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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------------------------------
FIRST FINANCIAL BANCORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------------------------------------
OHIO 6711 31-1042001
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
--------------------------------------------------
THIRD AND HIGH STREETS
HAMILTON, OHIO 45011
(513) 867-4700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------------------------------
RICHARD E. WEINMAN
EXEC. VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY, AND TREASURER
THIRD AND HIGH STREETS
HAMILTON, OHIO 45011
(513) 867-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------------------------------
Copy to:
NEIL GANULIN
FROST & JACOBS
2500 PNC CENTER
201 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 651-6800
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
--------------------------------------------------
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there
is compliance with General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT (1) PRICE (1) FEE
Common Stock, par value
$8.00 per share 540,000 $33.50 $18,090,000 $6,239.00
====================================================================================================================================
(1) ESTIMATED IN ACCORDANCE WITH RULE 457(f)(1) SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE.
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 SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
====================================================================================================================================
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FIRST FINANCIAL BANCORP. CROSS REFERENCE SHEET
FORM S-4 ITEM PROXY STATEMENT CAPTION
------------- -----------------------
1. Forepart of Registration Facing Page of Registration
Statement and Outside Front Cover Statement; Cross Reference
Page of Prospectus Sheet; Outside Front Cover
Page of Proxy Statement-
Prospectus; Introduction
2. Inside Front and Outside Back Available Information;
Cover Pages of Prospectus Documents Incorporated by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings Introduction; Summary;
to Fixed Charges and Other Comparative Market and Dividend
Information Information; Principal
Shareholders and Ownership
By Management
4. Terms of the Transaction Summary; Description of the
Merger; Comparison of Common
Stock and Shareholders'
Rights
5. Pro Forma Financial Information Pro Forma Consolidated Balance
Sheet; Pro Forma Condensed
Consolidated Statements of
Earnings; Pro Forma
Consolidated Selected
Financial Data
6. Material Contacts with the Summary; Description of the
Company Being Acquired Merger
7. Additional Information Required Not Applicable
for Reoffering by Persons and Parties
Deemed to Be Underwriters
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission Position Not Applicable
on Indemnification for Securities Act
Liabilities
10. Information with Respect to S-3 Not Applicable
Registrants
11. Incorporation of Certain Not Applicable
Information by Reference
12. Information with Respect to S-2 Documents Incorporated By
or S-3 Registrants Reference; Information About
Bancorp; Comparative Market
And Dividend Information
13. Incorporation of Certain Documents Incorporated By
Information by Reference Reference
14. Information with Respect to Not Applicable
Registrants Other Than S-3 or S-2
Registrants
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 Not Applicable
or S-3 Companies
17. Information with Respect to Information About the Business
Companies Other than of Bright; Bright's
S-3 or S-2 Companies Consolidated Financial
Statements; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations of Bright;
Comparative Market and Dividend
Information; Comparison of
Common Stock and Shareholders'
Rights
18. Information if Proxies, Consents Notice of Special Meeting of
Authorizations are to be Shareholders; Documents
Solicited Incorporated By Reference;
Introduction; Summary;
Description of the Merger;
Principal Shareholders and
Ownership By Management;
Information About the Business
of Bright
19. Information if Proxies, Consents Not Applicable
or Authorizations are not to be
Solicited or in an Exchange Offer
<PAGE> 3
(LETTERHEAD OF BRIGHT FINANCIAL SERVICES, INC.)
August __, 1995
Dear Fellow Shareholder:
You are cordially invited to attend the Special Meeting of
Shareholders (the "Special Meeting") of Bright Financial Services, Inc.
("Bright") to be held on September 12, 1995 at 2:00 p.m. local time. At the
Special Meeting, you will be asked to consider and vote on a proposal to
approve the Plan and Agreement of Merger dated February 20, 1995 (the "Merger
Agreement") between First Financial Bancorp. ("Bancorp") and Bright, pursuant
to which Bright will merge with and into Bancorp. Upon consummation of the
Merger, each share of Bright presently outstanding will be surrendered and
exchanged for a number of shares of Bancorp equal to the quotient of $73.184129
divided by the value of Bancorp shares, which figure will be determined and
adjusted in accordance with and as specified in the Merger Agreement, as
summarized in the accompanying Proxy Statement-Prospectus.
The Merger Agreement has been approved by your Board of Directors and
is recommended by the Board to you for approval. The enclosed Notice of
Special Meeting and Proxy Statement-Prospectus include a description of the
proposed Merger and provide specific information concerning the transaction.
Please read these materials and consider carefully the information set forth in
them.
Whether or not you plan to attend the Special Meeting, you are urged
to complete, sign, and promptly return the enclosed proxy form. If you attend
the Special Meeting, you may vote in person if you wish, even if you have
previously returned your proxy. The Merger is a significant step for Bright
and your vote on this matter is of great importance.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL
OF THE MERGER BY MARKING THE ENCLOSED PROXY FORM "FOR" ITEM ONE.
Sincerely,
Jerry L. Holsapple
Executive Vice President and
Chief Executive Officer
<PAGE> 4
BRIGHT FINANCIAL SERVICES, INC.
4 EAST MAIN STREET
FLORA, INDIANA 46929
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 12, 1995
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Bright Financial Services, Inc. ("Bright") will be held
at the Bright Main Office, 4 East Main Street, Flora, Indiana 46929, on
September 12, 1995 at 2:00 p.m. local time, to consider and act upon the
following matters, each of which is more completely set forth in the
accompanying Proxy Statement-Prospectus:
1. The approval of the Plan and Agreement of Merger dated
February 20, 1995 by and between First Financial Bancorp. ("Bancorp")
and Bright, a copy of which is attached hereto as Appendix A (the
"Merger Agreement"), and the transactions contemplated thereby,
including the merger of Bright with and into Bancorp (the "Merger"),
pursuant to which the following will occur on the effective date of
the Merger (the "Effective Time"):
(a) Each of the outstanding shares of Bright will
be canceled and extinguished in consideration
and exchange for a number of shares of
Bancorp specified by the Merger Agreement;
(b) Bright will merge with and into Bancorp at
the Effective Time and Bancorp will be the
continuing, surviving and resulting
corporation in the Merger; and
(c) Bright National Bank will become a wholly
owned subsidiary of Bancorp.
2. A proposal to permit the Special Meeting to be adjourned
or postponed, in the discretion of the proxies, which adjournment or
postponement could be used for the purpose, among others, of allowing
time for the solicitation of additional votes to approve the Merger
Agreement.
3. The transaction of such other business as may properly
come before the Special Meeting or any adjournment thereof.
Only shareholders of record at the close of business on August 1,
1995, are entitled to receive notice of and to vote at the Special Meeting or
any adjournment thereof. Shareholders of Bright entitled to vote at the
Special Meeting may dissent from the Merger and obtain payment of the value of
their Bright Common Stock in the manner provided under Indiana Code Chapter
23-1-44.
Whether or not you plan to attend the Special Meeting, please
complete, date, and sign the enclosed proxy form and return it at once in the
stamped return envelope. The submission of such Proxy does not affect your
right to vote in person in the event that you attend the Special Meeting.
By order of the Board of Directors
___________________________________
Eunice J. Lowery, Secretary
Flora, Indiana
________ __, 1995
<PAGE> 5
BRIGHT FINANCIAL SERVICES, INC.
Proxy Statement For Special Meeting of Shareholders
To be Held September 12, 1995
-----------------------
FIRST FINANCIAL BANCORP.
Prospectus
Up to 540,000 Shares of Common Stock, Par Value $8.00 Per Share
This Proxy Statement-Prospectus is being furnished to the shareholders
of Bright Financial Services, Inc. ("Bright") in connection with the
solicitation by the Board of Directors of Bright of proxies for use at the
Special Meeting of Shareholders ("Special Meeting") to be held September 12,
1995, at 2:00 p.m. at the Bright Main Office, 4 East Main Street, Flora,
Indiana 46929, and at any adjournments thereof. This Proxy
Statement-Prospectus and the accompanying form of Proxy are being mailed to
Bright's shareholders on or about ________ __, 1995.
This Proxy Statement-Prospectus is also the prospectus of First
Financial Bancorp., an Ohio corporation ("Bancorp"), in respect of up to
540,000 shares of Bancorp's Common Stock, par value $8.00 per share (the
"Bancorp Common Stock"), to be issued in connection with the merger of Bright
with and into Bancorp. Bancorp will be the surviving entity in the Merger and
Bright National Bank will become a wholly owned subsidiary of Bancorp.
As a result of the consummation of the Merger, each Bright shareholder
will be entitled to receive from Bancorp in exchange for each share of Bright
common stock, stated value $6.25 per share (the "Bright Common Stock"),
surrendered in the Merger a number of shares of Bancorp equal to the quotient
(the "Exchange Ratio") of $73.184129 divided by the mathematical average (the
"Average") of the average of the closing daily bid and asked prices of Bancorp
Common Stock on the National Association of Securities Dealers Automated
Quotation ("Nasdaq") National Market System for the period of 20 trading days
ending at 4:00 P.M. (New York time) two trading days prior to the effective
date of the Merger. The Exchange Ratio will be appropriately adjusted in the
event of the subdivision of the outstanding Bancorp shares, the payment of a
dividend in Bancorp Common Stock, a capital reorganization, or a
reclassification or recapitalization affecting Bancorp Common Stock. The
Merger may be terminated by Bancorp if the Average of Bancorp Common Stock
falls below $26.40 per share or by Bright if the Average of Bancorp Common
Stock exceeds $39.60 per share.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given
or made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement-Prospectus does not constitute an offer
to sell, or a solicitation of an offer to purchase, the securities offered by
this Proxy Statement-Prospectus, or the solicitation of a proxy, in any
jurisdiction in which, or from any person to whom, it is unlawful to make such
offer, or solicitation of an offer, or proxy solicitation. Neither the
delivery of this Proxy Statement-Prospectus nor any distribution of the
securities offered pursuant to this Proxy Statement-Prospectus shall, under any
circumstances, create an implication that there has been no change in the
information set forth herein or in the affairs of Bright or Bancorp since the
date of the Proxy Statement-Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT ENTITY.
_________________________
The date of this Proxy Statement-Prospectus is _________, 1995.
<PAGE> 6
AVAILABLE INFORMATION
---------------------
Bancorp has filed a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the "SEC") with
respect to the Bancorp Common Stock to be issued in connection with the Merger.
As permitted by the rules and regulations of the SEC, this Proxy
Statement-Prospectus omits certain information contained in the Registration
Statement. Copies of that information may be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed fees.
In addition, Bancorp is subject to the informational, reporting and
proxy statement requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the SEC. Copies of such reports, proxy
statements and other information can be obtained, at prescribed rates, from the
SEC by addressing written requests for such copies to the Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports,
proxy statements and other information can be inspected at the public reference
facilities referred to above and at the regional offices of the SEC as follows:
New York Regional Office Chicago Regional Office
75 Park Place Everett McKinley Dirksen Building
New York, New York 10007 219 South Deerborn Street
Chicago, Illinois 60604
Bancorp Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market System. Documents filed by Bancorp with
the SEC can also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Bright is not subject to the requirements of the Exchange Act.
Documents Incorporated By Reference
- -----------------------------------
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM MICHAEL R. O'DELL,
COMPTROLLER, FIRST FINANCIAL BANCORP., THIRD AND HIGH STREETS, HAMILTON, OHIO
45011. TELEPHONE REQUESTS MAY BE DIRECTED TO BANCORP AT (513) 867-4700. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
SEPTEMBER 5, 1995.
<PAGE> 7
The following documents previously filed with the SEC by Bancorp are
hereby incorporated by reference herein:
1. Bancorp's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 (the "Bancorp Form 10-K"); and
2. Bancorp's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus is accompanied by Bancorp's 1994
Annual Report to Shareholders and Bancorp's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995.
Following the Merger, Bancorp will continue to be subject to the
informational, reporting and proxy statement requirements of the Exchange Act.
<PAGE> 8
TABLE OF CONTENTS
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INTRODUCTION
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Record Date, Solicitation And Revocability Of Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shareholder Proposals To Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SUMMARY
Terms Of The Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reasons For The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Approval Of Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Other Possible Acquisitions By Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Summary Of Selected Financial Data And Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selected Unaudited Consolidated Financial Data And Per Share Data . . . . . . . . . . . . . . . . . . . . . . 13
Notes To Selected Unaudited Consolidated Financial Data And Per Share Data . . . . . . . . . . . . . . . . . 15
Other Business To Be Acted Upon At The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF THE MERGER
Background Of And Reasons For The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Opinions Of McDonald & Company Securities, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Structure Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Surrender Of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Effective Time Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conditions To Consummation Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Termination Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Management Following The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Interest Of Certain Persons In The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Shareholders' Rights Of Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Federal Income Tax Consequences Of The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Regulatory Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
PRO FORMA UNAUDITED CONSOLIDATED SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 46
INFORMATION ABOUT BANCORP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
INFORMATION ABOUT THE BUSINESS OF BRIGHT
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
INFORMATION ABOUT THE MANAGEMENT OF BRIGHT
Bright's Board Of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Board Meetings And Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Executive Officers Of Bright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Employment Agreements With Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Certain Transactions With Bright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF BRIGHT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
1
<PAGE> 9
TABLE OF CONTENTS CONTINUED
<TABLE>
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BRIGHT FINANCIAL STATEMENTS
Report Of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F1
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F2
Consolidated Statements Of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F3
Consolidated Statements Of Changes In Shareholders' Equity . . . . . . . . . . . . . . . . . F5
Consolidated Statements Of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . F6
Notes To Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F8
PRINCIPAL SHAREHOLDERS AND OWNERSHIP BY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 78
COMPARATIVE MARKET AND DIVIDEND INFORMATION
Nature of Trading Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
COMPARISON OF COMMON STOCK AND SHAREHOLDERS' RIGHTS
Authorized But Unissued Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Quorum For Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Redemption And Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Two-Thirds (2/3) Affirmative Shareholder Vote Requirement . . . . . . . . . . . . . . . . . 84
Amendments To Articles And Code Of Regulations . . . . . . . . . . . . . . . . . . . . . . . 84
Restrictions On Resale Of Bancorp Common Stock . . . . . . . . . . . . . . . . . . . . . . . 85
Bancorp Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
ADJOURNMENT OF THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
APPENDICES
Plan and Agreement of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix B
Indiana Code Chapter 23-1-44. Dissenters' Rights . . . . . . . . . . . . . . . . . Appendix C
</TABLE>
2
<PAGE> 10
INTRODUCTION
General
- -------
This Proxy Statement-Prospectus and the accompanying form of proxy are
being furnished to the shareholders of Bright Financial Services, Inc.
("Bright") in connection with the solicitation of proxies by the Board of
Directors of Bright for use at the Special Meeting of Shareholders ("Special
Meeting") to be held on September 12, 1995, at 2:00 p.m. local time.
At the Special Meeting, Bright shareholders will be asked to approve
the Plan and Agreement of Merger dated February 20, 1995 by and between Bright
and First Financial Bancorp. ("Bancorp"), a copy of which is attached hereto as
Appendix A (the "Merger Agreement"), and the transactions contemplated thereby.
If the Merger Agreement is approved by the shareholders at the Special Meeting
by at least a majority vote of the outstanding Bright shares and if certain
other conditions to consummation of the transactions contemplated by the Merger
Agreement, including the receipt of all required regulatory approvals, are
satisfied or are waived on or before September 30, 1995, Bright will merge with
and into Bancorp in a transaction in which the following will occur on the date
upon which the Merger becomes effective (the "Effective Time"):
(a) Each of the then outstanding shares of Bright common stock,
stated value $6.25 per share (the "Bright Common Stock"), will
be surrendered to Bancorp in consideration and exchange for a
number of Bancorp common shares, par value $8.00 per share
(the "Bancorp Common Stock"), equal to the quotient (the
"Exchange Ratio") of $73.184129 divided by the mathematical
average (the "Average") of the average of the closing bid and
asked prices of Bancorp Common Stock on the Nasdaq National
Market System for a period of 20 trading days ending at 4:00
p.m. (New York time) two trading days prior to the Effective
Time;
(b) Bright will merge with and into Bancorp and Bancorp will be
the continuing, surviving and resulting corporation in the
Merger; and
(c) Bright National Bank will become a wholly owned subsidiary of
Bancorp.
On ____________ ___, 1995, the last trading date before the printing
of the Proxy Statement-Prospectus, the closing sales price of a share of
Bancorp Common Stock equalled $_______. If ___________ ___, 1995 were the
Effective Time, the Average would have been $_________, the Exchange Ratio
would have equaled ________, and the aggregate number of shares of Bancorp
Common Stock issued in exchange for all shares of Bright Common Stock would
have been _________. The market price and Average of Bancorp Common Stock on
___________ ___, 1995 are presented for illustrative purposes only and may not
be indicative of the market price and Average at the Effective Time.
3
<PAGE> 11
A copy of the Merger Agreement, with Exhibits, setting forth the terms
of the Merger is attached to this Proxy Statement-Prospectus as Appendix A and
is incorporated herein by reference.
The Board of Directors of Bright has approved the Merger and
recommends that Bright shareholders vote FOR the approval of the Merger.
The principal executive office of Bright is located at 4 East Main
Street, Flora, Indiana 46929. The telephone number of Bright's principal
executive office is (219) 967-4151.
The principal executive office of Bancorp is located at Third and High
Streets, Hamilton, Ohio 45011. The telephone number of Bancorp's principal
executive office is (513) 867-4700.
Record Date, Solicitation And Revocability Of Proxy
- ---------------------------------------------------
The Board of Directors of Bright has established the close of business
on August 1, 1995 as the record date (the "Record Date") for the determination
of the Bright shareholders entitled to receive notice of and to vote at the
Special Meeting. Only Bright shareholders of record on the Record Date will be
entitled to notice of and to vote at the Special Meeting. Shares represented
by properly executed proxies, if such proxies are received before or at the
Special Meeting and not revoked, will be voted at the Special Meeting in
accordance with instructions indicated in such proxies. If no such
instructions are given, shares represented by such proxies will be voted:
FOR approval of the Merger Agreement;
FOR the adjournment of the meeting in the event that a sufficient
number of votes necessary to approve the foregoing proposal is not
received; and
In the discretion of the proxy holders on any other matter which may
properly come before the Special Meeting.
A shareholder who has given a proxy may revoke it at any time before
the Proxy is exercised by giving Bright written notice of revocation addressed
to and received by the Secretary of Bright before the Special Meeting, by
executing a later dated proxy or by attending and voting in person. All
written notices of revocation and other communication with respect to
revocation of proxies should be addressed to Bright as follows: Bright
Financial Services, Inc., 4 East Main Street, P.O. Box 188, Flora, Indiana
46929, Attention: Eunice J. Lowery, Secretary.
The cost of the solicitation of proxies will be borne by Bright.
Bright has not specially engaged employees or paid solicitors to aid in the
solicitation of proxies, but will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them
in sending proxy materials to the beneficial owners of Bright Common Stock. In
addition to solicitation by mail, directors, officers and regular employees of
Bright may solicit proxies personally or by telegraph or telephone, without
additional compensation.
4
<PAGE> 12
Bright shareholders are requested to complete, date and sign the
accompanying proxy form and return it promptly to Bright in the enclosed
postage paid envelope.
Vote Required
- -------------
APPROVAL OF MERGER. The affirmative vote of the holders of at least a
majority of the outstanding shares of Bright Common Stock entitled to vote at
the Special Meeting is required for approval of the Merger Agreement. Proxies
indicating an abstention from voting on any matter will be tabulated as a vote
withheld on such matter and will be included in computing the number of shares
present for purposes of determining the presence of a quorum for the Special
Meeting. If a broker indicates on the form of proxy that it does not have
discretionary authority as to certain common shares to vote on a particular
matter, those common shares will be considered as present but not entitled to
vote with respect to that matter. The effect of an abstention or a non-vote is
the same as a "no" vote.
No shareholder vote on the Merger is required by the shareholders of
Bancorp.
APPROVAL OF ADJOURNMENT. The affirmative vote of the holders of a
majority of the shares of Bright Common Stock represented in person or proxy at
the Special Meeting will be required for approval of the adjournment in the
event that a sufficient number of votes necessary to approve the foregoing
proposal is not received. The effect of an abstention or a non-vote for
purposes of the vote required to approve the adjournment is the same as a "no"
vote.
Shares Outstanding
- ------------------
At the close of business on the Record Date, there were _______ shares
of Bright Common Stock outstanding and entitled to vote, with each share being
entitled to one vote, and there were ___ holders of record of shares of Bright
Common Stock. On such date, the directors and executive officers of Bright as
a group beneficially owned 57,536 shares, an amount equal to 28.1% of the
shares of Bright Common Stock issued and outstanding on such date. If exercise
of stock options is assumed, the directors and executive officers of Bright
will beneficially own 58,166 shares, which is 28.4% of issued and outstanding
shares and shares that will be issued and outstanding upon exercise of the
stock options. The directors and executive officers have indicated their
intention to vote for the Merger. See "DESCRIPTION OF THE MERGER-- Interests
Of Certain Persons In The Merger" and "PRINCIPAL SHAREHOLDERS AND OWNERSHIP BY
MANAGEMENT."
5
<PAGE> 13
Other Matters
- -------------
The Board of Directors of Bright is not aware of any other business to
come before the Special Meeting other than the matters described above in the
Proxy Statement-Prospectus. However, if any other matters should properly come
before the Special Meeting, the holders of the proxies will act in accordance
with their best judgment.
Shareholder Proposals To Bancorp
- --------------------------------
If an eligible shareholder wishes to present a proposal for action at
the next Annual Meeting of Bancorp, it shall be presented to management by
certified mail, written receipt requested, not later than November 16, 1995,
for inclusion in Bancorp's Proxy Statement and form of Proxy relating to that
meeting. Any such proposal must comply with Rule 14a-8 promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended. Proposals shall be sent to First Financial Bancorp.,
Attention: Richard E. Weinman, Executive Vice President, Chief Financial
Officer, and Secretary/Treasurer, 300 High Street, P.O. Box 476, Hamilton, Ohio
45012-0476.
6
<PAGE> 14
SUMMARY
The following is a brief summary of certain information in respect of
matters to be considered at the Special Meeting of Bright shareholders and is
qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement-Prospectus, the accompanying
appendices and the documents incorporated herein by reference.
Terms Of The Merger Agreement
- -----------------------------
Upon consummation of the Merger, Bright shareholders will be entitled
to receive Bancorp shares equal to the quotient of $73.184129 divided by the
mathematical average of the average of the closing daily bid and asked prices
of Bancorp Common Stock on the Nasdaq National Market System for a period of 20
trading days ending at 4:00 p.m. (New York time) two trading days prior to the
Effective Time (the "Exchange Ratio"). The number of Bancorp shares to be
issued will be proportionately adjusted in the event of the subdivision or
split of the outstanding shares of Bancorp Common Stock, the payment of a
dividend in Bancorp Common Stock, a capital reorganization, or reclassification
or recapitalization affecting Bancorp Common Stock.
Reasons For The Merger
- ----------------------
The Board of Directors of Bright believes that the Merger is in the
best interests of Bright and its shareholders. As part of its continuing
efforts to maximize shareholder value, the Board of Bright has considered
various options from time to time, including the possibility of seeking a
merger with another financial institution. During the summer of 1994, the
Board retained an outside financial advisor and special legal counsel to assist
in reviewing market conditions and in evaluating strategic alternatives. After
careful and thorough discussion of the various alternatives, the Board
determined to consider a merger of Bright. See "DESCRIPTION OF THE
MERGER--Background Of And Reasons For The Merger."
Approval Of Merger Agreement
- ----------------------------
PARTIES TO THE MERGER AGREEMENT. Bancorp is a corporation organized
under the laws of the State of Ohio and is registered as a bank holding company
as well as a savings and loan holding company. Its principal executive offices
are located in Hamilton, Ohio. Bancorp owns eight commercial banking
subsidiaries-First National Bank of Southwestern Ohio, Hamilton, Ohio;
Citizens Commercial Bank & Trust Company, Celina, Ohio; Van Wert National Bank,
Van Wert, Ohio; Union Trust Bank, Union City, Indiana; Indiana Lawrence Bank,
North Manchester, Indiana; Citizens First State Bank, Hartford City, Indiana;
Union Bank and Trust Company, North Vernon, Indiana; Clyde Savings Bank Co.,
Clyde, Ohio; and three savings bank subsidiaries - Fidelity Federal Savings
Bank, Marion, Indiana; Fayette Federal Savings Bank, Connersville, Indiana; and
Home Federal Bank, a Federal Savings Bank, Hamilton, Ohio. At March 31, 1995,
Bancorp had total
7
<PAGE> 15
assets of approximately $1.9 billion, deposits of approximately $1.6 billion
and shareholders' equity of approximately $201 million. See Form 10-Q for the
quarter ended March 31, 1995 and "Item 1. Business" in the Bancorp Form 10-K,
both of which have previously been incorporated herein by reference.
Bright was organized in 1984 under the laws of the State of Indiana
and is registered as a bank holding company. Its only subsidiary, Bright
National Bank ("Bright National"), was founded in 1905. On December 14, 1990,
Bright National purchased the main office and three branch offices of the
former Hometown Savings Bank, F.S.B., Delphi, Indiana from the Resolution Trust
Corporation. The four acquired offices are located in Delphi, Rossville,
Burlington and Lafayette, Indiana. Bright is principally engaged in the
business of making mortgage loans and secured and unsecured consumer and
commercial loans. Loanable funds are obtained primarily from deposits and loan
principal repayments. In addition to originating loans, Bright invests in U.S.
Treasury and other government agency securities and in municipal securities.
Bright conducts its business through four full service offices located in
Flora, Lafayette, Delphi and Rossville, Indiana and three deposit oriented
branches in Burlington, Flora and Lafayette, Indiana. Flora, Burlington and
Delphi are located in Carroll County, northeastern Tippecanoe County and
northern Clinton County. Lafayette is located in Tippecanoe County and
Rossville is located in Clinton County. Bright's primary market area consists
of these three counties.
THE MERGER. If the Merger Agreement is approved by the Bright
shareholders by at least a majority of the outstanding Bright shares and if
certain other conditions to the consummation, including the receipt of all
required regulatory approvals, are satisfied or are waived on or before
September 30, 1995, Bright will merge with and into Bancorp in a transaction in
which the following will occur as of the Effective Time:
(a) Each of the then outstanding shares of Bright will be canceled
and extinguished in consideration and exchange for a number of
shares of Bancorp Common Stock equal to the Exchange Ratio;
(b) Bright will merge with and into Bancorp at the Effective Time
and Bancorp will be the continuing, surviving and resulting
entity; and
(c) Bright National will become a wholly owned subsidiary of
Bancorp.
On ___________ ___, 1995, the last trading date before the printing of
the Proxy Statement-Prospectus, the closing sales price of a share of Bancorp
Common Stock equalled $_____. If ____________, 1995 were the Effective Time,
the Average would have been $__________, the Exchange Ratio would have equaled
__________, and the aggregate number of shares of Bancorp Common Stock issued
in exchange for all shares of Bright Common Stock would have been _________.
The market price and Average of Bancorp Common Stock on ___________ ___, 1995
are presented for illustrative purposes only and may not be indicative of the
market price or the Average at the Effective Time.
8
<PAGE> 16
There were ________ shares of Bright Common Stock outstanding on
____________ ___, 1995. See "DESCRIPTION OF THE MERGER--Structure Of The
Merger" and "--Effective Time Of The Merger," as well as the copy of the Merger
Agreement attached hereto as Appendix A.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Bright Board of
Directors has approved the Merger Agreement and recommends that shareholders
vote FOR approval of the Merger Agreement. See "DESCRIPTION OF THE
MERGER--Background And Reasons For The Merger."
OPINIONS OF MCDONALD & COMPANY SECURITIES, INC. McDonald & Company
Securities, Inc. ("McDonald & Company"), Bright's financial advisor, has
rendered its opinion to Bright's Board of Directors to the effect that, as of
the date the Merger Agreement was signed and as of the date of this Proxy
Statement-Prospectus, the Exchange Ratio was fair, from a financial point of
view, to Bright's shareholders. A copy of McDonald & Company's fairness
opinion is attached hereto as Appendix B and should be read in its entirety
with respect to assumptions and justifications made and other matters
considered. See "DESCRIPTION OF THE MERGER--Opinion of Bright's Financial
Advisor."
RIGHTS OF APPRAISAL. Any shareholder of Bright who delivers before
the shareholders' vote a written notice of intent to demand payment for such
shareholder's shares in the manner provided by Indiana Code Chapter 23-1-44 and
who does not vote in favor of the approval of the Merger Agreement shall be
entitled, if and when the Merger becomes effective, and upon strict compliance
with certain procedures set forth in Chapter 23-1-44, a copy of which is
attached hereto as Appendix C, to receive the value of the Bright Common Stock
owned by such shareholder at the time and in the manner set forth in Chapter
23-1-44. See "DESCRIPTION OF THE MERGER--Shareholders' Rights Of Appraisal."
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS. It is anticipated
that the Merger will be a non-taxable reorganization for federal income tax
purposes and that no gain or loss for federal income tax purposes will be
recognized by the shareholders of Bright upon distribution to them of shares of
Bancorp. A gain or loss may be recognized, however, on cash received in place
of fractional shares. Holders of Bright Common Stock, who demand in accordance
with Chapter 23-1-44 of the Indiana Business Corporation Law to receive cash in
exchange for the shares of Bright Common Stock they actually own or are deemed
by the Internal Revenue Service ("IRS") to own constructively, will recognize a
capital gain or loss on the exchange. See "DESCRIPTION OF THE MERGER--Federal
Income Tax Consequences Of The Merger."
REPRESENTATIONS AND WARRANTIES. Both Bancorp and Bright have made
certain representations and warranties in the Merger Agreement. Such
representations and warranties address, among others, certain matters related
to the organization, capital structure, financial statements and the businesses
of Bright and Bancorp. See the Merger Agreement attached as Appendix A for a
more detailed discussion.
9
<PAGE> 17
REGULATORY APPROVALS AND OTHER CONDITIONS. The proposed Merger and
related transactions are subject to approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and the Indiana Department
of Financial Institutions. An application requesting approval was submitted to
the Federal Reserve Board on __________ ___, 1995 and the Indiana Department of
Financial Institutions on ___________ ___, 1995. There can be no assurance
that the approval of the Federal Reserve Board or the Indiana Department of
Financial Institutions will be given or whether conditions, if any, will be
imposed on such approval. See "DESCRIPTION OF THE MERGER--Regulatory
Considerations."
The Merger is subject to numerous additional conditions, including,
but not limited to, approval of the Merger by the holders of at least a
majority of the outstanding shares of Bright Common Stock; qualification of the
Merger for the pooling-of-interests accounting treatment; the truth of
representations and warranties made; receipt of opinions of counsel in
reference to certain matters pertaining to the Merger; the receipt of an
opinion from McDonald & Company, dated the date of the Merger Agreement and the
date hereof, that the Exchange Ratio is fair, from a financial point of view,
to Bright's shareholders; and the absence of any material adverse changes in
the corporate status, business, operations or financial condition of Bancorp or
Bright occurring since December 31, 1993. See "DESCRIPTION OF THE
MERGER--Conditions To Consummation Of The Merger."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated at any time prior to the Effective Time by the mutual consent of the
Boards of Directors of Bright and Bancorp. Either Bright or Bancorp may also
terminate the Merger Agreement upon the occurrence of certain events, such as
not obtaining the requisite approval of all required regulatory authorities or
the shareholders of Bright or not consummating the Merger on or before
September 30, 1995. The Merger may also be terminated by Bancorp if the
Average of Bancorp Common Stock falls below $26.40 per share or by Bright if
the Average of Bancorp Common Stock exceeds $39.60 per share. See "DESCRIPTION
OF THE MERGER-- Termination Of The Merger."
EFFECTIVE TIME. Bancorp and Bright intend to consummate the Merger as
soon as practicable after the receipt of all required regulatory and
shareholder approvals have been obtained and the other conditions to
consummation of the Merger have been satisfied. Bancorp and Bright are hopeful
that all conditions prior to consummation of the Merger will be satisfied so
that the Merger can be consummated during the third quarter of 1995. The
Merger Agreement provides that it may be terminated by either party if the
Merger has not been consummated by September 30, 1995. See "DESCRIPTION OF THE
MERGER--Effective Time Of The Merger."
10
<PAGE> 18
MARKET VALUE OF COMMON STOCK. The common stock of Bancorp is traded
in the over-the-counter market and is quoted by the Nasdaq National Market
System. On February 17, 1995, the last trading day prior to the first public
announcement of the proposed merger, the closing sale price for a share of
Bancorp Common Stock was $33.00 per share. Assuming the Merger was consummated
as of February 17, 1995, the Average would have been $33.3625, the Exchange
Ratio would have equaled 2.193604466, the aggregate number of shares of Bancorp
Common Stock issued in exchange for all shares of Bright Common Stock would
have been 451,255 shares and the equivalent per share value of Bancorp Common
Stock which would have been issued and exchanged for each Bright share,
assuming the closing sales price of $33.00 per share for Bancorp Common Stock,
would have been $72.388923.
Bright Common Stock is not traded in any established market. See
"COMPARATIVE MARKET AND DIVIDEND INFORMATION" for additional market price
information.
Other Possible Acquisitions By Bancorp
- --------------------------------------
As of the date of this Proxy Statement-Prospectus, Bancorp had entered
into a definitive agreement of merger with Peoples Bank and Trust Company,
Sunman, Indiana ("Peoples"). The consideration to be paid to Peoples'
shareholders pursuant to the merger agreement is fixed at approximately
$11,900,000 payable in Bancorp Common Stock to be issued in exchange for all
outstanding shares of Peoples common stock; provided however, that dissenting
shareholders of Peoples who perfect their rights under the laws of Indiana will
receive cash in such amount per share of Peoples as determined in accordance
with such laws. After the merger, Peoples will become a wholly owned subsidiary
of Bancorp. As of March 31, 1995, Peoples had total assets of approximately
$51 million, loans outstanding of $23 million, stockholders' equity of $8
million and total deposits of $43 million. Its equity-to-assets ratio at March
31, 1995 was 15.8%. Peoples had net earnings for the quarter ended March 31,
1995 of $182,000, or $5.20 per share. As of December 31, 1994, Peoples had
total assets of approximately $53.0 million, loans outstanding of $23.2
million, stockholders' equity of $7.8 million and total deposits of $44.9
million. Its equity-to-assets ratio at December 31, 1994 was 14.6%. Peoples
had net earnings for the year ended December 31, 1994 of $703,000, or $20.08
per share. Information regarding the financial condition and operating results
of Peoples is not included in the Pro Forma Financial Statements because the
acquisition of Peoples is not anticipated to result in the acquisition by
Bancorp of a significant subsidiary under applicable regulations of the
Exchange Act and is not anticipated to have a material effect on the financial
condition and results of operations of Bancorp. See "DESCRIPTION OF THE
MERGER--Pro Forma Financial Information."
The merger with Peoples is subject to numerous conditions including,
among others, regulatory and shareholder approvals. Bancorp is unable to
predict when or whether such conditions will be satisfied. Accordingly, there
can be no assurance that the proposed merger with Peoples will be consummated.
Provided all conditions are met and approvals obtained, the proposed merger
with Peoples is anticipated to be completed during the third quarter of 1995.
11
<PAGE> 19
As of the date of this Proxy Statement-Prospectus, Bancorp had entered
into an Agreement in Principle to affiliate with F&M Bancorp, Rochester,
Indiana ("F&M"). The consideration to be paid to F&M's shareholders pursuant
to the agreement is fixed at approximately $12,500,000, payable in Bancorp
Common Stock to be issued in exchange for all outstanding shares of F&M common
stock; provided however, that dissenting shareholders of F&M who perfect their
rights under the laws of Indiana will receive cash in such amount per share of
F&M as determined in accordance with such laws. After the merger of F&M into
Bancorp, F&M's only subsidiary, Farmers & Merchants Bank, will be merged with
Indiana Lawrence Bank, North Manchester, Indiana, a wholly owned subsidiary of
Bancorp. As of March 31, 1995, F&M had total assets of approximately $59
million, loans outstanding of $31 million, stockholders' equity of $7 million
and total deposits of $51 million. Its equity-to-assets ratio at March 31,
1995 was 12.5%. F&M had net earnings for the quarter ended March 31, 1995 of
$165,000, or $29.31 per share. As of December 31, 1994, F&M had total assets of
approximately $63.0 million, loans outstanding of $31 million, stockholders'
equity of $7 million and total deposits of $55 million. Its equity-to-assets
ratio at December 31, 1994 was 11.8%. F&M had net earnings for the year ended
December 31, 1994 of $699,000, or $124.17 per share.
The merger with F&M is subject to numerous conditions including, among
others, the signing of a definitive agreement of merger, regulatory
approvals and shareholder approval. Bancorp is unable to predict when or
whether such conditions will be satisfied. Accordingly, there can be no
assurance that the proposed merger with F&M will be consummated. Provided all
conditions are met and approvals obtained, the proposed merger with F&M is
anticipated to be completed during the first quarter of 1996.
Summary Of Selected Financial Data And Per Share Data
- -----------------------------------------------------
The historical data presented on the following pages has been derived
from the consolidated financial statements of the financial institutions shown
and should be read in conjunction with those financial statements. See
"AVAILABLE INFORMATION--Documents Incorporated by Reference" and "BRIGHT
FINANCIAL SERVICES, INC. FINANCIAL STATEMENTS." The pro forma data presented
on the following pages has been derived from the pro forma financial
information set forth under the heading "DESCRIPTION OF THE MERGER--Pro Forma
Financial Information."
12
<PAGE> 20
<TABLE>
SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA AND PER SHARE DATA
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
BRIGHT (HISTORICAL) (1)
Net earnings (A) $209 $160 $920 $866 $917 $692 $518
Total assets (period end) 108,788 110,972 114,285 111,774 106,505 103,570 103,182
Long-term borrowings (period end) 5,271 4,939 6,789 4,000 3,150 3,450 1,700
Net earnings per share (A) 1.02 0.81 4.56 4.38 4.64 3.50 2.62
Dividends declared per share 0.00 0.00 1.06 0.75 0.67 0.63 0.63
Book value per share (period end) 42.23 38.91 40.26 38.43 34.80 31.18 28.31
Average shares outstanding (B) 204,788 197,592 201,879 197,592 197,592 197,592 197,592
Shares outstanding (period end) (B) 205,084 197,592 204,633 197,592 197,592 197,592 197,592
BANCORP (HISTORICAL) (2)
Net earnings (A) $7,369 $7,002 $28,173 $25,194 $21,770 $18,600 $14,053
Total assets (period end) 1,893,341 1,817,216 1,922,643 1,810,673 1,816,414 1,860,955 1,631,481
Long-term borrowings (period end) 0 2,126 0 3,983 4,564 5,119 1,252
Net earnings per share (A) 0.60 0.57 2.31 2.06 1.77 1.51 1.13
Dividends declared per share 0.26 0.22 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 16.48 15.34 15.95 14.85 13.66 12.44 11.60
Average shares outstanding (B) 12,206,529 12,210,706 12,210,753 12,211,405 12,318,805 12,356,986 12,402,738
Shares outstanding (period end) (B) 12,209,474 12,213,537 12,204,575 12,207,004 12,272,065 12,391,865 12,402,738
PRO FORMA BANCORP AND BRIGHT COMBINED
ASSUMING 2.152078779 EXCHANGE RATIO (3)
Net earnings (A) $7,578 $7,162 $29,093 $26,060 $22,687 $19,292 $14,571
Net earnings per share (A) 0.60 0.57 2.30 2.06 1.78 1.51 1.13
Dividends declared per share:
Bancorp 0.26 0.22 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 16.59 15.41 16.04 14.93 13.73 12.49 11.64
Average shares outstanding (B) 12,649,242 12,653,419 12,653,466 12,654,118 12,761,518 12,799,699 12,845,451
Shares outstanding (period end) (B) 12,652,187 12,656,250 12,647,288 12,649,717 12,714,778 12,834,578 12,845,451
PRO FORMA BRIGHT ONE SHARE EQUIVALENT
ASSUMING 2.152078779 EXCHANGE RATIO (4)
Net earnings per share (A) $1.29 $1.23 $4.95 $4.43 $3.83 $3.25 $2.43
Dividends declared per share 0.56 0.47 2.11 1.76 1.59 1.42 1.33
Book value per share 35.70 33.16 34.52 32.13 29.55 26.88 25.05
- --------------------
<FN>
(A) Before cumulative effect of changes in accounting principles.
(B) Average and period end shares outstanding are not rounded to the nearest thousand.
</TABLE>
13
<PAGE> 21
<TABLE>
SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA AND PER SHARE DATA
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA BANCORP AND BRIGHT COMBINED
ASSUMING 2.772126098 EXCHANGE RATIO (5)
Net earnings (A) $7,578 $7,162 $29,093 $26,060 $22,687 $19,292 $14,571
Net earnings per share (A) 0.59 0.56 2.28 2.04 1.76 1.49 1.12
Dividends declared per share:
Bancorp 0.26 0.22 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 16.43 15.26 15.88 14.78 13.59 12.37 11.53
Average shares outstanding (B) 12,776,794 12,780,971 12,781,018 12,781,670 12,889,070 12,927,251 12,973,003
Shares outstanding (period end) (B) 12,779,739 12,783,802 12,774,840 12,777,269 12,842,330 12,962,130 12,973,003
PRO FORMA BRIGHT ONE SHARE EQUIVALENT
ASSUMING 2.772126098 EXCHANGE RATIO (5)
Net earnings per share (A) $1.64 $1.55 $6.32 $5.66 $4.88 $4.13 $3.10
Dividends declared per share 0.72 0.61 2.72 2.27 2.05 1.83 1.72
Book value per share 45.55 42.30 44.02 40.97 37.67 34.29 31.96
PRO FORMA BANCORP AND BRIGHT COMBINED
ASSUMING 1.848084065 EXCHANGE RATIO (6)
Net earnings (A) $7,578 $7,162 $29,093 $26,060 $22,687 $19,292 $14,571
Net earnings per share (A) 0.60 0.57 2.31 2.07 1.79 1.51 1.14
Dividends declared per share:
Bancorp 0.26 0.22 0.98 0.82 0.74 0.66 0.62
Book value per share (period end) 16.67 15.49 16.12 15.00 13.80 12.56 11.70
Average shares outstanding (B) 12,586,706 12,590,883 12,590,930 12,591,582 12,698,982 12,737,163 12,782,915
Shares outstanding (period end) (B) 12,589,651 12,593,714 12,584,752 12,587,181 12,652,242 12,772,042 12,782,915
PRO FORMA BRIGHT ONE SHARE EQUIVALENT
ASSUMING 1.848084065 EXCHANGE RATIO (6)
Net earnings per share (A) $1.11 $1.05 $4.27 $3.83 $3.31 $2.79 $2.11
Dividends declared per share 0.48 0.41 1.81 1.52 1.37 1.22 1.15
Book value per share 30.81 28.63 29.79 27.72 25.50 23.21 21.62
- --------------------
(A) Before cumulative effect of changes in accounting principles.
(B) Average and period end shares outstanding are not rounded to the nearest thousand.
</TABLE>
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<PAGE> 22
NOTES TO SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA AND PER SHARE DATA
--------------------------------------------------------------------------
(1) Earnings per share is calculated by dividing net earnings for the
period by the average number of common shares outstanding for the
period. Book value per share is calculated by dividing total
shareholders' equity at the end of the period by the number of shares
outstanding at the end of the period.
(2) Dividend information on Bancorp's subsidiaries which have merged with
Bancorp under the pooling-of-interests method after January 1, 1990,
has not been recalculated or added to Bancorp's historical dividend
information. Bancorp has adjusted historical information to reflect
the issuance of stock splits. The shares outstanding data has been
adjusted to reflect treasury stock transactions.
(3) The PRO FORMA BANCORP AND BRIGHT COMBINED reflects the combined
results of Bancorp and Bright after giving effect to the pooling-of-
interests method of accounting. For illustrative purposes, the
combined results assume the merger was consummated on January 1, 1990.
The per share data, average shares outstanding and shares outstanding
(period end) were calculated assuming the issuance of 442,713 shares
of Bancorp Common Stock at an Average equal to $34.00625, which is the
Average that would have been in effect if the Merger was effective
March 31, 1995 (2.152078779 Exchange Ratio).
The number of Bancorp shares to be issued at consummation is dependent
on the Average at that time and cannot be determined before that date.
The pro forma financial results included in this table are for
illustrative purposes only.
(4) Upon consummation of the Merger, Bright shareholders will be entitled
to receive Bancorp shares equal to the quotient of $73.184129 divided
by the mathematical average of the average of the closing daily bid
and asked prices of Bancorp Common Stock on the Nasdaq National Market
System for a period of 20 trading days ending at 4:00 p.m. (New York
time) two trading days prior to the Effective Time (the "Exchange
Ratio"). The number of Bancorp shares to be issued will be
proportionately adjusted in the event of the subdivision or split of
the outstanding shares of Bancorp Common Stock, the payment of a
dividend in Bancorp Common Stock, a capital reorganization, or
reclassification or recapitalization affecting Bancorp Common Stock.
Since the Exchange Ratio is not determinable at the printing of this
Proxy Statement-Prospectus, Bright's one share equivalent pro forma
net earnings, dividends and book value per share, calculated assuming
a 2.152078779 Exchange Ratio, are shown for illustrative purposes
only.
15
<PAGE> 23
(5) The Merger may be terminated by Bancorp if the Average of Bancorp
Common Stock at the Effective Time falls below $26.40. If the Average
at the Effective time is $26.40, the Exchange Ratio will be
2.772126098 and the aggregate number of shares of Bancorp Common Stock
issued in exchange for all shares of Bright Common Stock will be
570,265 shares. The number of Bancorp shares to be issued at
consummation is dependent on the Average at that time and cannot be
determined before that date. The pro forma financial results assuming
an Average of $26.40 are for illustrative purposes only.
(6) The Merger may be terminated by Bright if the Average of Bancorp
Common Stock at the Effective Time exceeds $39.60. If the Average at
the Effective Time is $39.60, the Exchange Ratio will be 1.848084065
and the aggregate number of shares of Bancorp Common Stock issued in
exchange for all shares of Bright Common Stock will be 380,177 shares.
The number of Bancorp shares to be issued at consummation is dependent
on the Average at that time and cannot be determined before that date.
The pro forma financial results assuming an Average of $39.60 are for
illustrative purposes only.
16
<PAGE> 24
Other Business To Be Acted Upon At The Special Meeting
- ------------------------------------------------------
Bright may seek an adjournment of the Special Meeting for not more
than 30 days to enable Bright to solicit additional votes in favor of the
Merger Agreement if the Merger Agreement does not receive the requisite vote of
the shareholders at the Special Meeting. The Board of Directors recommends
that shareholders vote FOR the proposal to approve a motion to adjourn the
Special Meeting, if necessary, to solicit additional proxies. See "ADJOURNMENT
OF THE SPECIAL MEETING."
17
<PAGE> 25
DESCRIPTION OF THE MERGER
This section of the Proxy Statement-Prospectus describes certain of
the more important aspects of the Merger. The following description does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement which is set forth in Appendix A to this Proxy
Statement-Prospectus. All shareholders are urged to read the Merger Agreement
in its entirety.
Background Of And Reasons For The Merger
- ----------------------------------------
As part of its continuing efforts to maximize shareholder value, the
Board of Directors of Bright has considered various options from time to time,
including the possibility of seeking a merger with another financial
institution.
In recent years, there has been, and there continues to be,
substantial consolidation in the United States banking and financial services
industry. This trend is necessarily of concern to smaller institutions, like
Bright, because larger entities that emerge from consolidations may acquire
substantial competitive advantages. Bright has been dedicated to the goal of
providing superior banking services, and in analyzing strategic alternatives
has always sought to ensure that the alternatives being considered can
reasonably be expected to result in improved services as well as enhanced
shareholder value.
In the summer of 1994, the Board decided to obtain independent
assistance in a strategic review of available options. The Board retained
outside financial advisors, McDonald & Company, and special legal counsel,
Bingham Summers Welsh & Spilman, to assist Bright in reviewing market
conditions and in evaluating strategic alternatives. Prior to selecting
McDonald & Company, the Board interviewed several investment banking firms. In
making its selection, the Board reviewed the experience of each investment
banking firm, the depth of their respective staffs and the fee estimates
provided by each firm. The Board determined that McDonald & Company had
extensive experience in advising financial institutions regarding strategic
alternatives, had a sizeable staff with the desired qualifications and provided
a fee estimate that was competitive with the other investment banking firms
that were considered.
McDonald & Company presented its strategic review materials to the
Bright Board in September 1994. After careful and thorough discussion of the
various alternatives, the Bright Board determined to consider the merger of
Bright.
In seeking potential acquirors, the Bright Board had a number of
criteria for selecting a merger partner. The criteria included (a) active and
broad marketability of acquiror's stock; (b) a control premium that reflects
Bright's financial condition; (c) attractive relative valuation of acquiror's
stock with prospects for price appreciation better than those for Bright's
stock; (d) a transaction with little or no adverse tax consequences for the
shareholders; (e) a willingness to exchange Bright's stock options for
acquiror's stock options; (f) possible higher dividends for shareholders; (g) a
sizeable acquiror with a diversified product base and revenue stream; (h)
benefit plans which are equal or superior to Bright's plans; (i) minimal
dislocation of employees; (j) a
18
<PAGE> 26
willingness to retain Bright National as a separate subsidiary; (k) an acquiror
which is a good corporate citizen; (l) an acquiror which maintains a diverse
and competitive source of commercial bank products and services for Bright's
customers; and (m) as few contingencies as possible to closing.
The Board authorized McDonald & Company to contact a number of other
bank holding companies to assess their interest in pursuing an acquisition of
Bright and at what price. Institutions contacted included companies which
Bright and McDonald & Company believed would have a strategic interest in
Bright and the financial ability to acquire Bright. After execution of
appropriate confidentiality agreements and receipt of preliminary indications
of interest, subject to due diligence, six companies were offered the
opportunity to conduct a business review of Bright in order to formulate a firm
offer which would not be conditional upon the performance of a further business
review by the offeror. All six companies availed themselves of this
opportunity. In November and December 1994, each of the six conducted in-depth
examinations of the books, records and operations of Bright.
Upon conclusion of their examinations, each of the companies that had
conducted a business review submitted offers which included offers of stock,
cash, notes and a hybrid of cash and stock.
After careful review of the consideration offered and of the merger
selection criteria, the Board determined that the stock offer from Bancorp, at
$73.184129 per share, was the most attractive offer. This offer was the
highest stock offer made by the bidding banks, after taking into account the
estimated valuation of certain minority stock of one bidder by McDonald &
Company. There were two bidders that offered slightly higher non-stock
consideration, one for $75.00 per share in cash and the other for $74.00 per
share in notes. The Board rejected the cash offer primarily because it would
provide an immediate and substantial capital gains tax to Bright shareholders.
The Board rejected the note offer primarily because the notes would also be
subject to substantial capital gains taxes at maturity and because of the lack
of marketability of the notes.
In addition to determining that the consideration offered by Bancorp
was superior to other offers, the Board determined that Bancorp and Bancorp's
offer favorably satisfied the merger criteria previously established by the
Board. Specifically, the Board found that, among favorable criteria, Bancorp's
offer would: afford a control premium to the shareholders of Bright because the
offer was valued by McDonald & Company at 185% of book value, and in excess of
recent trading prices for the Bright Common Stock; provide a marketable
security to Bright shareholders because Bancorp stock is actively traded on the
Nasdaq National Market System; provide no tax consequence to Bright
shareholders, except for cash received for fractional shares and cash paid to
dissenting shareholders who exercise dissenter's rights; provide higher
dividends for Bright shareholders; provide for a merger with a bank holding
company with $1.9 billion in assets which operates six Indiana and five Ohio
financial institution affiliates with a total of 69 banking office locations;
provide benefit plans at least equal to the Bright plans; maintain a diverse
and competitive source of commercial bank products and services for Bright's
customers; retain Bright National as a separate subsidiary which would allow
autonomy in Bright National's
19
<PAGE> 27
operations thereby also resulting in little or no dislocation of employees; and
provide for only one contingency (other than contingencies that would be
required in the normal course for any merger transaction), that the transaction
be treated as a pooling-of-interest for accounting purposes. In addition, the
banking philosophy of Bancorp, emphasizing community banking and the autonomy
of its subsidiaries, was of major importance to the Board.
In reviewing its initial merger criteria as well as the consideration
offered by each bidder, the Board determined that of the offers received for
Bright, the offer from Bancorp was superior because it provided a higher
consideration and favorably met more of the criteria considered by the Board.
After these deliberations, the Board, with the assistance of McDonald
& Company and Bingham Summers Welsh & Spilman, entered into negotiations toward
a definitive agreement with Bancorp. Following negotiation of the Merger
Agreement, the Board concluded that the Merger would be in the best interests
of Bright and its shareholders. On February 20, 1995, the Board approved the
Merger and the Merger Agreement.
Based on its review, the Board concluded the proposed Merger would be
in the best interests of the shareholders of Bright and its customers, and of
the communities which Bright serves. Accordingly, the Board recommends that
shareholders vote "FOR" the Merger.
Opinions Of McDonald & Company
- ------------------------------
Bright has retained McDonald & Company as its financial advisor in
connection with the Merger and requested that McDonald & Company render its
opinion with respect to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of Bright Common Stock. McDonald & Company
rendered its oral opinion to the Board of Directors of Bright on February 20,
1995, which it subsequently confirmed in writing, that as of the date of such
opinion, the Exchange Ratio pursuant to the Merger was fair, from a financial
point of view, to the holders of Bright Common Stock. McDonald & Company
updated its February 20, 1995 opinion as of the date of this Proxy
Statement-Prospectus. The updated opinion is attached as Appendix B to this
Proxy Statement-Prospectus.
In arriving at its February 20, 1995 opinion, McDonald & Company
reviewed, among other things, the Merger Agreement together with exhibits and
schedules thereto, certain publicly available information relating to the
business, financial condition and operations of Bright and Bancorp as well as
certain other non-public information, primarily financial in nature, furnished
to it by Bright and Bancorp relating to the respective businesses, earnings,
assets, financial forecasts and prospects. McDonald & Company also held
discussions with members of senior management of Bright and Bancorp concerning
their respective businesses, assets, financial forecasts and prospects.
McDonald & Company also reviewed certain publicly available information
concerning the trading of, and the trading market for, Bright Common Stock and
Bancorp Common Stock and certain publicly available information concerning
comparable companies and transactions, all as more fully set forth in McDonald
& Company's opinion.
20
<PAGE> 28
McDonald & Company was not engaged to and did not conduct a physical
inspection of any of the assets, properties or facilities of either Bright or
Bancorp, and was not engaged to do and has not made, obtained or been furnished
with any independent evaluation or appraisal of any such assets, properties or
facilities or any of the liabilities of Bright or Bancorp. McDonald & Company
has assumed and relied, without independent investigation, upon the accuracy
and completeness of the financial and other information provided to it or
publicly available, has relied upon the representations and warranties of
Bright and Bancorp contained in the Merger Agreement, and has not independently
attempted to verify any such information. McDonald & Company has also assumed
that all of the conditions to the Merger as set forth in the Merger Agreement,
including the tax-free treatment of the Merger to the holders of Bright Common
Stock, would be satisfied on a timely basis in the manner contemplated by the
Merger Agreement. No limitations were imposed by Bright upon McDonald &
Company with respect to the scope of its investigation nor were any specific
instructions given to McDonald & Company in connection with its opinion.
In connection with rendering its opinion dated February 20, 1995,
McDonald & Company considered a variety of financial analyses which are
summarized below. McDonald & Company believes that its analyses must be
considered as a whole and that selecting portions of such analyses and factors
may create an incomplete view of the analytical process underlying McDonald &
Company's opinion. In its analyses, McDonald & Company made numerous
assumptions with respect to industry performance, business and economic
conditions, and other matters. Any estimates contained in McDonald & Company's
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates.
The following is a summary of selected analyses considered by McDonald
& Company in connection with McDonald & Company's opinion dated February 20,
1995:
COMPARISON WITH SELECTED COMPANIES. McDonald & Company compared the
financial performance and stock market valuation of Bright with corresponding
data for the following selected banks: ANB Corporation, Bank of Geneva,
Citizens National Bancorp, Champaign National B&T, CoBancorp, Inc., Eastern
Michigan Financial Corp., First-Knox Banc Corp., First Bancshares, Inc., GAB
Bancorp, The Henry County Bank, Indebancorp, Indiana United Bancorp, Merchants
Bancorp, Inc., MetroBanCorp, MNB Bancshares, Inc., Northwest Illinois Bancorp,
Peoples Bancorp Inc., Peoples Bancorp of Washington, Princeton National Bancorp
and Peoples Bank Corporation of Indianapolis. In addition, McDonald & Company
compared such data of Bancorp with the following selected banking companies:
Dauphin Deposit Corporation, Firstbank of Illinois Co., FirstMerit Corp.,
Fulton Financial Corporation, One Valley Bancorp of WV, Inc., Park National
Corp., River Forest Bancorp, S&T Bancorp and United Bankshares, Inc. At the
time, none of the companies listed above had announced a merger transaction or
disclosed a possible interest in pursuing a possible merger transaction which
would have significantly affected its stock market valuation.
21
<PAGE> 29
PRO FORMA MERGER ANALYSES. McDonald & Company analyzed the changes in
per share amount of earnings, book value and indicated dividend represented by
one share of Bright Common Stock after the Merger. The analysis was performed
on the basis of financial information for both companies as of and for the
twelve months ended September 30, 1994, December 31, 1993, and December 31,
1992. The analysis indicated, among other things, that exchanging one share of
Bright Common at the Exchange Ratio (calculated using the $33.00 closing price
of Bancorp Common Stock as of February 17, 1995, the last trading day prior to
the execution of the Merger Agreement) for shares of Bancorp Common on a pro
forma basis would have resulted in a 29.0% increase in earnings per share for
each share of Bright Common Stock for the twelve months ended September 30,
1994, a 10.2% decrease in book value per share for each share of Bright Common
Stock as of September 30, 1994, and a 109.7% increase in dividends per share of
Bright Common Stock based on Bright's and Bancorp's indicated annual dividend
rate as of February 20, 1995.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. McDonald & Company reviewed
five groups of selected pending bank transactions involving (i) mergers with
transaction values between $10 million and $25 million, (ii) selling banks
having a tangible equity to assets ratio of between 6.00% and 8.25%, (iii)
selling banks having a return on assets of between 0.50% and 1.00%, (iv)
selling banks having non-performing assets as a percent of total assets less
than 0.30%, and (v) selling banks headquartered in the Midwest region of Iowa,
Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, North
Dakota, Nebraska, Ohio, South Dakota and Wisconsin. McDonald & Company
reviewed the ratios of the offer value to stated book value and tangible book
value, the multiple of the last twelve months' earnings of the acquired
company, and the ratio of the offer value to assets in each such transaction
and computed mean and median ratios and multiples for each group. The
calculations yielded ranges of median ratios of price to stated book value and
tangible book value of 176% to 186% and 176% to 189%, respectively. Median
multiples of earnings among the five groups ranged from 13.2x to 17.2x and
median ratios of offer value to assets ranged from 13.3% to 17.6%. Based on
the Bright equivalent price per share as of February 20, 1995 of $73.184129,
the ratio of price to stated book value was 185%, the ratio of price to
tangible book value was 192%, the multiple of price to last twelve months
earnings of Bright through September 30, 1994 was 19.4x and the ratio of price
to assets at September 30, 1994 was 13.7%.
NO COMPANY OR TRANSACTION USED IN THE ABOVE ANALYSES AS A COMPARISON
IS IDENTICAL TO BRIGHT, BANCORP OR THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE
RESULTS OF THE FOREGOING NECESSARILY INVOLVES COMPLEX CONSIDERATIONS AND
JUDGMENTS CONCERNING THE DIFFERENCES IN FINANCIAL AND OPERATING CHARACTERISTICS
OF THE COMPANIES AND OTHER FACTORS THAT COULD AFFECT THE PUBLIC TRADING VALUES
OR ACQUISITION VALUES OF THE COMPANIES TO WHICH THEY ARE BEING COMPARED.
MATHEMATICAL ANALYSIS (SUCH AS DETERMINING THE MEAN OR MEDIAN) IS NOT, IN
ITSELF, A MEANINGFUL METHOD OF USING COMPARABLE COMPANY OR COMPARABLE
TRANSACTION DATA.
DISCOUNTED CASH FLOW ANALYSIS. McDonald & Company estimated the
future streams of after-tax cash flows that Bright could produce over a five
year period from 1995 through 1999. These estimates were made using various
assumptions and included Bright management's forecasts. McDonald & Company
then estimated a terminal value of Bright after the five year period by
applying an estimated perpetual growth rate to the sixth year's projected
after-tax cash flow and then
22
<PAGE> 30
applied to this value, multiples ranging from 8x to 10x. The five year cash
flow streams and terminal value were then discounted to present values using
different discount rates chosen to reflect different assumptions regarding the
required rates of return of prospective buyers of Bright. On the basis of such
varying assumptions, this discounted cash flow analysis indicated a reference
range of $58.70 to $77.60 per share of Bright Common. This analysis was based
upon management projections including variations and assumptions made by
McDonald & Company which included adjustments to reflect the anticipated
effects of potential merger-related cost savings estimated by Bright.
Management's projections are based upon many factors and assumptions, many of
which are beyond the control of Bright or Bancorp. As indicated above, this
analysis is not necessarily indicative of actual values or actual future
results and does not purport to reflect the process at which any securities may
trade at the present time or at any time in the future.
In performing its analyses, McDonald & Company made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters. The analyses performed by McDonald & Company are
not necessarily indicative of actual values, which may be significantly more or
less favorable than the values suggested by such analyses. Such analyses were
prepared solely as part of McDonald & Company's opinion. The term "fair from a
financial point of view" is a standard phrase contained in investment banker
fairness opinions and refers to the fact that McDonald & Company's opinion as
to the fairness of the Exchange Ratio is addressed solely to the financial
attributes of the Exchange Ratio. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold. In
addition, as described above, McDonald & Company's fairness opinion and
presentation to the Bright Board of Directors were among many factors taken
into consideration by the Bright Board of Directors in making its determination
to approve the Merger Agreement. Consequently, the McDonald & Company analyses
described above should not be viewed as determinative of the Bright Board of
Directors' conclusions with respect to the value of Bright or of the decision
of the Bright Board of Directors to agree to the Exchange Ratio.
McDonald & Company's opinions are based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date of such opinion. In addition, the opinions do not address
Bright's underlying business decision to effect the Merger or any other terms
of the Merger. McDonald & Company is not rendering any opinion as to the value
of Bright Common Stock or Bancorp Common Stock at the Effective Time.
In connection with its opinion dated as of the date of this Proxy
Statement-Prospectus, McDonald & Company performed procedures to update certain
of its analyses and reviewed the assumptions on which such analyses were based
and the factors considered therewith.
23
<PAGE> 31
McDonald & Company, as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. McDonald & Company has
extensive experience with the valuation of financial institutions. Bright's
Board of Directors selected McDonald & Company as its financial advisor,
primarily because of McDonald & Company's industry expertise with respect to
financial institutions. McDonald & Company is not affiliated with either
Bright or Bancorp.
In the ordinary course of business, McDonald & Company makes a market
in Bancorp Common Stock and may actively trade the securities of Bancorp for
its own account and for the accounts of its customers. Accordingly, at any
time McDonald & Company may hold a long or short position in such securities.
In addition, McDonald & Company has provided investment banking services to
Bright in the past and may provide such services to Bancorp in the future.
For its services as financial advisor, Bright has paid McDonald &
Company a retainer of $20,000 and a fee of $15,000 upon the rendering of
McDonald & Company's oral fairness opinion. Additional fees equal to
approximately $85,000 will be payable to McDonald & Company, with $25,000 due
upon stockholder approval and the remainder due upon consummation of the
Merger. Bright has also agreed to reimburse McDonald & Company for its
reasonable out-of-pocket expenses and to indemnify McDonald & Company against
certain liabilities, including certain liabilities under federal securities
laws.
THE FULL TEXT OF THE OPINION OF MCDONALD & COMPANY UPDATED AS OF THE
DATE OF THIS PROXY STATEMENT-PROSPECTUS, WHICH SETS FORTH CERTAIN ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEWS UNDERTAKEN, IS ATTACHED
AS APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS, AND SHOULD BE READ IN ITS
ENTIRETY. THE SUMMARY OF THE OPINION OF MCDONALD & COMPANY SET FORTH IN THIS
PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
OPINION. MCDONALD & COMPANY'S OPINION SHOULD NOT BE CONSTRUED BY HOLDERS OF
BRIGHT COMMON STOCK AS A RECOMMENDATION AS TO HOW SUCH HOLDERS SHOULD VOTE AT
THE SPECIAL MEETING.
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<PAGE> 32
Structure Of The Merger
- -----------------------
If the Merger is approved by Bright shareholders at the Special
Meeting by at least a majority vote of the outstanding Bright shares and if
necessary regulatory approvals are received and certain other conditions to the
consummation of the transactions contemplated by the Merger Agreement are
satisfied or waived prior to September 30, 1995, Bright will merge with and
into Bancorp in a transaction in which the following will occur at the
Effective Time:
(a) Each of the then outstanding shares of Bright will be canceled
and extinguished in consideration and exchange for a number of
shares of Bancorp Common Stock equal to the Exchange Ratio;
(b) Bright will merge with and into Bancorp and Bancorp will be
the continuing, surviving and resulting entity; and
(c) Bright National will become a wholly owned subsidiary of
Bancorp.
Surrender Of Stock Certificates
- -------------------------------
The Merger Agreement provides for the surrender of Bright Common Stock
certificates by the holders thereof before such holders may receive
certificates evidencing the Bancorp Common Stock. First National Bank of
Southwestern Ohio, Butler County, Ohio, a wholly owned subsidiary of Bancorp,
will act as the exchange agent (the "Exchange Agent"). As soon as practicable
after the Effective Time of the Merger, the Exchange Agent will mail a letter
of transmittal with instructions to all holders of Bright Common Stock.
The letter of transmittal will provide that, as soon as practicable
after surrender (but in no event later than ten business days after delivery)
to the Exchange Agent of one or more properly endorsed certificates of Bright
Common Stock, together with a properly completed letter of transmittal, there
will be issued and mailed to the holder of such Common Stock a certificate
representing the number of shares of Bancorp Common Stock to which such
shareholder is entitled.
After the Effective Time, each certificate that represented Bright
Common Stock immediately prior to the Effective Time of the Merger will be
deemed for all purposes to evidence shares of Bancorp Common Stock. No
dividends may be paid by Bancorp to persons who have not surrendered their
Bright certificates until such certificates have been surrendered to the
Exchange Agent.
No Fractional Shares
- --------------------
No fractional shares of Bancorp Common Stock will be issued as a
result of the Merger. Bright shareholders otherwise entitled to a fractional
share of Bancorp Common Stock will receive cash in lieu thereof equal to the
fractional interest times $73.184129 upon the surrender by such holders of
their certificates formerly representing Bright Common Stock to the Exchange
Agent.
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<PAGE> 33
Effective Time Of The Merger
- ----------------------------
The Effective Time is expected to be as soon as practicable after the
approval of the Merger Agreement by Bright shareholders, the satisfaction of
all conditions set forth in the Merger Agreement and the receipt of approvals
from regulatory authorities, or at such later date as may be agreed upon by
Bright and Bancorp. See "DESCRIPTION OF THE MERGER--Regulatory
Considerations".
No assurance can be provided that the necessary shareholder and
regulatory approvals will be obtained or that other conditions precedent to the
Merger will be satisfied. It is anticipated that the Merger will be
consummated in the third quarter of 1995. In the event the Merger is not
consummated by September 30, 1995, either party may terminate the Merger
Agreement or the parties may agree to extend the time for completion of the
Merger.
Conditions To Consummation Of The Merger
- ----------------------------------------
Consummation of the Merger is subject to a number of conditions, each
of which may be waived by the party entitled thereto to the extent permissible
by applicable law, including the following:
(a) The receipt of all required regulatory approvals for the
completion of the Merger and the expiration of any applicable
waiting periods, with no such approval or authorization
containing any provision which would be materially adverse to
the merged businesses of Bright and Bancorp;
(b) The validity or legality of the transactions contemplated by
the Merger Agreement shall not have been materially questioned
by any suit, action, investigation by any governmental body or
other legal or administrative proceedings;
(c) The receipt of all consents required for the consummation of
the Merger or for the prevention of any default under any
contract, agreement or permit of Bancorp or Bright which, if
not obtained or made, is reasonably likely to have,
individually or in the aggregate, a material adverse effect on
the combined business affairs of Bancorp or Bright;
(d) Compliance by Bancorp and Bright with their respective
covenants and the truth of all representations and warranties
as of the Effective Time;
(e) The absence of any material adverse change in the financial
condition, operations, corporate status or business of Bancorp
or Bright since December 31, 1993;
(f) The receipt of opinions from Bancorp's special counsel and
from Bright's special counsel with respect to various
corporate matters, due execution and delivery of the Merger
Agreement and various other Merger related matters;
26
<PAGE> 34
(g) The receipt of a favorable ruling from the IRS or an opinion
of counsel, in form and substance satisfactory to Bancorp,
Bright and their respective counsel, to the effect that, under
the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), no taxable gain or loss will be recognized by
Bright or its shareholders who do not exercise dissenters'
rights as a result of the Merger (except in respect of
fractional share interests sold);
(h) The receipt of letters from Bancorp's independent accountants
stating that they are not aware of any reason that Bancorp is
not in compliance with the pooling-of-interests criteria and
that the Merger can be accounted for as a pooling-of-interests
from Bancorp's perspective and the receipt of similar letters
from Bright's independent accountants;
(i) The approval of the Merger Agreement by Bright shareholders at
the Special Meeting by at least a majority vote of the
outstanding Bright shares; and
(j) The receipt by Bright of an opinion from McDonald & Company,
dated the date of the Merger Agreement and the date hereof,
that the Exchange Ratio pursuant to the Merger Agreement is
fair to the Bright shareholders from a financial point of
view.
No assurance can be given that all of the conditions to the Merger
will be satisfied or waived by any party permitted to do so.
Termination Of The Merger
- -------------------------
The Merger may be terminated at any time prior to the Effective Time
under any one or more of the following circumstances:
(a) By the mutual consent of the Boards of Directors of Bright and
Bancorp;
(b) By Bancorp if the holders of 10.0% or more of the outstanding
shares of common stock of Bright do not vote in favor of the
Merger Agreement and have perfected dissenters' rights in
accordance with the provisions of Indiana Code Chapter 23-1-44
for payment of the fair or appraised value of their stock;
(c) By Bright or Bancorp if, prior to the Effective Time, the
conditions to such party's obligation to consummate the Merger
are not met;
(d) By either Bright or Bancorp if the requisite approval of the
shareholders of Bright is not obtained or if the Merger is not
consummated on or before September 30, 1995;
27
<PAGE> 35
(e) By Bancorp if the Average of Bancorp Common Stock falls below
$26.40 per share or by Bright if the Average of Bancorp Common
Stock exceeds $39.60 per share, as may be adjusted by the
declaration of a stock dividend, stock split or other such
recapitalization.
Management Following The Merger
- -------------------------------
If the Merger is consummated, Bancorp will be the surviving
corporation. The Directors of Bancorp at the Effective Time of the Merger will
be the directors of the surviving corporation until their respective successors
are duly elected and qualified and the officers of Bancorp will be the officers
of the surviving corporation. Bright National, Bright's only subsidiary, will
become a wholly owned subsidiary of Bancorp. The Directors of Bright National
at the Effective Time will continue to be directors until their successors are
duly elected and qualified by Bancorp as sole shareholder and the officers of
Bright National at the Effective Time will continue to be the officers of
Bright until their successors are duly elected and qualified.
Interest Of Certain Persons In The Merger
- -----------------------------------------
The Merger Agreement contains certain provisions regarding employee
benefits. If the Merger is consummated, Bright National's 401(k) Profit
Sharing Plan (the "Bright National Plan") will be merged into the Bancorp
401(k) Thrift Plan (the "Bancorp Plan") as soon as practicable after the
Effective Time, at which time participant accounts in the Bright National Plan
will become 100% vested and subject to participant investment directions in
accordance with the terms established in the Bancorp Plan.
The First Financial Bancorp. Employees Pension Plan and Trust (the
"Bancorp Pension Plan") covers the majority of the employees of Bancorp and its
subsidiaries. Bright or Bright National does not have a retirement or
profit-sharing plan other than Bright National's 401(k) Profit Sharing Plan.
Eligible employees of Bright National will accrue benefits under the Bancorp
Pension Plan commencing with the Effective Time of the Merger. Years of
service of an employee of Bright National prior to the Effective Time of the
Merger will be credited to such employee for purposes of eligibility in and
vesting, but not for purposes of benefit accrual or contributions, under the
Bancorp Pension Plan.
The Merger Agreement also provides that the Board of Directors of
Bright National following the Merger will consist of the directors of Bright
National at the Effective Time. In addition, subject to the authority of the
Board of Directors as provided by law and the By-Laws of Bright National, the
officers of Bright National at the Effective Time of the Merger will continue
to be the officers of Bright National after the Merger. Bright's directors and
officers will not receive any payments from either Bright or Bancorp as a
result of the Merger other than shares of Bancorp Common Stock in exchange for
their shares of Bright Common Stock, as specified by the Merger Agreement and
under the same terms as with other shareholders.
28
<PAGE> 36
Bright National has entered into employment agreements with Jerry L.
Holsapple, its Executive Vice President and CEO, and Joe T. Jones, its
President and Senior Trust Officer. Among other items, these agreements
provide for severance compensation if the employee is terminated by Bright
National without cause or if the employee terminates the agreement for cause.
The Merger Agreement provides that from and after the effective time
of the Merger, Bancorp will cause Bright National to honor the employment
agreements or Bancorp will assume the employment agreements, provided that
Bright National has given proper written notice to the employees that the term
of the employment agreements will not extend beyond May 31, 1998, in the case
of Jerry L. Holsapple, and May 31, 1997, in the case of Joe T. Jones.
The directors and executive officers of Bright have indicated their
intention to vote the shares of Bright Common Stock held by them in favor of
the Merger Agreement. On the Record Date, such directors and executive
officers as a group beneficially owned an aggregate of 57,536 shares of Bright
Common Stock, which represented 28.1% of the shares issued and outstanding at
that date. If exercise of stock options is assumed, the directors and
executive officers of Bright will beneficially own 58,166 shares, which is
28.4% of issued and outstanding shares and shares that will be issued and
outstanding upon exercise of the stock options.
Shareholders' Rights Of Appraisal
- ---------------------------------
Under Indiana Code Chapter 23-1-44, any holder of record of Bright
Common Stock on the Record Date who does not vote in favor of the Merger may
exercise dissenting shareholder rights and receive the fair value of such
holder's shares paid by complying with the requirements of Chapter 23-1-44.
Set forth below is a summary of the procedures relating to the
exercise of statutory dissenter's rights ("Dissenter's Rights"). THIS SUMMARY
DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY EXPRESS
REFERENCE TO APPLICABLE INDIANA LAW, INCLUDING INDIANA CODE CHAPTER 23-1-44, A
COPY OF WHICH IS APPENDED AS APPENDIX C TO THIS PROXY STATEMENT-PROSPECTUS.
Any shareholder of Bright contemplating exercising Dissenter's Rights with
respect to Bright Common Stock is urged to review carefully such provisions and
to consult an attorney, because Dissenter's Rights will be lost if the
procedural requirements under Chapter 23-1-44 are not fully and precisely
satisfied.
Under Chapter 23-1-44, a shareholder of record on the record date who
desires to assert Dissenters' Rights must (1) deliver to Bright before the
shareholders vote is taken written notice of the shareholder's intent to demand
payment for his or her shares if the Merger is effectuated and (2) not vote the
shareholder's shares in favor of the Merger. A shareholder's failure to vote
against the Merger will not constitute a waiver of that shareholder's
Dissenters' Rights. For purposes of Chapter 23-1-44, the fair value of a
dissenting shareholder's shares is the value of the shares immediately before
the effectuation of the Merger, excluding any appreciation or depreciation in
anticipation of the Merger unless the exclusion would be inequitable.
29
<PAGE> 37
Within ten days after the approval of the Merger by the shareholders,
Bright or Bancorp as the surviving corporation (hereinafter referred to for
purposes of this section as the "Corporation") must mail or deliver written
notice to each dissenting shareholder, which dissenter's notice must: (1)
state where the payment demand must be sent and where and when certificates for
certificated shares must be deposited; (2) inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; (3) supply a form for demanding payment that
includes the date of the first announcement to news media or to shareholders of
the terms of the proposed Merger and requires that the dissenting shareholder
certify whether or not he or she acquired beneficial ownership of the shares
before that date; (4) set a date by which the Corporation must receive the
payment demand, which date may not be fewer than thirty nor more than sixty
days after the date the dissenter's notice is delivered; and (5) be accompanied
by a copy of Indiana Code Chapter 23-1-44. A shareholder sent a dissenter's
notice, as described above, must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date set
forth in the dissenter's notice and deposit the shareholder's certificates in
accordance with the terms of the dissenter's notice. If the shareholder fails
to take these steps he or she will not be entitled to payment for the
shareholder's shares and will be considered to have voted his or her shares in
favor of the Merger.
Following effectuation of the Merger, the Corporation will pay each
shareholder who filed a payment demand with the Corporation the amount that the
Corporation estimates to be the fair value of the dissenting shareholder's
shares.
If the dissenting shareholder believes the amount paid by the
Corporation is less than the fair value for his or her shares or if the
Corporation fails to make payment to the dissenting shareholder within sixty
days after the date set for demanding payment, the dissenting shareholder may
notify the Corporation in writing of his or her own estimate of the fair value
of his or her shares and demand payment of his or her estimate. Such a demand
for payment must be made in writing within thirty days after the Corporation
has made payment for the dissenting shareholder's shares. A dissenter who
fails to make the demand waives his or her right to demand payment.
If a demand for payment remains unsettled, the Corporation must
commence a proceeding in the circuit or superior court of Carroll County within
sixty days after receiving the payment demand and petition the court to
determine the fair value of the shares. If the Corporation fails to commence
the proceeding within the sixty day period, it must pay each dissenter whose
demand remains unsettled the amount demanded. The Corporation must make all
dissenters whose demands remain unsettled parties to the proceeding and all
parties must be served a copy of the petition. The court may appoint on or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. Each dissenting shareholder made a party to the
proceeding is entitled to judgment for the amount, if any, by which the court
finds the fair value of the dissenter's shares, plus interest, exceeds the
amount paid by the Corporation.
30
<PAGE> 38
The Court in an appraisal proceeding shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court, and shall assess these costs and the fees and expenses
of counsel and experts for the respective parties against the parties in
amounts the court finds equitable.
Every shareholder who does not deliver a notice of intent to demand
payment for his or her shares as aforesaid, or who votes in favor of the
Merger, is bound by the vote of the assenting shareholders and will have no
right to the payment of the fair value of his or her shares as a result of the
Merger. Voting against the Merger does not in itself constitute the notice of
intent to demand payment required by Indiana Code Chapter 23-1-44.
The Merger Agreement includes a provision that Bancorp may terminate
the Merger Agreement before the Merger becomes effective if the number of
shares of Bright Common Stock for which Dissenter's Rights are perfected is 10%
or more of the outstanding shares of Bright Common Stock.
The Board of Directors of Bright has determined that the Merger is
fair to and in the best interest of Bright's shareholders and has recommended
that the Bright shareholders vote in favor of the Merger. Accordingly, the
Corporation does not intend to offer to pay more for any Bright Common Stock
for which Dissenter's Rights have been duly perfected than the fair value of
such shares, and intends to require dissenting shareholders to strictly comply
with the pertinent provisions of Indiana Code Chapter 23-1-44 perfecting
Dissenter's Rights.
Federal Income Tax Consequences Of The Merger
- ---------------------------------------------
Assuming that (i) the Merger constitutes a reorganization within the
meaning of section 368 (a)(1)(A) of the Code; (ii) after the transaction,
Bancorp, as successor of Bright, will hold substantially all of its assets; and
(iii) in the transaction, the Bright shareholders will exchange an amount of
stock constituting control of Bright solely for Bancorp Common Stock; the
following is a summary of the tax consequences which will result:
(1) No gain or loss will be recognized by Bright shareholders who
exchange all of their Bright Common Stock for Bancorp Common
Stock pursuant to the Merger, except to the extent of any cash
received in lieu of receipt of a fractional share of Bancorp
Common Stock.
(2) The basis of the Bancorp Common Stock (including fractional
share interests) received by Bright shareholders who exchange
all of their Bright Common Stock for Bancorp Common Stock will
be the same as the basis of the Bright Common Stock
surrendered in exchange therefor.
31
<PAGE> 39
(3) The holding period of the Bancorp Common Stock (including
fractional share interests) received by Bright shareholders
who exchange all of their Bright Common Stock for Bancorp
Common Stock will include the period during which the Bright
Common Stock was held, provided the Bright Common Stock was
held as a capital asset on the date of the exchange.
(4) Where a cash payment is received by a Bright shareholder in
lieu of fractional shares of Bancorp Common Stock, the cash
payment will be treated as a distribution in redemption of the
fractional share interest by Bancorp, subject to the
provisions and limitations of Section 302 of the Code. Where
such exchange qualifies under Section 302(a) of the Code, such
shareholder will recognize a capital gain or loss provided
that the Bright Common Stock was held as a capital asset on
the date of the Merger.
(5) Any Bright shareholder who perfects Dissenter's Rights and
receives solely cash in exchange for such shareholder's Bright
Common Stock shall be treated as having received such cash as
a distribution in redemption of the Bright Common Stock
subject to the provisions and limitations of Section 302 of
the Code. Where, as a result of such distribution, such
Bright shareholder owns no Bancorp Common Stock, either
directly or through the application of the constructive
ownership rules of Section 318(a) of the Code, the redemption
will be a complete termination of interest within the meaning
of Section 302(b)(3) of the Code and the cash will be treated
as a distribution in full payment and exchange for Bright
Common Stock as provided in Section 302(a) of the Code. Gain
or loss will be realized and recognized to such Bright
shareholder in an amount equal to the difference between the
redemption price and the adjusted basis of the Bright Common
Stock surrendered in exchange therefor.
(6) No gain or loss will be recognized by Bright or Bancorp in
connection with the transaction.
Receipt of an opinion of tax counsel (the "Tax Opinion") with respect
to the above is a condition precedent to consummation of the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON THE
CODE, TREASURY REGULATIONS, CASE LAW AND INTERNAL REVENUE SERVICE RULINGS AS IN
EFFECT ON THE DATE HEREOF WITHOUT CONSIDERATION OF THE FACTS AND CIRCUMSTANCES
OF ANY PARTICULAR SITUATION OF ANY BRIGHT SHAREHOLDER. THIS DISCUSSION ASSUMES
THAT BRIGHT SHAREHOLDERS HOLD THEIR BRIGHT COMMON STOCK AS CAPITAL ASSETS
WITHIN THE MEANING OF SECTION 1221 OF THE CODE. SPECIAL TAX CONSIDERATIONS NOT
DISCUSSED HEREIN MAY BE APPLICABLE TO PARTICULAR CLASSES OF TAXPAYERS, SUCH AS
BROKER-DEALERS, OR TO ANY SHAREHOLDER WHO ACQUIRED BRIGHT COMMON STOCK THROUGH
THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. EACH
SHAREHOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISER WITH RESPECT TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING THE
APPLICATION AND EFFECT OF EXISTING AND PROPOSED FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS.
32
<PAGE> 40
Accounting Treatment
- --------------------
It is anticipated that the Merger will be accounted for as a
pooling-of-interests. The receipt by Bancorp of letters from Bright's
independent accountants stating that they are not aware of any reason that
Bright is not in compliance with the pooling-of-interests criteria and that the
Merger can be accounted for as a pooling-of-interests from Bright's perspective
and the receipt of similar letters from Bancorp's independent accountants is a
condition precedent to Bancorp's obligation to consummate the Merger.
Regulatory Considerations
- -------------------------
The proposed transaction requires the approval of the Federal Reserve
Board under section 3(a)(5) of the Bank Holding Company Act of 1956, as
amended. The Bank Holding Company Act provides that the Federal Reserve Board
may not approve any transaction which would result in a monopoly or which would
be in furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States, or any
transaction the effect of which in any section of the United States may be
substantially to lessen competition or to tend to create a monopoly or which in
any other manner might restrain trade, unless the Federal Reserve Board
determines that the anti-competitive effects of the proposed merger are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the community to be served.
The Merger may generally not be consummated for fifteen days after the
receipt of Federal Reserve Board approval. Such fifteen day period will become
thirty days, however, if the United States Department of Justice issues an
adverse comment relating to competitive factors. During such fifteen or thirty
day period, the United States Department of Justice may commence legal action
challenging the Merger under the Federal Anti-trust Laws. If the Justice
Department does not commence a legal action during such period, the Merger may
be consummated and the Justice Department may not thereafter challenge the
transaction except in an action commenced under Section 2 of the Sherman
Anti-Trust Act.
The Merger is also subject to appropriate filings with the Indiana
Department of Financial Institutions.
Merger applications were filed by Bancorp with the Federal Reserve
Board on ____________ ___, 1995 and the Indiana Department of Financial
Institutions on ____________ ___, 1995. Bancorp and Bright anticipate that the
Merger will be approved by the Federal Reserve Board and the Indiana Department
of Financial Institutions and will not be challenged by the Justice Department
under the anti-trust laws. However, there can be no assurance that the Federal
Reserve Board, the Indiana Department of Financial Institutions and the Justice
Department will concur in this assessment.
33
<PAGE> 41
Pro Forma Financial Information
- -------------------------------
The following pro forma unaudited consolidated balance sheet as of
March 31, 1995 and the pro forma unaudited consolidated statement of earnings
for the years ended December 31, 1994, 1993, and 1992 and the three months
ended March 31, 1995 and 1994 indicate the pro forma effects of the merger of
Bright into Bancorp and the issuance of shares of Bancorp Common Stock in
exchange for all of the outstanding Bright Common Stock using the
pooling-of-interests method of accounting. Each share of Bright Common Stock
will be canceled and extinguished in consideration and exchange for a number of
shares of Bancorp Common Stock equal to the Exchange Ratio. The pro forma
information has been calculated assuming the issuance of 442,713 shares of
Bancorp Common Stock, which is the number of shares which would have been
issued if the Merger was effective on March 31, 1995.
The pro forma information is based on the historical financial
statements of the organizations presented giving effect to the accounting
method proposed and the assumptions and adjustments in the accompanying notes
to the pro forma financial statements. These pro forma unaudited statements
are presented for illustrative purposes only and may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. The pro forma
unaudited financial statements should be read in conjunction with the audited
and unaudited financial statements and related notes set forth or incorporated
by reference in this Proxy Statement-Prospectus.
34
<PAGE> 42
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1995
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 92,734 $ 2,231 $ 94,965
Interest-bearing deposits with other banks 4,517 100 4,617
Federal funds sold and securities purchased
under agreements to resell 198 0 198
Investment securities held to maturity 120,765 13,959 134,724
Investment securities available for sale,
at market value 211,556 14,596 226,152
Loans:
Commercial 311,415 14,398 325,813
Real estate-construction 24,292 0 24,292
Real estate-mortgage 747,261 48,381 795,642
Installment 297,747 9,873 307,620
Credit card 13,850 0 13,850
Lease financing 15,897 1,063 16,960
---------- ---------- ----------
Total loans 1,410,462 73,715 1,484,177
Less:
Unearned income 312 207 519
Allowance for loan losses 18,904 769 19,673
---------- ---------- ----------
Net loans 1,391,246 72,739 1,463,985
Premises and equipment 37,750 1,833 39,583
Deferred income taxes 4,583 69 4,652
Accrued interest and other assets 29,992 3,261 33,253
---------- ---------- ----------
TOTAL ASSETS $1,893,341 $ 108,788 $2,002,129
========== ========== ==========
LIABILITIES
Deposits:
Noninterest-bearing $ 184,417 $ 10,319 $ 194,736
Interest-bearing 1,406,278 83,588 1,489,866
---------- ---------- ----------
Total deposits 1,590,695 93,907 1,684,602
Short term borrowings
Federal funds purchased and securities
sold under agreements to repurchase 79,458 0 79,458
Other 944 0 944
---------- ---------- ----------
Total short-term borrowings 80,402 0 80,402
Long term borrowings 0 5,271 5,271
Accrued interest and other liabilities 20,992 950 21,942
---------- ---------- ----------
TOTAL LIABILITIES 1,692,089 100,128 1,792,217
SHAREHOLDERS' EQUITY
Common stock 97,676 3,542 (A) 101,218
Surplus 15,074 (674)(A) 14,400
Retained earnings 88,944 5,904 94,848
Unrealized net losses on securities
available-for-sale, net of tax (384) (112) (496)
Restricted stock awards (58) 0 (58)
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 201,252 8,660 209,912
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,893,341 $ 108,788 $2,002,129
========== ========== ==========
- -------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
35
<PAGE> 43
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 29,988 $ 1,693 $ 31,681
Investment securities:
Taxable 3,998 297 4,295
Tax-exempt 2,083 100 2,183
---------- ---------- ----------
Total investment securities 6,081 397 6,478
Interest-bearing deposits with other banks 75 16 91
Federal funds sold and securities
purchased under agreements to resell 18 8 26
---------- ---------- ----------
Total interest income 36,162 2,114 38,276
INTEREST EXPENSE:
Deposits 13,035 902 13,937
Short-term borrowings 1,460 5 1,465
Long-term borrowings 0 85 85
---------- ---------- ----------
Total interest expense 14,495 992 15,487
---------- ---------- ----------
Net interest income 21,667 1,122 22,789
Provision for loan losses 393 30 423
---------- ---------- ----------
Net interest income after
provision for loan losses 21,274 1,092 22,366
NONINTEREST INCOME:
Service charges on deposit accounts 2,022 78 2,100
Trust income 1,894 27 1,921
Gains (losses) on investment securities 13 (23) (10)
Other 944 70 1,014
---------- ---------- ----------
Total noninterest income 4,873 152 5,025
NONINTEREST EXPENSES:
Salaries and employee benefits 8,076 448 8,524
Net occupancy 1,081 54 1,135
Furniture and equipment 806 74 880
Data processing 1,317 31 1,348
Deposit insurance 886 54 940
State taxes 400 0 400
Other 3,095 255 3,350
---------- ---------- ----------
Total noninterest expenses 15,661 916 16,577
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 10,486 328 10,814
Income tax expense 3,117 119 3,236
---------- ---------- ----------
NET EARNINGS $ 7,369 $ 209 $ 7,578
========== ========== ==========
NET EARNINGS PER SHARE $0.60 $1.02 $0.60
===== ===== =====
AVERAGE SHARES OUTSTANDING 12,206,529 204,788 12,649,242 (B)
========== ========== ==========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
36
<PAGE> 44
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 24,291 $ 1,593 $ 25,884
Investment securities:
Taxable 4,632 188 4,820
Tax-exempt 2,548 108 2,656
---------- ---------- ----------
Total investment securities 7,180 296 7,476
Interest-bearing deposits with other banks 126 16 142
Federal funds sold and securities
purchased under agreements to resell 138 37 175
---------- ---------- ----------
Total interest income 31,735 1,942 33,677
INTEREST EXPENSE:
Deposits 11,412 840 12,252
Short-term borrowings 188 4 192
Long-term borrowings 53 62 115
---------- ---------- ----------
Total interest expense 11,653 906 12,559
---------- ---------- ----------
Net interest income 20,082 1,036 21,118
Provision for loan losses 169 45 214
---------- ---------- ----------
Net interest income after
provision for loan losses 19,913 991 20,904
NONINTEREST INCOME:
Service charges on deposit accounts 1,978 70 2,048
Trust income 1,797 19 1,816
Gains on investment securities 6 0 6
Other 1,323 65 1,388
---------- ---------- ----------
Total noninterest income 5,104 154 5,258
NONINTEREST EXPENSES:
Salaries and employee benefits 7,808 499 8,307
Net occupancy 1,096 52 1,148
Furniture and equipment 764 95 859
Data processing 1,284 12 1,296
Deposit insurance 883 54 937
State taxes 477 0 477
Other 3,077 208 3,285
---------- ---------- ----------
Total noninterest expenses 15,389 920 16,309
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 9,628 225 9,853
Income tax expense 2,626 65 2,691
---------- ---------- ----------
NET EARNINGS $ 7,002 $ 160 $ 7,162
========== ========== ==========
NET EARNINGS PER SHARE $0.57 $0.81 $0.57
===== ===== =====
AVERAGE SHARES OUTSTANDING 12,210,706 197,592 12,653,419 (B)
========== ========== ==========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
37
<PAGE> 45
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 104,936 $ 6,706 $ 111,642
Investment securities:
Taxable 18,229 1,031 19,260
Tax-exempt 9,676 383 10,059
---------- ---------- ----------
Total investment securities 27,905 1,414 29,319
Interest-bearing deposits with other banks 388 44 432
Federal funds sold and securities
purchased under agreements to resell 275 93 368
---------- ---------- ----------
Total interest income 133,504 8,257 141,761
INTEREST EXPENSE:
Deposits 47,042 3,454 50,496
Short-term borrowings 2,421 14 2,435
Long-term borrowings 124 294 418
---------- ---------- ----------
Total interest expense 49,587 3,762 53,349
---------- ---------- ----------
Net interest income 83,917 4,495 88,412
Provision for loan losses 1,268 120 1,388
---------- ---------- ----------
Net interest income after
provision for loan losses 82,649 4,375 87,024
NONINTEREST INCOME:
Service charges on deposit accounts 8,222 337 8,559
Trust income 7,017 77 7,094
Gains (losses) on investment securities (1,754) (4) (1,758)
Other 3,977 279 4,256
---------- ---------- ----------
Total noninterest income 17,462 689 18,151
NONINTEREST EXPENSES:
Salaries and employee benefits 31,296 1,947 33,243
Net occupancy 4,211 212 4,423
Furniture and equipment 3,006 325 3,331
Data processing 5,205 113 5,318
Deposit insurance 3,537 216 3,753
State taxes 1,726 0 1,726
Other 13,158 926 14,084
---------- ---------- ----------
Total noninterest expenses 62,139 3,739 65,878
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 37,972 1,325 39,297
Income tax expense 9,799 405 10,204
---------- ---------- ----------
NET EARNINGS $ 28,173 $ 920 $ 29,093
========== ========== ==========
NET EARNINGS PER SHARE $2.31 $4.56 $2.30
===== ===== =====
AVERAGE SHARES OUTSTANDING 12,210,753 201,879 12,653,466 (B)
========== ========== ==========
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
38
<PAGE> 46
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 99,333 $ 6,767 $ 106,100
Investment securities:
Taxable 19,363 808 20,171
Tax-exempt 10,659 330 10,989
---------- ---------- ----------
Total investment securities 30,022 1,138 31,160
Interest-bearing deposits with other banks 578 42 620
Federal funds sold and securities
purchased under agreements to resell 806 125 931
---------- ---------- ----------
Total interest income 130,739 8,072 138,811
INTEREST EXPENSE:
Deposits 50,862 3,574 54,436
Short-term borrowings 790 0 790
Long-term borrowings 228 224 452
---------- ---------- ----------
Total interest expense 51,880 3,798 55,678
---------- ---------- ----------
Net interest income 78,859 4,274 83,133
Provision for loan losses 3,747 285 4,032
---------- ---------- ----------
Net interest income after
provision for loan losses 75,112 3,989 79,101
NONINTEREST INCOME:
Service charges on deposit accounts 8,513 300 8,813
Trust income 6,425 59 6,484
Gains (losses) on investment securities (71) (1) (72)
Other 4,722 367 5,089
---------- ---------- ----------
Total noninterest income 19,589 725 20,314
NONINTEREST EXPENSES:
Salaries and employee benefits 29,633 1,731 31,364
Net occupancy 4,219 232 4,451
Furniture and equipment 3,147 295 3,442
Data processing 4,741 126 4,867
Deposit insurance 3,468 208 3,676
State taxes 1,704 0 1,704
Other 15,126 882 16,008
---------- ---------- ----------
Total noninterest expenses 62,038 3,474 65,512
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 32,663 1,240 33,903
Income tax expense 7,469 374 7,843
---------- ---------- ----------
NET EARNINGS $ 25,194 $ 866 $ 26,060
========== ========== ==========
NET EARNINGS PER SHARE $2.06 $4.38 $2.06
===== ===== =====
AVERAGE SHARES OUTSTANDING 12,211,405 197,592 12,654,118 (B)
========== ========== ==========
<FN>
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
39
<PAGE> 47
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 109,072 $ 7,417 $ 116,489
Investment securities:
Taxable 20,778 1,021 21,799
Tax-exempt 10,918 269 11,187
---------- ---------- ----------
Total investment securities 31,696 1,290 32,986
Interest-bearing deposits with other banks 883 27 910
Federal funds sold and securities
purchased under agreements to resell 1,788 91 1,879
---------- ---------- ----------
Total interest income 143,439 8,825 152,264
INTEREST EXPENSE:
Deposits 65,743 4,244 69,987
Short-term borrowings 878 0 878
Long-term borrowings 337 191 528
---------- ---------- ----------
Total interest expense 66,958 4,435 71,393
---------- ---------- ----------
Net interest income 76,481 4,390 80,871
Provision for loan losses 6,543 295 6,838
---------- ---------- ----------
Net interest income after
provision for loan losses 69,938 4,095 74,033
NONINTEREST INCOME:
Service charges on deposit accounts 7,810 277 8,087
Trust income 5,912 59 5,971
Gains on investment securities 1,811 74 1,885
Other 4,281 243 4,524
---------- ---------- ----------
Total noninterest income 19,814 653 20,467
---------- ---------- ----------
NONINTEREST EXPENSES:
Salaries and employee benefits 28,260 1,762 30,022
Net occupancy 3,858 257 4,115
Furniture and equipment 3,228 261 3,489
Data processing 4,725 154 4,879
Deposit insurance 3,553 219 3,772
State taxes 1,638 0 1,638
Other 15,377 796 16,173
---------- ---------- ----------
Total noninterest expenses 60,639 3,449 64,088
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 29,113 1,299 30,412
Income tax expense 7,343 381 7,724
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 21,770 $ 918 $ 22,688
========== ========== ==========
EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $1.77 $4.64 $1.78
===== ===== =====
AVERAGE SHARES OUTSTANDING 12,318,805 197,592 12,761,518 (B)
========== ========== ==========
<FN>
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
40
<PAGE> 48
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OTHER SELECTED FINANCIAL DATA:
BALANCES AT PERIOD END:
Total assets $1,893,341 $ 108,788 $2,002,129
Loans, net of unearned income 1,410,150 73,508 1,483,658
Deposits 1,590,695 93,907 1,684,602
Shareholders' equity 201,252 8,660 209,912
Shareholders' equity per share 16.48 42.23 16.59 (B)
AVERAGE BALANCES:
Average total assets $1,871,532 $ 111,536 $1,983,068
Average shareholders' equity 197,050 8,449 205,499
RATIOS:
Average equity to average total assets 10.53% 7.58% 10.36%
Return on average shareholders' equity 14.96% 9.89% 14.75%
Return on average assets 1.57% 0.75% 1.53%
<FN>
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
41
<PAGE> 49
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE THREE MONTHS ENDED MARCH 31, 1994
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OTHER SELECTED FINANCIAL DATA:
BALANCES AT PERIOD END:
Total assets $1,817,216 $ 110,972 $1,928,188
Loans, net of unearned income 1,204,201 73,992 1,278,193
Deposits 1,582,149 97,541 1,679,690
Long-term borrowings 2,126 4,939 7,065
Shareholders' equity 187,349 7,688 195,037
Shareholders' equity per share 15.34 38.91 15.41 (B)
AVERAGE BALANCES:
Average total assets $1,786,797 $ 111,373 $1,898,170
Average shareholders' equity 182,983 7,641 190,624
RATIOS:
Average equity to average total assets 10.24% 6.86% 10.04%
Return on average shareholders' equity 15.31% 8.38% 15.03%
Return on average assets 1.57% 0.57% 1.51%
<FN>
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
42
<PAGE> 50
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, 1994
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OTHER SELECTED FINANCIAL DATA:
BALANCES AT YEAR END:
Total assets $1,922,643 $ 114,285 $2,036,928
Loans, net of unearned income 1,378,867 73,447 1,452,314
Deposits 1,587,324 98,369 1,685,693
Shareholders' equity 194,673 8,239 202,912
Shareholders' equity per share 15.95 40.26 16.04 (B)
AVERAGE BALANCES:
Average total assets $1,834,000 $ 112,300 $1,946,300
Average shareholders' equity 188,752 8,182 196,934
RATIOS:
Average equity to average total assets 10.29% 7.29% 10.12%
Return on average shareholders' equity 14.93% 11.25% 14.77%
Return on average assets 1.54% 0.82% 1.49%
<FN>
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
43
<PAGE> 51
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OTHER SELECTED FINANCIAL DATA:
BALANCES AT YEAR END:
Total assets $1,810,673 $ 111,774 $1,922,447
Loans, net of unearned income 1,189,790 74,344 1,264,134
Deposits 1,580,546 99,470 1,680,016
Long-term borrowings 3,983 4,000 7,983
Shareholders' equity 181,252 7,595 188,847
Shareholders' equity per share 14.85 38.43 14.93 (B)
AVERAGE BALANCES:
Average total assets $1,781,841 $ 106,222 $1,888,063
Average shareholders' equity 173,327 7,326 180,653
RATIOS:
Average equity to average total assets 9.73% 6.90% 9.57%
Return on average shareholders' equity 14.54% 11.82% 14.43%
Return on average assets 1.41% 0.82% 1.38%
<FN>
- --------------------
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
44
<PAGE> 52
<TABLE>
PRO FORMA UNAUDITED CONSOLIDATED SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Consolidated
Bancorp Bright Pro Forma
---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
OTHER SELECTED FINANCIAL DATA:
BALANCES AT YEAR END:
Total assets $1,816,414 $ 106,505 $1,922,919
Loans, net of unearned income 1,137,482 72,233 1,209,715
Deposits 1,604,053 95,155 1,699,208
Long-term borrowings 4,564 3,150 7,714
Shareholders' equity 167,694 6,877 174,571
Shareholders' equity per share 13.66 34.80 13.73 (B)
AVERAGE BALANCES:
Average total assets $1,806,635 $ 102,863 $1,909,498
Average shareholders' equity 159,647 6,558 166,205
RATIOS:
Average equity to average total assets 8.84% 6.38% 8.70%
Return on average shareholders' equity (1) 13.64% 13.98% 13.65%
Return on average assets (1) 1.21% 0.89% 1.19%
- --------------------
<FN>
(1) Calculated using income before cumulative effect of changes in accounting principles.
See Notes to the Pro Forma Unaudited Consolidated Financial Statements on page 46.
</TABLE>
45
<PAGE> 53
NOTES TO THE PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
General
- -------
Reclassification of information has been made at times to provide
consistency in the presentation of financial information for the corporations
involved. These reclassifications are not material in nature and had no effect
on net earnings.
Listed below are certain costs that are directly attributable to the
Merger and some of these can reasonably be expected to be included in the
expenses of Bancorp during the next 12 months. Approximately $156,000 of the
costs listed below have already been paid and expensed or accrued and expensed
by Bright. Those costs not previously paid or accrued were not considered in
the preparation of the Pro Forma Unaudited Consolidated Financial Statements.
<TABLE>
<CAPTION>
Classification Amount
-------------- --------
<S> <C>
Legal $121,000
Accounting 20,000
Professional 125,000
Regulatory filing fees 13,000
Other 4,000
--------
Total $283,000
</TABLE>
(A) Bancorp is offering to exchange shares of Bancorp Common Stock for
outstanding shares of Bright Common Stock. The exact number of
Bancorp shares to be issued is not yet known. It will be calculated
by dividing $73.184129 by the mathematical average of the average of
the closing daily bid and asked prices of Bancorp Common Stock on the
Nasdaq National Market System for the period of 20 trading days ending
at 4:00 p.m. (New York time) two trading days prior to the Effective
Time ("Exchange Ratio"). The Exchange Ratio will be proportionately
adjusted in the event of the subdivision or split of the outstanding
shares of Bancorp Common Stock, the payment of a dividend in Bancorp
Common Stock, a capital reorganization or reclassification or
recapitalization affecting Bancorp Common Stock. The total number of
Bancorp shares to be issued will be equal to the Exchange Ratio
multiplied by the number of shares of Bright Common Stock outstanding
(_______ shares as of ______________, 1995).
The par value of Bancorp Common Stock is $8.00 per share, while the
stated value of Bright Common Stock is $6.25 per share. The
additional par value of the shares of Bancorp Common Stock issued, in
the aggregate, over the stated value of Bright Common Stock, in the
aggregate, is transferred from surplus. The pro forma common stock
and surplus for Bright were calculated assuming the issuance of
442,713 shares of Bancorp Common Stock, which is the number of shares
that would have been issued if the Merger was effective March 31, 1995
(2.152078779 Exchange Ratio). The use of such number of shares is for
illustrative purposes only and does not attempt to predict the actual
number of shares to be issued in the Merger. The adjustments to
common stock and surplus that would be required assuming an Exchange
Ratio of 2.152078779 are shown in the table below.
46
<PAGE> 54
<TABLE>
<CAPTION>
Bright Transfer from Bright
Actual Surplus Pro Forma
--------- ------------- ---------
(In thousands)
<S> <C> <C> <C>
Common stock $1,282 $2,260 $3,542
Surplus 1,586 (2,260) (674)
------ ------ ------
Total common stock and surplus $2,868 $ 0 $2,868
</TABLE>
(B) The consolidated pro forma average shares outstanding and
shareholders' equity per share were calculated assuming the issuance
of 442,713 shares of Bancorp Common Stock at an Average equal to
$34.00625, which is the Average that would have been in effect if the
Merger was effective March 31, 1995 (2.152078779 Exchange Ratio). The
use of the number of shares is for illustrative purposes only and does
not attempt to predict the actual number of shares to be issued in the
Merger.
47
<PAGE> 55
INFORMATION ABOUT BANCORP
Information about Bancorp is included in the December 31, 1994 Annual
Report of Bancorp on Form 10-K, previously incorporated herein by reference,
and in Bancorp's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, previously incorporated herein by reference.
48
<PAGE> 56
INFORMATION ABOUT THE BUSINESS OF BRIGHT
General
- -------
Bright is a bank holding company that engages indirectly in the
business of commercial banking and other permissible activities closely related
to banking. Since Bright does not itself conduct any operating businesses, it
depends largely upon Bright National for funds with which to pay the expenses
of its operations and, to the extent applicable, any dividends on its
outstanding shares of stock.
Bright was formed in 1984 for the purpose of becoming the parent
holding company of Bright National. Bright National was chartered by the
Office of the Comptroller of the Currency as a national bank in 1905. On
December 14, 1990, Bright National purchased the main office and three branch
offices of the former Hometown Savings Bank, F.S.B., Delphi, Indiana from the
Resolution Trust Corporation. The four acquired offices are located in Delphi,
Rossville, Burlington and Lafayette, Indiana. Currently, Bright National has
four full service offices located in Flora, Lafayette, Delphi and Rossville and
three deposit oriented offices located in Burlington, Flora and Lafayette,
Indiana. Bright's primary market area consists of Carroll County, northeastern
Tippecanoe County and northern Clinton County, Indiana. As of December 31,
1994, Bright had total assets of $114.3 million and total deposits of $98.4
million. It had 86 employees at December 31, 1994.
Bright has operated as a traditional community bank since its
founding. As with many community banks, Bright's lending focus has been
strongly real estate-oriented. At December 31, 1994, approximately 64.2% of
its lending portfolio was comprised of real estate loans. The balance of
Bright's loan portfolio is comprised primarily of consumer and commercial
loans. Lendable funds are obtained primarily from savings deposits and loan
principal payments. Bright offers a full line of checking and money market
accounts, passbook savings, certificates of deposit and individual retirement
accounts. In addition to originating loans, Bright invests in U.S. treasury
and government agency securities, corporate notes, mortgage-backed securities
and in municipal securities.
Competition
- -----------
Bright competes for deposits with other commercial banks, savings
associations, savings banks, credit unions and with issuers of commercial paper
and other securities, such as shares in money market mutual funds. The primary
factors in competing for deposits are interest rates and convenience of office
location.
In making loans, Bright competes with other commercial banks, savings
associations, savings banks, consumer finance companies, credit unions, leasing
companies, mortgage companies, and other lenders. Bright competes for loan
originations primarily through the interest rates and loan fees it charges and
through the efficiency and quality of services it provides to borrowers.
Competition is affected by, among other things, the general availability of
lendable funds, general and local economic conditions, current interest rate
levels and other factors which are not readily predictable.
49
<PAGE> 57
Regulation
- ----------
Bright, as a bank holding company, is subject to supervision and
regular examination by the Federal Reserve Board, the Office of the Comptroller
of the Currency, and the Federal Deposit Insurance Corporation (the "FDIC").
Bright National, as a national bank, is subject to supervision and regular
examination by the Comptroller's Office, as primary regulator, and by the FDIC,
as backup regulator.
Properties
- ----------
Bright operates from seven offices located in Flora, Lafayette,
Delphi, Rossville and Burlington, Indiana. The Main Office in Flora, branch
offices in Delphi and Flora and a branch office on South Sagamore Parkway,
Lafayette are owned by Bright. The branch offices in Burlington and Rossville
and a branch office on North Sagamore Parkway, Lafayette are leased by Bright.
Legal Proceedings
- -----------------
Neither Bright nor Bright National is presently involved in any legal
proceedings of a material nature. From time to time, Bright National is a
party to legal proceedings incidental to its business to enforce its security
interest in collateral pledged to secure loans made by Bright National.
50
<PAGE> 58
Selected Financial Data
- -----------------------
The following table sets forth certain information concerning the
financial condition, earnings and other data regarding Bright at the dates and
for the periods indicated:
<TABLE>
<CAPTION>
Financial condition At December 31,
and other data: ------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total amount of:
Assets $114,285 $111,774 $106,505 $103,570 $103,182
Investment securities:
Held-to-maturity 14,622 23,684 20,963 18,498 29,611
Available-for-sale 14,408 0 0 0 0
Loans receivable, net of
unearned income and
deferred loan fees 73,447 74,344 72,233 74,342 55,939
Deposits 98,369 99,470 95,155 92,679 93,594
Long-term borrowings 6,789 4,000 3,150 3,450 1,700
Shareholders' equity 8,239 7,595 6,877 6,161 5,593
Earnings and other Year ended December 31,
data: -----------------------------------------------
1994 1993 1992 1991 1990
-----------------------------------------------
(Dollars in thousands, except per share data)
Interest income $8,257 $8,072 $8,825 $9,610 $6,357
Interest expense 3,762 3,798 4,435 5,703 4,074
----- ------ ------ ------ ------
Net interest income 4,495 4,274 4,390 3,907 2,283
Provision for loan losses 120 285 295 117 41
----- ------ ------ ------ ------
Net interest income after
provision for loan losses 4,375 3,989 4,095 3,790 2,242
Other income 689 725 653 434 277
Other expenses 3,739 3,474 3,449 3,240 1,799
------ ------ ------ ------ ------
Earnings before income taxes and
cumulative effect of change
in accounting principle 1,325 1,240 1,299 984 720
Income taxes 405 374 381 292 202
----- ------ ------ ------ ------
Net earnings before cumulative effect
of change in accounting principle 920 866 918 692 518
Cumulative effect of change in
accounting principle 0 0 (70) 0 120
----- ------ ------ ------ ------
Net earnings $ 920 $ 866 $ 848 $ 692 $ 638
====== ====== ====== ====== ======
Earnings per share:
Before cumulative effect of
change in accounting principle $ 4.56 $ 4.38 $ 4.64 $ 3.50 $ 2.62
Cumulative effect of change in
accounting principle .00 .00 (.35) .00 .61
----- ------ ------ ------ ------
Net earnings per share $ 4.56 $ 4.38 $ 4.29 $ 3.50 $ 3.23
====== ====== ====== ====== ======
Dividends per share $ 1.06 $ .75 $ .67 $ .63 $ .63
Return on equity (net earnings
divided by average equity) 11.25% 11.82% 12.93% 11.77% 11.96%
Return on assets (net earnings
divided by average total assets) .82% .82% .82% 0.68% 0.87%
</TABLE>
51
<PAGE> 59
INFORMATION ABOUT THE MANAGEMENT OF BRIGHT
Bright's Board Of Directors
- ---------------------------
The Bylaws of Bright provide for a Board of Directors consisting of
seven persons, each serving for a term of one year. The following persons are
currently serving on Bright's Board of Directors:
<TABLE>
<CAPTION>
Year First Term
Name Age(1) Elected Director Expires
-------------------------- ------ ---------------- -------
<S> <C> <C> <C>
ADOLPH HAINES 77 1963 1996
Chairman of the Board of Bright
Retired President of Bright
JERRY L. HOLSAPPLE 47 1989 1996
Executive Vice President/CEO
of Bright
JOE T. JONES 60 1993 (2) 1996
President/Senior Trust Officer
of Bright
DICK N. BISHOP 63 1970 1996
Attorney, Bishop, Bishop & Bishop
ALVAN L. ELLER, M.D. 53 1982 1996
Physician
CRAIG W. GRAHAM 45 1989 1996
President, The Underwood Agency
DALE V. ZINN 57 1973 1996
Secretary, Zinn Kitchens, Inc.
-------------------------
<FN>
(1) As of December 31, 1994.
(2) Mr. Jones was also a Board member from 1974 - 1979.
</TABLE>
Board Meetings And Committees
- -----------------------------
The Board of Directors meets the second Wednesday of each month for
regular meetings. Additional special meetings may also be held from time to
time. During the year ended December 31, 1994 the Board of Directors of Bright
and Bright National met a total of 60 times for regular and special meetings.
The Board of Directors of Bright and Bright National has the following
committees:
(a) Loan Committee - The Loan Committee approves loans that are at
or above an amount required by the loan policy. The Loan
Committee meets as needed.
(b) Asset-Liability Committee - The Asset-Liability Committee
meets monthly to determine pricing objectives of loans and
deposits and to make decisions concerning funds management.
(c) Stock Option Committee - The Stock Option Committee meets on a
called basis and approves the granting of stock options and
approves all stock option plan activity.
52
<PAGE> 60
(d) Compensation Committee - The Compensation Committee meets at
least annually to review and make recommendations concerning
executive and employee compensation and benefits.
Each director attended at least 75% of the aggregate of the meetings
of the Board of Directors and the meetings of committees of the Board of
Directors on which he served.
Director Compensation
- ---------------------
During 1994, each director received an annual fee of $3,600 for
serving on the Board of Directors and a fee of $100 for each regular or special
board meeting attended and $100 for each committee meeting attended.
Executive Officers Of Bright
- ----------------------------
The table below sets forth certain information with respect to the
executive officers of Bright and Bright National with additional information
being provided in the following narrative section on each officer.
<TABLE>
<CAPTION>
Name Age(1) Position with Bright
------------------------- ------ ---------------------
<S> <C> <C>
Adolph Haines 77 Chairman of the Board
Joe T. Jones 60 President/Senior Trust Officer
Jerry L. Holsapple 47 Executive Vice President/CEO
Eunice J. Lowery 64 Vice President/Secretary/
Assistant Trust Officer
G. Atlee Oyler 53 Senior Vice President/Chief Lending Officer
Michael T. Blubaugh 40 Senior Vice President/Chief Financial Officer
--------------------
<FN>
(1) As of December 31, 1994.
</TABLE>
ADOLPH HAINES started his banking career at Bright National in 1962 as
a vice president and was elected to the Board of Directors in 1963. He was
elected president in 1970 and held this position until he retired in 1982, at
which time he was elected Chairman of the Board. Mr. Haines had an interest in
an independent loan company and was involved in farming prior to his banking
career. Mr. Haines attended various banking seminars while he was associated
with Bright National and is a past president of the Indiana Agri Bankers as
well as Region 4 of the Indiana Bankers Association. He is a member of the
Flora Methodist Church and past president of both the Flora Community Club and
the Flora Rotary Club. In 1972 Mr. Haines served as co-chairman and
treasurer of the Flora Centennial celebration.
53
<PAGE> 61
JOE T. JONES has served on Bright's Board of Directors since October
1993. He was appointed President and Senior Trust Officer in August 1994.
From 1986 to 1991, he served as President and Trust Officer of Salin Bank,
Camden, Indiana. From 1979 to 1986, he served as President and Trust Officer
of Camden State Bank, Camden, Indiana. From 1973 to 1979, Mr. Jones served as
Vice President of Bright National Bank. Mr. Jones holds a Bachelor of Science
degree from Purdue University and is a graduate of the Graduate School of
Banking at the University of Wisconsin. Mr. Jones is a member of the Carroll
County and National Association of Realtors, The Carroll County Economic
Development Corporation, Camden Lions Club and Camden Community Club. He is
also President of Camden-Jackson Housing, Inc., a senior citizens low to
moderate income housing organization.
JERRY L. HOLSAPPLE was promoted to Executive Vice President and Chief
Executive Officer in August 1994. Mr. Holsapple had been Senior Vice President
of Bright National since 1985 and was elected a Director of Bright in 1989.
Prior to assuming duties as CEO, he was responsible for all lending functions
and all branch managers. He had also been the head of operations at two
separate times during the Bright National's recent growth periods. Before
joining Bright, Mr. Holsapple was employed by Citizens National Bank, Linton,
Indiana, as Vice President and Head of Lending. Mr. Holsapple holds a Bachelor
of Science degree from Indiana State University and is a graduate of the
Graduate School of Banking at the University of Wisconsin, finishing in the
upper 10% of his class. He is a former Director of the Flora Community Club
and Chairman of its Industrial Development Committee and its Festival
Committee. He is Past Chairman of the Indiana Bankers Association Lending
Committee and is also Past President of the Flora Rotary Club.
EUNICE J. LOWERY joined Bright National in 1956 as Assistant Cashier.
In 1976, she was promoted to Cashier and Secretary to the Board of Directors.
She was appointed Assistant Trust Officer when Bright National received trust
powers in 1976. Her duties have also included payroll clerk, certificate of
deposit clerk, personnel manager, and secretary to the President. Ms. Lowery
was named Assistant Vice President in 1979 and Vice President in 1981. She has
completed the American Institute of Bankers (the "AIB") Principles of Banking
course and has attended numerous banking seminars. She is a member of the
Flora First Baptist Church, Psi Iota Xi Sorority and Flora Chapter 490 Order of
the Eastern Star.
G. ATLEE OYLER joined Bright National in 1982 as Farm Representative
and Loan Officer. He has been instrumental in the growth of Bright National's
agricultural loan portfolio. Prior to joining Bright National, Mr. Oyler owned
and operated a hog and grain farm for over twenty years. During that time he
served on the local Farm Bureau Co-op board and was an officer in Carroll
County Pork Producers. Mr. Oyler has completed various American Institute of
Banking courses, Purdue Agricultural Banking School, the Indiana Bankers
Association lending school and has attended various workshops and seminars. He
is presently treasurer of Carroll Athletic Boosters and a member of the Flora
Lions Club, Indiana Society of Agri Bankers, Flora Community Club and the Flora
Church of the Brethren. Mr Oyler is currently a member of the board of Carroll
Consolidated School Corporation Building Trades, Inc. and is Chairman of the
Agriculture Committee of the Indiana Bankers Association.
54
<PAGE> 62
MICHAEL T. BLUBAUGH joined Bright National in May 1995. A 1982
graduate of Franklin University, Columbus, Ohio with a Bachelor of Science
degree in Business Administration, Mr. Blubaugh's previous experiences include:
vice president, chief financial officer and secretary of Fifth Third Bank of
Southeastern Indiana, Greensburg, Indiana; self-employed certified public
accountant and corporate financial consultant in Columbus, Ohio; and vice
president, corporate finance, assistant secretary and director of Cardinal
Lodging Group, Inc., Columbus, Ohio.
Employment Agreements With Executive Officers
- ---------------------------------------------
On September 14, 1994, Bright National entered into employment
agreements with Jerry L. Holsapple, Chief Executive Officer and Executive Vice
President, and Joe T. Jones, President and Senior Trust Officer. Mr.
Holsapple's agreement terminates on May 31, 1998 and Mr. Jones' agreement
terminates on May 31, 1997. The employment agreements provide that if the
employee is terminated by Bright National without cause or if the employee
terminates the agreement for cause, the employee is entitled to his base
compensation for an additional 24 month period (or such shorter period, not to
exceed the term of the agreement). However, if such termination follows a
change of control of Bright National, the employee is entitled to his base
compensation for an additional 36 month period, rather than a 24 month period
(or such shorter period, not to exceed the term of the agreement). Termination
for cause by the employee is defined as any action by the employer's board of
directors to remove the employee from his office (unless such removal is for
cause) or to materially limit, increase or modify the employee's duties and/or
authority, any failure of the employer to obtain the assumption of the
agreement by any successor, and/or any intentional breach of the agreement by
the employer. The base compensation set forth in the employment agreements for
Jerry L. Holsapple and Joe T. Jones is $75,000 and $52,000, respectively, and
is subject to annual adjustments to be made by the board of directors.
The Merger Agreement provides that from and after the effective time
of the Merger, Bancorp will cause Bright National to honor the employment
agreements or Bancorp will assume the employment agreements, provided that
Bright National has given proper written notice to the employees that the terms
of the employment agreements will not extend beyond May 31, 1998, in the case
of Jerry L. Holsapple, and May 31, 1997, in the case of Joe T. Jones.
In addition, on August 15, 1994, Bright and Bright National entered
into a separation agreement with former President and Chief Executive Officer,
Marshall D. McCammack. The agreement provides severance compensation to Mr.
McCammack through August 15, 1995.
Executive Compensation
- ----------------------
CASH COMPENSATION. No executive officer of Bright received more than
$100,000 in salary and bonus payments during 1994. The following table sets
forth certain information as to the cash compensation received by Marshall D.
McCammack, who resigned as President, Senior Trust Officer and CEO effective
August, 1994, and Mr. Holsapple, who was elected CEO at such time.
55
<PAGE> 63
<TABLE>
<CAPTION> SUMMARY COMPENSATION TABLE
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary Bonus Options (#) Compensation
------------------- ------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Jerry L. Holsapple 1994 $59,681 $4,617 0 $ 1,133 (1)
Exec. Vice President/CEO
Marshall D. McCammack 1994 $89,202 $4,425 0 $21,086 (2)
Former President/CEO 1993 $74,843 $1,702 N/A $ 1,043 (1)
--------------------
<FN>
(1) Personal use of company vehicle.
(2) Includes personal use of company vehicle and benefits provided as part of a separation agreement.
</TABLE>
STOCK OPTION PLAN. The Bright Financial Services, Inc. Non-Qualified
Stock Option Plan (the "Stock Option Plan") was approved by the shareholders of
Bright at the shareholders meeting held on November 30, 1993 and became
effective January 1, 1994. The purpose of the Stock Option Plan is to increase
shareholder value by unifying interests of directors and senior executives and
shareholders, to provide incentive compensation to directors and executives
only when the market value of shares is increased and to emphasize long-term
growth. The Stock Option Plan will terminate on October 12, 2003 unless
earlier terminated by the Board of Directors. Options to purchase up to 15,000
shares of Bright Common Stock may be issued in the aggregate to Stock Option
Plan participants.
Options are exercisable according to the following vesting schedule:
20% of options after one year from date of grant, 40% after two years, 60%
after three years, 80% after four years, and 100% after five years. Options
become 100% vested, however, upon the participant reaching age 72. During
1994, 55 options were exercised at $35 per share. No options were exercised by
Messrs. Holsapple or McCammack during 1994. On March 31, 1995, 126 options
were eligible for exercise.
The following table shows all individual grants of stock options to
Mr. Holsapple and Mr. McCammack during the fiscal year ended December 31, 1994:
<TABLE>
OPTIONS GRANTS IN LAST FISCAL YEAR
<CAPTION> Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------------------- -----------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5%/$57.01 10%/$90.78
- ---- ----------- ------------ ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerry L. Holsapple 305 23% $35.00 4/10/04 $6,713 $17,013
Marshall D. McCammack (1) 555 41% $35.00 N/A $ N/A $ N/A
- --------------------
<FN>
(1) Per the terms of the Option Plan, Mr. McCammack's options became null and void 30 days after his resignation from Bright.
He did not exercise any of his options.
</TABLE>
Upon shareholder approval of the Merger Agreement and at the effective
time of the Merger, the Stock Option Plan will be terminated and all
outstanding options will become 100% vested. All option participants have
indicated they intend to exercise their options immediately prior to the
Merger.
56
<PAGE> 64
Certain Transactions With Bright
- --------------------------------
At December 31, 1994, certain directors and executive officers of
Bright and members of the immediate families of such directors and executive
officers were indebted to Bright in the aggregate amount of $121,268. Such
indebtedness was incurred in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated persons. All such loans
were current at December 31, 1994 and are not considered to involve more than
the normal risk of collectibility or to present other unfavorable features.
57
<PAGE> 65
BRIGHT FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is presented to facilitate the
understanding of the financial position and results of operations of Bright
Financial Services, Inc. (Bright). It identifies trends and material changes
that occurred during the reported periods and should be read in conjunction
with the consolidated financial statements and accompanying notes.
OVERVIEW OF OPERATIONS
The major components of Bright's operating results for the past five years are
summarized in Table 1 - Five Year Financial Summary.
Bright earned $920,480, or $4.56 per share, for 1994, compared to $865,990 or
$4.38 per share, for 1993. The $54,490 increase in net earnings from 1993 was
primarily contributed by increased net interest margin and a lower provision
for loan losses. Net earnings increased $18,276 from 1992 to 1993, however
1992 net earnings was reduced by a $69,763 cumulative effect of accounting
change. Income before accounting change actually declined $51,487 from 1992 to
1993, primarily from lower net interest margin. A ($69,763) accounting change
from the adoption of Statement of Financial Accounting Standard No. 109 was
recorded in 1992 and a $120,000 accounting change was recorded in 1990 from the
adoption of SFAS No. 106. Each line item in the Summary of Operations
increased from 1990 to 1991 to 1992 as a result of Bright's December, 1990
branch acquisition of Hometown Federal Savings Association from the Resolution
Trust Corporation. Bright acquired $5,256,616 of cash and securities,
$14,437,532 of loans, $42,916,708 deposits, and $438,410 net other liabilities.
Management will continue efforts to improve earnings through management of net
interest margin and controlling noninterest expenses.
NET INTEREST INCOME
Net interest income is the most significant component of Bright's earnings.
Net interest income is the excess of interest income earned on assets over the
interest paid for funds supporting those assets. Table 1 shows Bright's net
interest income from 1990 through 1994. Table 2 - Average Balance Sheets and
Interest Rates represents the major components of interest earning assets and
interest-bearing liabilities. For analytical purposes, interest income
presented in the table has been adjusted to a tax equivalent basis assuming a
34% tax rate for all years. The tax equivalent adjustment recognizes the
income tax savings when comparing taxable and tax-exempt assets.
58
<PAGE> 66
<TABLE>
Table 1 - FIVE YEAR FINANCIAL SUMMARY
<CAPTION>
For the years ended December 31,
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Interest income - tax equivalent $8,454,586 $8,241,875 $8,963,615 $9,765,367 $6,595,987
Interest expense 3,761,897 3,797,989 4,435,487 5,702,650 4,074,371
------------ ------------ ------------ ------------ ------------
Net interest income 4,692,689 4,443,886 4,528,128 4,062,717 2,521,616
Tax equivalent adjustment (1) (197,118) (169,865) (138,672) (156,045) (239,198)
------------ ------------ ------------ ------------ ------------
Net interest income 4,495,571 4,274,021 4,389,456 3,906,672 2,282,418
Provision for loan losses (120,000) (285,000) (295,000) (117,000) (41,000)
Noninterest income 688,622 725,492 653,339 433,886 277,472
Noninterest expenses 3,738,699 3,474,650 3,449,393 3,239,790 1,798,771
------------ ------------ ------------ ------------ ------------
Income before income taxes and cumulutive
effect of changes in accounting principles 1,325,494 1,239,863 1,298,402 983,768 720,119
Income tax expense 405,014 373,873 380,925 292,015 201,924
------------ ------------ ------------ ------------ ------------
Income before cumulative effect of changes in
accounting principles 920,480 865,990 917,477 691,753 518,195
Cumulative effect of changes in accounting principles 0 0 (69,763) 0 120,000
------------ ------------ ------------ ------------ ------------
Net earnings $920,480 $865,990 $847,714 $691,753 $638,195
============ ============ ============ ============ ============
PER SHARE DATA
Income before cumulative effect of changes in
accounting principles $4.56 $4.38 $4.64 $3.50 $2.62
Cumulative effect of changes in accounting principles $0.00 $0.00 ($0.35) $0.00 $0.61
------------ ------------ ------------ ------------ ------------
Net earnings $4.56 $4.38 $4.29 $3.50 $3.23
============ ============ ============ ============ ============
Cash Dividends declared $214,269 $148,194 $132,389 $123,495 $123,495
Average common shares outstanding 201,879 197,592 197,592 197,592 197,592
SELECTED ACTUAL YEAR-END BALANCES
Total assets $114,284,684 $111,773,794 $106,505,480 $103,569,788 $103,181,644
Earning assets 102,940,866 103,419,513 96,333,804 97,290,893 92,224,655
Investment securities available-for-sale 14,407,916 0 0 0 0
Investment securities held-to-maturity 14,622,138 23,683,832 20,962,929 18,498,487 29,610,784
Loans - net of unearned income 73,447,238 74,343,568 72,233,469 74,342,256 55,938,871
Allowance for loan losses (743,485) (681,973) (524,809) (541,539) (570,350)
Total deposits 98,368,746 99,470,166 95,155,473 92,679,493 93,593,901
Noninterest-bearing demand deposits 11,434,005 10,698,066 9,255,949 7,909,355 6,276,145
Interest-bearing demand deposits 15,180,291 15,352,741 14,444,072 13,840,535 14,721,257
Savings deposits 18,549,758 20,745,224 17,851,828 17,851,828 15,772,789
Time deposits 53,204,692 52,674,135 53,603,624 53,077,775 56,823,710
Long-term borrowings 6,788,632 4,000,000 3,150,000 3,449,660 1,699,660
Shareholders' equity 8,239,085 7,594,511 6,876,715 6,161,390 5,593,132
SELECTED AVERAGE BALANCES
Total assets $112,300,195 $106,221,892 $102,863,328 $101,904,121 $73,126,805
Earning assets 105,386,106 99,647,531 96,885,939 95,434,419 67,626,904
Securities 27,133,005 21,092,514 19,726,817 24,942,287 21,154,402
Loans- net of unearned income 74,845,990 74,138,672 74,108,779 65,976,016 42,728,160
Allowance for loan losses (716,791) (591,790) (543,253) (480,556) (441,667)
Total deposits 97,702,011 93,855,669 91,426,603 91,911,488 71,840,893
Noninterest-bearing demand deposits 9,519,024 8,299,148 7,191,663 6,235,202 9,972,580
Interest-bearing demand deposits 14,207,060 13,673,688 12,873,303 12,817,518 16,143,772
Savings deposits 20,880,977 18,277,430 18,066,965 20,306,060 12,106,963
Time deposits 53,094,950 53,605,403 53,294,672 52,552,708 33,617,578
Long-term borrowings 5,076,169 3,941,667 3,350,000 2,145,333 306,967
Shareholders' equity 8,181,834 7,326,499 6,558,292 5,877,261 5,335,782
RATIOS BASED ON AVERAGE BALANCES
Loans to deposits 76.61% 78.99% 81.06% 71.78% 59.48%
Shareholders' equity to:
Total assets 7.29% 6.90% 6.38% 5.77% 7.30%
Deposits 8.37% 7.81% 7.17% 6.39% 7.43%
Return on Assets 0.82% 0.82% 0.82% 0.68% 0.87%
Return on Equity 11.25% 11.82% 12.93% 11.77% 11.96%
<FN>
(1) Tax equivalent basis was calculated using a 34% tax rate for all periods presented.
</TABLE>
59
<PAGE> 67
<TABLE>
Table 2 - Average Balance Sheets and Interest Rates
<CAPTION>
Years ended December 31,
1994 1993
---------------------------------------------- ------------------------------------------
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
--------------- -------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets
Securities
Taxable $18,836,875 $986,090 5.23% $14,563,232 $745,793 5.12%
Tax-exempt (1) 7,790,668 579,798 7.44% 5,472,281 499,636 9.13%
Other 699,888 45,323 6.48% 1,057,001 63,441 6.00%
Unrealized loss on A.F.S. (194,426) 0 0 0
----------- ----------- ------- ----------- ---------- ------
Total securities 27,133,005 1,611,211 5.94% 21,092,514 1,308,870 6.21%
Loans (2)
Commercial 15,092,692 1,464,789 9.71% 13,953,052 1,335,347 9.57%
Real estate 46,978,346 3,879,055 8.26% 46,244,289 3,874,626 8.38%
Installment and other consumer 11,929,387 1,287,969 10.80% 12,907,297 1,465,375 11.35%
Lease financing 692,788 68,351 9.87% 826,580 85,315 10.32%
Other 152,777 5,517 3.61% 207,454 5,907 2.85%
----------- ----------- ------- ----------- ---------- ------
Total loans 74,845,990 6,705,681 8.96% 74,138,672 6,766,570 9.13%
Interest-bearing deposits
with other banks 1,033,180 44,454 4.30% 943,428 41,722 4.42%
Federal funds sold and
securities purchased under
agreements to resell 2,373,931 93,240 3.93% 3,472,917 124,713 3.59%
----------- ----------- ------- ----------- ---------- ------
Total average earning assets 105,386,106 $8,454,586 8.02% 99,647,531 $8,241,875 8.27%
=========== ======= ========== ======
Noninterest earning assets
Allowance for loan losses (716,791) (591,790)
Premises and equipment 1,902,112 2,026,706
Cash and due from banks 2,902,665 3,555,352
Accrued interest and other assets 2,826,103 1,584,093
------------ ------------
Total average assets $112,300,195 $106,221,892
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Deposits
Interest-bearing demand deposits $14,207,060 $309,391 2.18% $13,673,688 $330,086 2.41%
Savings deposits 20,880,977 630,855 3.02% 18,277,430 592,079 3.24%
Time deposits 53,094,950 2,499,946 4.71% 53,605,403 2,633,168 4.91%
----------- ----------- ------- ----------- ---------- ------
Total interest-bearing deposits 88,182,987 3,440,192 3.90% 85,556,521 3,555,333 4.16%
Borrowed funds
Other borrowings 380,178 26,722 7.03% 237,808 18,412 7.74%
Long-term borrowings 5,076,169 294,983 5.81% 3,941,667 224,244 5.69%
----------- ----------- ------- ----------- ---------- ------
Total borrowed funds 5,456,347 321,705 5.90% 4,179,475 242,656 5.81%
----------- ----------- ------- ----------- ---------- ------
Total avg. interest-bearing liabilities 93,639,334 $3,761,897 4.02% 89,735,996 $3,797,989 4.23%
=========== ======= ========== ======
Noninterest-bearing liabilities
Noninterest-bearing demand deposits 9,519,024 8,299,148
Other liabilities 960,003 860,249
Shareholders' equity 8,181,834 7,326,499
------------ ------------
Total average liabilities and
shareholders' equity $112,300,195 $106,221,892
============ ============
Interest margin recap
Net interest income and
interest rate spread $4,692,689 4.00% $4,443,886 4.04%
=========== ======= ========== ======
Net interest income margin 4.45% 4.46%
======= ======
<CAPTION>
Years ended December 31,
1992
--------------------------------------------
Average Average
ASSETS Balance Interest Rate
------------- ----------- ------------
<S> <C> <C> <C>
Interest earning assets
Securities
Taxable $14,122,556 $878,400 6.22%
Tax-exempt (1) 4,070,080 407,887 10.02%
Other 1,534,181 141,604 9.23%
Unrealized loss on A.F.S. 0 0
------------- ----------- ------
Total securities 19,726,817 1,427,891 7.24%
Loans (2)
Commercial 14,787,552 1,529,365 10.34%
Real estate 45,440,783 4,215,710 9.28%
Installment and other consumer 12,743,249 1,555,800 12.21%
Lease financing 1,012,195 115,791 11.44%
Other 125,000 829 0.66%
------------- ----------- ------
Total loans 74,108,779 7,417,495 10.01%
Interest-bearing deposits
with other banks 582,843 26,808 4.60%
Federal funds sold and
securities purchased under
agreements to resell 2,467,500 91,421 3.71%
------------- ----------- ------
Total average earning assets 96,885,939 $8,963,615 9.25%
Noninterest earning assets
Allowance for loan losses (543,253)
Premises and equipment 2,131,702
Cash and due from banks 2,784,024
Accrued interest and other assets 1,604,916
-------------
Total average assets $102,863,328
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Deposits
Interest-bearing demand deposits $12,873,303 $379,491 2.95%
Savings deposits 18,066,965 741,863 4.11%
Time deposits 53,294,672 3,098,353 5.81%
------------- ----------- ------
Total interest-bearing deposits 84,234,940 4,219,707 5.01%
Borrowed funds
Other borrowings 353,515 24,834 7.02%
Long-term borrowings 3,350,000 190,946 5.70%
------------- ----------- ------
Total borrowed funds 3,703,515 215,780 5.83%
------------- ----------- ------
Total avg. interest-bearing liabilities 87,938,455 $4,435,487 5.04%
=========== ======
Noninterest-bearing liabilities
Noninterest-bearing demand deposits 7,191,663
Other liabilities 1,174,918
Shareholders' equity 6,558,292
-------------
Total average liabilities and
shareholders' equity $102,863,328
=============
Interest margin recap
Net interest income and
interest rate spread $4,528,128 4.21%
========== =====
Net interest income margin 4.67%
=====
<FN>
(1) Interest income on tax-exempt securities has been adjusted to a tax
equivalent basis using a marginal federal income tax rate of 34% for
all years. Tax equivalent adjustments were $197,118 for 1994,
$169,865 for 1993, and $138,672 for 1992.
(2) Nonaccrual loans are included in average loan balances and loan fees
are included in interest income. Loan fees were $290,689 for 1994,
$305,805 for 1993, and $395,677 for 1992.
</TABLE>
60
<PAGE> 68
Table 3 - Net Interest Earning Assets illustrates net interest earning assets
and liabilities for 1994, 1993 and 1992.
<TABLE>
Table 3 -- Net Interest Earning Assets
<CAPTION>
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Average interest earning assets... $105,386,106 $99,647,531 $96,885,939
Average interest bearing liabilities.. 93,639,334 89,735,996 87,938,455
------------ ----------- -----------
Net interest earning assets $ 11,746,772 $ 9,911,535 $ 8,947,484
============ =========== ===========
</TABLE>
Net interest income increased $248,803, or 5.6% from 1993 to 1994 and decreased
$84,243, or 1.2% from 1992 to 1993. The increase to 1994 is primarily
attributable to the $1,835,237 increase in net average interest earning assets.
The major component of the increase in average earning assets was a $6,040,491
increase in securities. The decline from 1992 to 1993 is primarily due to
falling average rates, as evidenced by the .17% decline in the interest rate
spread. The net interest rate spread was 4.01% in 1994, 4.04% in 1993 and
4.21% in 1992.
Net interest income is affected by volume and rate of average interest earning
assets and interest-bearing liabilities. Table 4 - Volume and Rate Analysis
depicts the dollar effect of volume and rate changes from 1992 through 1994.
Variances which were not specifically attributable to volume or rate were
allocated proportionately between rate and volume using the absolute values of
each as a basis for the allocation. Nonaccruing loans were included in the
average loan balances used in determining the yields. Interest foregone on
nonaccruing loans is disclosed in Note 3 to the consolidated financial
statements, and is not considered to have a material effect on the
reasonableness of these presentations.
<TABLE>
Table 4 -- Volume/Rate Analysis
<CAPTION>
1994 change from 1993 due to 1993 change from 1992 due to
Volume Rate Total Volume Rate Total
-------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 64,962 $(125,851) $ (60,889) $ 2,993 $(653,918) $(650,925)
Securities
Taxable 223,378 16,919 240,297 28,136 (160,743) (132,607)
Tax-exempt 238,922 (158,760) 80,162 150,456 (58,707) 91,749
Other (19,226) 1,108 (18,118) (167,856) 89,693 (78,163)
------- --------- --------- --------- --------- ---------
Total securities interest 443,074 (140,733) 302,341 10,736 (129,757) (119,021)
Interest-bearing deposits with other banks 4,053 (1,321) 2,732 17,187 (2,273) 14,914
Federal funds sold and securities
purchased under agreements to resell (34,208) 2,735 (31,473) 38,316 (5,024) 33,292
-------- --------- --------- --------- --------- ---------
TOTAL INTEREST INCOME 477,881 (265,170) 212,711 69,232 (790,972) (721,740)
INTEREST EXPENSE
Interest-bearing demand deposits 13,235 (33,930) (20,695) 24,687 (74,092) (49,405)
Savings deposits 88,196 (49,420) 38,776 8,737 (158,521) (149,784)
Time deposits (25,384) (107,838) (133,222) 18,166 (483,351) (465,185)
Other borrowings 11,903 (3,593) 8,310 (6,921) 499 (6,422)
Long-term borrowings 65,831 4,908 70,739 33,788 (490) 33,298
-------- --------- --------- --------- --------- ---------
TOTAL INTEREST EXPENSE 153,781 (189,873) (36,092) 78,457 (715,955) (637,498)
-------- --------- --------- --------- --------- ---------
NET INTEREST INCOME $324,100 $ (75,297) $ 248,803 $ (9,225) $ (75,017) $ (84,242)
======== ========= ========= ========= ========= =========
</TABLE>
The $248,803 increase in net interest income from 1993 to 1994 resulted from
the net of a $324,099 increase in volume, offset by a $75,296 decrease in rate.
As rates declined, average interest earning assets,
61
<PAGE> 69
primarily securities, grew faster than average interest-bearing liabilities.
The $84,242 decrease in net interest income from 1992 to 1993 was substantially
related to declining interest rates on loans. Yields on assets declined faster
than rates on deposits.
If rates continue to rise during 1995, Bright's net interest margin will
improve slightly as asset growth continues. Bright has maintained shorter-term
maturities on securities and commercial loans and funded mostly variable rate
mortgage loans which will provide an opportunity for these assets to reprice as
rates increase.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
The provision for loan losses represents charges made to earnings to maintain
an adequate allowance for loan losses. The allowance is maintained at an
amount believed to be sufficient to absorb possible losses that may be
experienced in the credit portfolio. Factors considered in establishing an
appropriate allowance include: a careful assessment of the financial condition
of the borrower; a realistic determination of the value and adequacy of
underlying collateral; the condition of the local economy and the condition of
the specific industry of the borrower; a comprehensive analysis of the levels
and trends of loan categories; and a review of delinquent and classified loans.
A quarterly analysis of the allowance is prepared to determine a specific
allocation for loans which represent significant loss exposure and an
allocation based on historical loan loss experience and other factors and
trends.
Activity in the allowance for loan losses is reflected in Table 5 - Analysis of
Allowance for Loan Losses. The recorded values of loans and leases actually
removed from the consolidated balance sheets are referred to as charge-offs
and, after netting out recoveries on previously charged-off assets, become net
charge-offs. Bright's policy is to charge off loans, when, in management's
opinion, the loan is deemed uncollectible, although concerted efforts are made
to maximize recovery.
62
<PAGE> 70
<TABLE>
Table 5 - Analysis of Allowance for Loan Losses
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $681,973 $524,809 $541,539 $570,350 $530,362
Loans charged off
Commercial and agricultural (86,806) (30,307) (29,463) (23,470) 0
Real estate (3,804) (55,502) (112,096) (93,012) (2,461)
Installment (100,807) (98,111) (195,583) (41,694) (16,311)
-------- -------- -------- -------- --------
Total charge-offs (191,417) (183,920) (337,142) (158,176) (18,772)
-------- -------- -------- -------- --------
Charge-offs recovered
Commercial and agricultural 67,977 19,261 4,949 3,104 9,068
Real estate 37,978 852 0 0 0
Installment 26,974 35,971 20,463 9,261 8,692
-------- -------- -------- -------- --------
Total recoveries 132,929 56,084 25,412 12,365 17,760
-------- -------- -------- -------- --------
Net loans charged off (58,488) (127,836) (311,730) (145,811) (1,012)
Current year provision 120,000 285,000 295,000 117,000 41,000
-------- -------- -------- -------- --------
Balance at end of year $743,485 $681,973 $524,809 $541,539 $570,350
======== ======== ======== ======== ========
Loans at year end $73,447,238 $74,343,568 $72,233,469 $74,342,256 $55,938,871
Ratio of allowance to loans
at year end 1.01% 0.92% 0.73% 0.73% 1.02%
Average loans $74,845,990 $74,138,672 $74,108,779 $65,976,016 $42,728,160
Ratio of net loans charged off
to average loans -0.08% -0.17% -0.42% -0.22% 0.00%
</TABLE>
<TABLE>
Allocation of allowance for loan losses at December 31,
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Commercial and Agricultural $115,136 $123,161 $145,750 $157,664 $154,820
Real Estate 87,690 163,756 197,133 229,141 239,716
Installment 157,306 130,152 138,665 144,215 53,816
Unallocated 383,353 264,904 43,261 10,519 121,998
---------- ---------- ---------- ---------- ----------
Total $743,485 $681,973 $524,809 $541,539 $570,350
</TABLE>
The allowance for loan losses balance declined $45,541 from 1990 through 1992
and increased $218,676 from 1992 through 1994. The ratio of allowance to loans
declined from 1.02% in 1990 to .73% in 1991 partially due to net charge-offs
exceeding the annual provisions for loan losses, and partially due to the 1990
acquisition of loans. Management began to increase annual provisions in 1991
and 1992 and raised the allowance for loan losses to the 1.01% level in 1994.
As net charge-offs reduced from 1993 to 1994 and the level of nonperforming
loans declined (see below), the provision for loan losses was reduced from
$285,000 in 1993 to $120,000 in 1994.
63
<PAGE> 71
The level of nonperforming loans and leases is an important element in
assessing asset quality and credit risk in the loan portfolio. Nonperforming
loans include nonaccrual loans, restructured loans and loans delinquent 90 days
or more. Loans are classified as nonaccrual when management believes that
collection of interest is doubtful. Another element associated with asset
quality is other real estate owned (OREO), which represents properties acquired
by Bright through loan defaults by customers. Nonperforming assets and
relative percentage to loan balances is presented in Table 6 - Nonperforming
Assets.
<TABLE>
Table 6 - Nonperforming Assets
<CAPTION>
as of December 31,
---------------------------------------------------------------
1994 1993 1992 1991 1990
-------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Principal balance
Nonaccrual $68,470 $1,053,715 $643,426 $0 $68,806
Restructured 83,000 0 0 0 160,000
90 days or more past due 208,262 29,167 708,000 291,000 134,000
-------- ---------- -------- -------- --------
Total nonperforming loans $359,732 $1,082,882 $1,351,426 $291,000 $362,806
======== ========== ========== ======== ========
Nonperf. as a percent of 0.49% 1.46% 1.87% 0.39% 0.65%
Other real estate owned $0 $4,505 $31,314 $22,000 $29,224
OREO as a percent of loan 0.00% 0.01% 0.04% 0.03% 0.05%
Allowance as a percent of
nonperforming loans 206.68% 62.98% 38.83% 186.10% 157.21%
</TABLE>
Nonperforming assets were $1,082,882 in 1993 and $1,351,426 in 1992 primarily
from commercial real estate loans that management placed on nonaccrual status
because doubt existed as to the collectibility of interest. These credits
either paid-off or were renewed in 1994 and are currently performing. OREO
balances are not material to Bright.
Management believes the allowance for loan losses is maintained at a level
sufficient to cover possible losses in the portfolio and is appropriate given
the level of risk in the portfolio. Bright has only one loan with a balance of
$68,470 at January 1, 1995 that meets the criteria of an impaired loan in
accordance with SFAS No. 114 and 118. The impact of adopting this new
accounting pronouncement in 1995 will not have a material impact on Bright's
financial statements or on the level of its allowance for loan losses.
NONINTEREST INCOME AND EXPENSE
A listing of noninterest income and expense from 1992 through 1994 and
percentage changes between years is included in Table 7 - Noninterest Income
and Expense.
64
<PAGE> 72
<TABLE>
Table 7 - NONINTEREST INCOME & EXPENSE
<CAPTION>
% change % change
1994 from '93 1993 from '92 1992
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Noninterest Income
Trust department income $76,703 30.24% $58,895 -0.79% $59,362
Deposit service charges 337,059 12.11% 300,661 8.63% 276,783
Other 195,650 53.00% 127,873 28.02% 99,884
-------- -------- -------- ------- --------
609,412 25.03% 487,429 11.79% 436,029
Realized gain on sale of loans 83,502 -65.13% 239,493 67.56% 142,931
Security gains/(losses) (4,292) -200.14% (1,430) -101.92% 74,379
-------- -------- -------- ------- --------
Total noninterest income $688,622 -5.08% $725,492 11.04% $653,339
======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
% change % change
1994 from '93 1993 from '92 1992
---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Noninterest Expense
Salaries and employee benefits $1,946,467 12.47% $1,730,686 -1.80% $1,762,387
Occupancy expenses 212,254 -8.55% 232,091 -9.81% 257,345
Equipment expenses 324,922 10.10% 295,128 13.31% 260,461
Data processing expenses 112,515 -10.84% 126,199 -18.31% 154,483
FDIC insurance 216,070 3.88% 207,997 -4.88% 218,657
Other 926,471 4.98% 882,549 10.86% 796,060
---------- --------- ---------- -------- ----------
Total noninterest expense $3,738,699 7.60% $3,474,650 0.73% $3,449,393
========== ========= ========== ======== ==========
</TABLE>
Total noninterest income increased 11% from 1992 to 1993 and decreased 5.1%
from 1993 to 1994. The most significant factor was realized gains on sales of
loans and securities. Gains on sales of loans to the Federal Home Loan
Mortgage Corporation increased from $142,931 in 1992 to $239,493, a 67.6%
increase, in 1993 as a result of lower mortgage rates and customers refinancing
mortgage loans. Loan sales then dropped in 1994 as rates increased and
refinancings slowed, and gains on loan sales decreased to $83,502, or a 65.13%
decline. Security gains in 1992 resulted from the sales of six agency
securities. The sales proceeds were reinvested in securities with shorter
maturities in anticipation of rising interest rates and for asset-liability
management of Bright's liquidity position. There were no significant security
sales in 1993 or 1994. Security sales in 1995 are expected to rise to meet
short-term liquidity needs. Since the securities portfolio is in a net
unrealized loss position, losses on securities sales are anticipated during
1995. Loan sales are expected to continue during 1995. The volume will be
affected by the demand for fixed rate mortgage loans.
Without regard to gains on sales of loans and securities, noninterest income
increased 11.79% from 1992 to 1993 and 25.03% from 1993 to 1994. The primary
contributor to the increase from 1993 to 1994 was cash surrender value income
recorded on life insurance policies purchased as part of a deferred
compensation plan and income recognized from annuities sales. During 1994,
Bright opened the Carroll Annuities Agency, which is a service for Bank
customers who wish to purchase annuities. Income recognized from life
insurance cash surrender value growth is expected to increase during 1995,
however income from annuity sales is expected to decline as a result of lower
annuity interest rates and more competitive certificate of deposit interest
rates.
65
<PAGE> 73
Total noninterest expense did not change significantly from 1992 through 1994
with only a .7% increase from 1992 to 1993 and a 7.6% increase from 1993 to
1994. Noninterest expenses are expected to increase in 1995 as a result of
expenses related to the proposed merger. These costs may be partially offset
by a proposed reduction in the federal deposit insurance rates from .23% to
.04% for deposits insured by the Bank Insurance Fund. Approximately one-third
of Bright's deposits at the end of 1994 were those acquired in the branch
acquisition from the Resolution Trust Corporation. These deposits are insured
by the Savings Associations Insurance Fund, and are therefore not eligible for
the proposed reduction in insurance rates.
INCOME TAXES
Income tax expense increased $54,490, or 6.2%, from 1993 to 1994 which
correlates to the increase in income before taxes. The same correlation
relates to the slight decline in income tax expense from 1992 to 1993. The
effective tax rate remained constant from 29.3% in 1992 to 30.2% in 1993 to
30.6% in 1994.
Effective January 1, 1993, Bright adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which requires an asset and
liability approach to financial accounting and reporting for income taxes.
Deferred tax liabilities and assets are determined at each balance sheet date,
and are measured by applying enacted tax laws to future taxable income or
expense resulting from differences in the financial statement and tax basis of
assets and liabilities. The effect of adopting SFAS No. 109 is shown as a
cumulative effect of accounting change of $69,731, or $.35 per share, in the
financial statements.
Net deferred tax assets increased from $83,833 in 1993 to $293,264 in 1994, or
a 249.8% increase. This increase in 1994 is substantially due to the adoption
of SFAS No. 115, discussed below, which generated a $188,819 deferred tax asset
at December 31, 1994. This deferred tax asset is expected to decrease in 1995,
as securities values recover and the unrealized loss on securities
available-for-sale decreases. There is no valuation allowance placed in
deferred tax assets because management believes that Bright will generate
sufficient future taxable income to realize the deferred tax assets.
Note 9 to the consolidated financial statements contains additional analysis of
income taxes.
SECURITIES
On January 1, 1994, Bright adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
and accordingly classified certain of its securities as available-for-sale.
This reclassification increased equity $68,145 on January 1, 1994, the
after-tax effect of the adjustment from amortized cost to fair value.
Securities were classified as held-to-maturity in years prior to 1994.
Securities in 1994, upon adoption of SFAS No. 115, are classified as either
available-for-sale or held-to-maturity. Securities held-to-maturity are those
which Bright has both the positive intent and ability to hold to maturity, and
are reported at amortized cost. Available-for-sale securities are those which
Bright may decide to sell if needed for liquidity, asset-liability management,
or other reasons. Securities available-for-sale are reported at fair value,
with unrealized gains and losses included as a separate component of equity,
net of tax. Bright does not maintain any securities for trading purposes.
Table 8 - Securities and Securities Maturity Schedule summarizes the carrying
values of securities from 1992 through 1994 and the maturity distribution at
December 31, 1994, by classification.
66
<PAGE> 74
The majority of the securities portfolio is comprised of U.S. Treasury
securities, federal agency securities, state municipal securities (tax exempt),
mortgage-backed securities and collateralized mortgage obligations.
Total securities balances increased $2,720,903, or 13.0%, from 1992 to 1993 and
increased $5,346,222, or 22.6%, from 1993 to 1994. The composition of the
portfolio was changed as securities matured, by reinvesting proceeds from
maturities of mortgage-backed and asset-backed securities into government and
agency securities and municipal bonds. Other securities available-for-sale
include a federal agency mutual fund. Available-for-sale securities are 49.6%
of total securities and securities held-to-maturity are 50.4% at December 31,
1994. Bright's policy has been to hold the majority of the municipal bonds to
maturity and to classify most of the mortgage-backed and asset-backed
securities as available-for-sale.
Net unrealized losses on securities available-for-sale and securities
held-to-maturity were $796,891 and $701,798, respectively, at December 31,
1994. The portfolio had unrealized gains of $366,381 at December 31, 1993.
The market values of securities declined $1,565,070 from 1993 to 1994,
substantially due to changing interest rates. Shorter-term securities are less
sensitive to market value fluctuations from changing interest rates than
longer-term securities. Bright maintains 52.7% of its portfolio in the 5 year
or less maturity range. Structured notes have little or no credit risk as they
are secured by federal agencies, however, they are more sensitive to market
fluctuations caused by interest rate swings. Bright holds $1,815,000 of
structured notes which contributed $80,000 to the 1994 unrealized loss on
securities.
The securities portfolio carries varying degrees of risk. Investments in U.S.
Treasury and Federal agency securities have little or no credit risk.
Mortgage-backed and asset-backed securities are substantially issues of Federal
agencies. Obligations of states and political subdivisions and corporate
securities are the areas of highest exposure in the portfolio. This risk is
minimized through the purchase of high quality investments. When purchased,
obligations of states and political subdivisions and corporate bonds must have
a rating within the top four highest grades as determined by Moody's or
Standard and Poor's. The majority of these investments were rated A or better
at December 31, 1994. The risk of non-rated municipal bonds is minimized by
limiting the amounts invested and by investing in local issues. Management
believes the non-rated securities are of high quality. Bright does not use
off-balance sheet derivative financial instruments (such as interest rate
swaps) as defined in SFAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments."
67
<PAGE> 75
<TABLE>
Table 8 - SECURITIES
--------------------
<CAPTION>
at December 31,
----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale
-----------------------------
U.S. Government & Agencies $5,606,715 $0 $0
States and political subdivisions 2,351,824 0 0
Mortgage-backed and asset-backed 4,932,451 0 0
Other securities 1,516,926 0 0
------------- ------------- -------------
Total securities available-for-sale $14,407,916 $0 $0
Securities held-to-maturity
---------------------------
U.S. Government & Agencies $7,017,410 $7,546,077 $4,053,917
States and political subdivisions 5,684,319 7,039,792 4,338,115
Corporate obligations 0 0 140,000
Mortgage-backed and asset-backed 1,184,859 8,527,513 11,860,447
Other securities 735,550 570,450 570,450
------------- ------------- -------------
Total securities held-to-maturity $14,622,138 $23,683,832 $20,962,929
------------- ------------- -------------
Total securities $29,030,054 $23,683,832 $20,962,929
============= ============= =============
SECURITIES MATURITY SCHEDULE
----------------------------
<CAPTION>
1 Year 1 to 5
and Less Years
----------- -----------
Available-for-sale Balance Balance
- ------------------ ----------- -----------
<S> <C> <C>
U.S. Treasury $1,465,625 $0
Federal agencies 0 2,764,530
State and municipal 491,301 1,150,120
Mortgage-backed and asset-backed 0 2,937,833
Other securities 0 0
---------- ----------
Total available-for-sale $1,956,926 $6,852,483
========== ==========
Held-to-maturity
- ----------------
U.S. Treasury $504,344 $3,509,905
Federal agencies 0 2,503,161
State and municipal 35,257 1,395,687
Mortgage-backed and asset-backed 137,326 1,047,533
Other securities 0 0
---------- ----------
Total held-to-maturity $676,927 $8,456,286
========== ==========
<CAPTION>
5 to 10 Over
Years 10 Years Total
---------- ------------ --------------------------
Available-for-sale Balance Balance Balance Rate
- ------------------ ---------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury $0 $0 $1,465,625 4.96%
Federal agencies 887,979 488,581 4,141,090 4.13%
State and municipal 437,700 272,703 2,351,824 7.44%
Mortgage-backed and asset-backed 1,616,368 378,250 4,932,451 6.85%
Other securities 0 1,516,926 1,516,926 6.48%
---------- ---------- ----------- -----
Total available-for-sale $2,942,047 $2,656,460 $14,407,916 5.94%
========== ========== =========== =====
Held-to-maturity
U.S. Treasury $0 $0 $4,014,249 4.96%
Federal agencies 500,000 0 3,003,161 4.13%
State and municipal 1,962,962 2,290,413 5,684,319 7.44%
Mortgage-backed and asset-backed 0 0 1,184,859 6.85%
Other securities 0 735,550 735,550 6.48%
---------- ---------- ----------- -----
Total held-to-maturity $2,462,962 $3,025,963 $14,622,138 5.94%
========== ========== =========== =====
</TABLE>
68
<PAGE> 76
LOANS
The loan portfolio constitutes the major earning assets of Bright, and offers
the best alternative for maximizing interest spread above the cost of funds.
Average balances of loans has remained fairly even from 1992 through 1994 with
only a 1.0% increase during this period.
Table 9 - Loans Outstanding reflects outstanding balances by loan type for the
past five years.
<TABLE>
Table 9 - Loans Outstanding
<CAPTION>
at December 31,
---------------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Commercial and agricultural $14,040,287 $14,632,619 $13,473,676 $14,984,893 $10,934,196
Real estate 47,135,819 46,145,083 45,325,811 45,477,143 32,320,138
Installment 11,386,103 12,970,649 12,459,268 12,834,041 11,582,931
Lease financing 1,102,972 715,040 1,192,226 1,250,078 1,267,406
----------- ----------- ----------- ----------- -----------
Total loans 73,665,181 74,463,391 72,450,981 74,546,155 56,104,671
Unearned income (217,943) (119,823) (217,512) (203,899) (165,800)
----------- ----------- ----------- ----------- -----------
Total loans, net $73,447,238 $74,343,568 $72,233,469 $74,342,256 $55,938,871
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
Composition of loan portfolio by type at December 31,
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Commercial and Agricultural 19.06% 19.65% 18.60% 20.10% 19.49%
Real Estate 63.99% 61.97% 62.56% 61.01% 57.61%
Installment 15.46% 17.42% 17.20% 17.22% 20.65%
Lease financing 1.50% 0.96% 1.65% 1.68% 2.26%
------ ------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
Total net loans increased $18,403,385, or 32.9%, from 1990 to 1991 substantially
due to loans purchased in the branch acquisition from the Resolution Trust
Corporation. Total net loans have remained fairly constant from 1991 through
1994, declining only $895,018 during this period. For all years presented,
loans secured by real estate have been the primary component, making up 63.99%
of total loans at December 31, 1994.
Bright's lending area is primarily Carroll County, Indiana, an agricultural
area. Agricultural production loans are included in the commercial and
agricultural category, and farm loans secured by real estate are included in
the real estate category. The majority of loans are secured by specific items
of collateral. Bright's major lending guidelines require a 75% loan to value
ratio for commercial and agricultural loans and an 80% loan to value ratio for
loans secured by real estate. Bright has no concentrations of loans, except to
borrowers related to the agricultural industry. There are no loans outstanding
to foreign entities.
69
<PAGE> 77
Bright's volume of sales of real estate loans to the Federal Home Loan Mortgage
Corporation were $6,773,457, $16,603,841, and $15,519,249 for 1994, 1993, and
1992, respectively. Bright generally obtains a commitment to purchase the
loans prior to the funding date, and only sells loans as they are originated.
No loans have been sold from real estate loans on the balance sheet; therefore
no loans are classified as held- for-sale. The volume of loan sales has been
impacted by the quantity of originations and refinancings, which were
accelerated in 1992 and 1993 and were slower in 1994. The volume of sales
activity during 1995 is not expected to change substantially from 1994.
Table 10 - Loan Liquidity and Sensitivity to Changes in Interest Rates reflects
the maturity schedule of commercial loans and fixed and variable commercial
loans maturing after one year.
<TABLE>
Table 10 - Loan Liquidity
<CAPTION>
Loan Maturities at December 31, 1994
--------------------------------------------------------
1 year 1 - 5 Over 5
and less years Years Total
------------ ---------- -------- -----------
<S> <C> <C> <C> <C>
Commercial and agricultural $12,633,651 $1,364,636 $42,000 $14,040,287
------------ ---------- -------- -----------
Total selected loans $12,633,651 $1,364,636 $42,000 $14,040,287
============ ========== ======== ===========
Sensitivity to Changes in Interest Rates
----------------------------------------
<CAPTION>
Fixed Variable
Rate Rate
----------- ---------
<S> <C> <C>
Commercial and Agricultural:
Due after one year through five years $1,354,669 $9,967
Due after five years 42,000 0
----------- ---------
Total selected loans $1,396,669 $9,967
=========== =========
</TABLE>
Commercial loans are substantially one-year or less variable rate notes, most
of which have 90 day maturities. Commercial loans maturing after one year are
primarily fixed, but comprise only 10% of total commercial loans. Commercial
and mortgage loans, more than 80% of total loans, are variable or reprice
within one year, and are thus highly sensitive to interest rates.
SHORT-TERM INVESTMENTS
Federal funds sold and time deposits in other financial institutions are the
primary components of temporary investments. Federal funds sold are used for
daily liquidity needs and were $350,000 at December 31, 1994 and $4,550,000 at
December 31, 1993. From time to time the local governmental units will make
large deposits for short periods of time. These funds may be invested in
federal funds if it is anticipated that the funds will be withdrawn within a
few days. Time deposits in other institutions were $100,000 at December 31,
1994 and $498,000 at December 31, 1993. Time deposits generally mature within
one year and are purchased within federally insured limits.
70
<PAGE> 78
DEPOSITS AND BORROWINGS
The deposit base provides the major funding source for earning assets. A five
year schedule of deposits by type and maturities of time deposits greater than
$100,000 are presented in Table 11 - Deposit Information.
<TABLE>
Table 11 - Deposit Information
-------------------------------
<CAPTION>
Deposits at December 31,
---------------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Noninterest bearing $11,434,005 $10,698,066 $9,255,949 $7,909,355 $6,276,145
Interest bearing demand
and savings 33,730,049 36,097,965 32,295,900 31,692,363 30,494,046
Time 53,204,692 52,674,135 53,603,624 53,077,775 56,823,710
----------- ----------- ----------- ---------- ----------
Total deposits $98,368,746 $99,470,166 $95,155,473 $92,679,493 $93,593,901
=========== =========== =========== =========== ===========
Maturity Ranges of Time Deposits
with Balances of $100k or More at December 31,
----------------------------------------------
<CAPTION>
1994 1993 1992
----------- ---------- -------------
<S> <C> <C> <C>
3 months or less $3,018,457 $2,155,381 $4,220,205
3 through 6 months 827,352 1,503,277 506,900
6 through 12 months 936,467 818,851 700,000
over 12 months 2,569,207 2,546,270 2,078,597
----------- ---------- -------------
$7,351,483 $7,023,779 $7,505,702
=========== ========== =============
</TABLE>
Total deposits have remained fairly level from 1990 to 1994, increasing only
$4,774,845, or 5.1%, for this period. At December 31, 1994, 11.6% of total
deposits were noninterest bearing, 34.3% were interest bearing demand and
savings, and 54.1% were time deposits. The mix of deposits has changed from
interest bearing demand and savings partially to noninterest bearing demand and
partially to time. Bright competes with other financial institutions and
brokerage institutions for deposits within their market. Bright's current
strategy is to increase rates for interest-bearing demand deposits and
certificates of deposits to increase the deposit base during 1995.
Time deposits greater than $100,000 were $7,351,483, or 13.8% of total time
deposits at December 31, 1994, $7,023,779, or 13.3% at December 31, 1993, and
$7,505,702, or 14.0% at December 31, 1992.
Other borrowings include a capital lease obligation for the purchase of data
processing equipment in 1991 and federal funds purchased. Average other
borrowings were $380,178 for 1994 , $237,808 for 1993, and $353,515 for 1992.
The capital lease obligation is amortizing through 1996. Federal funds
purchased are generally for daily periods as needed for short-term liquidity
needs.
Average long-term borrowings were $5,076,169, $3,941,667, and $3,350,000 during
1994, 1993, and 1992, respectively. Long-term borrowings include a 10 year
amortizing loan borrowed in 1990 to fund the 1990 branch acquisition from the
Resolution Trust Corporation, and various advances from the Federal Home Loan
Bank drawn from 1992 through 1994 to fund real estate loans. These advances
have maturities ranging from 1995 through 2001. Should loan demand increase in
1995, Bright may apply with the Federal Home Loan Bank for additional advances.
One provision of the proposed merger requires
78
<PAGE> 79
Bright's long-term borrowings of $850,000 at the holding company to be repaid
prior to consummation of the merger.
LIQUIDITY AND RATE SENSITIVITY
Liquidity management is the process by which Bright ensures that adequate
liquid funds are available to meet financial commitments on a timely basis.
These commitments include withdrawals by depositors, funding credit obligations
to borrowers, servicing long-term obligations, shareholder dividend payments,
paying operating expenses, funding capital expenditures, and maintaining
reserve requirements. Liquidity is monitored closely by the asset-liability
committee, which establishes policies and rates, makes prudent investing and
funds management decisions, and manages liquidity levels.
The liquidity of Bright is dependent on the receipt of dividends from the
banking subsidiary. Certain restrictions exist regarding the transfer of funds
from the subsidiary as explained in Note 12 to the consolidated financial
statements. Management expects that in the aggregate, the banking subsidiary
will continue to have the ability to dividend adequate funds to Bright.
The banking subsidiary's source of funding is predominantly core deposits
consisting of both business and individual deposits, maturities of securities,
repayments of loan principal and interest, and federal funds purchased and
securities sold under agreements to repurchase. The deposit base is
diversified between individuals and businesses which helps avoid dependence on
large concentrations of funds. Bright does not solicit certificates of
deposits from brokers. Table 12 - Funding Uses and Sources details the main
components of cash flows for 1994 and 1993.
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------
| Table 12 - Funding Uses and Sources |
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1994 1993
------------------------------------- --------------------------------------
Average Increase/(decrease) Average Increase/(decrease)
Balance Amount Percent Balance Amount Percent
------------ ---------- -------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
FUNDING USES
- ------------
Loans, net of unearned income $74,845,990 $707,318 0.95% $74,138,672 $29,893 0.04%
Taxable securities 18,836,875 4,273,643 29.35% 14,563,232 440,676 3.12%
Tax exempt securities 7,790,668 2,318,387 42.37% 5,472,281 1,402,201 34.45%
Other 699,888 (357,113) -33.79% 1,057,001 (477,180) -31.10%
Interest bearing deposits in other banks 1,033,180 89,752 9.51% 943,428 360,585 61.87%
Federal funds sold and securities
purchased under agreements to resell 2,373,931 (1,098,986) -31.64% 3,472,917 1,005,417 40.75%
------------ ---------- ------ ----------- ---------- ------
TOTAL USES $105,580,532 $5,933,001 5.95% $99,647,531 $2,761,592 2.85%
============ ========== ====== =========== ========== ======
FUNDING SOURCES
- ---------------
Noninterest bearing deposits $9,519,024 $1,219,876 14.70% $8,299,148 $1,107,485 15.40%
Interest bearing demand and
savings deposits 35,088,037 3,136,919 9.82% 31,951,118 $1,010,850 3.27%
Time deposits 53,094,950 (510,453) -0.95% 53,605,403 $310,731 0.58%
Other borrowings 380,178 142,370 59.87% 237,808 ($115,707) -32.73%
Long-term borrowings 5,076,169 1,134,502 28.78% 3,941,667 $591,667 17.66%
------------ ---------- ------ ----------- ---------- ------
TOTAL SOURCES $103,158,358 $5,123,214 5.23% $98,035,144 $2,905,026 3.05%
============ ========== ====== =========== ========== ======
</TABLE>
72
<PAGE> 80
Bright's primary funding sources during 1994 was from deposit growth, long-term
borrowings, and reductions in short-term investments. Deposits provided
$3,846,342, substantially interest bearing demand and savings, long-term
borrowing provided $1,134,502, and other borrowings provided $1,098,986.
These funds were used for loan growth and purchases of taxable and tax-exempt
securities. Bright attempts to provide competitive rates for depositors to
maintain its deposit base. The amount of real estate refinancings has slowed
considerably during 1994. In response, Bright invested funds received in
shorter-term securities.
Interest rate risk is the exposure to Bright's earnings and capital to changes
in future interest rates. All financial institutions assume interest rate risk
as an integral part of normal operations. Managing and measuring the interest
rate risk is a process that includes limiting the exposure of Bright's interest
margin to swings in interest rates and assuring that there is sufficient
capital and liquidity to support future balance sheet growth.
Bright's interest rate sensitivity position is influenced by the distribution
of interest earning assets and interest-bearing liabilities among maturity
categories. Table 13 - Liquidity and Interest Rate Sensitivity reflects
interest earning assets and interest-bearing liabilities by maturity
distribution. Product lines repricing in time periods predetermined by
contractual agreements are included in the respective maturity categories.
The purpose of this GAP chart is to measure interest rate risk utilizing the
repricing intervals of interest sensitive assets and liabilities. Rate
sensitive GAPs constantly change as funds are acquired and invested and as
rates change. Rising interest rates are likely to increase net interest income
in a positive GAP position while falling interest rates are beneficial in a
negative GAP position.
Bright has a negative GAP position for all periods under one year, and a
positive GAP position over one year. The above rate sensitivity analysis
places interest-bearing demand and savings deposits in the shortest maturity
category because these liabilities do not have defined maturities. If these
deposits were placed in a maturity distribution representative of Bright's
deposit history, the GAP position would increase in the 1-30 days range and
within one year, and would decrease in the over 1 year range. Management feels
that historical funding from deposits has provided sufficient funds to meet
loan demands. Management sets deposit interest rates competitively to prevent
a significant amount of deposits from withdrawing.
If interest rates continue to rise during 1995, Bright will be impacted
positively as loans, primarily commercial, shorter-term time deposits, and
interest bearing demand deposits will reprice. If a portion of the interest
bearing demand and savings deposits were spread to longer categories, there
would be greater balances of loans repricing than deposits.
Since most of a financial institution's assets and liabilities are financial
instruments (monetary in nature), inflation has a significant effect on
operations and financial condition. Personnel costs, occupancy expenses and
equipment costs all tend to reflect the inflation rate as measured by the
consumer price index. Bright continues to attempt to offset such increases by
raising noninterest income.
73
<PAGE> 81
<TABLE>
Table 13 - Liquidity and Interest Rate Sensitivity
<CAPTION>
at December 31, 1994
Total
1 - 30 31 - 90 91 - 180 181 - 365 1 Year
Days Days Days Days & Under Over 1 Year Total
---------- ---------- ------------ ------------ ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
- -----------------------
Loans $13,372,792 $8,166,455 $7,871,299 $13,515,513 $42,926,059 $30,521,179 $73,447,238
Securities held-to-maturity
Taxable 0 137,326 0 504,344 641,670 8,296,149 8,937,819
Tax-exempt 0 0 0 35,257 35,257 5,649,062 5,684,319
Securities available-for-sale
Taxable 0 0 0 1,465,625 1,465,625 10,590,467 12,056,092
Tax-exempt 0 0 0 491,301 491,301 1,860,523 2,351,824
---------- --------- ------------ ----------- ---------- ------------ ----------
Total Securities 0 137,326 0 2,496,527 2,633,853 26,396,201 29,030,054
Interest-bearing deposits
with other banks 13,574 0 0 100,000 113,574 0 113,574
Federal funds sold and
securities purchased under
agreements to resell 350,000 0 0 0 350,000 0 350,000
----------- ---------- ------------ ------------ ----------- ----------- ------------
Total earning assets $13,736,366 $8,303,781 $7,871,299 $16,112,040 $46,023,486 $56,917,380 $102,940,866
=========== ========== ============ ============ =========== =========== ============
Interest bearing liabilities
- ----------------------------
Interest-bearing demand
deposits $15,180,291 $0 $0 $0 $15,180,291 $0 $15,180,291
Savings deposits 18,549,758 0 0 0 18,549,758 0 18,549,758
Time Deposits 4,276,329 7,680,968 8,632,807 11,876,474 32,466,578 20,738,114 53,204,692
Long-term borrowings 2,000,000 167,700 0 1,150,000 3,317,700 3,470,932 6,788,632
----------- ---------- ---------- ------------ ----------- ------------ -----------
Total interest bearing
liabilities $40,006,378 $7,848,668 $8,632,807 $13,026,474 $69,514,327 $24,209,046 $93,723,373
=========== ========== ========== ============= =========== ============ ============
Rate sensitive gap (26,270,012) 455,113 (761,508) 3,085,566 (23,490,841) 32,708,334 9,217,493
Rate sensitive cumulative gap (26,270,012) (25,814,899) (26,576,407) (23,490,841) 9,217,493
Cumulative gap as a percentage of
earning assets -25.52% -25.08% -25.82% -22.82% 8.96%
</TABLE>
74
<PAGE> 82
CAPITAL ADEQUACY
Capital adequacy in the banking industry is evaluated primarily by the use of
three required capital ratios: leverage capital (Tier 1 capital divided by
average assets less intangible assets and unrealized security gains/losses);
Tier 1 risk-based capital ( Tier 1 capital divided by risk-weighted assets);
and total risk-based capital (Tier 1 capital plus Tier 2 capital divided by
risk-weighted assets). Tier 1 capital is shareholders' equity less intangible
assets plus/less unrealized losses/gains. Tier 2 capital consists of the
allowance for loan losses limited to 1.25% of risk-weighted assets. Risk
weights are assigned to on-and off-balance sheet items in arriving at
risk-adjusted total assets.
Table 14 - Capital Ratios details the three capital requirements. A well
capitalized institution is defined as one with a leverage capital ratio of 5%
or better, and the minimum risk-based capital ratios are 4% Tier 1 capital and
8% total risk-based capital. Bright currently meets the minimum risk-based
capital ratio requirements and meets the well capitalized leverage ratio
classification.
<TABLE>
Table 14 - Capital Ratios
<CAPTION>
At December 31,
1994 1993
----------- -----------
<S> <C> <C>
Tier 1 capital
Shareholders' equity $8,239,085 $7,594,511
Less: Intangibles (291,467) (345,600)
Add: Unrealized loss on
securitities 308,072 0
----------- -----------
Total Tier 1 capital $8,255,690 $7,248,911
=========== ===========
Total risk-based capital
Tier 1 capital $8,255,690 $7,248,911
Allowance for loan loasses 743,485 681,973
----------- -----------
Total risk-based capital $8,999,175 $7,930,884
=========== ===========
Risk weighted assets $69,054,587 $71,480,697
=========== ===========
Average assets $112,300,195 $106,221,892
=========== ===========
Risk-based ratios
Tier 1 11.96% 10.14%
=========== ===========
Total risk-based capital 13.03% 11.10%
=========== ===========
Leverage Ratios 7.35% 6.83%
=========== ===========
</TABLE>
During 1994, Bright issued 7,041 shares of common stock, of which 6,248 shares
were issued to the Bright 401(k) plan, 738 shares were issued as part of the
dividend reinvestment plan (subsequently terminated), and 55 shares were issued
as part of the stock option plan.
PENDING ACCOUNTING CHANGES
Statement of Financial Accounting Standard No. 114 and 118, "Accounting by
Creditors for Impairment of a loan," was effective January 1, 1995. These
statements change the way loan loss allowance estimates are made for problem
loans. In general, when it is determined that all principal and interest due
under the contractual terms of a loan are not fully collectible, management
must value the loan using discounted future expected cash flows.
75
<PAGE> 83
Management believes that only one credit as of December 31, 1994 meets the
criteria as an impaired loan. A specific reserve allocation has been made in
the allowance for loan losses for the excess of the loan balance over the
estimated future cash flows. Application of this statement does not have a
material effect on Bright's financial statements.
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," is effective for the 1995 financial
statements. This statement requires disclosure of the fair value of financial
instruments, which are primarily cash, securities, loans, deposits, and
borrowings.
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1995
The following Management's Discussion and Analysis is presented to provide
additional information concerning the financial condition as of March 31, 1995
and the results of operations for the three months ended March 31, 1995 and
1994 for Bright. This discussion and analysis should be read in conjunction
with the consolidated financial statements and accompanying notes.
OVERVIEW OF OPERATIONS
Net income for the three months ended March 31, 1995 was $209,470, or $1.02 per
share, versus $159,906, or $.81 per share, for the same period in 1994. The
$49,564 increase in net income is primarily due to increased net interest
income. Interest income was $171,341 higher and interest expense was $85,165
higher than the prior year as a result of rising interest rates. As previously
stated, Bright's interest earning assets are primarily variable rate or
short-term assets that, during the first quarter of 1995, repriced faster than
interest-bearing liabilities.
The provision for loan losses reduced from $45,000 for the three months ended
March 31, 1994 to $30,000 for the same period in 1995. The reduction in
provision for loan losses is consistent with the years ended 1992 through 1994
as nonperforming loans have declined and the ratio of the allowance for loan
losses to total loans has remained fairly constant (1.04% at March 31, 1995
versus 1.01% at December 31, 1994). Based upon management's analysis, the
allowance for loan losses at March 31, 1995 is adequate to cover future
possible loan losses.
Total noninterest income and total noninterest expense did not change
materially for the first quarter of 1995 and 1994. Total noninterest income
was $151,684 and $154,039 for the two periods and noninterest expense was
$915,981 and $920,081 for the two periods. Slight increases in trust
department income, service charges and other income were offset by reduced
gains on loan sales and by a $23,012 loss on security sales. The reduced loan
sales is consistent with the previous trend caused by slowing mortgage loan
originations and refinancings due to rising interest rates. Six agency
securities were sold during the first quarter of 1995 and the funds were
reinvested in higher yielding securities. They were sold at losses due to the
overall devaluation of security values in the portfolio. The major cause of
increased noninterest expenses was due to merger expenses incurred as a result
of the proposed merger with First Financial Bancorp.
FINANCIAL CONDITION
Total assets declined $5,497,154 from $114,284,684 at December 31, 1994 to
$108,787,530 at March 31, 1995. The decrease in assets was primarily in cash
and cash equivalents and securities used to provide liquidity for decreased
deposits and servicing long-term borrowings. Deposits decreased $4,461,340
from December 31, 1994 due to withdrawn interest-bearing deposits by customers
who reinvested these funds in longer term certificates of deposits and fixed
rate investments at other institutions. Bright decided to not
76
<PAGE> 84
match rising deposit interest rates by competitive institutions, because
management believes the rate increases to be temporary. Debt service on
long-term borrowings was $2,167,700 for the first quarter of 1995.
Bright's common stock and additional paid-in-capital increased with the sale of
451 shares of stock to the Bright National Bank's 401(k) plan at $35.00 per
share in accordance with the Plan provisions. The unrealized loss on
securities available-for-sale decreased $195,555 during the first quarter 1995
due to recovering security market values.
PROPOSED MERGER
On February 20, 1995, Bright entered into a definitive agreement to merge with
First Financial Bancorp of Hamilton, Ohio. Pursuant to the proposed merger,
First Financial Bancorp has offered to exchange its shares for all of the
outstanding shares of Bright. The actual number of shares of First Financial
Bancorp to be issued will be based upon the fair market value of its stock
immediately prior to the merger. Consummation of the merger is subject to
regulatory and shareholder approval.
77
<PAGE> 85
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Bright Financial Services, Inc.
Flora, Indiana
We have audited the accompanying consolidated balance sheets of Bright
Financial Services, Inc. as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years ended December 31, 1994, 1993 and 1992. These financial
statements are the responsibility of the Corporation'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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bright Financial
Services, Inc. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years ended December 31, 1994, 1993 and
1992 in conformity with generally accepted accounting principles.
As disclosed in Note 1 to the consolidated financial statements, in 1994 the
Corporation changed its method of accounting for certain securities, and in
1992 the Corporation changed its method of accounting for income taxes.
Crowe, Chizek and Company
Indianapolis, Indiana
February 2, 1995 (except for
Note 16 as to which the date
is February 20, 1995)
F1.
<PAGE> 86
<TABLE>
BRIGHT FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, 1995
-------------- December 31,
(unaudited) 1994 1993
---- ----
<S> <C> <C> <C>
ASSETS
Cash and due from banks (Note 13) $ 2,230,727 $ 7,437,786 $ 5,011,328
Federal funds sold - 350,000 4,550,000
------------- ------------- -------------
Total cash and cash equivalents 2,230,727 7,787,786 9,561,328
------------- ------------- -------------
Interest-bearing deposits in other financial
institutions 100,000 100,000 498,000
Securities available-for-sale (at market)
(Note 2) 14,596,180 14,407,916 -
Securities held-to-maturity (Note 2)
(market values of $13,647,331, $13,920,340
and $24,050,213) 13,959,276 14,622,138 23,683,832
Loans (Note 3) 73,507,672 73,447,238 74,343,568
Less: Allowance for loan losses (Note 4) (768,737) (743,485) (681,973)
------------- ------------- -------------
Loans, net 72,738,935 72,703,753 73,661,595
Premises, furniture and equipment (Note 5) 1,833,444 1,901,815 1,935,389
Accrued interest receivable 1,118,742 1,087,176 981,093
Intangible assets (Note 1) 277,933 291,467 345,600
Other assets (Note 10) 1,932,293 1,382,633 1,106,957
------------- ------------- -------------
$ 108,787,530 $ 114,284,684 $ 111,773,794
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Non interest-bearing deposits $ 10,319,178 $ 11,434,005 $ 10,698,066
Interest-bearing deposits (Note 6) 83,588,228 86,934,741 88,772,100
------------- ------------- -------------
Total deposits 93,907,406 98,368,746 99,470,166
Accrued interest payable 423,021 395,743 385,136
Other liabilities (Note 10) 416,359 363,127 120,505
Capital lease obligation (Note 7) 109,916 129,351 203,476
Long-term debt (Note 8) 5,270,932 6,788,632 4,000,000
------------- ------------- -------------
Total liabilities 100,127,634 106,045,599 104,179,283
Commitments and contingent liabilities (Note 13)
Shareholders' equity
Common stock, $6.25 stated value, 250,000
shares authorized, 205,084, 204,633 and
197,592 shares issued and outstanding 1,281,775 1,278,956 1,234,950
Additional paid-in capital 1,586,467 1,573,501 1,371,072
Retained earnings (Note 12) 5,904,171 5,694,700 4,988,489
Unrealized loss on securities available-for-
sale, net of tax ($68,963 and $188,819) (112,517) (308,072) -
------------- ------------- -------------
Total shareholders' equity 8,659,896 8,239,085 7,594,511
------------- ------------- -------------
$ 108,787,530 $ 114,284,684 $ 111,773,794
============= ============= =============
</TABLE>
F2.
<PAGE> 87
<TABLE>
BRIGHT FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended March 31, Year ended December 31,
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 1,693,370 $ 1,593,180 $ 6,705,681 $ 6,766,570 $ 7,417,495
Taxable securities 296,858 187,807 988,271 778,448 969,358
Tax exempt securities 99,954 108,595 382,680 329,771 269,215
Other 23,574 52,833 180,836 197,221 168,875
----------- ----------- ----------- ----------- -----------
2,113,756 1,942,415 8,257,468 8,072,010 8,824,943
Interest expense
Deposits 902,284 840,355 3,440,192 3,555,333 4,219,707
Long-term debt 85,129 62,316 294,983 224,244 190,946
Other 4,159 3,736 26,722 18,412 24,834
----------- ----------- ----------- ----------- -----------
991,572 906,407 3,761,897 3,797,989 4,435,487
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME 1,122,184 1,036,008 4,495,571 4,274,021 4,389,456
Provision for loan losses (Note 4) 30,000 45,000 120,000 285,000 295,000
----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,092,184 991,008 4,375,571 3,989,021 4,094,456
Noninterest income
Trust department income 27,050 18,953 76,703 58,895 59,362
Service charges on deposit accounts 78,416 69,553 337,059 300,661 276,783
Realized gain (loss) on sales of securities (23,012) - (4,292) (1,430) 74,379
Realized gain on sale of loans 12,608 22,975 83,502 239,493 142,931
Other operating income 56,622 42,558 195,650 127,873 99,884
----------- ----------- ----------- ----------- -----------
151,684 154,039 688,622 725,492 653,339
<FN>
(Continued)
</TABLE>
F3.
<PAGE> 88
<TABLE>
BRIGHT FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended March 31, Year ended December 31,
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Noninterest expense
Salaries and employee benefits (Note 10) $ 448,228 $ 499,236 $ 1,946,467 $ 1,730,686 $ 1,762,387
Occupancy expenses, net 53,473 51,573 212,254 232,091 257,345
Equipment expenses 104,438 107,293 437,437 421,327 414,944
Deposit insurance expense 54,438 54,416 216,070 207,997 218,657
Other operating expenses 255,404 207,563 926,471 882,549 796,060
----------- ----------- ----------- ----------- -----------
915,981 920,081 3,738,699 3,474,650 3,449,393
----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 327,887 224,966 1,325,494 1,239,863 1,298,402
Income taxes (Note 9) 118,417 65,060 405,014 373,873 380,925
----------- ----------- ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 209,470 159,906 920,480 865,990 917,477
Cumulative effect on prior years of changing to a different
method of accounting for income taxes (Note 1) - - - - (69,763)
----------- ----------- ----------- ----------- -----------
NET INCOME $ 209,470 $ 159,906 $ 920,480 $ 865,990 $ 847,714
=========== =========== =========== =========== ===========
Per share data:
Income before cumulative effect of
accounting change $ 1.02 $ .81 $ 4.56 $ 4.38 $ 4.64
Cumulative effect of accounting change - - - - (.35)
----------- ----------- ----------- ----------- -----------
Net income per share $ 1.02 $ .81 $ 4.56 $ 4.38 $ 4.29
Average shares outstanding 204,788 197,592 201,879 197,592 197,592
<FN>
See accompanying notes to consolidated finacial statements.
</TABLE>
F4.
<PAGE> 89
<TABLE>
BRIGHT FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended March 31, 1995 and
for the years ended December 31, 1994, 1993 and 1992
<CAPTION>
Unrealized Loss
Additional on Securities Total
Paid-in Retained Available- Shareholders'
Common Stock Capital Earnings For-Sale Equity
------------ ------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992 $ 1,234,950 $ 1,371,072 $ 3,555,368 $ - $ 6,161,390
Net income for 1992 - - 847,714 - 847,714
Cash dividends ($.67
per share - - (132,389) - (132,389)
------------- ------------- ------------- ---------- ------------
BALANCE, DECEMBER 31,1992 1,234,950 1,371,072 4,270,693 - 6,876,715
Net income for 1993 - - 865,990 - 865,990
Cash dividends ($.75
per share) - - (148,194) - (148,194)
------------- ------------- ------------- ---------- ------------
BALANCE, DECEMBER 31, 1993 1,234,950 1,371,072 4,988,489 - 7,594,511
Net income for 1994 - - 920,480 - 920,480
Cash dividends ($1.06
per share) - - (214,269) - (214,269)
Issuance of 7,041 shares
of common stock at
$35 per share 44,006 202,429 - - 246,435
Unrealized loss on
securities available-
for-sale - - - (308,072) (308,072)
------------- ------------- ------------- ---------- ------------
BALANCE, DECEMBER 31, 1994 1,278,956 1,573,501 5,694,700 (308,072) 8,239,085
Net income - - 209,470 - 209,470
Issuance of 451 shares
of common stock at
$35 per share 2,819 12,966 - - 15,785
Unrealized loss on
securities available-
for-sale - - - 195,555 195,555
------------- ------------- ------------- ---------- ------------
BALANCE, MARCH 31, 1995 $ 1,281,775 $ 1,586,467 $ 5,904,170 $ (112,517) $ 8,659,895
============= ============= ============= ========== ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
F5.
<PAGE> 90
<TABLE>
BRIGHT FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended March 31, Year ended December 31,
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 209,470 $ 159,906 $ 920,480 $ 865,990 $ 847,714
Adjustments to reconcile net income to net
cash from operating activities
Cumulative effect of accounting change - - - - 69,763
Depreciation 69,759 70,815 277,596 274,056 275,476
Provision for loan losses 30,000 45,000 120,000 285,000 295,000
Amortization and accretion, net 8,323 8,331 99,328 15,020 21,065
Net realized (gain) loss on sale of
securities 23,012 - 4,292 1,430 (74,379)
Change in assets and liabilities:
Accrued interest receivable (31,566) 13,638 (106,083) 79,718 231,578
Other assets (257,115) (698,422) 23,323 (839,652) 42,881
Accrued interest payable 27,278 (15,987) 10,607 (44,202) (67,578)
Income taxes payable 8,489 45,979 10,437 (383,644) 41,720
Other liabilities 53,232 188,734 14,367 (198,185) 36,556
----------- ----------- ----------- ----------- -----------
Net cash from operating activities 140,882 (182,006) 1,374,347 55,531 1,719,796
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in interest-bearing deposits in
other financial institutions - 298,000 398,000 (1,000) 3,000
Purchases of securities available-for-sale (2,104,431) (2,794,994) (10,171,034) - -
Proceeds from sales of securities
available-for-sale 1,670,407 - 1,403,994 - -
Proceeds from maturities of securities
available-for-sale - 1,679,186 4,283,750 - -
Purchases of securities held-to-maturity (100,000) (482,058) (2,218,578) (18,621,357) (20,972,916)
Proceeds from sales of securities
held-to-maturity - - - 4,273,904 9,953,752
Proceeds from maturities of securities
held-to-maturity 1,000,000 583,000 753,786 11,504,468 8,574,386
Loans made to customers, net of payments
collected (67,290) 354,486 893,325 (1,953,707) 1,842,993
Purchases of premises and equipment (1,389) (31,230) (244,022) (125,623) (198,563)
----------- ----------- ----------- ----------- -----------
Net cash from investing activities 397,297 (393,610) (4,900,779) (4,923,315) (797,348)
<FN>
(Continued)
</TABLE>
F6.
<PAGE> 91
<TABLE>
BRIGHT FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended March 31, Year ended December 31,
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts $(4,461,340) $(1,928,676) $(1,101,420) $ 4,314,693 $ 2,475,980
Proceeds from stock issuances 15,785 - 246,435 - -
Dividends paid (112,548) (79,036) (180,757) (136,338) (126,955)
Proceeds from long-term debt - 938,632 3,000,000 1,000,000 -
Payments on long-term debt (1,537,135) (18,003) (211,368) (150,000) (299,660)
----------- ----------- ----------- ----------- -----------
Net cash from financing activities (6,095,238) (1,087,083) 1,752,890 5,028,355 2,049,365
----------- ----------- ----------- ----------- -----------
Net change in cash and cash equivalents (5,557,059) (1,662,699) (1,773,542) 160,571 2,971,813
Cash and cash equivalents at beginning of year 7,787,786 9,561,328 9,561,328 9,400,757 6,428,944
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,230,727 $ 7,898,629 $ 7,787,786 $ 9,561,328 9,400,757
=========== =========== =========== =========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 964,294 $ 922,394 $ 3,751,290 $ 3,842,191 $ 4,503,065
Income taxes 10,000 - 408,500 727,455 279,900
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
F7.
<PAGE> 92
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING: The consolidated financial statements include the accounts
of Bright Financial Services, Inc. ("Corporation") and its wholly-owned
subsidiary, The Bright National Bank ("Bank"). Upon consolidation, all
significant intercompany accounts and transactions have been eliminated.
DESCRIPTION OF BUSINESS: The Bank generates commercial, mortgage and
installment loans, and receives deposits from customers located primarily in
the Carroll County, Indiana area. Although the overall loan portfolio is
diversified, the economy of Carroll County is heavily dependent on the
agricultural industry. The majority of the Bank's loans are secured by
specific items of collateral including business assets, real property and
consumer assets.
SECURITIES: The Bank classifies securities as held-to-maturity and
available-for-sale. Held-to-maturity securities are those which the bank has
the positive intent and ability to hold to maturity, and are reported at
amortized cost. Available-for-sale securities are those which the Bank may
decide to sell if needed for liquidity, asset-liability management, or other
reasons. Available-for-sale securities are reported at fair value, with
unrealized gains or losses included as a separate component of equity, net of
tax.
On January 1, 1994, the Bank adopted Statement of Financial Accounting
Standards No. 115 and accordingly classified its securities into the categories
discussed above. Prior to this date, securities were reported at amortized
cost. This reclassification increased equity by $68,145 on January 1, 1994,
the after-tax effect of the adjustment from amortized cost to fair value for
securities available-for-sale at that date.
Realized gains or losses are determined based on the amortized cost of the
specific security sold. Interest and dividend income, adjusted by amortization
of purchase premium or discount is included in earnings.
INTEREST INCOME ON LOANS: Interest on real estate, commercial and consumer
loans is accrued over the term of the loans based on the principal outstanding.
The recognition of interest income is discontinued when, in management's
judgment, the interest will not be collectible in the normal course of
business.
The Bank defers loan fees net of certain direct loan origination costs. The
net amount deferred is reported in the balance sheet as part of loans and is
recognized into interest income over the term of the loan using a method which
approximates a level yield.
MORTGAGE BANKING ACTIVITIES: The Bank originates certain mortgage loans for
the purpose of selling in the secondary mortgage market. The balance of these
loans originated but not yet sold was immaterial at December 31, 1994 and 1993.
At these dates, aggregate market value exceeded aggregate cost of these loans.
Proceeds from loan sales were $6,773,457, $16,603,841 and $15,519,249 in 1994,
1993 and 1992.
(Continued)
F8.
<PAGE> 93
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ALLOWANCE FOR LOAN LOSSES: The balance in the allowance and the amount of the
annual provision charged to expense are judgmentally determined based upon a
number of factors. Estimating the risk of loss and the amount of loss on any
loan is necessarily subjective. Accordingly, the allowance is maintained by
management at a level considered adequate to cover possible losses that are
currently anticipated based on past loss experience, general economic
conditions, information about specific borrower situations, including their
financial position and collateral values, and other factors and estimates which
are subject to change over time. While management may periodically allocate
portions of the allowance for specific problem loan situations, the whole
allowance is available for any loan losses that occur. Increases to the
allowance are recorded by a provision for possible loan losses charged to
expense. A loan is charged off by management as a loss when deemed
uncollectible, although collection efforts continue and future recoveries may
occur.
PREMISES, FURNITURE AND EQUIPMENT: Premises, furniture and equipment are
stated at cost less accumulated depreciation. Depreciation is computed,
principally, using the straight line method for premises and the
declining-balance method for furniture and equipment based on the estimated
useful lives of the assets. Maintenance and repairs are expensed and major
improvements are capitalized.
OTHER REAL ESTATE: Real estate acquired through foreclosure or acceptance of a
deed in lieu of foreclosure is recorded at the lower of cost (fair value at
date of foreclosure) or fair value less estimated selling costs. Expenses
incurred in carrying other real estate are charged to operations as incurred.
INTANGIBLE ASSETS: Intangible assets, comprised of goodwill and a core deposit
intangible, are being amortized over 7.5 to 10 years on the straight-line
basis. Total amortization was $54,133 for 1994 and 1993.
ACCOUNTING FOR INCOME TAXES: The Corporation and the Bank file a consolidated
tax return. Income tax is computed on a separate return basis. Deferred tax
liabilities and assets are determined at each balance sheet date. They are
measured by applying enacted tax laws to future taxable income or expense
resulting from differences in the financial statement and tax basis of assets
and liabilities. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the
change during the period on deferred tax assets and liabilities.
On January 1, 1992, the Corporation adopted Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes. The cumulative effect of the
accounting change on years prior to 1992 of $69,763 is included in 1992 net
income.
(Continued)
F9.
<PAGE> 94
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STATEMENTS OF CASH FLOWS: For purposes of this statement cash and cash
equivalents is defined to include cash on hand, amounts due from other banks
and federal funds sold. Generally, federal funds are sold for one-day periods.
The Corporation reports net cash flows for customer loan transactions, deposit
transactions, and deposits made with other financial institutions.
FINANCIAL STATEMENT PRESENTATION: Certain items in the 1993 and 1992 financial
statements have been reclassified to correspond with the 1994 presentation.
NOTE 2 - SECURITIES
The amortized cost and estimated market value of securities are as follows at
December 31:
<TABLE>
<CAPTION>
1 9 9 4
-------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
AVAILABLE-FOR-SALE Cost Gains Losses Value
- ------------------ ---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and
agency securities $ 5,705,384 $ 233 $ (98,902) $ 5,606,715
Obligations of states
and political subdivisions 2,405,527 19,705 (73,408) 2,351,824
Mortgage-backed and other
asset-backed securities 5,236,473 913 (304,935) 4,932,451
Other securities 1,557,423 - (40,497) 1,516,926
------------- ------------- ------------- --------------
Total $ 14,904,807 $ 20,851 $ (517,742) $ 14,407,916
============= ============= ============= ==============
</TABLE>
Proceeds from sales of securities available-for-sale during 1994 were
$1,416,435. Gross gains of $1,084 and gross losses of $5,376 were realized on
those sales.
<TABLE>
<CAPTION>
1 9 9 4
-------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
HELD-TO MATURITY Cost Gains Losses Value
- ---------------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and
agency securities $ 7,017,410 $ - $ (359,441) $ 6,657,969
Obligations of states
and political subdivisions 5,684,319 87,735 (350,178) 5,421,876
Mortgage-backed and other
asset-backed securities 1,184,859 1,788 (81,702) 1,104,945
Other securities 735,550 - - 735,550
------------- ------------- --------------- --------------
Total $ 14,622,138 $ 89,523 $ (791,321) $ 13,920,340
============= ============= =============== ==============
<FN>
(Continued)
</TABLE>
F10.
<PAGE> 95
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
<TABLE>
NOTE 2 - SECURITIES (Continued)
<CAPTION>
1 9 9 3
-------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and
agency securities $ 7,546,077 $ 9,637 $ (25,245) $ 7,530,469
Obligations of states
and political subdivisions 7,039,792 373,704 (8,051) 7,405,445
Mortgage-backed and other
asset-backed securities 8,527,513 55,623 (39,287) 8,543,849
Other securities 570,450 - - 570,450
------------- ------------- -------------- --------------
Total $ 23,683,832 $ 438,964 $ (72,583) $ 24,050,213
============= ============= ============== ==============
</TABLE>
Proceeds from sales of securities held-to-maturity during 1993 and 1992 were
$4,273,904 and $9,953,752. Gross gains of $31,402 and gross losses of $32,832
were realized on those sales during 1993 and gross gains of $88,558 and gross
losses $14,179 were realized on those sales during 1992.
Investments in states and political subdivisions are made within policy
standards, which call for these securities to be investment grade or better as
established by national rating organizations. These securities are actively
traded and have a readily available market valuation.
The amortized cost and estimated market value of securities at December 31,
1994, by contractual maturity, are shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
------------------ ----------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 1,999,949 $ 1,956,926 $ 539,601 $ 527,354
Due after one year through five years 3,967,526 3,914,650 7,408,753 7,077,808
Due after five years through ten years 1,360,652 1,325,679 2,462,962 2,418,800
Due after ten years 782,784 761,284 2,290,413 2,055,883
-------------- -------------- -------------- --------------
Subtotal 8,110,911 7,958,539 12,701,729 12,079,845
Mortgage-backed and other
asset-backed securities 5,236,473 4,932,451 1,184,859 1,104,945
Other securities 1,557,423 1,516,926 735,550 735,550
-------------- -------------- -------------- --------------
Total $ 14,904,807 $ 14,407,916 $ 14,622,138 $ 13,920,340
============== ============== ============== ==============
</TABLE>
Securities with a carrying value of $1,182,991 and $4,610,057 at December 31,
1994 and 1993 were pledged to secure public deposits and for other purposes
required or permitted by law.
(Continued)
F11.
<PAGE> 96
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 3 - LOANS
Loans as presented on the balance sheet are comprised of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Commercial loans $ 14,040,287 $ 14,632,619
Real estate loans 47,135,819 46,145,083
Consumer loans 11,386,103 12,970,649
Lease financing 885,029 595,217
--------------- --------------
Total loans $ 73,447,238 $ 74,343,568
=============== ==============
</TABLE>
Lease financing consist of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Minimum lease payments receivable $ 928,630 $ 543,777
Unguaranteed residual receivable 174,342 171,263
Less: Unearned lease income (217,943) (119,823)
-------------- -------------
Total lease financing $ 885,029 $ 595,217
=============== ==============
</TABLE>
Minimum lease payments are receivable as follows at December 31:
<TABLE>
<S> <C>
1995 $ 282,764
1996 200,174
1997 152,790
1998 121,059
1999 73,460
2000 and thereafter 98,383
------------
Total $ 928,630
============
</TABLE>
Nonaccrual and restructured loans are as follows at December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Nonaccrual loans $ 68,470 $ 1,053,715 $ 643,426
Restructured loans 83,000 - -
------------- --------------- --------------
Total $ 151,470 $ 1,053,715 $ 643,426
============= =============== ==============
</TABLE>
(Continued)
F12.
<PAGE> 97
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 3 - LOANS (Continued)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income effect:
Gross amount of interest that would
have been recorded at original rate $ 9,131 $ 112,046 $ 71,147
Interest included in income 7,049 56,103 20,191
------------- ------------ -------------
Net impact on interest income $ 2,082 $ 55,943 $ 50,956
============= ============ =============
</TABLE>
The Bank has entered into loan transactions with its executive officers,
certain directors and principal shareholders. Total loans to these persons
were as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance, January 1 $ 124,321 $ 562,600
Additions 23,823 41,406
Collected (26,876) (479,685)
------------ -----------
Balance, December 31 $ 121,268 $ 124,321
============= ============
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance, January 1 $ 681,973 $ 524,809 $ 541,539
Provision charged to operations 120,000 285,000 295,000
Loans charged off (191,417) (183,920) (337,142)
Recoveries on loans previously charged off 132,929 56,084 25,412
------------- ------------ ------------
Balance, December 31 $ 743,485 $ 681,973 $ 524,809
============= ============ ============
</TABLE>
(Continued)
F13.
<PAGE> 98
BRIGHT FINACIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT
A summary of premises, furniture and equipment by major category follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Land $ 221,000 $ 221,000
Buildings and improvements 1,711,098 1,650,150
Furniture and equipment 1,500,567 1,361,454
Equipment held under capital lease (Note 7) 359,762 359,762
-------------- --------------
3,792,427 3,592,366
Accumulated depreciation (1,890,612) (1,656,977)
-------------- --------------
Premises, furniture and equipment, net $ 1,901,815 $ 1,935,389
============== ==============
</TABLE>
NOTE 6 - INTEREST-BEARING DEPOSITS
Certificates of deposit issued in denominations of $100,000 or greater totaled
$7,351,483 and $7,023,779 at December 31, 1994 and 1993.
NOTE 7 - CAPITAL LEASE
The Bank is the lessee of electronic data processing equipment under a
capitalized lease expiring in 1996. Equipment held under the capital lease and
capital lease obligations are recorded at the equipment's fair value. The
leased asset is depreciated over the lease term. Depreciation expense recorded
in 1994, 1993 and 1992 was $59,938, $64,218 and $91,739. Annual lease payments
are $87,076 per year with remaining lease payments of $50,693 in 1996. The
capital lease obligation on the balance sheet at December 31, 1994 represents
the aggregate amount payable less $8,419 of imputed interest. Imputed interest
rates vary from 6.9% to 8.2%.
(Continued)
F14.
<PAGE> 99
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 8 - LONG-TERM DEBT
Long-term debt outstanding at December 31, 1994 and 1993 consists of the
following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Note payable correspondent bank; payable $150,000 annually;
interest payable semi-annually at a variable prime rate; due
December 31, 2000; secured by all of The Bright National Bank
common stock. $ 850,000 $ 1,000,000
Federal Home Loan Bank Advances: interest payable monthly at
fixed rates from 5.47% to 7.07% maturities from January, 1995
to February, 2001; secured by mortgage loans. 5,938,632 3,000,000
------------ -----------
Total long-term debt $ 6,788,632 $ 4,000,000
============ ===========
</TABLE>
Annual principal payments required on long-term debt are as follows:
<TABLE>
<S> <C>
1995 $ 3,317,700
1996 1,391,360
1997 403,224
1998 368,915
1999 338,944
2000 and thereafter 968,489
--------------
Total $ 6,788,632
==============
</TABLE>
NOTE 9 - INCOME TAXES
Income taxes consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current
Federal $ 324,795 $ 344,359 $ 378,801
State 127,042 125,433 141,718
------- ------- -------
Total current 451,837 469,792 520,519
Deferred income taxes (benefit) (46,823) (95,919) (139,594)
------- ------- -------
Total income taxes $ 405,014 $ 373,873 $ 380,925
======= ======= =======
</TABLE>
Income taxes applicable to securities transactions were $(1,459), $(486) and
$25,289 in 1994, 1993 and 1992.
(Continued)
F15.
<PAGE> 100
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 9 - INCOME TAXES (Continued)
The following is a reconciliation of income taxes and the amount computed by
applying the statutory federal income tax rates of 34% to income before income
taxes:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory rate applied to income before
income taxes $ 450,674 $ 421,553 $ 441,457
Add (deduct)
Tax exempt interest income (133,160) (106,789) (96,232)
Nondeductible interest 16,108 15,479 12,955
State income tax, net 80,467 73,420 23,459
Effect of graduated rates and other (9,075) (29,790) (714)
------------ ------------ ------------
Total income taxes $ 405,014 $ 373,873 $ 380,925
============ ============ ============
</TABLE>
The net deferred tax asset in the accompanying balance sheet includes the
following amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION> 1994 1993
---- ----
<S> <C> <C>
Deferred tax asset $ 498,333 $ 255,236
Deferred tax liability (204,969) (171,403)
Valuation allowance - -
----------- -----------
Net deferred tax asset $ 293,364 $ 83,833
=========== ===========
</TABLE>
The effects of principle temporary differences are as follows:
<TABLE>
<CAPTION> 1994 1993
---- ----
<S> <C> <C>
Deferred tax assets
Loan loss provision $ 202,166 $ 139,543
Deferred loan fees 62,230 37,088
Unrealized loss on securities available-for-sale 188,819 -
Nonaccrual loan interest - 10,558
Intangible assets amortization 20,535 13,879
Other 41,826 54,258
---------- ----------
Total gross deferred tax assets 515,576 255,326
Deferred tax liabilities
Depreciation expense 181,194 153,354
Deferred gain on sale of leased asset 19,523 -
Other 21,495 18,139
---------- ----------
Total gross deferred tax liabilities 222,212 171,493
---------- ----------
Total net deferred tax asset $ 293,364 $ 83,833
=========== ==========
</TABLE>
(Continued)
F16.
<PAGE> 101
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Bank has a 401(k) defined contribution retirement plan to which
substantially all employees may elect to contribute up to 15% of their salary.
The Bank may contribute to the plan at its discretion. The Bank's matching and
discretionary contributions to the plan for 1994, 1993 and 1992 totaled $59,825,
$68,017 and $67,507.
The Bank established a deferred compensation plan for the benefit of certain
directors. Under the plan, the Bank agrees, in return for the directors
deferring the receipt of a portion of their current compensation, to pay a
retirement benefit computed at the amounts of the compensation deferred plus
accrued interest at 7%. Compensation can be deferred until the director
reaches age 70, and benefits can be paid out in a lump sum or in equal
installments over a 10 year period. A deferred compensation liability of
$23,296 is carried as an other liability in the consolidated balance sheet.
In conjunction with the plan formation, the Bank purchased life insurance on
the directors. The cash surrender value of that insurance was approximately
$801,928 at December 31, 1994 and is carried as an other asset on the
consolidated balance sheet.
NOTE 11 - STOCK OPTION PLAN
In 1993 directors and shareholders approved the Bright Financial Services, Inc.
Non-Qualified Stock Option Plan ("plan") whereby, beginning in January 1994 and
terminating 10 years thereafter, 15,000 shares of the Corporation's common
stock are available for grant to directors and executive and senior management
officers. Options may be granted provided a certain targeted return on equity
is achieved. Under the terms of the plan, options are granted at a price equal
to the fair market value of the stock at the date of grant. Options, if not
exercised, will expire no later than 10 years from the date of grant. Options
become 20% exercisable after one year and 20% each subsequent year. Following
is a summary of stock option plan activity.
<TABLE>
<CAPTION>
Shares under Option
-------------------
1994 1993
---- ----
<S> <C> <C>
Outstanding, beginning of year - -
Granted during the year 1,345 -
Terminated/expired during the year (660) -
Exercised during the year (at $35 per share) (55)
---- ----
Outstanding, end of year (at $35 per share) 630
==== ====
Eligible, end of year for exercise currently
(at $35 per share) 126 -
==== ====
</TABLE>
(Continued)
F17.
<PAGE> 102
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 12 - RESTRICTIONS ON LOANS AND DIVIDENDS FROM SUBSIDIARY
The Bank and the Corporation are subject to regulations which require the
maintenance of certain capital levels and, as a result, limit the amount of
dividends which may be paid by the companies. The Bank is regulated by the
Comptroller of the Currency, while the Corporation is regulated by the Federal
Reserve Board. The most restrictive of the regulations limits the amount of
dividends the Bank may pay to the Corporation in a single year without approval
by the Comptroller of the Currency to the balance of retained net profits of
the most recent two years. Under this restriction, approximately $1,400,000 of
undistributed earnings of the Bank was available for distribution to the
Corporation at December 31, 1994.
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES
In the ordinary course of business, the Bank has loans, commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the consolidated balance sheets. The Bank's
exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to make loans and standby letters of
credit is represented by the contractual amount of those instruments. The Bank
uses the same credit policy to make such commitments as it uses for on-balance
sheet items.
At December 31, off-balance sheet financial instruments whose contract amount
represents credit risk are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Unused lines of credit $ 3,732,354 $ 8,724,478
Commercial letters of credit 56,120 164,361
</TABLE>
Since many commitments to make loans expire without being used, the amount does
not necessarily represent future cash commitments. Collateral obtained upon
exercise of the commitment is determined using management's credit evaluation
of the borrower, and may include accounts receivable, inventory, property, land
and other items.
The cash balance required to be maintained on hand or on deposit with the
Federal Reserve was $526,000 and $478,000 at December 31, 1994 and 1993. These
reserves do not earn interest.
(Continued)
F18.
<PAGE> 103
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS
Presented below are the condensed balance sheets and statements of income and
cash flows for the parent company:
<TABLE>
CONDENSED BALANCE SHEETS
December 31, 1994 and 1993
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash on deposit with subsidiary $ 180,333 $ 80,794
Investment in bank subsidiary 8,949,506 8,555,887
Other assets 67,133 67,133
--------------- ---------------
$ 9,196,972 $ 8,703,814
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Other liabilities $ 107,887 $ 109,303
Long-term debt 850,000 1,000,000
--------------- ---------------
Total liabilities 957,887 1,109,303
Shareholders' equity
Common stock 1,278,956 1,234,950
Additional paid-in capital 1,573,501 1,371,072
Retained earnings 5,694,700 4,988,489
Unrealized loss on securities available-for-sale (308,072) -
--------------- ---------------
Total shareholders' equity 8,239,085 7,594,511
--------------- ---------------
$ 9,196,972 $ 8,703,814
=============== ===============
</TABLE>
<TABLE>
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
OPERATING INCOME
Dividends received from subsidiary $ 310,000 $ 240,000 $ 339,000
Other income 25 37,563 11,265
------------- ------------ ------------
Total operating income 310,025 277,563 350,265
Operating expenses
Interest expense 72,325 69,925 85,540
Other expenses 71,839 9,375 1,338
------------- ------------ ------------
Total operating expenses 144,164 79,300 86,878
------------- ------------ ------------
INCOME BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARY 165,861 198,263 263,387
Income tax benefit 52,928 37,671 23,020
------------- ------------ ------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 218,789 235,934 286,407
Equity of undistributed earnings of subsidiary 701,691 630,056 561,307
----------- ------------ ------------
NET INCOME $ 920,480 $ 865,990 $ 847,714
=========== ============ ============
</TABLE>
(Continued)
F19.
<PAGE> 104
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 920,480 $ 865,990 $ 847,714
Adjustments to reconcile net income to net cash
from operating activities
Equity in undistributed earnings of subsidiary (701,691) (630,056) (561,307)
Changes in:
Other assets - (3,439) 77,733
Other liabilities (34,928) 30,265 -
------------ ------------- -------------
Net cash provided by operating activity 183,861 262,760 364,140
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term borrowings (150,000) (150,000) (200,000)
Proceeds from stock issuances 246,435 - -
Dividends paid (180,757) (136,338) (126,955)
------------ ------------- -------------
Net cash from financing activities (84,322) (286,338) (326,955)
------------ ------------- -------------
Net change in cash and cash equivalents 99,539 (23,578) 37,185
Cash and cash equivalents at beginning of year 80,794 104,372 67,187
------------ ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 180,333 $ 80,794 $ 104,372
============ ============= =============
</TABLE>
NOTE 15 - PENDING CHANGES IN ACCOUNTING POLICIES
Statement of Financial Accounting Standard No. 114, "Accounting by Creditors
for Impairment of a Loan," relates to classification and valuation of impaired
loans and is effective for financial statements in 1995. SFAS 114 will result
in applying discounted cash flow analysis and other valuation techniques to
impaired loans as this term is defined in the new statement. Management, based
on its preliminary analysis and the composition of the Bank's current loan
portfolio, does not expect SFAS 114 to have a material effect on the
Corporation's financial position at the implementation date of January 1, 1995.
(Continued)
F20.
<PAGE> 105
BRIGHT FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE 16 - SUBSEQUENT EVENT
On February 20, 1995, the Corporation entered into a definitive agreement to
merge with First Financial Bancorp of Hamilton, Ohio. Pursuant to the proposed
merger, First Financial Bancorp has offered to exchange its shares for all of
the outstanding shares of Bright Financial Services, Inc. The actual number of
shares of First Financial Bancorp to be issued will be based upon the fair
market value of its stock immediately prior to the merger. Consummation of the
transaction is subject to regulatory and shareholder approval.
F21.
<PAGE> 106
PRINCIPAL SHAREHOLDERS AND OWNERSHIP BY MANAGEMENT
For information regarding the principal shareholders of Bancorp and
ownership of Bancorp Common Stock by Bancorp's directors and executive
officers, see "Item 12. Security Ownership of Certain Beneficial Owners and
Management" in the Bancorp Form 10-K, which is incorporated herein by
reference.
<TABLE>
The following table sets forth certain information with respect to the
only persons known to Bright to own beneficially more than 5% of the
outstanding common stock of Bright as of the Record Date:
<CAPTION>
Number of Percent of Shares
Name and Address Shares Outstanding
---------------------- --------------- -----------------
<S> <C> <C>
Adolph Haines 25,600 12.5%
P.O. Box 103
Flora, IN 46929
Dale V. Zinn 18,314 8.9%
P.O. Box 7
Flora, IN 46929
Evelyn Frank Trust 17,888 8.7%
74022 Zircon Circle W.
Palm Desert, CA 92260
Judith Bentley (1) 11,096 5.4%
405 Normandie Blvd.
Bowling Green, OH 43402
Richard Cook (1) 11,096 5.4%
9054 Eden Oaks Ave.
Orangevale, CA 95662
--------------------
<FN>
(1) Ms. Bentley and Mr. Cook are sister and brother.
</TABLE>
<TABLE>
The following table sets forth certain information regarding the
number of shares of common stock of Bright beneficially owned by each director
of Bright and by all directors and executive officers of Bright as a group as
of the Record Date:
<CAPTION>
Number of Percent of Shares
Name Shares(1) Outstanding
--------------------- ---------- -----------------
<S> <C> <C>
Adolph Haines 25,600 (2) 12.48%
Jerry L. Holsapple 547 (3) 0.27%
Joe T. Jones 95 0.05%
Dick N. Bishop 9,529 (4) 4.65%
Alvan L. Eller, M.D. 1,463 (5) 0.71%
Craig W. Graham 350 (6) 0.17%
Dale V. Zinn 18,314 (7) 8.93%
All executive officers and
directors as a group
(9 persons) 58,166 28.36%
--------------------
<FN>
(1) Includes unexercised options for 305 shares granted to Mr.
Holsapple; unexercised options for 55 shares each granted to
Messrs. Jones, Bishop, Eller, Graham and Zinn and unexercised
options for 50 shares granted to employees of Bright National
not named above.
(2) Of these, 25,600 shares are owned jointly with Mr. Haines'
wife.
(3) Of these, 40 shares are owned by Mr. Holsapple's wife, for
which Mr. Holsapple disclaims beneficial ownership.
(4) Of these, 8,594 shares are owned jointly with Mr. Bishop's
wife.
(5) Of these, 1,408 shares are owned jointly with Dr. Eller's wife.
(6) Of these, 52 shares are owned by the Underwood Agency, for
which Mr. Craig disclaims beneficial ownership.
(7) Of these, 117 shares are owned by Mr. Zinn's wife, for which
Mr. Zinn disclaims beneficial ownership.
</TABLE>
78
<PAGE> 107
After consummation of the Merger, Bancorp will instruct brokers that
they may not acquire Bancorp Common Stock from officers, directors or
affiliates of Bright who were owners of 1% or more of Bright's Common Stock
prior to its acquisition until such time as Bancorp has published results of
operations covering at least 30 days of combined operations.
79
<PAGE> 108
COMPARATIVE MARKET AND DIVIDEND INFORMATION
Nature Of Trading Market
- ------------------------
The Bancorp Common Stock is quoted on the Nasdaq National Market
System under the symbol "FFBC". On ___________ ___, 1995, the last reported
sale price of Bancorp Common Stock as reported on the Nasdaq National Market
System was $______ per share.
The Bright Common Stock is not traded on an established public market.
The last known trading price of Bright Common Stock was $43.75 per share on
June 24, 1994. There are no known broker quotations for Bright, and the stock
trades very inactively. Bright's management has traditionally been available
to assist shareholders who wished to sell stock by seeking willing buyers,
Only eight stock sales/purchase transactions were completed during 1994 and
1993 exclusive of stock issuances to employee benefit plans.
<TABLE>
The following table sets forth, for the periods indicated, the high
and low sales prices per share of Bancorp Common Stock as reported on the
Nasdaq National Market System. All prices have been adjusted to give
retroactive effect to stock dividends and stock splits.
<CAPTION>
BANCORP BANCORP
HIGH LOW
------- -------
<S> <C> <C>
1992
----
First Quarter $22.09 $19.64
Second Quarter 23.18 21.00
Third Quarter 23.86 22.23
Fourth Quarter 24.55 23.18
1993
----
First Quarter 25.05 23.55
Second Quarter 26.40 24.15
Third Quarter 32.55 25.50
Fourth Quarter 33.45 30.90
1994
----
First Quarter 39.80 29.20
Second Quarter 31.60 30.00
Third Quarter 32.20 30.20
Fourth Quarter 33.75 29.50
1995
----
First Quarter 34.50 32.50
Second Quarter (1) 34.00 33.00
-------------------
<FN>
(1) Through May 23, 1995
</TABLE>
<TABLE>
The following information reflects actual trade transactions in Bright
Common Stock made during 1993, 1994 and through May 23, 1995. The information
should not necessarily be relied upon when determining the value of a
shareholder's investment.
<CAPTION>
Bright Trades in
------------------------------------------
1993 1994 1995(1)
-------- -------- --------
<S> <C> <C> <C>
Number of trades 2 6 0
Number of shares traded 2,040 2,229 0
Selling price $30.00-$30.00 $35.00-$43.75 N/A
--------------------
<FN>
(1) Through May 23, 1995
</TABLE>
80
<PAGE> 109
As of ____________ ___, 1995, there were approximately ______ holders
of record of the Bancorp Common Stock. As of ____________ ___, 1995, Bright
had ______ shareholders of record.
Dividends
- ---------
The following table sets forth the per share cash dividends declared
on Bancorp and Bright Common Stock, respectively, for each quarter since
January 1, 1992. Bancorp dividends have been adjusted to give retroactive
effect to all stock dividends and stock splits.
<TABLE>
<CAPTION>
BANCORP BRIGHT
------- ------
<S> <C> <C>
1992
----
First Quarter $.1800 $.00
Second Quarter .1800 .33
Third Quarter .1800 .00
Fourth Quarter .1980 .34
1993
----
First Quarter .1980 .00
Second Quarter .1980 .35
Third Quarter .1980 .00
Fourth Quarter .2160 .40
1994
----
First Quarter .2160 .00
Second Quarter .2160 .50
Third Quarter .2160 .00
Fourth Quarter .3200 .56
1995
----
First Quarter .2600 .00
Second Quarter (1) .2600 .00
--------------------
<FN>
(1) Through May 23, 1995
</TABLE>
Bright anticipates paying a regular semi-annual dividend of up to
$0.60 per share on or before July 1, 1995 if the Merger is not consummated
prior to July 1, 1995 and a regular dividend of up to $0.30 per share on or
before October 1, 1995 if the Merger is not consummated prior to October 1,
1995. In the Merger Agreement, Bright and Bancorp agreed to cooperate with
each other to insure that the shareholders of Bright receive a regular
quarterly dividend from either Bright or Bancorp during the quarter in which
the Effective Time of the Merger occurs, and that such shareholders of Bright
do not receive dividends from both Bright and Bancorp during such quarter.
The future dividend policy of Bancorp is subject to the discretion of
Bancorp's Board of Directors, cash needs, general business conditions and
dividends from subsidiaries.
For certain restrictions on the payment of dividends by Bancorp and
Bright, see "COMPARISON OF COMMON STOCK AND SHAREHOLDERS' RIGHTS-- Dividend
Rights."
81
<PAGE> 110
COMPARISON OF COMMON STOCK AND SHAREHOLDERS' RIGHTS
The following summary comparison of the terms of the common stock of
Bright and Bancorp, and the rights of holders thereof, does not purport to be
complete and is qualified in its entirety by reference to Bancorp's and
Bright's Articles of Incorporation, Bancorp's Code of Regulations and Bright's
By-Laws. Various features of the Articles of Incorporation and Code of
Regulations of Bancorp differ from Bright's Articles of Incorporation and
By-Laws. The following discussion summarizes the differences that are deemed
to be material by Bancorp.
Authorized But Unissued Shares
- ------------------------------
Bancorp's Articles of Incorporation authorizes the issuance of
25,000,000 shares, par value $8.00 per share, of Bancorp Common Stock, of which
12,209,474 shares were issued and outstanding at March 31, 1995. The remaining
authorized but unissued shares of Bancorp Common Stock may be issued upon
authorization of the Board of Directors without prior shareholder approval.
Bright's Articles of Incorporation authorize the issuance of 250,000
shares, no par value, of Bright Common Stock, of which 204,633 shares were
issued and outstanding at March 31, 1995.
Dividend Rights
- ---------------
The holders of Bright and Bancorp Common Stock are entitled to
dividends and other distributions when, as and if declared by their respective
Boards of Directors out of funds legally available therefor. Subject to
certain regulatory restrictions, dividends may be paid in cash, property or
shares of common stock, unless the entity is insolvent or the dividend payment
would render it insolvent. The amount of dividends, if any, that may be
declared by Bancorp following the purchase will necessarily depend upon many
factors including, without limitation, future earnings, capital requirements,
business conditions of subsidiaries (since Bancorp will be dependent upon
dividends paid to it by its subsidiaries) and the discretion of Bancorp's Board
of Directors. Dividends paid to Bancorp by its subsidiary financial
institutions are subject to the regulations of various regulatory authorities.
A Federal Reserve Board Policy Statement provides that cash dividends
paid by a bank holding company should meet the following two guidelines: (1)
the organization's net income available to common shareholders over the past
year should be sufficient to fully fund the dividends and (2) the prospective
rate of earnings retention by the organization appears consistent with capital
needs, asset quality and overall financial condition. Bancorp and Bright have
complied with the first guideline since their organizations in 1983 and 1984,
respectively, and each believes it has also complied with the second guideline.
Directors
- ---------
Currently both Bright and Bancorp are under the direction of separate
boards of directors. Bright's Board will be dissolved at the Effective Time of
the Merger. Bright National, however, will become a wholly owned subsidiary of
Bancorp and the members of its Board of Directors will continue to be directors
until their successors are duly elected and qualified. The same individuals
serve on Bright's and Bright National's Board.
82
<PAGE> 111
The number of directors of Bancorp can be no less than nine and no
more than 25. Bancorp currently has 15 directors divided into three classes of
five directors with the term of office of one class expiring each year.
Shareholders of Bancorp annually elect one-third of its Board of Directors.
This method of election could be considered an impediment for a takeover of
control of Bancorp by third parties.
Bright's By-Laws fix the number of directors at seven members. Board
members are elected for one year terms at each annual meeting. Therefore,
shareholders of Bright annually elect 100% of its Board of Directors.
Bright's Articles of Incorporation require that directors be
shareholders of Bright. Bancorp's Articles of Incorporation and Code of
Regulations contain no such restriction.
In its Code of Regulations, Bancorp has an age limitation preventing
election or reelection of directors who have reached the age of 70 years or
older. Bright's Articles of Incorporation and By-Laws contain no such
restriction.
Quorum For Shareholders' Meetings
- ---------------------------------
Except as provided by law, the holders of record of a majority of
outstanding shares entitled to vote, in person or by proxy, are required for a
quorum at all Bancorp and Bright shareholders' meetings.
Voting Rights
- -------------
The holders of Bright Common Stock and Bancorp Common Stock are
entitled to one vote per share on all matters presented for shareholder vote.
Shareholders of neither Bancorp nor Bright have cumulative voting rights in the
election of directors.
Special Meetings
- ----------------
Special Meetings of the shareholders of Bancorp may be called for any
purpose by the Board of Directors or by any three or more shareholders owning,
in the aggregate, not less than 50% percent of the stock of Bancorp. Notice of
the meeting, including the purpose or purposes of the meeting, must be mailed,
postage prepaid, to every shareholder of record at the address appearing on
Bancorp's books at least 10 days prior to the date of the meeting.
Special Meetings of the shareholders of Bright may be called by the
Board of Directors, the President or shareholders owning, in the aggregate, not
less than a majority of all outstanding shares of capital stock entitled to
vote on the business proposed to be transacted at the special meeting. Notice
of the meeting, including the purpose or purposes of the meeting, must be
delivered or mailed at least 10 days prior to the date of the meeting to every
shareholder of record at the address appearing on Bright's books.
83
<PAGE> 112
Preemptive Rights
- -----------------
As permitted by law, neither Bancorp's nor Bright's Articles of
Incorporation provide for preemptive rights.
Liquidation Rights
- ------------------
In the event of liquidation, the holders of shares of Bancorp Common
Stock are entitled, subject to the payment in full of Bancorp's debts and other
liabilities, to receive pro rata any assets distributable to shareholders with
respect to the number of shares held by them. The same applies to Bright.
Redemption And Assessment
- -------------------------
Shares of Bancorp and Bright Common Stock are not subject to further
call or assessment. Bancorp may redeem or purchase shares of its Common Stock
with funds legally available therefor, provided it gives prior notice to the
Federal Reserve Board if the consideration to be paid for the purchase or
redemption, when aggregated with the consideration paid for all purchases or
redemptions for the preceding last 12 months, equals or exceeds 10% of
Bancorp's consolidated net worth. Redemptions may not be made when Bancorp is
insolvent or, as a result of the redemption, would be rendered insolvent.
Redemptions or repurchases of Bright's Common Stock are also subject to the
same regulatory limitations.
Two-Thirds (2/3) Affirmative Shareholder Vote Requirement
- ---------------------------------------------------------
Bright's Articles of Incorporation requires the affirmative vote of at
least 2/3 of the outstanding voting shares for the authorization and adoption
of: (1) any merger or consolidation of Bright or its subsidiaries with or into
a 10% shareholder, as defined in the Articles; (2) any sale, lease, exchange,
transfer or other disposition (including, without limitation, the granting of a
mortgage or other security interest) of any material part of the assets of
Bright or its subsidiaries to or with a 10% shareholder; or (3) a liquidation
or dissolution of Bright or any material subsidiary or adoption of any plan
with respect thereto. Bancorp's Articles of Incorporation and Code of
Regulations do not contain any such requirements.
Bancorp did not own shares of Bright Common Stock prior to signing the
Merger Agreement and does not intend to own shares prior to consummation of the
Merger. Bancorp does not, therefore, qualify as a 10% shareholder and the
above provisions are not applicable to the transactions contemplated by the
Merger Agreement.
Amendments To Articles And Code of Regulations
- ----------------------------------------------
The Articles of Incorporation of Bancorp may be amended, altered,
changed or repealed by following the procedures prescribed by the laws of the
State of Ohio. The Articles of Incorporation for Bright may be amended by a
majority vote of its outstanding shares, except that at least a 2/3 majority
vote is necessary to amend the section of the Articles of Incorporation
described in the previous paragraph.
84
<PAGE> 113
Bright's By-Laws may be amended by a majority of the entire Board of
Directors at any meeting of the Board, except that no amendment may in any way
change or repeal the provisions of the section of the Articles of Incorporation
described in "Two-Thirds (2/3) Affirmative Shareholder Vote Requirement above.
Bancorp's Code of Regulations may be amended by a majority vote of outstanding
shares at any regular or special meeting of shareholders.
Restrictions On Resale Of Bancorp Common Stock
- ----------------------------------------------
The offer and sale of Bancorp Common Stock are subject to registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
Accordingly, Bancorp Common Stock may be offered or sold only in compliance
with such registration requirements or pursuant to an applicable exemption from
registration.
The offering of shares of Bancorp Common Stock in connection with the
Merger has been registered under the Securities Act. Such registration does
not cover the resale of such shares. BANCORP COMMON STOCK RECEIVED IN THE
MERGER BY PERSONS WHO ARE NOT "AFFILIATES" OF BANCORP MAY BE RESOLD WITHOUT
REGISTRATION. Shares received by affiliates of Bancorp (primarily the
directors and officers of Bright who become directors or officers of Bancorp)
will be subject to the resale restrictions of Rule 145 under the Securities
Act, which are substantially the same as the restrictions of Rule 144 discussed
below. In general, the Rule 145 restrictions terminate with respect to persons
who are no longer affiliated with Bancorp after a two-year holding period if
Bancorp continues to comply with the reporting requirements of the Exchange Act
or after a three-year period if Bancorp does not meet such requirements.
However, any person who becomes an affiliate of Bancorp will continue to be
subject to the restrictions of Rule 144.
Rule 144 generally requires there be publicly available certain
information concerning Bancorp, and that sales thereunder be made in routine
brokerage transactions or through a market maker. Beginning 90 days after the
date of this Proxy Statement-Prospectus, if the conditions of Rule 144 are
satisfied (including those that in some cases require affiliate's sales to be
aggregated with sales by certain other persons), each affiliate is entitled to
sell in the public market, without registration, in any three-month period, a
number of shares which does not exceed one percent of the number of outstanding
shares of Bancorp Common Stock.
Bancorp Shareholder Rights Plan
- -------------------------------
On November 26, 1993, Bancorp adopted a shareholder rights plan (the
"Plan") and declared a dividend of one right on each outstanding share of
Bancorp Common Stock ("Right") to shareholders of record as of December 6,
1993. Each share of Bancorp Common Stock issued after December 6, 1993 will
include one Right. Under the Plan, the Rights will actually be distributed
only if one or more of certain designated actions involving Bancorp Common
Stock occur. See Note 17 of Bancorp's 1994 Financial Statements for more
information on the Plan.
85
<PAGE> 114
ADJOURNMENT OF THE SPECIAL MEETING
The shareholders of Bright are asked to approve a proposal to permit
the adjournment of the Special Meeting, if necessary, to solicit additional
proxies with respect to the approval of the Merger Agreement. The Merger
Agreement must be approved by the affirmative vote of at least a majority of
the outstanding shares of Bright Common Stock. If such matter does not receive
the requisite vote of shareholders at the Special Meeting and does not receive
a sufficient number of negative votes to assure the failure of the matter, the
Board of Directors may decide to adjourn the Special Meeting to solicit
additional proxies. If the Board of Directors decides to adjourn the Special
Meeting with respect to the Merger Agreement, the Chairman of the Special
Meeting will request a motion that the Special Meeting be adjourned for up to
30 days. An adjournment of up to 30 days would not require either the setting
of a new meeting date or the giving of notice of the adjourned meeting.
Each proxy given in connection with the Special Meeting will be voted
on a motion for adjournment in accordance with the instructions contained
therein. If no contrary instructions are given, each proxy will be voted in
favor of any motion to adjourn the Special Meeting. The holders of the
majority of the shares of Bright represented in person or by proxy at the
Special Meeting will be required to approve a motion to adjourn the Special
Meeting.
If a motion to adjourn the Special Meeting is approved, no vote will
be taken on the Merger Agreement at the Special Meeting on September 12, 1995,
but the Merger Agreement will be voted upon at the adjourned meeting. Unless
revoked prior to its use, any proxy solicited for the Special Meeting will
continue to be valid and will be voted in accordance with the instructions
contained therein at the adjourned meeting.
Because the Board of Directors recommends that the shareholders vote
for the Merger Agreement, the Board of Directors similarly recommends that the
shareholders vote FOR the proposal to adjourn the Special Meeting, which will
facilitate the approval of the Merger Agreement. Such an adjournment would be
disadvantageous to shareholders who oppose the Merger Agreement because the
adjournment will give Bright additional time to solicit votes in favor of the
Merger Agreement, thereby increasing the chances of passing the Merger
Agreement proposal. Bright has no reason to believe that an adjournment of the
Special Meeting will be required.
If a quorum is not present at the Special Meeting, none of the
proposals will be acted upon, and the Board of Directors will adjourn the
Special Meeting to a later date in order to solicit additional proxies to
assure the presence of a quorum. The proposal to approve a motion to adjourn
the Special Meeting does not apply to an adjournment relating to the absence of
a quorum.
86
<PAGE> 115
EXPERTS
The consolidated financial statements of Bancorp incorporated by
reference in First Financial Bancorp.'s Annual Report (Form 10-K) for the year
ended December 31, 1994, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Bright at December 31, 1994 and for the
year then ended appearing in this Proxy Statement-Prospectus have been audited
by Crowe, Chizek & Company, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
The legality of the shares of Bancorp Common Stock to be issued in the
Merger described herein will be passed upon by Frost & Jacobs, 2500 PNC Center,
201 East Fifth Street, Cincinnati, Ohio 45202.
Certain legal matters in connection with the Merger will be passed
upon for Bright by Bingham Summers Welsh & Spilman, 2700 Market Tower, 10 West
Market Street, Indianapolis, Indiana 46204-2982.
87
<PAGE> 116
APPENDIX A
PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
BRIGHT FINANCIAL SERVICES, INC.
<PAGE> 117
PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
BRIGHT FINANCIAL SERVICES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Effective Time of the Merger . . . . . . . . . . . . . . . . . . . 2
3. Governing Law; Articles of Incorporation . . . . . . . . . . . . . 2
4. Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Directors and Officers . . . . . . . . . . . . . . . . . . . . . . 2
6. Conversion of Shares in the Merger . . . . . . . . . . . . . . . . 2
6.1 FFB's Common Stock . . . . . . . . . . . . . . . . . . . . 2
6.2 BFS's Common Stock . . . . . . . . . . . . . . . . . . . . 2
6.3 Consideration; Exchange Ratio . . . . . . . . . . . . . . 3
6.4 Surrender of BFS Certificates . . . . . . . . . . . . . . 3
6.5 Fractional Interests . . . . . . . . . . . . . . . . . . . 4
7. Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . 4
8. Approval of Shareholders; Filing of Articles of Merger . . . . . . 4
9. BFS's Representations and Warranties . . . . . . . . . . . . . . . 5
9.1 Organization . . . . . . . . . . . . . . . . . . . . . . . 5
9.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 5
9.3 List of Information . . . . . . . . . . . . . . . . . . . 5
9.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 5
9.5 Financial Statements . . . . . . . . . . . . . . . . . . . 5
9.6 Good and Marketable Title . . . . . . . . . . . . . . . . 6
9.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.8 Absence of Certain Changes or Events . . . . . . . . . . . 7
9.9 Contracts and Agreements . . . . . . . . . . . . . . . . . 7
9.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 8
9.11 Litigation and Proceedings . . . . . . . . . . . . . . . . 8
</TABLE>
i
<PAGE> 118
<TABLE>
<S> <C> <C>
9.12 Material Contracts; No Conflict with Other Instruments . . . 8
9.13 Governmental Authorizations and Filings . . . . . . . . . . 8
9.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . 8
9.15 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.16 Environmental Matters . . . . . . . . . . . . . . . . . . . 9
9.17 Validity of Contemplated Transactions . . . . . . . . . . .10
9.18 Expiration of BFS's Representations and Warranties . . . . .10
10. FFB's Representations and Warranties . . . . . . . . . . . . . . . .10
10.1 Organization . . . . . . . . . . . . . . . . . . . . . . . .10
10.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .10
10.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . .11
10.4 Shares to be Issued . . . . . . . . . . . . . . . . . . . .11
10.5 Financial Statements . . . . . . . . . . . . . . . . . . . .11
10.6 Good and Marketable Title . . . . . . . . . . . . . . . . .11
10.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .12
10.8 Absence of Certain Changes or Events . . . . . . . . . . . .12
10.9 Proxy Statement Information . . . . . . . . . . . . . . . .12
10.10 Litigation and Proceedings . . . . . . . . . . . . . . . . .13
10.11 Material Contracts . . . . . . . . . . . . . . . . . . . . .13
10.12 Governmental Authorizations and Filings . . . . . . . . . .13
10.13 Consents and Approvals . . . . . . . . . . . . . . . . . . .13
10.14 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . .14
10.15 Validity of Contemplated Transactions . . . . . . . . . . .14
10.16 Filing of Reports . . . . . . . . . . . . . . . . . . . . .14
10.17 Employee Benefit Plans . . . . . . . . . . . . . . . . . . .14
10.18 Environmental Representation . . . . . . . . . . . . . . . .15
10.19 Expiration of FFB's Representations and Warranties . . . . .15
11. Conduct of Business Pending the Merger . . . . . . . . . . . . . . .15
12. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . .16
12.1 Access and Information . . . . . . . . . . . . . . . . . . .16
12.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . .16
12.3 Registration Statement . . . . . . . . . . . . . . . . . . .17
12.4 Employment Contracts . . . . . . . . . . . . . . . . . . . .17
12.5 Employee Benefit Plans . . . . . . . . . . . . . . . . . . .17
12.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .18
12.7 Further Assurances . . . . . . . . . . . . . . . . . . . . .18
12.8 Pooling . . . . . . . . . . . . . . . . . . . . . . . . . .18
12.9 Audited Financial Statements . . . . . . . . . . . . . . . .18
12.10 Press Releases . . . . . . . . . . . . . . . . . . . . . . .19
12.11 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . .19
12.12 Directors and Officers of BFS . . . . . . . . . . . . . . .19
</TABLE>
ii
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<TABLE>
<S> <C> <C>
12.13 Liability Insurance . . . . . . . . . . . . . . . . . . . .20
12.14 Fiduciary Responsibility . . . . . . . . . . . . . . . . . .20
13. Conditions Precedent; Terminations . . . . . . . . . . . . . . . . .21
13.1 Conditions Precedent to Obligations of the Parties . . . . .21
13.2 Conditions Precedent to FFB's Obligations . . . . . . . . .21
13.3 Conditions Precedent to BFS's Obligation . . . . . . . . . .23
13.4 Termination and Abandonment . . . . . . . . . . . . . . . .24
13.5 Effect of Termination . . . . . . . . . . . . . . . . . . .25
13.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .25
14. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . .25
14.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . .25
14.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . .25
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .25
14.4 Binding Nature of Agreement . . . . . . . . . . . . . . . .26
14.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . .26
14.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . .26
14.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .26
</TABLE>
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PLAN AND AGREEMENT OF MERGER
BETWEEN
FIRST FINANCIAL BANCORP.
AND
BRIGHT FINANCIAL SERVICES, INC.
PLAN AND AGREEMENT OF MERGER (hereafter called "this Agreement") dated
as of February 20, 1995 by and between FIRST FINANCIAL BANCORP., an Ohio
corporation and registered as a bank holding company under the Bank Holding
Company Act of 1956 and a savings and loan holding company under the Savings
and Loan Holding Company Act ("FFB"), and BRIGHT FINANCIAL SERVICES, INC., an
Indiana corporation and registered as a bank holding company under the Bank
Holding Company Act of 1956 ("BFS"), pursuant to which FFB and BFS hereby agree
as set forth more fully herein.
1. RECITALS.
1.1 FFB is a corporation duly organized and existing under the
laws of the State of Ohio, having been incorporated on August 8, 1982. BFS is
a corporation duly organized and existing under the laws of the State of
Indiana, having been incorporated on February 19, 1982.
1.2 The Boards of Directors of FFB and BFS deem it advisable for
the general welfare and advantage of FFB and BFS and their respective
shareholders that FFB and BFS merge into a single corporation pursuant to this
Agreement and pursuant to the applicable provisions of the laws of the States
of Ohio and Indiana and the United States of America, subject to the approval
of various federal and state regulatory authorities.
1.3 As of December 31, 1994, the authorized capital stock of FFB
consisted of 25,000,000 shares of common stock, par value $8.00 per share, of
which 12,204,575 shares were outstanding.
1.4 As of the date hereof, the authorized capital stock of BFS
consisted of 250,000 shares of common stock, no par value, of which 205,084
shares were outstanding and 630 shares were reserved for issuance pursuant to
outstanding options.
1.5 In consideration of the foregoing premises and of the mutual
agreements herein contained, the parties hereby agree, in accordance with the
applicable provisions of the States of Ohio and Indiana, the United States of
America, and any regulatory approvals, that FFB and BFS will be merged pursuant
to the terms and conditions of the merger hereby agreed upon (hereafter called
the "Merger") into a single corporation, which will be FFB, one of the
constituent corporations and which will continue its corporate existence and be
the corporation surviving the merger (said corporation hereafter being
sometimes called the "Surviving Corporation"), and the parties covenant to
observe, keep, perform and carry into effect the Merger and this Agreement as
hereafter set forth.
<PAGE> 121
2. EFFECTIVE TIME OF THE MERGER. At the effective time of the Merger,
the separate existence of BFS will be merged into the Surviving Corporation and
Bright National Bank (the "Bank"), a wholly owned subsidiary of BFS, shall
continue as a wholly owned subsidiary of the Surviving Corporation.
Consummation of this Agreement will be effected on the later date on which
Articles of Merger in substantially the form annexed hereto as Exhibit A are
filed in the offices of the Secretary of State of the States of Ohio and
Indiana, respectively, after satisfaction of the respective requirements of the
federal regulatory agencies and of the applicable laws of the States of Ohio
and Indiana prerequisite to such filings.
3. GOVERNING LAW; ARTICLES OF INCORPORATION. The laws which are to
govern the Surviving Corporation are the laws of the State of Ohio. The
Articles of Incorporation of FFB, at the effective time of the Merger, will be
the Articles of Incorporation of the Surviving Corporation until the same will
be further amended or altered in accordance with the provisions thereof.
4. BYLAWS. The Regulations of FFB at the effective time of the Merger
will be the Regulations of the Surviving Corporation until the same will be
altered or amended in accordance with the provisions thereof.
5. DIRECTORS AND OFFICERS. The directors of FFB at the effective time of
the Merger will be the directors of the Surviving Corporation until their
respective successors are duly elected and qualified. Subject to the authority
of the Board of Directors as provided by law and the Regulations of the
Surviving Corporation, the officers of FFB at the effective time of the Merger
will be the officers of the Surviving Corporation. The directors of the Bank
at the effective time of the Merger will be the directors of the Bank until
their respective successors are duly elected and qualified. Subject to the
authority of the board of directors of the Bank as provided by law and the
Bylaws of the Bank, the officers of the Bank at the effective time of the
Merger will continue to serve as officers of the Bank after the effective time
of the Merger.
6. CONVERSION OF SHARES IN THE MERGER. The mode of carrying into effect
the Merger provided in this Agreement and the manner and basis of converting
the shares of the constituent corporation into shares of the Surviving
Corporation are as follows:
6.1 FFB'S COMMON STOCK. None of the shares of common stock, par
value $8.00 per share, of FFB issued at the effective time of the Merger will
be converted as a result of the Merger, but all such shares (including shares
held in the treasury) will remain issued shares of common stock of FFB.
6.2 BFS'S COMMON STOCK. At the effective time of the Merger, each
share of BFS common stock outstanding immediately prior to the effective time
of the Merger (except as otherwise provided in Section 6.5) will by virtue of
the Merger be converted into shares of FFB common stock as determined pursuant
to Section 6.3 below, and each share of BFS common stock held in treasury
immediately prior to the effective time of the Merger will be cancelled. Prior
to the effective time of the Merger, the outstanding stock options for BFS
common stock
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<PAGE> 122
shall be exercised for 630 shares of BFS common stock, and such common stock
shall be entitled to the same conversion rights as set forth in this Section 6.
6.3 CONSIDERATION; EXCHANGE RATIO.
6.3.1 The consideration to be paid to BFS's
stockholders pursuant to this Agreement (the "Merger Price") is fixed at
$15,055,000 payable in FFB common stock; provided, however, that dissenting
shareholders of BFS who perfect their rights under the laws of the State of
Indiana will receive cash in such amount per share of BFS which they own as
determined in accordance with Indiana Business Corporation Law I.C. Section
23-1-44. On a per share basis for each share of BFS common stock, the merger
price equals $73.184129 per share in FFB stock. At the effective time of the
Merger, each of the then issued and outstanding shares of BFS will be cancelled
and extinguished and, in consideration and in exchange therefor, the holders
thereof will be entitled, upon compliance with Section 6.4, to receive from FFB
a number of common shares of FFB equal to $73.184129 divided by the
mathematical average of the average of the closing daily bid and asked prices
for FFB stock on the National Association of Security Dealers Automated
Quotation National Market System ("NASDAQ") for the twenty trading days ending
at 4:00 p.m. (New York time) two trading days prior to the effective time of
the Merger (the "Exchange Ratio"); provided, however, that in the event of the
subdivision or split of the outstanding shares of FFB, the payment of a
dividend in FFB stock or a capital reorganization, reclassification or
recapitalization affecting FFB stock, the Exchange Ratio will be adjusted
proportionately so that the shareholders of BFS shall receive such number of
shares of FFB common stock that represents the same percentage of outstanding
shares of FFB common stock on the effective time of the merger as would have
been represented by the number of shares such shareholders would have received
if the recapitalization had not occurred.
6.3.2 After determining the Exchange Ratio, each
holder of outstanding common stock of BFS after the effective time of the
Merger, upon surrender to FFB, will be entitled to receive one or more stock
certificates of FFB into which the common stock of BFS so surrendered will have
been converted as aforesaid. No dividends that may have been declared by FFB
after the effective time of the Merger and prior to the surrender of BFS shares
will be paid until such shares have been presented for exchange to FFB. FFB
shall make delivery of certificates to BFS shareholders within ten business
days of receipt by the Exchange Agent (as defined in Section 6.4 below) of BFS
certificates.
6.4 SURRENDER OF BFS CERTIFICATES. As soon as practicable after
the Merger becomes effective, the stock certificates representing common stock
of BFS issued and outstanding at the time the Merger becomes effective will be
surrendered for exchange to FFB. As promptly as practicable after the
effective time of the Merger, First National Bank of Southwestern Ohio (the
"Exchange Agent") shall prepare and mail to each holder of record of an
outstanding certificate or certificates prior thereto representing shares of
BFS a letter of transmittal containing instructions for the surrender of the
certificate or certificates of BFS held by such holder. Upon surrender of the
certificate or certificates that prior thereto represented shares of BFS in
accordance with instructions set forth in the letter of transmittal, such
holder shall be entitled
3
<PAGE> 123
to receive in exchange therefor, certificates representing the number of whole
shares of FFB into which the shares represented by the certificate or
certificates so surrendered shall have been converted, without interest.
Adoption of this agreement by the stockholders of BFS shall constitute
ratification of the appointment of First National Bank of Southwestern Ohio as
the Exchange Agent for this purpose. The Exchange Agent shall not be obligated
to deliver certificates for FFB stock to a former stockholder of BFS until such
former stockholder surrenders his or her certificate or certificates
representing shares of BFS or, in default thereof, an appropriate affidavit of
loss and indemnity agreement or bond as may be required by FFB. Until so
surrendered for exchange, each such stock certificate formerly representing
common stock of BFS will be deemed for all corporate purposes (except for the
payment of dividends, which will be subject to the exchange of stock
certificates as above provided) to evidence the ownership of the number of
shares of common stock of the Surviving Corporation that the holder thereof
would be entitled to receive upon its surrender to FFB.
6.5 FRACTIONAL INTERESTS. No fractional shares of common stock of
FFB or certificate or scrip representing the same will be issued. In lieu
thereof, each holder of BFS's common stock having a fractional interest arising
upon such conversion will be paid in cash by FFB for the additional fractional
interest. Such payment shall be equal to the fractional interest times
$73.184129. This amount shall not be paid to any holder of BFS's common stock
who shall not have surrendered his certificates for exchange pursuant to
Section 6.4 hereof, and FFB shall retain such amount until such time as such
certificates have been surrendered.
7. EFFECT OF THE MERGER. At the effective time of the Merger, the
Surviving Corporation will succeed to, without other transfer, and will possess
and enjoy, all the rights, privileges, immunities, powers and franchises both
of a public and a private nature, and be subject to all the restrictions,
disabilities and duties of each of FFB and BFS, and all the rights, privileges,
immunities, powers and franchises of each of FFB and BFS and all property,
real, personal and mixed, and all debts due to either of said constituent
corporations on whatever account, for stock subscriptions as well as for all
other things in action or belonging to each of said corporations, will be
vested in the Surviving Corporation; and all property, rights, privileges,
immunities, powers and franchises, and all and every other interest will be
thereafter as effectually the property of the Surviving Corporation as they
were of FFB and BFS, respectively, and the title to any real estate vested by
deed or otherwise in either of FFB and BFS will not revert or be in any way
impaired by reason of the Merger; provided; however, that all rights of
creditors and all liens upon any property of either of FFB or BFS will be
preserved unimpaired, limited in lien to the property affected by such liens at
the effective time of the Merger, and all debts, liabilities and duties of said
constituent corporations, respectively, will thenceforth attach to the
Surviving Corporation and may be enforced against it to the same extent as if
said debts, liabilities and duties had been incurred or contracted by the
Surviving Corporation.
8. APPROVAL OF SHAREHOLDERS; FILING OF ARTICLES OF MERGER. This
Agreement will be submitted to the shareholders of BFS for adoption and
approval. After such adoption and approval, and subject to the conditions
contained in this Agreement, Articles of Merger in substantially the form
annexed hereto as Exhibit A will be signed, verified and delivered to the
4
<PAGE> 124
Secretary of State of the States of Ohio and Indiana for filing as provided by
the respective statutes of such states.
9. BFS'S REPRESENTATIONS AND WARRANTIES. BFS represents and warrants to
FFB as of the date hereof and as of the effective time of the Merger as
follows:
9.1 ORGANIZATION. BFS is a corporation duly organized and validly
existing under the laws of the State of Indiana and is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended. BFS
has the corporate power to carry on its businesses as they are now being
conducted and is qualified to do business in each jurisdiction in which the
character and location of the assets owned by it, or the nature of the business
transacted by it, requires qualification. BFS, by order of its Board of
Directors, has authority to enter into this Agreement and this Agreement, when
executed and delivered, will be legally binding.
9.2 CAPITALIZATION. BFS's capitalization consists of 250,000
authorized shares of common stock (no par value), of which, as of the date
hereof, 205,084 shares were issued and outstanding and 630 shares were reserved
for issuance pursuant to outstanding options. Each issued share was validly
issued, fully paid, non-assessable and each outstanding share is entitled to
one vote. Except for outstanding options exercisable for 630 shares of BFS
common stock, there are no outstanding subscriptions, options, warrants, calls
or rights of any kind relating to or providing for the issuance, sale, delivery
or transfer of any class of securities of BFS.
9.3 LIST OF INFORMATION. For the due diligence examination in
December, 1994, BFS delivered to FFB certain information concerning BFS dated
as of the date furnished. Such information and the copies of documents
furnished to FFB are accurate in all material respects as of the date
furnished.
9.4 SUBSIDIARIES. BFS has one wholly owned subsidiary, the Bank.
BFS has no other subsidiaries. The Bank is a national bank duly organized and
validly existing under the laws of the United States. The Bank has the
corporate power to carry on its businesses as they are now being conducted and
is qualified to do business in each jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted by
it, requires qualification. All of the outstanding shares of the stock of the
Bank are validly issued, fully paid, non-assessable and, except as set forth in
the Disclosure Schedule, all such shares are owned by BFS free and clear of all
liens, claims, charges or encumbrances. There are no outstanding
subscriptions, options, warrants, calls or rights of any kind relating to or
providing for the issuance, sale, delivery or transfer of any class of
securities of the Bank.
9.5 FINANCIAL STATEMENTS. BFS has delivered to FFB copies of its
consolidated balance sheets as of December 31, 1993, 1992, and 1991 and the
related consolidated statements of earnings, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1993, in each case including the notes thereto, all certified by
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<PAGE> 125
Crowe, Chizek & Company, independent public accounts, or one of said
accountants' predecessor firms.
All of such financial statements have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods indicated, except as otherwise indicated in the notes thereto. All
liabilities of BFS (including any contingent liabilities), as of the date of
each balance sheet, were properly accrued in such balance sheet or disclosed in
the related footnotes, in accordance with generally accepted accounting
principles.
9.6 GOOD AND MARKETABLE TITLE. BFS and the Bank have and at the
effective time of the Merger will have good and marketable title in fee simple
to all lands and buildings shown as assets in their records and books of
account, free and clear of all liens, encumbrances and charges except as
reflected in the aforesaid financial statements and except for current taxes
and assessments not delinquent or being contested in good faith and liens,
encumbrances and charges shown in their records and books of account which are
not substantial in character or amount and do not materially detract from the
value or interfere with the use of the properties subject thereto or affected
thereby. BFS and the Bank have and at the effective time of the Merger will
have valid leases under which they are entitled to occupy and use in their
business all real property of which they are lessees, and BFS and the Bank have
no knowledge of any material default under any such lease. As of the date
hereof, neither BFS nor the Bank has title to any real property or buildings as
a result of foreclosure or by otherwise realizing on collateral held by either
of them. Neither BFS nor the Bank shall take action to foreclose or otherwise
realize on any real property collateral held by either of them prior to the
effective time of the Merger without the prior consent of FFB, which consent
shall not be unreasonably withheld.
BFS and the Bank have and at the effective time of the Merger
will have good and marketable title to the machinery, equipment, merchandise,
materials, supplies and other property of every kind, tangible or intangible,
contained in their offices and other facilities or shown as assets in their
records and books of account, except for properties held in trust or other
fiduciary capacity, free and clear of all liens, encumbrances and charges
except as reflected in the aforesaid financial statements and except for liens,
encumbrances and charges, if any, which do not materially detract from the
value of or interfere with the use of the properties subject thereto or
affected thereby. BFS and the Bank have and will have immediately prior to the
effective time of the Merger valid leases under which they are entitled to use
in their business all personal property of which they are lessees, and neither
BFS nor the Bank has any knowledge of any material default under any such
leases.
9.7 TAXES. All taxes imposed by the United States or by any
state, municipality, subdivision or instrumentality of the United States or by
any other taxing authority, which are due or payable by either BFS or the Bank,
and all claims asserted against each of them have been paid in full or are
adequately accrued in the records and books of accounts of each of BFS and the
Bank and will be so paid or provided for at the effective time of the Merger.
All income tax returns for each of BFS and the Bank have been filed with the
taxing authorities having jurisdiction thereof through the years specified in
the Disclosure Schedule, and no
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<PAGE> 126
extension of time for the assessment of deficiencies for any such years is in
effect. Neither BFS nor the Bank has knowledge of any unassessed tax
deficiency proposed or threatened against it.
9.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the disclosure schedule attached hereto (the "Disclosure Schedule), from
December 31, 1993 to the date hereof, there has not been:
9.8.1 any change in the corporate status, business,
operations or financial condition of BFS and the Bank, other than changes in
the ordinary course of business;
9.8.2 any declaration, setting aside or payment of any
dividend or other distribution, with respect to BFS's common stock, except a
semi-annual dividend of $0.40 per share paid on January 1, 1994, $0.50 per
share paid on July 1, 1994 and $0.55 per share paid on January 1, 1995; and
9.8.3 any other event or condition of any character which
has materially and adversely affected the corporate status, business,
operations or financial condition of BFS and the Bank taken as a whole.
9.9 CONTRACTS AND AGREEMENTS. Except for agreements described in
and appended to the Disclosure Schedule, none of which materially and adversely
affects the earnings, business, properties, assets or condition (financial or
otherwise) of BFS or the Bank, neither BFS nor the Bank is a party to: (a) any
sales agency agreement not subject to termination without liability on notice
of 60 days or less; (b) any contract for the purchase or sale of any materials,
products or supplies which contains any escalator, renegotiation or
redetermination clause or which commits it for a fixed term; (c) any contract
of employment with any officer or employee not terminable at will without
liability; (d) any pension, retirement or profit sharing plan or agreement not
cancelable within 60 days without lability; (e) any management or consultation
agreement not terminable at will without liability; (f) any lease, license,
royalty, union agreement or loan agreement except those entered into in the
ordinary course of business and which are terminable without liability on
notice of 60 days or less; (g) any contract, accepted order or commitment for
the purchase or sale of materials, products or supplies having a total contract
price in excess of $20,000; or (h) any other agreement which materially affects
the business properties, assets or condition (financial or otherwise) of BFS,
or which was entered into other than in the ordinary and usual course of
business. Adequate reserves have been provided and set up on the books of
account of BFS and the Bank, and will continue to be so provided and set up
through the effective time of the Merger for any contract, order or commitment
expected to be performed at a loss. The Disclosure Schedule will contain the
following with respect to each pension or profit sharing plan of BFS and the
Bank: a copy of the plan and any relevant trust agreements, copies of the
forms filed with the Internal Revenue Service, the latest report of the trustee
or insurance company of the value of the assets or the cash surrender values as
of the latest anniversary of the insurance polices held under the plan, and the
latest actuarial evaluation or statement of individual accounts.
7
<PAGE> 127
9.10 INSURANCE. The Disclosure Schedule will contain a list, and
be accompanied by copies, of all existing insurance policies of BFS and the
Bank, including but not limited to group insurance and pension plans. All such
policies are in full force and effect. The Disclosure Schedule will also
contain a list of all claims for insured losses filed by BFS and the Bank
during the three-year period immediately preceding the date of this Agreement,
including but not limited to worker's compensation, automobile and general
liability.
9.11 LITIGATION AND PROCEEDINGS. Except as set forth in the
Disclosure Schedule, there is no suit, action or legal or administrative
proceeding pending or, to the knowledge of BFS, threatened, against it or the
Bank, which, if adversely determined, might materially and adversely affect the
financial condition, on a consolidated basis, of BFS and the Bank or the
conduct of their businesses, nor is there any decree, injunction or order of
any court, governmental department or agency outstanding against BFS or the
Bank having any such effect.
9.12 MATERIAL CONTRACTS; NO CONFLICT WITH OTHER INSTRUMENTS.
Neither BFS nor the Bank is in default under the terms of any material
outstanding contract, agreement, lease or other commitment which default would
have a material and adverse effect, on a consolidated basis, on BFS and the
Bank, and at the effective time of the Merger, the consummation of the
transactions contemplated by this Agreement will not result in the breach of
any term or provision of or constitute a default under any material indenture,
mortgage, deed of trust or other material agreement or instrument to which BFS
or the Bank is a party, which default or breach would have a material and
adverse effect, on a consolidated basis, on BFS and the Bank.
9.13 GOVERNMENTAL AUTHORIZATIONS AND FILINGS. Each of BFS and the
Bank has all valid and sufficient licenses, franchises, permits and other
governmental authorizations for all businesses presently carried on by BFS and
the Bank, respectively, and has filed with the Federal Reserve Board all
reports necessary to the conduct of its business as a bank holding company and
is current in all respect as to such filings. BFS will provide in the
Disclosure Schedule its Annual Reports on Forms FRY-6 and FRY-9 for 1990, 1991,
1992, 1993 and 1994 when available, proxy materials for its Annual Meetings in
such years and shall provide proxy materials for its Annual Meeting in 1995
when available. The Bank will provide in the Disclosure Schedule its Year-End
Call Reports for 1990, 1991, 1992, 1993 and 1994, when available, as filed with
the Office of the Comptroller of the Currency.
9.14 CONSENTS AND APPROVALS. The only consent and approval
required to be obtained by or on behalf of BFS or the Bank on or prior to the
effective date of the Merger is the approval of the BFS shareholders in the
form required by the Financial Institutions Law of the State of Indiana.
9.15 BROKERS. Neither BFS, the Bank nor any of their officers,
directors or employees have employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with this Agreement or with the transactions
contemplated thereby, except that BFS has retained McDonald & Company
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Securities, Inc. ("McDonald & Company") to perform various investment banking
services in connection with this transaction. BFS will accrue all amounts due
McDonald & Company.
9.16 ENVIRONMENTAL MATTERS. For purposes hereof, "environmental
laws" means all applicable federal, state or local statutes, laws, ordinances,
codes, rules, regulations and guidelines (including consent decrees and
administrative orders) relating to public health and safety and protection of
the environment and natural resources.
(a) Except as set forth in the Disclosure Schedule, to the
best of their knowledge, BFS and the Bank have filed all notices, permit
applications and other required governmental submissions and have obtained all
permits, licenses and other authorizations which are required and which are
material in connection with the conduct of their respective businesses under
all applicable environmental laws, including approvals relating to emissions,
discharges, releases or threatened releases, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, new or used
petroleum products, industrial, toxic or hazardous substances or solid wastes
into the environment (including, without limitation, ambient air, surface
water, groundwater, land or sewers).
(b) Except as set forth in the Disclosure Schedule, to the
best of their knowledge, each of BFS and the Bank is in compliance, in all
material respects, in the conduct of its business with all terms and conditions
of the necessary permits, licenses and authorizations, and to the best of their
knowledge is also in compliance in all material respects with all other
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such
environmental laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved under such environmental laws.
(c) Except as set forth in the Disclosure Schedule, neither
BFS nor the Bank is aware of, nor has either of BFS or the Bank received notice
of, any past or present events, condition, circumstances, activities,
practices, incidents, actions or plans which may materially interfere with or
prevent compliance or continued compliance in the conduct of its business with
such environmental laws or any regulations, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved under such environmental laws, or which may give rise to any common
law or legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation, based on or related
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment (including, without limitation, ambient
air, surface water, groundwater, land or sewers), of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or waste or
new or used petroleum products.
(d) Except as set forth in the Disclosure Schedule, neither
BFS nor the Bank is aware of, nor has either of BFS or the Bank received notice
of, any material civil, criminal or administrative action, suit, demand, claim,
hearing, notice or demand letter, notice of violation,
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investigation, or proceeding pending or threatened against either BFS or the
Bank relating in any way to the environmental laws or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved under such environmental laws.
(e) Except as set forth in the Disclosure Schedule, to the
best knowledge of each of BFS and the Bank, there is no asbestos containing
material that materially violates any environmental law or is in need of
removal or repair.
9.17 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as set forth in
the Disclosure Schedule, the execution, delivery and performance of this
Agreement will not: (i) violate, or conflict with, or require any consent
under, or result in a breach of any provision of, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any lien upon any of the assets of
either of BFS or the Bank, under any of the terms, conditions or provisions of
the Articles of Incorporation or bylaws of BFS or the Bank, or of any note,
bond, mortgage, indenture, deed of trust, material license, lease, agreement or
other instrument or obligation to which either of BFS or the Bank is a party or
by which either of BFS or the Bank or any of their assets may be bound or
affected or (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to BFS, the Bank or any of their assets.
9.18 EXPIRATION OF BFS'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of BFS made in this Section 9 and subsections
thereto shall expire at the effective time of the Merger.
10. FFB'S REPRESENTATIONS AND WARRANTIES. FFB represents and warrants to
BFS as of the date hereof and as of the effective time of the Merger as
follows:
10.1 ORGANIZATION. FFB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and is
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended, and a savings and loan holding company under the Savings and
Loan Holding Company Act. FFB has the corporate power to carry on its
businesses as they are now being conducted and is qualified to do business in
each jurisdiction in which the character and location of the assets owned by
it, or the nature of the business transacted by it, requires qualification.
FFB by order of its Board of Directors, has authority to enter into this
Agreement and this Agreement is legally binding.
10.2 SUBSIDIARIES. Each indirect and direct subsidiary of FFB
which, as of the effective time of the Merger would be deemed to be a
"significant subsidiary," as such term is defined in Rule 405 of the rules and
regulations promulgated in the Securities Act of 1933, as amended (the "1933
Act"), is either a national bank or federal savings association duly organized,
validly existing, and in good standing under a charter granted by the Office of
the Comptroller of the Currency or the Office of Thrift Supervision, or is a
corporation or state
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bank duly organized, validly existing and in good standing under the laws of
the state of its incorporation, and in either case, is duly qualified to do
business and is in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and where failure to so qualify would have a material and adverse
effect on the consolidated business, financial condition or results of
operations of FFB.
10.3 CAPITALIZATION. FFB's capitalization consists of 25,000,000
authorized shares of common stock (par value $8.00 per share), of which, as of
December 31, 1994, 12,204,575 shares were issued and outstanding. Each issued
share is validly issued, fully paid and non-assessable, and each outstanding
share is entitled to one vote.
10.4 SHARES TO BE ISSUED. All shares of common stock of FFB into
which the common stock of BFS will be converted will be, immediately after the
effective time of the Merger and when issued upon such conversion, duly and
validly authorized and issued, fully paid and non-assessable, and no
stockholder of FFB will have any pre-emptive right of subscription or purchase
in respect thereof. FFB shall take such steps as may be necessary for such
shares to be listed on NASDAQ immediately after the effective time of the
Merger.
10.5 FINANCIAL STATEMENTS. FFB will have delivered to BFS copies
of its consolidated balance sheets as of December 31, 1993, 1992 and 1991, and
the related consolidated statements of earnings, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1993, in each case including the notes thereto, all certified by Ernst &
Young, independent public accounts, or one of said accountants' predecessor
firms.
All of such financial statements have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods indicated, except as otherwise indicated in the notes thereto. All
liabilities of FFB (including any contingent liabilities), as of the date of
each balance sheet, were properly accrued in such balance sheet or disclosed in
the related footnotes, in accordance with generally accepted accounting
principles.
10.6 GOOD AND MARKETABLE TITLE. FFB has and at the effective time
of the Merger will have good and marketable title in fee simple to all lands
and buildings shown as assets in its records and books of account, except for
properties held in trust or other fiduciary capacity, free and clear of all
liens, encumbrances and charges except as reflected in the aforesaid financial
statements and except for current taxes and assessments not delinquent or being
contested in good faith and liens, encumbrances and charges shown in their
records and books of account which are not substantial in character or amount
and do not materially detract from the value or interfere with the use of the
properties subject thereto or affected thereby. FFB has and at the effective
time of the Merger will have valid leases under which it is entitled to occupy
and use in its business all real property of which it is lessee, and FFB has no
knowledge of any material default under any such lease.
FFB has and at the effective time of the Merger will have good
and marketable title to the machinery, equipment, merchandise, materials,
supplies and other property of every
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kind, tangible or intangible, contained in its offices and other facilities or
shown as assets in its records and books of account, except for properties held
in trust or other fiduciary capacity, free and clear of all liens, encumbrances
and charges except as reflected in the aforesaid financial statements and
except for liens, encumbrances and charges, if any, which do not materially
detract from the value of or interfere with the use of the properties subject
thereto or affected thereby. FFB has and will have immediately prior to the
effective time of the Merger valid leases under which it is entitled to use in
its business all personal property of which it is lessee, and FFB has no
knowledge of any material default under any such lease.
10.7 TAXES. All taxes imposed by the United States or by any
state, municipality, subdivision or instrumentality of the United States or by
any other taxing authority, which are due or payable by FFB, and all claims
asserted against it have been paid in full or are adequately accrued in the
records and books of accounts of FFB and will be so paid or provided for at the
effective time of the Merger. All income tax returns for FFB have been filed
with the taxing authorities having jurisdiction thereof through the years
specified in the Disclosure Schedule, and no extension of time for the
assessment of deficiencies for any such years is in effect. FFB has no
knowledge of any unassessed tax deficiency proposed or threatened against it.
10.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. From December 31, 1993
to the date hereof, there has not been:
10.8.1 any change in the corporate status, business,
operations or financial condition of FFB and its consolidated Subsidiaries,
other than changes in the ordinary course of business; those changes described
in any FFB filings with the Securities and Exchange Commission, and those
changes that may result from FFB's acquisition of Peoples Bank and Trust
Company, of Sunman, Indiana, none of which are, in the aggregate, materially
adverse to FFB;
10.8.2 with respect to FFB's common stock, any declaration,
setting aside or payment of any dividend or other distribution, other than a
five-for-four stock dividend distributed on December 1, 1994, and other than a
quarterly dividend of $0.27 per share paid on January 1, 1994, April 1, 1994,
July 1, 1994 and October 1, 1994, and the regular dividend of $0.24 per share
and a special dividend of $0.08 per share declared on November 22, 1994 and
paid on January 3, 1995; and
10.8.3 any other event or condition of any character which
has materially and adversely affected the corporate status, business,
operations or financial condition of FFB and its consolidated Subsidiaries
taken as a whole.
10.9 PROXY STATEMENT INFORMATION. Neither this Agreement nor any
written report, statement, list, certificate or information furnished or to be
furnished by FFB to BFS in connection with this Agreement or any of the
transactions contemplated hereby (including, without limitation, any written
information which has been or shall be supplied by FFB with respect to its
business, operations, financial conditions, directors and officers for
inclusion in
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the proxy statement and registration statement relating to the Merger) contains
or shall contain (in the case of information relating to the proxy statement at
the time it is mailed and to the registration statement at the time it becomes
effective) any untrue statement of a material fact or omits or shall omit to
state a material fact necessary to make the statement contained herein or
therein, in light of the circumstances in which they are made, not misleading.
10.10 LITIGATION AND PROCEEDINGS. There is no suit, action or legal
or administrative proceeding pending, or to the knowledge of FFB threatened,
against it or any of FFB's consolidated Subsidiaries, which, if adversely
determined, might materially and adversely affect the financial condition, on a
consolidated basis, of FFB and FFB's consolidated Subsidiaries or the conduct
of their businesses, nor is there any decree, injunction or order of any court,
governmental department or agency outstanding against FFB or any of FFB's
consolidated Subsidiaries having any such effect.
10.11 MATERIAL CONTRACTS; NO CONFLICT WITH OTHER INSTRUMENTS.
Neither FFB nor any of its consolidated Subsidiaries is in default under the
terms of any material outstanding contract, agreement, lease or other
commitment which default would have a material and adverse effect, on a
consolidated basis, on FFB and FFB's consolidated Subsidiaries, and at the
effective time of the Merger, the consummation of the transactions contemplated
by this Agreement will not result in the breach of any term or provision of or
constitute a default under any material indenture, mortgage, deed of trust or
other material agreement or instrument to which FFB or any of its consolidated
Subsidiaries is a party, which default or breach would have a material and
adverse effect, on a consolidated basis, on FFB and FFB's consolidated
Subsidiaries.
10.12 GOVERNMENTAL AUTHORIZATIONS AND FILINGS. FFB and each of
FFB's consolidated Subsidiaries has all valid and sufficient licenses,
franchises, permits and other governmental authorizations necessary to the
conduct of its business as a bank holding company and has filed with the Board
of Governors of the Federal Reserve System ("FRB"), the Office of Thrift
Supervision and the Securities and Exchange Commission all reports necessary to
the conduct of its business as a bank holding company and savings and loan
holding company and is current in all respects as to such filings.
10.13 CONSENTS AND APPROVALS. The consents and approvals required
to be obtained by FFB on or prior to the effective date of the Merger are set
forth below:
10.13.1 approval and effectiveness of the Registration
Statement referred to in Section 12.3 or of any post effective amendment
thereto,
10.13.2 approval of FRB under the Bank Holding Company Act,
10.13.3 approval of the Department of Financial
Institutions of the State of Indiana, and
10.13.4 any other required consents for the completion of
the Merger.
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10.14 BROKERS. Neither FFB nor any of its officers, directors or
employees have employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finders' fees in
connection with this Agreement or with the transactions contemplated thereby.
10.15 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution,
delivery and performance of this Agreement will not: (i) violate, or conflict
with, or require any consent under, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien
upon any of the assets of FFB, under any of the terms, conditions or provisions
of the Articles of Incorporation or bylaws of FFB, or of any note, bond,
mortgage, indenture, deed of trust, material license, lease, agreement or other
instrument or obligation to which FFB is a party or by which FFB or any of its
assets may be bound or affected or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to FFB or any of its assets.
10.16 FILING OF REPORTS. FFB is subject to the reporting
requirements of Section 12 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the rules promulgated thereunder. FFB has been subject
to the reporting requirements of Section 13 of the 1934 Act for a period of at
least 365 days prior to the date hereof and has filed all reports to be filed
thereunder during the 12 months preceding the date hereof. Since January 1,
1994, FFB has filed with the Securities and Exchange Commission (the "SEC") all
documents and reports (including all amendments, exhibits and schedules thereto
and documents incorporated by reference therein) required to be filed by FFB
under the 1934 Act and the 1933 Act, and the rules and regulations promulgated
by the SEC thereunder ("FFB Reports"). The FFB Reports, as of their respective
dates (as amended through the date hereof), did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in view of the
circumstances under which they were made, not misleading.
10.17 EMPLOYEE BENEFIT PLANS. To the best knowledge of the senior
management of FFB (after due inquiry), all employee benefit plans maintained by
FFB or any of its consolidated Subsidiaries (i) comply in all respects with
the requirements of ERISA and the Internal Revenue Code of 1986, as amended
(the "IRC") and (ii) have been administered to date in compliance with the
requirements of ERISA, the IRC, and subsequent legislation regulating ERISA
plans. Each of such plans that is an employee pension benefit plan that is
intended to be a qualified plan under Section 401(a) of the IRC, has been
amended to comply in all material respects with current law as required or the
remedial amendment period for such amendment under Section 401(b) of the IRC
has not expired and FFB has obtained favorable determination letters. As of
the date hereof, neither FFB or any of its consolidated Subsidiaries has any
liability on account of any accumulated funding deficiency (as defined in
Section 412 of the IRC) or on account of any failure to make contributions to
or pay benefits under any such pension plan nor is FFB or any of its
consolidated Subsidiaries aware of any claim pending or threatened to be
brought by any party regarding such matters. No prohibited transaction has
occurred with respect to any
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such pension plan that would result, directly or indirectly, in the imposition
of any excise tax under Section 4975 of the IRC; nor has any reportable event
under Section 4043 of ERISA occurred with respect to any such pension plan.
Neither FFB nor any of its consolidated Subsidiaries is a defendant in any
lawsuit or criminal action concerning such entity's conduct as a fiduciary,
party-in-interest, or disqualified person with respect to any plan nor is under
investigation or examination by, or is engaged in litigation or a continuing
controversy with, the Department of Labor, Internal Revenue Service, Justice
Department, or Pension Benefit Guaranty Corporation involving compliance with
ERISA, or the provisions of the IRC relating to employee benefit plans. All
reporting and disclosure requirements of ERISA and the IRC have been met in all
material respects by all employee pension benefit plans. Neither FFB nor any
of its consolidated Subsidiaries is required to contribute to an employee
benefit plan that is a "multi-employer plan" within the meaning of Section
3(37) of ERISA.
10.18 ENVIRONMENTAL REPRESENTATION. To the best of FFB's knowledge,
neither FFB nor any of its consolidated Subsidiaries has been or is in
violation of or liable under any environmental law, except for any such
violations or liabilities which would not reasonably be expected, individually
or in the aggregate, to have a material adverse effect on FFB. FFB is not
aware of, nor has FFB received notice of, any material civil, criminal or
administrative action, suit, demand, claim, hearing, notice or demand letter,
notice of violation, investigation, or proceeding pending or threatened against
either FFB or any of its consolidated Subsidiaries relating in any way to the
environmental laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
under such environmental laws. For purposes of this section, "material adverse
effect" shall mean a material adverse effect on the condition (financial or
otherwise), results of operations, or business of FFB and its consolidated
Subsidiaries, taken as a whole, or the ability of FFB to consummate the
transactions contemplated hereby.
10.19 EXPIRATION OF FFB'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of FFB made in this Section 10 and subsections
thereto shall expire at the effective time of the Merger.
11. CONDUCT OF BUSINESS PENDING THE MERGER. From and after the date of
this Agreement and prior to the effective time of the Merger, without the prior
written consent of FFB, BFS will not:
11.1 amend its respective Articles of Incorporation or Regulations;
11.2 engage in any material activity or transaction or incur any
material obligation (by contract or otherwise) except in the ordinary course of
business or other than as described in Sections 11.3, 11.4 and 11.5;
11.3 issue rights or options to purchase or subscribe to any shares
of its capital stock or subdivide or otherwise change any such shares.
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11.4 issue or sell any shares of its capital stock; or
11.5 declare or pay any dividends on or make any distributions in
respect of any shares of its capital stock, except that BFS may declare and pay
a regular semi-annual dividend of up to $0.60 per share on or before July 1,
1995, if the Merger is not consummated prior to July 1, 1995 and a regular
quarterly dividend of up to $0.30 per share on or before October 1, 1995 if the
Merger is not consummated prior to October 1, 1995. The parties agree to
cooperate with each other to insure that the shareholders of BFS receive a
regular quarterly dividend from either BFS or FFB during the quarter in which
the effective time of the Merger occurs, and that such shareholders of BFS do
not receive dividends from both BFS and FFB during such quarter.
11.6 From and after the date of this Agreement and prior to the
effective time of the Merger, BFS and the Bank will use their respective best
efforts to preserve its business organizations intact; to keep available the
services of their present officers and employees and to preserve the goodwill
of their suppliers, customers and others having business relations with it.
During the same period, BFS and the Bank will not put into effect any material
increase in the compensation or other benefits applicable to officers or other
key personnel except normal raises to the Bank staff personnel, effective July
1, 1995, in accordance with past practices. However, the Bank shall have the
right to fill the positions of Chief Financial Officer, Trust Officer, Head of
Lending, three loan officers and other vacancies as they occur after obtaining
the consent of FFB, which consent will not be unreasonably withheld.
12. ADDITIONAL AGREEMENTS.
12.1 ACCESS AND INFORMATION. FFB and BFS hereby agree that each
will give to the other and to the other's accountants, counsel and other
representatives full access during normal business hours throughout the period
prior to the Merger to all of its properties, books, contracts, commitments and
records, and that each will furnish the other during such period with all such
information concerning its affairs as such other party may reasonably request.
In the event of the termination of this Agreement each party will deliver to
the other all documents, work papers and other material obtained from the other
relating to the transactions contemplated hereby, whether so obtained before or
after the execution hereof, and will use its best efforts to have any
information so obtained and not heretofore made public kept confidential.
12.2 CONFIDENTIALITY. From and after the date of this Agreement,
the parties and their respective Subsidiaries shall, and they shall cause their
respective directors, officers, employees and advisors ("Affiliates") to, treat
all information received from or on behalf of another party hereto or its
Affiliates concerning the business, assets, operations and financial condition
of such other party or its Subsidiaries as confidential, unless and to the
extent that the party receiving such information can demonstrate that such
information was in the public domain, and the party receiving such information
and its Subsidiaries shall, and shall cause their respective Affiliates to, not
use any such confidential information for any purpose except in furtherance of
the transactions contemplated by this Agreement. In the event this Agreement
is terminated pursuant to Section 13.4 hereof, each party and its Subsidiaries
shall promptly return to the other party
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all documents and work papers and all copies thereof, containing any such
confidential information received from or on behalf of another party hereto in
connection with the transactions contemplated by this Agreement. The covenants
contained in this Section are of the essence and shall survive any termination
of this Agreement and the closing of the transactions contemplated by this
Agreement.
12.3 REGISTRATION STATEMENT. FFB will prepare and file a
Registration Statement on Form S-4 under the 1933 Act to register a sufficient
number of shares of common stock which the shareholders of BFS will receive
pursuant to Section 6 at the effective time of the Merger. FFB will use its
best efforts to cause such Registration Statement to become effective.
12.4 EMPLOYMENT CONTRACTS. From and after the effective time of
the Merger, FFB will cause the Bank to honor the employment contracts or FFB
will assume the employment contracts between certain employees and the Bank as
identified in the Disclosure Schedule, provided, that the Bank has given proper
written notice to the employee that the term of the employment contract will
not extend beyond May 31, 1997 in the case of Joe T. Jones and May 31, 1998 in
the case of Jerry L. Holsapple.
12.5 EMPLOYEE BENEFIT PLANS.
(a) After the effective time of the Merger, Bank shall
maintain such non-qualified benefit plans and fringe benefits (such as bonus
plans, vacation policies, the Director Deferred Compensation Plan, the health,
life and long term disability coverage and the Split Dollar Plan/Salary
Continuaton Plan, etc.) as in effect at the Bank at the effective time of the
Merger until such time as FFB shall establish a different overall corporate and
affiliate policy with respect to such non-qualified benefit plans and fringe
benefits. In establishing any such overall corporate and affiliate policy, FFB
will use its best efforts to maintain the levels of such benefit plans and
fringe benefits at the levels in effect at the Bank as of immediately before
the effective time of the Merger. The Bank 401(k) Profit Sharing Plan (the
"Bank Plan") shall be merged into the FFB 401(k) Thrift Plan as soon as
practicable after the effective time of the Merger at which time participant
accounts in the Bank Plan will become 100% vested and subject to participant
investment directions in accordance with the terms established in the FFB
401(k) Thrift Plan. Employees of Bank will receive credit for years of
employment with Bank for purposes of eligibility in and vesting under the First
Financial Bancorp. Employees Pension Plan and Trust; and 401(k) plan; eligible
employees will accrue benefits commencing with the effective time of the
Merger.
(b) The terms of this Section 12.5 or the provision of any
employee benefits by FFB or any of its subsidiaries to employees of Bank shall
not:
(i) create any employment contract,
agreement or understanding with or employment rights for, or constitute a
commitment or obligation of employment to, any of the officers or employees of
Bank; or
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(ii) prohibit or restrict FFB or its
subsidiaries, whether before or after the effective time of the Merger, from
changing, amending or terminating any employee benefits provided to its
employees from time to time.
12.6 EXPENSES. Upon a termination of this Agreement as provided in
Section 13.4, each party will pay all costs and expenses of its performance of
and compliance with all agreements and conditions contained herein on its part
to be performed or complied with, including fees, expenses and disbursements of
its accountants and counsel.
12.7 FURTHER ASSURANCES. If at any time the Surviving Corporation
will consider or be advised that any further assignment or assurance in law or
other action is necessary or desirable to vest, perfect, or confirm, of record
or otherwise, in the Surviving Corporation, the title to any property or rights
of BFS acquired or to be acquired by or as a result of the Merger, the proper
officers and directors of BFS and the Surviving Corporation, respectively, will
be and they hereby are severally and fully authorized to execute and deliver
such proper deeds, assignments and assurances in law and take such other action
as may be necessary or proper in the name of BFS or the Surviving Corporation
to vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise carry out the purposes of this Agreement.
12.8 POOLING. Neither BFS, Bank, FFB nor any of its consolidated
Subsidiaries has taken or agreed to take any action that would prevent BFS and
FFB from accounting for the business combination to be effected by the Merger
as a "pooling of interests." BFS has received from its independent
accountants, Crowe, Chizek and Company, a letter stating that, based upon
Crowe, Chizek and Company's review of such relevant documents and information
which Crowe, Chizek and Company deemed relevant, such firm is currently unaware
of any reason why the business combination to be effected by the Merger cannot
be accounted for as a "pooling of interests" in regard to BFS and the Bank.
FFB has received from its independent accountants, Ernst & Young, a letter
stating that, based upon Ernst & Young's review of such relevant documents and
information which Ernst & Young deemed relevant, such firm is currently unaware
of any reason why the business combination to be effected by the Merger cannot
be accounted for as a "pooling of interests" in regard to FFB and its
consolidated Subsidiaries.
12.9 AUDITED FINANCIAL STATEMENTS. As soon as reasonably
practicable, BFS will deliver to FFB the information required by Item 17 of the
instructions to Registration Statement Form S-4, including but not limited to
a copy of its consolidated balance sheet as of December 31, 1994 and 1993 and
related consolidated statements of income, changes in shareholders' equity and
cash flows for the fiscal years ended December 31, 1994, 1993 and 1992, and
such financial statements for the most recently ended fiscal year will be in
the format required by the Securities and Exchange Commission and will include
a Management's Discussion and Analysis of Financial Condition and Results of
Operations section. If the effective date of the Registration Statement
described in Section 12.3 is after May 15, 1995, BFS will deliver to FFB a copy
of its balance sheet (unaudited) and related statements of income and cash
flows (unaudited) for the three, six and/or nine months period ending March 31,
1995 and 1994,
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June 30, 1995 and 1994, and September 30, 1995 and 1994, as applicable, in each
case including the notes thereto. All of such financial statements shall
present fairly the financial positions as of and at the date shown and the
results of operations for the periods covered thereby. They shall have been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated, except as otherwise
indicated in the notes thereto. All liabilities of BFS (including any
contingent liabilities), as of the date of each balance sheet, shall be
properly accrued in such balance sheet or disclosed in the related footnotes in
accordance with generally accepted accounting principles. Each of such
consolidated statements of earnings of BFS shall be fairly presented in
accordance with generally accepted accounting principles for the periods
indicated.
12.10 PRESS RELEASES. The parties shall consult with each other as
to the form and substance of any press release, written communication with
their shareholders, or other public disclosure of matters related to this
Agreement, and a party shall not issue any such press release, written
communication, or public disclosure without the prior consent of the other
party, which consent shall not be unreasonably withheld or delayed; provided,
however, that nothing contained herein shall prohibit any party, following
notification to the other party, from making any disclosures which its counsel
deems necessary to conform with requirements of law or the rules of NASDAQ.
12.11 BEST EFFORTS. Each party will use its best efforts to take or
cause to be taken all actions necessary, proper or advisable to consummate the
Merger at the earliest practicable time including, but not limited to, the
filing of all applicable regulatory applications and the diligent prosecution
of all regulatory approvals. Any delay by FFB in effecting any pending
acquisition transaction shall have no bearing on the closing of the Merger,
unless such delay is otherwise required by applicable regulatory authorities or
applicable law.
12.12 DIRECTORS AND OFFICERS OF BFS.
(a) FFB agrees to permit the Bank to maintain all rights to
indemnification and limitation of liability now existing in favor of the
current or former directors, officers, employees, fiduciaries and agents of BFS
and the Bank pursuant to their respective charters, articles of incorporation,
code of regulations or bylaws, in effect on the date of this Agreement, which
provisions shall survive the Merger and shall continue in full force and effect
in accordance with their terms; provided, however, that FFB will not be
required to obtain any additional insurance for the foregoing persons.
(b) In the event that any proceedings shall be instituted in which
indemnity may be sought pursuant to Section 12.12(a) wherein a person acted in
a manner he or she reasonably believed to be in good faith and to be in or not
opposed to the best interest of BFS or the Bank, the person seeking indemnity
(the "Indemnified Party") shall promptly notify FFB (the "Indemnifying Party")
in writing and the Indemnifying Party shall retain counsel chosen by the
Indemnifying Party to represent the Indemnified Party in such proceeding and
the Indemnifying Party shall pay the fees and disbursements of such counsel
related to such proceeding. In any
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such proceeding, the Indemnified Party shall have the right to retain separate
counsel, and the fees and expenses of such counsel shall be at the expense of
the Indemnifying Party, if (i) the Indemnifying Party and the Indemnified Party
shall have mutually agreed to the retention of such counsel, and (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnifying Party and Indemnified Party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for all such Indemnified
Parties and that all such fees and expenses shall be reimbursed as they are
incurred. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party agrees to indemnify the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment.
12.13 LIABILITY INSURANCE. BFS and the Bank shall maintain for a
period of three years from the effective time of the Merger policies of
directors' and officers' liability insurance providing coverage to the current
and past directors of BFS of at least the same amount and containing terms and
conditions that are no less favorable than policies currently maintained by BFS
with respect to matters occurring prior to the effective time of the Merger.
12.14 FIDUCIARY RESPONSIBILITY. BFS shall not, directly or
indirectly, and shall instruct and otherwise use its diligent efforts to cause
its officers, directors, employees, agents and advisors not to, directly or
indirectly, solicit or initiate any proposals or offers from any person or
entity, or discuss or negotiate with any such person or entity, relating to any
acquisition or purchase of all or a material amount of the assets of, or any
equity securities of, or any merger or business combination with, BFS (such
transactions are referred to herein as "Acquisition Transactions"), provided,
however, that nothing contained in this section shall prohibit (i) BFS from
furnishing information to, or entering into discussions or negotiations with,
any person or entity that makes an unsolicited proposal of an Acquisition
Transaction if and to the extent that (a) the Board of Directors of BFS, after
consultation with and based upon the written advice of legal counsel,
determines in good faith that such action is required for the directors of BFS
to fulfill their fiduciary duties and obligations to the BFS shareholders and
other constituencies under Indiana law, taking into consideration the bidding
procedures engaged in in connection with the transactions contemplated hereby
and (b) prior to furnishing such information to, or entering into discussions
or negotiations with, such person or entity, BFS provides immediate written
notice to FFB to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person or entity, or (ii) the Board
of Directors of BFS from failing to make, withdrawing or modifying its
recommendation to shareholders regarding the merger with FFB following receipt
of a proposal for an Acquisition Transaction if the Board of Directors of BFS,
after consultation with and based upon the written advice of legal counsel,
determines in good faith that such action is required for the directors of BFS
to fulfill their fiduciary duties and obligations to the BFS shareholders and
other constituencies under Indiana
20
<PAGE> 140
law, taking into consideration the bidding procedures engaged in in connection
with the transactions contemplated hereby.
13. CONDITIONS PRECEDENT; TERMINATIONS.
13.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. The
obligations of each of the parties hereto to effect the Merger is subject to
the fulfillment on or prior to the effective time of the Merger of the
following conditions precedent:
13.1.1 The Merger shall have been approved by the FRB or
the delegate, and by any other governmental authority having jurisdiction and
any applicable waiting period shall have expired, with no such approval or
authorization containing any provision which would be materially adverse to the
merged businesses of BFS and FFB as contemplated by this Agreement.
13.1.2 No suit, action, investigation by any governmental
body, or other legal or administrative proceedings shall have been brought or
threatened which materially questions the validity or legality of the
transactions contemplated herein. For the purposes hereof, inquiries which
could give rise to any such suit, investigation or proceeding given by any
governmental agency may, at the option of either party, be deemed such a
threat.
13.1.3 The parties hereto shall have obtained any and all
consents required for the consummation of the Merger or for the preventing of
any default under any contract, agreement or permit of the parties hereto,
which, if not obtained or made, is reasonably likely to have, individually or
in the aggregate, a material adverse effect on the combined business affairs of
BFS and FFB.
13.2 CONDITIONS PRECEDENT TO FFB'S OBLIGATIONS. The obligation of
FFB to effect the Merger will be subject to the following conditions (which may
be waived in writing by FFB):
13.2.1 The representations and warranties of BFS herein
contained will be true as of and at the effective time of the Merger with the
same effect as though made at such time; BFS will have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the effective time of the Merger; and
BFS will have delivered to FFB a certificate, dated the effective date of the
Merger and signed by its president or one of its vice presidents and its
secretary or one of its assistant secretaries, to both such effects.
13.2.2 No material change in the corporate status,
businesses, operations or condition (financial or otherwise) of either of BFS
or the Bank will have occurred since December 31, 1993, (whether or not covered
by insurance), none of which has been materially adverse in relation to BFS,
taken as a whole, and no other event or condition of any character
21
<PAGE> 141
will have occurred or arisen since that date which will have materially and
adversely affected the corporate status, businesses, operations or financial
condition of BFS.
13.2.3 FFB will have received from Bingham Summers Welsh &
Spilman, counsel for BFS, a favorable opinion, dated immediately prior to the
effective time of the Merger, in form and substance satisfactory to FFB's
counsel and substantially in the form of the attached Exhibit B. In rendering
this opinion, such counsel may rely on certificates of public officials and of
corporate officers, opinions of recognized local counsel in jurisdictions where
such counsel is not qualified to practice, and such other evidence as he may
deem appropriate. The provisions of the preceding sentence are applicable to
all other opinions of counsel to be delivered hereunder.
13.2.4 A Registration Statement on Form S-4 under the 1933
Act will have become effective relating to the shares of FFB which the
shareholders of BFS will receive at the effective time of the Merger.
13.2.5 FFB will have received a favorable ruling from the
Internal Revenue Service, or opinion of counsel, in form and substance
satisfactory to FFB and its counsel, to the effect that, under the IRC, and
particularly Section 368(a)(1)(A), no gain or loss will be recognized to FFB or
its shareholders or to BFS or its shareholders as a result of the Merger except
for gain (but not loss) on cash received by the shareholders of BFS.
13.2.6 FFB will have received such written consents and
confirmations (or opinions of counsel to the effect that such consents or
confirmations are not required), as they may reasonably request to the effect
that the Surviving Corporation will succeed upon consummation of the Merger to
all of BFS's right, title and interest in and to its material contracts,
agreements, leases and other commitments and that the Surviving Corporation
will possess and enjoy all material licenses, permits and other governmental
authorizations possessed by BFS at the date hereof. FFB will have received
those approvals and consents described in Section 10.12 hereof.
13.2.7 At the date of signing this Agreement and
immediately prior to the effective time of the Merger, FFB shall receive from
FFB's independent accountants letters to the effect that they are not aware of
any reason that FFB is not in compliance with the pooling of interests criteria
as specified under APB No. 16, and that, accordingly, the Merger can be
accounted for as a pooling of interests from FFB's perspective.
13.2.8 FFB has retained Environmental Assessment Services,
Inc. to perform a Phase I Environmental Survey of the real estate owned or
leased by BFS or Bank. FFB has reviewed the results of such Phase I
Environmental Survey and is satisfied with the results thereof and has
determined that no further testing is required and no remedial action is
necessary.
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<PAGE> 142
13.3 CONDITIONS PRECEDENT TO BFS'S OBLIGATION. The obligation of
BFS to effect the Merger will be subject to the following conditions (which may
be waived in writing by BFS):
13.3.1 The representations and warranties of FFB herein
contained will be true as of and at the effective time of the Merger with the
same effect as though made at such time; FFB will have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the effective time of the Merger; and
FFB will have delivered to BFS a certificate, dated the effective date of the
Merger and signed by its president or one of its vice presidents and its
secretary or one of its assistant secretaries, to both such effects.
13.3.2 No material change in the corporate status,
businesses, operations or condition (financial or otherwise) of FFB and its
consolidated Subsidiaries will have occurred since December 31, 1993 (whether
or not covered by insurance), none of which has been materially adverse in
relation to FFB and its consolidated Subsidiaries, taken as a whole, and no
other event or condition of any character will have occurred or arisen since
that date which will have materially and adversely affected the corporate
status, businesses, operations or financial condition of FFB and its
consolidated Subsidiaries, taken as a whole.
13.3.3 BFS will have received from Frost & Jacobs, counsel
for FFB, a favorable opinion, dated immediately prior to the effective time of
Merger, in form and substance satisfactory to BFS's counsel and substantially
in the form of the attached Exhibit C. In rendering this opinion, such counsel
may rely on certificates of public officials and of corporate officers,
opinions of recognized local counsel in jurisdictions where such counsel is not
qualified to practice, and such other evidence as he may deem appropriate. The
provisions of the preceding sentence are applicable to all other opinions of
counsel to be delivered hereunder.
13.3.4 A Registration Statement on Form S-4 under the 1933
Act will have become effective relating to the shares of FFB common stock which
the shareholders of BFS will receive at the effective time of the Merger.
13.3.5 BFS will have received a favorable ruling from the
Internal Revenue Service, or opinion of counsel, in form and substance
satisfactory to BFS, to the effect that, under the Internal Revenue Code of
1986, as amended (i) no gain or loss will be recognized to BFS as a result of
the Merger, and (ii) no gain or loss (except in respect of fractional share
interests sold) will be recognized to BFS's shareholders as a result of their
exchange of common stock of BFS for common stock of FFB, and covering such
other matters as are typically covered by such opinion.
13.3.6 At the date of signing this Agreement and
immediately prior to the effective time of the Merger, BFS shall receive from
BFS's independent accountants letters to the effect that they are not aware of
any reason that BFS is not in compliance with the pooling
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<PAGE> 143
of interests criteria as specified under APB No. 16, and that, accordingly, the
Merger can be accounted for as a pooling of interests from BFS's perspective.
13.3.7 BFS will have received an opinion, dated as of a
date reasonably proximate to the effective date of the Registration Statement
to be filed pursuant to Section 12.3 hereof, from McDonald & Company, that the
Exchange Ratio is fair, from a financial point of view, to the shareholders of
BFS.
13.4 TERMINATION AND ABANDONMENT. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and abandoned at
any time before the effective time of the Merger, whether before or after
adoption or approval of this Agreement by the shareholders of BFS, under any
one or more of the following circumstances:
13.4.1 By the mutual consent of the Boards of Directors of
FFB and BFS;
13.4.2 By FFB if the holders of 10.0% or more of the
outstanding shares of common stock of BFS will be entitled to receive cash in
exchange for their BFS shares pursuant to perfected dissenters' rights under
the Indiana Business Corporation Law;
13.4.3 By FFB if, prior to the effective time of the
Merger, the conditions set forth in Sections 13.2.1 through 13.2.8, inclusive,
will not have been met;
13.4.4 By BFS if, prior to the effective time of the
Merger, the conditions set forth in Sections 13.3.1 through 13.3.7, inclusive,
will not have been met;
13.4.5 By either FFB or BFS if prior to the effective time
of the Merger, the conditions set forth in Sections 13.1.1 through 13.1.3,
inclusive, shall not have been met, or any action or proceeding before any
court or other governmental body or agency will have been instituted or
threatened to restrain or prohibit the Merger and such constituent corporation
deems it unadvisable to proceed with the Merger;
13.4.6 By either FFB or BFS if the requisite approval of
the shareholders of BFS will not have been obtained or if the effective time of
the Merger shall not have occurred on or before September 30, 1995; or
13.4.7 By FFB if the average of the bid and ask price of
FFB shares for the twenty day period associated with the Exchange Ratio as set
forth in Section 6.3.1 falls below $26.40 per share or by BFS if the average of
the bid and ask price of FFB shares for the twenty day period associated with
the Exchange Ratio as set forth in Section 6.3.1 exceeds $39.60 per share (in
either case, as may be adjusted by the declaration of a stock dividend, stock
split or other such recapitalization).
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<PAGE> 144
13.5 EFFECT OF TERMINATION. Upon any such termination and
abandonment, neither party will have any liability or obligation hereunder to
the other, except for the return of all documents exchanged and the
preservation of the confidentiality by each party of the information exchanged.
13.6 EXPENSES. Upon a termination of this Agreement as provided in
Section 13.4, each party will pay all costs and expenses of its performance of
and compliance with all agreements and conditions contained herein on its part
to be performed or complied with, including fees, expenses and disbursements of
its accountants and counsel.
14. GENERAL PROVISIONS.
14.1 DEFINITIONS. "Subsidiaries" as used herein means any
corporation 50% or more of whose outstanding voting securities are owned
directly or indirectly by FFB or BFS, as the context may require, whether
consolidated or unconsolidated. The headings in this Agreement will not affect
in any way its meaning or interpretation.
14.2 AMENDMENTS. Any of the terms or conditions of this Agreement
may be modified or waived at any time before the effective time of the Merger
by the party which is, or the shareholders of which are, entitled to the
benefit thereof upon the authority of the Board of Directors of such party,
provided that any such modification or waiver will in the judgment of the party
making it not affect substantially or materially and adversely the benefits to
such party or its shareholders intended under this Agreement.
14.3 NOTICES. All notices, demands, requests, consents or
approvals required hereunder will be in writing and will be given (and shall be
deemed to have been duly given upon receipt) by delivery in person or by
certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or to such other address
as any party may give to the other by like notice:
IF TO FFB: First Financial Bancorp.
300 High Street
P.O. Box 476
Hamilton, Ohio 45012-0476
ATTENTION: Stanley N. Pontius, President
and Chief Executive Officer
With copies to: Frost & Jacobs
2500 PNC Center
201 East Fifth Street
P.O. Box 5715
Cincinnati, Ohio 45201-5715
ATTENTION: Neil Ganulin
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<PAGE> 145
IF TO BFS: Bright Financial Services, Inc.
4 East Main Street
Flora, Indiana 46929
ATTENTION: Jerry L. Holsapple
Executive Vice President and CEO
With copies to: Bingham Summers Welsh & Spilman
2700 Market Tower
10 West Market Street
Indianapolis, Indiana 46204-2982
ATTENTION: Jonathan L. Birge
14.4 BINDING NATURE OF AGREEMENT. This Agreement will be binding
upon and inure to the benefit of FFB and BFS and their respective successors
and permitted assigns.
14.5 ASSIGNMENT. Neither this Agreement nor any obligation or
right hereunder may be assigned by any party hereto, whether directly or
indirectly, without the prior written consent of the other party.
14.6 GOVERNING LAW. This Agreement will in all respects be
governed and construed in accordance with the laws of the State of Ohio.
14.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
26
<PAGE> 146
IN WITNESS WHEREOF, pursuant to authority duly given by its Board of
Directors, each of FFB, and BFS has caused this Agreement to be executed and
attested by its authorized officers as of the date and year first above
written.
<TABLE>
<S> <C>
FIRST FINANCIAL BANCORP.
ATTEST:
By: /s/ Stanley N. Pontius
-------------------------------------------------------
Richard E. Weinman Print Name: Stanley N. Pontius
- --------------------------------------------------- -----------------------------------------------
Secretary Title: President
----------------------------------------------------
BRIGHT FINANCIAL SERVICES,
INC.
ATTEST:
By: /s/ Adolph W. Haines
-------------------------------------------------------
Eunice Lowery Print Name: Adolph W. Haines
- --------------------------------------------------- -----------------------------------------------
Secretary Title: Chairman
----------------------------------------------------
</TABLE>
0172586.06
27
<PAGE> 147
[OHIO SECRETARY OF STATE SEAL] EXHIBIT A
Prescribed by Approved_______
Bob Taft, Secretary of State Date___________
30 East Broad Street, 14th Floor Fee____________
Columbus, Ohio 43266-0418
Form MER (July 1994)
CERTIFICATE OF MERGER
In accordance with the requirements of Ohio Law, the undersigned
corporations, limited liability companies and/or limited partnerships, desiring
to effect a merger, set forth the following facts:
I. SURVIVING ENTITY
A. The name of the entity surviving the merger is:
______________________________________________________________________
______________________________________________________________________
(if the surviving entity is an Ohio limited partnership or qualified
foreign limited partnership, its registration number must be provided)
B. NAME CHANGE: As a result of this merger, the name of the
surviving entity has been changed to the following:___________
______________________________________________________________
(complete only if the name of surviving entity is changing
through the merger)
C. The surviving entity is a: (PLEASE CHECK THE APPROPRIATE BOX
AND FILL IN THE APPROPRIATE BLANKS)
[ ] Domestic (Ohio) corporation
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of
the state/country of _________________, and licensed to
transact business in the state of Ohio.
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of
the state/country of _________________, and NOT licensed to
transact business in the state of Ohio.
[ ] Domestic (Ohio) limited liability company
[ ] Foreign (Non-Ohio) limited liability company organized under
the laws of the state/country of _________________, and
registered to do business in the state of Ohio.
[ ] Foreign (Non-Ohio) limited liability company organized under
the laws of the state/country of _________________, and NOT
registered to do business in the state of Ohio.
[ ] Domestic (Ohio) limited partnership, registration number
______________
<PAGE> 148
[ ] Foreign (Non-Ohio) limited partnership organized under the
laws of the state/country of ___________________, and registered
to do business in the state of Ohio, under registration number
_________________
[ ] Foreign (Non-Ohio) limited partnership organized under the
laws of the state/country of ___________________, and NOT
registered to do business in the state of Ohio
II. MERGING ENTITIES
The name, type of entity, and state/country of incorporation or
organization, respectively, of each entity, other than the survivor, which is a
party to the merger are as follows: (If insufficient space to cover this item,
please attach a separate sheet listing the merging entities; Ohio registered or
foreign qualified limited partnerships must include registration number)
Name State/Country of Organization Type of Entity
____________________________________ ______________________ __________________
____________________________________ ______________________ __________________
____________________________________ ______________________ __________________
____________________________________ ______________________ __________________
____________________________________ ______________________ __________________
III. MERGER AGREEMENT ON FILE
The name and mailing address of the person or entity from whom/which
eligible persons may obtain a copy of the agreement of merger upon written
request:
NAME ADDRESS
___________________________ ____________________________________
(street and number)
____________________________________
(city, village or township) (state) (zip code)
IV. EFFECTIVE DATE OF MERGER
This merger is to be effective:
On ________________ (if a date is specified, the date must be a date on
or after the date of filing; the effective date of the merger cannot be earlier
than the date of filing; if no date is specified, the date of filing will be
the effective date of merger).
<PAGE> 149
V. MERGER AUTHORIZED
The laws of the state or country under which each constituent entity
exists, permits this merger.
This merger was adopted, approved and authorized by each of the
constituent entities in compliance with the laws of the state under which it is
organized, and the persons signing this certificate on behalf of each of the
constituent entities are duly authorized to do so.
VI. STATUTORY AGENT
The name and address of the surviving entity's statutory agent upon
whom any process, notice or demand may be served is:
NAME ADDRESS
___________________________ _____________________________________________
(complete street address)
_____________________________________________
(city, village or township) (zip code)
(THIS ITEM MUST BE COMPLETED IF THE SURVIVING ENTITY IS A FOREIGN ENTITY WHICH
IS NOT LICENSED, REGISTERED OR OTHERWISE AUTHORIZED TO CONDUCT OR TRANSACT
BUSINESS IN THE STATE OF OHIO)
ACCEPTANCE OF AGENT
The undersigned, named herein as the statutory agent for the above
referenced surviving entity, hereby acknowledges and accepts the appointment of
statutory agent for said entity.
_____________________________________________
SIGNATURE OF AGENT
(THE ACCEPTANCE OF AGENT MUST BE COMPLETED BY DOMESTIC SURVIVING ENTITIES IF
THROUGH THIS MERGER THE STATUTORY AGENT FOR THE SURVIVING ENTITY HAS CHANGED,
OR THE NAMED AGENT DIFFERS IN ANY WAY FROM THE NAME REFLECTED ON THE SECRETARY
OF STATE'S RECORDS.)
VII. STATEMENT OF MERGER
Upon filing, or upon such later date as specified herein, the merging
entity/entities listed herein shall merge into the listed surviving entity.
VIII. AMENDMENTS
The articles of incorporation, articles of organization or certificate
of limited partnership (STRIKE THE INAPPLICABLE TERMS) of the surviving
domestic entity herein, are amended as set forth in the attached "Exhibit A"
(PLEASE NOTE THAT ANY AMENDMENTS TO ARTICLES OF INCORPORATION, ARTICLES
OF ORGANIZATION OR TO A CERTIFICATE OF LIMITED PARTNERSHIP MUST BE ATTACHED IF
THE SURVIVING ENITY IS A DOMESTIC CORPORATION, LIMITED LIABILITY COMPANY, OR
LIMITED PARTNERSHIP.)
<PAGE> 150
IX. QUALIFICATION OR LICENSURE OF FOREIGN SURVIVING ENTITY
A. The listed surviving foreign corporation, limited liability
company, or limited partnership desires to transact business in Ohio as a
foreign corporation, foreign limited liability company, or foreign limited
partnership, and hereby appoints the following as its statutory agent upon whom
process, notice or demand against the entity may be served in the State of
Ohio. The name and complete address of the statutory agent is:
__________________________ ________________________________
(name) (street and number)
________________________________, Ohio___________________
(city, village or township) (zip code)
The subject surviving foreign corporation, limited liability company or
limited partnership irrevocably consents to service of process on the statutory
agent listed above as long as the authority of the agent continues, and to
service of process upon the Secretary of State if the agent cannot be found, if
the corporation, limited liability company or limited partnership fails to
designate another agent when required to do so, or if the corporation's,
limited liability company's, or limited partnership's license or registration
to do business in Ohio expires or is cancelled.
B. The qualifying entity also states as follows: (complete only if
applicable)
1. FOREIGN QUALIFYING LIMITED COMPANY
(If the qualifying entity is a foreign limited liability
company, the following information must be completed)
a. The name of the limited liability company, in its state
of organization/registration is _______________________
_______________________________________________________
b. The name under which the limited liability company
desires to tranact business in Ohio is ________________
_______________________________________________________
c. The limited liability company was organized or
registered on _____________________________ under the
month day year
laws of the state/country of _________________________.
d. The address to which interested persons may direct
request for copies of the articles of organization,
operating agreement, bylaws, or other charter documents
of the company is: ___________________________________
_______________________________________________________
<PAGE> 151
2. FOREIGN QUALIFYING LIMITED PARTNERSHIP
(If the qualifying entity is a foreign limited partnership,
the following information must be completed)
a. The name of limited partnership is ____________________
_______________________________________________________
b. The limited partnership was formed on __________________
month day year
under the laws of the state/country of _________________
c. The address of the office of the limited partnership in
its state/country of organization is __________________
________________________________________________________
d. The limited partnership's principal office address is
_______________________________________________________
e. The names and business or residence address of the
GENERAL partners of the partnership are as follows:
Name Address
_______________________________________________________
_______________________________________________________
_______________________________________________________
(IF INSUFFICIENT SPACE TO COVER THIS ITEM, PLEASE
ATTACH A SEPARATE SHEET LISTING THE GENERAL PARTNERS
AND THEIR RESPECTIVE ADDRESSES)
f. The address of the office where a list of the names and
business or residence addresses of the limited partners
and their respective capital contributions is to be
maintained is:
_______________________________________________________
_______________________________________________________
The limited partnership hereby certifies that it shall
maintain said records until the registration of the
limited partnership in Ohio is cancelled or withdrawn.
<PAGE> 152
The undersigned constituent entities have caused this certificate of
merger to be signed by its duly authorized officers, partners and
representatives on the date(s) stated below.
______________________________________ ______________________________________
exact name of entity exact name of entity
By:___________________________________ By:___________________________________
Its:__________________________________ Its:__________________________________
Date:__________________ Date:__________________
______________________________________ ______________________________________
exact name of entity exact name of entity
By:___________________________________ By:___________________________________
Its:__________________________________ Its:__________________________________
Date:__________________ Date:__________________
______________________________________ ______________________________________
exact name of entity exact name of entity
By:___________________________________ By:___________________________________
Its:__________________________________ Its:__________________________________
Date:__________________ Date:__________________
______________________________________ ______________________________________
exact name of entity exact name of entity
By:___________________________________ By:___________________________________
Its:__________________________________ Its:__________________________________
Date:__________________ Date:__________________
______________________________________ ______________________________________
exact name of entity exact name of entity
By:___________________________________ By:___________________________________
Its:__________________________________ Its:__________________________________
Date:__________________ Date:__________________
(Please note that the chairman of the board, the president, vice president,
secretary or an assistant secretary must sign on behalf of each constituent
corporation, and at least one general partner must sign on behalf of each
constituent limited partnership; If insufficient space for signature, a
separate sheet should be attached containing such signatures)
<PAGE> 153
EXHIBIT A
[SEAL]
Provided by Joseph Hogsett, Secretary of State
ARTICLES OF MERGER SECRETARY OF STATE OF INDIANA
State Form 39038 (R3 / 9-92) CORPORATIONS DIVISION
State Board of Accounts Approved 1992 302 W. WASHINGTON ST., RM E018
Indiana Code 23-1-40-1 et. seq. INDIANAPOLIS IN 46204
TELEPHONE (317) 232-6578
FILING FEE:$80.00
INSTRUCTIONS: Present original and one copy - use 8 1/2" x 11" paper for inserts
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ARTICLES OF MERGER
OF
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(hereinafter the "nonsurviving corporation(s)")
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INTO
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(hereinafter the "surviving corporation(s)")
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In accordance with the requirements of the Indiana Business Corporation Law,
the undersigned corporations desiring to effect a merger or share exchange, set
forth the following facts:
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ARTICLE I - SURVIVING CORPORATION
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The name of the surviving corporation is:
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and such name has/ has not (designate which) been changed as a result of the
merger.
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a. The surviving corporation is a domestic corporation existing pursuant
to the provisions of the Act
Incorporated on _________________________
b. The surviving corporation is a foreign corporation incorporated under
the laws of the State of:__________________________ and qualified/
not qualified (designate which) to do business in Indiana. If the
surviving corporation is qualified to do business in Indiana, state
the date of qualification:_________________________. (If application
for Certificate of Authority is filed concurrently herewith state:
"Upon approval of Application for Certificate of Authority.")
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ARTICLE II - NONSURVIVING CORPORATION(S)
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The name, state of incorporation, and date of incorporation or qualification
(if applicable) respectively, of each Indiana domestic corporation and Indiana
qualified foreign corporation, other than the survivor, which is party to the
merger are as follows:
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Name of Corporation
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State of Domicile |Date of incorporation or qualification
|in Indiana (if applicable)
|
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Name of Corporation
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State of Domicile |Date of incorporation or qualification
|in Indiana (if applicable)
|
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Name of Corporation
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State of Domicile |Date of incorporation or qualification
|in Indiana (if applicable)
|
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ARTICLE III - PLAN OF MERGER OR SHARE EXCHANGE
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The Plan of Merger of Share Exchange, containing such information as
required by Indiana Code 23-1-40-1(b), is set forth in "Exhibit A" attached
hereto and made a part hereof.
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<PAGE> 154
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ARTICLE IV - MANNER OF ADOPTION AND VOTE OF SURVIVING CORPORATION (strike
inapplicable section)
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Shareholder vote not required.
The merger/share exchange was adopted by the incorporators or board of
directors without shareholder action and shareholder action was not required.
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Vote of shareholders.
The designation (i.e. common, preferred or any classification where different
classes of stock exist), number of outstanding shares, number of votes entitled
to be cast by each voting group entitled to vote separately on the merger/
share exchange and the number of votes of each voting group represented at the
meeting is set forth below:
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TOTAL | A | B | C
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DESIGNATION OF EACH VOTING GROUP (i.e. preferred and common) | | |
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NUMBER OF OUTSTANDING SHARES | | | |
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NUMBER OF VOTES ENTITLED TO BE CAST | | | |
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NUMBER OF VOTES REPRESENTED AT MEETING | | | |
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SHARES VOTED IN FAVOR | | | |
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SHARES VOTED AGAINST | | | |
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ARTICLE V - MANNER OF ADOPTION AND VOTE OF NONSURVIVING CORPORATION (strike
inapplicable section)
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Shareholder vote not required.
The merger/share exchange was adopted by the incorporators or board of
directors without shareholder action and shareholder action was not required.
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Vote of shareholders.
The designation (i.e. common, preferred or any classification where different
classes of stock exist), number of outstanding shares, number of votes entitled
to be cast by each voting group entitled to vote separately on the merger/
share exchange and the number of votes of each voting group represented at the
meeting is set forth below:
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TOTAL | A | B | C
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DESIGNATION OF EACH VOTING GROUP (i.e. preferred and common) | | |
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NUMBER OF OUTSTANDING SHARES | | | |
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NUMBER OF VOTES ENTITLED TO BE CAST | | | |
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NUMBER OF VOTES REPRESENTED AT MEETING | | | |
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SHARES VOTED IN FAVOR | | | |
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SHARES VOTED AGAINST | | | |
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In Witness Whereof, the undersigned being the _________________________
___________ of the surviving corporation executes these Articles of
Merger/Share Exchange and verifies, subject to penalties of perjury that
the statements contained herein are true, this _________________ day of
_______________, 19____.
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Signature | Printed name
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<PAGE> 155
EXHIBIT B (Opinion of BFS Counsel)
---------
___________________________, 1995
First Financial Bancorp.
300 High Street
P.O. Box 476
Hamilton, Ohio 45012-0476
Ladies and Gentlemen:
This opinion is provided to you on behalf of Bright Financial
Services, Inc. ("BFS") in connection with the consummation of a Plan and
Agreement of Merger (the "Agreement") between BFS and First Financial Bancorp.
("First Financial"), dated ____________, 1995 pursuant to which BFS will be
merged into First Financial (the "Merger") effective as of ____________, 1995
at 12:01 a.m. ("Effective Time of the Merger"). This opinion is given to you
pursuant to Section 14.2.3 of the Agreement. Capitalized terms defined in the
Agreement and not otherwise defined herein shall have the meanings given those
terms in the Agreement.
As to various questions of fact material to our opinion, we have
relied upon the representations made in the Agreement and upon a certificate of
an officer of BFS (the "Officer's Certificate"). We have examined such
certificates of public officials, corporate documents and records and other
certificates, opinions and instruments and have made such other investigations
as we have deemed necessary in connection with the opinions hereinafter set
forth. In rendering the opinions set forth herein, we have assumed the
authenticity of all documents submitted to us as originals, the due execution
of and genuineness of the signatures on such documents, the legal capacity of
all signing parties to such documents and the conformity to original documents
of all photostatic copies of such documents submitted to us.
The opinions hereinafter expressed are limited to the laws of the
State of Indiana and are subject to the following additional qualifications:
(i) The enforceability of any provisions in the Agreement, or any
rights granted to you pursuant to the Agreement, is subject to and may be
affected by applicable state and/or federal bankruptcy, insolvency,
reorganization, moratorium laws, or similar laws affecting the rights of
creditors or debtors generally, and the application of general principles of
equity and matters of public policy (whether considered in a proceeding at law
or in equity) including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing.
B-1
<PAGE> 156
First Financial Bancorp.
_______________, 1995
Page 2
(ii) Any provisions requiring payment of attorney's fees and
litigation expenses may not be enforceable.
(iii) No opinion is expressed as to the enforceability of (a)
self-help provisions, (b) waiver of constitutional rights, (c) provisions
related to waiver of remedies (or the delay or omission of enforcement
thereof), disclaimers, liability limitations with respect to third parties,
liquidated damages or the creation of remedies not available under Indiana or
Ohio law or (d) provisions pursuant to which BFS attempts to exempt itself from
liability for its own negligence, fault or actions or providing for
indemnification against criminal liability, civil penalties or punitive damages
or against actions to the extent that the indemnitee has been grossly negligent
or engaged in wilful misconduct.
As used herein, the phrase "to the best of our knowledge" means we
have relied, without any independent investigation or inquiry, solely upon (i)
the Officer's Certificate and (ii) the actual knowledge, if any, of a limited
number of attorneys in this firm who regularly perform legal services for BFS
obtained in the scope of such representation.
Based upon and subject to the foregoing, we are of the opinion that:
1. BFS is a corporation duly organized and validly existing under
the laws of the State of Indiana and is registered as a bank holding company
under the Banking Holding Company Act of 1956, as amended. BFS has the
corporate power to carry on its businesses as they are now being conducted and
is qualified to do business in each jurisdiction in which the character and
location of the assets owned by it, or the nature of the business transacted by
it, requires qualification.
2. BFS's capitalization consists of 250,000 authorized shares of
common stock (par value $_____ per share), of which, as of the Effective Time
of the Merger, 204,663 shares were issued and outstanding and 630 shares were
reserved for issuance pursuant to outstanding options. Each issued share was
validly issued, fully paid and non-assessable. Except for outstanding options
exercisable for 630 shares of BFS common stock, to the best of our knowledge,
there are no outstanding subscriptions, options, warrants, calls or rights of
any kind relating to or providing for the issuance, sale, delivery or transfer
of any class of securities of BFS.
3. Bright National Bank (the "Bank") is a wholly owned subsidiary
of BFS. BFS has no other subsidiaries. The Bank is a national bank duly
organized and validly existing under
B-2
<PAGE> 157
First Financial Bancorp.
_______________, 1995
Page 3
the laws of the United States. The Bank has the corporate power to carry on
its businesses as they are now being conducted and is qualified to do business
in each jurisdiction in which the character and location of the assets owned by
it, or the nature of the business transacted by it, requires qualification.
All of the outstanding shares of stock of the Bank are validly issued, fully
paid and non-assessable, and all such shares are owned by BFS free and clear of
all liens, claims, charges or encumbrances. To the best of our knowledge,
there are no outstanding subscriptions, options, warrants, calls or rights of
any kind relating to or providing for the issuance, sale, delivery or transfer
of any class of securities of the Bank.
4. The execution and performance of the Agreement will not: (i)
violate, or conflict with, or require any consent under, or result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any lien upon any of the assets of either of BFS or the Bank, under
any of the terms, conditions or provisions of the Articles of Incorporation or
By-Laws of BFS or the Bank, or of any note, bond, mortgage, indenture, deed of
trust, material license, lease, agreement or other instrument or obligation of
which we have knowledge and to which either of BFS or the Bank is a party or by
which either of BFS or the Bank or any of their assets may be bound or affected
or (ii) to the best of our knowledge, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to BFS, the Bank or any of their
assets.
5. All corporate action by BFS required in order to authorize the
Merger, and the execution and delivery of all documents related thereto, has
been taken. This Agreement has been duly executed and delivered by BFS and is
a valid and binding obligation of BFS in accordance with its terms.
6. Except as set forth in the Disclosure Schedule, to the best of
our knowledge, there is no suit, action or legal or administrative proceeding
pending or threatened against BFS or the Bank, which, if adversely determined,
might materially and adversely affect the financial condition, on a
consolidated basis, of BFS and the Bank or the conduct of their businesses, nor
is there any decree, injunction, or order of any court, governmental department
or agency outstanding against BFS or the Bank having any such effect.
This opinion is given for the sole use and benefit of First Financial
and no party or entity other than First Financial is entitled to rely on this
opinion. This opinion is based upon facts and law in existence on the date
hereof, and we disclaim any undertaking to advise you of changes occurring
therein after the date hereof.
Very truly yours,
0175079.02
B-3
<PAGE> 158
EXHIBIT C (Opinion of First Financial's Counsel)
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____________________________, 1995
Bright Financial Services, Inc.
4 East Main Street
Flora, Indiana 46929
Ladies and Gentlemen:
This opinion is provided to you on behalf of First Financial Bancorp.
("First Financial") in connection with the consummation of a Plan and
Agreement of Merger (the "Agreement") among First Financial and Bright
Financial Services, Inc. ("BFS"), dated _____________, 1995 pursuant to which
BFS will be merged into First Financial (the "Merger") effective as of
______________, 1995 at 12:01 a.m. ("Effective Time of the Merger"). This
opinion is given to you pursuant to Section 14.3.3 of the Agreement.
Capitalized terms defined in the Agreement and not otherwise defined herein
shall have the meanings given those terms in the Agreement.
As to various questions of fact material to our opinion, we have
relied upon the representations made in the Agreement and upon a certificate of
an officer of First Financial (the "Officer's Certificate"). We have also
examined such certificates of public officials, corporate documents and records
and other certificates, opinions and instruments and have made such other
investigations as we have deemed necessary in connection with the opinions
hereinafter set forth. In rendering the opinions set forth herein, we have
assumed the authenticity of all documents submitted to us as originals, the due
execution of and genuineness of the signatures on such documents, the legal
capacity of all signing parties to such documents and the conformity to
original documents of all photostatic copies of such documents submitted to us.
The opinions hereinafter expressed are limited to the laws of the
State of Ohio and are subject to the following additional qualifications:
(i) The enforceability of any provisions in the Agreement, or any
rights granted to you pursuant to the Agreement, is subject to and may be
affected by applicable state and/or federal bankruptcy, insolvency,
reorganization, moratorium laws, or similar laws affecting the rights of
creditors or debtors generally, and the application of general
C-1
<PAGE> 159
Bright Financial Services, Inc.
_______________, 1995
Page 2
principles of equity and matters of public policy (whether considered in a
proceeding at law or in equity) including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing.
(ii) Any provisions requiring payment of attorney's fees and
litigation expenses may not be enforceable.
(iii) No opinion is expressed as to the enforceability of (a)
self-help provisions, (b) waiver of constitutional rights, (c) provisions
related to waiver of remedies (or the delay or omission of enforcement
thereof), disclaimers, liability limitations with respect to third parties,
liquidated damages or the creation of remedies not available under Ohio and
Indiana law or (d) provisions pursuant to which BFS attempts to exempt itself
from liability for its own negligence, fault or actions or providing for
indemnification against criminal liability, civil penalties or punitive damages
or against actions to the extent that the indemnitee has been grossly negligent
or engaged in wilful misconduct.
As used herein, the phrase "to the best of our knowledge" means we
have relied, without any independent investigation or inquiry, solely upon (i)
the Officer's Certificate and (ii) the actual knowledge, if any, of a limited
number of attorneys in this firm who regularly perform legal services for First
Financial obtained in the scope of such representation.
Based upon and subject to the foregoing, we are of the opinion that:
1. First Financial is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and is
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended and a savings and loan holding company under the Savings and
Loan Holding Company Act. First Financial has the corporate power to carry on
its businesses as they are now being conducted and is qualified to do business
in each jurisdiction in which the character and location of the assets owned by
it, or the nature of the business transacted by it, requires qualification.
2. First Financial's capitalization consists of 25,000,000
authorized shares of common stock (par value $8.00 per share), of which, as of
the Effective Time of the Merger, __________ shares were issued and
outstanding.
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<PAGE> 160
Bright Financial Services, Inc.
_______________, 1995
Page 3
3. All shares of common stock of First Financial to be issued to
BFS shareholders in exchange for their BFS common stock in connection with the
Merger will be, immediately after the Effective Time of the Merger, duly and
validly authorized and, upon First Financial's receipt of the consideration
provided in the Agreement in the form of BFS common stock from BFS shareholders
and due issuance of the shares by First Financial's registrar, will be duly
issued, fully paid and non-assessable. No shareholder of First Financial has
any pre-emptive right of subscription or purchase pursuant to First Financial's
Articles of Incorporation with respect to the shares of common stock of First
Financial to be issued to BFS shareholders in connection with the Merger.
4. The execution, delivery and performance of this Agreement will
not: (i) violate, or conflict with, or require any consent under, or result in
a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
the creation of any lien upon any of the assets of First Financial, under any
of the terms, conditions or provisions of the Articles of Incorporation or
bylaws of First Financial, or of any note, bond, mortgage, indenture, deed of
trust, material license, lease, agreement or other instrument or obligation of
which we have knowledge and to which First Financial is a party or by which
First Financial or any of its assets may be bound or affected or (ii) to the
best of our knowledge, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to First Financial or any of its assets.
5. All corporate action by First Financial required in order to
authorize the Merger, and the execution and delivery of all documents related
thereto, has been taken. The Agreement has been duly executed and delivered by
First Financial and is the valid and binding obligation of First Financial in
accordance with its terms.
6. To the best of our knowledge, there is no litigation,
proceeding, governmental investigation or labor dispute pending or overtly
threatened against First Financial or any of its consolidated Subsidiaries or
its or their properties or businesses, other than litigation disclosed by First
Financial in its annual and quarterly reports filed with the Securities and
Exchange Commission ("SEC").
This opinion is given for the use and benefit of BFS and no party or
entity other than BFS is entitled to rely on this opinion. This opinion is
based upon facts and law in existence
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<PAGE> 161
Bright Financial Services, Inc.
_______________, 1995
Page 4
on the date hereof, and we disclaim any undertaking to advise you of changes
occurring therein after the date hereof.
Very truly yours,
0175092.01
C-4
<PAGE> 162
Appendix B
February 20, 1995
Board of Directors
Bright Financial Services, Inc.
4 East Main Street
Flora, IN 46929
Gentlemen:
You have requested our opinion with respect to the fairness, from a
financial point of view, as of the date hereof, to the holders of common stock,
no par value per share ("Bright Common"), of Bright Financial Services, Inc.
("Bright") of the exchange ratio (the "Exchange Ratio") as set forth in Section
6.3.1 of the Plan and Agreement of Merger, dated February 20, 1995 (the "Merger
Agreement"), by and among First Financial Bancorp. ("First Financial") and
Bright. The Exchange Ratio provides for the exchange of each share of Bright
Common for shares of First Financial common stock, $8.00 par value per share
("First Financial Common"), equal to the quotient of $73.184129 divided by the
mathematical average of the average of the closing daily bid and asked prices
of First Financial Common on the National Association of Securities Dealers
Automated Quotation National Market System for the twenty trading days ending
two trading days prior to the effective date of the Merger (as defined in the
Merger Agreement).
The Merger Agreement provides for the merger (the "Merger") of Bright
with and into First Financial, pursuant to which, among other things, at the
effective date of the Merger, outstanding shares of Bright Common shall be
canceled and converted into the right to receive shares of First Financial
Common at the Exchange Ratio. The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
McDonald & Company Securities, Inc., as part of its investment banking
business, is customarily engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
We have acted as Bright's financial advisor in connection with, and
have participated in certain of the negotiations leading to, the execution of
the Merger Agreement.
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Board of Directors
February 20, 1995
In connection with rendering our opinion set forth herein, we have
among other things:
(i) Reviewed Bright's Annual Reports to Shareholders for each of
the three years ended December 31, 1993, including the
audited financial statements contained therein, as well as
Bright's unaudited financial statements for each of the
three month periods ended March 31, 1994, June 30, 1994 and
September 30, 1994;
(ii) Reviewed First Financial's Annual Reports to Shareholders
and Annual Reports on Form 10-K for each of the three years
ended December 31, 1993, including the audited financial
statements contained therein, as well as First Financial's
Quarterly Reports on Form 10-Q for each of the three month
periods ended March 31, 1994, June 30, 1994 and September
30, 1994;
(iii) Reviewed certain other non-public information, primarily
financial in nature, relating to the respective businesses,
earnings, assets, and prospects of Bright and First
Financial furnished to us and prepared by Bright and First
Financial;
(iv) Participated in meetings and telephone conferences with
members of senior management of Bright and meetings and
telephone conferences with members of senior management of
First Financial concerning the financial condition,
business, assets, financial forecasts, and prospects of the
respective companies, as well as other matters we believe
relevant to our inquiry;
(v) Reviewed certain stock market information for Bright Common
and First Financial Common, and compared it with similar
information for certain companies, the securities of which
are publicly traded;
(vi) Compared the results of operations and financial condition
of Bright with that of certain companies which we deemed to
be relevant for purposes of this opinion;
(vii) Reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions which we
deemed to be relevant for purposes of this opinion;
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Board of Directors
February 20, 1995
(viii) Reviewed the Merger Agreement and its schedules and exhibits
and certain related documents; and
(ix) Performed such other analyses as we have deemed appropriate.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have relied upon the accuracy and
completeness of the representations and warranties of Bright and First
Financial contained in the Merger Agreement, without undertaking any
responsibility for independent investigation or verification of such matters.
We were not engaged to and have not conducted a physical inspection of any of
the assets, properties or facilities of either Bright or First Financial, nor
have we made or obtained or been furnished with any independent evaluation or
appraisal of any of such assets, properties or facilities or any of the
liabilities of either Bright or First Financial. With respect to financial
forecasts provided to us by management of Bright and First Financial, we have
assumed that such forecasts have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of
Bright and First Financial as to the future performance of Bright and First
Financial, as the case may be. We express no view as to such financial
forecasts or the assumptions on which they are based. We have also assumed
that all of the conditions to the consummation of the Merger, as set forth in
the Merger Agreement, including the tax-free treatment of the Merger to the
holders of Bright Common, would be satisfied and that the Merger would be
consummated on a timely basis in the manner contemplated by the Merger
Agreement.
We will receive a fee for our services as financial advisor to Bright,
a significant portion of which is contingent upon closing of the Merger.
In the ordinary course of business, we may actively trade securities
of First Financial for our own account and for the accounts of customers and,
accordingly, we may at any time hold a long or short position in such
securities.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the fairness, as
of the date hereof, from a financial point of view, of the Exchange Ratio and
does not address Bright's underlying business decision to effect the Merger or
any other terms of the Merger and does not constitute a recommendation to any
Bright stockholder as to how such stockholder should vote with respect to the
Merger. We are not rendering any opinion as to what the value of Bright Common
or First Financial Common may be at the effective date of the Merger or as to
the prospects of First Financial's business, nor are we making any
recommendation to Bright's shareholders with respect to the advisability of
disposing or retaining First Financial Common received pursuant to the Merger.
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<PAGE> 165
Board of Directors
February 20, 1995
This opinion has been prepared solely for the confidential use of the
Board of Directors and senior management of Bright and will not be reproduced,
summarized, described or referred to or given to any other person without our
prior written consent. Notwithstanding the foregoing, this opinion may be
included in a proxy statement to be mailed to the holders of Bright Common in
connection with the Merger, provided that this opinion will be reproduced in
such proxy statement in full, and any description of or reference to us or our
actions, or any summary of the opinion in such proxy statement will be in a
form acceptable to us and our counsel.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Exchange Ratio, pursuant to the Merger Agreement, is fair
to the holders of Bright Common from a financial point of view.
Very truly yours,
MCDONALD & COMPANY SECURITIES, INC.
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<TABLE>
APPENDIX C
CHAPTER 44
DISSENTERS' RIGHTS
<CAPTION>
<S> <C> <C> <C>
Section. Section.
23-1-44-1. "Corporation" defined. 23-1-44-14. Transfer of shares restricted after demand
23-1-44-2. "Dissenter" defined. for payment.
23-1-44-3. "Fair value" defined. 23-1-44-15. Payment to dissenter.
23-1-44-4. "Interest" defined. 23-1-44-16. Return of shares and release of restrictions.
23-1-44-5. "Record shareholder" defined. 23-1-44-17. Offer of fair value for shares obtained after
23-1-44-6. "Beneficial shareholder" defined. first announcement.
23-1-44-7. "Shareholder" defined. 23-1-44-18. Dissenter demand for fair value under certain
23-1-44-8. Shareholder dissent. conditions.
23-1-44-9. Beneficial shareholder dissent. 23-1-44-19. Effect of failure to pay demand -
23-1-44-10. Notice of dissenters' rights Commencement of judicial appraisal
preceding shareholder vote. proceeding.
23-1-44-11. Notice of intent to dissent. 23-1-44-20. Judicial determination and assessment of
23-1-44-12. Notice of dissenter's rights costs.
following action creating rights.
23-1-44-13. Demand for payment by dissenter.
</TABLE>
23-1-44-1. "CORPORATION" DEFINED. - As used in this chapter, "corporation"
means the issuer of the shares held by a dissenter before the corporate action,
or the surviving or acquiring corporation by merger or share exchange of that
issuer.[P.L.149-1986, Section 28.]
23-1-44-2. "DISSENTER" DEFINED. - As used in this chapter, "dissenter" means a
shareholder who is entitled to dissent from corporate action under section 8
[IC 23-1-44-8] of this chapter and who exercises that right when and in the
manner required by sections 10 through 18 [IC 23-1- 44-10 through IC
23-1-44-18] of this chapter. [P.L.149-1986, Section 28.]
23-1-44-3. "FAIR VALUE" DEFINED.- As used in this chapter, "fair value," with
respect to a dissenter's shares, means the value of the shares immediately
before the effectuation of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable. [P.L. 149-1986, Section 28.]
23-1-44-4. "INTEREST" DEFINED. - As used in this chapter, "interest" means
interest from the effective date of the corporate action until the date of
payment, at the average rate currently paid by the corporation on its principal
bank loans or, if none, at a rate that is fair and equitable under all the
circumstances. [P.L. 149-1986, Section 28.]
23-1-44-5. "RECORD SHAREHOLDER" DEFINED. - As used in this chapter, "record
shareholder" means the person in whose name shares are registered in the
records of a corporation or the beneficial owner of shares to the extent that
treatment as a record shareholder is provided under a recognition procedure or
a disclosure procedure established under IC 23-1-30-4. [P.L.149-1986, Section
28.]
23-1-44-6. "BENEFICIAL SHAREHOLDER" DEFINED. - As used in this chapter,
"beneficial shareholder" means the person who is a beneficial owner of shares
held by a nominee as the record shareholder. [P.L. 149-1986, Section 28.]
23-1-44-7. "SHAREHOLDER" DEFINED. - As used in this chapter, "shareholder"
means the record shareholder or the beneficial shareholder. [P.L.149-1986,
Section 28.]
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23-1-44-8. SHAREHOLDER DISSENT. - (a) A shareholder is entitled to dissent
from, and obtain payment of the fair value of the shareholder's shares in the
event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party if:
(A) Shareholder approval is required for the merger by IC
23-1-40-3 or the articles of incorporation; and
(B) The shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the
usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be
distributed to the shareholders within one (1) year after the
date of sale.
(4) The approval of a control share acquisition under IC 23-1-42.
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) This section does not apply to the holders of shares of any class or
series if, on the date fixed to determine the shareholders entitled to receive
notice of and vote at the meeting of shareholders at which the merger, plan of
share exchange, or sale or exchange of property is to be acted on, the shares
of that class or series were:
(1) Registered on a United States securities exchange registered
under the Exchange Act (as defined in IC 23-1-43-9); or
(2) Traded on the National Association of Securities Dealers, Inc.
Automated Quotations System Over-the-Counter Markets -
National Market Issues or a similar market.
(c) A shareholder:
(1) Who is entitled to dissent and obtain payment for the
shareholder's shares under this chapter; or
(2) Who would be so entitled to dissent and obtain payment but for
the provisions of subsection (b); may not challenge the
corporate action creating (or that, but for the provisions of
subsection (b), would have created) the shareholder's
entitlement. [P.L.149-1986, Section 28; P.L.107-1987, Section
19.]
23-1-44-9. BENEFICIAL SHAREHOLDER DISSENT. - (a) A record shareholder may
assert dissenters' rights as to fewer than all the shares registered in the
shareholder's name only if the shareholder dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in
writing of the name and address of each person on whose behalf the shareholder
asserts dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which the shareholder dissents
and the shareholder's other shares were registered in the names of different
shareholders.
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(b) A beneficial shareholder may assert dissenters' rights as to shares
held on the shareholder's behalf only if:
(1) The beneficial shareholder submits to the corporation the
record shareholder's written consent to the dissent not later
than the time the beneficial shareholder asserts dissenters'
rights; and
(2) The beneficial shareholder does so with respect to all the
beneficial shareholder's shares or those shares over which the
beneficial shareholder has power to direct the vote.
[P.L.149-1986, Section 28.]
23-1-44-10. NOTICE OF DISSENTERS' RIGHTS PRECEDING SHAREHOLDER VOTE. - (a) If
proposed corporate action creating dissenters' rights under section 8 [IC
23-1-44-8] of this chapter is submitted to a vote at a shareholders' meeting,
the meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this chapter.
(b) If corporate action creating dissenters' rights under section 8 of
this chapter is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in section
12 [IC23-1-44-12] of this chapter. [P.L.149-1986, Section 28; P.L.107-1987,
Section 20.]
23-1-44-11. NOTICE OF INTENT TO DISSENT. - (a) If proposed corporate action
creating dissenters' rights under section 8 [IC 23-1-44-8] of this chapter is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken
written notice of the shareholder's intent to demand payment
for the shareholder's shares if the proposed action is
effectuated; and
(2) Must not vote the shareholder's shares in favor of the
proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for the shareholder's shares under this chapter.
[P.L.149-1986, Section 28.]
23-1-44-12. NOTICE OF DISSENTERS' RIGHTS FOLLOWING ACTION CREATING RIGHTS. -
(a) If proposed corporate action creating dissenters' rights under section 8
[IC 23-1-44-8] of this chapter is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 11 [IC 23-1-44-11] of this chapter.
(b) The dissenters' notice must be sent no later than ten (10) days after
approval by the shareholders, or if corporate action is taken without approval
by the shareholders, then ten (10) days after the corporate action was taken.
The dissenters' notice must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(3) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not the
person acquired beneficial ownership of the shares before that
date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more
than sixty (60) days after the date the subsection (a) notice
is delivered; and
(5) Be accompanied by a copy of this chapter. [P.L.149-1986,
Section 28.]
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23-1-44-13. DEMAND FOR PAYMENT BY DISSENTER. - (a) A shareholder sent a
dissenters' notice described in IC 23-1-42-11 or in section 12 [IC 23-1-44-12]
of this chapter must demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to be set forth in
the dissenter's notice under section 12(b)(3) [IC 23-1-44-12(b)(3)] of this
chapter, and deposit the shareholder's certificates in accordance with the
terms of the notice.
(b) The shareholder who demands payment and deposits the shareholder's
shares under subsection (a) retains all other rights of a shareholder until
these rights are canceled or modified by the taking of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter and is considered, for purposes of this article, to have
voted the shareholder's shares in favor of the proposed corporate action.
[P.L.149-1986, Section 28.]
23-1-44-14. TRANSFER OF SHARES RESTRICTED AFTER DEMAND FOR PAYMENT. - (a) The
corporation may restrict the transfer of uncertificated shares from the date
the demand for their payment is received until the proposed corporate action is
taken or the restrictions released under section 16 [IC 23-1-44-16] of this
chapter.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
[P.L.149-1986, Section 28.]
23-1-44-15. PAYMENT TO DISSENTER. - (a) Except as provided in section 17 [IC
23-1-44-17] of this chapter, as soon as the proposed corporate action is taken,
or, if the transaction did not need shareholder approval and has been
completed, upon receipt of a payment demand, the corporation shall pay each
dissenter who complied with section 13 [IC 23-1-44-13] of this chapter the
amount the corporation estimates to be the fair value of the dissenter's
shares.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of
the shares; and
(3) A statement of the dissenter's right to demand payment under
section 18 [IC 23-1-44-18] of this chapter. [P.L.149-1986,
Section 28; P.L. 107-1987, Section 21.]
23-1-44-16. RETURN OF SHARES AND RELEASE OF RESTRICTIONS. - (a) If the
corporation does not take the proposed action within sixty (60) days after the
date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 12 [IC 23-1-44-12] of this chapter and repeat
the payment demand procedure. [P.L.149-1986, Section 28.]
23-1-44-17. OFFER OF FAIR VALUE FOR SHARES OBTAINED AFTER FIRST ANNOUNCEMENT.
- - (a) A corporation may elect to withhold payment required by section 15 [IC
23-1-44-15] of this chapter from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action.
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(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares and shall pay this amount to each dissenter who
agrees to accept it in full satisfaction of the dissenter's demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares and a statement of the dissenter's right to demand payment
under section 18 [IC 23-1-44-18] of this chapter. [P.L.149-1986, Section 28.]
23-1-44-18. DISSENTER DEMAND FOR FAIR VALUE UNDER CERTAIN CONDITIONS. - (a) A
dissenter may notify the corporation in writing of the dissenter's own estimate
of the fair value of the dissenter's shares and demand payment of the
dissenter's estimate (less any payment under section 15 [IC 23-1-44-15] of this
chapter), or reject the corporation's offer under section 17 [IC 23-1-44-17] of
this chapter and demand payment of the fair value of the dissenter's shares,
if:
(1) The dissenter believes that the amount paid under section 15
of this chapter or offered under section 17 of this chapter
is less than the fair value of the dissenter's shares;
(2) The corporation fails to make payment under section 15 of this
chapter within sixty (60) days after the date set for
demanding payment; or
(3) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty (60) days after the date set for demanding payment.
(b) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (a) within thirty (30) days after the corporation made
or offered payment for the dissenter's shares. [P.L.149-1986, Section 28.]
23-1-44-19. EFFECT OF FAILURE TO PAY DEMAND - COMMENCEMENT OF JUDICIAL
APPRAISAL PROCEEDING. - (a) If a demand for payment under IC 23-1-42-11 or
under section 18 [IC 23-1-44-18] of this chapter remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares. If the corporation does not commence the proceedings within the sixty
(60) day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
(b) The corporation shall commence the proceeding in the circuit or
superior court of the county where a corporation's principal office (or, if
none in Indiana, its registered office) is located. If the corporation is a
foreign corporation without a registered office in Indiana, it shall commence
the proceeding in the county in Indiana where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled parties to the proceeding as in
an action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1)
or more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
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(e) Each dissenter made a party to the proceeding is entitled to judgment.
(1) For the amount, if any, by which the court finds the fair
value of the dissenter's shares, plus interest, exceeds the
amount paid by the corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to
withhold payment under section 17 [IC 23-1-44-17] of this
chapter. [P.L.149-1986, Section 28.]
23-1-44-20. JUDICIAL DETERMINATION AND ASSESSMENT OF COSTS. - (a) The court in
an appraisal proceeding commenced under section 19 [IC 23-1-44- 19] of this
chapter shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against such parties and in such amounts as the court
finds equitable.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially
comply with the requirements of sections 10 through 18 [IC
23-1-44-10 through IC 23-1-44-18] of this chapter; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted. [P.L.149-1986, Section 28.]
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INFORMATION NOT REQUIRED IN THE PROXY-STATEMENT PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ---------------------------------------------------
The Ohio General Corporation Law allows a corporation under certain
circumstances to indemnify its directors, officers, and employees. Generally,
whether by its articles of incorporation or its code of regulations or by
statute, the indemnification permits the Corporation to pay expenses actually
and necessarily incurred in the defense of any pending or threatened suit. The
determination of the right of indemnification is determined by a quorum of
disinterested directors not involved in such a pending matter and if they are
unable to make such determination, then such determination shall be made by
independent legal counsel, Bancorp's shareholders or by the Butler County,
Ohio, Court of Common Pleas. Bancorp has such an indemnification provision in
its Code of Regulations, and that provision is set forth below. The Code of
Regulations of Bancorp and the statute do not allow indemnification of an
officer or director wherein such person has been adjudicated negligent or
guilty of misconduct and, additionally, such officer or director must have
acted in good faith or had no reason to believe such officer's or director's
conduct was unlawful to be indemnified.
Article III-A of the Code of Regulations of Bancorp provides:
SECTION 3-A.1. MANDATORY INDEMNIFICATION. The Corporation shall
indemnify any officer or director, or any other employee of the
Corporation who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including,
without limitation, any action threatened or instituted by or in the
right of the Corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, trustee,
officer, employee or agent of another corporation (domestic or
foreign, nonprofit or for profit), partnership, joint venture, trust
or other enterprise, against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgment, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, he
had no reasonable cause to believe his conduct was unlawful. A person
claiming indemnification under this Section 3-A.1 shall be presumed to
have met the applicable standard of conduct set forth herein, and the
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contenders or its
equivalent, shall not, of itself, rebut such presumption.
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SECTION 3-A.2. COURT-APPROVED INDEMNIFICATION. Anything contained in
the Regulations or elsewhere to the contrary notwithstanding:
(A) the Corporation shall not indemnify any officer or director or
employee of the Corporation who was a party to any completed
action or suit instituted by or in the right of the
Corporation to procure a judgment in its favor by reason of
the fact he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, officer, employee or agent
of another corporation (domestic or foreign, nonprofit or for
profit), partnership, joint venture, trust or other
enterprise, in respect of any claim, issue or matter asserted
in such action or suit as to which he shall have been adjudged
to be liable for misconduct (other than negligence of any
degree) in the performance of his duty to the Corporation
unless and only to the extent that the Court of Common Pleas
of Butler County, Ohio or the court in which such action or
suit was brought shall determine upon application that,
despite such adjudication of liability, and in view of all the
circumstances of the case, he is fairly and reasonably
entitled to such indemnity as such Court of Common Pleas or
such other court shall deem proper; and
(B) the Corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as
contemplated by this Section 3-A.2.
SECTION 3-A.3. INDEMNIFICATION FOR EXPENSES. Anything contained in
the Regulations or elsewhere to the contrary notwithstanding, to the
extent that an officer, director or employee of the Corporation has
been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 3-A.1, or in defense of any
claim, issue or matter therein, he shall be promptly indemnified by
the Corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript
costs) actually and reasonably incurred by him in connection
therewith.
SECTION 3-A.4. DETERMINATION REQUIRED. Any indemnification required
under Section 3-A.1 and not precluded under Section 3- A.2 shall be
made by the Corporation only upon a determination that such
indemnification of the officer or director or employee is proper in
the circumstances because he has met the applicable standard of
conduct set forth in Section 3-A.1. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
Corporation who were not and are not parties to, or threatened with,
any such action, suit or proceeding, or (B) if such a quorum is not
obtainable or if a majority of a quorum of disinterested directors so
directs, in a written opinion by independent legal counsel other than
an attorney, or a firm having associated with it an attorney, who has
been retained by or who has performed services
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for the Corporation, or any person to be indemnified, within the past
five years, or (C) by the shareholders, or (D) by the Court of Common
Pleas of Butler County, Ohio or (if the Corporation is a party
thereto) the court in which such action, suit or proceeding was
brought, if any. Any determination made by the disinterested
directors under subparagraph (A) of this Section or by independent
legal counsel under subparagraph (B) of this Section to make
indemnification in respect of any claim, issue or matter asserted in
an action or suit threatened or brought by or in the right of the
Corporation shall be promptly communicated to the person who
threatened or brought such action or suit, and within ten (10) days
after receipt of such notification such person shall have the right to
petition the Court of Common Pleas of Butler County, Ohio or the Court
in which such action or suit was brought, if any, to review the
reasonableness of such determination.
SECTION 3-A.5. ADVANCES FOR EXPENSES. Unless the only liability
asserted against a director in an action, suit or proceeding referred
to in Section 3-A.1 of this article arises pursuant to Section 1701.95
of the Ohio Revised Code, expenses, including attorney's fees,
incurred by a director in defending the action, suit or proceeding
shall be paid by the Corporation as they are incurred, in advance of
the final disposition of the action, suit or proceeding, upon receipt
of an undertaking by or on behalf of the director in which he agrees:
(i) to repay amounts so advanced if it is proved by clear and
convincing evidence in a court of competent jurisdiction that his
action or failure to act was undertaken with deliberate intent to
cause injury to the Corporation or with reckless disregard for the
best interests of the Corporation; and (ii) to reasonably cooperate
with the Corporation with respect to the action, suit or proceeding.
Expenses, including attorneys' fees, incurred by a director,
trustee, officer, employee or agent in defending any action, suit or
proceeding referred to in Section 3-A.3 of this Article, may be paid
by the Corporation as they are incurred, in advance of the final
disposition of the action, suit or proceeding as authorized by the
directors in the specific case, upon receipt of any undertaking by or
on behalf of the director, trustee, officer, employee, or agent to
repay such undertaking by or on behalf of the director, trustee,
officer, employee, or agent to repay such amount if it is ultimately
determined that he is not entitled to be indemnified by the
Corporation.
SECTION 3-A.6. ARTICLE III-A NOT EXCLUSIVE. The indemnification
provided by this Article III-A shall not be deemed exclusive of any
other rights to which any person seeking indemnification may be
entitled under the Articles or the Regulations or any agreement, vote
of shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be an officer or director or employee of the Corporation and
shall inure to the benefit of the heirs, executors, and administrators
of such a person.
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SECTION 3-A.7. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, trustee, officer, employee
or agent of another corporation (domestic or foreign, nonprofit or for
profit), partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not
the Corporation would have the obligation or the power to indemnify
him against such liability under the provisions of this Article III-A.
SECTION 3-A.8. VENUE. Any action by a person claiming
indemnification under this Article III-A, or by the Corporation, to
determine such claim for indemnification may be filed as to the
Corporation and each such person in Butler County, State of Ohio. The
Corporation and (by claiming such indemnification) each such person
consent to the exercise of jurisdiction over its or his person by the
Court of Common Pleas of Butler County, Ohio.
Item 21. Exhibits and Financial Statement Schedules
- ----------------------------------------------------
(a) See Index to Exhibits.
(b) See "BRIGHT FINANCIAL SERVICES, INC. FINANCIAL STATEMENTS"
(c) Fairness Opinion furnished as Appendix B to Proxy
Statement-Prospectus.
Item 22. Undertakings
- ----------------------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
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(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934;
and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide
such interim financial information.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other Items of the applicable form.
(6) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act") and is used in connection with an offering of
securities subject to Rule 415 will be filed as a part of an amendment
to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(7) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
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 registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such
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director, officer or controlling person in connection with the
securities being registered, the registrant 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 Securities Act and will be governed by the final
adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of
this Form, within one business day of receipt of such request and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hamilton, State of Ohio,
on June 1, 1995.
FIRST FINANCIAL BANCORP.
By:/s/ Stanley N. Pontius
-----------------------------------
Stanley N. Pontius
President and Chief Executive Officer
Date: June 1, 1995
- --------------------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
/s/ Stanley N. Pontius /s/ Richard E. Weinman
- -------------------------------------- -------------------------------------
Stanley N. Pontius, Director, President Richard E. Weinman, Exec. Vice
and Chief Executive Officer President, Chief Financial Officer,
Secretary and Treasurer
Date: June 1, 1995 Date: June 1, 1995
---------------------------------- ---------------------------------
/s/ Arthur W. Bidwell /s/ Paul S. Risser
- -------------------------------------- -------------------------------------
Arthur W. Bidwell, Director Paul S. Risser, Director
Date: June 1, 1995 Date: June 1, 1995
---------------------------------- ---------------------------------
/s/ Carl R. Fiora /s/ Lauren N. Patch
- -------------------------------------- -------------------------------------
Carl R. Fiora, Director Lauren N. Patch, Director
Date: June 1, 1995 Date: June 1, 1995
---------------------------------- ---------------------------------
/s/ F. Elden Houts /s/ Barry S. Porter
- -------------------------------------- -------------------------------------
F. Elden Houts, Director Barry S. Porter, Director
Date: June 1, 1995 Date: June 1, 1995
---------------------------------- ---------------------------------
/s/ Richard J. Fitton /s/ Barry Levey
- -------------------------------------- -------------------------------------
Richard J. Fitton, Director Barry Levey, Director
Chairman of the Board
Date: June 1, 1995 Date: June 1, 1995
---------------------------------- --------------------------------
II-7
<PAGE> 179
INDEX TO EXHIBITS
<TABLE>
Exhibit
Number Description
------ -----------
<CAPTION>
<S> <C>
2.1 Plan and Agreement of Merger between First
Financial Bancorp. and Bright Financial
Services, Inc. (Included as Appendix A in
the Proxy Statement-Prospectus)
5.* Opinion of Counsel
8.* Tax Opinion of Bingham Summers Welsh & Spilman
23.1* Consent of Ernst & Young LLP, Independent Auditors
for First Financial Bancorp.
23.2* Consent of Crowe, Chizek and Company, Independent
Auditors for Bright Financial Services, Inc.
23.3 Consent of Frost & Jacobs, Counsel for Registrant
(Incorporated in Exhibit 5)
23.4* Consent of Bingham Summers Welsh & Spilman
23.5* Consent of McDonald & Company
99.1 Fairness Opinion of McDonald & Co.
(Included as Appendix B in the Proxy
Statement-Prospectus.)
99.2* Bright's Form of Proxy
</TABLE>
* Electronically filed.
II-8
<PAGE> 1
EXHIBIT 5.--OPINION OF COUNSEL
June 1, 1995
First Financial Bancorp.
300 High Street
Hamilton, Ohio 45012-0476
Re: First Financial Bancorp.
FORM S-4 REGISTRATION STATEMENT
Gentlemen:
We are counsel for First Financial Bancorp., an Ohio corporation
(the "Company"), which is named as the registarnt in the Registration Statement
on Form S-4 which is being filed on or about June 1, 1995 with the Securities
and Exchange Commission for the purpose of registering under the Securities Act
of 1933, as amended (the "Act"), certain common shares, par value $8.00 per
share (the "Common Shares"), of the Company.
With respect to the Common Shares being registered pursuant to such
Registration Statement as filed and as it may be amended, it is our opinion
that the Common Shares, when issued and paid for pursuant to the Plan and
Agreement of Merger dated as of February 20, 1995 between First Financial
Bancorp. and Bright Financial Services, Inc., will be validly issued, fully
paid and non-assessable.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Frost & Jacobs
NG/gam
<PAGE> 1
EXHIBIT 8.--TAX OPINION OF BINGHAM SUMMERS WELSH & SPILMAN
June 1, 1995
Board of Directors
Bright Financial Services, Inc.
4 East Main Street
Flora, Indiana 46929
Board of Directors
First Financial Bancorp.
300 High Street
P.O. Box 476
Hamilton, Ohio 45012-0476
Re: Merger of Bright Financial Services, Inc.
with and into First Financial Bancorp.
Ladies and Gentlemen:
We have acted as special counsel to Bright Financial Services, Inc.,
an Indiana corporation registered as a bank holding company under the Bank
Holding Company Act of 1956 ("BFS"), in connection with the proposed merger of
BFS with and into First Financial Bancorp., an Ohio corporation registered as a
bank holding company under the Bank Holding Company Act of 1956, and a savings
and loan holding company under the Savings and Loan Holding Company Act
("FFB"), pursuant to the terms of the Plan and Agreement of Merger between
First Financial Bancorp. and Bright Financial Services, Inc., dated February
20, 1995 ("Merger Agreement"), as described in the Registration Statement on
Form S-4 to be filed by FFB with the Securities and Exchange Commission on June
1, 1995 ("Registration Statement").
This opinion is being rendered as required by Section 13 of the Merger
Agreement. All capitalized terms herein, unless otherwise specified, have the
meaning assigned to them in the Registration Statement.
In Connection with this opinion, we have relied on and have examined,
and we are familiar with originals or copies of,
<PAGE> 2
Board of Directors
June 1, 1995
Page 2
certified or otherwise identified to our satisfaction, the (i) Merger
Agreement, the (ii) Registration Statement, and (iii) such other documents as
we have deemed necessary or appropriate in order to enable us to render the
opinions below. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such copies. This opinion is subject to
the receipt by us prior to the effective time of the Merger of certain written
representations and covenants of BFS and FFB, the accuracy and truthfulness of
which we shall assume and rely upon without investigation.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant.
Based upon and subject to the foregoing, provided that the merger of
BFS with and into FFB qualifies as a statutory merger under applicable state
law, and assuming that (i) after the transaction, FFB, as successor of BFS,
will hold substantially all of its assets, and that (ii) in the transaction,
the BFS shareholders will exchange an amount of stock constituting majority
control of BFS solely for FFB Common Stock, we are of the opinion that the
Merger will, under current law, constitute a reorganization within the meaning
of Section 368(a)(1)(A) of the Code and that BFS and FFB will each be a party
to the reorganization within the meaning of Section 368(b) of the Code. As a
reorganization under Section 368(a)(1)(A) of the Code, the Merger will have the
following federal income tax consequences for BFS shareholders, BFS, and FFB:
1. No gain or loss will be recognized by BFS
shareholders who exchange all of their BFS Common Stock for FFB Common
Stock pursuant to the Merger, except to the extent of gain or loss
attributable to any cash received in lieu of receipt of a fractional
share of FFB Common Stock.
<PAGE> 3
Board of Directors
June 1, 1995
Page 3
2. The basis of FFB Common Stock (including deemed
fractional share interests) received by BFS shareholders who exchange
all of their BFS Common Stock for FFB Common Stock will be the same as
the basis of the BFS Common Stock surrendered in exchange therefor.
3. The holding period of the FFB Common Stock received
by the BFS shareholders (including deemed fractional share interests)
who exchange all of their BFS Common Stock for FFB Common Stock will
include the period during which the BFS Common Stock was held,
provided the BFS Common Stock was held as a capital asset on the date
of the exchange.
4. Where a cash payment is received by a BFS shareholder
in lieu of fractional shares of FFB Common Stock, the cash payment
will be treated as a distribution in redemption of the deemed
fractional share interest by FFB, subject to the provisions and
limitations of Section 302 of the Code. Where such exchange qualifies
under Section 302(a) of the Code, such shareholder will recognize a
capital gain or loss provided that the BFS Common Stock was held as a
capital asset on the date of the Merger.
5. Any BFS shareholder who perfects dissenter's rights
and receives solely cash in exchange for such shareholder's BFS Common
Stock shall be treated as having received such cash as a distribution
in redemption of the BFS Common Stock subject to the provisions and
limitations of Section 302 of the Code. If, as a result of such
distribution, such BFS shareholder owns no FFB Common Stock, either
directly or through the application of the constructive ownership
rules of Section 318(a) of the Code, the redemption will be a complete
termination of interest within the meaning of Section 302(b)(3) of the
Code and the cash will be treated as a distribution in full payment
and exchange for the BFS Common Stock as provided in Section 302(a) of
the Code. Under Section 1001 of the Code, gain or loss (subject to
any applicable limitations of the Code) will be realized and
recognized by such BFS shareholder in an amount equal to the
difference between the redemption price and the adjusted basis of the
BFS Common Stock surrendered in exchange therefor.
<PAGE> 4
Board of Directors
June 1, 1995
Page 4
6. No gain or loss will be recognized by BFS or FFB in
connection with the transaction.
7. The basis of the assets of BFS acquired by FFB in the
Merger will be the same as the basis of such assets in the hands of
BFS immediately prior to the Merger.
The opinions expressed herein represent our conclusions as to the
application of existing federal income tax law to the facts as presented to us,
and we give no assurance that changes in such law or any interpretation thereof
will not affect the opinions expressed by us. Moreover, there can be no
assurance that these opinions will not be challenged by the Internal Revenue
Service or that a court considering the issues will not hold contrary to such
opinions. We express no opinion on the treatment of this transaction under the
income tax laws of any state or other taxing jurisdictions. We assume no
obligation to advise of any changes concerning the above, whether or not deemed
material, which may hereafter come or be brought to our attention.
Except as set forth above, we express no opinion as to the tax
consequences to any party, whether federal, state, local or foreign, of the
Merger or of any transactions related to the Merger or contemplated by the
Merger Agreement. This opinion is addressed to you and is being furnished to
you solely for your use in connection with the transaction that is the subject
of the Merger Agreement. We assume no professional responsibility to any other
person or entity. Accordingly, the opinions expressed herein are not to be
utilized or quoted by, delivered or disclosed to, in whole or in part, any
other person, corporation, entity or governmental authority, or for any other
purpose, without the prior written consent of this Firm. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement.
Sincerely,
BINGHAM SUMMERS WELSH & SPILMAN
<PAGE> 1
EXHIBIT 23.1--CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-4 and related Prospectus of First
Financial Bancorp. for the registration of 540,000 shares of its common stock
and to the incorporation by reference therein of our report dated January 20,
1995, with respect to the consolidated financial statements of First Financial
Bancorp. incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1994, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Cincinnati, Ohio
June 1, 1995
<PAGE> 1
EXHIBIT 23.2--CONSENT OF CROWE, CHIZEK AND COMPANY, INDEPENDENT AUDITORS
We consent to the use of our report dated February 2, 1995 on the 1994
consolidated financial statements of Bright Financial Services, Inc., which are
included in this Registration Statement on Form S-4. We also consent to the
reference to us under the headings "Experts" in the Prospectus, which is part
of this Registration Statement.
CROWE, CHIZEK AND COMPANY
Indianapolis, Indiana
June 1, 1995
<PAGE> 1
EXHIBIT 23.4--CONSENT OF BINGHAM SUMMERS WELSH & SPILMAN
We hereby consent to the use in this Registration Statement of our
opinions as filed as Exhibit 8 and to the reference to us under the heading
"Legal Matters" in the Proxy Statement-Prospectus.
BINGHAM SUMMERS WELSH & SPILMAN
Indianapolis, Indiana
June 1, 1995
<PAGE> 1
EXHIBIT 23.5--CONSENT OF MCDONALD & COMPANY SECURITIES, INC.
We consent to the inclusion in this Registration Statement on Form S-4
by First Financial Bancorp. of the form of our opinion set forth as Appendix B
to the Proxy Statement-Prospectus, which is part of this Registration
Statement, and to the summarization thereof in the Proxy Statement-Prospectus
under the caption "Opinions of McDonald & Company Securities, Inc."
MCDONALD & COMPANY SECURITIES, INC.
Cleveland, Ohio
June 1, 1995
<PAGE> 1
EXHIBIT 99.2--FORM OF PROXY
REVOCABLE PROXY
BRIGHT FINANCIAL SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF BRIGHT FINANCIAL SERVICES, INC.
The undersigned shareholder of Bright Financial Services, Inc., an
Indiana Corporation, ("Bright") hereby nominates, constitutes and appoints
________________, ________________ and ________________, or any one of them, as
proxy or proxies for the undersigned, each with full power of substitution and
resubstitution, to vote all of the shares of Bright which the undersigned is
entitled to cast at the Special Meeting of the Shareholders of Bright to be
held at 2:00 p.m., local time, on September 12, 1995, at the Bright Main
Office, 4 East Main Street, Flora, Indiana 46929 and at any adjournments
thereof (the "Special Meeting"), on the following proposals, all of which are
described in the accompanying Proxy Statement-Prospectus:
1. Approval of the Plan and Agreement of Merger.
[] FOR [] AGAINST [] ABSTAIN
2. Adjournment of the Special Meeting in the event that a
sufficient number of votes necessary to approve the Plan and
Agreement of Merger at the Special Meeting is not received.
[] FOR [] AGAINST [] ABSTAIN
3. In their discretion, upon such other matters as may properly
come before the Special Meeting.
This Revocable Proxy will be voted as directed by the undersigned
shareholder. If no direction is given, this Revocable Proxy will be voted FOR
proposals 1 through 2.
All proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Special Meeting of Bright Financial Services, Inc.
and of the accompanying Proxy Statement is hereby acknowledged.
This Revocable Proxy may be revoked by the undersigned at any time
before it is exercised by (i) executing and delivering to Bright a later dated
proxy, (ii) attending the Special Meeting and voting in person, or (iii) giving
written notice of revocation to the Secretary of Bright.
NOTE: Please sign your name exactly as it appears on your stock
certificate(s). Joint accounts require only one signature. If you are signing
this Proxy as an attorney, administrator, agent, corporation, officer,
executor, trustee, or guardian, etc., please add your full title to your
signature.
_______________________________________________________
Signature
_______________________________________________________
Print Name
_______________________________________________________
Address
_______________________________________________________
Dated:___________________, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE
DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED FOR MAILING IN THE U.S.A.
