banking strategy of Citizens First
Bank is to offer basic banking products and services that are attractively
priced and easily understood by the customer. Citizens First Bank will focus on
making its products and services convenient and readily accessible to the
customer. In addition to banking during normal business hours, Citizens First
Bank's products and services will be delivered via multiple channels, including
extended drive-thru hours, automated teller machines, telephone, mail and by
personal appointment. We plan for Citizens First Bank to utilize automated
teller machines, with one automated teller machine initially at the main office
drive-in facility. Citizens First Bank will join an automated teller machine
network and we intend for it to explore locating automated teller machines at
convenience stores and/or service stations, establishing Internet-based services
and using a mobile branch bank. Citizens First Bank may also provide debit and
credit card services by contracting for such services and will also offer night
depository, direct deposits, Series E Savings Bond redemptions, cashier's and
travelers checks and letters of credit.
12
<PAGE> 14
Citizens First Bank plans to offer a variety of deposit accounts, including
checking accounts, regular savings accounts, NOW accounts, money market
accounts, sweep accounts, fixed and variable rate individual retirement
accounts, certificate of deposit accounts and safety deposit boxes. Although
Citizens First Bank intends to offer a range of consumer and commercial deposit
accounts, it does not plan initially to actively solicit certificates of
deposits in principal amounts greater than $100,000.
We have hired and will continue to hire experienced staff to provide
personalized service. This experienced staff will have access to current
software and database systems selected to deliver high-quality products and
provide responsive service to clients. Our data management agreement with a
third-party service provider will provide Citizens First Bank customers with
convenient electronic access to their accounts. The use of a third-party service
provider is intended to allow Citizens First Bank to remain at the forefront of
technology while reducing the in-house personnel and equipment required to
deliver such products.
PROPOSED LENDING PRACTICES. We expect Citizens First Bank to make loans to
individuals and businesses located within its proposed market area. We
anticipate Citizens First Bank's loan portfolio will consist of commercial loans
(65%), residential mortgage loans (20%) and personal loans (15%), although these
percentages are approximations and the actual percentages may vary. We
anticipate Citizens First Bank's legal lending limit under applicable
regulations will be approximately $1.5 million immediately following the
offering, based on the legal lending limit of 20% of capital and surplus.
Commercial loans will be made primarily to small- and medium-sized
businesses. These loans will be both secured and unsecured and are expected to
be made available for inventory and accounts receivable, as well as any other
purposes considered appropriate. Citizens First Bank will generally look to a
borrower's business operations as the principal source of repayment, but will
often also receive security interests in personal property and/or personal
guarantees. Approximately 50% of Citizens First Bank's commercial loans are
expected to be commercial real estate loans secured by a first lien on the
commercial real estate. In addition, we expect that the majority of commercial
loans that are not mortgage loans will be secured by a lien on equipment,
inventory and/or other assets of the commercial borrower.
Commercial lending involves more risk than residential lending because loan
balances are greater and repayment is dependent upon the borrower's operations.
Citizens First Bank will attempt to minimize the risks associated with these
transactions by generally limiting its exposure to owner-operated properties of
customers with an established profitable history. In many cases, risk will be
further reduced by limiting the amount of credit to any one borrower to an
amount less than Citizens First Bank's legal lending limit and avoiding types of
commercial real estate financings considered risky.
We expect Citizens First Bank to originate residential mortgage loans with
either fixed or variable interest rates. Citizens First Bank's anticipated
general policy will be to sell all fixed-rate loans in the secondary market.
This policy is subject to review by management and may be revised as a result of
changing market and economic conditions and other factors. We also expect
Citizens First Bank to offer home equity loans which are secured by prior liens
on the subject residence. We do not expect Citizens First Bank to retain
servicing rights with respect to the majority of the residential mortgage loans
that it originates. We anticipate that all of Citizens First Bank's residential
real estate loans will
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<PAGE> 15
be secured by a first lien on the real estate and that the majority of Citizens
First Bank's personal loans will be home equity loans secured by a second lien
on real estate.
Citizens First Bank will make personal loans and lines of credit available
to consumers for various purposes, such as the purchase of automobiles, boats
and other recreational vehicles, and the making of home improvements and
personal investments. We expect to retain substantially all of such loans.
Consumer loans generally have shorter terms and higher interest rates than
residential mortgage loans and, except for home equity lines of credit, usually
involve more credit risk than mortgage loans because of the type and nature of
the collateral. Consumer lending collections are dependent on a borrower's
continuing financial stability and are thus likely to be adversely affected by
job loss, illness or personal bankruptcy. In many cases, repossessed collateral
for a defaulted consumer loan will not provide an adequate source of repayment
of the outstanding loan balance because of depreciation of the underlying
collateral. Citizens First Bank will underwrite its loans carefully, with a
strong emphasis on the amount of the down payment, credit quality and history,
employment stability and monthly income. These loans are expected generally to
be repaid on a monthly repayment schedule with the payment amount tied to the
borrower's periodic income. We believe that the generally higher yields earned
on consumer loans will help compensate for the increased credit risk associated
with such loans and that consumer loans will be important to Citizens First
Bank's efforts to serve the credit needs of its customer base.
Although we intend for Citizens First Bank to take a progressive and
competitive approach to lending, it will stress high quality in its loans.
Citizens First Bank will adopt written loan policies that contain general
lending guidelines. These policies will be subject to periodic review and
revision by the Citizens First Bank Board of Directors Loan Committee. These
policies concern loan administration, documentation, approval and reporting
requirements for various types of loans.
Citizens First Bank will seek to make sound loans while recognizing that
lending money involves a degree of business risk. Citizens First Bank's loan
policies are designed to assist it in managing the business risk involved in
making loans. These policies provide a general framework for Citizens First
Bank's loan operations while recognizing that not all loan activities and
procedures can be anticipated. Citizens First Bank's loan policies instruct
lending personnel to use care and prudent decision-making and to seek the
guidance of the Chief Credit Officer or the President and Chief Executive
Officer of Citizens First Bank where appropriate.
The Citizens First Bank loan policies address loan portfolio
diversification and prudent underwriting standards, loan administration
procedures, and documentation, approval and reporting requirements in light of
Citizens First Bank's basic objectives of:
- granting loans on a sound and collectible basis;
- investing Citizens First Bank funds profitably for the benefit of you
and other shareholders and securely for the benefit of depositors; and
- serving the credit needs of the Bowling Green-Warren County market.
Such policies provide that:
- individual officers of Citizens First Bank have personal lending
authority within varied ranges;
14
<PAGE> 16
- credits in excess of an officer's lending authority but not in excess
of $750,000 require the approval of Citizens First Bank's executive
officers; and
- credits in excess of $750,000 require the approval of the Citizens
First Bank Board of Directors Loan Committee.
Citizens First Bank's loan policies provide guidelines for loan-to-value
ratios that limit the size of loans to a maximum percentage of the value of the
collateral securing the loans, which percentage varies by the type of
collateral, including the following maximum loan-to-value ratios:
- raw land (65%);
- improved residential real estate lots (75%);
- owner-occupied commercial real estate (80%);
- non-owner-occupied commercial real estate (75%);
- first mortgages on residences (90%); and
- junior mortgages on residences (90%)
We expect Citizens First Bank to use credit risk insurance, principally for
residential real estate mortgages where the loan-to-value ratio exceeds 80%.
Regulatory and supervisory loan-to-value limits are established by the Federal
Deposit Insurance Corporation Improvement Act of 1991. Citizens First Bank's
internal loan-to-value limitations will follow these limits and will often be
more restrictive than those required by the regulators.
Citizens First Bank's loan policies will also include other underwriting
standards for loans secured by liens on real estate. These underwriting
standards are designed to determine the maximum loan amount that a borrower has
the capacity to repay based upon the type of collateral securing the loan and
the borrower's income. Typically the borrower would be expected to have annual
cash flow of 1.5 times required debt service. In addition, the loan policies
require that Citizens First Bank obtain a written appraisal by a state certified
appraiser for loans secured by real estate in excess of $50,000, subject to
limited exceptions. The appraiser must be selected by Citizens First Bank and
must be independent and licensed or state certified. Citizens First Bank may
elect to conduct an in-house real estate evaluation for loans not exceeding
$50,000. Citizens First Bank's loan policies also include maximum amortization
schedules and loan terms for each category of loans secured by liens on real
estate. Loans secured by commercial real estate will be subject to a maximum
term of 10 years and a maximum amortization schedule of 20 years. Loans secured
by residential real estate will have a maximum term and amortization schedule of
30 years. We intend for Citizens First Bank to sell to the secondary market all
residential fixed-rate mortgage loans, thereby reducing the interest rate risk
and credit risk to Citizens First Bank. Loans secured by vacant land will be
subject to a maximum term of 3 years and a maximum amortization schedule of 10
years.
Citizens First Bank's loan policies will also establish a limit on the
aggregate amount of loans to any one borrower. These loan policies provide that
no loan shall be granted where the aggregate liability of the borrower to
Citizens First Bank will exceed approximately $1.5 million. This internal
lending limit is subject to review and revision by the Citizens First Bank Board
of Directors from time to time.
15
<PAGE> 17
In addition, Citizens First Bank's loan policies will provide guidelines
for:
- personal guarantees;
- environmental policy review;
- loans to employees, executive officers and directors;
- problem loan identification;
- maintenance of a loan loss reserve; and
- other matters relating to Citizens First Bank's lending practices.
INVESTMENTS. Our principal investment will be the purchase of all of the
common stock of Citizens First Bank. In addition, until such time as Citizens
First Bank can make use of additional capital we intend to retain ownership of
our securities portfolio. Funds retained by us from time to time may be invested
in various debt instruments, including, but not limited to, obligations of, or
guaranteed by, the United States, general obligations of states or political
subdivisions thereof, bankers' acceptances or certificates of deposit of U.S.
commercial banks, or commercial paper of U.S. issuers rated in the highest
category by a nationally-recognized investment rating service. Although we are
permitted to make limited portfolio investments in equity securities and to make
equity investments in subsidiary corporations engaged in other permissible
non-banking activities, which may include real estate-related activities such as
mortgage banking, community development, real estate appraisals, arranging
equity financing for commercial real estate and owning and operating real estate
used substantially by Citizens First Bank or acquired for its future use, we
have no present plan to make any such equity investment. Our Board of Directors
may alter our investment policy without shareholder approval.
Citizens First Bank may invest its funds in a variety of debt instruments
and may participate in the federal funds market with other depository
institutions. Subject to limited exceptions, Citizens First Bank will be
prohibited from investing in equity securities. Under one such exception, with
the prior approval of the Federal Deposit Insurance Corporation, a bank can
invest up to 10% of its total assets in the equity securities of a subsidiary
corporation engaged in permissible real estate-related activities. Citizens
First Bank has no present plan to make such an investment. Real estate acquired
by Citizens First Bank in satisfaction of or in foreclosure upon loans may be
held, subject to a determination by a majority of its Board of Directors as to
the advisability of retaining the property, for a period not to exceed 60 months
after the date of acquisition or such longer period as the appropriate
regulators may approve. Citizens First Bank will also be permitted to invest an
aggregate amount not in excess of 40% of its capital in such real estate,
including furniture and fixtures, as is necessary for the convenient transaction
of the business. Citizens First Bank has no present plan to make any such
investment though its Board of Directors may alter the investment policy without
shareholder approval.
FINANCIAL PLANNING. We are exploring using a third-party provider or
creating a partnership, joint venture or other relationship with a financial
planner to offer financial planning and investment services through Citizens
First Bank. The objective of offering these products and services would be to
generate fee income and strengthen relationships with Citizens First Bank
customers.
TRUST SERVICES. Citizens First Bank through its regulatory applications is
seeking the approval for trust powers. We anticipate the establishment of a
trust department by Citizens First Bank in the future, though not immediately
upon the commencement of
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<PAGE> 18
operations, and expect some of Citizens First Bank's administrative trust
services to be provided by a third-party provider.
BANK PREMISES; BANKING HOURS
We have purchased, through a loan collateralized by our securities
portfolio and the subject property, a building at 1805 Campbell Lane in Bowling
Green which is intended to serve as our corporate headquarters and as the main
office of Citizens First Bank. The main office telephone number is (502)
393-0700. The main office is located in the Scottsville Road/Greenwood Mall area
of Bowling Green, a high-traffic retail area which serves as the center of
retail trading in Warren County. We will contribute the main office in a
renovated and furnished state as part of the capitalization of Citizens First
Bank. See "Use of Proceeds" on page 39.
The main office will consist of a one-story building of approximately 5,100
square feet with public areas including a lobby measuring 912 square feet and 3
teller stations. The building will also include 7 offices, 1 conference room, a
vault, an employee lounge and general storage space. The cost of renovations to
the main office will be approximately $500,000, and the cost of initial
furnishings, fixtures and equipment will be approximately $390,000. See "Use of
Proceeds" on page 39.
We have entered into a lease agreement for a branch office of Citizens
First Bank. This office will include 3,642 square feet of office space in a
building at 901 Lehman Avenue in mid-town Bowling Green. The branch office is
expected to open in March 1999 and its telephone number will be (502) 393-0700.
The lease agreement is for a term of 1 year and provides options to Citizens
First Bank to extend the lease for 2 additional 2 year terms. Monthly rent under
the lease is $2,200, and will be adjusted for the option extensions based on the
consumer price index.
The branch office will include a lobby measuring 506 square feet and 2
teller stations. The branch office will also include 5 offices, 1 conference
room, a vault, an employee lounge and general work area. The cost of leasehold
improvements to the branch office will be approximately $50,000, and the cost of
initial furnishings, fixtures and equipment will be approximately $93,850. See
"Use of Proceeds" on page 39.
Citizens First Bank expects to offer convenient banking hours with the main
office and branch lobbies open from 8:30 a.m. to 4:30 p.m., Monday through
Thursday and from 8:30 a.m. to 5:30 p.m. on Friday, and with the main office
drive-in window open from 7:30 a.m. to 5:30 p.m., Monday through Friday and 9:00
a.m. to 1:00 p.m on Saturday.
DATA MANAGEMENT AND OTHER SERVICES
The data management function is a major expense center for any bank. Rather
than expending the large sums required to conduct the data management function
directly, we have entered into an agreement with the Bowling Green office of
Fiserv, Inc. Fiserve will provide, among other things, on-line facilities, daily
financial report preparation, loan and deposit data processing and customer
account statement preparation for a term of 3 years.
Our agreement with Fiserv is terminable by either party upon 6 months prior
notice and will be automatically extended if not voided by a party through
written notice at least 6 months prior to the end of the agreement term. While
it is difficult to estimate the costs to us under this agreement since most of
the charges are on a per item basis, we anticipate
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<PAGE> 19
annual fees not to exceed the minimum fee prescribed by the agreement of
approximately $88,000, as adjusted in the second and third years of the
agreement by the respective increases in the consumer price index.
We believe using Fiserv for these services is a more cost efficient
alternative than hiring the personnel and purchasing the equipment required to
perform such services in-house. In addition, Citizens First Bank intends to
develop and maintain strong correspondent banking relationships that will enable
it to purchase other services such as check collection, purchase and sale of
federal funds, wire transfer services and customer credit services, including
selling participations in loans which would otherwise exceed Citizens First
Bank's legal lending limit.
PERSONNEL AND BENEFITS
We expect initially that the operations of Citizens First Bank will be
staffed with 24 employees, including 5 part-time tellers, and that 2 employees
will be added per year in the years 2000 through 2003. The initial staffing will
be broken down as follows:
MANAGEMENT
President and Chief Executive Officer
Vice-President and Chief Operations Officer
Vice-President and Chief Financial Officer
Secretary
Branch Manager
RETAIL OPERATIONS
Ten Tellers/New Accounts Staff
Secretary/Administration
LENDING
Vice-President/Chief Credit Officer
Mortgage Lender
Consumer/Installment Lender
Three Commercial Lenders
Two Loan Support Employees
To be able to recruit the experienced personnel necessary for our success,
the compensation committee of the Citizens First Bank Board of Directors will
establish salaries and benefit packages at levels which are competitive in the
local market place. We expect the Citizens First Bank Board of Directors to
approve an employee benefit plan which will include life insurance, health
insurance, a 401(k) plan, paid vacations and other traditional benefits
currently offered by other employers in the Bowling Green market. These may
include incentive compensation packages for senior officers and/or stock option
plans for key employees.
The foregoing summary of proposed employee benefits and retirement plans is
subject to change and approval by the Citizens First Bank Board of Directors
and, where necessary, you and our other shareholders.
COMPETITION
The banking business in the Bowling Green market area is highly
competitive. Competition exists between state and national banks for deposits,
loans and other banking
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<PAGE> 20
services. At the outset, Citizens First Bank will have no existing customer base
or depositors other than perhaps its management, though Citizens First Bank
intends to solicit banking business from purchasers of shares. Citizens First
Bank will be required to compete with numerous well-established financial
institutions with vastly greater financial and human resources than those
available to it.
There are 7 commercial banks operating a total of 29 offices in Warren
County as well as several small loan companies. The following table is adapted
from information provided in the Federal Deposit Insurance Corporation Summary
of Deposits and sets forth information respecting the financial institutions
with offices in Warren County, and the deposits attributable to such offices, as
of June 30, 1998:
<TABLE>
<CAPTION>
JUNE 30, 1998 NUMBER OF
INSTITUTION NAME DEPOSITS (000) OFFICES
---------------- -------------- ---------
<S> <C> <C>
Bowling Green Bank and Trust Co., NA................... $ 153,957 9
Farmers National Bank.................................. * 1
First American National Bank of Kentucky............... $ 174,985 3
National City Bank of Kentucky......................... $ 162,560 5
Republic Bank & Trust Co............................... $ 61,625 1
South Central Bank of Bowling Green.................... $ 118,911 4
Trans Financial Bank (now Firstar Corporation)......... $ 454,355 6
---------- --
Total........................................ $1,126,393 29
========== ==
</TABLE>
- -------------------------
* In August 1998, Farmers National Bank, formerly located in Scottsville,
Kentucky, relocated its main office to Bowling Green. Deposits attributable to
the Bowling Green office at this time are not currently known but are believed
to be nominal.
Competition for Citizens First Bank will not only increase due to the
deregulation of depository institutions but also because of the enhanced ability
of non-banking financial institutions to provide services previously reserved
for commercial banks. Citizens First Bank will be in competition with existing
area financial institutions other than commercial banks and savings banks,
including commercial bank loan production offices, mortgage companies, insurance
companies, consumer finance companies, securities brokerage firms, credit
unions, money market funds and other business entities which have recently
entered traditional banking markets. Competition from these sources can pose a
significant challenge to Citizens First Bank since non-banking financial
institutions may operate with greater flexibility because they are not subject
to the same regulatory restrictions as banks. See "Supervision and
Regulation -- Citizens First Bank: Effects of Governmental Policies and Economic
Conditions" on page 54.
MARKETING STRATEGY
Citizens First Bank's ability to compete with other area financial
institutions will be enhanced by its local management and a broad base of common
stock ownership. We believe that promoting the local ownership of Citizens First
Bank is a highly effective means of attracting customers and fostering loyalty.
Through superior service we anticipate that Citizens First Bank employees
will develop relationships with their customers. We believe there has been a
great deal of customer dissatisfaction as a result of the fact that most banking
offices in Bowling Green
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<PAGE> 21
are now branches of larger financial institutions which, in our view, are
managed with a philosophy of strong centralization. Citizens First Bank and its
management will be committed to develop strong customer relationships by
providing:
- customer access to executive management;
- continuity in officer and staff personnel;
- an active personal call program by officers;
- an understanding of customers' businesses and needs;
- prompt response to customer requests; and
- development of relationships that are durable and that grow as Citizens
First Bank and its customers continue in business.
Citizens First Bank management will be committed to providing a high level of
service and to fostering strong and enduring relationships with customers. All
Citizens First Bank employees, from the President to the front-line employees,
will be formally evaluated on an annual basis as to their contributions toward
achieving this goal.
With an experienced staff to provide a superior level of personalized
service, we believe Citizens First Bank will be able to generate competitively
priced loans and deposits. We further believe that with access to current
state-of-the-art software and database systems selected to deliver high-quality
products and provide responsive service to clients, Citizens First Bank's staff
will be able to devote more time and attention to personal service, respond more
quickly to clients' requests and deliver services in the most timely manner
possible. Citizens First Bank also expects to enter into agreements with
third-party service providers to provide clients with convenient electronic
access to their accounts and to deliver other bank products such as credit cards
and debit cards. The use of third-party service providers is intended to allow
Citizens First Bank to provide the most current services and products at the
lowest cost possible.
We believe, in the spirit of outstanding customer service, that convenience
is essential. The main office will be in the Scottsville Road/Greenwood Mall
area which is the center of the retail trading area in Warren County and is
convenient to targeted residential areas. The branch office will be located
closer to downtown Bowling Green and will serve primarily downtown businesses
and professional offices and neighborhoods adjacent to that area. We are
exploring placing automated teller machines at convenience stores and service
stations as well as joining an automated teller machine network and using a
mobile branch bank to provide further convenience to customers. Banking by
appointment during non-banking hours and lending at the customer's location are
two other ways envisioned for providing service to customers in the most
convenient fashion.
Citizens First Bank management will be active in business development.
Employees will earn bonuses based on meeting Citizens First Bank earnings goals.
Training will be provided to outside directors so they will be knowledgeable
about our mission, products and services. This effort will be particularly
intense in the initial years of operation, but an active business call program
will be ongoing.
Our officers and directors include individuals active in the Bowling
Green-Warren County area. Their continued community involvement will provide
opportunities for the promotion of Citizens First Bank and its products and
services, thereby enhancing its marketing efforts. Moreover, Citizens First
Bank's initial marketing efforts will be directed at our shareholders and
directors, and Citizens First Bank employees, and local businesses
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<PAGE> 22
and individuals with whom they have relationships. As we expand our marketing
efforts community wide, our marketing and advertising plan will emphasize the
message of superior service from a locally managed bank owned by a company with
a broad base of local ownership.
We have retained The Carpenter Group in Bowling Green as a public relations
consultant. The Carpenter Group principals, Mary E. Carpenter and Howard R.
Carpenter, have between them over 30 years experience in marketing and public
relations activities. Ms. Carpenter was for 17 years print media buyer in the
marketing department of Castner-Knott Company in Nashville, Tennessee and was
for 1 year director of marketing for the private banking group at Trans
Financial Bank in Bowling Green. Mr. Carpenter for 13 years was director of
marketing for Martin Automotive Group, now Martin Management Group, in Bowling
Green. The Carpenter Group will provide general consultation respecting Citizens
First Bank product development and will perform other services, including the
creation and production of an advertising campaign, signage design and creation
of an Internet website.
Citizens First Bank will have an ongoing interest in the economic
development and continued growth of the Bowling Green-Warren County area. As a
locally owned and managed community bank, Citizens First Bank's success will
depend on the continued positive economic environment and growth that Warren
County has enjoyed over the past decade. Made up of people who have a personal
stake in the Bowling Green community and who understand the community's needs
and how to meet those needs, Citizens First Bank will emphasize excellent
corporate citizenship.
MARKET AREA
Citizens First Bank will concentrate the majority of its marketing efforts
in the Bowling Green-Warren County area. Warren County is located in central
Kentucky, approximately 110 miles south of Louisville and approximately 70 miles
north of Nashville, Tennessee. The Bowling Green area is the financial, retail
and health care center of Warren County and the surrounding area and is the home
of Western Kentucky University which provides a strong educational and
employment base, drawing students from throughout the area and beyond.
As of 1996 Warren County had a population of 85,544 and its county seat and
largest city, Bowling Green, had a population of 45,451. Since 1980 Warren
County's total population has grown by 13,717 or 19.1%, and Warren County was
one of the fastest growing counties in the Commonwealth of Kentucky from 1990
through 1996.
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Though not its primary focus, opportunities for Citizens First Bank are
expected to present themselves, from time to time, in the following counties
located near Warren County:
<TABLE>
<CAPTION>
COUNTY 1996 COUNTY POPULATION LARGEST CITY & 1996 POPULATION
- ------ ---------------------- ------------------------------
<S> <C> <C>
Allen............................ 15,899 Scottsville -- 4,563
Barren........................... 36,221 Glasgow -- 13,739
Butler........................... 11,651 Morgantown -- 2,483
Edmonson......................... 11,008 Brownsville -- 936
Hart............................. 16,322 Horse Cave -- 2,350
Logan............................ 25,885 Russellville -- 7,851
Metcalfe......................... 9,349 Edmonton -- 1,533
Monroe........................... 11,323 Tompkinsville -- 2,827
Simpson.......................... 16,109 Franklin -- 7,240
-------
Total.................. 153,767
=======
</TABLE>
Income levels for Warren County have also grown sharply of late. In 1996
Warren County had a per capita personal income of $21,264 as compared to $11,838
in 1986.
As of June 1996, the unemployment rate for Warren County was 4.7%, compared
with the statewide average of approximately 5.6%. Moreover, the Warren County
employment base is diversified and well-balanced by sector as reflected by the
following:
<TABLE>
<CAPTION>
SECTOR % OF TOTAL EMPLOYMENT
- ------ ---------------------
<S> <C>
Manufacturing/Construction/Transportation.................. 26.4%
Financial and Other Services............................... 30.2%
Wholesale and Retail....................................... 25.9%
Government and Other....................................... 17.5%
</TABLE>
The Warren County area has a diversified employment base which is not
dependent on any particular firm or firms. There are 34 manufacturing companies
in the county with 50 or more employees and the largest employers in Warren
County include the following:
<TABLE>
<CAPTION>
COMPANY OR INSTITUTION WORKFORCE
- ---------------------- ---------
<S> <C>
Western Kentucky University................................. 2,059
Medical Center at Bowling Green/CHC......................... 2,016
Warren County Board of Education............................ 1,642
General Motors (Corvette Plant)............................. 1,035
Fruit of the Loom........................................... 820
Greenview Hospital.......................................... 730
Coltec/Holley............................................... 600
DESA........................................................ 550
Huish....................................................... 500
Eagle Industries............................................ 461
</TABLE>
22
<PAGE> 24
DIVIDENDS
The holders of shares will be entitled to receive such dividends and other
distributions as may be declared from time to time out of funds legally
available. Dividends, if any, will be contingent upon the earnings, financial
condition and capital requirements of Citizens First Bank, general business
conditions, regulatory restrictions and other factors. In view of Citizens First
Bank's expected deposit base, anticipated initial operating losses and
associated capital retention requirements, we are unable to determine when, if
ever, we will declare or pay cash dividends or any other distributions or
dividends of any kind. It is not expected that Citizens First Bank will realize
a profit at least during its first two years of operation nor can there be any
assurance that during subsequent years of operations any profits will be
realized to justify or allow the payment of dividends. In addition, banking
regulations restrict the payment of dividends. See "Risk Factors -- We Have No
Plans to Pay Cash Dividends" on page 8, "Description of Capital
Stock -- Dividend Rights and Limitations on Payment of Dividends" on page 42 and
"Supervision and Regulation -- Citizens First Bank: Dividend Restrictions" on
page 51.
YEAR 2000 READINESS
The approach of the year 2000 presents potential problems to businesses
that utilize computers. See "Risk Factors -- Our Profitability May Suffer
Because of Year 2000 Problems" on page 7. We expect that most of Citizens First
Bank's computer equipment will be acquired during the first half of 1999. The
Fiserv data management contract includes, and we will require all material
contracts for equipment and services to include, assurances that the provider's
products and services will be Year 2000 ready or compliant. "Year 2000 ready"
means that the system has been reviewed and modified, if necessary, so that it
will be able to accurately process dates ending in the Year 2000 and after. John
T. Perkins will chair a committee appointed to oversee the Year 2000 process and
to inform the board of directors on a regular basis of the progress being made.
We intend to assess our Year 2000 readiness in the areas of processing services
and reports, electronic banking services, correspondent services and
communication systems. Other systems which could affect operations include
security systems, heating, ventilation, and air conditioning. We intend to
complete this assessment by March 31, 1999.
Citizens First Bank will use the following steps to minimize Year 2000
risks:
- internal communications to keep employees knowledgeable and updated on
Year 2000 readiness;
- require general assurances from commercial borrowers as to their Year
2000 readiness as part of the loan application and review process; and
- continued dialogue with loan clients during 1999 to review Year 2000
readiness.
Because it is starting with new equipment, we do not expect Citizens First
Bank to incur large operating expenses to modify its systems to be Year 2000
ready. Costs to Citizens First Bank related to Year 2000 readiness are estimated
to be less than $25,000. These costs may include testing of equipment and
software programs, equipment upgrades and customer education. It is difficult to
predict such costs and additional funds may be needed. The failure of Citizens
First Bank, its vendors or its customers to successfully address Year 2000
issues could interfere with Citizens First Bank's ability to operate its
business and could have an adverse effect on its financial condition and results
of operation. We intend to develop a contingency plan to address Year 2000
problems that
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<PAGE> 25
may occur after December 31, 1999, and expect to develop the plan prior to March
31, 1999.
WHERE YOU CAN FIND MORE INFORMATION
We have not previously been subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended. We have filed with the SEC a
registration statement on Form SB-2 to register the offer and sale of the
shares. This prospectus is part of that registration statement, and, as
permitted by the SEC's rules, does not contain all of the information set forth
in the registration statement. For further information with respect to us and
the shares offered under this prospectus, you may refer to the registration
statement and to the exhibits and schedules filed as a part of the registration
statement. You can review the registration statement and its exhibits and
schedules at the public reference facility maintained by the SEC at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC at 7 World Trade Center, Suite 1300, New York, New
York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference room. The registration statement is also available
electronically on the World Wide Web at http://www.sec.gov.
We, and our directors as organizers of Citizens First Bank, have filed
various applications with state and federal banking regulators. However, you
should rely only on information contained in this prospectus and in the
registration statement in making an investment decision and not upon other
available information not presented in this prospectus, including information
available from us and information in public files and records maintained by the
banking regulators.
We intend to furnish our shareholders with annual reports containing
audited financial statements.
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<PAGE> 26
SELECTED FINANCIAL DATA
The following tables present our selected financial data for the nine
months ended September 30, 1998 and 1997 and for the two-year period ended
December 31, 1997. The information has been derived from our financial
statements included elsewhere in this prospectus in the case of the two years
ended December 31, 1997, and should be read in conjunction therewith and with
the notes thereto. The information for the nine months ended September 30, 1998
and 1997 has been compiled from our records and is unaudited. Historical results
are not necessarily indicative of results to be expected for any future period.
In our opinion, all adjustments necessary to arrive at a fair statement of our
interim results of operations, including normal recurring adjustments and those
related to the adoption of new accounting principles, have been included.
THE PRESENTATION OF OUR FINANCIAL DATA WILL CHANGE DRAMATICALLY IN
CONNECTION WITH OUR ANTICIPATED OPERATIONS AS A BANK HOLDING COMPANY.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -----------------
1998 1997 1997 1996
--------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues............................ $ 10,413 $10,098 $67,427 $64,492
Total expenses............................ 174,990 1,088 1,358 763
--------- ------- ------- -------
Income (loss) before income taxes......... (164,577) 9,010 66,069 63,729
========= ======= ======= =======
Net income (loss)............... (164,577) 7,609 54,461 52,926
========= ======= ======= =======
PER COMMON SHARE DATA
Earnings.................................. $ (1.61) $ .07 $ .53 $ .52
Cash dividends............................ 0 0 0 0
Book value................................ 8.44 8.16 8.70 6.05
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- ---------------------
1998 1997 1997 1996
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total assets........................ $1,382,062 $1,137,316 $1,207,461 $824,812
Investment securities available for
sale.............................. 1,342,882 1,128,991 1,098,997 814,694
Deferred tax liability.............. 379,399 303,818 308,267 196,957
Total shareholders' equity.......... 861,088 832,097 887,586 617,052
Average assets...................... 1,294,762 981,064 1,016,137 696,568
Average shareholders' equity........ 874,337 724,575 752,319 524,010
Average shares outstanding.......... 102,000 102,000 102,000 102,000
</TABLE>
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<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We were organized under the laws of Kentucky in 1975 as a private
investment club. We had total assets of $1,382,062, $1,207,461 and $824,812 as
of September 30, 1998, December 31, 1997, and December 31, 1996, respectively.
Net income (loss) was $(164,577) for the nine months ended September 30, 1998 as
compared to $7,609 for the same period in 1997. Earnings (loss) per share was
$(1.61) and $0.07 for the nine months ended September 30, 1998 and 1997,
respectively. Net income was $54,461 in 1997, up from $52,926 in 1996. Earnings
per share increased to $0.53 in 1997 from $0.52 in 1996. The number of shares
used in the calculation of earnings per share has been restated to reflect the
100-to-1 common stock split that occurred in August 1998.
We historically kept the level of purchases and sales of our investments at
a low level. Our operations consisted mainly of using cash obtained from
dividends, and from selling selected securities, to provide funds that were then
used to purchase stock in other companies that were deemed by our shareholders
to have long-term growth potential. Our investments in our securities portfolio
are carried as available for sale. Our securities portfolio will be available to
be liquidated as needed to provide our capital contribution to Citizens First
Bank as described in "Use of Proceeds" on page 39.
The discussion that follows is intended to provide additional insight into
our financial condition and results of operations. It should be read in
conjunction with the financial statements and accompanying notes included
elsewhere in this prospectus and should also be considered in light of the
recent change in our line of business.
THE PRESENTATION OF OUR FINANCIAL DATA WILL CHANGE DRAMATICALLY IN
CONNECTION WITH OUR ANTICIPATED OPERATIONS AS A BANK HOLDING COMPANY.
INCOME STATEMENT REVIEW
For the nine months ended September 30, 1998, our net loss was $164,577 as
compared with net income of $7,609 for the same period in 1997. Dividends and
interest received were $10,413 for the nine months ended September 30, 1998 as
compared with $10,098 for the same period in 1997. Operating expenses for the
nine months ended September 30, 1998 were $174,990 as compared with $1,088 for
the same period in 1997. The significant increase in expenses is due to the
increased level of expenses paid and accrued in connection with our transition
to a bank holding company; start-up costs associated with the formation of
Citizens First Bank; and costs associated with this offering. The expenses in
the first nine months of 1998 include legal fees of $50,000, consulting fees of
$49,909, salaries and benefits of $37,796, accounting and professional fees of
$27,420, filing fees of $7,500, supplies of $942, utility expenses of $830,
travel expenses of $211, publications of $179, and other expenses of $203. These
expenses were included in the estimate of start-up costs anticipated by us, and
they will be paid from the proceeds of this offering.
Our net income was $54,461 in 1997, compared with $52,926 in 1996. Results
in 1997 include a pre-tax gain on the sale of securities of $53,566 and
dividends of $13,861. This compares with pre-tax gains of $52,387 and dividends
and interest received of $12,105 in 1996. Operating expenses of $1,358 in 1997
compared with $763 in 1996.
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<PAGE> 28
MARKET RISKS
We have not historically used any type of off-balance sheet derivatives to
hedge against the market risk inherent in our securities portfolio. The strategy
of our shareholders has been to hold growth securities for long periods of time
and to meet our minimal operating expenses using available cash from dividend
income. To the extent dictated by future changes in interest rates and the
general economy, we will consider adjusting such strategies.
NET INTEREST INCOME
Our primary source of revenue upon the commencement of banking operations
will be net interest income, which is the difference between the interest
received on earning assets and the interest paid on the funds acquired to
support those assets. Loans made to businesses and individuals will be our
primary interest-earning assets, followed by investment securities. Deposits
will be the primary interest-bearing liabilities used to support the
interest-earning assets, followed by various borrowings. The level of net
interest income will be affected by both the balance and mix of interest earning
assets and interest bearing liabilities, the changes in their corresponding
yields and costs, by the volume of interest-earning assets funded by
noninterest-bearing deposits, and the level of capital. Our long-term objective
will be to manage this income to provide the largest possible amount of income
while balancing interest rate, credit and liquidity risks.
NONINTEREST INCOME
In addition to net interest income, we can expect noninterest income upon
the commencement of banking operations from such sources as service charges on
deposit products, loan origination fees, late charges on loan accounts and
commissions on the sale of insurance contracts in conjunction with loan
originations.
NONINTEREST EXPENSE
In addition to interest expense, we will have noninterest expenses, the
primary component of which will be salaries and employee benefits, with other
noninterest expenses to include occupancy expenses, fees paid under the Fiserv
data management agreement, taxes other than payroll and income, and marketing
expenses.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Our allowance for loan losses will be regularly evaluated by management and
maintained at a level believed to be adequate to absorb loan losses in Citizens
First Bank's loan portfolio. Periodic provisions to the allowance will be made
as needed. The amount of the provision for loan losses necessary to maintain an
adequate allowance will be based upon an assessment of current economic
conditions, analysis of periodic loan reviews, delinquency trends and ratios,
changes in the mixture and levels of the various categories of loans, historical
charge-offs, recoveries and other information.
The allocation for the allowance for loan losses is an estimate of the
portion of the allowance that will be used to cover charge-offs in each major
loan category, but it does not preclude any portion of the allowance allocated
to one type of loan being used to absorb losses of another loan type.
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<PAGE> 29
ASSET QUALITY
Citizens First Bank will place a loan on non-accrual basis when principal
or interest is past due 90 days or more and the loan is not adequately
collateralized and in the process of collection, or when, in the opinion of
management, after considering economic and business conditions and collection
efforts, the borrower's financial condition is such that the collection of
principal or interest is not likely in accordance with the terms of the
obligation. Consumer loans will be charged off after 120 days of delinquency
unless adequately secured and in the process of collection. Non-accrual loans
will not be reclassified as accruing until principal and interest payments are
brought current and future payments appear likely. Loans will be categorized as
restructured if the original interest rate, repayment terms, or both are
restructured due to a deterioration in the financial condition of the borrower.
However, restructured loans that demonstrate performance under the restructured
terms and that yield a market rate of interest may be removed from restructured
status in the year following the restructure.
SECURITIES
Securities, which are all classified as available for sale, averaged
$1,220,930 for the nine months ended September 30, 1998, and $956,836 in 1997 as
compared with $687,442 in 1996. The increase in the securities portfolio
throughout this period was the result of appreciation of securities held.
Securities with a book value or market value in excess of 10% of our
stockholders' equity as of September 30, 1998, December 31, 1997 and December
31, 1996 are presented in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
SEPTEMBER 30, 1998 1997 1996
--------------------- --------------------- ---------------------
BOOK MARKET BOOK MARKET BOOK MARKET
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
The Coca Cola
Company............ $ 67,922 92,000 $ 67,922 106,701 $ 67,922 84,200
Dollar General
Corporation........ 3,474 653,203 3,474 574,599 3,474 324,640
Firstar
Corporation........ 36,024 284,404 36,024 185,745 36,024 109,894
Other................ 119,583 313,275 84,888 231,932 127,988 295,960
-------- ---------- -------- ---------- -------- ----------
Total................ $227,003 1,342,882 $192,308 1,098,977 $235,408 814,694
======== ========== ======== ========== ======== ==========
</TABLE>
DEPOSITS
Managing the mix and repricing of deposit liabilities will be an important
factor in our ability to maximize net interest margin. The strategies used to
manage interest-bearing deposit liabilities will be designed to adjust as the
interest rate environment changes. In this regard, we will regularly assess
funding needs, deposit pricing and interest rate outlook.
BORROWED FUNDS
Citizens First Bank can be expected to borrow money through federal funds
purchased, securities sold under agreements to repurchase, Federal Home Loan
Bank advances and other borrowed funds. Levels of other borrowed funds will be
routinely
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<PAGE> 30
evaluated by management with consideration given to growth in the loan
portfolio, liquidity needs, costs of retail deposits, market conditions and
other factors.
ASSET/LIABILITY MANAGEMENT
Asset/liability management involves developing, implementing and monitoring
strategies to maintain sufficient liquidity, maximize net interest income and
minimize the impact significant fluctuations in market interest rates have on
earnings. Citizens First Bank's Asset/Liability Management Committee will be
responsible for managing this process. Much of this committee's efforts will be
focused on minimizing sensitivity to changes in interest rates.
LIQUIDITY
Liquidity is generally defined as the ability to meet cash flow
requirements and both we and Citizens First Bank will have liquidity
obligations. Our cash requirements will consist primarily of operating expenses
and dividend payments to our shareholders though we do not expect to pay
dividends for the foreseeable future. Our primary source of funds will be
dividends received from Citizens First Bank.
Citizens First Bank's primary liquidity consideration will be to meet the
cash flow needs of its customers, such as borrowings and deposit withdrawals. To
meet cash flow requirements, sufficient sources of liquid funds must be
available. These sources include short-term investments, repayments and
maturities of loans and securities, growth in deposits and other liabilities and
profits. Principal reductions received on loans also will provide a continual
stream of cash flows. Another source of liquid funds is net cash provided from
operating activities. Citizens First Bank will also establish federal funds
lines of credit with its correspondent banks which will allow it to borrow up to
$6,000,000. Finally, following its first year of operations Citizens First Bank
will be a member of the Federal Home Loan Bank of Cincinnati through which
additional borrowing capacity may be available.
CAPITAL RESOURCES
We believe that a strong capital position will be paramount to our
profitability and depositor and shareholder confidence. A strong capital
position would also provide Citizens First Bank with flexibility to take
advantage of growth opportunities and to accommodate larger commercial loan
customers. Regulators have established "risk-based" capital guidelines for banks
and bank holding companies. Under the guidelines, minimum capital levels are
based on the perceived risk in asset categories and other off-balance sheet
items, such as loan commitments and standby letters of credit. Management will
monitor its capital levels to comply with regulatory requirements. In order to
be considered "well-capitalized" by the Federal Deposit Insurance Corporation,
financial institutions must maintain a leverage ratio of 5% or greater, a tier 1
capital ratio of 6% or greater and a total risk-based capital ratio of 10% or
greater. See "Supervision and Regulation -- Citizens First Bank: Prompt
Corrective Action for Capital Deficiencies" on page 52.
IMPACT OF INFLATION
Our financial statements and notes have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the
29
<PAGE> 31
relative purchasing power of money over time due to inflation. The impact of
inflation will be reflected in the increased cost of operations. Nearly all of
our assets and liabilities will be financial. As a result, performance will be
directly affected by changes in interest rates, which are directly influenced by
inflationary expectations. Our ability to match the interest sensitivity of
financial assets to the interest sensitivity of financial liabilities may tend
to minimize the effect of changes in interest rates on performance. Changes in
interest rates do not necessarily move to the same extent as do changes in the
prices of goods and services.
YEAR 2000
We are implementing plans to address the Year 2000 issue. See
"Business -- Year 2000 Readiness" on page 23. We have determined that the Year
2000 issue may be material to our business, operations and suppliers. The Year
2000 issue principally involves the installation of selected software releases
which meet Year 2000 functional requirements and adherence to our policy of only
purchasing technological equipment that is Year 2000 compliant. The performance
of Citizens First Bank's software suppliers will be essential for the successful
implementation of its Year 2000 objectives.
Up to the present time, our records have been maintained with a manual
system which could be recreated if necessary. All additional systems to be
purchased or developed are being evaluated carefully. We are actively selecting
only those third-party vendors, correspondents, and system providers who can
demonstrate that they are Year 2000 compliant, or are on schedule to meet the
federal agencies' Year 2000 timetables. We are acting under the belief and
understanding that all federal agencies are actively managing the Year 2000
problems which are inherent in the global banking and payment systems.
30
<PAGE> 32
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table and subsequent discussion sets forth information
concerning our directors and executive officers, each of whom will serve in the
same capacity with Citizens First Bank upon completion of the offering. Each
director and executive officer was elected to his or her position in August
1998, except for Mr. Hall who was elected to his position in January 1999.
The numbers in this table reflect shares of common stock held as of the
date of this prospectus in the case of Mr. Lucas and, to the extent of 10,000
shares, Messrs. Bell and Ellis, all of which numbers will likely change as set
forth in "Principal Shareholders -- Adjustment to Shareholdings; Dilution of
Your Shares" on page 37. In the case of Ms. Cohron, Messrs. Baker, Hall, Natcher
and Perkins, and, to the extent of 4,000 shares, Messrs. Bell and Ellis, the
numbers in this table reflect shares respecting which these individuals and
their spouses have made non-binding indications of interest in purchasing.
With respect to common stock ownership reflected below, a person is deemed
to have beneficial ownership of any shares of common stock as to which such
person, directly or indirectly, has or shares voting power or investment power.
Apart from 3,300 shares attributable to Mr. Perkins' spouse, the below-named
persons have or expect to have sole voting and investment power with respect to
the shares reflected.
The percentage ownership numbers reflected below assume 568,667 shares of
common stock outstanding following the offering:
<TABLE>
<CAPTION>
SHARES TO BE
HELD FOLLOWING PERCENTAGE
NAME POSITION(S) THE OFFERING OF CLASS
- ---- ----------- -------------- ----------
<S> <C> <C> <C>
Jerry E. Baker Director 14,000 2.46%
Billy J. Bell Director 14,000 2.46
Mary D. Cohron President and Chief Executive 14,000 2.46
Officer; Director
Floyd H. Ellis Chairman of the Board of 14,000 2.46
Directors
Gregg A. Hall Chief Financial Officer 7,150 1.26
James H. Lucas Director 10,000 1.76
Joe B. Natcher, Jr. Director 6,667 1.17
John T. Perkins Chief Operating 10,420 1.83
Officer; Director
------ -----
Total 90,237 15.86%
====== =====
</TABLE>
JERRY E. BAKER, age 67, has since 1996 been Chairman of the Board of
Directors of Airgas Mid-America, Inc., an industrial gas and welding equipment
and supplies company located in Bowling Green. Mr. Baker was President of such
company from 1986 to 1996. Mr. Baker is also the owner and President of Jay
Enterprises, Inc., a farm equipment and vehicle leasing company in Bowling
Green.
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<PAGE> 33
BILLY J. BELL, age 64, has since 1964 been a co-owner and the
Secretary/Treasurer of Mid South Feeds, a feed manufacturer located in
Nashville, Tennessee. Mr. Bell is also a co-owner of Caribbean Ships, a
commercial shipping company and Bell & Howell, a real estate partnership.
MARY D. COHRON, age 51, is our President and Chief Executive Officer. Ms.
Cohron attended Western Kentucky University from 1966 to 1968 and received her
Master of Business Administration degree from Vanderbilt University's Owen
Graduate School of Management in 1988. From 1996 to 1998, Ms. Cohron was
employed by the Kentucky School Boards Association where she provided Board Team
Development services and headed the Tax Revenue Anticipation Note Program. From
1989 to 1996, Ms. Cohron provided strategic planning and consultant services for
small businesses and governmental entities. Ms. Cohron served from 1979 to April
1998 as a director of Trans Financial Bank and/or Trans Financial, Inc.
FLOYD H. ELLIS, age 72, is our Chairman of the Board of Directors. Since
1980 Mr. Ellis has been the President and Chief Executive Officer of Warren
Rural Electric Cooperative Corporation located in Bowling Green. Mr. Ellis is
also Chairman of the Board of Directors of Commonwealth Health Corp., a health
care holding company, and was until April 1998 a director for 11 years of Trans
Financial, Inc. during part of which tenure he served as Vice-Chairman.
JAMES H. LUCAS, age 66, became in 1997 Of Counsel to the law firm of
English, Lucas, Priest & Owsley in Bowling Green, with whom he had previously
practiced law since the firm's formation in 1973.
GREGG A. HALL, age 41, is our Vice-President/Chief Financial Officer. Mr.
Hall graduated with a Bachelor of Science degree from Marshall University in
1979. From August 1988 to August 1998, Mr. Hall served as Auditor and Senior
Vice-President for Trans Financial, Inc.
JOE B. NATCHER, JR., age 41, has since 1983 been a co-owner and President
of Southern Foods, Inc., a food service distributor located in Bowling Green.
JOHN T. PERKINS, age 55, is our Vice-President/Chief Operating Officer. Mr.
Perkins graduated from LaRue County High School in 1961. He previously owned a
bank consulting company for 3 years and prior to that served for over 20 years
with Trans Financial Bank, holding the position of Chief Operating Officer at
the time he left Trans Financial Bank in 1995.
BOARDS OF DIRECTORS
We intend for the Citizens First Bank Board of Directors to be comprised of
up to 15 community leaders, including our directors. Our directors will serve as
our directors and as the initial directors for Citizens First Bank until our
next annual meeting and the first annual meeting of Citizens First Bank
shareholders to be held early in 2000. It is anticipated that both Boards of
Directors will meet on a monthly basis.
Citizens First Bank's Board of Directors shall have the power to manage and
administer the affairs of Citizens First Bank, including the power to hire and
terminate the employment of the its officers and employees. Citizens First
Bank's Board of Directors may designate one or more persons to serve as Advisory
Directors, without voting rights, on such terms and conditions as it may
designate.
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<PAGE> 34
Citizens First Bank's regulators have the authority to disallow any of the
proposed directors from assuming his or her designated position. See
"Supervision and Regulation -- Citizens First Bank: Prompt Corrective Action for
Capital Deficiencies" on page 52.
BOARD COMMITTEES
The Citizen First Bank Board of Directors will have the following
committees:
LOAN COMMITTEE. The Loan Committee will be comprised of Ms. Cohron and
Messrs. Baker, Bell, Ellis, Lucas and Natcher and will establish and monitor
adherence to adopted lending policies and regulatory requirements, review and
participate in the loan approval process and monitor the quality of the loan
portfolio, including review of Citizens First Bank's allowance for loan and
lease losses. The Loan Committee will exercise, when the Board is not in
session, all other powers of the Board regarding loans that may lawfully be
delegated. The Loan Committee will meet monthly.
ASSET/LIABILITY MANAGEMENT COMMITTEE. The Asset/Liability Management
Committee will be comprised of Ms. Cohron and Messrs. Ellis, Baker and Hall and
will have the power to establish and monitor adherence to adopted investment and
asset liability policies and regulatory requirements, review and participate in
the purchase of Citizens First Bank's investment portfolio and monitor interest
rate sensitivity and liquidity. This committee will exercise, when the Board is
not in session, all other powers of the Board regarding asset/liability
management that may lawfully be delegated. The Asset/Liability Management
Committee will meet monthly.
COMMUNITY REINVESTMENT ACT COMMITTEE. The Community Reinvestment Act
Committee will be comprised of all board members and will have the power to
establish and monitor adherence to the Community Reinvestment Act of 1978. The
Community Reinvestment Act Committee will meet quarterly.
COMPENSATION COMMITTEE. The Compensation Committee will be comprised of
all board members, will meet quarterly, and will have the duty of reviewing
compensation arrangements for all employees.
EXECUTIVE COMMITTEE. The Executive Committee will be inactive during
Citizens First Bank's initial year of operations. When active, the Executive
Committee will preview all matters that are brought to the Board of Directors.
In addition, the Executive Committee will have the power to establish and
monitor adherence to a Compensation and Fringe Benefits Program. The Executive
Committee will have the power to direct the business of Citizens First Bank,
apart from such functions as its Board of Directors by law is solely authorized
to perform.
We expect that, with the exception of an audit committee and possibly an
executive committee, our Board of Directors for the foreseeable future will
function without committees. Our audit committee will have the duty of
nominating an independent accounting firm to conduct an annual audit, review the
audited financial statements and monitor and supervise internal audit control.
Our audit committee will report the results of the annual audit in writing to
our Board of Directors. Such report will state whether we are in a sound
condition and whether adequate internal controls and procedures are being
maintained, and will recommend to the Board advisable changes in the manner of
conducting our affairs. Our executive committee will function in a manner
similar to the Citizens First Bank executive committee.
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<PAGE> 35
DIRECTOR COMPENSATION
It is anticipated that our directors and those of Citizens First Bank will
not receive fees for serving in such capacities during 1999. This policy may be
reevaluated and changed in light of the expenses of attending Board and
committee meetings. The fees paid for attending such meetings shall be further
evaluated in light of fees customarily paid by institutions of similar size and
type. Directors who are employees of Citizens First Bank are not expected to
receive additional compensation for their service as our directors or as
directors of Citizens First Bank.
EMPLOYMENT AGREEMENTS AND COMPENSATION
We have entered into employment agreements providing for a term of
employment for 3 years with each of Mary Cohron, John Perkins, Gregg Hall and
Barry Bray. Such employment agreements may be terminated by us upon 60 days
notice for cause and without cause. In the event we terminate any of such
employment agreements without cause, we would be obligated to pay such
terminated employee the value of accrued fringe benefits through the date of
termination and compensation, based upon months of service rendered by such
employee, of as much as a full year's salary. Finally, each of said employees
may voluntarily terminate his or her employment upon 60 days notice and in the
event of termination of employment prior to the natural expiration of the
employment agreements, each employee is prohibited for one year from performing
in Warren County and any contiguous county thereto duties for a banking
organization comparable to the duties performed for us or Citizens First Bank.
The employment agreements prescribe annual salaries for Ms. Cohron, Mr.
Perkins, Mr. Hall and Mr. Bray during the first year of banking operations of
$95,000, $85,000, $85,000 and $63,750, respectively. Such salaries are exclusive
of any bonuses which may be paid, in the determination of the Board of
Directors, based on the performance of Citizens First Bank following its
organization. We may adjust any officer's compensation as appropriate. Other
officers and employees will receive salaries comparable to those being paid in
the market and the industry.
Officers may receive additional benefits, including club dues, automobile
allowances and other benefits commensurate with their positions. We intend for
these benefits to be competitive within the banking industry in our market area.
Life insurance, health insurance, a 401(k) plan and other traditional
benefits such as paid vacations will be provided to Citizens First Bank
employees commensurate with the types of benefits offered to employees of
financial institutions in our market area, as well as incentive compensation,
bonus and stock option plans for its officers and employees. The foregoing
summary of proposed employee benefits and retirement plans is subject to change
and approval by the Citizens First Bank Board of Directors and, where it is
deemed appropriate, our directors and/or shareholders.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
Kentucky law authorizes a Kentucky corporation to eliminate or limit the
personal liability of a director to the corporation and its shareholders for
monetary damages for breach of some fiduciary duties as a director. We believe
that such a provision is beneficial in attracting and retaining qualified
directors. Our Articles of Incorporation and those of
34
<PAGE> 36
Citizens First Bank include provisions eliminating liability for monetary
damages for any breach of fiduciary duty by a director, except:
- for any transaction in which the director's personal financial interest
is in conflict with our financial interests or the financial interests of
our shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for any transaction from which the director derives an improper personal
benefit; or
- for payment of dividends, or approval of stock repurchases or
redemptions, that are unlawful under Kentucky law.
However, provisions of Kentucky banking law, federal banking law and federal
securities law may impose restrictions on the extent to which a bank or company
may limit the liability of its directors and officers, particulary in cases
involving violations of applicable bank statutes or regulations or claims under
the securities laws. Nonetheless, the foregoing provision of the Articles may
reduce the likelihood of derivative litigation against directors and may
discourage or deter shareholders or management from bringing a lawsuit against
directors for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise have benefitted us, Citizens First Bank and our
shareholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Kentucky law authorizes a Kentucky corporation to indemnify its directors,
officers, employees and agents in some cases. In addition, Kentucky law
authorizes a corporation to indemnify such persons, to an extent not
inconsistent with law, as may be provided by its bylaws, agreement, vote of
shareholders, disinterested directors or otherwise. Our Bylaws and those of
Citizens First Bank require the indemnification of directors and officers to the
fullest extent permitted by Kentucky law. See "Risk Factors -- Our Profitability
May Suffer Because of the Indemnification of Our Directors and Officers" on page
7. Provisions of Kentucky banking law, federal banking law and federal
securities law may impose restrictions on the extent to which a bank or company
may indemnify its directors and officers against expenses and liability,
particularly in cases involving violations of applicable bank statutes or
regulations or claims under the securities laws.
Kentucky law also permits a Kentucky corporation to purchase and maintain
insurance on behalf of its directors, officers, employees and agents against
liability asserted against or incurred by them in their capacities as directors,
officers, employees or agents of the corporation, whether or not the corporation
would have the power under Kentucky law to indemnify them against such
liability. We have purchased directors' and officers' liability insurance since
we believe such insurance is useful in encouraging qualified individuals to
serve us and Citizens First Bank as directors and officers and in retaining
their service in such capacities.
35
<PAGE> 37
PRINCIPAL SHAREHOLDERS
CURRENT SHAREHOLDERS
The following table sets forth information respecting our current
shareholders. With respect to shares of common stock, a person is deemed to have
beneficial ownership of any shares of common stock as to which such person,
directly or indirectly, has or shares voting power or investment power. The
below-named persons have sole voting and investment power with respect to the
shares reflected. The numbers in the table reflect shares of common stock held
as of the date of this prospectus and do not reflect shares which may be
acquired by such persons under the offering. The numbers in this table assume
568,667 shares of common stock outstanding following the offering:
<TABLE>
<CAPTION>
PERCENTAGE
OF CLASS
NAME AND PRINCIPAL PERCENTAGE FOLLOWING
CITY OF RESIDENCE OCCUPATION SHARES OF CLASS OFFERING
----------------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Billy J. Bell See "Management -- 10,000 9.80% 1.76%
Bowling Green, Directors and Executive Officers"
Kentucky
J. Joe Cheek Shareholder; Cheek, Breiwa & Ware, PSC 10,000 9.80% 1.76%
Bowling Green, (Optometrists)
Kentucky
John C. Desmarais President and Chief Executive 2,000 2.00% .35%
Bowling Green, Officer; Commonwealth
Kentucky Health Corporation (Hospital
and Nursing Home Operator)
Floyd H. Ellis See "Management -- 10,000 9.80% 1.76%
Bowling Green, Directors and Executive Officers"
Kentucky
Charles E. English, Partner; English, Lucas 10,000 9.80% 1.76%
Sr.
Bowling Green, Priest & Owsley (Law Firm)
Kentucky
David C. Hancock President; CDS Home Care 10,000 9.80% 1.76%
Bowling Green, (Home Healthcare Equipment Company)
Kentucky
Charles A. Hardcastle President; 10,000 9.80% 1.76%
Bowling Green, B. G. Consolidated, Inc.
Kentucky (Cleaning Supplies and
Materials Company)
</TABLE>
36
<PAGE> 38
<TABLE>
<CAPTION>
PERCENTAGE
OF CLASS
NAME AND PRINCIPAL PERCENTAGE FOLLOWING
CITY OF RESIDENCE OCCUPATION SHARES OF CLASS OFFERING
----------------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C>
C. Carroll Hildreth President; C. C. Hildreth, Inc. 10,000 9.80% 1.76%
Bowling Green, (Fuel Distributor)
Kentucky
James H. Lucas See "Management -- 10,000 9.80% 1.76%
Bowling Green, Directors and Executive Officers"
Kentucky
William H. Mason, Jr. President; Hill-Motley 10,000 9.80% 1.76%
Bowling Green, Lumber Company, Inc.
Kentucky
Joel E. Rodgers Retired Vice-President; 10,000 9.80% 1.76%
Bowling Green, Allied Signal, Inc. -- Professor of
Kentucky Finance and Operations, Nova
Southeastern University
------- ---- -----
Total 102,000 100% 17.95%
======= ==== =====
</TABLE>
ADJUSTMENT TO SHAREHOLDINGS; DILUTION OF YOUR SHARES
The shares of common stock held by our current shareholders will be
adjusted as of the close of business on the last business day preceding the date
of the final prospectus. The Board of Directors will make this adjustment
through a stock split. The Board of Directors has determined to divide by 15 the
sum of $69,000, which represents our approximate cash reserves as of August 1,
1998 when we decided to become a bank holding company and organize Citizens
First Bank, all dividends received by us with respect to our securities
portfolio since August 1, 1998 and the market value of our securities portfolio,
including proceeds from the sale of securities. The result of such calculation
will be the aggregate shares of common stock to be owned by our current
shareholders upon the beginning of the offering.
Following this calculation, our Board of Directors will declare the stock
split or reverse stock split required in order to make the necessary adjustment.
By way of example, if, as of the close of business on the last business day
preceding the date of the final prospectus, the market value of our securities
portfolio, including proceeds from the sale of securities, is $1,600,000, and
assuming the dividends received with respect to such portfolio since August 1,
1998 were $12,000, our current shareholders' aggregate shares of common stock
would be determined by the result of $1,681,000 / 15, or 112,067. A stock split
of 1.0987 to 1 would be declared by our Board of Directors to arrive at such
adjustment, though cash would be paid in lieu of any fractional shares resulting
from such stock split.
Our Board of Directors decided that the shares to be held by our current
shareholders should be calculated based upon the value of our August 1, 1998
assets as of the commencement of this offering. The adjustment described above
is designed to account for the fluctuation, upwards or downwards, in the value
of those assets between the date we decided to become a bank holding company and
the beginning of the offering. This calculation assures that the number of
shares held by our current shareholders is determined using the same $15.00 per
share price used in this offering.
37
<PAGE> 39
The adjustment described above can be viewed as diluting your shares
because of our deferred tax liability with respect to our securities portfolio.
This deferred tax liability arose because of the appreciation in the value of
our securities portfolio since our purchase of such securities. As of September
30, 1998 the deferred tax liability of our securities portfolio was $379,399.
Assuming a $1,600,000 market value of our securities portfolio, the deferred tax
liability can be estimated at approximately $466,819. If the calculation made
above were to take into account such a deferred tax liability:
- our current shareholders would be entitled to 80,945 shares instead of
112,067 shares; and
- the percentage ownership represented by shares sold in this offering
would increase from 80.6% to 85.2%.
While we anticipate being able to offset gains realized on the sale of our
securities portfolio by Citizens First Bank's anticipated initial operating
losses, the use of such losses in such fashion prevents us from using the losses
to offset future earnings.
Our Board of Directors, which includes 3 of our current shareholders, has
determined that our deferred tax liability should not be taken into account in
determining the shares of common stock to be held by our current shareholders.
This judgment was made in light of the risks being assumed by our current
shareholders with respect to Citizens First Bank's pre-operational expenses,
expenses associated with the offering and the purchase, renovation and
furnishing of the Citizens First Bank offices. See "Use of Proceeds" on page 39.
In the event, for example, we were unable to obtain all regulatory approvals
necessary to commence banking operations, and satisfy conditions imposed by such
approvals, we would remain responsible for payment of the above-referenced costs
and expenses. Our current shareholders are bearing the risk that we will be
obligated for such costs and expenses and yet be unable to consummate the
offering and open Citizens First Bank.
38
<PAGE> 40
USE OF PROCEEDS
The net proceeds to Citizens First Corporation from the sale of the 466,667
shares of common stock under the offering are estimated to be $6,510,004.65
after deduction of the underwriting discounts, but before deducting estimated
offering expenses of $97,500.00. The net proceeds will be $7,486,504.65 if the
underwriter exercises its option to purchase shares for over-allotments.
The anticipated sources and uses of the proceeds from the offering are as
follows:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
------------- ----------
<S> <C> <C>
Sources:
Sale of 466,667 shares of common stock....... $7,000,005.00 100%
============= =====
Uses:
Cash capital contribution to Citizens First
Bank...................................... $4,693,504.65 67.05%
Underwriting discounts....................... 490,000.35 7.00%
Repayment of short-term borrowings........... 1,370,000.00 19.57%
Offering expenses............................ 97,500.00 1.39%
Organizational expenses...................... 214,000.00 3.06%
Organizational expenses attributable to
Citizens First Bank prior to offering..... 135,000.00 1.93%
------------- -----
Total uses........................... $7,000,005.00 100%
============= =====
</TABLE>
The short-term borrowings were in the form of 2 lines of credit in the
amount of $1,120,000 and $250,000 obtained from First Security Bank of
Lexington, Lexington, Kentucky. These lines of credit are for terms of 1 year
and are secured by the Citizens First Bank main office and our securities
portfolio. The interest rate on the $1,120,000 line of credit is an annual rate
equal to the prime rate less 1/2% and the interest rate on the $250,000 line of
credit is an annual rate equal to the prime rate. The proceeds of these lines of
credit were used to purchase the real estate and some of the furniture and
equipment for Citizens First Bank's main office.
We intend to contribute $7,598,504.65 to Citizens First Bank in exchange
for all of its common stock. The purchase of Citizens First Bank's common stock
is intended to provide it with the capital required by regulators to start
operations. This capital contribution will be made up of the following assets:
<TABLE>
<S> <C>
Cash..................................................... $6,093,504.65
Real Property............................................ 1,125,000.00
Furniture, fixtures and equipment........................ 245,000.00
Organizational expenses attributable to Citizens First
Bank prior to offering................................. 135,000.00
-------------
Total capital contribution............................... $7,598,504.65
=============
</TABLE>
The cash portion of the capital contribution will be made up of:
- net cash proceeds from this offering of $4,693,504.65 after other
uses;
- proceeds from the liquidation of all or a part of our securities
portfolio; and
- net cash proceeds, if any, from the exercise of the underwriter's
option to purchase additional shares to cover over-allotments.
39
<PAGE> 41
The anticipated uses of the net cash proceeds to be received by Citizens
First Bank are as follows:
<TABLE>
<S> <C>
Funding of loans, investments in securities and payment
of operating expenses.................................. $5,751,154.65
Purchase of additional furniture, equipment and other
assets necessary for operations........................ 288,850.00
Payment of organizational expenses after offering........ 53,500.00
-------------
Total uses..................................... $6,093,504.65
=============
</TABLE>
40
<PAGE> 42
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and our pro forma capitalization as of December 31, 1998, as adjusted to give
effect to the sale by us of 466,667 shares in this offering and the application
of sale proceeds from the sale of a portion of our investment securities as
described in "Use of Proceeds" on page 39. This table should be read in
conjunction with our financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Short-term borrowings........................... $ 995,000 $ 0
Stockholders' Equity:
Preferred Stock, no par value: 500 shares
authorized; no shares issued and
outstanding................................... 0 0
Common Stock, no par value: 1,000,000 shares
authorized;
568,667 shares issued and outstanding......... 0 0
Paid-in capital................................. 20,542 6,433,047
Retained earnings (deficit)..................... (186,499) 597,270
Accumulated other comprehensive income.......... 833,797 50,028
---------- ----------
Total stockholders' equity............ 667,840 7,080,345
---------- ----------
Total capitalization.................. $1,662,840 $7,080,345
========== ==========
</TABLE>
RELATED PARTY TRANSACTIONS
We and Citizens First Bank may have banking and other business transactions
in the ordinary course of business with directors, officers and shareholders and
their associates, including members of their families and corporations,
partnerships and other organizations in which such directors, officers and
shareholders have a controlling interest or a management role. All banking
transactions will be made in accordance with all applicable laws and regulations
and on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
parties of similar credit worthiness, and are not expected to involve more than
the normal risk of collectibility or present other unfavorable features to
Citizens First Bank. All future transactions with our affiliates will be on
terms no less favorable than could be obtained from unaffiliated third parties
and must be approved by a majority of our directors, including a majority of our
disinterested directors.
The law firm of English, Lucas, Priest & Owsley will be paid fees totaling
$95,000 for legal services rendered by it on our behalf in connection with the
offering and the organization of Citizens First Bank. Our director James H.
Lucas is Of Counsel to, and our shareholder Charles E. English, Sr. is a partner
in, said law firm. We further anticipate that English, Lucas, Priest & Owsley
will perform ongoing legal services for us and Citizens First Bank following the
start of banking operations.
41
<PAGE> 43
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock under our Articles of Incorporation consists
of 1,000,000 shares of common stock, no par value per share and 500 shares of
preferred stock, no par value per share. Immediately following the offering,
568,667 shares of common stock (assuming no adjustment to the shares of common
stock held by our current shareholders as described in "Principal
Shareholders -- Adjustment to Shareholdings; Dilution of Your Shares" on page
37) and no shares of preferred stock will be issued and outstanding.
All material provisions of the common stock are summarized in this
prospectus. However, the following description of our capital stock does not
purport to be complete and is subject in all respects to applicable Kentucky law
and to the provisions of our Articles of Incorporation and Bylaws, copies of
which have been filed as exhibits to the Registration Statement of which this
prospectus is a part.
VOTING RIGHTS
All of the shares of common stock will have identical rights and
preferences. Holders of common stock are entitled to cast one vote for each
share held of record on all matters submitted to a vote of shareholders, except
that shareholders have cumulative voting rights in the election of directors.
Cumulative voting rights entitle each shareholder to cast as many votes in the
election of directors as is equal to the number of shares owned by such
shareholder multiplied by the number of directors to be elected. Under
cumulative voting, such shareholder may cast all such votes for one nominee for
director or may divide such votes among some or all of the nominees, as the
shareholder sees fit. The effect of cumulative voting is that a shareholder may
cumulate his or her votes for the election of only one or several nominees for
director and, accordingly, holders of less than a majority of the outstanding
shares voting for the election of directors may be able to elect one or more
directors.
DIVIDEND RIGHTS AND LIMITATIONS ON PAYMENT OF DIVIDENDS
The holders of common stock are entitled to receive, pro rata, such
dividends and other distributions as and when declared by our Board of Directors
out of the assets and funds legally available. The Kentucky Business Corporation
Act further prohibits the payment of any dividends where, after payment of the
dividend, a company would be unable to pay its debts as they come due in the
usual course of business or such company's total assets would be less than the
sum of its total liabilities plus any preferential amounts required to be set
aside.
Our principal source of income from which dividends may be paid to the
holders of common stock will be dividends from Citizens First Bank. Under
Kentucky banking law, Citizens First Bank may legally declare dividends only if
(a) it has net profits available for dividends and (b) at least 10% of the net
profits for the period covered by the dividend are allocated to Citizens First
Bank's surplus, until such time as such surplus equals the amount of its stated
capital attributable to its common stock. Moreover, the Kentucky Department of
Financial Institutions must approve the declaration of any dividends if the
total dividends to be declared by Citizens First Bank for any calendar year
would exceed Citizens First Bank's total net profits for that year combined with
its retained net profits for the preceding two years, less any required
transfers to surplus or a fund for the retirement of preferred stock, if any, or
debt. See "Supervision and Regulation -- Citizens First Bank: Dividend
Restrictions" on page 51. No net earnings, and therefore no monies
42
<PAGE> 44
which may be distributed as cash dividends to us, from which we could pay
dividends on the common stock, are projected for Citizens First Bank's initial
years of operation. Moreover, despite the possible availability of net or
accumulated earnings in the initial years of operations, and the capacity to
maintain capital at levels required by governmental regulations, Citizens First
Bank may choose to retain all earnings for its operations. You should not expect
to receive any dividends on shares in the near future, if ever, and this
investment may be inappropriate for you if you need dividend income from an
investment in shares. See "Business -- Dividends" on page 23.
LIQUIDATION RIGHTS
In the event of our liquidation, dissolution or winding up of affairs,
holders of common stock will be entitled to share in the distribution of assets
remaining after payment or provision for payment of all debts, liabilities and
expenses, and any liquidation preference to which holders of preferred stock, if
any, may then be entitled. Subject to any required regulatory approvals, our
directors, at their discretion, may authorize and issue debt obligations,
whether or not subordinated, without prior approval of our shareholders, thereby
potentially further reducing the liquidation value of your shares.
NO PREEMPTIVE RIGHTS
Holders of common stock will not have preemptive rights to subscribe for or
to purchase any additional shares offered by us in the future. The absence of
preemptive rights could, in the event of our sale of additional shares of common
stock, result in a dilution of the percentage ownership in us held by you.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the common stock will be Reliance
Trust Co.
PREFERRED STOCK
Our authorized preferred stock may be issued from time to time in one or
more designated series or classes. Our Board of Directors, without the approval
of our shareholders, is authorized to establish the voting, dividend,
redemption, conversion, liquidation and other relative provisions as may be
provided in a particular series or class. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of the holders of common stock and, under some circumstances, make it more
difficult for a third party to acquire, or discourage a third party from
acquiring, a majority of our outstanding voting stock. We have no present
intention to issue any series or class of preferred stock.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to the offering, we will have 102,000 shares of common
stock outstanding, which shares are subject to adjustment as described in
"Principal Shareholders -- Adjustment to Shareholdings; Dilution of Your Shares"
on page 37. Upon completion of the offering, we expect, subject to such
adjustment, to have 568,667 shares of common stock outstanding, plus any
additional shares sold upon the underwriter's
43
<PAGE> 45
exercise of its option to purchase 70,000 for over-allotments. Of the shares
outstanding after the offering, the 466,667 shares sold in this offering will
have been registered with the SEC under the Securities Act of 1933 and will be
eligible for resale without registration under the Securities Act unless they
were acquired by our directors, executive officers or other affiliates. Our
affiliates generally will be able to sell shares of common stock only in
accordance with the limitations of Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, each of our affiliates
(as defined in Rule 144) may sell shares of common stock within any three-month
period in an amount limited to the greater of 1% of our outstanding shares of
common stock or the average weekly trading volume in our common stock during the
four calendar weeks preceding such sale. Sales under Rule 144 are also subject
to manner-of-sale provisions, notice requirements and the availability of
current public information about us.
We and our directors, executive officers and current shareholders, who are
expected, subject to adjustment, to hold an aggregate of approximately 160,000
shares after the offering have agreed, or will agree, that they will not issue,
offer for sale, sell, transfer, grant options to purchase or otherwise dispose
of or register with the SEC any shares of common stock or any securities
convertible into or exercisable for shares of common stock, without the prior
written consent of the underwriter, for a period of 180 days from the date of
the final prospectus. The underwriter has indicated that it has no intention of
consenting to any deviation from these lock-up agreements. Under Rule 144 as
currently in effect, current shareholders who will not be our affiliates
following the offering, owning in the aggregate approximately 72,000 shares,
will be able to sell such shares without restriction following the expiration of
the 180-day lock-up period.
Prior to the offering, there has been no public trading market for the
common stock, and no predictions can be made as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the
prevailing market price of the common stock after completion of the offering.
Nevertheless, sales of substantial amounts of common stock in the public market
could have an adverse effect on prevailing market prices.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. The following is a brief summary of statutes and rules
and regulations that will affect us and Citizens First Bank. This summary is
qualified in its entirety by reference to the particular statutes and regulatory
provisions referred to below and is not intended to be an exhaustive description
of the statutes or regulations that will be applicable to our business or that
of Citizens First Bank. Supervision, regulation and examination of us and
Citizens First Bank by the regulatory agencies are intended primarily for the
protection of depositors rather than our shareholders.
CITIZENS FIRST CORPORATION
GENERAL. Our activities are subject to the supervision of Kentucky and
federal law. With respect to Kentucky law, Kentucky Revised Statutes Section
287.900 provides that any individual (which is defined to mean a natural person,
partnership, association, business trust, voting trust or similar organization,
but not a corporation) or bank holding company having its principal place of
business in Kentucky may acquire control of one or more banks or bank holding
companies wherever located within the Commonwealth of
44
<PAGE> 46
Kentucky, subject to two general restrictions: (1) neither an individual, which
on the effective date of the legislation controlled a bank or bank holding
company, nor a bank holding company can acquire control of any bank located in
Kentucky, if the bank was chartered after July 13, 1984 but has been in
existence for fewer than five years on the date of its acquisition, except for
one bank holding company formations; and (2) no individual or bank holding
company may acquire control of any bank or bank holding company if, upon the
acquisition, the individual or bank holding company would control banks located
in Kentucky holding more than 15% of the total deposits of all federally-
insured depository institutions in Kentucky.
In addition to Kentucky Revised Statutes Section 287.900, Kentucky Revised
Statutes Section 287.905 also contains provisions requiring any bank holding
company to seek and obtain the approval of the Commissioner of the Kentucky
Department of Financial Institutions before acquiring control of any bank
chartered in Kentucky or any bank holding company controlling a bank which is
chartered in the Commonwealth of Kentucky. Control is defined the same as in the
Bank Holding Company Act of 1956, as amended, which generally means the power to
vote 25% or more of any class of voting securities, the power to elect a
majority of the board of directors or the power to directly or indirectly
exercise a controlling influence over the management or policies of a bank or
bank holding company.
The Commissioner of the Kentucky Department of Financial Institutions must
approve an application by a bank holding company to acquire a bank or bank
holding company unless he finds:
- the terms of the acquisition are not in accordance with the laws of
Kentucky;
- the financial condition or the competence, experience and integrity of
the acquiring company or its principals are such as will jeopardize the
financial stability of the acquired entity;
- the public convenience and advantage will not be served by the
acquisition; or
- a federal regulatory authority whose approval is required has disapproved
the transaction because it would result in a monopoly or substantially
lesser competition.
Bank holding companies are required to obtain the prior approval of the
Federal Reserve Board before they may:
- acquire direct or indirect ownership or control of more than 5% of the
voting shares of any bank;
- acquire all or substantially all of the assets of any bank; or
- merge or consolidate with any other bank holding company.
The Federal Reserve Board generally may not approve any transaction that
would result in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States. Nor can the Federal Reserve Board
approve a transaction that could substantially lessen competition in any section
of the country, that would tend to create a monopoly in any section of the
country, or that would be in restraint of trade. But the Federal Reserve Board
may approve any such transaction if it determines that the public interest in
meeting the convenience and needs of the community served clearly outweighs the
anticompetitive effects of the proposed transaction. The Federal Reserve Board
is also required to consider the financial and managerial resources and future
prospects of the bank holding companies and banks concerned, as well as the
convenience
45
<PAGE> 47
and needs of the community to be served. Consideration of financial resources
generally focuses on capital adequacy, which is discussed below. Consideration
of convenience and needs include the parites' performance under the Community
Reinvestment Act of 1977.
RESTRICTIONS ON ACTIVITIES. In addition to the effect of Kentucky law, we
are also restricted in our activities by federal law. Under the Bank Holding
Company Act, a bank holding company is, with limited exceptions, prohibited from
acquiring direct or indirect ownership or control of any voting shares of any
company which is not a bank, or engaging in any activity other than managing and
controlling banks.
Among the activities which are permissible for bank holding companies are:
- acquiring and holding shares of any company engaged solely in the
business of the holding and operating of properties used wholly or
substantially by a subsidiary bank, conducting a safe deposit business or
furnishing services to or performing services for a subsidiary bank;
- acquiring and holding up to 5% of the outstanding voting shares of any
company;
- acquiring and holding up to 5% of the outstanding voting shares of an
investment company that is solely engaged in investing in securities and
that does not own or control more than 5% of the outstanding shares of
any class of voting securities of any company; and
- acquiring and holding shares of any company, the activities of which the
Board has determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
In determining whether a particular activity is permissible, the Federal
Reserve Board must consider whether the performance of such an activity
reasonably can be expected to produce benefits to the public that outweigh
possible adverse effects. Possible benefits that the Federal Reserve Board
considers include greater convenience, increased competition, or gains in
efficiency. Possible adverse effects include undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices. Among the activities which the Federal Reserve Board has determined
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto and which may be engaged in by a bank holding company or
a subsidiary thereof in accordance with the rules and regulations of the Federal
Reserve Board are:
- making, acquiring and servicing loans and other extensions of credit;
- operating an industrial bank, Morris Plan bank or industrial loan
company;
- performing functions or activities that may be performed by a trust
company;
- acting as an investment or financial advisor;
- leasing personal or real property if the lease is to serve as the
functional equivalent of an extension of credit to the lessee and meets
other criteria;
- making investments in corporations or projects designed primarily to
promote community welfare;
- providing data processing and data transmission services if the data to
be processed or furnished are financial, banking or economic in nature;
- acting as a principal, agent or broker for insurance that is directly
related to an extension of credit by the holding company or a bank
subsidiary of the holding company, or engaging in any insurance agency
activity in a place where the holding
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company or a subsidiary has a lending office and that has a population not
exceeding 5,000;
- owning, controlling or operating a savings association;
- providing courier services for financial instruments exchanged among
banks and financial institutions;
- providing management consulting advice to banks and other depository
institutions not affiliated with the holding company;
- issuing and selling money orders and similar consumer-type payment
instruments having a face value of not more than $1,000;
- performing appraisals of real estate and personal property;
- acting as intermediary for the financing of commercial or industrial
income-producing real estate;
- providing securities brokerage services, if the services are restricted
to buying and selling securities solely as agent for the account of
customers and do not include securities underwriting or dealing or
investment advice or research services;
- underwriting and dealing in government obligations and money market
instruments;
- providing general information and statistical forecasting with respect to
foreign exchange markets and transactional services with respect thereto;
- acting as futures commissions merchant for nonaffiliated persons;
- providing investment advice on financial futures and options on futures;
- providing consumer financial counseling;
- providing tax planning and preparation services;
- providing check guaranty services;
- operating a collection agency; and
- operating a credit bureau.
The Federal Reserve Board has determined that the following nonbanking
activities, among others, are not so closely related to banking or managing or
controlling banks as to be a proper incident thereto:
- insurance premium funding, the combined sale of mutual funds and
insurance;
- underwriting life insurance, except in low-population areas, that is not
sold in connection with a credit transaction by a bank holding company
system;
- real estate brokerage;
- land development;
- real estate syndication;
- management consulting;
- property management; and
- operation of a travel agency.
Bank holding companies are not limited under section 4(c)(8) of the Bank
Holding Company Act to activities previously approved by the Federal Reserve
Board. If a bank holding company is of the opinion that other activities in the
circumstances surrounding a particular case are closely related to banking or
managing or controlling banks, the holding
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company may apply for Federal Reserve Board approval to engage in the activity
or acquire an interest in a company that is engaged in the activity.
There are no territorial limitations on permissible non-banking activities
of bank holding companies. Despite prior approval, the Federal Reserve Board has
the power to order a holding company or its subsidiaries to terminate any
activity or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of that bank holding company may
result from such activity.
We may seek to engage, or to acquire an interest in a company that engages,
in nonbanking activities so closely related to banking or managing or
controlling banks as to be a proper incident thereto. No negotiations for the
acquisition of any entities other than Citizens First Bank have been carried on
by us, nor are any such negotiations specifically contemplated, nor are any
plans currently under consideration under which we would engage in any
nonbanking activities. There can be no assurance that any such entity will be
acquired by us or that we will engage in any nonbanking activities in the
future.
CAPITAL ADEQUACY. We and Citizens First Bank will be required to comply
with the capital adequacy standards established by the Federal Reserve Board and
the Federal Deposit Insurance Corporation, respectively. There are two basic
measures for capital adequacy for bank holding companies and the depository
institutions that they own: a risk-based measure and a leverage measure. All
applicable capital standards must be satisfied for a bank holding company to be
considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among depository
institutions and bank holding companies, to account for off-balance-sheet
exposure, and to minimize disincentives for holding liquid assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance-sheet items.
The minimum guideline for the total capital ratio or the ratio of total
capital to risk-weighted assets, including some off-balance sheet items, such as
standby letters of credit, is 8.0%. At least half of total capital must be
composed of common equity, undivided profits, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
other permissible intangible assets, known as "tier 1 capital". The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves, known as "tier 2 capital".
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum leverage ratio of tier 1 capital to average assets, less goodwill and
permissible other intangible assets, of 3.0% for bank holding companies that
meet specified criteria, including having the highest regulatory rating. All
other bank holding companies generally are required to maintain a leverage ratio
of at least 3.0%, plus an additional cushion of 100 to 200 basis points. The
guidelines also provide that bank holding companies that experience internal
growth to make acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. The Federal Reserve Board will consider a
"tangible tier 1 capital
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leverage ratio," deducting all intangibles, and other indicia of capital
strength in evaluating proposals for expansion or new activities.
The federal bank regulators continue to indicate their desire to raise the
capital requirements that apply to banks beyond their current levels. The
Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office
of the Comptroller of the Currency have proposed an amendment to the risk-based
capital standards that would calculate the change in a bank's net economic value
attributable to increases and decreases in market interest rates and would
require banks with excessive interest rate risk exposure to hold additional
amounts of capital against such exposures.
REPORTING OBLIGATIONS. A bank holding company is required to file with the
Federal Reserve Board annual reports and other information regarding its
business operations and the business operations of its subsidiaries. It is also
subject to examination by the Federal Reserve Board and is required to obtain
Federal Reserve Board approval prior to acquiring, directly or indirectly,
ownership or control of any voting shares of any bank if, after such
acquisition, it would own or control, directly or indirectly, more than five
percent of the voting stock of such bank unless it already owns a majority of
the shares of voting stock of such bank.
SUPPORT OF SUBSIDIARY INSTITUTIONS. Under Federal Reserve Board policy we
will be expected to act as a source of financial strength for, and to commit
resources to support, Citizens First Bank. This support may be required at times
when, absent such Federal Reserve Board policy, we may not be inclined to
provide it. In addition, any capital loans by a bank holding company to any of
its banking subsidiaries are subordinate in right of payment to deposits and to
other indebtedness of such banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act, a depository institution insured
by the Federal Deposit Insurance Corporation can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the Federal Deposit
Insurance Corporation after August 9, 1989, in connection with the default of a
commonly controlled Federal Deposit Insurance Corporation-insured depository
institution or any assistance provided by the Federal Deposit Insurance
Corporation to any commonly controlled Federal Deposit Insurance
Corporation-insured depository institution "in danger of default." "Default" is
defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The Federal Deposit Insurance Corporation's claim for damages is
superior to claims of shareholders of the insured depository institution or its
holding company, but is subordinate to claims of depositors, secured creditors,
and holders of subordinated debt, other than affiliates, of the commonly
controlled insured depository institution. Citizens First Bank will be subject
to these cross-guarantee provisions. As a result, any loss suffered by the
Federal Deposit Insurance Corporation in respect of Citizens First Bank would
likely result in assertion of the cross-guarantee provisions, the assessment of
such estimated losses against the depository institution's banking or thrift
affiliates, and a potential loss of our respective investment in any other
subsidiary depository institution.
YEAR 2000. Another factor that is gaining increasing scrutiny in the
application process is the Year 2000 readiness of the parties involved in
acquisition transactions.
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Banking organizations whose Year 2000 readiness is in less than satisfactory
condition are undergoing special scrutiny in connection with acquisition
transactions requiring regulatory approval, and may not be eligible to use
expedited application procedures for acquisition transactions.
CITIZENS FIRST BANK
GENERAL. As a bank organized under Kentucky law, Citizens First Bank will
be subject to the regulation and supervision of the Kentucky Department of
Financial Institutions. As an insured bank under the Federal Deposit Insurance
Act, Citizens First Bank will also be subject to regulation and examination by
the Federal Deposit Insurance Corporation. Although Citizens First Bank will not
be a member of the Federal Reserve System, it will nevertheless be subject to
provisions of the Federal Reserve Act and regulations promulgated thereunder.
The Federal Deposit Insurance Corporation and the Kentucky Department of
Financial Institutions will regularly examine the operations of Citizens First
Bank. State banks also are subject to regulation requiring the maintenance of
prescribed minimum capital levels, and Citizens First Bank will be required to
file annual reports and such additional information as the Kentucky Department
of Financial Institutions and Federal Deposit Insurance Corporation regulations
require. Citizens First Bank will also be subject to restrictions on loan
limits, interest rates, "insider" loans to officers, directors and principal
shareholders, restrictions on tie-in arrangements and transactions with
affiliates, as well as many other matters. Strict compliance at all times with
state and federal banking laws will be required. Supervision, regulation, and
examination of Citizens First Bank by bank regulatory agencies is intended for
the protection of Citizens First Bank's depositors, not Citizens First Bank's
shareholders. Federal and state regulators have authority to impose sanctions on
Citizens First Bank and its directors and officers if Citizens First Bank
engages in unsafe or unsound practices, or otherwise fails to comply with
regulatory standards.
The following summaries of statutes, regulations and policies affecting
banks do not purport to be complete, and the statutes and regulations described
should be referred to by all prospective investors.
INTERSTATE BANKING. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 has introduced a process that will enable nationwide
interstate banking through bank subsidiaries and interstate banking mergers.
Effective September 29, 1995, the Riegle-Neal Act allowed adequately capitalized
and well-managed bank holding companies to acquire control of a bank in any
state subject to concentration limits. The Riegle-Neal Act also generally
provides that, after June 1, 1997, national and state-chartered banks may branch
interstate through acquisitions of banks in other states. By adopting
legislation prior to that date, a state has the ability either to "opt in" and
accelerate the date after which interstate branching is permissible, or "opt
out" and prohibit interstate branching altogether.
Kentucky has enacted "opt-in" legislation that permits banks from other
states to establish branches in Kentucky by acquisition of a Kentucky bank after
June 1, 1997. Restrictions currently imposed upon Kentucky banks will continue
to apply under the legislation, including
- prohibiting bank holding companies from chartering a new bank in Kentucky
or acquiring a bank in Kentucky which has been in existence for less than
five years,
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- generally prohibiting a bank from establishing a branch office in
Kentucky outside its home county except by merging with a bank that has
operated an office in the target county for at least five years, and
- prohibiting acquisitions which have the result of concentrating control
of more than 15% of the federally insured deposits in Kentucky.
It is expected that the Riegle-Neal Act will increase competition in the
banking industry as it will allow out of state banks to branch into Kentucky
through acquisitions of banks in Kentucky.
STATE REGULATION. Kentucky law places numerous restrictions and
requirements on the banking operations of state-chartered banks. State-chartered
banks must report to the Kentucky Department of Financial Institutions
periodically upon request, and at least annually, regarding the financial
condition and operations of the bank.
Kentucky Revised Statutes Section 287.100(2) limits a bank's investment in
real estate and provides that a bank may only hold title to real estate
necessary or appropriate for the transaction of legitimate business and the cost
of such real estate, including furniture and fixtures, generally may not exceed
40% of the total paid-in capital, unimpaired surplus and undivided profits of
the bank without approval of the Kentucky Department of Financial Institutions.
A state-chartered bank may invest in real estate other than that related to its
legitimate business within its generally accepted banking market provided such
investment does not exceed 10% of the bank's actual paid-in capital and surplus
at the time the investment is made. Exceptions to the foregoing rules apply in
the case of real estate conveyed to a bank in satisfaction of a debt previously
contracted.
With respect to expansion, Citizens First Bank may establish branches only
within the geographical limits of Warren County, Kentucky, and at locations
which are subject to approval by the Kentucky Department of Financial
Institutions. Citizens First Bank is also subject to the banking and usury laws
of Kentucky restricting the amount of interest it may charge in making loans or
other extensions of credit.
Kentucky law also currently imposes a time restriction on the acquisition
of recently chartered banks in Kentucky. Except for mergers or consolidations of
banks whose principal place of business is in the same county, Kentucky Revised
Statutes Section 287.900 provides that a bank or bank holding company may not be
acquired unless it has been in existence for at least five years at the time of
the acquisition.
DIVIDEND RESTRICTIONS. Federal and state statutes and regulations restrict
the payment of dividends by state-chartered banks. Under Kentucky law, dividends
by Kentucky banks may be paid only from current or retained net profits. Before
any dividend may be declared for any period, other than with respect to
preferred stock, if any, a bank must increase its capital surplus by at least
10% of the net profits of the bank for such period until the bank's capital
surplus equals the amount of its stated capital attributable to its common
stock. Moreover, the Commissioner of the Kentucky Department of Financial
Institutions must approve the declaration of dividends if the total dividend to
be declared by a bank for any calendar year would exceed the bank's total net
profits for such year combined with its retained net profits for the preceding
two years, less any required transfers to surplus or a fund for the retirement
of preferred stock, if any, or debt.
The Kentucky Business Corporation Act provides additional restrictions on
distributions by a Kentucky corporation, including the Bank. See "Description of
Capital Stock -- Dividend Rights and Limitations on Payment of Dividends" on
page 42.
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The Federal Deposit Insurance Corporation may also restrict Citizens First
Bank's payment of dividends. If the Federal Deposit Insurance Corporation
determines that a depository institution under its jurisdiction is engaged in or
is about to engage in an unsafe or unsound practice, the Federal Deposit
Insurance Corporation may require, after notice and hearing, that the
institution cease and desist from such practice. Depending on the financial
condition of the depository institution, an unsafe or unsound practice could
include the payment of dividends. Moreover, regulations of the Federal Deposit
Insurance Corporation requiring Citizens First Bank to maintain certain capital
levels will also affect Citizens First Bank's ability to pay dividends. See
"Business -- Dividends" on page 23.
PROMPT CORRECTIVE ACTION FOR CAPITAL DEFICIENCIES. Citizens First Bank
will be subject to risk-based and leverage capital requirements similar to those
imposed upon us as described above under "Capital Adequacy." The failure of
Citizens First Bank to meet its capital guidelines would subject it to a variety
of enforcement remedies and other restrictions on its business. The Federal
Deposit Insurance Corporation Improvement Act of 1991 establishes a system of
prompt corrective action to resolve the problems of undercapitalized
institutions. Under this system, which became effective in December 1992, the
federal banking regulators are required to establish five capital categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. With respect to institutions
in the three undercapitalized categories, the regulators must take prescribed
supervisory actions and are authorized to take other discretionary actions.
Generally, subject to a narrow exception, the Improvement Act requires the
banking regulator to appoint a receiver or conservator for an institution that
is critically undercapitalized. The federal banking agencies have specified by
regulation the relevant capital level for each category.
An institution is deemed to be well capitalized if it
- has a total capital ratio of 10% or greater;
- has a tier 1 capital ratio of 6.0% or greater;
- has a leverage ratio of 5.0% or greater; and
- is not subject to any written agreement, order, capital directive, or
prompt corrective action directive issued by its federal banking agency.
An institution is considered to be adequately capitalized if it has
- a total capital ratio of 8.0% or greater;
- a tier 1 capital ratio of 4.0% or greater; and
- a leverage ratio of 4.0% or greater.
An institution is considered to be undercapitalized if it has
- a total capital ratio of less than 8.0%;
- a tier 1 capital ratio of less than 4.0%; or
- a leverage ratio of less than 4.0%.
An institution is considered to be significantly undercapitalized if it has
- a total capital ratio of less than 6.0%;
- a tier 1 capital ratio of less than 3.0%; or
- a leverage ratio of less than 3.0%.
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An institution that has a tangible equity capital to assets ratio equal to
or less than 2.0% is deemed to be critically undercapitalized. For purposes of
the regulation, the term "tangible equity" includes core capital elements
counted as Tier 1 Capital for purposes of the risk-based capital standards, plus
the amount of outstanding cumulative perpetual preferred stock, including
related surplus, minus all intangible assets with exceptions. A depository
institution may be deemed to be in a capitalization category that is lower than
is indicated by its actual capital position if it receives an unsatisfactory
examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under the Improvement Act, a bank holding company must guarantee that a
subsidiary depository institution meet its capital restoration plan, subject to
limitations. The obligations of a controlling bank holding company under the
Improvement Act to fund a capital restoration plan is limited to the lesser of
5.0% of an undercapitalized subsidiary's assets or the amount required to meet
regulatory capital requirements. An undercapitalized institution is also
generally prohibited from increasing its average total assets, making
acquisitions, establishing any branches, or engaging in any new line of
business, except in accordance with an accepted capital restoration plan or with
the approval of the Federal Deposit Insurance Corporation. In addition, the
appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of the Improvement Act.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions:
- sell enough shares, including voting shares, to become adequately
capitalized;
- merge with, or be sold to, another institution or holding company, but
only if grounds exist for appointing a conservator or receiver;
- restrict transactions with banking affiliates as if the "sister bank"
exception to the requirements of Section 23A of the Federal Reserve Act
did not exist;
- otherwise restrict transactions with bank or non-bank affiliates;
- restrict interest rates that the institution pays on deposits to
"prevailing rates" in the institution's "region";
- restrict asset growth or reduce total assets;
- alter, reduce, or terminate activities;
- hold a new election of directors;
- dismiss any director or senior executive officer who held office for more
than 180 days immediately before the institution became undercapitalized,
provided that in requiring dismissal of a director or senior officer, the
agency must comply with prescribed procedural requirements, including the
opportunity for an appeal in which the director or officer will have the
burden of proving his or her value to the institution;
- employ "qualified" senior executive officers;
- cease accepting deposits from correspondent depository institutions;
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- divest nondepository affiliates which pose a danger to the institution;
or
- be divested by a parent holding company.
In addition, without the prior approval of the appropriate federal banking
agency, a significantly undercapitalized institution may not pay any bonus to
any senior executive officer or increase the rate of compensation for such an
officer.
DEPOSIT INSURANCE. Citizens First Bank's deposits will be insured by the
Federal Deposit Insurance Corporation up to the statutory limit of $100,000 per
depositor through the Bank Insurance Fund. Under current law, the insurance
assessment paid by Bank Insurance Fund-insured institutions is set by the
Federal Deposit Insurance Corporation and is designed to achieve a target
reserve ratio of 1.25 percent of estimated insured deposits or such higher ratio
as the Federal Deposit Insurance Corporation may determine in accordance with
law. The Federal Deposit Insurance Corporation is also authorized to impose one
or more special assessments in any amount deemed necessary to enable repayment
of amounts borrowed by the Federal Deposit Insurance Corporation from the
Treasury Department. Bank Insurance Fund annual assessment rates currently range
from 0 to 27 basis points. The actual assessment rate paid by individual
institutions is determined by the risk category rating of the institution as
determined by the Federal Deposit Insurance Corporation.
On September 30, 1996, Congress enacted the Deposit Insurance Funds Act of
1996. The Funds Act authorized the Financing Corporation to levy assessments on
Bank Insurance Fund-assessable deposits and stipulates that the rate must equal
one-fifth of the Financing Corporation assessment rate that is applied to
deposits assessable by the Savings Association Insurance Fund. Based on June 30,
1996, deposit date, Financing Corporation assessments imposed on Bank Insurance
Fund-insured deposits in annual amounts are presently estimated at 1.26 basis
points.
EFFECTS OF GOVERNMENTAL POLICIES AND ECONOMIC CONDITIONS. Citizens First
Bank's earnings will be affected by the difference between the interest earned
by Citizens First Bank on its loans and investments and the interest paid by
Citizens First Bank on its deposits or other borrowings. The yields on its
assets and the rates paid on its liabilities are sensitive to changes in
prevailing market rates of interest. Thus, the earnings and growth of Citizens
First Bank will be influenced by general economic conditions, fiscal policies of
the Federal government, and the policies of regulatory agencies, particularly
the Federal Reserve Board, which establishes national monetary policy, all of
which are beyond Citizens First Bank's control. The nature and impact of any
future changes in fiscal or monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities, or affecting the competitive balance between banks and other
financial institutions. For example, the Depository Institutions Deregulation
and Monetary Control Act of 1980 provided for the phasing out of restrictions on
deposit interest rate ceilings, the authorization of new accounts and related
services, and the expansion of the lending authority of savings and loan
associations. The Depository Institutions Deregulation Act, has altered the
competitive relationship that previously existed among financial institutions,
and has resulted in a substantial reduction in the historical distinction
between the services offered by banks, savings and loan associations and other
financial institutions.
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MONETARY POLICY. Commercial banks, including Citizens First Bank, are
affected by the credit policy of various regulatory authorities, including the
Federal Reserve Board. An important function of the Federal Reserve Board is to
regulate the national supply of bank credit. Among the instruments of monetary
policy used by the Federal Reserve Board to implement these objectives are open
market operations in U.S. government securities, changes in reserve requirements
on bank deposits, changes in the discount rate on bank borrowings and
limitations on interest rates that banks may pay on time and savings deposits.
The Federal Reserve Board uses these means in varying combinations to influence
overall growth of bank loans, investments and deposits, and also to affect
interest rates charged on loans, received on investments or paid for deposits.
The monetary and fiscal policies of regulatory authorities, including the
Federal Reserve Board, also affect the banking industry. Through changes in the
reserve requirements against bank deposits, open market operations in U.S.
government securities and changes in the discount rate on bank borrowings, the
Federal Reserve Board influences the cost and availability of funds obtained for
lending and investing. No prediction can be made with respect to possible future
changes in interest rates, deposit levels or loan demand or with respect to the
impact of such changes on the business and earnings of Citizens First Bank.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement between
us and J.J.B. Hilliard, W.L. Lyons, Inc. as underwriter, we have agreed to sell
to such underwriter the shares. The underwriting agreement provides that the
obligations of the underwriter thereunder are subject to conditions and provide
for our payment of some expenses incurred in connection with the review of the
underwriting arrangements for the offering by the National Association of
Securities Dealers, Inc. Under the terms and conditions of the underwriting
agreement, the underwriter is committed to take and pay for all of the shares
offered under this prospectus, if any are taken.
We and the underwriter have agreed that the underwriter will purchase the
466,667 shares of common stock offered under this prospectus at a price to the
public of $15.00 per share less underwriting discounts of $1.05 per share. The
underwriter proposes to offer the shares to the public at the public offering
price set forth on the cover page of this prospectus and to dealers at such
price less a concession not in excess of $.63 per share. Subject to our
discretion, no more than 14,000 shares may be purchased from the underwriter by
any person, including his affiliates and immediate family members. After the
offering, the offering price and other selling terms may be changed by the
underwriter.
We have granted the underwriter an option exercisable for 30 days after the
date of this prospectus to purchase up to an aggregate of 70,000 additional
shares, solely to cover over-allotments, if any at the same price per share as
is to be paid by the underwriter for the other shares offered under this
prospectus. If the underwriter exercises its option for any over-allotments, the
underwriter has agreed, subject to some conditions, to purchase such
over-allotment shares.
We have agreed, during the period beginning from the date of this
prospectus and continuing to and including the date 180 days after the date of
the final prospectus, not to offer, sell, contract to sell or otherwise dispose
of any shares of common stock or preferred stock which are substantially similar
to the shares or which are convertible or exchangeable into securities which are
substantially similar to the shares without the prior consent of the
underwriter. Our current shareholders have agreed not to offer, sell, contract
to sell or otherwise dispose of any of our securities beginning from the date of
this prospectus and continuing to and including the date 180 days after the date
of the final prospectus. The underwriter has indicated that it has no intention
of consenting to any deviation from these lock-up agreements.
The underwriter has informed us that it does not intend to make sales to
any accounts over which it exercises discretionary authority.
Prior to the offering, there has been no public market for the common
stock. The initial public offering price of the common stock was determined by
us and the underwriter. This price is not based upon earnings or any history of
operations and should not be construed as indicative of the present or
anticipated value of shares of common stock. Several factors were considered in
determining the initial public offering price of the shares, including the size
of the offering and the desire that the shares be attractive to individuals.
To facilitate the offering of the shares, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the common stock. Specifically, the underwriter may over-allot shares in
connection with the offering, thereby creating a short position in the
underwriter's syndicate account. Additionally, to cover such
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over-allotments or to stabilize the market price of the shares, the underwriter
may bid for, and purchase, shares in the open market. Any of these activities
may maintain the market price of the shares at a level above that which might
otherwise prevail in the open market. The underwriter is not required to engage
in these activities, and, if commenced, any such activities may be discontinued
at any time.
We have agreed to indemnify the underwriter against some liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares offered under this prospectus is being passed
upon for us by Stoll, Keenon & Park, LLP, Lexington, Kentucky. Other legal
matters in connection with the offering will be passed upon for the underwriter
by Brown, Todd & Heyburn PLLC, Louisville, Kentucky.
EXPERTS
Our financial statements as of December 31, 1997 and 1996, and for the
years then ended, included in this prospectus and in the registration statement,
have been so included in reliance upon the report of KPMG LLP, independent
certified public accountants, included in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
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CITIZENS FIRST CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
FINANCIAL STATEMENTS:
Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997 and 1996................................ F-3
Statements of Income for the nine months ended September 30,
1998 and 1997 (unaudited) and the years ended December 31,
1997 and 1996............................................. F-4
Statements of Comprehensive Income for the nine months ended
September 30, 1998 and 1997 (unaudited) and the years
ended December 31, 1997 and 1996.......................... F-5
Statements of Changes in Stockholders' Equity for the nine
months ended September 30, 1998 (unaudited) and the years
ended December 31, 1997 and 1996.......................... F-6
Statements of Cash Flows for the nine months ended September
30, 1998 and 1997 (unaudited) and the years ended December
31, 1997 and 1996......................................... F-7
Notes to Financial Statements............................... F-8
</TABLE>
F-1
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Citizens First Corporation:
We have audited the accompanying balance sheets of Citizens First
Corporation (the Company) as of December 31, 1997 and 1996, and the related
statements of income, comprehensive income, changes in stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Citizens First Corporation
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Louisville, Kentucky
October 30, 1998
F-2
<PAGE> 61
CITIZENS FIRST CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------
1998 1997 1996
------------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 30,948 $ 108,484 $ 10,118
Securities available for sale (amortized cost
of $227,003, $192,308 and $235,408,
respectively) (notes 3 and 6).............. 1,342,882 1,098,977 814,694
---------- ---------- --------
Total current assets............... 1,373,830 1,207,461 824,812
Fixed assets................................. 6,032 -- --
Other........................................ 2,200 -- --
---------- ---------- --------
$1,382,062 $1,207,461 $824,812
========== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................. $ 141,575 $ -- $ --
Taxes payable................................ -- 11,608 10,803
Deferred tax liability....................... 379,399 308,267 196,957
---------- ---------- --------
Total current liabilities.......... 520,974 319,875 207,760
---------- ---------- --------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 1,000,000 shares
authorized, 102,000 shares issued and
outstanding (note 7)....................... -- -- --
Paid-in capital.............................. 20,542 20,542 20,542
Retained earnings............................ 104,065 268,642 214,181
Accumulated other comprehensive income....... 736,481 598,402 382,329
---------- ---------- --------
Total stockholders' equity......... 861,088 887,586 617,052
---------- ---------- --------
Total current liabilities and
stockholders' equity............ $1,382,062 $1,207,461 $824,812
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 62
CITIZENS FIRST CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -----------------
1998 1997 1997 1996
--------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Dividend and interest income.............. $ 10,413 $10,098 $13,861 $12,105
Gain on sale of securities................ -- -- 53,566 52,387
--------- ------- ------- -------
Total revenues.................. 10,413 10,098 67,427 64,492
EXPENSES:
Salaries and employee benefits............ 37,796 -- -- --
Professional fees......................... 127,329 -- -- --
Registration fees......................... 7,500 -- -- --
License fees.............................. -- 164 164 134
Administrative............................ 1,121 565 600 595
Other..................................... 1,244 359 594 34
--------- ------- ------- -------
Total expenses.................. 174,990 1,088 1,358 763
--------- ------- ------- -------
Income (loss) before income
taxes........................ (164,577) 9,010 66,069 63,729
Income tax expense (note 4)............... -- 1,401 11,608 10,803
--------- ------- ------- -------
Net income (loss)............... $(164,577) $ 7,609 $54,461 $52,926
========= ======= ======= =======
Earnings (loss) per
share -- basic and diluted... $ (1.61) $ 0.07 $ 0.53 $ 0.52
========= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 63
CITIZENS FIRST CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------- -------------------
1998 1997 1997 1996
--------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss)...................... $(164,577) $ 7,609 $ 54,461 $ 52,926
Other comprehensive income:
Unrealized holding gain on available
for sale securities arising during
the period, net of tax of $71,132,
$106,861, $111,310 and $68,597,
respectively...................... 138,079 207,436 248,204 165,895
Reclassification adjustment for prior
period unrealized gain recognized
during current period, net of tax
of $16,553 and $16,865 in 1997 and
1996, respectively................ -- -- (32,131) (32,737)
--------- -------- -------- --------
Net gain recognized in other
comprehensive income...... 138,079 207,436 216,073 133,158
--------- -------- -------- --------
Comprehensive income (loss)............ $ (26,498) $215,045 $270,534 $186,084
========= ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 64
CITIZENS FIRST CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TOTAL
---------------- PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME EQUITY
------- ------ ------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995 (unaudited).... 102,000 $-- $20,542 $ 161,255 $249,171 $ 430,968
Comprehensive income:
Net income............ -- -- -- 52,926 -- 52,926
Other comprehensive
income, net of tax:
Unrealized gain on
available for
sale securities,
net of
reclassification
adjustment....... -- -- -- -- 133,158 133,158
---------
Comprehensive
income.............. 186,084
------- --- ------- --------- -------- ---------
Balance, December 31,
1996................ 102,000 -- 20,542 214,181 382,329 617,052
Comprehensive income:
Net income............ -- -- -- 54,461 -- 54,461
Other comprehensive
income, net of tax:
Unrealized gain on
available for
sale securities,
net of
reclassification
adjustment....... -- -- -- -- 216,073 216,073
---------
Comprehensive
income.............. 270,534
------- --- ------- --------- -------- ---------
Balance, December 31,
1997................ 102,000 -- $20,542 268,642 598,402 887,586
Comprehensive income:
Net loss.............. -- -- -- (164,577) -- (164,577)
Other comprehensive
income, net of tax:
Unrealized gain on
available for
sale securities,
net of
reclassification
adjustment....... -- -- -- -- 138,079 138,079
---------
Comprehensive loss.... (26,498)
------- --- ------- --------- -------- ---------
Balance, September 30,
1998................ 102,000 $-- $20,542 $ 104,065 $736,481 $ 861,088
======= === ======= ========= ======== =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 65
CITIZENS FIRST CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------
1998 1997 1997 1996
--------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................ $(164,577) $ 7,609 $ 54,461 $52,926
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Gain on sale of securities............. -- -- (53,566) (52,387)
Increase in other assets............... (2,200) -- -- --
Increase in accounts payable........... 141,575 -- -- --
Increase (decrease) in taxes payable... (11,608) (9,402) 805 1,808
--------- ------- -------- -------
Net cash provided by (used in)
operating activities........ (36,810) (1,793) 1,700 2,347
--------- ------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities
available for sale..................... -- -- 113,049 68,021
Proceeds from partial return of capital
on securities available for sale....... 3,583 -- -- --
Purchases of securities available for
sale................................... (38,277) -- (16,383) (68,384)
Purchases of equipment................... (6,032) -- -- --
--------- ------- -------- -------
Net cash provided by (used in)
investing activities........ (40,726) -- 96,666 (363)
--------- ------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:.... -- -- -- --
--------- ------- -------- -------
Net increase (decrease) in cash and cash
equivalents............................ (77,536) (1,793) 98,366 1,984
Cash and cash equivalents, beginning..... 108,484 10,118 10,118 8,134
--------- ------- -------- -------
Cash and cash equivalents, ending........ $ 30,948 $ 8,325 $108,484 $10,118
========= ======= ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes............... $ 14,010 $10,803 $ 10,803 $ 8,970
========= ======= ======== =======
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 66
CITIZENS FIRST CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
Citizens First Corporation ("the Company") was incorporated on December 24,
1975 for the purpose of conducting business as an investment club. The Company
is registered under the laws of the Commonwealth of Kentucky and is
headquartered in Bowling Green, Kentucky. In September 1998, the Company filed
an application with the Kentucky Department of Financial Institutions ("KDFI")
and the Federal Deposit Insurance Corporation ("FDIC") to organize and charter
Citizens First Bank, Inc. (the "Bank") as a new Kentucky bank and a wholly-owned
subsidiary of the Company. The Company will file an application to the Board of
Governors of the Federal Reserve System ("FRB") for approval to become a bank
holding company under the Holding Company Act of 1956, as amended. After the
Bank is chartered and opens for business the principal business activity of the
Company will be the business of banking conducted through its wholly-owned
subsidiary Bank. The Company will not be authorized to do business as a bank
holding company until it secures the approval of the FRB.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
(B) INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The interim financial statements as of September 30, 1998 and for the nine
months ended September 30, 1998 and 1997 are unaudited. In the opinion of
management, such interim financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position and results of operations.
(C) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and balances due from banks.
(D) SECURITIES
Securities available for sale include securities which may be sold in
response to changes in interest rates, resultant prepayment risk and other
factors related to interest rate and prepayment risk changes. Securities
available for sale are carried at fair value with unrealized gains or losses,
net of tax effect, included in stockholders' equity. Amortization of premiums
and accretion of discounts are recorded using the interest method. Gains or
losses on sales of securities are computed on a specific identification cost
basis.
F-8
<PAGE> 67
CITIZENS FIRST CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(E) INCOME TAXES
The Company utilizes the asset and liability approach to accounting for
income taxes. The objective of the asset and liability method is to establish
deferred tax assets and liabilities for temporary differences between the
financial reporting and the tax bases of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
(F) EARNINGS PER SHARE
Basic earnings per share (EPS) is determined by dividing income by the
weighted average number of shares of common stock outstanding during the period
adjusted for the stock split described in note 7. Diluted EPS takes into account
the dilutive effect of common stock equivalents. Diluted and basic EPS are the
same for the Company as the Company does not have common stock equivalents.
(3) SECURITIES
The amortized cost, gross unrealized gains and losses, and fair value of
securities available for sale at September 30, 1998 and December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
AMORTIZED ------------------- FAIR
SEPTEMBER 30, 1998 COST GAINS LOSSES VALUE
- ------------------ --------- ---------- ------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Equity securities....................... $227,003 $1,115,879 -- $1,342,882
======== ========== == ==========
DECEMBER 31, 1997
- -----------------
Equity securities....................... $192,308 $ 906,669 -- $1,098,977
======== ========== == ==========
DECEMBER 31, 1996
- -----------------
Equity securities....................... $235,408 $ 579,286 -- $ 814,694
======== ========== == ==========
</TABLE>
Gross gains of $53,566 and $52,387, respectively, were realized on sales of
securities in 1997 and 1996. There were no gross losses realized on sales of
securities in 1997 and 1996.
(4) INCOME TAXES
The total income tax expense was allocated as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------
1998 1997 1997 1996
------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income from operations.................... $ -- $ 1,401 $ 11,608 $10,803
Stockholders' equity, for unrealized net
gain on securities available for sale... 71,132 106,861 111,310 68,596
------- -------- -------- -------
Total........................... $71,132 $108,262 $122,918 $79,399
======= ======== ======== =======
</TABLE>
F-9
<PAGE> 68
CITIZENS FIRST CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) INCOME TAXES -- (CONTINUED)
The components of income tax expense from operations consist of the
following:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- -----------------
1998 1997 1997 1996
------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current................................... $ -- $1,401 $11,608 $10,803
Deferred.................................. -- -- -- --
------ ------ ------- -------
Total........................... $ -- $1,401 $11,608 $10,803
====== ====== ======= =======
</TABLE>
An analysis of the differences between the effective tax rates and the
statutory U.S. federal income tax rate is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------
1998 1997 1997 1996
-------- ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax based on statutory rate............. $(55,956) $3,063 $22,463 $21,668
Surtax exemption........................ -- (1,712) (10,946) (10,736)
Increase in valuation allowance......... 55,956 -- -- --
Other, net.............................. -- 50 91 (129)
-------- ------ ------- -------
Total......................... $ -- $1,401 $11,608 $10,803
======== ====== ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER 31,
30, -------------------
1998 1997 1996
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
DEFERRED TAX ASSET:
Net operating loss carryforward.............. $ 55,956 $ -- $ --
Valuation allowance.......................... (55,956) -- --
-------- -------- --------
Net deferred tax asset............. -- -- --
DEFERRED TAX LIABILITY:
Investment securities........................ 379,399 308,267 196,957
-------- -------- --------
Net deferred tax liability......... $379,399 $308,267 $196,957
======== ======== ========
</TABLE>
F-10
<PAGE> 69
CITIZENS FIRST CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) INCOME TAXES -- (CONTINUED)
Under the asset and liability method, the likelihood of realizing tax
benefits related to potential deferred tax assets is evaluated by management and
a valuation allowance is recognized to reduce the deferred tax asset if it is
more likely than not that the deferred asset will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment.
(5) RELATED PARTY TRANSACTION
The Company began occupying office space from a stockholder at no charge
during 1998.
(6) CONCENTRATION OF MARKET RISK
Substantially all of the Company's assets consist of equity securities. The
single largest common stock held at September 30, 1998 and December 31, 1997 and
1996 was approximately 47%, 48% and 39% of total assets, respectively.
(7) SUBSEQUENT EVENTS
On August 5, 1998, the Company's board of directors approved to increase
the number of authorized shares to 1,000,000. At the same time, the board of
directors approved a 100 for 1 stock split to properly adjust the outstanding
shares to the approximate market value of current assets in light of the
increase in authorized shares. All share and per share information included in
the accompanying financial statements have been adjusted to reflect the stock
split.
On October 8, 1998, the Company signed a one-year promissory note in the
amount of $1,120,000 to purchase and renovate a building to serve as the Bank's
principal office. The note is secured by the building and the Company's
investment securities. Terms of the note require quarterly interest payments
commencing on January 8, 1999 at one-half percent below the prime rate and
principal due on October 8, 1999.
On October 30, 1998, the Company obtained a $250,000 operating line of
credit secured by the Company's investment securities. The line of credit bears
interest at the prime rate and matures on October 8, 1999.
F-11
<PAGE> 70
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR
AFFAIRS SINCE THE DATE OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................. 3
RISK FACTORS........................ 6
FORWARD-LOOKING STATEMENTS.......... 10
BUSINESS............................ 11
SELECTED FINANCIAL DATA............. 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 26
MANAGEMENT.......................... 31
PRINCIPAL SHAREHOLDERS.............. 36
USE OF PROCEEDS..................... 39
CAPITALIZATION...................... 41
RELATED PARTY TRANSACTIONS.......... 41
DESCRIPTION OF CAPITAL STOCK........ 42
SHARES ELIGIBLE FOR FUTURE SALE..... 43
SUPERVISION AND REGULATION.......... 44
UNDERWRITING........................ 56
LEGAL MATTERS....................... 57
EXPERTS............................. 57
INDEX TO FINANCIAL STATEMENTS....... F-1
</TABLE>
-------------------------
UNTIL MAY , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
466,667 Shares
(CITIZENS FIRST Corporation LOGO)
Common Stock
------------------------
PROSPECTUS
------------------------
J.J.B. HILLIARD, W.L. LYONS, INC.
February , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 71
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XIII entitled INDEMNIFICATION OF DIRECTORS & OFFICERS, of the small
business issuer's Amended and Restated Bylaws provides as follows:
SECTION 1. DEFINITIONS. As used in this article, the term
"person" means any past, present or future Director or officer of
the Corporation.
SECTION 2. INDEMNIFICATION GRANTED. The Corporation shall
indemnify, to the full extent and under the circumstances
permitted by the Kentucky Business Corporation Act in effect,
from time to time, any person as defined above, made or
threatened to, be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is
or was a Director, officer of the Corporation, or designated
officer of an operating division of the Corporation, or is or was
an employee or agent of the Corporation, or is or was serving at
the specific request of the Corporation as a Director, officer,
employee or agent of another company or other enterprise in which
the Corporation should own, directly or indirectly, an equity
interest or of which it may be a creditor.
This right of indemnification shall not be deemed exclusive of
any other rights to which a person indemnified herein may be
entitled by law, agreement, vote of Shareholders or disinterested
Directors, the Kentucky Business Corporation Act, or otherwise,
and shall continue as to a person who has ceased to be a
Director, officer, designated officer, employee or agent, and
shall inure to the benefit of the heirs, executors,
administrators and other legal representatives of such person. It
is not intended that the provisions of this article be applicable
to, and they are not to be construed as granting indemnity with
respect to, matters as to which indemnification would be in
contravention of the laws of Kentucky or the United States of
America, whether as a matter of public policy or pursuant to
statutory provision.
Indemnification of corporate directors and officers is governed by
Sections 271B.8-500 through 271B.8-580 of the Kentucky Revised Statutes (the
"Act"). Under the Act, a person may be indemnified by a corporation against
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) actually and necessarily incurred by him in connection with any
threatened or pending suit or proceeding or any appeal thereof (other than an
action by or in the right
<PAGE> 72
of the corporation), whether civil or criminal, by reason of the fact that he is
or was a director or officer of the corporation or is or was serving at the
request of the corporation as a director or officer, employee or agent of
another corporation of any type or kind, domestic or foreign, if such director
or officer acted in good faith for a purpose which he reasonably believed to be
in the best interests of the corporation and, in criminal actions or proceedings
only, in addition, had no reasonable cause to believe that his conduct was
unlawful. A Kentucky corporation may indemnify a director or officer thereof in
a suit by or in the right of the corporation against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and necessarily
incurred as a result of such suit if such director or officer acted in good
faith for a purpose which he reasonably believed to be in the best interests of
the corporation.
A person who has been wholly successful, on the merits or otherwise, in the
defense of any of the foregoing types of suits or proceedings is entitled to
indemnification for the foregoing amounts. A person who has not been wholly
successful in any such suit or proceeding may be indemnified only upon the order
of a court or a finding that the director or officer met the required statutory
standard of conduct by (i) a majority vote of a disinterested quorum of the
Board of Directors, (ii) the Board of Directors based upon the written opinion
of independent legal counsel to such effect, or (iii) a vote of the shareholders
(excluding shares held by the person in question).
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses in connection with the issuance
and distribution of the securities being registered. Except for the registration
fee, all of the amounts shown are estimates.
<TABLE>
<S> <C>
Registration Fee $ 2,237.90
Blue Sky Fees and Expenses 6,000.00
NASD Filing Fee 1,305.00
Accounting Fees 12,000.00
Legal Fees 40,000.00
Printing 30,000.00
Miscellaneous Expenses 5,957.10
-----------
Total $ 97,500.00
===========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
No securities have been sold by the small business issuer within the past
three years without registering the securities under the Securities Act of 1933.
ITEM 27. EXHIBITS
The following exhibits are filed herein:
II-2
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1* Form of Underwriting Agreement between Citizens First
Corporation and J.J.B. Hilliard, W.L. Lyons, Inc.
3.1* Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now Citizens
First Corporation)
3.2* Amended and Restated Bylaws of Citizens First Corporation
3.3 Articles of Amendment to Articles of Restatement and
Amendment to Articles of Incorporation of Citizens First
Corporation
4* Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now Citizens
First Corporation) (included in Exhibit 3.1)
5* Opinion of Stoll, Keenon & Park, LLP as to the validity of
the shares of Citizens First Corporation Common Stock being
registered
10.1* Employment Agreement between Citizens First Corporation and
Mary D. Cohron
10.2* First Amendment to Employment Agreement between Citizens
First Corporation and Mary D. Cohron
10.3* Employment Agreement between Citizens First Corporation and
John T. Perkins
10.4* Employment Agreement between Citizens First Corporation and
Gregg A. Hall
10.5* Bank Contract for Electronic Data Processing Services and
Customerfile System between Fiserv Bowling Green and
Citizens First Bank (in organization)
10.6* Promissory Note secured by Real Estate Mortgage and Security
Agreement and Stock Pledge (issued by Citizens First
Corporation for benefit of First Security Bank of Lexington)
10.7* Deed of Conveyance from David A. and Karla N. Dozer to
Citizens First Corporation
10.8* Security Agreement and Stock Pledge between Citizens First
Corporation and First Security Bank of Lexington
10.9* Mortgage from Citizens First Corporation to First Security
Bank of Lexington
10.10* Commercial Line of Credit Agreement and Note between
Citizens First Corporation and First Security Bank of
Lexington
</TABLE>
II-3
<PAGE> 74
<TABLE>
<S> <C>
10.11* Assignment of Securities Account by Citizens First
Corporation
10.12* Employment Agreement between Citizens First Corporation and
Barry D. Bray
10.13* Consulting Agreement between Citizens First Corporation and
The Carpenter Group
10.14* Lease Agreement between Citizens First Corporation and
Midtown Plaza, Inc.
11* Statement re: computation of per share earnings
21* Subsidiaries of Citizens First Corporation
23.1 Consent of KPMG LLP
23.2* Consent of Stoll, Keenon & Park, LLP (included in Exhibit 5)
24* Power of attorney from officers and directors of the Company
27.1* Financial Data Schedule for the nine months ended September
30, 1998
27.2* Financial Data Schedule for the year ended December 31, 1997
27.3* Financial Data Schedule for the year ended December 31, 1996
</TABLE>
- ------------------
*Previously filed.
ITEM 28. UNDERTAKINGS
The undersigned small business issuer hereby undertakes:
(1) That for the purposes of determining any liability under the Securities
Act of 1933 (the "Act"), it will treat the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the small business issuer
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it effective.
(2) That for the purposes of determining any liability under the Act, it
will treat each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial bona
fide offering of those securities.
(3) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the
II-4
<PAGE> 75
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(4) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
II-5
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to
registration statement to be signed on its behalf by the undersigned, in the
City of Bowling Green, Commonwealth of Kentucky on this the 3rd day of
February, 1999.
CITIZENS FIRST CORPORATION
By: /s/ Mary D. Cohron
---------------------------------
Mary D. Cohron
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
amendment to registration statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Floyd H. Ellis* Chairman of the Board of February 3, 1999
- ------------------------ Directors
Floyd H. Ellis
/s/ Mary D. Cohron President; Chief Executive February 3, 1999
- ------------------------ Officer; Director
Mary D. Cohron (Principal Executive Officer)
/s/ Gregg A. Hall* Chief Financial Officer February 3, 1999
- ------------------------ (Principal Financial and
Gregg A. Hall Accounting Officer)
</TABLE>
II-6
<PAGE> 77
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Billy J. Bell* Director February 3, 1999
- ------------------------
Billy J. Bell
/s/ Joe B. Natcher, Jr.* Director February 3, 1999
- -------------------------
Joe B. Natcher, Jr.
/s/ Jerry E. Baker* Director February 3, 1999
- -------------------------
Jerry E. Baker
/s/ James H. Lucas* Secretary; Director February 3, 1999
- -------------------------
James H. Lucas
/s/ John T. Perkins* Chief Operating Officer; February 3, 1999
- ------------------------- Director
John T. Perkins
*By: /s/ Mary D. Cohron
---------------------
Mary D. Cohron
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 78
CITIZENS FIRST CORPORATION
FORM SB-2
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1* Form of Underwriting Agreement between Citizens First
Corporation and J.J.B. Hilliard, W.L. Lyons, Inc.
3.1* Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now Citizens
First Corporation)
3.2* Amended and Restated Bylaws of Citizens First Corporation
3.3 Articles of Amendment to Articles of Restatement and
Amendment to Articles of Incorporation of Citizens First
Corporation
4* Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now Citizens
First Corporation) (included in Exhibit 3.1)
5* Opinion of Stoll, Keenon & Park, LLP as to the validity of
the shares of Citizens First Corporation Common Stock being
registered
10.1* Employment Agreement between Citizens First Corporation and
Mary D. Cohron
10.2* First Amendment to Employment Agreement between Citizens
First Corporation and Mary D. Cohron
10.3* Employment Agreement between Citizens First Corporation and
John T. Perkins
10.4* Employment Agreement between Citizens First Corporation and
Gregg A. Hall
10.5* Bank Contract for Electronic Data Processing Services and
Customerfile System between Fiserv Bowling Green and
Citizens First Bank (in organization)
10.6* Promissory Note secured by Real Estate Mortgage and Security
Agreement and Stock Pledge (issued by Citizens First
Corporation for benefit of First Security Bank of Lexington)
10.7* Deed of Conveyance from David A. and Karla N. Dozer to
Citizens First Corporation
10.8* Security Agreement and Stock Pledge between Citizens First
Corporation and First Security Bank of Lexington
</TABLE>
<PAGE> 79
<TABLE>
<S> <C>
10.9* Mortgage from Citizens First Corporation to First Security
Bank of Lexington
10.10* Commercial Line of Credit Agreement and Note between
Citizens First Corporation and First Security Bank of
Lexington
10.11* Assignment of Securities Account by Citizens First Corporation
10.12* Employment Agreement between Citizens First Corporation and
Barry D. Bray
10.13* Consulting Agreement between Citizens First Corporation and
The Carpenter Group
10.14* Lease Agreement between Citizens First Corporation and
Midtown Plaza, Inc.
11* Statement re: computation of per share earnings
21* Subsidiaries of Citizens First Corporation
23.1 Consent of KPMG LLP
23.2* Consent of Stoll, Keenon & Park, LLP (included in Exhibit 5)
24* Power of attorney from officers and directors of the Company
27.1* Financial Data Schedule for the nine months ended September
30, 1998
27.2* Financial Data Schedule for the year ended December 31, 1997
27.3* Financial Data Schedule for the year ended December 31, 1996
</TABLE>
- ---------------------
*Previously filed.
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO
ARTICLES OF RESTATEMENT AND AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
CITIZENS FIRST CORPORATION
These ARTICLES OF AMENDMENT TO ARTICLES OF RESTATEMENT AND
AMENDMENT TO ARTICLES OF INCORPORATION OF CITIZENS FIRST CORPORATION
(hereinafter "the Corporation") executed this 21st day of January 1999, evidence
and certify that by Resolutions of the Board of Directors and Shareholders of
the Corporation dated 11 November 1998, the following Articles of Amendment to
its Articles of Restatement and Amendment to Articles of Incorporation were duly
adopted pursuant to KRS 271B.10-060:
I
The present name of the Corporation is Citizens First
Corporation.
II
Article IV of the Articles of Restatement and Amendment to
Articles of Incorporation is hereby amended to read as follows:
The total number of shares of stock authorized to be issued
and the authorized class thereof is:
(a) One Million (1,000,000) shares of no par value common
stock; the voting of such stock shall be one (1) vote
per share. The shareholders of common stock shall not
have preemptive rights.
(b) Five Hundred (500) shares of preferred stock, which
stock shall have the preferences, limitations and
relative rights as
<PAGE> 2
may be established from time to time by the Board of
Directors. The Board of Directors are hereby vested with
the authority to amend the Articles of Incorporation for
purposes of setting forth the preferences, limitations
and relative rights of the holders of preferred stock
prior to the issuance of same without submitting the
amendment to the Articles of Incorporation to the
Shareholders.
IN TESTIMONY WHEREOF, the Corporation has subscribed its name
on this the 21st day of January, 1999.
CITIZENS FIRST CORPORATION
BY: /s/ Mary Cohron
----------------------------------
MARY COHRON, PRESIDENT
ATTEST:
/s/ James H. Lucas
- -----------------------------
JAMES H. LUCAS, SECRETARY
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
I, the undersigned, a Notary Public in and for the
Commonwealth and County aforesaid, do hereby certify that the foregoing Articles
of Amendment to the Articles of Restatement and Amendment to Articles of
Incorporation of Citizens First Corporation was executed before me by Citizens
First Corporation, by and through its President, Mary Cohron, and Secretary,
James H. Lucas, and that the said Mary Cohron and James H. Lucas personally
appeared before me, after being first duly sworn, and declared that they were
the officers designated and that they executed the foregoing Articles of
Amendment to Articles of Restatement and Amendment to Articles of Incorporation
of Citizens First Corporation and that the statements contained therein are the
free and voluntary act and deed of Citizens First Corporation.
Witness my hand on this the 21st day of January, 1999.
-------------------------------------
NOTARY PUBLIC, Ky. State-at-Large
My Commission Expires: 8-24-02
--------------
THIS INSTRUMENT PREPARED BY:
ENGLISH, LUCAS, PRIEST & OWSLEY
Attorneys at Law
1101 College St., P.O. Box 770
Bowling Green, KY 42102-0770
BY: /s/ Keith M. Carwell
-----------------------------------
KEITH M. CARWELL
2
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Citizens First Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Louisville, Kentucky
February 4, 1999
