<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-13585
NATIONAL CITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1632155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
227 Main Street, P.O. Box 868, Evansville, Indiana 47705-0868
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 812-464-9800
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $3.33 1/3 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
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Based on the closing sales price of February 28, 1995, the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$137,174,810.
The number of shares outstanding of the registrant's common stock, $3.33 1/3
par value was 3,658,650 at February 28, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for
the year ended December 31, 1994. (Part I, Part II, and Part
IV)
(2) Portions of the Registrant's Proxy Statement for the Annual
Shareholders' Meeting to be held April 18, 1995. (Part III)
Exhibit Index appears on page 17.
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NATIONAL CITY BANCSHARES, INC.
1994 FORM 10-K ANNUAL REPORT
Table of contents
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders . 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . 8
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . 8
PART III
Item 10. Directors and Executive Officers of the Registrant . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 11
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 11
Item 13. Certain Relationships and Related Transactions . . . . 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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FORM 10-K
NATIONAL CITY BANCSHARES, INC.
December 31, 1994
PART I
ITEM 1. BUSINESS
National City Bancshares, Inc., (hereinafter referred to as the "Corporation"),
is an Indiana Corporation organized in 1985 to engage in the business of a bank
holding company. Based in Evansville, Indiana, the Corporation has ten wholly
owned subsidiaries, nine commercial banks serving nineteen towns and cities
with a total of twenty-eight banking centers and a leasing corporation. Each
subsidiary, its locations, number of offices, year founded, and date of merger
is shown below.
<TABLE>
<CAPTION>
Subsidiary Number of Year Date of
Principal and Other Cities Offices Founded Merger
<S> <C> <C> <C>
The National City Bank of Evansville 10 1850 May 6, 1985
Evansville, Chandler, and Newburgh,
Indiana
The Peoples National Bank of Grayville 1 1937 May 16, 1988
Grayville, Illinois
The Farmers and Merchants Bank 1 1896 January 30, 1989
Fort Branch, Indiana
First Kentucky Bank 3 1916 November 30, 1990
Sturgis and Poole, Kentucky
Lincolnland Bank 5 1904 December 17, 1993
Dale, Chrisney, Grandview,
Hatfield, and Rockport, Indiana
The Bank of Mitchell 3 1882 December 17, 1993
Mitchell and Bedford, Indiana
Pike County Bank 1 1900 December 17, 1993
Petersburg, Indiana
The Spurgeon State Bank 2 1921 December 17, 1993
Spurgeon and Arthur, Indiana
The State Bank of Washington 2 1910 December 17, 1993
Washington and Odon, Indiana
NCBE Leasing Corp. 1 1994 November 1, 1994
Evansville, Indiana
</TABLE>
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The Corporation's subsidiary banks provide a wide range of financial services
to the communities they serve in Southwestern Indiana, Western Kentucky and
Southeastern Illinois. These services include various types of deposit
accounts; safe deposit boxes; safekeeping of securities; automated teller
machines; consumer, mortgage, and commercial loans; mortgage loan sales and
servicing; letters of credit; accounts receivable management (financing,
accounting, billing and collecting); and complete personal and corporate trust
services. All banks are members of the Federal Deposit Insurance Corporation.
The Corporation's nonbank subsidiary, NCBE Leasing Corp., operates as a full
service equipment and real property leasing company offering its services to
all commercial clients of the Corporation's subsidiary banks.
At December 31, 1994, the Corporation and its subsidiaries had 374 full-time
equivalent employees. The subsidiaries provide a wide range of employee
benefits and consider employee relations to be excellent.
COMPETITION
The Corporation has active competition in all areas in which it presently
engages in business. Each subsidiary bank competes for commercial and
individual deposits and loans with commercial banks, savings and loan
associations, credit unions connected with local businesses and other
non-banking institutions. The Corporation's leasing company competes with bank
and nonbank leasing companies as well as finance subsidiaries of major
equipment vendors.
FOREIGN OPERATIONS
The Corporation and its subsidiaries have no foreign branches or significant
business with foreign obligers or depositors.
REGULATION AND SUPERVISION
The Corporation, as a bank holding company registered under the Bank Holding
Company Act of 1956, as amended ("Act"), is subject to regulation by the Board
of Governors of the Federal Reserve System ("Board"). Under the Act, the
Corporation is required to obtain the prior approval of the Board before
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any bank which is not already majority owned. In addition, the
Corporation is prohibited under the Act, with certain exceptions, from
acquiring direct or indirect ownership or control of 5% or more of the voting
shares of any company which is not a bank. The Corporation may engage in, and
may own shares of companies engaged in, certain activities found by the Board
to be so closely related to banking as to be a proper incident thereto. The
Act prohibits the acquisition by a bank holding company of shares of a bank
located outside the state in which the operations of its banking subsidiaries
are principally conducted, unless such an acquisition is specifically
authorized by statute of
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the state in which the bank to be acquired is located. The Corporation is
required by the Act to file annual reports of its operations with the Board and
such additional information as they may require pursuant to the Act, and the
Corporation and its subsidiaries are subject to examination by the Board.
Further, under the Act and the regulations of the Board, the Corporation and
its subsidiaries are prohibited from engaging in certain tie-in arrangements
with respect to any extension of credit or provision of property or services.
The Board has adopted "capital adequacy guidelines" for its use in examining
and supervising bank holding companies. A bank holding company's ability to
pay dividends and expand its business through the acquisition of additional
subsidiaries can be restricted if its capital falls below levels established by
these guidelines.
The primary supervisory authority of The National City Bank of Evansville and
The Peoples National Bank of Grayville is the Comptroller of the Currency, who
regularly examines such areas as reserves, loans, investments, management
practices, and other aspects of bank operations. The Comptroller of the
Currency has the authority to prevent a national bank from engaging in an
unsafe or an unsound practice in conducting its business. The payment of
dividends, depending upon the financial condition of a bank, could be deemed
such a practice. In addition, both banks are members of, and subject to
regulation by, the Federal Deposit Insurance Corporation.
As a state bank, First Kentucky Bank is supervised and regulated by the
Commonwealth of Kentucky Department of Financial Institutions. The Farmers and
Merchants Bank, Lincolnland Bank, The Bank of Mitchell, Pike County Bank, The
Spurgeon State Bank, and The State Bank of Washington are supervised and
regulated by the State of Indiana Department of Financial Institutions. In
addition, all seven banks are members of, and subject to regulation by, the
Federal Deposit Insurance Corporation.
Federal and state banking laws and regulations govern, among other things, the
scope of the bank's business, the investments it may make, the reserves against
deposits it must maintain, loans the bank makes and collateral it takes,
activities with respect to mergers and consolidations and the establishment of
branches.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") was enacted on August 9, 1989, primarily in an attempt to address
problems in the savings and loan industry. However, the Act has had a
substantial effect on the environment in which commercial banks operate. The
annual assessment rates for banks insured by the Federal Deposit Insurance
Corporation were to increase from .083% of deposits to .12% in 1990, and to
.15% in 1991. However, such rates were increased by the FDIC to .195%
effective January 1, 1991 and .23% effective July 1, 1991.
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The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
was enacted in 1991. Among other things, FDICIA, requires federal bank
regulatory authorities to take "prompt corrective action" with respect to banks
that do not meet minimum capital requirements. For these purposes, FDICIA
established five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. The Corporation and each of the Corporation's Banks
currently exceed the regulatory definition of a "well capitalized" financial
institution.
NCBE Leasing Corp. is regulated by the Board of Governors of the Federal
Reserve System.
STATISTICAL DISCLOSURE
The statistical disclosure on the Corporation and its subsidiaries, on a
consolidated basis, included on pages 1, 3 through 13 and 32 of the
Corporation's Annual Report to Shareholders for the fiscal year ended December
31, 1994, is hereby incorporated by reference herein.
ITEM 2. PROPERTIES
The net investment of the Corporation and its subsidiaries in real estate and
equipment at December 31, 1994, was $10,504,126. The Corporation's offices are
located in a building owned by The National City Bank of Evansville
(hereinafter referred to as the Bank), in which the Bank's main office is
located. The main office of the Bank is located at 227 Main Street in downtown
Evansville, Indiana. This building is owned in fee by the Bank. The other
subsidiary banks, all branches and the leasing company are located on premises
either owned or leased. None of the property is subject to any major
encumbrance.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
Pages 1 and 32 of the Corporation's Annual Report to Shareholders for the
fiscal year ended December 31, 1994, is hereby incorporated by reference
herein. Dividends are restricted by earnings and the need to maintain adequate
capital. Management intends to continue its current dividend policy subject to
these restrictions.
ITEM 6. SELECTED FINANCIAL DATA
Page 1 of the Corporation's Annual Report to Shareholders for the fiscal year
ended December 31, 1994, is hereby incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Pages 1, 3 through 13 and 32 of the Corporation's Annual Report to Shareholders
for the fiscal year ended December 31, 1994, are incorporated by reference
herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 15 through 29 of the Corporation's Annual Report to Shareholders for the
fiscal year ended December 31, 1994, are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Board of Directors approved the appointment of McGladrey & Pullen, LLP, as
independent auditors to audit the financial statements of the Corporation and
its subsidiaries beginning with the year 1993. Gaither Rutherford & Co., LLP,
formerly Gaither Koewler Rohlfer Luckett & Co., ("Gaither") audited the books
and records of the Corporation and its subsidiaries from 1985 through 1992.
The Board of Directors had determined it to be in the best interest of the
Corporation to change independent accountants for 1993. This change was
ratified by the Corporation's shareholders at the 1993 annual meeting.
The report on the financial statements audited by Gaither in 1992 did not
contain any adverse opinions or any disclaimers of opinions, nor were they
qualified or modified as to uncertainty, audit scope or accounting reasons.
Further, there have been no disagreements between Gaither and the Corporation.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Corporation
This information under the heading "Election of Directors and Information with
Respect to Directors and Officers" on pages 3 to 5 of the Corporation's Proxy
Statement for its Annual Meeting of Shareholders to be held April 18, 1995, is
hereby incorporated by reference herein.
(b) Executive Officers of the Corporation
The Executive Officers of the Corporation, some of whom are also Executive
Officers of The National City Bank of Evansville (hereinafter referred to as
the "Bank") are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
<S> <C> <C>
John D. Lippert 61 Chairman of the Board and Chief Executive Officer of
the Corporation since 1992. President of the Corporation
from 1985 to 1993. Director of the Corporation since 1985.
Chairman of the Board of the Bank since 1992 and Chief
Executive Officer from 1989 to 1994. President of the Bank
from 1984 to 1993 and a Director since 1981.
Robert A. Keil 51 President and Director of the Corporation since 1993.
Executive Vice President of the Corporation from 1991 to
1993. Assistant Secretary and Assistant Treasurer of the
Corporation from 1985 to 1993. Executive Vice President
of the Bank from 1991 to 1993 and Senior Vice President
from 1987 to 1991.
</TABLE>
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<TABLE>
<CAPTION>
NAME AGE OFFICE AND BUSINESS EXPERIENCE
<S> <C> <C>
Benjamin W. Bloodworth 59 Executive Vice President and Assistant Secretary and
Assistant Treasurer of the Corporation since 1993. Senior
Vice President of the Corporation from 1989 to 1993.
Executive Vice President of the Bank since 1991. Senior
Vice President of the Bank from 1980 to 1991. Director
of The Peoples National Bank of Grayville from 1988 to
January 1994 and from January 1995 to present. Director
of The Farmers and Merchants Bank from 1989 to 1993.
Director of Lincolnland Bank since 1994. Director of The
State Bank of Washington from 1994 to January 1995.
Michael F. Elliott 43 Executive Vice President of the Corporation since 1993.
Director of the Corporation since 1994. President,
Chief Executive Officer, and Director of the Bank since 1994.
Chairman of the Board of The State Bank of Washington since
1989, Chief Executive Officer and Director of The State Bank of
Washington from 1982 to 1994. Chairman of the Board from 1990
to December 1993 and President and Chief Executive Officer
from 1988 to December 1993 of Sure Financial Corporation.
Harold A. Mann 56 Secretary and Treasurer of the Corporation since 1985.
Senior Vice President and Controller of the Bank from
1984 to January 1995. Director of Poole Deposit Bank
from 1986 to 1990 and for 1994.
Nancy G. Epperson 50 Human Resources Director for the Corporation since 1994.
Personnel Director of the Bank from 1985 to January
1995.
Byron W. Jett 52 Senior Vice President of the Corporation since January
1995. Senior Vice President of the Bank from December
1994 to January 1995 and Vice President of the Bank
until December 1994.
</TABLE>
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ITEM 11. EXECUTIVE COMPENSATION
The information under the heading "Compensation of Executive Officers" on pages
6 through 10 of the Corporation's Proxy Statement for its Annual Meeting of
Shareholders to be held April 18, 1995, is hereby incorporated by reference
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information under the heading "Voting Securities" on pages 1 through 3 of
the Corporation's Proxy Statement for its Annual Meeting of Shareholders to be
held April 18, 1995, is hereby incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Transactions with Management" on page 11 of
the Corporation's Proxy Statement for its Annual Meeting of Shareholders to be
held April 18, 1995, is hereby incorporated by reference herein.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation and its
subsidiaries, included on pages 15 through 29 of the Corporation's Annual
Report to Shareholders for the fiscal year ended December 31, 1994, are hereby
incorporated by reference:
Independent Auditor's Report
Consolidated Statements of Financial Position, at
December 31, 1994 and 1993
Consolidated Statements of Income, for years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity,
for years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows, for years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or not required or
because the required information is included in the consolidated financial
statements or related notes.
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EXHIBITS
The following exhibits are submitted herewith or incorporated by reference:
2(i) Plan of Reorganization and Merger Agreement by and between
Registrant and White County Bank dated December 12, 1994
2(ii) Merger Agreement by and between Registrant and United
Financial Bancorp, Inc. dated December 28, 1994
3 Articles of Incorporation and By-Laws
(i) A copy of the Amended Articles of Incorporation (as
amended through March 21, 1995) of the Registrant was
filed with the Commission as an exhibit to the Annual
Report on Form 10-K for year ended December 31, 1993,
and is herein incorporated by reference
(ii) By-laws, as amended
13 Annual Report to Shareholders for the year ended
December 31, 1994
21 Subsidiaries of the Registrant
23 Consent of Experts and Counsel
A Consent of McGladrey & Pullen, LLP
B Consent of Gaither Rutherford & Co., LLP
C Consent of Geo S. Olive & Co., LLC
REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the dates indicated.
NATIONAL CITY BANCSHARES, INC.
By /s/ JOHN D. LIPPERT 3/21/95
John D. Lippert Date
Chairman of the Board and
Chief Executive Officer
By /s/ ROBERT A. KEIL 3/21/95
Robert A. Keil Date
President and
Chief Financial Officer
By /s/ HAROLD A. MANN 3/21/95
Harold A. Mann Date
Secretary and Treasurer
(Chief Accounting Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ DONALD B. COX 3/21/95
Donald B. Cox Date
Director
/s/ MICHAEL F. ELLIOTT 3/21/95
Michael F. Elliott Date
Director
/s/ SUSANNE R. EMGE 3/22/95
Mrs. N. Keith Emge Date
Director
/s/ MICHAEL D. GALLAGHER 3/21/95
Michael D. Gallagher Date
Director
/s/ DONALD G. HARRIS 3/22/95
Donald G. Harris Date
Director
/s/ EDGAR P. HUGHES 3/21/95
Edgar P. Hughes Date
Director
/s/ R. EUGENE JOHNSON 3/21/95
R. Eugene Johnson Date
Director
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/s/ ROBERT A. KEIL 3/21/95
Robert A. Keil Date
Director
/s/ JOHN D. LIPPERT 3/21/95
John D. Lippert Date
Director
/s/ JOHN LEE NEWMAN 3/21/95
John Lee Newman Date
Director
/s/ RONALD G. REHERMAN 3/22/95
Ronald G. Reherman Date
Director
/s/ LAURENCE R. STEENBERG 3/21/95
Laurence R. Steenberg Date
Director
/s/ C. WAYNE WORTHINGTON 3/21/95
C. Wayne Worthington Date
Director
/s/ GEORGE A. WRIGHT 3/21/95
George A. Wright Date
Director
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
2(i) Plan of Reorganization and Merger
Agreement by and between
Registrant and White County Bank
dated December 12, 1994
2(ii) Merger Agreement by and between
Registrant and United Financial
Bancorp, Inc. dated December 28,
1994
3(ii) By-laws, as amended
13 Annual Report to Shareholders for
the year ended December 31, 1994
21 Subsidiaries of the Registrant
23 Consent of Experts and Counsel
A Consent of McGladrey & Pullen, LLP
B Consent of Gaither Rutherford & Co., LLP
C Consent Geo. S. Olive & Co., LLC
27 Financial Data Schedule
</TABLE>
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EXHIBIT 2(i)
AGREEMENT AND PLAN OF REORGANIZATION
This is an AGREEMENT dated December 12, 1994, between National City
Bancshares, Inc. (hereinafter called "NCBE") and White County Bank (hereinafter
called "White County").
WITNESSETH:
NCBE is a corporation duly organized under the laws of the State of
Indiana. Its principal office is located at 227 Main Street, Evansville,
Vanderburgh County, Indiana. As of June 30, 1994, NCBE had authorized capital
stock consisting of 5,000,000 shares of common stock, par value $3.33 1/3 per
share, ("NCBE Common Stock") of which a total of 3,693,254 shares were issued
and outstanding and none were shares of treasury stock owned by NCBE. NCBE
owns all of the outstanding capital stock of The National City Bank of
Evansville, Evansville, Indiana; Poole Deposit Bank, Poole, Kentucky; The
Peoples National Bank of Grayville, Grayville, Illinois; The Farmers and
Merchants Bank, Fort Branch, Indiana; Farmers State Bank, Sturgis, Kentucky;
Lincolnland Bank, Dale, Indiana; The State Bank of Washington, Washington,
Indiana; The Spurgeon State Bank, Spurgeon, Indiana; Pike County Bank,
Petersburg, Indiana; and The Bank of Mitchell, Mitchell, Indiana (hereinafter
referred to as "NCBE Banks"); and NCBE Leasing Corp., Evansville, Indiana.
White County is an Illinois state banking corporation duly organized
under the laws of the State of Illinois. Its principal office is located at
215 E. Main Street, Carmi, Illinois 61821. As of June 30, 1994, White County
had authorized capital stock consisting of 9,600 authorized shares of common
stock, $100 par value per share ("White County Common Stock"), of which 9,600
shares were issued and outstanding and none were shares of treasury stock owned
by White County.
At least a majority of the entire Board of Directors of NCBE and at
least a majority of the entire Board of Directors of White County,
respectively, have approved the entering into of this Agreement and have
authorized the execution and delivery of this Agreement. The Boards of
Directors of NCBE and White County have determined that it is in the best
interests of their respective corporations and Stockholders that White County
become a wholly owned subsidiary
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corporation of NCBE. After the execution of this Agreement, NCBE will
undertake to cause the formation of a new banking corporation to be organized
under the laws of the State of Illinois ("New Bank"), and thereafter NCBE and
White County will cause, subject to the terms and conditions set forth in this
Agreement, the merger of White County and the New Bank, in accordance with the
terms set forth in the Merger Agreement attached hereto and designated Appendix
A (the "Merger Agreement"). From and after the time the merger of White County
and New Bank shall become effective, the "Merger" and as and when required by
this Agreement and the Merger Agreement, NCBE will issue shares of NCBE Common
Stock in exchange for all of the issued and outstanding shares of White County
Common Stock.
In consideration of mutual covenants and premises herein contained,
NCBE and White County hereby make this Agreement and prescribe the terms and
conditions of the Merger and the mode of carrying the Merger into effect as
follows:
1. Formation of New Bank. As soon as practicable after the date hereof,
NCBE shall commence formation of the New Bank, all of the outstanding
shares of which will be acquired by NCBE prior to the merger of White
County and the New Bank. NCBE will proceed with formation of the New
Bank with due diligence. The New Bank will merge with White County
pursuant to the Merger Agreement. Upon consummation of the Merger,
Stockholders of White County will be entitled to receive as
consideration for their shares of White County shares of NCBE in
accordance with the provisions regarding the exchange of shares set
forth in the Merger Agreement.
2. The Merger Agreement. Promptly following the commencement of the
corporate existence of the New Bank, White County and NCBE shall enter
into, and NCBE shall cause the New Bank to enter into, the Merger
Agreement.
3. Discussions with Others. White County or its officers, directors or
agents will not solicit inquiries or proposals or initiate any
discussions or negotiations leading to any acquisition or purchase of
all or a substantial portion of the assets or stock of White
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County or any merger or consolidation of White County with any third
party without the prior written consent from NCBE, so long as this
Agreement is pending.
4. Undertakings of the Parties. NCBE and White County further agree as
follows:
(a) This Agreement and the Merger Agreement shall be submitted to
the Stockholders of White County for approval and adoption at
a special meeting of Stockholders to be called and held in
accordance with law and the Articles of Incorporation and
Bylaws of White County.
(b) NCBE and White County will cooperate in the preparation by
NCBE of the application to the Board of Governors of the
Federal Reserve System (the "Board") under the appropriate
provisions of Section 3 of the Bank Holding Company Act of
1956, as amended, and to any other state or federal regulatory
agency which may be required to facilitate the Merger. NCBE
and White County will cooperate in the preparation of proxy
and registration statements under the federal and state
securities laws so as to facilitate the exchange of shares as
contemplated by this Agreement and the Merger Agreement.
(c) Each party will assume and pay all of its fees and expenses
incurred by it incident to the negotiation, preparation and
execution of this Agreement, obtaining of the requisite
regulatory and shareholder consents and approvals and all
other acts incidental to, contemplated by or in pursuance of
this Agreement. NCBE shall promptly prepare and file at no
expense to White County: (i) any and all required regulatory
applications necessary in connection with the transactions
contemplated by this Agreement; and (ii) an S-4 Registration
Statement to be filed with the Securities and Exchange
Commission to register the shares of NCBE Common Stock to be
issued in connection with the transactions contemplated by
this Agreement. Such registration statement will not cover
resale's by any persons who may be considered "underwriters"
under Rule 145(c) of the Securities Act of 1933, as amended
(the "1933 Act"). NCBE will also take any action required to
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be taken under any applicable state securities or "Blue Sky"
laws in connection with the Merger.
(d) All information furnished by one party to another party in
connection with this Agreement and the transactions
contemplated hereby will be kept confidential by such other
party and will be used only in connection with this Agreement
and the transactions contemplated hereby, except to the extent
that such information: (i) is already known to such other
party when received; (ii) thereafter becomes lawfully
obtainable from other sources; or (iii) is required to be
disclosed in any document filed with the Securities and
Exchange Commission, the Board, or any other governmental
agency or authority. In the event that this Agreement is
terminated, each party will return to the other party or
destroy any documents received by it from the other party that
contain any such confidential information.
(e) After (i) receipt of the Board's prior approval of NCBE's
acquisition of White County; (ii) the approval of the
Stockholders of White County; and (iii) the regulatory waiting
period(s) have expired, NCBE shall designate the date as of
which NCBE desires the Merger to become effective and the time
the Merger shall become effective shall occur at the time and
on the date so designated. However, any date so specified
shall not be later than either (a) the first of the month
immediately following the month in which the last of the
events described above (i-iii) occurs if said event occurs
before the twenty-first day of such month or (b) the first day
of the second month immediately following such month if the
last of the events described above occurs after the twentieth
day of such month.
(f) Subject to the terms and conditions of this Agreement, NCBE
and White County each agree that, subject to applicable laws
and to the fiduciary duties of its Directors, each will
promptly take or cause to be taken all action, and promptly do
or cause to be done all things necessary, proper or advisable
under applicable laws
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and regulations to consummate and make effective the Merger
and other transactions contemplated by this Agreement.
(g) As soon as practicable following the time the Merger shall
become effective, employees of White County shall be entitled
to participate in all employee benefit plans of NCBE. For
purposes of eligibility and vesting in the NCBE Employees'
Savings and Profit Sharing Plan, employees of White County
will be given credit for their years of service as employees
of White County. For purposes of the NCBE Employees' Plan for
Pensions will be subject to all eligibility and vesting
provisions of such plan, including years of service, without
credit for service as an employee of White County.
(h) White County shall, prior to the time the Merger shall become
effective, take such actions as shall be necessary or
desirable to cause the White County Employee Stock Ownership
Plan (the "ESOP") to be terminated at or after the effective
date of Merger.
(i) NCBE undertakes to cause, immediately after the effective
date of the Merger, the continuance as Directors of White
County, all those persons serving as Directors immediately
prior to the effective time of the Merger, plus one additional
person to be named by NCBE will be added to the Board of
Directors of White County.
(j) NCBE will maintain "current public information" within the
meaning of Rule 144 for three (3) years following the
effective date.
5. Dissenting Stockholders. Holders of White County Common Stock who do
not vote their shares in favor of the Merger and otherwise comply in
all respects to perfect dissenters' rights, will be entitled to
dissenters' or appraisal rights, if any, pursuant to and solely upon
strict compliance with, the applicable provisions of Illinois law.
6. Tax Opinion. NCBE and White County, for the benefit of their
Stockholders shall obtain a written opinion of NCBE's counsel, Werner
& Blank Co., L.P.A., to the effect that:
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(a) The statutory merger of New Bank with and into White County
will constitute a reorganization within the meaning of Section
368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code;
(b) No gain or loss will be recognized by White County or NCBE as
a consequence of the transactions herein contemplated;
(c) No gain or loss will be recognized by the Stockholders of
White County on the exchange of their shares of White County
Common Stock for shares of NCBE Common Stock (disregarding for
this purpose any cash received for fractional share interests
to which they may be entitled);
(d) The federal income tax basis of the NCBE Common Stock received
by the Stockholders of White County for their shares of White
County Common Stock will be the same as the federal income tax
basis of the White County Common Stock surrendered in exchange
therefor; and
(e) The holding period of the NCBE Common Stock received by a
shareholder of White County for shares of White County Common
Stock will include the period for which the White County
Common Stock exchanged therefor was held, provided the
exchanged White County Common Stock was held as a capital
asset by such shareholder on the date of the exchange.
7. Representations and Warranties of NCBE. NCBE represents and warrants
to White County as follows:
(a) NCBE is a corporation duly organized and validly existing
under the laws of the State of Indiana, is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business in the State of
Indiana, together with all other jurisdictions where it is
both required to so qualify and the failure to so qualify
would have material and adverse consequences to NCBE. NCBE
has full power and authority (including all licenses,
franchises, permits and other governmental authorizations
which are legally required) to
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engage in the businesses and activities now conducted by it.
As of June 30, 1994, the authorized capital stock of NCBE
consisted of 5,000,000 shares of common stock, par value $3.33
1/3 per share of which a total of 3,693,254 shares were issued
and outstanding and no shares were held by NCBE as treasury
stock. All of said shares of capital stock are fully paid and
nonassessable and are not issued in violation of the
preemptive rights of any shareholder.
(b) NCBE has furnished to White County copies of the following
financial statements relating to NCBE and its consolidated
subsidiaries: (i) the audited Consolidated Balance Sheets of
NCBE as of December 31, 1993, and 1992, and the Consolidated
Statements of Income, Stockholders' Equity and Statements of
Cash Flows for the three years ended December 31, 1993, 1992
and 1991, together with the notes thereto; and (ii) the
unaudited Consolidated Balance Sheet of NCBE as of June 30,
1994, and the unaudited Consolidated Statements of Income and
Stockholders' equity for the period then ended. Each of the
aforementioned financial statements was prepared in accordance
with Generally Accepted Accounting Principles, consistently
applied and is true and correct in all material respects and
together present fairly the consolidated financial position
and results of operations of NCBE as of the dates and for the
periods therein set forth (subject, in the case of such
interim financial statements, to normal year-end audit
adjustments). Such financial statements do not, as of the
dates thereof, include any material asset or omit any material
liability, absolute or contingent, or other fact, the
inclusion or omission of which renders such financial
statements, in light of the circumstances under which they
were made, misleading in any material respect. Since December
31, 1993, there has not been any material adverse change in
the financial condition, results of operations, business or
prospects of NCBE and its subsidiaries on a consolidated
basis.
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(c) The Board of Directors of NCBE has authorized execution of
this Agreement and the Merger Agreement and approved the
merger of the New Bank and White County as contemplated herein
and therein. NCBE has all requisite power and authority to
enter into this Agreement and the Merger Agreement and NCBE
has the authority to consummate the transactions contemplated
hereby. This Agreement constitutes the valid and legally
binding obligation of NCBE and this Agreement and the
consummation of the transactions contemplated herein have been
duly authorized and approved on behalf of NCBE by all
requisite corporate action. Provided the required approvals
are obtained from the Board, neither the execution and
delivery of this Agreement or the Merger Agreement nor the
consummation of the Merger will conflict with, result in the
breach of, constitute a default under or accelerate the
performance provided by the terms of any law, or any rule or
regulation of any governmental agency or authority or any
judgment, order or decree of any court or other governmental
agency to which NCBE may be subject, any contract, agreement
or instrument to which NCBE is a party or by which NCBE is
bound or committed, or the Articles of Incorporation or Bylaws
of NCBE, or constitute an event which with the lapse of time
or action by a third party, could, to the best of NCBE's
knowledge, result in the default under any of the foregoing or
result in the creation of any lien, charge or encumbrance upon
any of the assets or properties of NCBE or upon any of the
stock of NCBE, except, however, in the case of contracts,
agreements or instruments, such defaults, conflicts or
breaches which either (i) will be cured or waived prior to the
time the Merger becomes effective, or (ii) if not so cured or
waived would not, in the aggregate, have any material adverse
effect on the financial condition, results of operations or
business of NCBE on a consolidated basis.
(d) There is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge after due
inquiry of NCBE and its executive officers,
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threatened, against or affecting NCBE or its subsidiaries or
involving any of their respective properties or assets, at law
or in equity, before any federal, state, municipal, local or
other governmental authority, involving a material amount
which, if resolved adversely to the interest of NCBE or its
subsidiaries, would materially affect the financial conditions
or operations of NCBE or its subsidiaries and/or its ability
to perform under this Merger Agreement, and to the best of the
knowledge and belief after due inquiry of NCBE and its
executive officers, no one has asserted and no one has
reasonable or valid grounds on which it reasonably can be
expected that anyone will assert any such claims against NCBE
or its subsidiaries based upon the wrongful action or inaction
of NCBE or its subsidiaries or any of their respective
officers, directors or employees.
(e) At the time the Merger shall become effective and on such
subsequent date when the former Stockholders of White County
surrender their White County share certificates for
cancellation, the shares of NCBE Common Stock to be received
by Stockholders of White County will have been duly authorized
and validly issued by NCBE and will be fully paid and
nonassessable.
(f) NCBE has not incurred and will not incur directly or
indirectly any liability for brokerage, finders', agents' or
investment bankers' fees or commissions in connection with
this Merger Agreement or the transactions contemplated
thereby.
(g) The Employees' Savings and Profit Sharing Plan of National
City Bancshares, Inc. and the Plan for Pensions of National
City Bancshares, Inc. (hereinafter referred to collectively as
the "plans") which purport to be qualified plans under Section
401(a) of the Internal Revenue Code is so qualified and is in
compliance in all material respects with the applicable
requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). All material notices, reports and
other filings required under applicable law to be given or
made to or with any governmental agency with respect to the
plans have been
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timely filed or delivered where failure to file will result in
a penalty or result in disqualification of the plan. NCBE has
no knowledge either of any circumstances which would adversely
affect the qualifications of the plans or their compliance
with the applicable requirements of ERISA, or of any
"reportable event" (as such term is defined in Section 4043(b)
of ERISA) or any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975(c) of the
Internal Revenue Code) which has occurred since the date on
which said section became applicable to the plans. With
respect to those plans which are defined benefit plans within
the meaning of ERISA, such plans meet the minimum funding
standards set forth in the Internal Revenue Code and ERISA.
(h) NCBE has delivered to White County copies of the Annual Report
on Form 10-K filed with the Securities and Exchange Commission
by NCBE for its fiscal years ended December 31, 1993, 1992,
and 1991 including exhibits and all documents incorporated by
reference therein, and the proxy materials disseminated by
NCBE to its Stockholders in connection with the 1994 Annual
Meeting of Stockholders of NCBE; such Annual Report and proxy
materials do not misstate a material fact or omit to state a
material fact necessary in order to make the statements
contained therein, in light of the circumstances under which
they are made, not misleading.
(i) Since December 31, 1993, each of NCBE and its subsidiaries has
conducted business only in the ordinary course, and has
preserved its corporate existence, business and goodwill
intact, except for the sale by NCBE of the Ayer-Wagoner-Deal
Insurance Agency, Inc.
(j) NCBE and the NCBE Banks each have good and marketable title to
all assets and properties, whether real or personal, tangible
or intangible, including without limitation the capital stock
of the NCBE Banks and all other assets and properties
reflected in NCBE's Balance Sheet of December 31, 1993 or
acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of
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for fair value in the ordinary course of business since
December 31, 1993) subject to no liens, mortgages, security
interests, encumbrances, pledges or charges of any kind,
except: (i) those items that secure liabilities that are
reflected in said Balance Sheet; (ii) statutory liens for
taxes not yet delinquent; and (iii) minor defects and
irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which
they are held; and such liens, mortgages, security interests,
encumbrances and charges are not in the aggregate, material to
the assets and properties of NCBE. NCBE or the NCBE Banks as
lessee has the contractual right under valid leases to occupy,
use, possess and control all material property leased by NCBE
or the NCBE Banks.
(k) To the best of the knowledge after due inquiry of NCBE and its
executive officers, NCBE and the NCBE Banks have complied with
all laws, regulations and orders applicable to them and to the
conduct of their businesses, including without limitation, all
statutes, rules and regulations pertaining to the conduct of
banking activities except for possible technical violations
which together with any penalty which results therefrom are or
will be of no material consequence to either NCBE or the NCBE
Banks. Neither NCBE nor any of the NCBE Banks are the subject
of, nor a party to, any regulatory action or agreement such as
letter agreements, memorandum of understanding, cease and
desist orders or like agreements. Neither NCBE nor the NCBE
Banks are in default under, and no event has occurred which,
with the lapse of time or action by a third party, could, to
the best of NCBE's knowledge after due inquiry, result in the
default under the terms of any judgment, decree, order, writ,
rule or regulation of any governmental authority or court,
whether federal, state or local and whether at law or in
equity, where the default(s) could reasonably be expected to
have a material adverse effect on the financial conditions,
results of operations or business of NCBE or the NCBE Banks on
a consolidated basis.
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(l) NCBE has duly filed all federal, state, county and local
income, excise, real and personal property and other tax
returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by NCBE up to the date
hereof. To the best of the knowledge and belief of NCBE all
such returns are true and correct in all material respects,
and NCBE has paid or, prior to the time the Merger shall
become effective, will pay all taxes, interest and penalties
shown on such return or reports or claimed (other than those
claims being contested in good faith and which have been
disclosed to White County) to be due to any federal, state,
county, local or other taxing authority, and there is, and at
the time the Merger shall become effective will be, no basis
for any additional claim or assessment which might materially
and adversely affect NCBE or the NCBE Banks, and for which an
adequate reserve has not been established. To the best of its
knowledge and belief, NCBE has paid or made adequate provision
in its financial statements or its books and records for all
taxes payable in respect of all periods ending as of the date
thereof. To the best of its knowledge and belief NCBE has, or
at the time the Merger shall become effective will have, no
material liability for any taxes, interest or penalties of
any nature whatsoever, except for those taxes which may have
arisen up to the time the Merger shall become effective in the
ordinary course of business and are properly accrued on the
books of NCBE as of the time the Merger shall become
effective.
8. Representations and Warranties of White County. White County
represents and warrants to NCBE as follows:
(a) White County is a banking corporation duly organized and
validly existing in good standing under the laws of the State
of Illinois. White County has full power and authority
(including all licenses, franchises, permits and other
governmental authorizations which are legally required) to
engage in the
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businesses and activities now conducted by it. As of the date
of this Agreement, the authorized capital stock of White
County consists of 9,600 shares of common stock with $100 par
value, of which a total of 9,600 shares are issued and
outstanding and none are shares of treasury stock owned by
White County. All of said shares of capital stock are fully
paid and nonassessable and are not issued in violation of the
preemptive rights of any shareholder. There are no
outstanding options, warrants or commitments of any kind
relating to White County's capital stock except as disclosed
in the letter to NCBE of even date herewith.
(b) White County has furnished to NCBE copies of all financial
statements relating to White County, as filed with the
appropriate regulatory agencies, as of and for the years ended
December 31, 1993 and 1992. White County has furnished to
NCBE copies of all financial statements relating to White
County, as filed with the appropriate regulatory agencies, as
of and for the period ended June 30, 1994. Each of the
aforementioned financial statements is prepared in accordance
with Generally Accepted Accounting Principles or applicable
regulatory accounting principles applicable to White County
consistently applied and is true and correct in all material
respects and together present fairly the consolidated
financial position and results of operations of White County
as of the dates and for the periods therein set forth
(subject, in the case of such interim financial statements,
to normal year-end adjustments). White County financial
statements do not, as of the dates thereof, include any
material asset or omit any material liability, absolute or
contingent, or other fact, the inclusion or omission of which
renders such financial statements, in light of the
circumstances under which they were made, misleading in any
material respect, except for certain off balance sheet
liabilities which are disclosed in White County's letter to
NCBE of even date herewith. Since December 31, 1993, there
has not been any material adverse
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change in the financial condition, results of operations,
business or prospects of White County.
(c) The Board of Directors of White County has authorized
execution of this Agreement. Subject to the approval by the
Stockholders of White County, White County has all requisite
power and authority to enter in this Agreement and the Merger
Agreement. White County has the authority to consummate the
transactions contemplated hereby so that, provided all
required corporate and regulatory approvals are obtained,
neither the execution and delivery of this Agreement, the
Merger Agreement nor the consummation of the Merger will
conflict with, result in the breach of, constitute a default
under or accelerate the performance provided by the terms of
any law, or any rule or regulation of any governmental agency
or authority or any judgment, order or decree of any court or
other governmental agency to which White County may be
subject, any contract, agreement or instrument to which White
County is a party or by which White County is bound or
committed, or the Articles of Incorporation or Bylaws of White
County, or constitute an event which with the lapse of time or
action by a third party, could, to the best of White County's
knowledge, result in the default under any of the foregoing or
result in the creation of any lien, charge, encumbrance upon
any of the assets, property or capital stock of White County,
except, however, in the case of contracts, agreements or
instruments, such defaults, conflicts or breaches which either
(i) will be cured or waived prior to the time the Merger
becomes effective, or (ii) if not so cured or waived would
not, in the aggregate, have any material adverse effect on the
financial condition, results of operations or business of
White County.
(d) Except as disclosed in White County's letter to NCBE of even
date herewith, there is no litigation, action, suit,
investigation or proceeding pending or, to the best of their
knowledge after due inquiry of White County and its executive
officers,
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overtly threatened, against or affecting White County or
involving any of their respective properties or assets, at law
or in equity, before any federal, state, municipal, local or
other governmental authority, involving a material amount
which, if resolved adversely to the interest of White County,
would materially affect the financial condition or operations
of White County and/or its ability to perform under this
Agreement or the Merger Agreement, and to the best of the
knowledge and belief after due inquiry of White County and its
executive officers, no one has asserted and no one has
reasonable or valid ground on which it reasonably can be
expected that anyone will assert any such claims against White
County based upon the wrongful action or inaction of White
County or its respective officers, directors or employees.
(e) White County has good and marketable title to all assets and
properties, whether real or personal, tangible or intangible
reflected in White County's Balance Sheet of December 31, 1993
or acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of for fair value in
the ordinary course of business since December 31, 1993)
subject to no liens, mortgages, security interests,
encumbrances, pledges or charges of any kind, except: (i)
those items that secure liabilities that are reflected in said
Balance Sheet; (ii) statutory liens for taxes not yet
delinquent; and (iii) minor defects and irregularities in
title and encumbrances which do not materially impair the use
thereof for the purposes for which they are held; and such
liens, mortgages, security interests, encumbrances and charges
are not in the aggregate, material to the assets and
properties of White County. White County as lessee has the
contractual right under valid leases to occupy, use, possess
and control all material property leased by White County.
(f) To the best of the knowledge after due inquiry of White County
and its executive officers, White County has complied with all
laws, regulations and orders
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applicable to it and to the conduct of its business, including
without limitation, all statutes, rules and regulations
pertaining to the conduct of White County banking activities
except for possible technical violations which together with
any penalty which results therefrom are or will be of no
material consequence to White County. Except as disclosed in
White County's letter to NCBE of even date herewith, White
County is not the subject of nor is a party to, any
regulatory actions or agreement such as letter agreements,
memorandum of understanding, cease and desist order or like
agreements. White County is not in default under, and no
event has occurred which, with the lapse of time or action by
a third party, could, to the best of White County's knowledge
after due inquiry, result in the default under the terms of
any judgment, decree, order, writ, rule or regulation of any
governmental authority or court, whether federal, state or
local and whether at law or in equity, where the default(s)
could reasonably be expected to have a material adverse effect
on the financial condition, results of operations or business
of White County.
(g) Except as disclosed in White County's letter to NCBE of even
date herewith, receipt of which is acknowledged by NCBE, White
County has not, since December 31, 1993 to the date hereof:
(i) issued or sold any of its capital stock or any corporate
debt securities; (ii) granted any option for the purchase of
capital stock; (iii) declared or set aside or paid any
dividend or other distribution in respect of its capital stock
except as permitted pursuant to Section 9(a) hereof or,
directly or indirectly, purchased, redeemed or otherwise
acquired any shares of such stock; (iv) incurred any
obligation or liability (absolute or contingent), except for
obligations reflected in this Agreement or the Merger
Agreement, and except for obligations or liabilities incurred
in the ordinary course of business, or mortgaged, pledged or
subjected to lien or encumbrance (other than statutory liens
for taxes not yet delinquent) any of its assets or properties;
(v) discharged or
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satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than the current
portion of any long term liabilities which become due after
December 31, 1993, current liabilities included in its
financial statements as of December 31, 1993, current
liabilities incurred since the date thereof in the ordinary
course of business and liabilities incurred in carrying out
the transactions contemplated by this Agreement or the Merger
Agreement; (vi) sold, exchanged or otherwise disposed of any
of its material capital assets outside the ordinary course of
business; (vii) made any extraordinary officers' salary
increase or wage increase, entered into any employment
contract with any officer or salaried employee or, instituted
any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement; (viii) suffered any
damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its business,
property or assets or waived (except for fair consideration)
any rights of value which are material in the aggregate,
considering its business taken as a whole; or (ix) entered or
agreed to enter into any agreement or arrangement granting any
preferential right to purchase any of its assets, properties
or rights or requiring the consent of any party to the
transfer and assignment of any such assets, properties or
rights.
(h) Except as disclosed in White County's letter to NCBE of even
date herewith, White County is not a party to or bound by any
written or oral: (i) employment or consulting contract which
is not terminable by it on 60 days or less notice, (ii)
employee bonus (other than an annual bonus to be paid to
employees of White County for the year 1994, in amounts and on
dates consistent with past practice, which bonuses are payable
at the discretion of the White County board of directors),
deferred compensation, pension, stock bonus or purchase,
profit-sharing, retirement or stock option plan, (iii) other
employee benefit or welfare plan, or (iv) other executory
material agreements which in any case obligate
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White County to make any payment(s) which in the aggregate
exceed $10,000 per year except for contracts terminable on 60
days notice. All such pension, stock bonus or purchase,
profit-sharing, defined benefit and retirement plans set forth
under the caption "Qualified Plans" in the White County
Document List (hereinafter referred to collectively as the
"plan") are qualified plans under Section 401(a) of the
Internal Revenue Code and in compliance in all material
respects with ERISA. All material notices, reports and other
filings required under applicable law to be given or made to
or with any governmental agency with respect to the plans have
been timely filed or delivered where failure to file would
result in a penalty and/or result in disqualification of the
plan. White County has no knowledge either of any
circumstances which would adversely affect the qualification
of the plans or their compliance with ERISA, or of any
unreported "reportable event" (as such term is defined in
Section 4043(b) of ERISA) or, except as disclosed in White
County's letter to NCBE of even date herewith, any
"prohibited transaction" (as such term is defined in Section
406 of ERISA and Section 4975(c) of the Internal Revenue Code)
which has occurred since the date on which said sections
became applicable to the plans. The plans meet the minimum
funding standards set forth in the Internal Revenue Code and
ERISA.
(i) White County has duly filed all federal, state, county and
local income, excise, real and personal property and other tax
returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by White County up to
the date hereof. Except as set forth in White County's letter
to NCBE of even date herewith, receipt of which is
acknowledged by NCBE, to the best of the knowledge and belief
of White County all such returns are true and correct in all
material respects, and White County has paid or, prior to the
time the Merger shall become
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effective, will pay all taxes, interest and penalties shown
on such return or reports or claimed together than those
claims being contested in good faith and which have been
disclosed to NCBE to be due to any federal, state, county,
local or other taxing authority, and there is, and at the time
the Merger shall become effective will be, no basis for any
additional claim or assessment which might materially and
adversely affect White County and for which an adequate
reserve has not been established. To the best of its
knowledge and belief, White County has paid or made adequate
provision in its financial statements or its books and records
for all taxes payable in respect of all periods ending as of
the date thereof. To the best of its knowledge and belief,
White County has, or at the time the Merger shall become
effective will have, no material liability for any taxes,
interest or penalties of any nature whatsoever, except for
those taxes which may have arisen up to the time the Merger
shall become effective in the ordinary course of business and
are properly accrued on the books of White County as of the
time the Merger shall become effective.
(j) To the best of its knowledge and belief, but without
having undertaken an environmental audit, White County has no
knowledge of any underground storage tanks, any hazardous
substances, hazardous waste, pollutant or contaminant,
including, but not limited to, asbestos (except as previously
disclosed to NCBE in a letter of even date herewith), PCB's or
urea formaldehyde, having been generated, released into,
stored or deposited over, upon or below (in storage tanks or
otherwise) White County's premises or any other real property
owned or leased by White County other than other real estate
owned, for which no investigation was conducted by White
County, but for which White County has no knowledge of such,
or into any water systems on or below the surface of the White
County premises or any other real property owned or leased by
White County other than other real estate owned, for which no
investigation was conducted by White
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County, but for which White County has no knowledge of such
from any source whatsoever. As used in this Agreement, the
terms "hazardous substance," "hazardous waste," "pollutant"
and "contaminant" mean any substance, waste, pollutant or
contaminant included within such terms under any applicable
Federal, state or local statute or regulation.
(k) White County has in effect insurance coverage with reputable
insurers, which in respect of amounts, premiums, types and
risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against companies
comparable in size and operation to White County.
(l) Except as disclosed in White County's letter to NCBE of even
date herewith, White County has not incurred and will not
incur any liability for brokerage, finders', agents', or
investment bankers' fees or commissions in connection with
this Agreement or the Merger Agreement or the transactions
contemplated hereby and thereby.
(m) The directors of White County executing this Agreement shall
vote the shares of White County held directly by them in favor
of adoption of the Agreement.
9. Action by White County Pending Effective Time. White County agrees
that from the date of this Agreement until the time the Merger shall
become effective, except with prior written permission of NCBE:
(a) Beginning with the date hereof and until such time as the
Merger shall become effective, White County will not declare
or pay any dividends or make any distributions other than
regular cash dividends, payable at such times and in amounts
consistent with past practice and not to exceed the per share
rate paid in the prior calendar year, provided, however, that
Stockholders of White County may for any given quarter,
receive dividends attributable to that quarter only from NCBE
or White County, but not from both. If, prior to the
consummation of the Merger, White County shall declare a stock
dividend or make distributions upon
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or subdivide, split up, reclassify or combine its shares of
common stock in any security convertible into its common
stock, appropriate adjustment or adjustments will be made in
the foregoing per share dividend rate.
(b) White County will not issue, sell, grant any option for, or
acquire for value any shares of its capital stock or otherwise
effect any change in connection with its capitalization.
(c) Except as otherwise set forth in or contemplated by this
Agreement or the Merger Agreement, White County will carry on
its businesses in substantially the same manner as heretofore,
keep in full force and effect insurance comparable in amount
and scope of coverage to that now maintained by it and use its
best efforts to maintain and preserve its business
organization intact.
(d) White County will not: (i) enter into any transaction other
than in the ordinary course of business or incur or agree to
incur any obligation or liability except liabilities incurred
and obligations entered into in the ordinary course of
business; (ii) change its lending, investment, liability
management and other material White County banking policies in
any material respect; (iii) except as committed for adjustment
as of the date hereof and consistent with prior practice,
grant any general or uniform increase in the rates of pay of
employees; (iv) except as disclosed in White County's letter
to NCBE of even date herewith, incur or commit to any capital
expenditures other than in the ordinary course of business
(which in no event shall include the establishment of new
branches and such other facilities or any capital expenditures
for any purpose which exceed 1% of White County's combined
capital, surplus and undivided profit accounts as of December
31, 1993), or (v) merge into, consolidate with or sell its
assets to any other corporation or person, or permit any other
corporation to be merged or consolidated with it or acquire
all of the assets of any other corporation or person.
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(e) White County will not change its method of accounting in
effect at December 31, 1993 except as required by changes in
generally accepted accounting principles and concurred in by
White County's independent auditors, or change any of its
methods of reporting income and deductions for Federal income
tax purposes from those employed in the preparation of White
County's Federal income tax returns for the taxable year
ending December 31, 1993, except for changes required by law.
(f) White County will afford NCBE, its officers and other
authorized representatives, such access to all books, records,
tax returns, leases, contracts and documents of White County
and will furnish to NCBE such information with respect to the
assets and business of White County as NCBE may from time to
time reasonably request in connection with this Agreement or
the Merger Agreement and the transactions contemplated hereby
or thereby.
(g) White County will promptly advise NCBE in writing of all
material actions taken by the directors and Stockholders of
White County, furnish NCBE with copies of all interim
financial statements of White County as they become available,
and keep NCBE fully informed concerning all developments which
in the opinion of White County may have a material effect upon
the business, properties or condition (either financial or
otherwise) of White County.
10. Action by NCBE Pending Effective Time. NCBE agrees that from the date
of this Agreement until the time the Merger shall become effective:
(a) NCBE will carry on its business in substantially the same
manner as heretofore except as otherwise set forth in or
contemplated by this Agreement, and NCBE will keep in full
force and effect insurance comparable in amount and scope of
coverage to that now maintained by it and use its best efforts
to maintain and preserve its business organization intact.
White County acknowledges that, in the ordinary course of its
business as a bank holding company, NCBE from time-to-
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time, enters into an agreement(s) to acquire by merger, stock
purchase or like means, another financial institution or its
holding company.
(b) NCBE will not change its methods of accounting in effect at
December 31, 1993, except as required by changes in generally
accepted accounting principles as concurred in by NCBE's
independent auditors, or change any of its methods of
reporting income and deductions for Federal income tax
purposes from those employed in the preparation of the Federal
income tax returns of NCBE Banks for the taxable year ending
December 31, 1993, except for changes required by law or take
any action which could jeopardize the tax free nature of the
Merger or the pooling of interests accounting treatment for
the Merger.
(c) NCBE will promptly advise White County in writing of all
material corporate actions taken by the directors of NCBE,
furnish White County with copies of interim financial
statements of NCBE and all reports, schedules and statements
filed by or delivered to NCBE pursuant to the Securities and
Exchange Act of 1934 and the rules and regulations promulgated
thereunder, as they become available, and keep White County
fully informed concerning all developments which in the
opinion of NCBE may have a material effect upon the business,
properties or condition (either financial or otherwise) of
NCBE.
11. Conditions to Obligations of NCBE. The obligations of NCBE under this
Agreement and the Merger Agreement are subject, unless waived by NCBE,
to the satisfaction of the following conditions on or prior to the
time the Merger shall become effective:
(a) There shall not have been any material adverse change or
discovery of a condition or the occurrence of an event which
has or is likely to result in such a change, in the financial
condition, aggregate net assets, Stockholders' equity,
business or operating results of White County from December
31, 1993 to the time the Merger shall become effective.
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(b) White County shall not have paid cash dividends from the date
hereof to the time the Merger shall become effective except as
permitted under this Agreement.
(c) All representations by White County contained in this
Agreement and the Merger Agreement shall be true in all
material respects at, or as of, the time the Merger shall
become effective as though such representations were made at
and as of said date, except for changes contemplated by this
Agreement or the Merger Agreement and except also for
representations as of a specified time other than the time the
Merger shall become effective, which shall be true in all
material respects at such specified time.
(d) NCBE shall have received the opinion of legal counsel for
White County, dated the time the Merger shall become
effective, substantially to the effect set forth in Exhibit A
hereto.
(e) White County shall have performed or satisfied in all material
respects all agreements and conditions required by this
Agreement or the Merger Agreement to be performed or satisfied
by it at or prior to the time the Merger shall become
effective.
(f) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before
any court or other governmental agency by the federal or state
government in which it is sought to restrain or prohibit the
consummation of the Merger, and no other suit, action or
proceeding shall be pending or overtly threatened and no
liability or claim shall have been asserted against White
County which NCBE shall in good faith determine, with advice
of counsel: (i) has a reasonable likelihood of being
successfully prosecuted and (ii) if successfully prosecuted,
would materially and adversely affect the benefits hereunder
intended for NCBE.
(g) Prior to the time the Merger shall become effective, NCBE
shall not have been deprived of adequate opportunity to
conduct such review and examination of the
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business, properties, and condition (financial or otherwise)
of White County as NCBE shall have deemed prudent, and such
review and examination shall not have disclosed matters which
are inconsistent in any material respect with any of the
representations and warranties of White County contained in
this Agreement or the Merger Agreement. Immediately prior to
the time the Merger shall become effective, White County shall
be entitled to receive from NCBE a statement as to whether
the condition set forth herein has been satisfied.
(h) Holders of White County Common Stock who are entitled to
exercise in the aggregate not more than 5% of the voting power
of the issued and outstanding White County Common Stock as of
the time the Merger shall become effective shall have taken
steps to perfect their rights as dissenting Stockholders
pursuant to the provisions of Section 5/29 of the Illinois
Banking Act so that if, at the time the Merger shall become
effective, holders of more than 5% of such shares shall have
taken such steps, NCBE may, at its option, refuse to
consummate the Merger.
(i) White County shall have furnished NCBE certificates, signed on
its behalf by the Chairman or President and the Secretary or
an Assistant Secretary of White County and dated the time the
Merger shall become effective, to the effect that to the best
of their knowledge, after due inquiry, the conditions
described in Paragraphs (a), (b), (c), and (f) of this Section
11 have been fully satisfied.
(j) NCBE shall have received assurances, satisfactory to it, that
the Merger will be accounted for as a pooling of interest.
12. Conditions to Obligations of White County. The obligations of White
County under this Agreement or the Merger Agreement are subject,
unless waived by White County, to the satisfaction on or prior to the
time the Merger shall become effective of the following conditions:
(a) There shall not have been any material adverse change or
discovery of a condition or the occurrence of an event which
has or is likely to result in such a change, in
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the financial condition, aggregate net assets, Stockholders'
equity, business, or operating results of NCBE from December
31, 1993 to the time the Merger shall become effective.
(b) All representations by NCBE contained in this Agreement and
the Merger Agreement shall be true in all material respects
at, or as of, the time the Merger shall become effective as
though such representations were made at and as of said date,
except for changes contemplated by this Agreement and the
Merger Agreement, and except also for representations as of a
specified time other than the time the Merger shall become
effective, which shall be true in all material respects at
such specified time.
(c) White County shall have received the opinion of Counsel for
NCBE dated the time the Merger shall become effective
substantially to the effect set forth in Exhibit B hereto.
(d) NCBE shall have performed or satisfied in all material
respects all agreements and conditions required by this
Agreement and the Merger Agreement to be performed or
satisfied by it at or prior to the time the Merger shall
become effective.
(e) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before
any court or other governmental agency of the federal or state
government in which it is sought to restrain, prohibit or set
aside consummation of the Merger and no other suit, action or
proceeding shall be pending or overtly threatened and no
liability or claim shall have been asserted against NCBE which
White County shall in good faith determine, with advice of
counsel: (i) has a reasonable likelihood of being
successfully prosecuted and (ii) if successfully prosecuted,
would materially and adversely affect the benefits hereunder
intended for White County and its Stockholders.
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(f) NCBE shall have furnished White County a certificate, signed
by the Chairman or President and by the Secretary or Assistant
Secretary of NCBE and dated the time the Merger shall become
effective to the effect that to the best of their knowledge
after due inquiry the conditions described in Paragraphs (a),
(b), and (e) of this Section 12 have been fully satisfied.
13. Conditions to Obligations of All Parties. In addition to the
provisions of Sections 11 and 12 hereof, the obligations of NCBE and
White County to cause the transactions contemplated herein to be
consummated shall be subject to the satisfaction of the following
conditions on or prior to the time the Merger shall become effective:
(a) The parties hereto shall have received all necessary approvals
of governmental agencies and authorities of the transactions
contemplated by this Agreement and each of such approvals
shall remain in full force and effect at the time the Merger
shall become effective and such approvals and the transactions
contemplated thereby shall not have been contested by any
federal or state governmental authority by formal proceeding,
or contested by any other third party by formal proceeding
which the Board of Directors or the party asserting a failure
of a condition under this Section 13(a) shall in good faith
determine, with the advice of counsel: (i) has a reasonable
likelihood of being successfully prosecuted and (ii) if
successfully prosecuted, would materially and adversely affect
the benefits hereunder intended for such party. It is
understood that, if any contest as aforesaid is brought by
formal proceedings, NCBE may, but shall not be obligated to,
answer and defend such contest. NCBE shall notify White
County promptly upon receipt of all necessary governmental
approvals.
(b) The registration statement required to be filed by NCBE
pursuant to Section 4(c) of this Agreement shall have become
effective by an order of the Securities and Exchange
Commission, the shares of NCBE Common Stock to be exchanged in
the Merger shall have been qualified or exempted under all
applicable state
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securities laws, and there shall have been no stop order
issued or threatened by the Securities and Exchange Commission
that suspends or would suspend the effectiveness of the
registration statement, and no proceeding shall have been
commenced, pending or overtly threatened for such purpose.
(c) This Agreement and the Merger Agreement shall have been duly
adopted, ratified and confirmed by the requisite affirmative
votes of the Stockholders of White County.
(d) NCBE and White County shall have received the opinion called
for pursuant to Section 6 of this Agreement and there shall
exist as of, at or immediately prior to the time the Merger
shall become effective no facts or circumstances which would
render such opinion inapplicable in any respect to the
transactions to be consummated hereunder.
14. Nonsurvival of Representations and Warranties. The respective
representations and warranties of NCBE and White County set forth
shall survive the time the Merger shall become effective for a period
of one (1) year.
15. Governing Law. This Agreement shall be construed and interpreted
according to the applicable laws of the State of Illinois.
16. Assignment. This Agreement and the Merger Agreement and all of the
provisions hereof and thereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor the Merger Agreement
nor any of the rights, interest, or obligations hereunder or
thereunder shall be assigned by either of the parties hereto without
the prior written consent of the other party; provided, however, that
NCBE shall not engage in a transaction pursuant to which its
Stockholders exchange NCBE common stock for securities or property of
another party whether by statutory share exchange, merger,
consolidation, reorganization or the sale of substantially all the
assets of NCBE without concurrently therewith assigning to the
acquiring or surviving party, all of the obligations of NCBE under
this Agreement.
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17. Satisfaction of Conditions; Termination.
(a) NCBE agrees to use its best effort to obtain satisfaction of
the conditions insofar as they relate to NCBE, and White
County agrees to use its best efforts to obtain the
satisfaction of the conditions insofar as they relate to White
County. If any material condition to the obligations of NCBE
set forth in Section 11 or 13 is not substantially satisfied
at the time or times contemplated thereby and such condition
is not waived by NCBE, or if any material condition to the
obligations of White County set forth in Section 12 or 13 is
not substantially satisfied at the time or times contemplated
thereby and such condition is not waived by White County, or
if at any time prior to the time the Merger shall become
effective, it shall become reasonably certain that such
condition will not be substantially satisfied and such
condition is not waived by NCBE or White County, as the case
may be, either NCBE or White County may terminate this
Agreement by written notice to the other party after the
expiration of fifteen (15) days written notice to the other
party during which time such other party shall have an
opportunity to cure such defect in said condition. This
Agreement may be terminated and abandoned (either before or
after the meetings of Stockholders contemplated hereby) by
mutual written consent of NCBE and White County authorized by
their respective Boards of Directors. In the event of such
termination caused otherwise than by breach of this Agreement
by any of the parties hereto, this Agreement shall cease and
terminate, the acquisition of White County as provided herein
shall not be consummated, and neither NCBE nor White County
shall have any further liability under this Agreement of any
nature whatever, including any liability for damages. In the
event this Agreement is terminated, the duties of both parties
with respect to confidential information set forth in Sections
4(d) shall survive any such termination. In addition to the
other grounds for termination of this Agreement set forth
herein, this Agreement can be terminated
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by written notice by either party to the other, in each case
authorized by its Board of Directors, if the Merger shall not
have been consummated by June 30, 1995, or the date of such
notice, whichever is later.
(b) If termination of this Agreement shall be judicially
determined to have been caused by breach of this Agreement,
then, in addition to other remedies at law or equity for
breach of this Agreement, the party so found to have breached
this Agreement shall indemnify the other parties for their
respective costs, fees and expenses of its counsel,
accountants and other experts and advisors as well as fees and
expenses incident to negotiation, preparation and execution of
this Agreement and related actions and its Stockholders'
meetings and actions.
18. Waivers Amendments. Any of the provisions of this Agreement may be
waived at any time by the party which is, or the Stockholders of which
are, entitled to the benefit thereof, by resolution of the Board of
Directors of such party. This Agreement may be amended or modified in
whole or in part by an agreement in writing executed in the same
manner (but not necessarily by the same person) as this Agreement and
which makes reference to this Agreement, pursuant to a resolution,
adopted by the Boards of Directors of the respective parties,
provided, however, such amendment or modification may be made in this
manner by the respective Boards of Directors of NCBE and White County
at anytime prior to a favorable vote of such party's Stockholders, but
may be made after a favorable vote by the Stockholders of such party,
only if, in the opinion of its Board of Directors, such amendment or
modification will not have any material adverse effect on the benefits
intended under this Agreement for the Stockholders of such party and
will not require resolicitation of any proxies from such Stockholders.
19. Entire Agreement. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into by
NCBE and White County or by any officer or officers of such parties
relating to the acquisition of the business or the capital stock of
White County by NCBE. Except for the letters specified in this
Agreement
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(which shall include for purposes hereof the Merger Agreement) and of
even date herewith, this Agreement constitutes the entire agreement by
the parties, and there are no agreements or commitments except as set
forth herein and therein.
20. Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
This Agreement may be executed in several counterparts, each of which
shall constitute one and the same instrument.
21. Notices. All notices and other communications hereunder shall be
deemed to have been duly given if forwarded by a nationally recognized
overnight courier service. All notices and other communications
hereunder given to any party shall be communicated to the remaining
party to this Agreement by mail in the same manner as herein provided.
a) If to NCBE, to:
Mr. Robert A. Keil
President
National City Bancshares, Inc.
227 Main Street, P.O. Box 868
Evansville, Indiana 47705-0868
With copies to:
Martin D. Werner, Esq.
Werner & Blank Co., L.P.A.
7205 W. Central Avenue
Toledo, Ohio 43617
(b) If to White County, to:
Mr. George H. Schanzle
Chairman
White County Bank
215 E Main Street
Carmi, Illinois 62821
With copies to:
Robert S. Cohen
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Giffin, Winning, Cohen & Bodewes, P.C.
Suite 600 Myers Building
One West Old State Capitol Plaza
P.O. Box 2117
Springfield, IL 62705
22. Undertakings of Affiliates. NCBE shall have received undertakings in
writing from each of such persons, if any, as counsel for NCBE
believes might reasonably be considered "affiliates" of White County
within the meaning of Rule 145 of the Securities and Exchange
Commission pursuant to the Securities Act of 1933, in each case in
form and substance satisfactory to counsel for NCBE, to the effect
that so long as NCBE complies with its obligations under Section 4(j)
hereof, (i) any disposition made by such person of any share of NCBE
Common Stock received by such person pursuant to the Merger shall be
made within the limits and in accordance with the applicable
provisions of said Rule 145, as such Rule may be amended from time to
time, and (ii) such person will not sell, assign or transfer any of
such NCBE Common Stock until NCBE shall have published financial
results including the combined operations of NCBE and White County for
a period of at least 30 days following the time the Merger shall
become effective.
23. Publicity. NCBE and White County agree to consult with and obtain the
consent of the other, prior to any media release or other public
disclosures as to the matters covered by this Agreement, except as may
be required by law.
IN WITNESS WHEREOF, this Agreement has been executed the day and year
first above written.
ATTEST: National City Bancshares, Inc.
NATIONAL CITY BANCSHARES, INC. By: /s/ JOHN D. LIPPERT
By: /s/ HAROLD A. MANN John D. Lippert, Chairman,
Its: Secretary and Treasurer and Chief Executive Officer
ATTEST: White County Bank
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WHITE COUNTY BANK By: /s/ GEORGE H. SCHANZLE
By: /s/ SHARON WINTER George H. Schanzle, Chairman
Its: Cashier
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[As individuals and with respect solely to the understanding made in Section
8(m) of this Agreement.]
/s/ R. KEITH HOSKINS /s/ DONALD D. DRONE
/s/ JAMES R. SCHANZLE /s/ PAUL D. HAYSE
/s/ CHARLES H. ATTEBERRY /s/ FRANK BARBRE
/s/ GEORGE H. SCHANZLE _______________________________
/s/ JAMES S. RUHOFF _______________________________
/s/ ANNE B. RUSSELL _______________________________
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APPENDIX A
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") dated as of __________, 1994,
is by and between White County Interim Bank ("New Bank"), an Illinois state
banking corporation and wholly owned subsidiary of National City Bancshares,
Inc., an Indiana corporation ("NCBE") and White County Bank ("White County"),
an Illinois state banking corporation and is joined in by NCBE.
WITNESSETH:
WHEREAS, the Board of Directors of the New Bank and the Board of
Directors of White County have determined that it is in the best interests of
the New Bank and White County to merge New Bank with and into White County in
accordance with the provisions of the laws of the State of Illinois and the
Federal Deposit Insurance Act (the "Merger"); and
WHEREAS, the Board of Directors of White County and the Board of
Directors of New Bank have each adopted a resolution approving this Agreement
and have directed that the Merger Agreement be submitted to the shareholders of
White County and New Bank entitled to vote in respect thereof for adoption and
approval;
NOW, THEREFORE, the parties hereto, subject to the terms and
conditions contained herein, agrees as follows:
ARTICLE I
Constituent Corporations
White County and New Bank shall be the constituent banking
corporations with respect to the Merger.
ARTICLE II
Merger
Effective as of the time of the filing of this Agreement with the
Commissioner of Banks and Trust Companies for the State of Illinois (the
"Effective Time"), New Bank shall be merged into White County and White County
shall be the surviving banking corporation (the "Surviving Corporation"), which
after the effective time of the Merger shall be known as "White County Bank."
ARTICLE III
Articles of Incorporation, Etc.
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1. At the Effective Time, the Articles of Incorporation and Bylaws of
White County shall constitute the Articles of Incorporation of the
Surviving Corporation.
2. The Surviving Corporation's main office shall be located at 215 E.
Main Street, Carmi, Illinois, until otherwise changed in accordance
with law.
3. Attached hereto as Exhibit A is a complete list of the Stockholders
of White County as of the date of this Merger Agreement.
4. Attached hereto as Exhibit B is a complete list of the Stockholders of
The New Bank as of the date of this Merger Agreement.
5. Attached hereto as Exhibit C is a detailed pro forma financial
Statement, based upon financial information as of _____________199_,
showing the assets and liabilities of the Surviving Corporation after
the Merger.
6. At the Effective Time, the directors of White County then holding
office shall constitute the directors of the Surviving Corporation,
subject to the Surviving Corporation's Articles of Incorporation and
Bylaws and applicable law as to the term and removal of directors.
ARTICLE IV
Manner of Converting and Exchanging Stock and Capital Structure
1. Subject to the provisions of this Article IV, the manner of converting
and exchanging the shares of the constituent corporation's stock at the
Effective Time shall be as follows.
Conversion and Exchange of Shares.
(a) At the time the Merger shall become effective;
(i) All of the outstanding shares of White County Common
Stock shall, (subject to statutory dissenters rights
as provided by Section 29 of the Illinois Banking
Act; 205 ILCS 5/29, a copy of which is attached
hereto as Exhibit D), be exchanged, pro rata, for
264,000 shares, in the aggregate, of NCBE Common
Stock (or cash for fractional shares), provided
however that in the event that the per share weighted
average (based upon the number of shares traded) high
and low price of NCBE Common Stock, as reported by
the NASDAQ National Market System for the ten
business days immediately proceeding the effective
date the Merger, is lower than $38.00 or higher than
$48.00 per share, (adjusted for any and all stock
dividends and stock splits between the date hereof
and the effective time of the Merger), either party
hereto may elect to renegotiate the provisions hereof
relating to the number of shares of NCBE Common Stock
issuable
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in the Merger or to terminate the Merger Agreement
and the transactions contemplated hereby.
(ii) The shares of White County Common Stock issued and
outstanding immediately prior to the time the Merger
shall become effective shall continue to be issued
and outstanding shares of the Surviving Corporation
and shall be held by NCBE.
(iii) The shares of New Bank held issued and outstanding
immediately prior to the effective time of the Merger
and held by NCBE shall be deemed canceled.
(b) No fractional shares or scrip representing fractional shares
of NCBE Common Stock will be issued by NCBE in connection with
the Merger, but in lieu thereof, any holder of White County
Common Stock entitled to such a fractional share shall, upon
surrender of the certificate or certificates formerly
representing such White County Common Stock, be paid cash,
without interest, by NCBE for such fractional share(s). The
cash paid for fractional shares shall be based upon the
closing bid price of NCBE on the day the Merger shall become
effective or the trading day immediately preceding the day the
Merger shall become effective if such day shall not be a
trading day.
(c) As soon as practicable after the time the Merger shall become
effective, and subject to the provisions set forth above
relating to the fractional shares, NCBE, or an Exchange Agent
designated thereby, will distribute to the former holders of
White County Common Stock in exchange for and upon surrender
for cancellation by such holders of a certificate or
certificates formerly representing shares of White County
Common Stock the certificate(s) for shares of NCBE Common
Stock in accordance with the provisions regarding the exchange
of shares of White County Common Stock set forth in paragraph
1(a)(i) of this Merger Agreement. Each certificate formerly
representing White County Common Stock (other than
certificates representing shares of White County Common Stock
subject to the rights of dissenting shareholders) shall be
deemed for all purposes to evidence the ownership of the
number of whole shares of NCBE Common Stock and cash for
fractional share interests in NCBE Common Stock into which
such shares have been converted. Certificates representing
shares of White County Common Stock held by a stockholder of
White County, shall be aggregated together in determining the
number of fractional shares for which such shareholder shall
receive cash as provided for herein. Until surrender of the
certificate or certificates formerly representing shares of
White County Common Stock, the holder thereof shall not be
entitled to receive any dividend or other payment or
distribution payable to holders of NCBE Common Stock. Upon
such surrender (or in lieu of surrender other provisions
reasonably satisfactory to NCBE as are made as set forth in
the next following paragraph), there shall be paid to the
person entitled thereto the aggregate amount of dividends or
other
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payments or distributions (in each case without interest)
which became payable after the time the Merger shall become
effective on the whole shares of NCBE Common Stock represented
by the certificates issued upon such surrender and exchange or
in accordance with such other provisions, as the case may be.
After the time the Merger shall become effective, the holders
of certificates formerly representing shares of White County
Common Stock shall cease to have rights with respect to such
shares except such rights, if any, as a holder of
certificates formerly representing shares of White County
Common Stock may have as dissenting shareholders pursuant to
Illinois Banking Act and except as aforesaid, their sole
rights shall be to exchange said certificates for certificates
for shares of NCBE Common Stock in accordance with this Merger
Agreement.
Certificates formerly representing shares of White County
Common Stock surrendered for cancellation by each shareholder
entitled to exchange shares of White County Common Stock for
shares of NCBE Common Stock by reason of the Merger shall be
accompanied by such appropriate instruments of transfer as
NCBE may reasonably require, provided, however, that if there
be delivered to NCBE by any person who is unable to produce
any such certificate formerly representing shares of White
County Common Stock for transfer (i) evidence to the
reasonable satisfaction of NCBE that any such certificate has
been lost, wrongfully taken or destroyed, and (ii) such
indemnity agreement as reasonably may be requested by NCBE to
save it harmless, and (iii) evidence to the reasonable
satisfaction of NCBE that such person is the owner of the
shares theretofore represented by each certificate claimed by
him to be lost, wrongfully taken or destroyed and that he is
the person who would be entitled to present each such
certificate and to receive shares of NCBE Common Stock
pursuant to this Merger Agreement, then NCBE, in the absence
of actual notice to it that any shares theretofore represented
by any such certificate have been acquired by a bona fide
purchaser, shall deliver to such person the certificate(s)
representing shares of NCBE Common Stock which such person
would have been entitled to receive upon surrender of each
such lost, wrongfully taken or destroyed certificate
representing shares of White County Common Stock.
2. After the Effective Time, there shall be no transfers of the stock
transfer books of New Bank of any certificates representing shares of
New Bank Common Stock. After the Effective Time, upon presentation to
the Surviving Corporation of certificates formerly representing
capital stock of New Bank, such certificates shall be canceled.
3. The Resulting Corporation shall have a capital structure equal to the
following:
(a) Common stock of $958,000, consisting of 9,600 shares of $100
par value all of which will be issued and outstanding
immediately following the Effective Time of the Merger; and
(b) Surplus of $1,540,000; and
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<PAGE> 39
(c) Undivided profits, including capital reserves, of $4,603,000,
adjusted for all earnings and losses between June 30, 1994,
and the Effective Time of the Merger.
ARTICLE V
Effect of Merger
From and after the Effective Time, the Surviving Corporation shall
have all of the rights, interests, privileges, powers, immunities and
franchises (public and private) of each of the constituent corporations, and
all property (real, personal and mixed), all debts due on whatever account, and
all other choses in action, of each of the constituent corporations. All
interests of or belonging to or due to either of the constituent corporations
shall thereupon be deemed to be transferred to and vested in the Surviving
Corporation without act or deed and no title to any real estate or any interest
therein vested in either of the constituent corporations shall revert or be in
any way impaired because of the Merger.
ARTICLE VI
Surviving Corporation
From and after the Effective Time, the Surviving Corporation shall be
responsible for all obligations of each of the constituent corporations and
each claim existing and each action or proceeding pending by or against either
of the constituent corporations may be prosecuted as if the Merger had not
taken place, and the Surviving Corporation may be substituted in the place of
such constituent corporation. No right of any creditor of either constituent
corporation and no lien upon the property of either constituent corporation
shall be impaired by the Merger.
ARTICLE VII
Further Documents
If at any time the Surviving Corporation shall consider or be advised
that any further assignments, conveyances or assurances in law are necessary or
desirable to vest, perfect or confirm of record in the Surviving Corporation
the title to any property or rights of the constituent corporations, or
otherwise to carry out the provisions hereof, the persons who were the proper
officers and directors of the constituent corporations immediately prior to the
Effective Time (or their successors in office) shall execute and deliver any
and all proper deeds, assignments and assurances in law, and do all things
necessary or proper, to vest, perfect or confirm title to such property or
rights in the Surviving Corporation, including, but not limited to, filing with
each court or other public tribunal, agency or officer by which White County or
New Bank have been appointed in the capacity of fiduciary or agent, and in the
court file of each estate, suit or proceeding in which any of them has been
acting, a statement setting forth the information required by law or otherwise
to carry out the provisions hereof.
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<PAGE> 40
ARTICLE VIII
Termination
Notwithstanding the adoption and approval of this Agreement and the
Merger by the shareholders of White County and New Bank, this Agreement and the
Merger may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent
of the Boards of Directors of White County and New Bank; or
(b) This Merger Agreement shall automatically terminate in the
event of the termination of the Agreement and Plan of
Reorganization dated _________, 1994 by and between White
County and NCBE to which it relates.
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<PAGE> 41
(c) At any time prior to the Effective Time, by White County or
New Bank if there shall have been a final judicial
determination (as to which all periods for appeal shall have
expired and no appeal shall be pending) that any material
provision of this Agreement or of the Merger is illegal,
invalid or unenforceable;
In the event that this Agreement is terminated pursuant to this
Article VIII, the Merger provided for herein shall be abandoned automatically
and without any further act or deed by the parties hereto.
ARTICLE IX
Conditions to Consummation of the Merger
The Merger is subject to the approval of all required regulatory
authorities, including but not limited to the Commissioner of Banks and Trust
Companies for the State of Illinois and to the approval of the stockholders of
New Bank and White County in accordance with the Illinois Banking Act. Each of
the merging banks agree to pay all examination expenses of the Illinois
Commissioner of Banks and Trust Companies incurred in connection with the
Merger.
The consummation of the Merger pursuant to this Merger Agreement and
the obligations of the parties hereto is subject to the satisfaction of the
provisions and conditions of the Agreement and Plan of Reorganization by and
between White County and NCBE dated _______1994.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and attested to on their behalf by the following directors and
officers thereunto duly authorized as of the day and year first written above.
White County Bank: White County Interim Bank
By: _____________________________ By: _____________________________
George H. Schanzle, President Robert A. Keil, President
Attest: Attest:
_________________________________ _________________________________
by: _____________________________ by: _____________________________
its: ____________________________ its: ____________________________
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<PAGE> 42
I, __________________, the duly appointed and incumbent Cashier of
White County State Bank, hereby certify that the Merger Agreement between White
County Bank and White County Interim Bank dated ______________, 1994, was
adopted and approved by the shareholders of White County Bank on ___________,
1995.
________________________________
I, __________________________, the duly appointed and incumbent
Cashier of White County Interim Bank, hereby certify that the Merger
Agreement between White County Bank and White County Interim Bank, dated
___________, 1994, was adopted and approved by the unanimous written consent of
the sole shareholder of White County Interim Bank dated _________________,
1995.
________________________________
Joined in by National City Bancshares, Inc.
____________________________
by _________________________
its ________________________
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<PAGE> 1
EXHIBIT 2(ii)
MERGER AGREEMENT
This is a MERGER AGREEMENT dated _____________, 1994, between National
City Bancshares, Inc. (hereinafter called "NCBE") and United Financial Bancorp,
Inc. (hereinafter called "United").
WITNESSETH:
NCBE is a corporation duly organized under the laws of the State of
Indiana. Its principal office is located at 227 Main Street, Evansville,
Vanderburgh County, Indiana. As of September 30, 1994, NCBE had authorized
capital stock consisting of 5,000,000 shares of common stock, par value $3.33
1/3 per share, ("NCBE Common Stock") of which a total of 3,693,254 shares were
issued and outstanding and none were shares of treasury stock owned by NCBE.
NCBE owns all of the outstanding capital stock of The National City Bank of
Evansville, Evansville, Indiana; The Peoples National Bank of Grayville,
Grayville, Illinois; The Farmers and Merchants Bank, Fort Branch, Indiana,
First Kentucky Bank, Sturgis, Kentucky; Lincolnland Bank, Dale, Indiana; The
State Bank of Washington, Washington, Indiana; The Spurgeon State Bank,
Spurgeon, Indiana; Pike County Bank, Petersburg, Indiana; and The Bank of
Mitchell, Mitchell, Indiana, (hereinafter referred to as "NCBE Banks") and NCBE
Leasing Corp., Evansville, Indiana; and
United is a corporation duly organized under the laws of the State of
Delaware. Its principal office is located at 619 Main Street, Vincennes,
Indiana. As of September 30, 1994, United had authorized capital stock
consisting of: (i) 2,000,000 authorized shares of common stock, $.01 par value
per share ("United Common Stock"), of which (a) 440,712 shares were issued and
outstanding; and (b) 19,288 were shares of treasury stock owned by United, and
(ii) 500,000 shares of preferred stock, none of which were either issued and
outstanding or were shares of treasury stock owned by United. United owns all
of the outstanding capital stock of United Federal Savings Bank of Vincennes, a
federal savings bank, (hereinafter referred to as "United Bank").
<PAGE> 2
The Board of Directors of NCBE and the Board of Directors of United,
respectively, have unanimously approved the entering into of this Merger
Agreement and have authorized the execution and delivery of this Merger
Agreement. From and after the time the merger of United into NCBE shall become
effective, the "Merger" as defined in Section 1 of this Merger Agreement, and
as and when required by this Merger Agreement, NCBE will issue shares of NCBE
Common Stock in exchange for all of the issued and outstanding shares of United
Common Stock in accordance with the provisions hereinafter set forth. It is
understood by each of the parties hereto that NCBE seeks to acquire United and
all of the operating assets of United including United Bank and the entities
and assets which United or United Bank own or may acquire prior to the time the
Merger shall become effective, through the Merger of United with and into NCBE
under the charter of NCBE. At the effective time of the Merger United Bank will
remain an independent operating subsidiary of NCBE. The parties will exert
their best efforts to obtain such regulatory approvals and to complete such
other actions as are necessary or appropriate to effect the Merger.
In consideration of mutual covenants and premises herein contained,
NCBE and United hereby make this Merger Agreement and prescribe the terms and
conditions of the Merger and the mode of carrying the Merger into effect as
follows:
1. Merger. Subject to the terms and conditions hereinafter set forth,
United shall be merged with and into NCBE under the Articles of
Incorporation of NCBE pursuant to and in accordance with the
applicable provisions of the laws of the States of Indiana and
Delaware.
2. Name. The name of the surviving corporation (hereinafter called the
"Surviving Corporation" whenever reference is made to it as of the
time the Merger shall become effective, as hereinafter provided, or
thereafter) shall be "National City Bancshares, Inc."
3. Business. The business of NCBE as the Surviving Corporation shall be
that of a financial institution holding company. The Surviving
Corporation shall exist by virtue of, and be governed by the laws of
the State of Indiana, shall have its registered office in Indiana at
2
<PAGE> 3
227 Main Street, Evansville, Vanderburgh County, Indiana and shall
have its principal office at that same location.
4. Effective Time of Merger: Articles of Merger. The Merger shall
become effective upon the filing of the appropriate Articles of Merger
with the appropriate state authorities (the "time the Merger shall
become effective") in accordance with applicable provisions of the
laws of the States of Indiana and Delaware.
The Articles of Incorporation of NCBE in effect immediately prior to
the time the Merger shall become effective, shall be the Articles of
Incorporation of the Surviving Corporation, and the Bylaws of NCBE in
effect immediately prior to the time the Merger shall become
effective, shall be the Bylaws of the Surviving Corporation.
5. Effect of Merger. At the time the Merger shall become effective, the
separate corporate existence of United and NCBE, respectively, shall,
in accordance with applicable provisions of the laws of the State of
Indiana and the State of Delaware, be merged into and continued in
NCBE as the Surviving Corporation with the effect as provided by
Section 23-1-40-6 of the Indiana Business Corporation Law and the
provisions of Section 252 of the Delaware General Business Corporation
Law.
6. Liabilities upon Merger. The Surviving Corporation shall be
responsible for all of the liabilities and obligations of each of the
corporations so merged in the same manner and to the same extent as if
such single corporation had itself incurred the same or contracted
therefore.
7. Conversion of Shares.
(a) At the time the Merger shall become effective;
(i) All of the outstanding shares of United Common Stock,
other than Dissenting Shares (as defined in Section
11 hereof), shall be converted into and exchanged for
shares of NCBE Common Stock (or cash for fractional
shares) in accordance with the Exchange Ratio (as
defined herein). In determining the total number of
shares of NCBE Common
3
<PAGE> 4
Stock to be issued to shareholders of United, the
value of each share of NCBE Common Stock shall be the
average price per share of NCBE Common Stock for the
twenty business days immediately preceding the
effective date of the Merger (the "Average Price").
For purposes hereof, Average Price shall be based
upon information reported by the NASDAQ National
Market System, and shall mean with respect to NCBE
Common Stock, the quotient resulting from: (a) the
sum of the product of; (i) the numerical average of
the reported high and low price per share, for each
of the twenty business days immediately preceding the
effective date of the Merger; times (ii) the total
number of shares of NCBE Common Stock traded on each
of such business days, respectively; divided by (b)
the aggregate number of shares traded during such
twenty business day period, provided that should the
Average Price be less than $40.50 per share, then
$40.50 per share shall be utilized as the Average
Price. Should the Average Price be more than $49.50
per share, then $49.50 shall be utilized as the
Average Price.
(ii) Notwithstanding the foregoing, the dollar amounts and
the 10% range set forth in the preceding two
sentences shall be appropriately adjusted to reflect
any recapitalization, reorganization, split-up,
merger, consolidation, exchange, stock or other
dividend or distribution (other than regular
quarterly cash dividends) made, declared or effective
on a pro-rata basis with respect to all issued and
outstanding NCBE Common Stock (a "Stock Adjustment")
arising between the date hereof and the time the
Merger becomes effective. Provided however, that in
the event a Stock Adjustment (as herein defined)
occurs during the trading days described above then
the trading days for the period prior to the Stock
Adjustment will be eliminated in calculating the
Average Price.
4
<PAGE> 5
(iii) The outstanding shares of United Common Stock other
than Dissenting Shares shall, at the time the Merger
shall become effective, automatically and without any
act or deed on the part of the holder thereof be
converted into and exchangeable for (x) newly issued,
fully paid and non-assessable whole shares of NCBE
Common Stock at the Exchange Ratio and (y) cash in
lieu of any fractional shares of NCBE Common Stock as
provided in Section 7(b) hereof. The "Exchange
Ratio" means the number resulting from dividing
$44.40 by the Average Price, rounded to the sixth
decimal place, appropriately adjusted for any stock
dividends or stock splits with respect to United
Common Stock after the date of this Merger Agreement.
(iv) Each of the shares of United Common Stock, if any,
held by United in its treasury immediately prior to
the time the Merger shall become effective shall be
canceled; and
(v) The shares of NCBE Common Stock issued and
outstanding immediately prior to the time the Merger
shall become effective shall continue to be issued
and outstanding shares of the Surviving Corporation.
(b) No fractional shares or scrip representing fractional shares
of NCBE Common Stock will be issued by NCBE in connection with
the Merger, but in lieu thereof, any holder of United Common
Stock shall, upon surrender of the certificate or certificates
formerly representing such United Common Stock, be paid cash,
without interest, by NCBE for such fractional share(s). The
cash paid for fractional shares shall be based upon the
Average Price.
(c) As soon as practicable after the time the Merger shall become
effective, and subject to the provisions set forth above
relating to the fractional shares, the Trust Department of The
National City Bank of Evansville, will distribute to the
former holders of United Common Stock in exchange for and upon
surrender for cancellation by such holders of a certificate or
certificates formerly representing
5
<PAGE> 6
shares of United Common Stock the certificate(s) for newly
issued, fully paid and non-assessable shares of NCBE Common
Stock in accordance with the Exchange Ratio and any cash
payment in lieu of fractional shares. Each certificate
formerly representing United Common Stock (other than
certificates representing Dissenting Shares) shall be deemed
for all purposes to evidence the ownership of the number of
whole shares of NCBE Common Stock and cash for fractional
share interests in NCBE Common Stock into which such shares
have been converted pursuant to the Exchange Ratio.
Certificates representing shares of United Common Stock held
by a shareholder of United, shall be aggregated together in
determining the fractional share for which such shareholder
shall receive cash as provided for herein. Until surrender of
the certificate or certificates formerly representing shares
of United Common Stock, the holder thereof shall not be
entitled to receive any dividend or other payment or
distribution payable to holders of NCBE Common Stock. Upon
such surrender (or in lieu of surrender other provisions
reasonably satisfactory to NCBE as are made as set forth
herein below), there shall be paid to the person entitled
thereto the aggregate amount of dividends or other payments or
distributions (in each case without interest) which became
payable after the time the Merger shall become effective on
the whole shares of NCBE Common Stock represented by the
certificates issued upon such surrender and exchange or in
accordance with such other provisions, as the case may be.
Certificates formerly representing shares of United Common
Stock surrendered for cancellation by each shareholder
entitled to exchange shares of United Common Stock for shares
of NCBE Common Stock by reason of the Merger shall be
accompanied by such customary instruments of transfer as NCBE
may reasonably require, provided, however, that if there be
delivered to NCBE by any person who is unable to produce any
such certificate formerly representing shares
6
<PAGE> 7
of United Common Stock for transfer (i) evidence to the
reasonable satisfaction of NCBE that any such certificate has
been lost, wrongfully taken or destroyed, and (ii) such
indemnity agreement as reasonably may be requested by NCBE to
save it harmless, and (iii) evidence to the reasonable
satisfaction of NCBE that such person is the owner of the
shares theretofore represented by each certificate claimed by
him to be lost, wrongfully taken or destroyed and that he is
the person who would be entitled to present each such
certificate and to receive shares of NCBE Common Stock
pursuant to this Merger Agreement, then NCBE, in the absence
of actual notice to it that any shares theretofore represented
by any such certificate have been acquired by a bona fide
purchaser, shall deliver to such person the certificate(s)
representing shares of NCBE Common Stock which such person
would have been entitled to receive upon surrender of each
such lost, wrongfully taken or destroyed certificate
representing shares of United Common Stock.
8. Board of Directors. The Board of Directors of NCBE as constituted at
the time the Merger shall become effective and Janice L. Beesley shall
serve as the Board of Directors of NCBE as the Surviving Corporation.
The Board of Directors of NCBE will, at the time the Merger shall
become effective, appoint and elect Janice L. Beesley as a Director of
NCBE for the longest term available under NCBE's Articles of
Incorporation and Bylaws.
9. Discussions with Others. United or its officers, directors or agents
will not directly or indirectly, solicit, authorize, initiate or
encourage submission of, any proposal, offer, tender offer or exchange
offer from any person relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of
all or a substantial portion of the assets or deposits of, or any
material equity interest in, United or any of its wholly-owned
subsidiaries or other similar transaction or business combination
involving United or any of its wholly-owned subsidiaries while this
Agreement is pending, unless
7
<PAGE> 8
the Board of Directors of United shall have determined, after
consultation with United's outside counsel, that there is a reasonable
likelihood that the Board of Directors of United has a fiduciary duty
to do so (or to authorize or direct the United's officers or agents to
do so), (a) participate in any negotiations in connection with or in
furtherance of any of the foregoing, (b) permit any person other than
NCBE and its representatives to have any access to the facilities of,
or (c) furnish to any person other than NCBE and its representatives
any non-public information with respect to, United or any of its
wholly-owned subsidiaries in connection with or in furtherance of any
of the foregoing. United shall promptly notify NCBE if any such
proposal or offer, or any inquiry from or contact with any person with
respect thereto, is made, and shall promptly provide NCBE with such
information regarding the identity of the person making such proposal,
offer, inquiry or contact as NCBE may reasonably request. Nothing
herein shall be deemed to prohibit United or its Board of Directors
from complying with Rules 14d-9 and 14e-2 under the Securities
Exchange Act of 1934 (the "1934 Act") or with any other applicable
laws, regulations or directives of any public authority, or from
making any disclosure to the United's shareholders which, in the
judgment of its Board of Directors, may be required under applicable
law.
10. Undertakings of the Parties. NCBE and United further agree as
follows:
(a) Subject to the fiduciary duty of the United Board of
Directors, this Merger Agreement shall be submitted to the
shareholders of United and, if required, to the shareholders
of NCBE, for approval and adoption at separate meetings to be
called and held in accordance with law and the Articles or
Certificate of Incorporation and Bylaws of United and NCBE.
(b) NCBE and United will cooperate in the preparation of
applications to the Board of Governors of the Federal Reserve
System (the "Board") and The Office of Thrift Supervision (the
"OTS") and to any other state or federal regulatory agency
which may be required to facilitate the Merger. For the
purpose (i) of holding meetings
8
<PAGE> 9
of shareholders of United and NCBE, if required, to approve
this Merger Agreement and the Merger and (ii) of registering
with the Securities and Exchange Commission ("SEC") and with
applicable state securities authorities the NCBE Common Stock
to be issued as contemplated by this Merger Agreement, the
parties hereto shall cooperate in the preparation of an
appropriate registration statement (such registration
statement, together with all and any amendments and
supplements thereto, being herein referred to as the
"Registration Statement"), which shall include a
prospectus/proxy statement satisfying all applicable
requirements of the Securities Act of 1933 (the "1933 Act"),
the 1934 Act, applicable state securities laws and the rules
and regulations thereunder (such prospectus/proxy statement,
together with any and all amendments or supplements thereto,
being herein referred to as the "Prospectus/Proxy Statement").
United shall have the right to review and approve such
Registration Statement prior to filing with the SEC. NCBE
shall promptly file the Registration Statement with the SEC
and applicable state securities agencies. NCBE shall use
reasonable efforts to cause the Registration Statement to
become effective under the 1993 Act and applicable state
securities laws at the earliest practicable date. United
authorizes NCBE to utilize in the Registration Statement
information concerning United, its wholly-owned subsidiaries,
and its securities provided to NCBE for the purpose of
inclusion in the Prospectus/Proxy Statement. NCBE shall
advise United promptly when the Registration Statement has
become effective and of any supplements or amendments thereto,
and NCBE shall furnish United with copies of all such
documents. Prior to the time the Merger shall become
effective or the termination of this Merger Agreement, each
party shall consult with the other with respect to any
material (other than the Prospectus/Proxy Statement) that
might constitute a "prospectus" relating to the Merger within
the meaning of the 1933 Act.
9
<PAGE> 10
(c) Each party will assume and pay all of its fees and expenses
incurred by it incident to the negotiation, preparation and
execution of this Merger Agreement, obtaining of the requisite
regulatory and shareholder consents and approvals and all
other acts incidental to, contemplated by or in pursuance of
this Merger Agreement. NCBE shall promptly prepare and file
at no expense to United: (i) any and all required regulatory
applications necessary in connection with the transactions
contemplated by this Merger Agreement; and (ii) the
Registration Statement. NCBE will also take any action
required to be taken under any applicable state securities or
"Blue Sky" laws in connection with the Merger.
(d) All information furnished by one party to another party in
connection with this Merger Agreement and the transactions
contemplated hereby will be kept confidential by such other
party and will be used only in connection with this Merger
Agreement and the transactions contemplated hereby, except to
the extent that such information: (i) is already known to
such other party when received; (ii) thereafter becomes
lawfully obtainable from other sources; or (iii) is required
to be disclosed in any document filed with the SEC, the Board,
or any other governmental agency or authority (the
"Confidential Information"). In the event that this Merger
Agreement is terminated, each party will return to the other
party or destroy any documents received by it from the other
party that contain any such Confidential Information.
(e) After (i) receipt of the Board's and the OTS's prior approval,
(ii) the approval of the shareholders of United and, if
required NCBE, as provided in Section 10(a) has occurred; and
(iii) the regulatory waiting period(s) have expired, NCBE
shall designate the date as of which NCBE desires the Merger
to become effective and the time the Merger shall become
effective shall occur at the time and on the date so
designated, consistent with the terms of Section 4 hereof.
However, any date so specified shall not be later than either
(a) the first of the month immediately
10
<PAGE> 11
following the month in which the last of the events described
above (i-iii) occurs if said event occurs before the
twenty-first day of such month or (b) the first day of the
second month immediately following such month if the last of
the events described above occurs after the twentieth day of
such month.
(f) Subject to the terms and conditions of this Merger Agreement,
NCBE and United each agree that, subject to applicable laws
and, in the case of United only, to the fiduciary duties of
its Directors, each will promptly take or cause to be taken
all action, and promptly do or cause to be done all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger and
other transactions contemplated by this Merger Agreement.
(g) As soon as practicable following the time the Merger shall
become effective, eligible employees of United and United
Bank shall be entitled to participate in all employee benefit
plans of NCBE. For purposes of eligibility and vesting in:
(i) the NCBE Employees' Profit Sharing Plan ("NCBE Profit
Plan") and, (ii) in the event of the merger of the Financial
Institutions Retirement Fund ("FIRF") pension plan sponsored
by United (the "United Pension Plan") with the NCBE's
Employees' Plan for Pensions (the "NCBE Pension Plan"), the
NCBE Pension Plan, employees of United and United Bank shall
be given credit for their years of service as employees of
United or United Bank. Subject to the foregoing, and provided
that the United Pension Plan is merged with the NCBE Pension
Plan, employees of United and United Bank shall begin to
accrue credit for benefit accruals under the NCBE Pension Plan
at the earliest entry date (January 1 or July 1) following the
effective time of the Merger without offset or reduction for
the benefits they had accrued under the United Pension Plan.
11
<PAGE> 12
In the event that the United Pension Plan is terminated at the
direction of NCBE as hereinafter provided for, employees of
United shall, for purposes of eligibility, vesting and benefit
accrual under the NCBE Pension Plan, be considered new
employees of NCBE. In the event that such employees shall not
commence accruing credit for benefit accrual purposes upon the
commencement of employment with NCBE, then they shall continue
to accrue benefits under the United Pension Plan until such
time as they shall be entitled to commence the accrual of
benefits under the NCBE Pension Plan without offset or
reduction for the benefits they had accrued under the United
Pension Plan.
(h) At the request of NCBE, United shall, prior to the time the
Merger shall become effective, take such actions as shall be
necessary or desirable to cause the United Pension Plan and
the FIRF Thrift Plan sponsored by United and United Bank (the
"United 401(k) Plan") to be terminated at or after the
effective date of Merger and/or be merged with the NCBE
Pension Plan and the NCBE Profit Plan, respectively, in
accordance with the applicable requirements of ERISA. In all
events, the United and United Bank employees who participate
in the United Pension Plan and/or the United 401(k) Plan shall
incur no reduction in their account balance or accrued benefit
or lose any rights or benefits they had accrued under the
United Pension Plan and/or the United 401(k) Plan prior to
such termination or merger. In the event that the United
Pension Plan and the NCBE Pension Plan are not merged and
employees of United are considered new employees of NCBE on
the effective date of the Merger for purposes of determination
of eligibility and vesting under the NCBE Pension Plan, then
the United Pension Plan shall, subject to the provisions of
ERISA, be continued in effect for the employees of United and
United Bank (solely with respect to those persons employed as
of the effective date of the Merger) until such persons are
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<PAGE> 13
eligible on the basis of length of service to accrue benefits
under the NCBE Pension Plan on the same basis as the
employees of NCBE.
(i) Subject to the fiduciary duty of the NCBE Board of Directors,
NCBE undertakes to cause, immediately after the effective
date of the Merger the continuance as Directors of United Bank
to January, 1996, with at least the same compensation and
benefits, subject to any retirement policies of NCBE or United
Bank as in effect as of the date of this Agreement, all those
persons serving as Directors of such bank immediately prior to
the effective time of the Merger, plus one additional person
to be named by NCBE may be added to the Board of Directors of
United Bank.
(j) NCBE will maintain "current public information" within the
meaning of Rule 144 for three (3) years following the
effective date.
(k) NCBE, United, and their Directors and Executive Officers shall
not cause any transactions in NCBE Common Stock during the 20
business days immediately preceding the effective date of the
Merger.
(l) NCBE shall assume and maintain the non-qualified deferred
compensation plan for the directors of United Bank who
currently participate in the aforesaid plan and shall permit
such directors who currently participate in such plan to
continue to defer their directors' fees on a tax-deferred
basis in the same amount currently being deferred until June
30, 1998. After June 30, 1998, the amount of United Bank
directors' fees that had been deferred by Janice Beesley shall
be paid to her as part of her annual salary.
(m) NCBE shall, at such time as is recommended by its accountants,
McGladrey and Pullen, sell approximately 75,000 shares of its
common stock acquired by it during 1994, pursuant to its stock
repurchase program. NCBE shall use its best efforts to cause
such sale to remove any "taint" attached to such shares which
taint may make pooling of interest accounting for the Merger
unavailable.
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<PAGE> 14
(n) United shall use its best efforts to cause the termination of
the United Bank employment contacts with Janice L. Beesley, G.
Jeffrey Palmer and Patrick W. Lenahan at or immediately prior
to the effective time of the Merger.
11. Dissenting Shareholders. Holders of United Common Stock who do not
vote their shares in favor of the Merger and otherwise comply in all
respects to perfect dissenters' rights with respect to their shares
("Dissenting Shares"), will be entitled to dissenters' or appraisal
rights, if any, pursuant to and solely upon strict compliance with,
the applicable provisions of Delaware law.
12. Tax Opinion. NCBE, for the benefit of the United shareholders shall
obtain a written opinion of Werner & Blank Co., L.P.A. to the effect
that:
(a) The statutory merger of United with and into NCBE will
constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code;
(b) No gain or loss will be recognized by United or NCBE as a
consequence of the transactions herein contemplated;
(c) No gain or loss will be recognized by the shareholders of
United on the exchange of their shares of United Common Stock
for shares of NCBE Common Stock (disregarding for this purpose
any cash received for fractional share interests to which they
may be entitled);
(d) The federal income tax basis of the NCBE Common Stock received
by the shareholders of United Common Stock for their shares of
United Common Stock will be the same as the federal income tax
basis of the United Common Stock surrendered in exchange
therefor; and
(e) The holding period of the NCBE Common Stock received by a
shareholder of United for his shares of United Common Stock
will include the period for which the United Common Stock
exchanged therefor was held, provided the exchanged
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<PAGE> 15
United Common Stock was held as a capital asset by such
shareholder on the date of the exchange.
13. Representations and Warranties of NCBE. NCBE represents and warrants
to United as follows:
(a) NCBE is a corporation duly organized and validly existing
under the laws of the State of Indiana, is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business in the State of
Indiana, together with all other jurisdictions where it is
both required to so qualify and the failure to so qualify
would have a Material Adverse Effect on NCBE. For purposes of
this Merger Agreement, the term "Material Adverse Effect"
means, with respect to either NCBE or United, any condition,
event, change or occurrence that has caused a material adverse
change in the business, operations, results of operations or
financial condition of such entity and its wholly-owned
subsidiaries on a consolidated basis, but shall not include
(i) an adverse change with respect to, or effect on, such
entity or its wholly-owned subsidiaries resulting from a
change in law, rule, regulation, generally accepted accounting
principles or regulatory accounting principles (as such would
apply to the financial statements of such entity), (ii) an
adverse change with respect to, or effect on, such entity
resulting from expenses incurred in connection with this
Agreement or the transactions contemplated hereby, or (iii) an
adverse change with respect to, or effect on, such entity or
its wholly-owned subsidiaries resulting from any other matter
affecting federally insured depository institutions or their
holding companies, regulated mortgage lenders or mortgage
originators generally, including (without limitation) judicial
decisions, changes in general economic conditions and changes
in prevailing interest and deposit rates. NCBE has full power
and authority (including all licenses, franchises, permits and
other governmental authorizations which are legally required)
to engage in the
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<PAGE> 16
businesses and activities now conducted by it. As of
September 30, 1994, the authorized capital stock of NCBE
consisted of 5,000,000 shares of common stock, par value $3.33
1/3 per share of which a total of 3,693,254 shares were issued
and outstanding and no shares were held by NCBE as treasury
stock. All of said shares of capital stock are fully paid and
nonassessable and are not issued in violation of the
preemptive rights of any shareholder. There are no
outstanding options, warrants or commitments of any kind
relating to NCBE's capital stock.
(b) NCBE has furnished to United copies of the following financial
statements relating to NCBE and its consolidated subsidiaries:
(i) the audited Consolidated Balance Sheets of NCBE as of
December 31, 1993 and 1992 and the Consolidated Statements of
Income, Shareholders' Equity and Statements of Cash Flows for
the years ended December 31, 1993, 1992, and 1991, together
with the notes thereto, and (ii) the unaudited Consolidated
Balance Sheet of NCBE as of September 30, 1994, and the
unaudited Consolidated Statements of Income and Shareholders'
equity for the period then ended. Each of the aforementioned
financial statements was prepared in accordance with generally
accepted accounting principles, consistently applied and is
true and correct in all material respects and together present
fairly the consolidated financial position and results of
operations of NCBE as of the dates and for the periods therein
set forth (subject, in the case of such interim financial
statements, to normal year-end audit adjustments and to the
absence of footnotes), except for the effect of the pending
acquisition of White County Bank, Carmi, Illinois, pursuant to
the terms of an Agreement and Plan of Reorganization dated
December 12, 1994. Such financial statements do not, as of
the dates thereof, include any material asset or omit any
material liability, absolute or contingent, or other fact, the
inclusion or omission of which renders such financial
statements, in light of the circumstances under which they
were
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<PAGE> 17
made, misleading in any material respect. Since December 31,
1993, NCBE has not suffered a Material Adverse Effect.
(c) The Board of Directors of NCBE has authorized execution of
this Merger Agreement and approved the merger of United and
NCBE as contemplated by this Merger Agreement. NCBE has all
requisite power and authority to enter into this Merger
Agreement and NCBE has the authority to consummate the
transactions contemplated hereby. This Merger Agreement
constitutes the valid and legally binding obligation of NCBE
and this Merger Agreement and the consummation hereof has been
duly authorized and approved on behalf of NCBE by all
requisite corporate action. Provided the required approvals
are obtained from the Board and OTS, neither the execution and
delivery of this Merger Agreement nor the consummation of the
Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the
terms of any law, or any rule or regulation of any
governmental agency or authority or any judgment, order or
decree of any court or other governmental agency to which NCBE
may be subject, any contract, agreement or instrument to which
NCBE is a party or by which NCBE is bound or committed, or the
Articles of Incorporation or Bylaws of NCBE, or constitute an
event which with the lapse of time or action by a third party,
could, to the best of NCBE's knowledge, result in the default
under any of the foregoing or result in the creation of any
lien, charge or encumbrance upon any of the assets or
properties of NCBE or upon any of the stock of NCBE, except,
however, in the case of contracts, agreements or instruments,
such defaults, conflicts or breaches which either (i) will be
cured or waived prior to the time the Merger becomes
effective, or (ii) if not so cured or waived would not, in the
aggregate, have a Material Adverse Effect on NCBE.
(d) There is no litigation, action, suit, investigation or
proceeding pending or, to the best of its knowledge after due
inquiry of its executive officers, threatened,
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<PAGE> 18
against or affecting NCBE or its wholly-owned subsidiaries or
involving any of their respective properties or assets, at law
or in equity, before any federal, state, municipal, local or
other governmental authority, involving a material amount
which, if resolved adversely to the interest of NCBE or its
subsidiaries, would materially affect the consolidated
financial condition or operations of NCBE and its wholly-owned
subsidiaries or its ability to perform under this Merger
Agreement, and to the best of its knowledge and belief after
due inquiry of its executive officers, no one has asserted and
no one has reasonable or valid grounds on which it reasonably
can be expected that anyone will assert any such claims
against NCBE or its wholly-owned subsidiaries based upon the
wrongful action or inaction of NCBE or its subsidiaries or any
of their respective officers, directors or employees.
(e) At the time the Merger shall become effective and on such
subsequent date when the former shareholders of United
surrender their United share certificates for cancellation,
the shares of NCBE Common Stock to be received by shareholders
of United will have been duly authorized and validly issued by
NCBE, will be fully paid and nonassessable, and the
Registration Statement and all amendments with respect thereto
shall have been declared effective by the SEC with respect to
the shares of NCBE Common Stock to be received by the
shareholders of United.
(f) NCBE has not incurred and will not incur directly or
indirectly any liability for brokerage, finders', agents' or
investment bankers' fees or commissions in connection with
this Merger Agreement or the transactions contemplated
thereby.
(g) The Employees' Savings and Profit Sharing Plan of National
City Bancshares, Inc. and the Plan for Pensions of National
City Bancshares, Inc. (hereinafter referred to collectively as
the "plans") which purports to be a qualified plan under
Section 401(a) of the Internal Revenue Code is so qualified
and is in compliance in all material respects with the
applicable requirements of the Employee
18
<PAGE> 19
Retirement Income Security Act of 1974, as amended ("ERISA").
All material notices, reports and other filings required under
applicable law to be given or made to or with any governmental
agency with respect to the plans have been timely filed or
delivered where failure to file will result in a penalty or
result in disqualification of the plan. NCBE has no knowledge
either of any circumstances which would adversely affect the
qualifications of the plans or their compliance with the
applicable requirements of ERISA, or of any "reportable event"
(as such term is defined in Section 4043(b) of ERISA) or any
"prohibited transaction" (as such term is defined in Section
406 of ERISA and Section 4975(c) of the Internal Revenue Code)
which has occurred since the date on which said section became
applicable to the plans. The plans which are defined benefit
plans within the meaning of ERISA meet the minimum funding
standards set forth in the Internal Revenue Code and ERISA.
(h) NCBE has filed all reports, forms and registration statements
(collectively, "SEC Documents") required to be filed by it
pursuant to the 1933 Act, as amended, and the 1934 Act, as
amended for periods ending after January 1, 1985, and such SEC
Documents complied in all material respects with the 1933 Act
and the 1934 Act and all applicable rules and regulations
promulgated thereunder (the "SEC Laws"). NCBE has delivered
to United copies of the Annual Report on Form 10-K filed with
the Securities and Exchange Commission by NCBE for its fiscal
years ended December 31, 1993, 1992, and 1991 including
exhibits and all documents incorporated by reference therein,
and the proxy materials disseminated by NCBE to its
shareholders in connection with the 1994 Annual Meeting of
Shareholders of NCBE; such Annual Report and proxy materials
do not misstate a material fact or omit to state a material
fact necessary in order to make the statements contained
therein, in light of the circumstances under which they are
made, not misleading.
19
<PAGE> 20
(i) Since December 31, 1993, each of NCBE and its subsidiaries has
conducted business only in the ordinary course, and has
preserved its corporate existence, business and goodwill
intact, except for the sale during 1994, by NCBE of its
interest in its non-bank subsidiary, Ayer-Wagoner-Deal
Insurance Agency, Inc., and the merger of two of its wholly
owned subsidiary banking corporations, namely, Poole Deposit
Bank and Farmers State Bank, which merger was effective
December 1, 1994.
(j) NCBE and the NCBE Banks each have good and marketable title to
all assets and properties, whether real or personal, tangible
or intangible, including without limitation the capital stock
of the NCBE Banks and all other assets and properties
reflected as owned by it or them in NCBE's Balance Sheet of
September 30, 1994, or acquired subsequent thereto (except to
the extent that such assets and properties have been disposed
of for fair value in the ordinary course of business since
September 30, 1994) subject to no liens, mortgages, security
interests, encumbrances, pledges or charges of any kind,
except: (i) those items that secure liabilities that are
reflected in said Balance Sheet; (ii) statutory liens for
taxes not yet delinquent; and (iii) minor defects and
irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which
they are held; and such liens, mortgages, security interests,
encumbrances and charges which are not in the aggregate,
material to the assets and properties of NCBE. NCBE or the
NCBE Banks as lessee has the contractual right under valid
leases to occupy, use, possess and control all material
property leased by NCBE or the NCBE Banks.
(k) To the best of its knowledge after due inquiry of its
executive officers, NCBE and the NCBE Banks have complied with
all laws, regulations and orders applicable to them and to the
conduct of their businesses, including without limitation, all
statutes, rules and regulations pertaining to the conduct of
banking activities
20
<PAGE> 21
except for possible technical violations which together with
any penalty which results therefrom are or will be of no
material consequence to either NCBE or the NCBE Banks.
Neither NCBE nor any of the NCBE Banks are the subject of, nor
a party to, any regulatory action or agreement such as letter
agreements, memorandum of understanding, cease and desist
orders or like agreements. Neither NCBE nor the NCBE Banks
are in default under, and no event has occurred which, with
the lapse of time or action by a third party, could, to the
best of NCBE's knowledge after due inquiry of its executive
officers, result in the default under the terms of any
judgment, decree, order, writ, rule or regulation of any
governmental authority or court, whether federal, state or
local and whether at law or in equity, where the default(s)
could reasonably be expected to have a Material Adverse Effect
on NCBE.
(l) NCBE has duly filed all federal, state, county and local
income, excise, real and personal property and other tax
returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by NCBE up to the date
hereof (excluding any return or report for which a current
valid extension is in effect. To the best of the knowledge
and belief of NCBE after due inquiry of its executive
officers, all such returns are true and correct in all
material respects, and NCBE has paid or, prior to the time the
Merger shall become effective, will pay all taxes, interest
and penalties shown on such return or reports or claimed
(other than those claims being contested in good faith and
which have been disclosed to United) to be due to any federal,
state, county, local or other taxing authority, and there is,
and at the time the Merger shall become effective will be, no
basis known to the executive officers of NCBE for any
additional claim or assessment which might result in a
Material Adverse Effect on NCBE, and for which an adequate
reserve has not been established. To the best of its
knowledge and belief after due inquiry of its
21
<PAGE> 22
executive officers, NCBE has paid or made adequate provision
in its financial statements or its books and records for all
taxes payable in respect of all periods ending as of the date
thereof. To the best of its knowledge and belief after due
inquiry of its executive officers, NCBE has, or at the time
the Merger shall become effective will have, no material
liability for any taxes, interest or penalties of any nature
whatsoever, except for those taxes which may have arisen up to
the time the Merger shall become effective in the ordinary
course of business and are properly accrued on the books of
NCBE as of the time the Merger shall become effective.
(m) To the best of its knowledge and belief, but without having
undertaken an environmental audit or investigation, NCBE has
no knowledge of any underground storage tanks, any hazardous
substances, hazardous waste, pollutant or contaminant,
including, but not limited to, asbestos (except as previously
disclosed to United in a letter of even date herewith), PCB's
or urea formaldehyde, having been generated, released into,
stored or deposited over, upon or below (in storage tanks or
otherwise) any real property currently or to be owned or
leased by NCBE or any of its wholly-owned subsidiaries, or
into any water systems on or below the surface any real
property currently or to be owned or leased by NCBE or any of
its wholly-owned subsidiaries from any source whatsoever. As
used in this Merger Agreement, the terms "hazardous
substance," "hazardous waste," "pollutant" and "contaminant"
mean any substance, waste pollutant or contaminant included
within such terms under any applicable Federal, state or local
statute or regulation.
(n) NCBE and the NCBE Banks have in effect insurance coverage with
reputable insurance underwriters, which in respect of amounts,
premiums, types and risksinsured, constitutes reasonably
adequate coverage against all risks
22
<PAGE> 23
customarily insured against by companies comparable in size
and operation to NCBE and the NCBE Banks.
23
<PAGE> 24
14. Representations and Warranties of United. United represents and
warrants to NCBE as follows:
(a) United is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, is a
registered savings and loan holding company under the Home
Owners' Loan Act, as amended. United has full power and
authority (including all licenses, franchises, permits and
other governmental authorizations which are legally required)
to engage in the businesses and activities now conducted by
it. As of the date of this Merger Agreement, the authorized
capital stock of United consists of; (i) 2,000,000 shares of
common stock with $.01 par value, of which a total of 440,712
shares are issued and outstanding and of which 19,288 are
shares of treasury stock owned by United, and (ii) 500,000
shares of preferred stock, none of which are either issued and
outstanding or are shares of treasury stock owned by United.
All of said shares of capital stock are fully paid and
nonassessable and are not issued in violation of the
preemptive rights of any shareholder. There are no
outstanding options, warrants or commitments of any kind
relating to United's capital stock except options to purchase
26,698 shares of United Common Stock at a price of $10.00 per
share issued pursuant to United's 1992 Stock Option and
Incentive Plan adopted in 1992.
(b) United has furnished to NCBE copies of all its audited
financial statements relating to United and its subsidiaries,
as of June 30, 1994 and 1993 and for each of the fiscal years
ended June 30, 1994, 1993, and 1992. United has furnished to
NCBE copies of all financial statements relating to United and
its subsidiaries, as filed with the appropriate regulatory
agencies, as of and for the interim period ended September 30,
1994. Each of the aforementioned financial statements is
prepared in accordance with generally accepted accounting
principles or
24
<PAGE> 25
applicable regulatory accounting principles applicable to the
United Bank, consistently applied and is true and correct in
all material respects and together present fairly the
consolidated financial position and results of operations of
United as of the dates and for the periods therein set forth
(subject, in the case of such interim financial statements, to
normal year-end adjustments and the absence of footnotes).
Such financial statements do not, as of the dates thereof,
include any material asset or omit any material liability,
absolute or contingent, or other fact, the inclusion or
omission of which renders such financial statements, in light
of the circumstances under which they were made, misleading in
any material respect, except for certain contingent
liabilities which are disclosed in United's letter to NCBE of
even date herewith. Since June 30, 1994, United has not
suffered a Material Adverse Effect.
(c) The Board of Directors of United has authorized execution of
this Merger Agreement. Subject to the approval by the OTS and
the shareholders of United, United has all requisite power and
authority to enter in this Merger Agreement. United owns all
of the shares of United Bank. United has the authority to
consummate the transactions contemplated hereby, provided all
required corporate and regulatory approvals are obtained, so
that neither the execution and delivery of this Merger
Agreement nor the consummation of the Merger will conflict
with, result in the breach of, constitute a default under or
accelerate the performance provided by the terms of any law,
or any rule or regulation of any governmental agency or
authority or any judgment, order or decree of any court or
other governmental agency to which United may be subject, any
contract, agreement or instrument to which United is a party
or by which United is bound or committed, or the Certificate
of Incorporation or Bylaws of United, or constitute an event
which with the lapse of time or action by a third party,
could, to the best of United's knowledge, result in the
default under any of the foregoing
25
<PAGE> 26
or result in the creation of any lien, charge, encumbrance
upon any of the assets, property or capital stock of United,
except, however, in the case of contracts, agreements or
instruments, such defaults, conflicts or breaches which either
(i) will be cured or waived prior to the time the Merger
becomes effective, or (ii) if not so cured or waived would
not, in the aggregate, have a Material Adverse Effect on
United.
(d) Other than as disclosed on the United Document List there is
no litigation, action, suit, investigation or proceeding
pending or, to the best of its knowledge after due inquiry of
its executive officers, overtly threatened, against or
affecting United or its wholly-owned subsidiaries or involving
any of their respective properties or assets, at law or in
equity, before any federal, state, municipal, local or other
governmental authority, involving a material amount which, if
resolved adversely to the interest of United would materially
affect the consolidated financial condition or operations of
United and its wholly-owned subsidiaries on a consolidated
basis, and/or its ability to perform under this Merger
Agreement, and to the best of its knowledge and belief after
due inquiry its executive officers, no one has asserted and no
one has reasonable or valid ground on which it reasonably can
be expected that anyone will assert any such claims against
United or its wholly-owned subsidiaries based upon the
wrongful action or inaction of United or its subsidiaries or
any of their respective officers, directors or employees.
(e) Each of United and its wholly owned subsidiaries have good and
marketable title to all assets and properties, whether real or
personal, tangible or intangible, including without limitation
the capital stock of its wholly-owned subsidiaries and all
other assets and properties reflected as owned by it or them
in United's Balance Sheet of September 30, 1994, or acquired
subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the
ordinary course of business since September 30, 1994) subject
to no liens, mortgages,
26
<PAGE> 27
security interests, encumbrances, pledges or charges of any
kind, except: (i) those items that secure liabilities that are
reflected in said Balance Sheet; (ii) statutory liens for
taxes not yet delinquent; and (iii) minor defects and
irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which
they are held; and such liens, mortgages, security interests,
encumbrances and charges are not in the aggregate, material to
the assets and properties of United on a consolidated basis.
Each of United and its wholly-owned subsidiaries, as lessee
has the contractual right under valid leases to occupy, use,
possess and control all material property leased by them.
(f) To the best of its knowledge after due inquiry of United and
its executive officers, United and its wholly-owned
subsidiaries have complied with all laws, regulations and
orders applicable to them and to the conduct of their
businesses, including without limitation, all statutes, rules
and regulations pertaining to the conduct of United Bank
banking activities except for possible technical violations
which together with any penalty which results therefrom are or
will be of no material consequence to United and its
wholly-owned subsidiaries. Neither United nor any of its
wholly-owned subsidiaries is the subject of nor a party to,
any regulatory actions or agreement such as letter agreements,
memorandum of understanding, cease and desist order or like
agreements. United and its wholly-owned subsidiaries are not
in default under, and no event has occurred which, with the
lapse of time or action by a third party, could, to the best
of United's knowledge after due inquiry of its executive
officers, result in the default under the terms of any
judgment, decree, order, writ, rule or regulation of any
governmental authority or court, whether federal, state or
local and whether at law or in equity, where the default(s)
could reasonably be expected to have a Material Adverse Effect
on United.
27
<PAGE> 28
(g) Except as disclosed in United's letter to NCBE of even date
herewith, receipt of which is acknowledged by NCBE, United has
not, since September 30, 1994, to the date hereof: (i) issued
or sold any of its capital stock or any corporate debt
securities; (ii) granted any option for the purchase of
capital stock; (iii) declared or set aside or paid any
dividend or other distribution in respect of its capital stock
except as permitted pursuant to the terms of this agreement
or, directly or indirectly, purchased, redeemed or otherwise
acquired any shares of such stock; (iv) incurred any
obligation or liability (absolute or contingent), except for
obligations reflected in this Merger Agreement and for
obligations or liabilities incurred in the ordinary course of
business; (v) mortgaged, pledged or voluntarily subjected to
lien or encumbrance (other than statutory liens for taxes not
yet delinquent) any of its assets or properties; (vi)
discharged or satisfied any material lien or encumbrance or
paid any material obligation or liability (absolute or
contingent), other than the current portion of any long term
liabilities which became due after September 30, 1994, current
liabilities included in its financial statements as of
September 30, 1994, current liabilities incurred since the
date thereof in the ordinary course of business and
liabilities incurred in carrying out the transactions
contemplated by this Merger Agreement; (vii) sold, exchanged
or otherwise disposed of any of its material capital assets
outside the ordinary course of business; (viii) made any
extraordinary officers' salary increase or wage increase,
entered into any employment contract with any officer or
salaried employee or, instituted any employee welfare, bonus,
stock option, profit-sharing, retirement or similar plan or
arrangement; (ix) suffered any damage, destruction or loss,
whether or not covered by insurance, materially and adversely
affecting its business, property or assets or waived (except
for fair consideration) any rights of value which are material
in the aggregate, considering its business taken as a whole;
or (x) entered or agreed to enter into any agreement or
arrangement
28
<PAGE> 29
granting any preferential right to purchase any of its assets,
properties or rights or requiring the consent of any party to
the transfer and assignment of any material portion of such
assets, properties or rights.
(h) Except as set forth in the United Document List attached to
United's letter to NCBE of even date herewith, receipt of
which is acknowledged by NCBE, neither United nor any of its
wholly-owned subsidiaries is a party to or bound by any
written or oral: (i) employment or consulting contract which
is not terminable by it on 60 days or less notice, (ii)
employee bonus, deferred compensation, pension, stock bonus or
purchase, profit-sharing, retirement or stock option plan,
(iii) other employee benefit or welfare plan, or (iv) other
executory material agreements which in any case obligate it to
make any payment(s) which in the aggregate exceed $10,000 per
year except for contracts terminable on 60 days notice. All
such pension, stock bonus or purchase, profit-sharing, defined
benefit and retirement plans set forth under the caption
"Qualified Plans" in the United Document List (hereinafter
referred to collectively as the "plan") are qualified plans
under Section 401(a) of the Internal Revenue Code and in
compliance in all material respects with ERISA. All material
notices, reports and other filings required under applicable
law to be given or made to or with any governmental agency
with respect to the plans have been timely filed or delivered
where failure to file would result in a penalty of $25,000
and/or result in disqualification of the plan. United has no
knowledge either of any circumstances which would adversely
affect the qualification of the plans or their compliance with
ERISA, or of any unreported "reportable event" (as such term
is defined in Section 4043(b) of ERISA) or, except as
indicated in the United Document List attached to United's
letter to NCBE of even date herewith, any "prohibited
transaction" (as such term is defined in Section 406 of ERISA
and Section 4975(c) of the Internal Revenue Code) which has
occurred since the date on which said sections became
29
<PAGE> 30
applicable to the plans. Each plan that is a defined benefit
pension plan meets the minimum funding standards set forth in
the Internal Revenue Code and ERISA.
(i) United has duly filed all federal, state, county and local
income, excise, real and personal property and other tax
returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by United up to the
date hereof (excluding any return or report for which a
current valid extension is in effect). Except as set forth in
United's letter to NCBE of even date herewith, receipt of
which is acknowledged by NCBE, to the best of the knowledge
and belief of United after due inquiry of its executive
officers, all such returns are true and correct in all
material respects, and United has paid or, prior to the time
the Merger shall become effective, will pay all taxes,
interest and penalties shown on such return or reports or
claimed (other than those claims being contested in good faith
and which have been disclosed to NCBE) to be due to any
federal, state, county, local or other taxing authority, and
there is, and at the time the Merger shall become effective
will be, no basis known to the executive officers of United
for any additional claim or assessment which might result in a
Material Adverse Effect on United and for which an adequate
reserve has not been established. To the best of its
knowledge and belief after due inquiry of its executive
officers, United has paid or made adequate provision in its
financial statements or its books and records for all taxes
payable in respect of all periods ending as of the date
thereof. To the best of its knowledge and belief after due
inquiry of its executive officers, United has, or at the time
the Merger shall become effective will have, no material
liability for any taxes, interest or penalties of any nature
whatsoever, except for those taxes which may have arisen up to
the time the Merger shall become effective in the ordinary
course of business and are properly accrued on the books of
United as of the time the Merger shall become effective.
30
<PAGE> 31
(j) To the best of its knowledge and belief, but without having
undertaken an environmental audit or investigation, United has
no knowledge of any underground storage tanks, any hazardous
substances, hazardous waste, pollutant or contaminant,
including, but not limited to, asbestos (except as previously
disclosed to NCBE in a letter of even date herewith), PCB's or
urea formaldehyde, having been generated, released into,
stored or deposited over, upon or below (in storage tanks or
otherwise) any real property currently or to be owned or
leased by United or any of its wholly-owned subsidiaries, or
into any water systems on or below the surface any real
property currently or to be owned or leased by United or any
of its wholly-owned subsidiaries from any source whatsoever.
(k) United or United Bank has in effect insurance coverage with
reputable insurance underwriters, which in respect of amounts,
premiums, types and risks in insured, constitutes reasonably
adequate coverage against all risks customarily insured
against companies comparable in size and operation to United
or United Bank.
(l) Except as set forth in the United Document List, United has
not incurred and will not incur any liability for brokerage,
finders', agents', or investment bankers' fees or commissions
in connection with this Merger Agreement or the transactions
contemplated hereby.
15. Action by United Pending Effective Time. United agrees that from the
date of this Merger Agreement until the time the Merger shall become
effective or this Merger Agreement is properly terminated, except with
prior written permission of NCBE:
(a) United will not declare or pay any dividends or make any
distributions other than regular cash dividends, payable at
such times and in amounts consistent with past practice and
not to exceed the per share rate paid in the prior calendar
year, provided, however, that shareholders of United may for
any given quarter, receive a dividend attributable to that
quarter only from NCBE or United, but not from both. NCBE and
United agree to cooperate to coordinate the record and payment
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<PAGE> 32
dates of their cash dividend for the quarter in which the
Merger becomes effective so that the United shareholders
receive a quarterly dividend from either United or NCBE but
not from both with respect to such quarter. If, prior to the
consummation of the Merger, United shall declare a stock
dividend or make distributions upon or subdivide, split up,
reclassify or combine its shares of common stock in any
security convertible into its common stock, appropriate
adjustment or adjustments will be made in the foregoing per
share dividend rate.
(b) United will not issue, sell, grant any option for, or acquire
for value any shares of its capital stock or otherwise effect
any change in connection with its capitalization except in
connection with the exercise of stock options which are
outstanding on the date hereof.
(c) Except as otherwise set forth in or contemplated by this
Merger Agreement, United will use its best efforts to (i)
carry on its businesses in substantially the same manner as
heretofore conducted; (ii) keep in full force and effect
insurance comparable in amount and scope of coverage to that
now maintained by it; and (iii) maintain and preserve its
business organization intact.
(d) United will not: (i) enter into any transaction other than in
the ordinary course of business or voluntarily incur or agree
to incur any material obligation or liability except
liabilities incurred and obligations entered into in the
ordinary course of business; (ii) change its or United Bank's
lending, investment, liability management and other material
United Bank banking policies in any material respect except in
accordance with prudent banking practices after consultation
with NCBE; (iii) except for customary periodic increases
consistent with prior practice, grant any individual, general
or uniform increase in the rates of pay of employees or make
any significant increase in its staff size; (iv) incur or
commit to any capital expenditures other than (x) in the
ordinary course of business (which in no event shall include
the establishment of new branches and such other
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<PAGE> 33
facilities or any capital expenditures for any purpose which
exceed 1% of United's combined capital, surplus and undivided
profit accounts as of June 30, 1994) or (y) in connection with
emergency repairs or replacements; or (v) permit any other
corporation to be merged or consolidated with and into it or
acquire all of the assets of any other corporation or person.
(e) United will not change its methods of accounting in effect at
June 30, 1994, except as required by changes in generally
accepted or regulatory accounting principles and concurred in
by United's independent auditors, or change any of its methods
of reporting income and deductions for Federal income tax
purposes from those employed in the preparation of United's
Federal income tax returns for the taxable year ending June
30, 1994, except for changes required by law.
(f) United will afford NCBE, its officers and other authorized
representatives, reasonable access to all books, records, tax
returns, leases, contracts and documents of United and its
wholly-owned subsidiaries and will furnish to NCBE such
information with respect to the assets and business of United
and its wholly-owned subsidiaries as NCBE may from time to
time reasonably request in connection with this Merger
Agreement and the transactions contemplated hereby.
(g) United will promptly advise NCBE in writing of all material
actions taken by the directors and shareholders of United,
furnish NCBE with copies of all interim financial statements
of United as they become available, and keep NCBE fully
informed concerning all developments which in the opinion of
United may have a material effect upon the business,
properties or condition (either financial or otherwise) of
United.
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<PAGE> 34
16. Action by NCBE Pending Effective Time. NCBE agrees that from the date
of this Agreement until the time the Merger shall become effective or
this Merger Agreement is properly terminated:
(a) NCBE will carry on its business in substantially the same
manner as heretofore conducted except as otherwise set forth
in or contemplated by this Merger Agreement, and NCBE will
keep in full force and effect insurance comparable in amount
and scope of coverage to that now maintained by it and use its
best efforts to maintain and preserve its business
organization intact. United acknowledges that, in the
ordinary course of its business as a bank holding company,
NCBE from time-to-time, enters into an agreement(s) to acquire
by merger, stock purchase or like means, another financial
institution or its holding company.
(b) NCBE will not change its methods of accounting in effect at
December 31, 1993, except as required by changes in generally
accepted or regulatory accounting principles as concurred in
by NCBE's independent auditors, or change any of its methods
of reporting income and deductions for Federal income tax
purposes from those employed in the preparation of the Federal
income tax returns of NCBE Banks for the taxable year ending
December 31, 1993, except for changes required by law or take
any action which could jeopardize the tax free nature of the
Merger or the pooling of interests accounting treatment for
the Merger.
(c) NCBE will promptly advise United in writing of all material
corporate actions taken by the directors of NCBE, furnish
United with copies of interim financial statements of NCBE and
all reports, schedules and statements filed by or delivered to
NCBE pursuant to the 1934 Act and the rules and regulations
promulgated thereunder, as they become available, and keep
United fully informed concerning all developments which in the
opinion of NCBE may have a
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<PAGE> 35
material effect upon the business, properties or condition
(either financial or otherwise) of NCBE.
(d) NCBE will afford United, its officers and other authorized
representatives, reasonable access to all books, records, tax
returns, leases, contracts and documents of NCBE and its
wholly-owned subsidiaries and will furnish to United such
information with respect to the assets and business of NCBE
and its wholly-owned subsidiaries as United may from time to
time reasonably request in connection with this Merger
Agreement and the transactions contemplated hereby.
(e) NCBE shall knowingly take no action, nor knowingly fail to
take any action which reasonably may be taken by it, to
prevent or disqualify the Merger from being accounted for as a
pooling of interests.
17. Notification of Certain Matters.
(a) Each party shall give prompt notice to the other party of (i)
the occurrence or failure to occur of any event or the
discovery of any information, which occurrence, failure or
discovery would be likely to cause any representation or
warranty on its part contained in this Merger Agreement to be
untrue, inaccurate or incomplete in any material respect after
the date hereof or, in case of any representation or warranty
given as of a specific date, would be likely to cause any such
representation on its part contained in this Merger Agreement
to be untrue, inaccurate or incomplete in any material respect
as of such specific date and (ii) any material failure of such
party to comply with or satisfy any covenant or agreement to
be complied with or satisfied by it hereunder.
(b) From time to time prior to the time the Merger shall become
effective, each party shall promptly supplement or amend any
of its representations and warranties which apply to the
period after the date hereof by delivering a letter to the
other party with respect to any matter hereafter arising which
would render any such representation or warranty after the
date of this Merger Agreement materially
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<PAGE> 36
inaccurate or incomplete as a result of such matter arising.
Such supplement or amendment to a party's representations and
warranties contained in any such letter shall be deemed to
have modified the representations and warranties of the
disclosing party, and no such supplement or amendment, or the
information contained in any such letter, shall constitute a
breach of a representation or warranty of the disclosing
party; provided that no such supplement or amendment may cure
any breach of a covenant or agreement of a party. Within 20
days after receipt of such supplement or amendment (or if cure
is promptly commenced by the disclosing party, but is not
effected within the Cure Period (as defined below)), the
receiving party may exercise its right to terminate this
Agreement pursuant to Section 27(e) hereof if the information
in such supplement or amendment together with the information
in any or all of the supplements or amendments previously
provided by the disclosing party indicate that the disclosing
party has suffered or is reasonably likely to suffer a
Material Adverse Effect which either has not or cannot be
cured within 30 days after disclosure to the receiving party
(the "Cure Period").
18. Affiliate Letters. United shall obtain and deliver to NCBE as
promptly as practicable after (and shall use its reasonable best
efforts to obtain and deliver within five days after) the date hereof
a signed representation letter substantially in the form of Exhibit A
hereto from each executive officer and director of United and each
shareholder of United who may reasonably be deemed an "affiliate" of
United within the meaning of such term as used in Rule 145 under the
1933 Act and for purposes of qualifying for pooling of interests
accounting treatment for the Merger, and shall obtain and deliver to
NCBE a signed representation letter substantially in the form of
Exhibit A from any person who becomes an executive officer or director
of United or any shareholder who becomes such an "affiliate" after the
date hereof as promptly as practicable after (and shall use its
reasonable best efforts to obtain and deliver within five days after)
such person achieves
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<PAGE> 37
such status. NCBE shall likewise use its best efforts to secure
letters or commitments from its affiliates to satisfy
pooling-of-interest accounting requirements.
19. Indemnification
(a) From and after the time the Merger becomes effective, NCBE
shall indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date hereof or who
becomes prior to the time the Merger becomes effective, an
officer, director, employee or agent of Untied or any of its
wholly-owned subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses (including
attorney's fees), liabilities or judgments or amounts that are
paid in settlement (which settlement shall require the prior
written consent of NCBE, which consent shall not be
unreasonably withheld) of or in connection with any claim,
action, suit, proceeding or investigation (a "Claim") in which
an Indemnified Party is, or is threatened to be made, a party
or a witness based in whole or in part on or arising in whole
or in part out of the fact that such person is or was a
director, officer, employee or agent of United or any of its
wholly-owned subsidiaries if such Claim pertains to any matter
or fact arising, existing or occurring on or prior to the time
the Merger shall become effective (including, without
limitation, the Merger and other transactions contemplated by
this Merger Agreement), regardless of whether such Claim is
asserted or claimed prior to, at or after the time the Merger
shall become effective (the "Indemnified Liabilities") to the
fullest extent permitted by NCBE's Articles of Incorporation
and Bylaws or applicable law whichever shall be greater. Any
Indemnified Party wishing to claim indemnification under this
Section 19(a), upon learning of any Claim, shall notify NCBE
(but the failure so to notify NCBE shall not relieve it from
any liability which NCBE may have under this Section 19(a)
except to the extent such failure prejudices NCBE) and shall
be entitled to receive advances of costs and expenses from
NCBE upon delivery to NCBE of any undertaking required by
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<PAGE> 38
applicable law relating to the obligation of the Indemnified
Party to reimburse NCBE for such advances in certain
circumstances. The obligations of NCBE described in this
Section 19(a) shall continue in full force and effect, without
any amendment thereto, for a period of not less than six years
from the time the Merger shall become effective; provided,
however, that all rights to indemnification in respect of any
Claim asserted or made within such period shall continue until
the final disposition of such Claim; and provided further that
nothing in this Section 19(a) shall be deemed to modify
applicable law regarding indemnification of former officers
and directors.
(b) From and after the time the Merger shall become effective, the
directors, officers and employees of United or any of its
wholly-owned subsidiaries who become directors, officers or
employees of NCBE or any NCBE wholly-owned subsidiary
including United Bank, shall also have indemnification rights
with prospective application. The prospective indemnification
rights shall consist of such rights to which directors,
officers and employees of NCBE are entitled under the
provisions of the Articles of Incorporation, Bylaws or similar
governing documents of NCBE and the NCBE wholly-owned
subsidiaries, as in effect from time to time after the time
the Merger becomes effective, as applicable, and provisions of
applicable law as in effect from time to time after the time
the Merger shall become effective.
(c) If requested by United at any time prior to the effective time
of the Merger, from and after the effective time of the
Merger, NCBE shall use its best efforts to cause United Bank
and any successor thereto to maintain directors and officers
liability insurance comparable to that being maintained by
United Bank on the date hereof, or continue the existing
insurance being maintained by United Bank, for the benefit of
the current and former directors and officers of United Bank
for a period of at least three years after the time the Merger
becomes effective, which
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<PAGE> 39
insurance shall provide coverage for acts and omission
occurring on or prior to the time the Merger shall become
effective; provided, further, that officers and directors of
United Bank may be required to make application and provide
customary representations and warranties to NCBE's or United
Bank's insurance carrier for the purpose of obtaining such
insurance.
(d) The contractual obligations of NCBE provided under Sections
19(a), 19(b) and 19(c) hereof are intended to benefit, and be
enforceable against NCBE directly by, the Indemnified Parties,
and shall be binding on all successors of NCBE.
20. Conditions to Obligations of NCBE. The obligations of NCBE under this
Merger Agreement are subject, unless waived by NCBE, to the
satisfaction of the following conditions on or prior to the time the
Merger shall become effective:
(a) There shall not have been occurred an event or series of
events which has resulted or is likely to result in a Material
Adverse Effect on United from September 30, 1994, to the time
the Merger shall become effective.
(b) United shall not have paid cash dividends from the date hereof
to the time the Merger shall become effective except as
permitted under section 15(a) this Merger Agreement.
(c) All representations by United contained in this Merger
Agreement shall be true in all material respects at, or as of,
the time the Merger shall become effective as though such
representations were made at and as of said date, except for
changes contemplated by the Merger Agreement and except also
for representations as of a specified time other than the time
the Merger shall become effective, which shall be true in all
material respects at such specified time.
(d) NCBE shall have received the opinion of legal counsel for
United, dated the time the Merger shall become effective,
substantially to the effect set forth in Exhibit B hereto.
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<PAGE> 40
(e) United shall have performed or satisfied in all material
respects all agreements, covenants and conditions required by
this Merger Agreement to be performed or satisfied by it at or
prior to the time the Merger shall become effective.
(f) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before
any court or other governmental agency by the federal or state
government in which it is sought to restrain or prohibit the
consummation of the Merger, and no other suit, action or
proceeding shall be pending or overtly threatened and no
liability or claim shall have been asserted against United or
United Bank which NCBE shall in good faith determine, with
advice of counsel: (i) has a reasonable likelihood of being
successfully prosecuted and (ii) if successfully prosecuted,
would result in a Material Adverse Effect on United.
(g) Holders of United Common Stock who are entitled to exercise in
the aggregate not more than 5% of the voting power of the
issued and outstanding United Common Stock as of the time the
Merger shall become effective shall have taken steps to
perfect their rights as dissenting shareholders pursuant to
the provisions of Section 262 of the Delaware General Business
Corporation Law so that if, at the time the Merger shall
become effective, holders of more than 5% of such shares shall
have taken such steps, NCBE may, at its option, refuse to
consummate the Merger.
(h) United shall have furnished NCBE certificates, signed on its
behalf by the Chairman or President and the Secretary or an
Assistant Secretary of United and dated the time the Merger
shall become effective, to the effect that to the best of
their knowledge, after due inquiry, the conditions described
in Paragraphs (b), (c), and (f) of this Section 20 have been
fully satisfied.
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(i) No event shall have occurred which, in the reasonable opinion
of NCBE and concurred in by McGladrey & Pullen, would prevent
the Merger from being accounted for as a pooling of interests.
(j) The employment contracts between United Bank and Janice L.
Beesley, G. Jeffrey Palmer and Patrick W. Lenahan shall have
expired or have been terminated, without liability to United
or United Bank, at or prior to the effective time of the
Merger.
21. Conditions to Obligations of United. The obligations of United under
this Merger Agreement are subject, unless waived by United, to the
satisfaction on or prior to the time the Merger shall become effective
of the following conditions:
(a) There shall not have occurred an event or series of events
which has or is likely to result in a Material Adverse Effect
on NCBE from September 30, 1994, to the time the Merger shall
become effective.
(b) All representations by NCBE contained in this Merger Agreement
shall be true in all material respects at, or as of, the time
the Merger shall become effective as though such
representations were made at and as of said date, except for
changes contemplated by this Merger Agreement, and except also
for representations as of a specified time other than the time
the Merger shall become effective, which shall be true in all
material respects at such specified time.
(c) United shall have received the opinions of Counsel for NCBE
dated the time the Merger shall become effective substantially
to the effect set forth in Exhibit C hereto and in section 12
hereto.
(d) NCBE shall have performed or satisfied in all material
respects all agreements and covenants required by this Merger
Agreement to be performed or satisfied by it at or prior to
the time the Merger shall become effective.
(e) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before
any court or other governmental agency
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<PAGE> 42
of the federal or state government in which it is sought to
restrain, prohibit or set aside consummation of the Merger and
no other suit, action or proceeding shall be pending or
overtly threatened and no liability or claim shall have been
asserted against NCBE which United shall in good faith
determine, with advice of counsel: (i) has a reasonable
likelihood of being successfully prosecuted; and (ii) if
successfully prosecuted, would result in a Material Adverse
Effect on NCBE.
(f) NCBE shall have furnished United a certificate, signed by the
Chairman or President and by the Secretary or Assistant
Secretary of NCBE and dated the time the Merger shall become
effective to the effect that to the best of their knowledge
after due inquiry the conditions described in Paragraphs (a),
(b), and (e) of this Section 21 have been fully satisfied.
(g) United shall have received a written opinion of Charles Webb
and Co., dated within two days of the date of the
Prosptecuts/Proxy Statement, reasonably satisfactory in
substance to the United Board of Directors, to the effect that
the Merger is fair to the holders of United common stock from
a financial point of view, and such opinion shall not have
been withdrawn prior to the conclusion of the United
shareholders' meeting.
(h) No event shall have occurred which would prevent the Merger
from being accounted for as a pooling of interests.
22. Conditions to Obligations of All Parties. In addition to the
provisions of Sections 20 and 21 hereof, the obligations of NCBE and
United to cause the transactions contemplated herein to be consummated
shall be subject to the satisfaction of the following conditions on or
prior to the time the Merger shall become effective:
(a) The parties hereto shall have received all necessary approvals
of governmental agencies and authorities of the transactions
contemplated by this Merger Agreement and each of such
approvals shall remain in full force and effect at the time
the Merger shall become effective and such approvals and the
transactions
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contemplated thereby shall not have been contested by any
federal or state governmental authority by formal proceeding,
or contested by any other third party by formal proceeding
which the Board of Directors of the party asserting a failure
of a condition under this Section 22(a) shall in good faith
determine, with the advice of counsel: (i) has a reasonable
likelihood of being successfully prosecuted and (ii) if
successfully prosecuted, would materially and adversely affect
the benefits hereunder intended for such party. It is
understood that, if any such contest is brought by formal
proceedings, NCBE may, but shall not be obligated to, answer
and defend such contest. NCBE shall notify United promptly
upon receipt of all necessary governmental approvals.
(b) The Registration Statement shall have become effective by an
order of the SEC, the shares of NCBE Common Stock to be
exchanged in the Merger shall have been qualified or exempted
under all applicable state securities laws, and there shall
have been no stop order issued or threatened by the SEC that
suspends or would suspend the effectiveness of the
registration statement, and no proceeding shall have been
commenced, pending or overtly threatened for such purpose.
(c) This Merger Agreement shall have been duly adopted, ratified
and confirmed by the requisite affirmative votes of the
shareholders of United and, if required, NCBE.
(d) NCBE and United shall have received the opinion called for
pursuant to Section 12 of this Merger Agreement and there
shall exist as of, at or immediately prior to the time the
Merger shall become effective no facts or circumstances which
would render such opinion inapplicable in any respect to the
transactions to be consummated hereunder.
23. Nonsurvival of Representations and Warranties. The respective
representations and warranties of NCBE and United set forth shall not
survive the time the Merger shall
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become effective, provided, however, that all agreements or covenants
of a party contemplated to be performed after the time the Merger
becomes effective shall survive.
24. Governing Law. This Merger Agreement shall be construed and
interpreted according to the applicable laws of the State of Indiana,
except to the extent that federal or Delaware law controls.
25. Assignment. This Merger Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but neither
this Merger Agreement nor any of the rights, interest, or obligations
hereunder shall be assigned by either of the parties hereto without
the prior written consent of the other party; provided, however, that
NCBE shall not engage in a transaction pursuant to which its
shareholders exchange NCBE common stock for securities or property of
another party whether by statutory share exchange, merger,
consolidation, reorganization or the sale of substantially all the
assets of NCBE without concurrently therewith assigning to the
acquiring or surviving party, all of the obligations of NCBE under
this Agreement.
26. Satisfaction of Conditions.
NCBE agrees to use its best effort to obtain satisfaction of the
conditions insofar as they relate to NCBE, and United agrees to use
its best efforts to obtain the satisfaction of the conditions insofar
as they relate to United.
27. Termination. This Merger Agreement may be terminated prior to the
time the Merger becomes effective as follows:
(a) by mutual consent of NCBE and United, if the Board of
Directors of each so determines by vote of a majority of the
members of its entire Board;
(b) by either NCBE or United, if any of the conditions to such
party's obligation to consummate the transactions contemplated
in this Merger Agreement shall have become impossible to
satisfy;
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(c) by either NCBE or United, if this Merger Agreement is not duly
approved by the requisite vote of shareholders of United and
NCBE, if required, in each case a meeting of shareholders (or
any adjournment thereof duly called and held for such
purpose);
(d) by either NCBE or United, if the Merger does not become
effective on or before September 30, 1995 (unless the failure
to consummate the Merger by such date shall be due to the
action or failure to act of the party seeking to terminate
this Merger Agreement);
(e) by NCBE or United as provided in Section 17(b) hereof;
(f) by United if the Average Price is less than $38.00 as
recalculated for each Stock Adjustment;
(g) by United if its Board of Directors shall determine, after
consultation with United's independent financial advisor and
outside counsel, that the failure to terminate this Merger
Agreement could reasonably be found to constitute a breach of
its fiduciary duties; or
(h) by either NCBE or United, if the other party hereto commits a
willful breach which is not cured within 10 days after receipt
by the breaching party of written demand for cure by the
nonbreaching party. For purposes of this Merger Agreement, a
"willful breach" means a knowing and intentional violation by
a party of any of its covenants, representations, warranties,
agreements or obligations under this Merger Agreement.
Any party desiring to terminate this Merger Agreement shall give
written notice of such termination and the reasons therefor to the
other party.
28. Effect of Termination.
(a) In the event this Merger Agreement is properly terminated
pursuant to Section 27(a)-(f), then neither party shall have
any liability to the other party.
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(b) In the event this Merger Agreement is properly terminated
pursuant to Section 27(g), then within ten (10) days after
written demand by NCBE, United shall pay to NCBE in
immediately available funds, a termination fee of $500,000.
(c) In the event this Merger Agreement is properly terminated by
either party pursuant to Section 27(h), then within ten (10)
days after written demand by the terminating party, the party
that has willfully breached this Merger Agreement shall pay to
the terminating party, in immediately available funds,
$1,000,000 as agreed upon liquidated damages.
(d) The confidentiality provisions of Section 10(d) hereof shall
survive any termination of this Merger Agreement.
29. Waivers Amendments. Any of the provisions of this Merger Agreement
may be waived at any time by the party which is, or the shareholders
of which are, entitled to the benefit thereof, by resolution of the
Board of Directors of such party. This Merger Agreement may be
amended or modified in whole or in part by an agreement in writing
executed in the same manner (but not necessarily by the same person)
as this Merger Agreement and which makes reference to this Merger
Agreement, pursuant to a resolution, adopted by the Boards of
Directors of the respective parties, provided, however, such amendment
or modification may be made in this manner by the respective Boards of
Directors of NCBE and United at anytime prior to a favorable vote of
such party's shareholders, but may be made after a favorable vote by
the shareholders of such party, only if, in the opinion of its Board
of Directors, such amendment or modification will not have any
material adverse effect on the benefits intended under this Merger
Agreement for the shareholders of such party and will not require
resolicitation of any proxies from such shareholders.
30. Entire Agreement. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into by
NCBE and United or by any officer or officers of such parties relating
to the acquisition of the business or the capital stock of United by
NCBE. Except for the letters specified in this Merger Agreement and
of even
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date herewith, this Agreement constitutes the entire agreement by the
parties, and there are no agreements or commitments except as set
forth herein and therein.
31. Captions; Counterparts. The captions in this Merger Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Merger
Agreement. This Merger Agreement may be executed in several
counterparts, each of which shall constitute one and the same
instrument.
32. Notices. All notices and other communications hereunder shall be
deemed to have been duly given if forwarded by a nationally recognized
overnight courier service. All notices and other communications
hereunder given to any party shall be communicated to the remaining
party to this Merger Agreement by mail in the same manner as herein
provided.
a) If to NCBE, to:
Mr. Robert A. Keil
President
National City Bancshares, Inc.
227 Main Street, P.O. Box 868
Evansville, Indiana 47705-0868
With copies to:
Martin D. Werner, Esq.
Werner & Blank Co., L.P.A.
7205 W. Central Avenue
Toledo, Ohio 43617
(b) If to United, to:
Ms. Janice L. Beesley
President
United Financial Bancorp, Inc.
619 Main Street
Vincennes, IN 47591
With copies to:
Jeffrey M. Werthan, Esq.
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Silver Freedman & Taff
1100 New York Avenue, N.W.
Washington, D.C. 20005
33. Publicity. NCBE and United agree to consult with and obtain the
consent of the other, prior to any media release or other public
disclosures as to the matters covered by this Merger Agreement, except
as may be required by law.
IN WITNESS WHEREOF, this Merger Agreement has been executed the day and
year first above written.
ATTEST: National City Bancshares, Inc.
__________________________________ By: /s/ JOHN D. LIPPERT
By: /s/ ROBERT A. KEIL John D. Lippert, Chairman,
Its: President and Chief Executive Officer
ATTEST: United Financial Bancorp, Inc..
__________________________________ By: /s/ JANICE L. BEESLEY
By: /s/ HORACE A. FONCANNON Janice L. Beesley, President and
Its: Chairman of the Board Chief Executive Officer
48
<PAGE> 1
EXHIBIT 3(ii)
BY-LAWS
OF
NATIONAL CITY BANCSHARES, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the corporation
shall be at such place in the City of Evansville, Indiana, as may be designated
from time to time by the Board of Directors.
Section 2. Other Offices. The corporation shall also have offices at
such other places without, as well as within, the State of Indiana, as the
Board of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of
this corporation for the purpose of fixing or changing the number of Directors
of the corporation, electing Directors and transacting such other business as
may come before the meeting, shall be held at such time as may be designated by
the Board of Directors, but not later than April 30th of each year.
Section 2. Special Meetings. Special meetings of the shareholders may be
called at any time by the Chairman of the Board of Directors, President, or a
majority of the Board of Directors acting with or without a meeting, or the
holder or holders of one-fourth of all shares outstanding and entitled to vote
thereat.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
the office of the corporation in the City of Evansville, Indiana, unless the
Board of Directors decides that a meeting shall be held at some other place
within or without the State of Indiana and causes the notice thereof to so
state.
Section 4. Notice of Meetings. Unless waived, a written, printed, or
typewritten notice of each annual or special meeting stating the date, hour,
and place and the purpose or purposes thereof shall be served upon or mailed to
each shareholder of record (a) as of the day next preceding the date on which
notice is given or (b) if a record date therefor is duly fixed, as of said
date. Such notice shall be given not more than thirty (30) days, nor less than
ten (10) days before any such meeting. If mailed, it shall be directed to a
shareholder at his address as the name appears upon the records of the
corporation.
1
<PAGE> 2
All notices with respect to any shares of record in the names of two or more
persons may be given to whichever of such persons is named first on the books
of the corporation and notice so given shall be effective as to all the holders
of record of such shares.
Every person who by operation of law, transfer, or otherwise shall become
entitled to any share or right or interest therein, shall be bound by every
notice in respect of such share which, prior to his name and address being
entered upon the books of the corporation as the registered holder of such
share, shall have been given to the person in whose name such share appeared of
record.
Section 5. Waiver of Notice. Any shareholder, either before or after any
meeting, may waive any notice required to be given by law or under these
By-Laws; and whenever all of the shareholders entitled to vote shall meet in
person or by proxy and consent to holding a meeting, it shall be valid for all
purposes without call or notice, and at such meeting any action may be taken.
Section 6. Quorum. At any meeting for the determination of the number of
directors, or the election of directors, or for the consideration and action
upon reports, required to be laid before such meeting, provided that at least
one-third of the voting power of the corporation is present in person or
represented by proxy, then the shareholders present in person or by proxy shall
constitute a quorum.
At any meeting called for any other purpose, the holders of shares
entitling them to exercise a majority of the voting power of the corporation,
present in person or represented by proxy, shall constitute a quorum, except
when a greater proportion is required by law, the Articles of Incorporation or
these By-Laws.
At any meeting at which a quorum is present, all questions and business
which shall come before the meeting shall be determined by the vote of the
holders of a majority of such voting shares as are represented in person or by
proxy, except when a greater proportion is required by law or the Articles of
Incorporation.
At any meeting, whether a quorum is present or not, the holders of a
majority of the voting shares represented by shareholders present in person or
by proxy may adjourn from time to time and from place to place without notice
other than by announcement at the meeting. At any such adjourned meeting at
which a quorum is present, any business may be transacted which might be
transacted at the meeting as originally notified or held.
2
<PAGE> 3
Section 7. Proxies. Any shareholder of record who is entitled to attend
a shareholders' meeting, or to vote thereat or to assent or give consents in
writing, shall be entitled to be represented at such meetings or to vote
thereat or to assent or give consents in writing, as the case may be, or to
exercise any other of his rights, by proxy or proxies appointed by a writing
signed by such shareholder, which need not be sealed, witnessed or
acknowledged.
A telegram, cablegram, wireless message or photogram appearing to have
been transmitted by a shareholder, or a photograph, photostatic or equivalent
reproduction of a writing appointing a proxy or proxies shall be a sufficient
writing.
No appointment of a proxy shall be valid after the expiration of eleven
(11) months after it is made, unless the writing specifies the date on which it
is to expire or the length of time it is to continue in force.
Unless the writing appointing a proxy or proxies otherwise provides:
(1) Each and every proxy shall have the power of substitution, and when
three (3) or more persons are appointed, a majority of them or their respective
substitutes may appoint a substitute or substitutes to act for all;
(2) if more than one proxy is appointed, then (a) with respect to voting
or giving consents at a shareholders' meeting, a majority of such proxies as
attend the meeting, or if only one attends then that one may exercise all the
voting and consenting authority thereat; and if an even number attend and a
majority do not agree on any particular issue, each proxy so attending shall be
entitled to exercise such authority with respect to an equal number of shares;
(b) with respect to exercising any other authority, a majority may act for all;
(3) A writing appointing a proxy shall not be revoked by the death or
incapacity of the maker unless before the vote is taken or the authority
granted is otherwise exercised, written notice of such death or incapacity is
given to the corporation by the executor or the administrator of the estate of
such maker or by the fiduciary having control of the shares in respect of which
the proxy was appointed;
(4) The presence of a shareholder at a meeting shall not operate to
revoke a writing appointing a proxy. A shareholder, without affecting any vote
previously taken, may revoke such writing not otherwise revoked by giving
notice to the corporation in writing or in open meeting.
Section 8. Voting. At any meeting of shareholders, each shareholder of
the corporation shall, except as otherwise provided by law or by the Articles
of Incorporation or by these By-Laws be entitled to one vote in person or by
proxy for each share of the corporation registered in his name on the books of
the corporation (1) on the date fixed by the Board of Directors as the record
date of ownership, or (2) if no such record date shall have been fixed, then at
the time of such meeting.
3
<PAGE> 4
Section 9. Financial Reports. At the annual meeting of shareholders, or
the meeting held in lieu thereof, there shall be laid before the shareholders a
financial statement consisting of: (1) a balance sheet containing a summary of
the assets, liabilities, stated capital, and surplus (showing separately any
capital surplus arising from unrealized appreciation of assets, other capital
surplus, and earned surplus) of the corporation as of a date not more than four
(4) months before such meeting; if such meeting is an adjourned meeting, said
balance sheet may be as of a date not more than four (4) months before the date
of the meeting as originally convened; and (2) a statement of profit and loss
of surplus, including a summary of profits, dividends paid, and other changes
in the surplus accounts of the corporation for the period commencing with the
date marking the end of the period for which the last preceding statement of
profit and loss under this section was made and ending with the date of said
balance sheet.
An opinion signed by the Chairman of the Board of Directors, or the
President and the Treasurer or an Assistant Treasurer, or by a public
accountant or firm of public accountants, shall be appended to such financial
statement, stating that the financial statement presents fairly the
corporation's financial position and the results of its operations in
conformity with generally accepted accounting principles applied on a basis
consistent with that of the preceding period, or such other opinion as in
accordance with sound accounting practice.
Section 10. Action Without Meeting. Any action which may be authorized
or taken at any meeting of shareholders may be authorized or taken without a
meeting in a writing or writings signed by all of the holders of shares who
would be entitled to notice of a meeting of the shareholders held for such
purpose. Such writing or writings shall be filed with or entered upon the
records of the corporation.
ARTICLE III
Directors
Section 1. Number of Directors. The number of Directors of the
corporation shall be no less than five (5) and no more than twenty-five (25).
The number of Directors to be elected shall be fixed at the annual meeting of
shareholders.
In any year between annual meetings of shareholders, the Board of
Directors may by vote of a majority of the full Board choose to increase the
number of the members of the Board of Directors and appoint Directors to fill
the vacancies so created, but such an increase in members of the Board of
Directors shall not exceed the creation of four (4) seats.
4
<PAGE> 5
Section 2. Election and Term of Directors. All Directors of the
corporation shall be elected as a group at the 1985 Annual Shareholders'
Meeting. Directors elected at the 1985 Annual Shareholders' Meeting will serve
until the corporation's Annual Shareholders' Meeting in 1986. At the 1986
Annual Shareholders' Meeting the Directors shall be divided into three classes:
Class I, Class II, and Class III, Classes I and II being comprised of five (5)
members of the Board of Directors, and Class III being comprised of four (4)
members of the Board of Directors. The term of office of the initial Class I
Directors shall expire at the annual meeting of shareholders in 1987, the term
of office of the initial Class II Directors shall expire at the annual meeting
of shareholders in 1988, and the term of office of the initial Class III
Directors shall expire at the annual meeting of shareholders in 1989, or
thereafter in each case when their respective successors are elected and have
qualified. At each annual election held after classification of Directors, the
Directors chosen to succeed those whose terms then expire shall be identified
as being of the same Class as the Directors they succeed and shall be elected
for a term expiring at the third succeeding annual meeting or thereafter when
their respective successors in each case are elected and have qualified. If
the number of Directors is changed, any increase or decrease in Directors shall
be apportioned among the Classes so as to maintain all Classes as nearly equal
in number as possible, and any additional Director to any Class shall hold
office for a term which shall coincide with the terms of such Class. Upon the
effectiveness of this provision, the Board of Directors is authorized to take
such steps as are necessary to implement these provisions.
Section 3. Vacancies. Vacancies in the Board of Directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the remaining members of the Board of Directors, whether or not such remaining
directors constitute a quorum of the Board. A vacancy that will occur at a
specific later date by reason of a resignation effective at a later date may be
filled before the vacancy occurs but the new director may not take office until
the vacancy occurs.
Section 4. Meetings of the Board. A meeting of the Board of Directors
shall be held immediately following the adjournment of each shareholder's
meeting at which Directors are elected, and notice of such meeting need not be
given.
The Board of Directors may, by By-Laws or resolution, provide for other
meetings of the Board.
Special meetings of the Board of Directors may be held at any time upon
call of the Chairman of the Board of Directors, the President, or 25% or
greater of the members of the Board of Directors.
5
<PAGE> 6
Notice of any special meeting of the Board of Directors shall be mailed to
each Director, addressed to him at his residence or usual place of business, at
least five (5) days before the date on which the meeting is to be held, or
shall be sent to him at such place by telegraph, cable, radio or wireless, or
be given personally or by telephone, not later than the date before the day on
which the meeting is to be held. Every such notice shall state the time and
place of the meeting but need not state the purposes thereof. Notice of any
meeting of the Board need not be given to any director, however, if waived by
him in writing or by telegraph, cable, radio, wireless, or telephonic
communication whether before or after such meeting is held, or if he shall be
present at such meeting; and any meeting of the Board shall be a legal meeting
without any notice thereof having been given, if all the Directors shall be
present thereat.
Meetings of the Board shall be held at the principal office of the
corporation or at such other place, within or without the State of Indiana, as
the Board may determine from time to time and as may be specified in the notice
thereof. Meetings of the Board of Directors may also be held by the
utilization of simultaneous telephonic communications linking all directors
present at such meetings, and all such business conducted via such telephonic
communication shall be considered legally enforceable by the corporation.
Section 5. Quorum. A majority of the Board of Directors shall constitute
a quorum for the transaction of business, provided that whenever less than a
quorum is present at the time and place appointed for any meeting of the Board,
a majority of those present may adjourn the meeting from time to time, without
notice other than by announcement at the meeting, until a quorum shall be
present.
Section 6. Action Without Meeting. Any action which may be authorized or
taken at a meeting of the Directors may be authorized or taken without a
meeting in a writing or writings signed by all the Directors, which writing or
writings shall be filed with or entered upon the records of the corporation.
Section 7. Compensation. The Directors, as such, shall not receive any
salary for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular
or special meeting of the Board; provided that nothing herein contained shall
be construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of the executive
committee or of any standing or special committee may by resolution of the
Board be allowed such compensation for their services as the Board may deem
reasonable, and additional compensation may be allowed to Directors for special
services rendered.
Section 8. Retirement. Members of the Board of Directors shall be
required to retire from service on the Board of Directors at the end of the
month in which he or she reaches the age of 72 years.
6
<PAGE> 7
Section 9. Nominations. Nominations for the election of Directors may be
made by the Board of Directors or by any shareholder entitled to vote in the
election of Directors. However, any shareholder entitled to vote in the
election of Directors at a meeting may nominate a Director only if written
notice of such shareholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not later than (a) with respect to
an election to be held at an Annual Meeting of Shareholders, ninety (90) days
in advance of the date in the current year, corresponding to the date of the
previous year's annual meeting at which Directors were elected, and (b) with
respect to an election to be held at a Special Meeting of Shareholders for the
election of Directors, the close of business on the seventh (7th) day following
the date on which notice of such meeting is first given to shareholders. Each
such notice shall set forth (a) the name and address of the shareholder who
intends to make the nomination and of the person or persons to be nominated,
(b) a representation that the shareholder is a holder of record of shares of
the Corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or person specified in
the notice, (c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder, (d) such other information regarding each nominee
proposed by such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board of Directors, and (e) the consent of each nominee to serve as a Director
of the Corporation if so elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
ARTICLE IV
Committees
Section 1. Committees. The Board of Directors may by resolution provide
for such standing or special committees as it deems desirable, and discontinue
the same at pleasure. Each such committee shall have such powers and perform
such duties, not inconsistent with law, as may be delegated to it by the Board
of Directors. Vacancies in such committees shall be filled by the Board of
Directors or as it may provide.
7
<PAGE> 8
ARTICLE V
Officers
Section 1. General Provisions. The Board of Directors shall elect a
Chairman of the Board of Directors, a President, such number of Vice Presidents
as the Board may from time to time determine, a Secretary, and a Treasurer.
The Board of Directors may from time to time create such officers as it may
determine. The President and the Chairman of the Board shall be, but the other
officers need not be, chosen from among the members of the Board of Directors.
Any two or more of such offices, other than that of President and Vice
President, Secretary and Assistant Secretary, or Treasurer and Assistant
Treasurer, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity.
Section 2. Term of Office. The officers of the corporation shall hold
office during the pleasure of the Board of Directors, and unless sooner removed
by the Board of Directors, until the reorganization meeting of the Board of
Directors following the date of their election and until their successors are
chosen and qualified.
The Board of Directors may remove any officer at any time, with or without
cause, by a majority vote.
A vacancy in any office, however created, shall be filled by the Board of
Directors.
ARTICLE VI
Duties of Officers
Section 1. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and Board of Directors and shall be
a member ex officio of all committees appointed by the Board of Directors. The
Chairman of the Board shall serve as Chief Executive Officer and shall have
such other powers and duties as may be prescribed by the Board of Directors or
prescribed by the General Corporation Act.
8
<PAGE> 9
Section 2. President. The President shall be the Chief Administrative
Officer of the corporation, and in the absence of the Chairman of the Board, he
shall preside at meetings of the shareholders and Board of Directors, and shall
carry out the general executive powers conferred upon the Chairman. He shall
have authority to sign all certificates for shares and all deeds, mortgages,
bonds, contracts, notes and other instruments requiring his signature, and
shall have all the powers and duties prescribed by the General Corporation Act
and such others as the Board of Directors may from time to time assign to him.
He shall also be a member ex officio of all committees appointed by the Board
of Directors.
Section 3. Vice Presidents. The Vice Presidents shall perform such
duties as are conferred upon them by these By-Laws or as may from time to time
be assigned to them by the Board of Directors, the Chairman of the Board or the
President. At the request of the President, or in his absence or disability,
the Vice President, designated by the President (or in the absence of such
designation, the Vice President designated by the Board), shall perform all the
duties of the President, and when so acting, shall have all the powers of the
President. The authority of Vice Presidents to sign in the name of the
corporation all certificates for shares and authorized deeds, mortgages, bonds,
contracts, notes and other instruments, shall be coordinate with like authority
of the President. Any one or more of the Vice Presidents may be designated as
an "Executive Vice President".
Section 4. Secretary. The Secretary shall keep minutes of all the
proceedings of the shareholders and Board of Directors, and shall make proper
record of the same, which shall be attested by him; sign all certificates for
shares, and all deeds, mortgages, bonds, contracts, notes and other instruments
executed by the corporation requiring his signature; give notice of meetings of
shareholders and Directors; produce on request at each meeting of shareholders
for the election of Directors a certified list of shareholders arranged in
alphabetical order; keep such books as may be required by the Board of
Directors, and file all reports to States, to the Federal Government, and to
foreign countries; and perform such other and further duties as may from time
to time be assigned to him by the Board of Directors, the Chairman of the Board
or by the President.
Section 5. Treasurer. The Treasurer shall have general supervision of
all finances; he shall receive and have in charge all money, bills, notes,
deeds, leases, mortgages and similar property belonging to the corporation, and
shall do with the same as may from time to time be required by the Board of
Directors. He shall cause to be kept adequate and correct accounts of the
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, stated capital, and
shares, together with such other accounts as may be required, and, upon the
expiration of his term of office, shall turn over to his successor or to the
Board of Directors all property, books, papers and money of the corporation in
his hands; and he shall perform such other duties as from time to time may be
assigned to him by the Board of Directors.
9
<PAGE> 10
Section 6. Assistant and Subordinate Officers. The Board of Directors
may appoint such assistant and subordinate officers as it may deem desirable.
Each such officer shall hold office during the pleasure of the Board of
Directors, and perform such duties as the Board of Directors may prescribe.
The Board of Directors may, from time to time, authorize any officer to
appoint and remove assistant and subordinate officers, to prescribe their
authority and duties, and to fix their compensation.
Section 7. Duties of Officers may be Delegated. In the absence of any
officer of the corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any Director.
ARTICLE VII
Stock and Stock Certificates
Section 1. Stock Certificates. Issued shares of the corporation may be
represented by certificates or be uncertificated as determined from time to
time by the Board of Directors. Certificates for shares shall be in such form
as shall be approved by the Board of Directors. Such certificates shall be
signed by the Chairman of the Board of Directors or the President or a Vice
President or by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the corporation, which certificates shall certify the
number and class of shares held by the shareholder in the corporation, but no
certificate for shares shall be delivered until such shares are fully paid.
When such certificate is countersigned by an incorporated transfer agent or
registrar, the signature of any of said officers of the corporation may be
facsimile, engraved, stamped or printed. Although any officer of the
corporation whose manual or facsimile signature is affixed to a share
certificate shall cease to be such officer before the certificate is delivered,
such certificate, nevertheless, shall be effective in all respects when
delivered.
Such certificate for shares shall be transferable in person or by attorney,
but, except as hereinafter provided in the case of lost, mutilated or destroyed
certificates, no transfer of shares shall be entered upon the records of the
corporation until the previous certificate, if any, given for the same shall
have been surrendered and cancelled.
10
<PAGE> 11
Section 2. Replacement of Lost, Destroyed, and Stolen Certificates.
(a) Where the holder of a share certificate claims that the certificate has
been lost, destroyed or wrongfully taken, the corporation shall issue a new
certificate in place of the original certificate if the owner so requests
before the corporation has notice that the share has been acquired by a bona
fide purchaser; and if the owner files with the corporation a sufficient
indemnity bond; and if the owner satisfies any other reasonable requirements
imposed by the Board of Directors.
(b) Transfer of Certificated Shares Before Replacement. When a share
certificate has been lost, apparently destroyed or wrongfully taken and the
owner fails to notify the corporation of the fact within a reasonable time
after he has notice of it, and the corporation registers a transfer of the
share represented by the security before receiving such a notification, the
owner is precluded from asserting against the corporation any claim for
registering the transfer or any claim to a new security.
(c) Transfer of Certificated Shares After Replacement. If, after the issue
of a new certificate as a replacement for a lost, destroyed or wrongfully
taken certificate, a bona fide purchaser of the original certificate presents
it for registration of transfer, the corporation must register the transfer
unless registration would result in over-issue. In addition to any rights on
the indemnity bond, the corporation may recover the new share certificate
from the person to whom it was issued or any person taking under him except a
bona fide purchaser.
Section 3. Uncertificated Shares.
(a) With regard to uncertificated shares, within a reasonable time after
shares are purchased, a written statement shall be given by the corporation
stating the name of the person to whom issued, the number of shares
purchased, and the total number of shares being held uncertificated.
(b) Upon receipt of a transfer instruction originated by the registered
owner or other appropriate person, the uncertificated stock shall be
cancelled and an equivalent certificated evidence of ownership of such shares
of stock shall be issued. All transfers of uncertificated shares of stock on
the transfer books of the corporation shall be in accordance with the
provisions of IC 26-1-8 as it pertains to uncertificated securities.
11
<PAGE> 12
(c) The transfer instruction shall be an order to the corporation
requesting the transfer of the uncertificated shares of stock and must
include the name and address of the Transferee, the number of shares to be
transferred and the social security number or federal taxpayer identification
number of the Transferee.
Section 4. Registered Stockholders. A person in whose name shares are of
record on the books of the corporation shall conclusively be deemed the
qualified owner thereof for all purposes and to have capacity to exercise all
rights of ownership. Neither the corporation nor any transfer agent of the
corporation shall be bound to recognize any equitable interest in or claim to
such shares on the part of any other person, whether disclosed upon such
certificate or otherwise, nor shall they be obliged to see to the execution of
any trust or obligation.
ARTICLE VIII
Fiscal Year
The fiscal year of the corporation shall end on the 31st day of December
in each year, or on such other day as may be fixed from time to time by the
Board of Directors.
ARTICLE IX
Seal
The Board of Directors may, in its discretion, provide a suitable seal
containing the name of the corporation. If deemed advisable by the Board of
Directors, duplicate seals may be provided and kept for the purposes of the
corporation.
12
<PAGE> 13
ARTICLE X
Amendments
These By-Laws may be amended, altered or repealed, at any regular meeting
of the Board of Directors, by a vote of a majority of the full Board of
Directors.
13
<PAGE> 1
1994 EXHIBIT 13
NATIONAL
CITY
BANCSHARES, INC.
ANNUAL
REPORT
<PAGE> 2
FINANCIAL REVIEW
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
As of and for the year ended December 31
------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net interest income $ 30,681 $ 28,974 $ 28,773 $ 27,724 $ 27,097
Provision for loan losses (5) 654 1,234 2,324 1,515
Noninterest income 4,465 5,532 5,229 4,728 4,164
Noninterest expense 21,397 21,522 20,841 20,439 19,721
------------ ----------- ----------- ------------ ------------
Income before income taxes 13,754 12,330 11,927 9,689 10,025
Income taxes 4,691 3,956 3,727 2,659 3,003
------------ ----------- ----------- ------------ ------------
Net income $ 9,063 $ 8,374 $ 8,200 $ 7,030 $ 7,022
============ =========== =========== ============ ============
PER COMMON SHARE
Net income $ 2.45 $ 2.24 $ 2.19 $ 1.88 $ 1.87
Book value 23.54 22.96 21.33 19.82 18.49
Cash dividends declared by
National City Bancshares, Inc. 0.93 0.88 0.84 0.78 0.73
TOTALS AT YEAR END
Loans $ 483,592 $ 435,021 $ 416,503 $ 405,674 $ 411,066
Allowance for loan losses 3,794 3,791 4,186 4,639 4,431
Securities 184,519 175,762 183,398 203,531 224,616
Total assets 731,764 717,139 731,080 765,451 789,595
Deposits 615,968 606,648 624,843 649,959 675,173
Shareholders' equity 86,119 85,901 79,772 74,139 69,175
SELECTED FINANCIAL RATIOS
Net income to average assets 1.27% 1.18% 1.12% 0.93% .90%
Net income to average equity 10.53 10.15 10.67 9.86 10.46
Cash dividend payout 37.96 39.29 38.36 41.49 39.04
Average equity to average assets 12.06 11.60 10.53 9.41 8.61
Tangible equity to tangible assets 11.62 11.80 10.71 9.46 8.51
Total capital to risk-weighted assets 17.80 19.36 18.62 16.72 15.86
OTHER DATA
Number of shares 3,658,142 3,741,257 3,740,678 3,740,476 3,741,342
Number of shareholders 1,620 1,556 1,541 1,462 1,476
Number of full-time equivalent employees 374 388 401 419 ,424
Weighted average number of common
shares outstanding 3,694,650 3,742,427 3,741,124 3,743,865 3,746,249
</TABLE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FINANCIAL REVIEW 1
MESSAGE TO SHAREHOLDERS 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
REPORT ON MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS 14
INDEPENDENT AUDITOR'S REPORT 15
FINANCIAL STATEMENTS 16
NOTES TO FINANCIAL STATEMENTS 21
OFFICIAL ORGANIZATION 30
SHAREHOLDER INFORMATION 32
</TABLE>
1
<PAGE> 3
Message to Shareholders
March 13, 1995
National City Bancshares, Inc. achieved its highest earnings in 1994. Per
share net income was $2.45 compared to $2.24 in 1993, a significant 9.4%
increase. Net income for the year totaled $9,063,000 compared to $8,374,000
earned in 1993. The most commonly accepted measurement of a bank holding
company's profitability is return on average assets, or R.O.A. Your
Corporation's R.O.A. was 1.27% last year, up from 1.18% the previous year.
Both percentages are considered excellent.
Corporate assets are sound. The loan portfolios among our nine banks are
"clean" as a result of our continued high underwriting standards. The
allowance for loan and lease losses at the corporate level was 273% of
underperforming loans, up 66% from the prior year. The banks' investment
accounts are also high grade.
The Corporation's subsidiary banks' loan portfolio grew an impressive
$48,571,000 during the year, up 11.2% from 1993. We anticipate continued loan
growth during 1995. Of course, lending is the Corporation's main source of
income.
Capital, your investment in the company, remains one of the highest in the
country as a percentage of assets. At December 31, 1994, it was 11.77% of
assets.
Your stock has grown in market value; price per share increased 25% during the
past year, from $37.00 to $46.25. During the same period, 425,000 shares were
traded on the The Nasdaq Stock Market. Management continues to believe stock
price enhancement is one of our more significant duties as corporate officers.
As a result of updating the Corporation's Strategic Plan last spring, the Board
of Directors has been restructured to provide more efficiency and less
redundance in our organization. The Board will operate with fewer members,
allowing us to be more proactive and reactive to the ever-changing banking
environment. We want to thank our previous Board members who have served so
well over the years. It is without question, this group of individuals brought
our holding company to its present place of prominence among the Midwest's
finest bank holding companies.
Many noteworthy, well-deserved promotions took place among our family of banks.
Equally important, many of our officers and employees retired. We, once again,
offer our congratulations and thanks for a job well done to all those affected.
After careful study and exhaustive research, it was determined by management,
with the concurrence of the Board of Directors, that a subsidiary leasing
company be established to help complete our mission as a full service financial
corporation. NCBE Leasing Corp. began operation on November 1, 1994.
The Boards of Directors of Farmers State Bank, Sturgis, Kentucky, and Poole
Deposit Bank, Poole, Kentucky, concluded they could best serve their respective
markets by combining the two banks into a new bank known as First Kentucky
Bank, headquartered in Sturgis, Kentucky. This merger became effective
December 1, 1994. In addition to the branch in Poole, First Kentucky Bank has
received permission from the Bank's supervisory agencies to establish a branch
office in Morganfield, the county seat of Union County, Kentucky.
As previously announced, we are in the process of completing mergers of two
banks into our holding company. The first announced was White County Bank,
Carmi, Illinois--a $65 million community bank located within our area of
operation. We expect this merger to be completed in the next few months. The
second merger, announced in December 1994, is United Federal Savings Bank,
owned by United Financial Bancorp, Inc. in Vincennes, Indiana. United is a
$110 million bank which operates with a thrift charter. This merger is also
moving through the regulatory approval process. Both additions to the
Corporation will strengthen our presence in the tri-state region.
Our management team, through continued planning, is well prepared to carry out
many profit enhancement projects during 1995. However, we are aware of
possible factors such as interest rate changes and government regulations,
which could have a dramatic effect on the "bottom line." We, as a Corporation,
are alert and able to react quickly in the event our plans must be changed due
to uncontrollable circumstances.
In conclusion, please avail yourself of the remainder of this report. We think
you will find the schedules and narrative informative and helpful in evaluating
your investment in National City Bancshares, Inc.
/s/ John D. Lippert
John D. Lippert
Chairman of the Board and
Chief Executive Officer
/s/ Robert A. Keil
Robert A. Keil
President, Chief Financial Officer
and Chief Administrative Officer
[PHOTO]
SENIOR MANAGEMENT
Seated left to right:
Robert A. Keil, President & CFO
Benjamin W. Bloodworth, Executive Vice President
Standing left to right:
John D. Lippert, Chairman & CEO
Nancy G. Epperson, Human Resources Director
Michael F. Elliott, Executive Vice President
Harold A. Mann, Secretary, Treasurer, & CAO
Byron W. Jett, Senior Vice President (not pictured)
2
<PAGE> 4
Management's Discussion and Analysis
of Financial Condition and Results of Operations
(Dollar Amounts Other Than Share Data in Thousands)
INTRODUCTION
The discussion and analysis which follows is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of National City Bancshares, Inc. and its subsidiaries as presented
in the following consolidated financial statements and related notes. The text
of this review is supplemented with various financial data and statistics. All
information has been retroactively restated to include bank acquisitions
accounted for using the pooling of interests method and to give effect to stock
dividends.
BUSINESS DESCRIPTION
National City Bancshares, Inc. (NCBE) is an Indiana corporation established in
1985 to engage in the business of a bank holding company. Based in Evansville,
Indiana, NCBE has ten wholly owned subsidiaries, nine commercial banks serving
nineteen towns and cities with a total of twenty-eight banking centers and a
leasing corporation. Each subsidiary, its locations, number of offices, year
founded, date of merger, and size in assets and equity is shown below.
<TABLE>
<CAPTION>
12/31/94 (millions)
SUBSIDIARY Number of Year --------------------
Principal and Other Cities Offices Founded Date of Merger Assets Equity
-------------------------------------------- ------- ------- ---------------- ------ ------
<S> <C> <C> <C> <C> <C>
THE NATIONAL CITY BANK OF EVANSVILLE 10 1850 May 6, 1985 $343 $36
Evansville, Chandler, and Newburgh, Indiana
THE PEOPLES NATIONAL BANK OF GRAYVILLE 1 1937 May 16, 1988 41 5
Grayville, Illinois
THE FARMERS AND MERCHANTS BANK 1 1896 January 30, 1989 40 5
Fort Branch, Indiana
FIRST KENTUCKY BANK 3 1916 November 30, 1990 89 11
Sturgis and Poole, Kentucky
LINCOLNLAND BANK 5 1904 December 17, 1993 103 13
Dale, Chrisney, Grandview,
Hatfield, and Rockport, Indiana
THE BANK OF MITCHELL 3 1882 December 17, 1993 41 3
Mitchell and Bedford, Indiana
PIKE COUNTY BANK 1 1900 December 17, 1993 28 3
Petersburg, Indiana
THE SPURGEON STATE BANK 2 1921 December 17, 1993 20 2
Spurgeon and Arthur, Indiana
THE STATE BANK OF WASHINGTON 2 1910 December 17, 1993 46 4
Washington and Odon, Indiana
NCBE LEASING CORP. 1 1994 November 1, 1994 - -
Evansville, Indiana
</TABLE>
The Corporation's subsidiary banks provide a wide range of financial services
to the communities they serve in Southwestern Indiana, Western Kentucky and
Southeastern Illinois. These services include various types of deposit
accounts; safe deposit boxes; safekeeping of securities; automated teller
machines; consumer, mortgage, and commercial loans; mortgage loan sales and
servicing; letters of credit; accounts receivable management (financing,
accounting, billing, and collecting); and complete personal and corporate trust
services. All banks are members of the Federal Deposit Insurance Corporation.
3
<PAGE> 5
Management's Discussion and Analysis
of Financial Condition and Results of Operations Continued
(Dollar Amounts Other Than Share Data in Thousands)
FINANCIAL CONDITION
Highlights for 1990 through 1994 are presented in the financial review on page
1. An average balance sheet and analysis of net interest income is provided on
page 13. Earnings per share have increased every year since the Corporation
was formed in 1985. A higher net interest margin and continued cost controls
contributed to the 1994 earnings per share of $2.45, an increase of $.21, or
9%. Sixty-two percent of 1994 earnings were retained, increasing the book
value per share $0.58 to $23.54 and resulting in a very strong ratio of average
equity capital to average assets of 12.06%. We are not aware of any current
recommendations by the regulatory authorities which, if they were to be
implemented, would have a material effect on our operations, capital resources,
or liquidity.
Average earning assets and average assets increased 0.5% and 0.3%,
respectively, in 1994, compared to 2.8% and 2.6% decreases in 1993. During
1994 average federal funds sold decreased $20,094, or 65.9%, and
interest-bearing deposits in banks decreased $13,364, or 60.5%. Average
securities increased $8,297, or 4.6%. All types of securities increased except
U.S. Governments and agencies. The largest increase in average securities was
in other securities, which increased $9,125, or 54.5%. Average loans increased
$28,191, or 6.6%. Commercial, consumer, and mortgage loans had significant
increases, with the largest being $10,173, or 5.8%, in average mortgage loans.
A strong loan demand and lower interest rates contributed to the growth of the
loan portfolio. The change in earning asset mix was intended and resulted in
improved earnings in 1994 and a continued strong condition to begin 1995.
An increase of $9,858, or 5.5%, in average savings and interest-bearing
checking accounts was more than offset by a decrease of $12,511, or 4.3%, in
average certificates of deposit and other time deposits, caused by declining
interest rates. Average federal funds purchased and securities sold under
agreements to repurchase increased $3,447, or 26.7%. Average
noninterest-bearing deposits increased $3,580, or 4.7%. It is the
Corporation's philosophy to only increase deposits if they are needed to fund
loan growth.
SECURITY PORTFOLIO
Average securities comprised 28.5% of the 1994 average earning assets compared
to 27.4% and 27.9% in 1993 and 1992, respectively. They represent the second
largest component after loans. The Corporation holds various types of
securities, including mortgage-backed securities. Inherent in mortgage-backed
securities is prepayment risk, which occurs when borrowers prepay their
obligations due to market fluctuations and rates. In an effort to reduce this
risk, management closely monitors the amount of mortgage-backed securities
contained in the portfolio. The Corporation has no securities by any issuer,
with the exception of the U. S. Government, exceeding 10% of shareholders'
equity. The Corporation manages the quality and risk of securities through its
Asset/Liability Committee, which recommends and monitors the overall security
portfolio approved by the Corporation's Board of Directors. Among other
things, the investment policy establishes guidelines for the level, type,
quality, and mix of securities appropriate for the portfolio. The security
portfolio at December 31, 1994, included $2,950 in structured notes, which were
comprised of $2,450 in multi-coupon step-up notes that have a price volatility
comparable to a callable U.S. Government agency of like maturity and $500 in a
capped floating rate note that will mature within one year. These securities
have risk characteristics which are well within the constraints of the
non-structured securities held in the security portfolio.
As of December 31, 1993, the Corporation adopted Financial Accounting Standards
Board Statement No. 115. For 1994 and 1993, securities classified as held to
maturity are carried at amortized cost, and those classified as available for
sale are carried at fair value. For 1992, debt securities were carried at
amortized cost and equity securities were carried at the lower of cost or
market.
The available-for-sale securities included unrealized losses of approximately
$3,648 and unrealized gains of $52 at December 31, 1994. The fair value of
held-to-maturity securities was $72,815, reflecting unrealized losses of $1,643
and unrealized gains of $770. At December 31, 1994, the Corporation's
available-for-sale securities included $29,638 in mortgage-backed securities,
or 26.7% of the available-for-sale portfolio. The held-to-maturity portfolio
contained $4,475 in mortgage-backed securities or 6% of the held-to-maturity
portfolio. The weighted average maturity of the available-for-sale and
held-to-maturity portfolios at December 31, 1994, was 3.7 years and 4.4 years,
respectively. The weighted average maturity of the available-for-sale and the
held-to-maturity portfolios at December 31, 1993, was 3.8 years and 4.2 years,
respectively.
The following is a three-year analysis of the year-end balances in the security
portfolio and an analysis of the maturities and weighted average yields as of
December 31, 1994. The weighted average yields on obligations of state and
political subdivisions that are tax-exempt have been computed on a
federal-tax-equivalent basis using a 34.3% tax rate.
4
<PAGE> 6
SECURITY PORTFOLIO
<TABLE>
<CAPTION>
Carrying Value at December 31
----------------------------------------------------------------------------------
1994 1993 1992
---------------------------- ------------------------ -------
HELD TO AVAILABLE Held to Available
MATURITY FOR SALE Maturity For Sale
-------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Debt Securities:
U. S. Treasury securities $ 3,502 $ 23,230 $ 9,101 $ 19,071 $ 36,110
U. S. Government agencies 4,932 48,722 9,762 63,500 82,020
Taxable municipals 2,530 - 1,646 - 696
Tax-exempt municipals 40,418 - 38,148 - 38,390
Corporate securities 17,831 6,721 10,769 1,122 6,144
Mortgage-backed securities 4,475 29,638 4,614 15,457 18,349
------- --------- ------- -------- ---------
Total debt securities 73,688 108,311 74,040 99,150 181,709
Equity securities - 2,520 - 2,572 1,689
------- --------- ------- -------- ---------
Total securities $73,688 $110,831 $74,040 $101,722 $ 183,398
======= ========= ======= ======== =========
</TABLE>
<TABLE>
<CAPTION>
MATURITY ANALYSIS
DECEMBER 31, 1994 After 1 Year After 5 Years
but but
Within 1 Year Within 5 Years Within 10 Years After 10 Years Total
----------------- -------------- ----------------- --------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES CLASSIFIED AS
HELD TO MATURITY:
U. S. Treasury securities $ 3,002 4.10% $ 500 4.27% $ - - $ - - $ 3,502 4.12%
U. S. Government agencies 306 6.24% 2,993 7.51% 1,087 4.16% 546 3.89% 4,932 6.29%
Taxable municipals 550 5.06% 1,300 6.10% 680 7.19% - - 2,530 6.17%
Tax-exempt municipals 3,638 7.80% 11,949 8.87% 16,754 9.65% 8,077 9.39% 40,418 9.20%
Corporate securities 3,551 5.24% 13,362 5.36% 918 4.22% - - 17,831 5.28%
------- ------- ------- ------ --------
Total maturing securities $11,047 5.77% $30,104 6.95% $19,439 8.94% $8,623 8.96% 69,213 7.61%
======= ======= ======= ======
Mortgage-backed securities 4,475 7.78%
--------
Total securities $ 73,688 7.62%
========
SECURITIES CLASSIFIED AS
AVAILABLE FOR SALE:
U. S. Treasury securities $ 5,058 4.58% $17,673 6.64% $ 499 7.76% $ - - $ 23,230 6.21%
U. S. Government agencies 16,496 4.94% 28,229 6.02% 3,997 5.16% - - 48,722 5.59%
Corporate securities - - 5,673 5.79% 1,048 5.22% - - 6,721 5.70%
------- ------- ------- ------ --------
Total maturing securities $21,554 4.86% $51,575 6.21% $ 5,544 5.41% $ - - 78,673 5.78%
======= ======= ======= ======
Mortgage-backed securities 29,638 5.85%
Equity securities 2,520 6.56%
--------
Total securities $110,831 5.82%
========
</TABLE>
LOANS
Each subsidiary bank has competent lending officers who follow loan policies
approved by their boards of directors. These policies are compatible with the
Corporation's loan policy approved by its Board of Directors. The lending
policies address risks associated with each type of lending, collateralization,
loan-to-value ratios, loan concentrations, insider lending, and other pertinent
matters. These functions are monitored by subsidiary and corporate loan review
personnel and by the loan committees of the boards of directors for compliance
and loan quality. Close loan administration and high credit standards minimize
credit risk, as evidenced by the ratio of underperforming loans to total loans.
Highly speculative loans are prohibited, and the normal loan-to-value ratio is
a minimum of 80% for real estate loans. The loan portfolio contains no foreign
loans. All real estate loans, and in excess of 95% of commercial and consumer
loans, are secured.
5
<PAGE> 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations Continued
(Dollar Amounts Other Than Share Data in Thousands)
LOANS CONTINUED
The Corporation's loan portfolio is well diversified by type of loan, industry,
and geographic location, which minimizes economic risk. The loan portfolio
contained 30% commercial loans, 51% real estate loans (primarily residential),
and 19% consumer loans at December 31, 1994. The Corporation's affiliate banks
lend to customers in various industries including manufacturing, agricultural,
health and other services, transportation, mining, wholesale, and retail.
Commercial loans increased dramatically in 1994 due to a general increase in
business among the communities the Corporation's banks serve. Management feels
little risk is associated with this growth because most of the borrowers are
long-standing customers who increased their lines of credit for expansion and
inventory purposes. Consumer loans also grew appreciably as a direct result of
increased automobile sales. Strict underwriting standards, as evidenced by
negligible loan losses, should minimize future losses on these loans.
Agriculture in our trade area was profitable for the second straight year,
allowing credit "clean up" and pay down on agriculture-related credit while
also increasing outstandings. The Corporation's banks do not make loans for
land speculation or other high credit risk farm ventures. The increase in real
estate lending was a direct result of lower interest rates during most of 1994.
This portfolio is mostly comprised of single-family, owner-occupied housing.
Guidelines for mortgage lending were followed, advances did not exceed 80% of
appraised value, and the customer's ability to repay was closely scrutinized.
At December 31, 1994, there was no concentration of credit risk from borrowers
engaged in the same or similar industries exceeding 10% of total loans.
Geographic diversification is provided by the Corporation's policy to extend
credit to customers in its geographic market areas in and around its subsidiary
banks' nineteen cities located in Southwestern Indiana, Southeastern Illinois,
and Western Kentucky.
The following is a five-year summary of the loan portfolio and an analysis of
the loan maturities and rate sensitivities at December 31, 1994.
LOAN PORTFOLIO AT YEAR END, FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Real estate loans $ 247,596 $ 236,037 $ 222,606 $ 212,453 $ 204,873
Loans to financial institutions - 50 50 500 1,227
Loans for purchasing/carrying securities - - 350 350 350
Agricultural loans 22,952 22,188 20,167 21,386 20,402
Commercial and industrial loans 110,280 95,254 92,313 78,819 80,252
Economic development loans and
other obligations of state
and political subdivisions 12,529 9,649 9,400 11,443 13,161
Consumer loans 89,033 72,822 74,808 81,351 94,438
All other loans 1,419 1,156 1,638 5,708 5,096
--------- --------- --------- --------- ---------
Total loans - gross 483,809 437,156 421,332 412,010 419,799
Less: unearned income 217 2,135 4,829 6,336 8,733
--------- --------- --------- --------- ---------
Total loans - net of unearned income 483,592 435,021 416,503 405,674 411,066
Less: allowance for loan losses 3,794 3,791 4,186 4,639 4,431
--------- --------- --------- --------- ---------
Total loans - net $ 479,798 $ 431,230 $ 412,317 $ 401,035 $ 406,635
========= ========= ========= ========= =========
</TABLE>
LOAN MATURITIES AND RATE SENSITIVITIES AT DECEMBER 31, 1994
ON AGRICULTURAL, COMMERCIAL, AND TAX-EXEMPT LOANS
<TABLE>
<CAPTION>
After 1
Year But
Within Within Over 5
1 Year 5 Years Years Total
-------- -------- ------- ---------
<S> <C> <C> <C> <C>
Rate sensitivities:
Fixed rate loans $ 19,476 $ 25,831 $12,974 $ 58,281
Variable rate loans 86,068 692 537 87,297
-------- -------- ------- ---------
Subtotal $105,544 $ 26,523 $13,511 145,578
======== ======== =======
Percent of subtotal 72.50% 18.22% 9.28%
Nonaccrual loans 183
--------
Total loans net of unearned income $145,761
========
</TABLE>
6
<PAGE> 8
UNDERPERFORMING ASSETS
Underperforming assets consist of nonaccrual securities and loans, restructured
loans, 90 days past due loans, and other real estate held. Nonaccrual
securities are those which have defaulted on interest payments. Nonaccrual
loans are loans on which interest recognition has been suspended because of
doubts as to the borrower's ability to repay principal or interest. Loans are
generally placed on nonaccrual status after becoming 90 days past due if the
ultimate collectibility of the loan is in question. Loans which are current,
but for which serious doubt exists about repayment ability, may also be placed
on nonaccrual status. Restructured loans are loans where the terms have been
changed to provide a reduction or deferral of principal or interest because of
the borrower's financial position. Past-due loans are accruing loans that are
contractually past due ninety days or more as to interest or principal
payments. Other real estate held represents properties obtained for debts
previously contracted. Management is not aware of any loans which have not
been disclosed that represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity or capital resources, or represent material credits about which
management is aware of any information which causes management to have serious
doubt as to the ability of such borrower to comply with loan repayment terms.
The following summarizes the underperforming assets as of December 31:
UNDERPERFORMING ASSETS AT YEAR END, FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Underperforming loans:
Nonaccrual $ 734 $ 1,958 $ 2,758 $ 3,832 $ 3,073
Restructured 134 76 1,902 1,860 2,119
90 days past due 522 274 1,524 3,552 2,248
------- ------- ------- -------- --------
Total underperforming loans 1,390 2,308 6,184 9,244 7,440
Nonaccrual municipal securities - 81 182 104 -
Other real estate held 605 688 3,300 3,195 3,182
------- ------- ------- -------- --------
Total $ 1,995 $ 3,077 $ 9,666 $ 12,543 $ 10,622
======= ======= ======= ======== ========
</TABLE>
Past due 90 days or more, nonaccrual, and restructured loans were 0.3% of total
loans at the end of 1994, compared to 0.5% at the end of 1993. Of the loans in
these categories, $757, or 54.5%, were secured by real estate at the end of
1994, compared to $1,460, or 63.3%, at the end of 1993. Additional interest
income that would have been recorded, if nonaccrual and restructured loans had
been current and in accordance with their original terms, was $92, $145, and
$307 in 1994, 1993, and 1992, respectively. The interest recognized on
nonaccrual loans was approximately $36, $13, and $89 in 1994, 1993, and 1992,
respectively. Other real estate held at the end of 1992 included properties
valued at $2,011 which were sold with The National City Bank of Evansville
holding the mortgages.
In addition to those loans classified as underperforming, management was
closely monitoring loans of approximately $15,952 and $15,923 as of the end of
1994 and 1993, respectively, for the borrowers' abilities to comply with
present loan repayment terms.
RISK MANAGEMENT
As of December 31, 1994, management considered the allowance for loan losses
adequate to provide for potential losses. Management reviews delinquent and
problem loans weekly. Loans which are judged uncollectible are charged off on
a timely basis. The allowance for loan losses is reviewed quarterly in order
to evaluate and maintain its adequacy based on a thorough analysis of the
entire loan portfolio. Some of the factors used in this review include current
economic conditions and forecasts, risk by type of loan, previous loan loss
experience, and evaluation of specific borrowers and collateral. The
Corporation and its banks closely monitor loan portfolios using models designed
in part by regulatory agencies.
Total loans charged off during 1994 decreased $782, or 56%, and recoveries were
$275, or 78%, greater than in 1993. During the past three years, net
charge-offs and underperforming assets have reduced significantly, allowing for
reduced provision for loan losses. This has resulted in a reduced ratio of
allowance to loans and a significant increase in the ratio of allowance to
underperforming loans. The provision for loan losses was decreased for 1994
and 1993 as a result of receiving payments on loans which had been allocated
for in previous quarterly evaluations or previously charged off and improved
loan quality as evidenced by the significant reductions in underperforming
loans and in charge-offs in both periods.
7
<PAGE> 9
Management's Discussion and Analysis
of Financial Condition and Results of Operations Continued
(Dollar Amounts Other Than Share Data in Thousands)
RISK MANAGEMENT CONTINUED
The following is a five-year analysis of loan loss experience and allocation of
allowance for loan losses:
SUMMARY OF LOAN LOSS EXPERIENCE
Analysis of the Allowance for Loan Losses
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Allowance for loans losses, January 1 $ 3,791 $ 4,186 $ 4,639 $ 4,431 $ 4,412
Loans charged off:
Commercial 221 1,099 1,495 1,573 1,125
Real estate 235 27 551 343 188
Consumer 163 275 367 498 490
-------- -------- --------- --------- --------
Total 619 1,401 2,413 2,414 1,803
-------- -------- --------- --------- --------
Recoveries on charged-off loans:
Commercial 135 210 428 181 93
Real estate 63 27 75 53 147
Consumer 429 115 223 64 67
-------- -------- --------- --------- --------
Total 627 352 726 298 307
-------- -------- --------- --------- --------
Net charge-offs (8) 1,049 1,687 2,116 1,496
Provision for loan losses (5) 654 1,234 2,324 1,515
-------- -------- --------- --------- --------
Allowance for loans losses, December 31 $ 3,794 $ 3,791 $ 4,186 $ 4,639 $ 4,431
======== ======== ========= ========= ========
Total loans at year end $483,592 $435,021 $ 416,503 $ 405,674 $411,066
Average loans $455,079 $426,888 $ 415,182 $ 407,489 $408,385
As a percent of year-end loans:
Net charge-offs 0.00% 0.24% 0.41% 0.52% 0.36%
Provision for loans losses 0.00% 0.15% 0.30% 0.57% 0.37%
Year-end allowance balance 0.78% 0.87% 1.01% 1.14% 1.08%
As a percent of average loans:
Net charge-offs 0.00% 0.25% 0.41% 0.52% 0.37%
Provision for loan losses 0.00% 0.15% 0.30% 0.57% 0.37%
Year-end allowance balance 0.83% 0.89% 1.01% 1.14% 1.09%
Allowance for loan losses as a percent
of underperforming loans 272.95% 164.25% 67.69% 50.18% 59.56%
</TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31
<TABLE>
<CAPTION>
Loan Type Allowance Applicable to Percent of Loans to Total Gross Loans
--------- ---------------------------------------------- -------------------------------------------
1994 1993 1992 1991 1990 1994 1993 1992 1991 1990
-------- -------- ------- -------- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 1,687 $ 1,379 $ 1,754 $ 2,131 $ 1,727 30% 29% 29% 29% 29%
Real estate 520 508 799 769 296 51 54 53 51 49
Consumer 420 502 452 416 505 19 17 18 20 22
-------- -------- ------- -------- ------- --- --- --- --- ---
Allocated 2,627 2,389 3,005 3,316 2,528 100% 100% 100% 100% 100%
Unallocated 1,167 1,402 1,181 1,323 1,903 === === === === ===
-------- -------- ------- -------- -------
Total $ 3,794 $ 3,791 $ 4,186 $ 4,639 $ 4,431
======== ======== ======= ======== =======
</TABLE>
8
<PAGE> 10
DEPOSITS
The Corporation's Asset/Liability Committee manages the deposits of its banks
to best utilize short-term and long-term benefits of deposit growth. Average
deposits decreased $3,158, or 0.5%, during 1994. Average time deposits of
$100,000 or more decreased $2,346, or 4.1%. Time deposits of $100,000 or more
increased $19,377, or 36.2%, during 1994. Of this increase, $8,250 was
deposited to collateralize a standby letter of credit. Time deposits of
$100,000 or more are from local depositors and are not brokered deposits. They
are not considered to present an undue risk, and their averages have remained
at less than 10% of average total assets during the past three years.
The following is a three-year summary of average deposit balances and rates.
Also presented is a comparative analysis of time deposits of $100,000 or more.
AVERAGE DEPOSITS
<TABLE>
<CAPTION>
1994 1993 1992
------------------------ ------------------------- -----------------------
AMOUNT RATE Amount Rate Amount Rate
--------- ---- --------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand $ 79,999 - $ 76,419 - $ 72,778 -
Money market accounts 52,898 2.59% 56,983 2.75% 53,992 3.41%
Interest-bearing demand 120,758 2.31% 114,654 2.48% 106,704 3.16%
Savings 69,052 2.64% 65,298 2.80% 58,198 3.43%
Time deposits of $100,000
or more 54,893 4.57% 57,239 3.43% 54,044 4.71%
Other time deposits 224,577 4.16% 234,742 4.60% 271,178 5.38%
--------- --------- ---------
Total $ 602,177 $ 605,335 $ 616,894
========= ========= =========
</TABLE>
TIME DEPOSITS OF $100,000 OR MORE AT DECEMBER 31
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Maturing:
3 months or less $ 34,347 $ 20,662 $ 24,219
Over 3 to 6 months 19,767 16,714 9,198
Over 6 to 12 months 7,871 4,477 5,917
Over 12 months 10,884 11,639 7,943
--------- --------- ---------
Total $ 72,869 $ 53,492 $ 47,277
========= ========= =========
</TABLE>
CAPITAL RESOURCES
At the end of 1994, shareholders' equity totaled $86,119, an increase of $218,
or 0.3%, over 1993, after declared cash dividends of $3,430 and after $2,964
for the repurchase of 75,000 common shares under the buy-back program initiated
in March 1994 for future stock dividends. The equity to asset ratio on an
average basis was 12.1% and 11.6% for 1994 and 1993, respectively. The
dividend payout ratio for 1994 was 38.0% compared to 39.3% in 1993. There are
no material commitments for capital expenditures.
Guidelines for minimum capital levels have been established by the Federal
Reserve Board. Tier 1 (core) capital consists of shareholders' equity less
goodwill, other identifiable intangible assets, and unrealized losses on
marketable equity securities. Total capital consists of Tier 1 capital plus
allowance for loan losses. Regulatory minimum capital levels are 3% for the
leverage ratio which is defined as Tier 1 capital as a percentage of total
assets less goodwill and other identifiable intangible assets; 4% for Tier 1
capital to risk-weighted assets; and 8% for total capital to risk-weighted
assets. The Corporation has, by far, exceeded each of these levels. Its
leverage ratio was 11.8% and 11.7%; Tier 1 capital to risk-weighted assets was
16.9% and 18.5%; and total capital to risk-weighted assets was 17.8% and 19.4%
at the end of 1994 and 1993, respectively. In addition, each of its subsidiary
banks has exceeded the capital guidelines established by bank regulators.
SHORT-TERM BORROWINGS
Federal funds purchased are borrowings from other financial institutions
maturing daily. Repurchase agreements are secured transactions with customers.
Repurchase agreements generally mature within six months. Notes payable U.S.
Treasury are demand notes created by treasury tax and loan account funds
transfers. Short-term borrowings increased $5,719, or 30.8%, during 1994. All
types of short-term borrowings decreased during 1994, except federal funds
purchased, with the largest decrease being in notes payable U.S. Treasury,
which decreased $2,718, or 50.4%. A detailed analysis of these three types of
borrowings follows:
9
<PAGE> 11
Management's Discussion and Analysis
of Financial Condition and Results of Operations Continued
(Dollar Amounts Other Than Share Data in Thousands)
SHORT-TERM BORROWINGS AT DECEMBER 31
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Federal funds purchased $ 10,575 $ - $ 1,275
Securities sold under agreements to repurchase 11,035 13,173 14,179
Notes payable U. S. Treasury 2,675 5,393 4,275
-------- -------- --------
Total $ 24,285 $ 18,566 $ 19,729
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Securities
Federal Sold Under
Funds Agreements Notes Payable
Purchased to Repurchase U. S. Treasury
--------- ------------- --------------
<S> <C> <C> <C>
1994
AVERAGE AMOUNT OUTSTANDING $ 5,300 $ 11,071 $ 2,096
MAXIMUM AMOUNT AT ANY MONTH END 19,450 14,849 4,783
WEIGHTED AVERAGE INTEREST RATE:
DURING YEAR 4.81% 3.40% 3.81%
END OF YEAR 5.64% 4.55% 5.20%
1993
Average amount outstanding $ 427 $ 12,497 $ 3,567
Maximum amount at any month end 2,233 15,532 8,568
Weighted average interest rate:
During year 3.48% 3.06% 2.82%
End of year - 2.93% 2.76%
1992
Average amount outstanding $ 1,141 $ 21,083 $ 3,755
Maximum amount at any month end 3,645 24,537 9,000
Weighted average interest rate:
During year 3.29% 3.86% 3.40%
End of year 3.02% 4.00% 2.81%
</TABLE>
LIQUIDITY
The liquidity of a banking institution reflects the ability to provide funds to
meet loan requests, to accommodate possible outflows in deposits, and to take
advantage of interest rate market opportunities. Funding of loan requests,
providing for liability outflows, and management of interest rate fluctuations
require continuous analysis in order to match maturities of specific categories
of short-term and long-term loans and investments with specific types of
deposits and borrowings. Bank liquidity is thus normally considered in terms
of the nature of mix of the banking institution's sources and uses of funds.
For National City Bancshares, Inc., the primary sources of short-term liquidity
have been federal funds sold, interest-bearing deposits in banks, and U.S.
Government and agency securities available for sale. In addition to these
sources, short-term liquidity is provided by maturing loans and securities.
The balance between these sources and needs to fund loan demand and deposit
withdrawals is closely monitored by the Corporation's asset/liability
management program and by each subsidiary bank to provide liquidity without
penalizing earnings. The increased loan demand throughout the year was funded
by primary assets, federal funds sold, and U.S. Government and agency
securities available for sale. However, management remains comfortable with
the shift in earning assets, mainly because of the deposits following from
loans and a continued shortening of loan maturities. Additionally, the
Corporation's underwriting standards for its mortgage loan portfolio is in
accordance with standards established by government housing agencies; and
thereby, a portion of the mortgage loan portfolio could be sold to provide
additional liquidity. At December 31, 1994 and 1993, respectively, federal
funds sold were $0 and $42,224, interest-bearing deposits in banks were $5,116
and $13,578, and U.S. Government and agency securities available for sale were
$71,952 and $82,571.
These sources and other liquid assets also provide long-term liquidity needs.
Long-term liquidity is managed in the same way, only with longer maturities, to
provide for future needs while maintaining interest margins. In excess of
$6,732 was available to the Corporation at December 31, 1994, from dividends by
subsidiaries without prior regulatory approval. Note 11 to the financial
statements in this report provides more detail about restrictions on dividends
from subsidiaries. These dividends provide liquidity for the Corporation. The
Corporation has no material long-term commitments.
10
<PAGE> 12
INTEREST RATE SENSITIVITY
Management of liquidity must be coordinated with interest rate management. The
following "Interest Rate Sensitivity Analysis" schedule shows assets and
liabilities which are maturing at various periods in time and which will be
subject to repricing. Money market accounts are shown in the shortest period,
and savings accounts are shown in the longest period presented.
Interest-bearing demand accounts are divided between the shortest and longest
periods based on the historical pattern of the interest rate sensitivity of the
account. Variable rate interest-earning assets and interest-bearing
liabilities are distributed based on repricing opportunities while fixed rate
interest-earning assets and interest-bearing liabilities are distributed based
on contractual maturity. No adjustments were made for projected prepayment
assumptions or for projected response to changes in market interest rates.
Liabilities to be repriced in three months or less and on a cumulative basis
through one year exceed assets to be repriced in the same time periods. In
times of rising interest rates, this will reduce net interest margin and thus
the earnings of the banks, as liabilities will be repriced at higher rates
while matching assets remain at their old lower rates until maturity. In times
of falling interest rates, this will increase net interest margin and thus the
earnings of the banks. Interest rate levels cannot be predicted at any future
point in time; therefore, it is in our best interest to match maturities of
assets and liabilities so that the gap will be as close to zero as possible.
This can be accomplished by shortening maturities of investment purchases
and/or purchasing investments where the rates adjust every thirty to ninety
days. While more liabilities than assets are subject to repricing within three
months, we believe our asset/liability management program allows adequate
reaction time for changes in rates as they occur, maximizing the potential
positive effect of an increase in interest rates.
Corporate asset liability gap positions are targeted at plus or minus 10% at
the six-month and one-year horizons. At December 31, 1994, all subsidiary
banks were within, or close to, their targeted spreads. The cumulative gap
position through one year of negative $24,722 at the end of 1994 was 3.4% of
total assets, a relatively balanced position in the opinion of management.
Management believes interest-bearing liabilities are driven by changes in the
Corporation's assets.
INTEREST RATE SENSITIVITY ANALYSIS AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
Over Over
3 Months 1 Year
3 Months through through Over
or Less 1 Year 5 Years 5 Years Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans - net of unearned income
(excluding nonaccrual) $ 149,857 $ 96,698 $ 146,954 $ 89,349 $ 482,858
Securities (excluding nonaccrual) 18,534 24,430 95,674 45,881 184,519
Interest-bearing
deposits in banks 1,085 2,077 1,954 - 5,116
--------- --------- --------- --------- ---------
Total earning assets 169,476 123,205 244,582 135,230 672,493
--------- --------- --------- --------- ---------
RATE-SENSITIVE LIABILITIES:
Interest-bearing liabilities:
Interest-bearing demand 51,793 - - 72,122 123,915
Money market and other savings 47,256 - - 66,713 113,969
Time deposits of $100,000 or more 34,347 27,638 10,345 539 72,869
Other time 50,763 81,421 80,054 7,637 219,875
Borrowed funds 21,572 2,613 100 - 24,285
--------- --------- --------- --------- ---------
Total interest-bearing liabilities 205,731 111,672 90,499 147,011 554,913
Noninterest-bearing demand - - - 85,340 85,340
--------- --------- --------- --------- ---------
Total rate-sensitive liabilities 205,731 111,672 90,499 232,351 640,253
--------- --------- --------- --------- ---------
INTEREST SENSITIVITY GAP (36,255) 11,533 154,083 (97,121)
CUMULATIVE GAP (36,255) (24,722) 129,361 32,240
</TABLE>
CHANGES IN NET INTEREST INCOME
(Interest on a Federal-Tax-Equivalent Basis)
<TABLE>
<CAPTION>
1994 COMPARED TO 1993 1993 Compared to 1992
-------------------------------------- -----------------------------------------
CHANGE DUE TO A Change Due to a
CHANGE IN Change in
--------------------- -----------------------
VOLUME RATE TOTAL CHANGE Volume Rate Total Change
------- ------ ------------ ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest income increase (decrease)
Loans $ 2,380 $ (573) $ 1,807 $ 1,004 $ (2,649) $ (1,645)
Securities 505 (383) 122 (550) (2,193) (2,743)
Other short-term investments (1,308) 137 (1,171) (797) (623) (1,420)
------- ------ ------- ------- -------- --------
Total interest income 1,577 (819) 758 (343) (5,465) (5,808)
------- ------ ------- ------- -------- --------
Interest expense increase (decrease)
Deposits (230) (941) (1,171) (546) (4,800) (5,346)
Borrowings 71 136 207 (361) (259) (620)
------- ------ ------- ------- -------- --------
Total interest expense (159) (805) (964) (907) (5,059) (5,966)
------- ------ ------- ------- -------- --------
Net interest income increase (decrease) $ 1,736 $ (14) $ 1,722 $ 564 $ (406) $ 158
======= ====== ======= ======= ======== ========
</TABLE>
11
<PAGE> 13
Management's Discussion and Analysis
of Financial Condition and Results of Operations Continued
(Dollar Amounts Other Than Share Data in Thousands)
RESULTS OF OPERATIONS
Net income increased $689, or 8.2%, in 1994 and increased $174, or 2.1%, in
1993. Income also increased during both years on a per-share basis. Due to
increased net interest margins, net interest income increased $1,707, or 5.9%,
in 1994 and increased $201, or 0.7%, in 1993. The provision for loan losses
has decreased during both years due to high loan quality.
Changes in net interest income for the last two years are presented in the
preceding schedule with dollar changes allocated to rate and volume variances.
The combined rate-volume variances are included in the total volume variances.
In addition to this schedule, on page 13 is a three-year balance sheet analysis
on an average basis and an analysis of net interest income, setting forth (i)
average assets, liabilities, and shareholders' equity; (ii) interest income
earned on interest-earning assets and interest expense incurred on
interest-bearing liabilities; (iii) average yields earned on interest-earning
assets and average rates incurred on interest-bearing liabilities; (iv) the net
interest margin (i.e. the average yield earned on interest-earning assets less
the average rate incurred on interest-bearing liabilities); and (v) the net
yield on interest-earning assets (i.e. net interest income divided by average
interest-earning assets). Nonaccrual loans are included in the average
balances shown on the three-year balance sheet analysis and in the average
balances used to compute the volume variances in the changes in net interest
income.
A summary analysis of operations and return on equity and assets is provided in
a five-year financial review on page 1. The following discussion of results of
operations is on a federal-tax-equivalent basis. Average loans increased 6.6%
during 1994, compared to an increase of 2.8% during 1993. Loan income
increased 4.9% in 1994 and decreased 4.3% in 1993. The average yield on loans
decreased slightly from 8.58% in 1993 to 8.44% in 1994, a direct result of
lower interest rates. Average securities increased 4.6% in 1994 and decreased
4.6% in 1993. Securities income increased 1.1% during 1994 and decreased 19.4%
during 1993. The yield on securities decreased from 6.30% in 1993 to 6.06% in
1994. Average earning assets were approximately the same from 1992 through
1994 while income increased 1.5% during 1994 and decreased 10.4% during 1993.
The average yield on total earning assets increased from 7.56% in 1993 to 7.64%
in 1994. Net interest income in 1994 increased mainly due to an increase in
volume of earning assets.
Average total interest-bearing deposits decreased during both 1994 and 1993.
The average cost of interest-bearing deposits decreased from 4.48% in 1992 to
3.59% in 1993 and 3.42% in 1994. Rate was the stronger factor during 1994 and
1993, and the larger changes were recorded in 1993.
In 1994 and 1993 the increase in net interest income due to volume was stronger
than the decrease due to rate, resulting in a $1,722 and $158 increase in net
interest income in 1994 and 1993, respectively.
As reported in the financial statements, noninterest income and noninterest
expense decreased during 1994 but increased during 1993. These changes are
discussed in detail in the next two sections.
NONINTEREST INCOME
Noninterest income for 1994 decreased $1,067, or 19.3%, from 1993, compared to
an increase of $303, or 5.8%, for 1993 over 1992. Service charges on deposit
accounts, the largest item in this category, decreased $5, or 0.3%, during
1994, and increased $14, or 0.7%, during 1993. Trust income decreased $45, or
3.5%, during 1994, compared to a $74, or 5.4%, decrease during 1993. These
changes are due to fluctuations in the number of estates each year. Other
service charges and fees decreased $119, or 10.8%, during 1994 and increased
$167, or 17.9%, during 1993. Included in security gains and losses were
write-downs of $164, $54, and $100 during 1994, 1993, and 1992, respectively,
to reflect a decline in value of certain securities deemed to be other than
temporary under regulatory guidelines. During 1993 some of these securities
were sold for a $303 recovery. The other types of noninterest income decreased
$71 during 1994 and increased $80 during 1993.
NONINTEREST EXPENSE
Noninterest expense decreased $125, or 0.6%, during 1994, compared to an
increase of $681, or 3.3%, during 1993. The expense of salaries and other
employee benefits increased $439, or 3.9%, in 1994 and increased $410, or 3.8%,
in 1993. Occupancy expense of bank premises increased $27, or 1.7%, during
1994 compared to an increase of $58, or 3.7%, during 1993. Furniture and
equipment expense increased $127, or 8.0%, and $83, or 5.5%, during 1994 and
1993, respectively. The FDIC assessment increased $2, or 0.1%, during 1994 and
decreased $59, or 4.1%, during 1993 due to a decrease in deposits. Other types
of noninterest expenses decreased $720, or 12.7%, and increased $189, or 3.4%,
during 1994 and 1993, respectively. Included in 1994 and 1993, respectively,
were $183 and $372 in merger and acquisition expense.
12
<PAGE> 14
AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------- --------------------------- ------------------------------
AVERAGE INTEREST YIELD/ Average Interest Yield/ Average Interest Yield/
BALANCES & FEES COST Balances & Fees Cost Balances & Fees Cost
-------- ------- ------- -------- ------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Interest-bearing deposits
in banks $ 8,714 $ 392 4.50% $ 22,078 $ 1,003 4.54% $ 33,619 $ 1,915 5.70%
Federal funds sold 10,394 355 3.42% 30,488 915 3.00% 40,793 1,423 3.49%
Securities:
U. S. Government and agency 122,051 6,469 5.30% 124,797 6,763 5.42% 130,919 9,017 6.89%
State and municipal - taxable 2,426 150 6.18% 1,095 79 7.23% 752 46 6.16%
State and municipal - nontaxable 39,924 3,570 8.94% 38,500 3,604 9.36% 37,492 3,622 9.66%
Other 25,883 1,341 5.18% 16,758 962 5.74% 20,720 1,466 7.08%
-------- ------- -------- ------- -------- -------
Securities before market
value adjustment 190,284 11,530 6.06% 181,150 11,408 6.30% 189,883 14,151 7.45%
Market value adjustment (837) - -
-------- -------- --------
Total securities 189,447 181,150 189,883
Loans:
Commercial 178,849 14,881 8.32% 170,187 13,207 7.76% 166,850 14,181 8.50%
Consumer 81,060 7,614 9.39% 72,485 7,433 10.25% 69,544 7,940 11.42%
Real estate mortgage 184,740 14,981 8.11% 174,567 15,076 8.64% 168,095 15,090 8.98%
Economic development and
other municipal loans 10,430 936 8.97% 9,649 889 9.23% 10,553 1,029 9.75%
Bankers' acceptances and
term federal funds sold - - - - - - 140 10 6.91%
-------- ------- -------- ------- -------- -------
Total loans 455,079 38,412 8.44% 426,888 36,605 8.58% 415,182 38,250 9.21%
-------- ------- -------- ------- -------- -------
Total earning assets 663,634 $50,689 7.64% 660,604 $49,931 7.56% 679,477 $55,739 8.20%
======= ======= =======
NON-EARNING ASSETS:
Allowance for possible loan
losses (3,830) (4,194) (4,403)
Cash and due from banks 28,232 28,895 26,568
Premises and equipment 10,218 10,166 10,207
Other assets 14,891 15,557 18,034
-------- -------- --------
TOTAL ASSETS $713,145 $711,028 $729,883
======== ======== ========
INTEREST-BEARING LIABILITIES:
Savings and
interest-bearing demand $189,810 $ 4,611 2.43% $179,952 $ 4,672 2.60% $164,902 $ 5,362 3.25%
Money market accounts 52,898 1,371 2.59% 56,983 1,568 2.75% 53,992 1,840 3.41%
Certificates of deposit and
other time 279,470 11,856 4.24% 291,981 12,769 4.37% 325,222 17,153 5.27%
-------- ------- -------- ------- -------- -------
Total interest-bearing deposits 522,178 17,838 3.42% 528,916 19,009 3.59% 544,116 24,355 4.48%
Federal funds purchased and
securities sold under
agreements to repurchase 16,371 632 3.86% 12,924 397 3.07% 22,224 851 3.83%
Other borrowings 2,096 80 3.82% 3,701 108 2.91% 6,270 274 4.38%
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities 540,645 $18,550 3.43% 545,541 $19,514 3.58% 572,610 $25,480 4.45%
======= ======= =======
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Noninterest-bearing demand
deposits 79,999 76,419 72,778
Other liabilities 6,462 6,606 7,622
Shareholders' equity 86,039 82,462 76,873
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $713,145 $711,028 $729,883
======== ======== ========
Interest income/earning assets $50,689 7.64% $49,931 7.56% $55,739 8.20%
Interest expense/earning assets 18,550 2.80% 19,514 2.95% 25,480 3.75%
------- ------- -------
Net interest income/earning
assets $32,139 4.84% $30,417 4.60% $30,259 4.45%
======= ======= =======
</TABLE>
Note: Average volume includes nonaccrual loans.
Income is on a federal-tax-equivalent basis using a 34.3% tax rate for
1994 and 34% for 1993 and 1992.
Loans are classified by department.
13
<PAGE> 15
REPORT ON MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL STATEMENTS
March 13, 1995
The Management of National City Bancshares, Inc. is responsible for the
preparation, integrity, and objectivity of the consolidated financial
statements and other financial information presented in this Annual Report.
The financial reports have been prepared in accordance with generally accepted
accounting principles and properly reflect the effects of amounts that are
based on the best judgments and estimates made by Management.
The Corporation maintains a system of internal controls which, in the opinion
of Management, provides reasonable assurance that its financial records can be
relied on in the preparation of financial statements and that its assets are
safeguarded against loss or unauthorized use. The careful selection and
training of qualified personnel, the use of written policies and procedures,
and an audit program carried out by a professional staff of internal auditors
contribute to the effectiveness of this system.
The 1994 and 1993 consolidated financial statements of the Corporation have
been audited by McGladrey & Pullen, LLP, independent certified public
accountants. Prior years were audited by other independent certified public
accountants. These audits were conducted in accordance with generally accepted
auditing standards and included a review of the financial controls and such
other procedures and tests of the accounting records as they considered
necessary under the circumstances.
The Audit Committee of the Board of Directors, composed solely of directors who
are not officers or employees of the Corporation, meets regularly with the
internal auditor and with the independent certified public accountants, and
Management, when appropriate, to review auditing, accounting, reporting, and
internal control matters. Both the internal and external auditors have direct
and private access to the Audit Committee.
/s/ John D. Lippert /s/ Robert A. Keil
John D. Lippert Robert A. Keil
Chairman of the Board and President, Chief Financial Officer,
Chief Executive Officer and Chief Administrative Officer
14
<PAGE> 16
Independent Auditor's Report
MCGLADREY & PULLEN, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
To the Shareholders and Board of Directors
National City Bancshares, Inc.
Evansville, Indiana
We have audited the accompanying consolidated statements of financial position
of National City Bancshares, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders' equity,
and cash flows for the years then ended. 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 consolidated financial position of
National City Bancshares, Inc. and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
The consolidated financial statements of National City Bancshares, Inc., for
the year ended December 31, 1992, prior to the restatement for the 1993 pooling
of interests, and the separate financial statements of the other companies
included in the 1992 restated consolidated financial statements were audited by
other auditors whose reports expressed unqualified opinions on those
statements. We audited the combination of the accompanying consolidated
statements of income, shareholders' equity, and cash flows for the year ended
December 31, 1992, after restatement for the 1993 pooling of interests; in our
opinion, such consolidated financial statements have been properly combined.
/s/ McGladrey & Pullen, LLP
Champaign, Illinois
January 18, 1995
15
<PAGE> 17
Consolidated Statements of Financial Position
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
December 31
-------------------------
1994 1993
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks $ 36,343 $ 29,885
Interest-bearing deposits in banks 5,116 13,578
Securities held to maturity (fair value: 1994 - $72,815; 1993 - $76,945) 73,688 74,040
Securities available for sale 110,831 101,722
Federal funds sold - 42,224
Loans - net of allowance for loan losses of $3,794 in 1994 and $3,791 in 1993 479,798 431,230
Premises and equipment 10,504 10,439
Other real estate owned 605 688
Income earned but not collected 8,262 7,242
Income taxes receivable 31 80
Deferred income taxes 575 -
Other assets 6,011 6,011
-------- --------
TOTAL ASSETS $731,764 $717,139
======== ========
LIABILITIES
Deposits:
Noninterest-bearing demand $ 85,340 $ 81,385
Interest-bearing:
Savings, daily interest checking, and money market accounts 237,884 244,292
Time deposits of $100,000 or more 72,869 53,492
Other time 219,875 227,479
-------- --------
Total deposits 615,968 606,648
Federal funds purchased and securities sold under agreements to repurchase 21,610 13,173
Notes issued to the U.S. Treasury 2,675 5,393
Guaranteed bank loan of Employee Stock Ownership Plan - 541
Dividends payable 805 823
Accrued interest payable 2,414 2,324
Income taxes payable 215 95
Deferred income taxes - 1,379
Other liabilities 1,958 862
-------- --------
Total liabilities 645,645 631,238
-------- --------
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK
SHAREHOLDERS' EQUITY
Common stock - $3.33 1/3 par value:
1994 1993
--------- ---------
Shares authorized 5,000,000 5,000,000
Shares outstanding 3,658,142 3,741,257 12,194 12,471
Capital surplus 33,113 36,128
Retained earnings 43,008 37,375
Unrealized gain (loss) on securities available for sale (2,196) 468
Employee Stock Ownership Plan obligation guaranty - (541)
-------- --------
Total shareholders' equity 86,119 85,901
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $731,764 $717,139
======== ========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
16
<PAGE> 18
Consolidated Statements of Income
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31
---------------------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans:
Taxable $37,480 $35,715 $37,221
Nontaxable 630 605 701
Interest and dividends on securities:
Taxable 7,959 7,803 10,529
Nontaxable 2,415 2,447 2,464
Interest on federal funds sold 355 915 1,423
Interest on deposits in banks 392 1,003 1,915
------- ------- -------
Total interest income 49,231 48,488 54,253
------- ------- -------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 2,511 1,965 2,513
Interest on other deposits 15,327 17,044 21,842
Interest on federal funds purchased and
securities sold under agreements to repurchase 632 397 851
Interest on funds borrowed 80 108 274
------- ------- -------
Total interest expense 18,550 19,514 25,480
------- ------- -------
NET INTEREST INCOME 30,681 28,974 28,773
Provision for loan losses (5) 654 1,234
------- ------- -------
Net interest income after provision for loan losses 30,686 28,320 27,539
------- ------- -------
NONINTEREST INCOME
Trust income 1,247 1,292 1,366
Service charges on deposit accounts 1,983 1,988 1,974
Other service charges and fees 980 1,099 932
Security gains (losses) (170) 657 541
Other 425 496 416
------- ------- -------
Total noninterest income 4,465 5,532 5,229
------- ------- -------
NONINTEREST EXPENSE
Salaries, wages, and other employee benefits 11,721 11,282 10,872
Occupancy expense 1,640 1,613 1,555
Furniture and equipment expense 1,714 1,587 1,504
Assessments of the Federal Deposit Insurance Corporation 1,365 1,363 1,422
Other 4,957 5,677 5,488
------- ------- -------
Total noninterest expense 21,397 21,522 20,841
------- ------- -------
Income before income taxes 13,754 12,330 11,927
Income taxes 4,691 3,956 3,727
------- ------- -------
NET INCOME $ 9,063 $ 8,374 $ 8,200
======= ======= =======
EARNINGS PER SHARE $ 2.45 $ 2.24 $ 2.19
======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
17
<PAGE> 19
Consolidated Statements of Shareholders' Equity
(Dollar Amounts Other Than Share Data in Thousands)
For the Years Ended
December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Employee
Unrealized Stock
Gain (Loss) Ownership
on Securities Plan
Common Common Capital Retained Available Obligation
Shares Stock Surplus Earnings For Sale Guaranty
--------- ------- ------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1991 3,614,007 $12,047 $32,635 $30,254 $ (39) $(758)
--------- ------- ------- ------- ------- -----
Net income - - - 8,200 - -
Cash dividends declared - - - (2,634) - -
Stock dividend of 5% declared 126,587 422 3,502 (3,924) - -
Repurchase of outstanding shares (20,050) (67) (499) - - -
Shares issued in Dividend
Reinvestment Program 20,134 67 501 - - -
Change in unrealized gain (loss)
on securities - - - - (44) -
Employee Stock Ownership Plan
note payment - - - - - 109
--------- ------- ------- ------- ------- -----
BALANCES AT DECEMBER 31, 1992 3,740,678 12,469 36,139 31,896 (83) (649)
--------- ------- ------- ------- ------- -----
Net income - - - 8,374 - -
Cash dividends declared - - - (2,895) - -
Payment for fractional shares
for merger and stock dividends (355) (1) (14) - - -
Repurchase of outstanding shares (18,333) (61) (589) - - -
Shares issued in Dividend
Reinvestment Program 19,267 64 592 - - -
Change in unrealized gain (loss)
on securities - - - - 551 -
Employee Stock Ownership Plan
note payment - - - - - 108
--------- ------- ------- ------- ------- -----
BALANCES AT DECEMBER 31, 1993 3,741,257 12,471 36,128 37,375 468 (541)
--------- ------- ------- ------- ------- -----
Net income - - - 9,063 - -
Cash dividends declared - - - (3,430) - -
Repurchase of outstanding shares (102,343) (341) (3,696) - - -
Shares issued in Dividend
Reinvestment Program 19,228 64 681 - - -
Change in unrealized gain (loss)
on securities - - - - (2,664) -
Employee Stock Ownership Plan
note payment - - - - - 541
--------- ------- ------- ------- ------- -----
BALANCES AT DECEMBER 31, 1994 3,658,142 $12,194 $33,113 $43,008 $(2,196) $ -
========= ======= ======= ======= ======= =====
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
18
<PAGE> 20
Consolidated Statements of Cash Flows
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31
----------------------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,063 $ 8,374 $ 8,200
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,411 1,378 1,261
Amortization 2,608 2,411 1,803
Provision for loan losses (5) 654 1,234
Write-down of securities and other assets 189 147 535
Securities losses (gains) 6 (711) (641)
(Gain) on sale of premises and equipment (148) (30) (74)
(Gain) loss on sale of other real estate owned (11) 48 184
(Gain) on sale of subsidiary (8) - -
Increase (decrease) in deferred taxes (241) 218 (126)
Changes in assets and liabilities:
(Increase) decrease in income earned but not collected (1,020) 725 1,431
(Increase) decrease in other assets (374) (241) (388)
Increase (decrease) in accrued interest payable 90 (482) (1,630)
Increase (decrease) in other liabilities 1,257 (634) 579
-------- -------- --------
Net cash flows provided by operating activities 12,817 11,857 12,368
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits in banks 8,464 15,899 12,551
Proceeds from maturities of securities held to maturity 21,096 66,761 90,066
Proceeds from maturities of securities available for sale 56,745 - -
Proceeds from sales of securities - 14,087 28,021
Proceeds from sales of securities available for sale 1,999 - -
Purchases of securities held to maturity (22,369) (73,790) (98,849)
Purchases of securities available for sale (73,108) - -
(Increase) decrease in federal funds sold 42,224 2,427 9,725
(Increase) decrease in loans made to customers (48,468) (18,039) (14,174)
Capital expenditures (1,653) (1,344) (1,361)
Proceeds from sale of other real estate owned 274 960 933
Proceeds from sale of premises and equipment 206 29 84
Cash transferred to buyer in sale of subsidiary (68) - -
-------- -------- --------
Net cash flows provided by (used in) investing activities (14,658) 6,990 26,996
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 9,320 (18,195) (25,116)
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase 8,437 (2,281) (7,174)
Net proceeds (payments) on notes issued to the U.S. Treasury (2,718) 1,118 (4,758)
Payments on other borrowings - (512) (1,618)
Dividends paid (3,448) (2,629) (2,634)
Repurchase of common stock (4,037) (650) (566)
Sale of common stock 745 641 568
-------- -------- --------
Net cash flows provided by (used in) financing activities 8,299 (22,508) (41,298)
-------- -------- --------
Net increase (decrease) in cash and due from banks 6,458 (3,661) (1,934)
Cash and due from banks at beginning of year 29,885 33,546 35,480
-------- -------- --------
Cash and due from banks at end of year $ 36,343 $ 29,885 $ 33,546
======== ======== ========
</TABLE>
Consolidated Statements of Cash Flows are continued on the following page.
19
<PAGE> 21
Consolidated Statements of Cash Flows Continued
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31
------------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 18,460 $ 19,996 $ 27,107
Income taxes 4,763 4,108 424
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING & FINANCING ACTIVITIES
Change in allowance for unrealized gain (loss)
on securities available for sale $ (4,377) $ 864 $ (44)
Change in deferred taxes attributable to securities
available for sale 1,713 (313) -
Employee Stock Ownership Plan obligation guaranty note payment 541 108 109
Other real estate acquired in settlement of loans 205 484 1,693
Loans originated on sales of other real estate owned - 2,011 -
Sale of subsidiary:
Loan receivable $ 300
========
Assets disposed of, principally intangible assets,
premises and equipment, and cash 333
Liabilities assumed by buyer, principally accounts payable (41)
Gain on sale of subsidiary 8
--------
$ 300
========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
20
<PAGE> 22
Notes to Consolidated Financial Statements
(Dollar Amounts Other Than Share Data in Thousands)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
National City Bancshares, Inc. (Corporation) is a holding company whose
subsidiaries operate in the commercial banking industry. The accounting and
reporting policies of the Corporation conform to generally accepted accounting
principles and to general practices within the banking industry. The following
is a description of the more significant of these policies.
BASIS OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of the Corporation and its wholly-owned subsidiaries: The
National City Bank of Evansville, The Peoples National Bank of Grayville, The
Farmers and Merchants Bank, First Kentucky Bank, Lincolnland Bank, The Bank of
Mitchell, Pike County Bank, The Spurgeon State Bank, The State Bank of
Washington, and NCBE Leasing Corp. All significant intercompany transactions
and balances have been eliminated.
CASH FLOWS - For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks. Interest-bearing deposits in
banks, regardless of maturity, are considered short-term investments.
TRUST ASSETS - Property held for customers in fiduciary or agency capacities,
other than trust cash on deposit at the bank, is not included in the
accompanying consolidated financial statements since such items are not assets
of the Corporation or its subsidiaries.
SECURITIES - Securities classified as held to maturity are those securities the
banks have both the intent and ability to hold to maturity regardless of
changes in market conditions, liquidity needs, or changes in general economic
conditions. These securities are carried at cost adjusted for amortization of
premium and accretion of discount, computed by the interest method over their
contractual lives.
Securities classified as available for sale are those securities that the banks
intend to hold for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar factors. Securities
available for sale are carried at fair value. Unrealized gains or losses are
reported as increases or decreases in shareholders' equity, net of the related
deferred tax effect. Realized gains or losses, determined on the basis of the
cost of specific securities sold, are included as a component of net income.
LOANS - Loans are stated at the principal amount outstanding, less unearned
interest income and an allowance for loan losses. Unearned income on
installment loans is recognized as income based on the sum-of-the-months digits
method which approximates the interest method. Interest income on
substantially all other loans is credited to income based on the principal
balances of loans outstanding.
The Corporation's policy is to discontinue the accrual of interest income on
any loan when, in the opinion of management, there is reasonable doubt as to
the timely collectibility of interest or principal. Nonaccrual loans are
returned to accrual status when, in the opinion of management, the financial
position of the borrower indicates there is no longer any reasonable doubt as
to the timely collectibility of interest and principal.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained at a
level believed adequate by management to provide for known and inherent risks
in the loan portfolio. The allowance is based upon a continuing evaluation of
the risk characteristics of the loan portfolios, past loan loss experience, and
current economic conditions. The continuing review considers such factors as
the financial condition of the borrower, fair market value of the collateral,
and other considerations which, in management's opinion, deserve current
recognition in estimating loan losses. Loans which are deemed to be
uncollectible are charged to the allowance. The provision for loan losses and
recoveries are credited to the allowance.
PREMISES AND EQUIPMENT - Premises and equipment are carried at cost less
accumulated depreciation. Provisions for depreciation are charged to operating
expense over the useful lives of the assets, computed principally by the
straight-line method.
OTHER REAL ESTATE OWNED - Property acquired in settlement of loans is recorded
at the lower of the current estimated fair value less estimated costs to sell
or the fair value at the time of foreclosure. Management periodically reviews
each property for changes in market conditions or other developments which may
result in a reduction of the carrying value of the property. Reductions of the
carrying values and costs associated with holding the properties are charged to
operating expenses.
INCOME TAXES - The Corporation and its subsidiaries file a consolidated Federal
income tax return with each organization computing its taxes on a separate
company basis. The provision for income taxes is based on income as reported
in the financial statements, with deferred income taxes provided on the
differences between the basis of assets and liabilities for financial and
income tax purposes. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion, or all of the deferred tax assets, will not be realized. Deferred tax
assets and liabilities are adjusted for effects of changes in tax laws and
rates on the date of enactment.
21
<PAGE> 23
Notes to Consolidated Financial Statements Continued
(Dollar Amounts Other Than Share Data in Thousands)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
EARNINGS PER SHARE - Earnings per share is computed by dividing net income by
the weighted average number of shares outstanding giving effect to stock
dividends. The weighted average number of shares used in computing earnings
per share are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C>
3,694,650 3,742,427 3,741,124
</TABLE>
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSION - The Corporation is
recognizing the transition obligation using the straight-line method over the
plan participants' average future service period of twenty years. Management
does not expect this obligation to increase.
PENSION BENEFITS - The Corporation maintains a noncontributory pension plan in
which substantially all employees are eligible to participate upon the
completion of one year of service.
ACCOUNTING BY CREDITORS FOR THE IMPAIRMENT OF A LOAN -
Financial Accounting Standards Board Statement No. 114, "Accounting by
Creditors for the Impairment of a Loan," defines a loan as impaired if, based
on current information and events, it is probable that the bank will not be
able to collect all amounts (principal and interest) due in accordance with the
terms of the agreement. The statement requires financial institutions to take
into account the expected loss of interest income when valuing nonperforming
loans. When a loan is considered impaired, this rule involves the discounting
of a loan's future cash flows by using the loan's contractual interest rate
adjusted for any deferred loan fees or costs, premiums, or discounts. The
Corporation will be required to adopt Statement 114 for the year ending
December 31, 1995.
In October 1994, the Financial Accounting Standards Board issued Statement No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures," which amended FAS 114 to allow a creditor to use existing methods
of recognizing interest income on impaired loans.
The Corporation believes the adoption of FAS 114 and its amendment, FAS 118,
will not have a material impact on the consolidated financial statements.
AUTHORIZED SHARES - Data for 1992 has been restated to reflect the increase
from 3,500,000 to 5,000,000 in authorized shares approved at the Corporation's
1993 Annual Meeting of Shareholders.
Note 2. CASH AND DUE FROM BANKS
Aggregate cash and due from bank balances of $8,398 and $9,279 as of December
31, 1994 and 1993, respectively, were maintained in satisfaction of statutory
reserve requirements of the Federal Reserve Bank.
Note 3. SECURITIES
Amortized cost and fair values of securities classified as held to maturity are
as follows:
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Government
and agency
securities $ 8,434 $ 3 $ 171 $ 8,266
State and municipal
securities:
Taxable 2,530 14 97 2,447
Nontaxable 40,418 706 617 40,507
Corporate securities 17,831 2 581 17,252
Mortgage-backed
securities 4,475 45 177 4,343
--------- ------- ------- --------
$ 73,688 $ 770 $ 1,643 $ 72,815
========= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ------- --------- --------
<S> <C> <C> <C> <C>
U.S. Government
and agency
securities $ 18,863 $ 49 $ 135 $ 18,777
State and municipal
securities:
Taxable 1,646 68 - 1,714
Nontaxable 38,148 2,702 30 40,820
Corporate securities 10,769 47 37 10,779
Mortgage-backed
securities 4,614 243 2 4,855
-------- ------- ------- --------
$ 74,040 $ 3,109 $ 204 $ 76,945
======== ======= ======= ========
</TABLE>
The amortized cost and fair value of securities classified as available for
sale are as follows:
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Government
and agency
securities $ 73,398 $ 31 $ 1,477 $ 71,952
Corporate securities 6,936 - 215 6,721
Mortgage-backed
securities 31,362 21 1,745 29,638
--------- ------- ------- --------
111,696 52 3,437 108,311
Equity securities 2,731 - 211 2,520
--------- ------- ------- --------
$ 114,427 $ 52 $ 3,648 $110,831
========= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ------- ------- --------
<S> <C> <C> <C> <C>
U.S. Government
and agency
securities $ 81,495 $ 1,152 $ 76 $ 82,571
Corporate securities 1,115 7 - 1,122
Mortgage-backed
securities 15,663 73 279 15,457
--------- ------- ------- --------
98,273 1,232 355 99,150
Equity securities 2,668 - 96 2,572
--------- ------- ------- --------
$ 100,941 $ 1,232 $ 451 $101,722
========= ======= ======= ========
</TABLE>
22
<PAGE> 24
The amortized cost and fair value of the securities as of December 31, 1994, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because certain securities may be called or prepaid
without penalties.
MATURITY SCHEDULE OF SECURITIES HELD TO MATURITY:
<TABLE>
<CAPTION>
December 31, 1994 Amortized Cost Fair Value
----------------- -------------- ----------
<S> <C> <C>
Less than 1 year $11,047 $10,943
1 year to 5 years 30,104 29,590
5 years to 10 years 19,439 19,547
Over 10 years 8,623 8,392
Mortgage-backed
securities 4,475 4,343
------- -------
Total $73,688 $72,815
======= =======
</TABLE>
MATURITY SCHEDULE OF DEBT SECURITIES AVAILABLE FOR SALE:
<TABLE>
<CAPTION>
December 31, 1994 Amortized Cost Fair Value
----------------- -------------- ----------
<S> <C> <C>
Less than 1 year $ 21,708 $ 21,554
1 year to 5 years 52,918 51,575
5 years to 10 years 5,708 5,544
Mortgage-backed
securities 31,362 29,638
-------- --------
Total $111,696 $108,311
======== ========
</TABLE>
Proceeds from sales of securities available for sale in 1994 were $1,999.
Proceeds from sales of securities, prior to the adoption of FAS 115, were
$14,087 and $28,021 in 1993 and 1992, respectively.
Securities gains and (losses) can be summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Gross realized gains $ 7 $ 865 $ 683
Gross realized losses (13) (154) (42)
Recognized losses
not yet realized (164) (54) (100)
------ ------ ------
Total $(170) $ 657 $ 541
====== ====== ======
</TABLE>
Securities pledged as collateral for public deposits and for other purposes
as required or permitted by law as of December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Fair value $47,976 $50,901
Amortized cost 49,205 50,300
</TABLE>
Note 4. LOANS
A summary of loans as of December 31 follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Real estate loans $247,596 $236,037
Agricultural loans 22,952 22,188
Commercial and industrial loans 110,280 95,254
Economic development loans and
other obligations of state and
political subdivisions 12,529 9,649
Consumer loans 89,033 72,822
All other loans 1,419 1,206
--------- ---------
Total loans - gross 483,809 437,156
Unearned income on loans (217) (2,135)
--------- ---------
Total loans - net of
unearned income 483,592 435,021
Allowance for loan losses (3,794) (3,791)
--------- ---------
Total loans - net $479,798 $431,230
========= =========
</TABLE>
As of December 31, 1994 and 1993, the accrual of interest was discontinued or
renegotiated on loans in the amount of $804 and $2,034, respectively. If
these loans had been current according to original loan terms, additional
gross income in the amount of $92 and $145 would have been recorded in 1994
and 1993, respectively.
In the normal course of business, the banks make loans to their executive
officers and directors, and to companies and individuals affiliated with
officers and directors of the banks and the Corporation. In the opinion of
management, these loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. The activity in these loans during 1994
is as follows:
<TABLE>
<S> <C>
Balance as of January 1, 1994 $10,520
New loans 7,457
Repayments (6,458)
-------
Balance as of December 31, 1994 $11,519
=======
</TABLE>
Note 5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows during the three
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Balance at beginning
of year $3,791 $ 4,186 $ 4,639
Provision for loan losses (5) 654 1,234
Recoveries 627 352 726
Loans charged off (619) (1,401) (2,413)
------- ------- -------
Balance at end of year $3,794 $ 3,791 $ 4,186
======= ======= =======
</TABLE>
23
<PAGE> 25
Notes to Consolidated Financial Statements Continued
(Dollar Amounts Other Than Share Data in Thousands)
Note 6. PREMISES AND EQUIPMENT
Premises and equipment as of December 31 consist of:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Land $ 1,223 $ 1,052
Buildings 11,833 11,698
Equipment 9,667 9,169
Leasehold improvements 1,281 1,342
------- -------
Total cost 24,004 23,261
Less accumulated depreciation 13,500 12,822
------- -------
Net premises and equipment $10,504 $10,439
======= =======
</TABLE>
Note 7. INCOME TAXES
Effective January 1, 1993, the Corporation adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in the
future. The deferred tax assets and liabilities are computed based on enacted
tax laws and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to an 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 in deferred tax assets and liabilities. For
years prior to 1993, deferred income taxes were recognized for timing
differences between financial statement and taxable income.
The adoption of FAS 109 did not have a material effect on the 1993 financial
statements.
The components of income tax expense for the years ended December 31 follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Federal:
Current $3,934 $2,830 $3,000
Deferred (294) 60 (90)
------- ------- -------
Total 3,640 2,890 2,910
------- ------- -------
State:
Current 998 908 853
Deferred 53 158 (36)
------- ------- -------
Total 1,051 1,066 817
------- ------- -------
Total income
tax expense $4,691 $3,956 $3,727
======= ======= =======
</TABLE>
A reconciliation of income tax in the statement of income, with the amount
computed by applying the statutory rate of 35% in 1994 and 34% in 1993 and
1992, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Federal income tax
computed at
the statutory rates $ 4,814 $ 4,192 $ 4,055
Adjusted for effect of:
Nontaxable
municipal interest (1,066) (1,043) (981)
Nondeductible
expenses 333 233 66
Investment tax
credit - - (11)
State income taxes, net
of federal benefit 683 704 539
Benefit of income taxed
at lower rates (100) - -
Change in deferred tax
asset valuation allowance (71) - -
Other differences 98 (130) 59
-------- -------- --------
Total income
tax provision $ 4,691 $ 3,956 $ 3,727
======== ======== ========
</TABLE>
The portion of the tax provision relating to realized security gains and losses
amounted to $(2), $245, and $212 for 1994, 1993, and 1992, respectively.
The net deferred tax asset (liability) in the accompanying balance sheet
includes the following amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deferred tax liability $(2,062) $(2,254)
Deferred tax asset 2,637 946
Valuation allowance for
deferred tax assets - (71)
-------- --------
Net deferred tax
asset (liability) $ 575 $(1,379)
======== ========
</TABLE>
The tax effects of principal temporary differences are shown in the following
table:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Allowance for loan losses $ 1,112 $ 778
Property acquired in settlement of loans - 50
Direct financing and leveraged leases 4 (90)
Prepaid pension cost (1,425) (1,253)
Fixed assets (637) (586)
Securities 1,400 (312)
State net operating loss carryforwards 57 71
Other 64 34
-------- --------
Net temporary differences 575 (1,308)
Valuation allowance - (71)
-------- --------
Net deferred tax asset (liability) $ 575 $(1,379)
======== ========
</TABLE>
24
<PAGE> 26
Note 8. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table reflects a comparison of the carrying amounts and fair
values of financial instruments of the Corporation and its subsidiary banks at
December 31:
<TABLE>
<CAPTION>
1994 1993
-------------------------- --------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Assets:
Cash and
short-term
investments $ 41,459 $ 41,459 $ 85,687 $ 85,687
Securities 184,519 183,646 175,762 178,667
Loans - net of
allowance 478,505 465,891 430,727 449,364
Liabilities:
Deposits 615,968 607,551 606,648 607,935
Short-term debt 24,285 24,285 18,566 18,566
</TABLE>
The above fair value information was derived using the information described
below for the groups of instruments listed. It should be noted the fair values
disclosed in this table do not represent market values of all assets and
liabilities of the Corporation and, thus, should not be interpreted to
represent a market or liquidation value for the Corporation. In addition, the
carrying value for loans above differs from that reported elsewhere due to the
exclusion of capital leases receivable of $1,293 and $503 in 1994 and 1993,
respectively.
CASH AND SHORT-TERM INVESTMENTS - Cash and short-term investments include cash
and due from banks, interest-bearing deposits in banks, and federal funds sold.
For cash and short-term investments, the carrying amount is a reasonable
estimate of fair value.
SECURITIES - For securities, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.
LOANS - For certain homogeneous categories of loans, such as some residential
mortgages, fair value is estimated using the quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities.
DEPOSITS - The fair value of demand deposits, savings accounts, money market
deposits, and variable rate certificates of deposit is the amount payable on
demand at the reporting date. The fair value of other time deposits is
estimated using the rates currently offered for deposits of similar remaining
maturities.
SHORT-TERM DEBT - Rates currently available to the Corporation for debt with
similar terms and remaining maturities are used to estimate fair value of
existing debt. These instruments adjust on a periodic basis and thus the
carrying amount represents fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT - The fair value of
commitments is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also considers the difference between current levels of
interest rates and the committed rates. The fair value of guarantees and
letters of credit is based on fees currently charged for similar agreements or
on the estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date. Because all commitments and
standby letters of credit reflect current fees and interest rates, no
unrealized gains or losses are reflected in the summary of fair values.
Note 9. COMMITMENTS, CONTINGENCIES, AND CREDIT RISK
Most of the business activity of the Corporation and its subsidiaries is
conducted with customers located in the immediate geographical area of their
offices. These areas, comprised of Southwestern Indiana, Western Kentucky and
Southeastern Illinois, are dependent on the agribusiness, and to a lesser
degree, energy economic sectors. While the Corporation maintains a diversified
loan portfolio, approximately $46,477 and $45,395 of the Corporation's loans
were directly related to the agricultural sector as of December 31, 1994 and
1993, respectively.
The Corporation and its subsidiaries evaluate each credit request of their
customers in accordance with established lending policies. Based on these
evaluations and the underlying policies, the amount of required collateral (if
any) is established. Collateral held varies but may include negotiable
instruments, accounts receivable, inventory, property, plant and equipment,
income producing properties, residential real estate, and vehicles. The
lenders' access to these collateral items is generally established through the
maintenance of recorded liens or, in the case of negotiable instruments,
possession.
25
<PAGE> 27
Notes to Consolidated Financial Statements Continued
(Dollar Amounts Other Than Share Data in Thousands)
Note 9. COMMITMENTS, CONTINGENCIES, AND CREDIT RISK CONTINUED
The Corporation and its subsidiaries are parties to legal action which arise in
the normal course of their business activities. In the opinion of management,
the ultimate resolution of these matters is not expected to have a material
effect on the financial position or on the results of operations of the
Corporation and its subsidiaries.
The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The
contract or notional amounts of those instruments reflect the extent of
involvement the Corporation has in particular classes of financial instruments.
The Corporation's exposure to credit loss, in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit, is represented by the contractual notional
amount of those instruments. The Corporation uses the same credit policies in
making commitments and conditional obligations as it does for other on-balance
sheet instruments. Financial instruments whose contract amounts represent
credit risk at December 31 follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Commitments to
extend credit $77,576 $73,031
Standby letters
of credit 16,274 2,511
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
Standby letters of credit written are conditional commitments issued by the
banks to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers.
The Corporation does not engage in the use of interest rate swaps, futures,
forwards, or option contracts.
Note 10. DIVIDEND REINVESTMENT PLAN
The Corporation established a Dividend Reinvestment Plan for its shareholders
in 1989. The Plan permits the issuance of previously authorized and unissued
shares or the repurchase of outstanding shares for reissuance. As of December
31, 1994, 61,880 shares of authorized but unissued common stock were reserved
for Plan requirements.
Note 11. RESTRICTIONS ON DIVIDENDS FROM SUBSIDIARIES
The principal source of income for the Corporation is dividends from its
subsidiary banks. Banking regulations impose restrictions on the ability of
subsidiaries to pay dividends to the Corporation. The limitation is generally
based on net income less dividends paid for the three years in the period ended
December 31, 1994. At December 31, 1994, regulatory approval would have been
required for aggregate dividends in excess of approximately $6,732. The amount
of dividends that could be paid is further restricted by the limitations of
sound and prudent banking principles.
Note 12. EMPLOYEE RETIREMENT PLANS
The Corporation maintains a noncontributory pension plan in which substantially
all employees are eligible to participate upon the completion of one year of
service. No company contribution or funding was required in any of the years
reported here. The assets of the pension plan primarily consist of corporate
obligations and equity securities. The plan does not hold any equity
securities of the Corporation.
In establishing the amounts reflected in the financial statements, the
following significant assumption rates were used:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Discount rate 8.0% 7.5%
Increase in compensation rate 5.0% 5.0%
Expected long-term rate of return 9.0% 9.0%
</TABLE>
The following summary reflects the plan's funded status and the amounts
reflected on the Corporation's financial statements.
26
<PAGE> 28
Actuarial present value of benefit obligations at December 31 are:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Accumulated benefit obligation
including vested benefits
of $3,562, $4,214, and $5,063
in 1994, 1993, and 1992 $(3,757) $(4,466) $(5,259)
Effects of projected future
compensation levels (1,795) (2,433) (2,026)
------- ------- -------
Projected benefit obligation
for service rendered to date (5,552) (6,899) (7,285)
Plan assets at fair value 9,669 12,182 11,699
------- ------- -------
Plan assets in excess of
projected benefit obligation 4,117 5,283 4,414
Unrecognized net loss (gain)
from past experience
different from that assumed
and effects of changes in
assumptions 257 (1,189) (512)
Prior service cost not yet
recognized in net periodic
pension cost (116) 22 25
Unrecognized net asset at
January 1, 1987, being
recognized over 11.11
years from that date (728) (962) (1,195)
------- ------- -------
Prepaid pension cost
included in other assets $ 3,530 $ 3,154 $ 2,732
======= ======= =======
</TABLE>
Net periodic pension cost (credit) included the following components for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 450 $ 425 $ 407
Interest cost on projected
benefit obligation 483 483 513
Return on assets (500) (693) (681)
Net amortization and deferral (809) (637) (808)
------- ------- -------
Net periodic pension
cost (credit) $ (376) $ (422) $ (569)
======= ======= =======
</TABLE>
The Corporation also maintains a savings and profit-sharing plan for
substantially all employees who have completed one year of service. Employees
may voluntarily contribute to the plan. The company's contribution to the plan
is an amount equal to 7% of the net income before income taxes at the
discretion of the Board of Directors. Company contributions were $1,017, $628,
and $617 during 1994, 1993, and 1992, respectively.
As the result of previous mergers and subsequent amendment of the Corporation's
pension and profit-sharing plans to include employees of the other subsidiary
banks, retirement plans previously maintained by those banks have been
terminated or frozen.
The plans have been amended to comply with requirements of the Employee
Retirement Income Security Act of 1974 and the Tax Reform Act of 1986.
Sure Financial Corporation maintained a profit-sharing 401(k) plan for
substantially all employees of its subsidiaries. Contributions to the plan
were $116 and $123 during 1993 and 1992, respectively. This plan was merged
into the Corporation's savings and profit-sharing plan during 1994.
Lincolnland Bancorp, Inc. maintained an Employee Stock Ownership Plan in which
substantially all employees were eligible to participate. Contributions to the
plan were made at the discretion of the Board of Directors and amounted to $88
and $175 for 1993 and 1992, respectively. This plan was terminated during
1994. The Employee Stock Ownership Trust obligation, which was guaranteed by
the Corporation, was reflected as a liability and shareholders' equity was
reduced by the same amount. The obligation was reduced by $108 and $109 in
principal repayments in 1993 and 1992, respectively. In addition, the plan
paid interest amounting to $31 and $38 during 1993 and 1992, respectively.
Note 13. GUARANTEED BANK LOAN OF EMPLOYEE STOCK OWNERSHIP PLAN
In accordance with the consensus reached on issue number 89-10 of the Financial
Accounting Standards Board's Emerging Issues Task Force, the Corporation
recorded the debt of the Employee Stock Ownership Plan as an increase in
liabilities and a reduction of shareholders' equity. This debt was guaranteed
by the Corporation and was paid in full during 1994.
27
<PAGE> 29
Notes to Consolidated Financial Statements Continued
(Dollar Amounts Other Than Share Data in Thousands)
Note 14. UNAUDITED INTERIM FINANCIAL DATA
The following table reflects summarized quarterly data for the periods
described (unaudited):
<TABLE>
<CAPTION>
1994
--------------------------------------------------------------------
December September June March
31 30 30 31
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Interest income $ 12,990 $ 12,606 $ 12,144 $ 11,491
Interest expense 5,015 4,649 4,476 4,410
------------ ------------ ------------- ------------
Net interest income 7,975 7,957 7,668 7,081
Provision for
loan losses 32 16 100 (153)
Noninterest income 1,097 1,251 1,222 895
Noninterest expense 5,458 5,255 5,354 5,330
------------ ------------ ------------- ------------
Income before
income taxes 3,582 3,937 3,436 2,799
Income taxes 1,305 1,365 1,123 898
------------ ------------ ------------- ------------
Net income $ 2,277 $ 2,572 $ 2,313 $ 1,901
============ ============ ============= ============
Earnings
per share $ .62 $ .70 $ .62 $ .51
</TABLE>
<TABLE>
<CAPTION>
1993
--------------------------------------------------------------------
December September June March
31 30 30 31
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Interest income $ 11,998 $ 12,010 $ 12,328 $ 12,152
Interest expense 4,670 4,784 4,899 5,161
------------ ------------ ------------- ------------
Net interest income 7,328 7,226 7,429 6,991
Provision for
loan losses 88 128 243 195
Noninterest income 1,551 1,266 1,262 1,453
Noninterest expense 5,639 5,168 5,412 5,303
------------ ------------ ------------- ------------
Income before
income taxes 3,152 3,196 3,036 2,946
Income taxes 1,078 1,064 936 878
------------ ------------ ------------- ------------
Net income $ 2,074 $ 2,132 $ 2,100 $ 2,068
============ ============ ============= ============
Earnings
per share $ .56 $ .57 $ .56 $ .55
</TABLE>
Note 15. PENDING ACQUISITIONS
On December 12, 1994, the Corporation entered into a definitive agreement to
acquire White County Bank, a $65 million in assets bank located in Carmi,
Illinois. Subject to regulatory approval and the shareholders of White County
Bank, the Corporation will exchange 264,000 shares of its common stock with the
White County Bank shareholders.
On December 28, 1994, the Corporation entered into a definitive agreement to
acquire United Financial Bancorp, Inc., which is a holding company for a $110
million in assets savings bank in Vincennes, Indiana. Subject to regulatory
approval and the shareholders of United Financial Bancorp, Inc., the
Corporation will exchange between 419,202 and 512,420 shares of its common
stock with the United Federal Bancorp, Inc. shareholders.
Consummation of each transaction is subject to its being accounted for as a
pooling of interests, which will require the Corporation to take actions
related to disposition of shares acquired by the Corporation during 1994.
Note 16. FINANCIAL INFORMATION OF PARENT COMPANY
Condensed financial data for National City Bancshares, Inc. (parent company
only) are as follows:
CONDENSED STATEMENTS OF
FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31
--------------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 204 $ 1,157
Investment in bank subsidiaries 81,258 83,542
Securities purchased under
agreements to resell 3,100 -
Note receivable 300 -
Property and equipment 498 694
Income taxes receivable 181 83
Other assets 1,657 1,873
---------- ----------
TOTAL ASSETS $ 87,198 $ 87,349
========== ==========
LIABILITIES
Notes payable $ - $ 541
Dividends payable 805 823
Deferred income taxes 88 81
Other liabilities 186 3
---------- ----------
Total liabilities 1,079 1,448
---------- ----------
SHAREHOLDERS' EQUITY
Common stock 12,194 12,471
Capital surplus 33,113 36,128
Retained earnings 43,008 37,375
Unrealized gain (loss) on securities
available for sale (2,196) 468
Employee Stock Ownership
Plan obligation guaranty - (541)
---------- ----------
Total shareholders' equity 86,119 85,901
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 87,198 $ 87,349
========== ==========
</TABLE>
28
<PAGE> 30
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years
Ended December 31
------------------------------------------------
1994 1993 1992
--------- --------- --------
<S> <C> <C> <C>
Dividends from subsidiaries $ 9,175 $ 6,530 $ 4,882
Other income 822 474 371
--------- --------- --------
Total income 9,997 7,004 5,253
--------- --------- --------
Interest expense - 152 289
Other expenses 1,683 1,451 911
--------- --------- --------
Total expenses 1,683 1,603 1,200
--------- --------- --------
Income before income taxes
and equity in undistributed
earnings of subsidiaries 8,314 5,401 4,053
Income tax benefit (129) (230) (181)
--------- --------- --------
Income before equity in
undistributed earnings of
subsidiaries 8,443 5,631 4,234
Equity in undistributed
earnings of subsidiaries 620 2,743 3,966
--------- --------- --------
Net income $ 9,063 $ 8,374 $ 8,200
========= ========= ========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years
Ended December 31
------------------------------------------------
1994 1993 1992
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 9,063 $ 8,374 $ 8,200
Adjustments to
reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 513 525 493
Undistributed earnings of
subsidiaries (620) (2,743) (3,966)
(Gain) on sale of subsidiary (8) - -
Increase (decrease) in
deferred taxes 7 2 (9)
Changes in assets and liabilities:
(Increase) decrease in
other assets (166) (291) 100
Increase (decrease) in
other liabilities 183 16 (33)
--------- -------- ---------
Net cash flows provided
by operating activities 8,972 5,883 4,785
--------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
For the Years
Ended December 31
---------------------------------------------------------------
1994 1993 1992
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from maturities of
securities available for sale $ 1,997 $ - $ -
Purchase of securities
available for sale (1,997) - -
Capital expenditures (47) (349) (134)
Proceeds from sale of premises
and equipment 14 - -
Investment in subsidiary (52) - -
(Increase) in securities
purchased under agreements
to resell (3,100) - -
-------- ------- --------
Net cash flows provided
by (used in) investing
activities (3,185) (349) (134)
-------- ------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES
Dividends paid (3,448) (2,629) (2,634)
Payments on notes payable - (2,515) (2,001)
Repurchase of common stock (4,037) (650) (566)
Sale of common stock 745 641 568
-------- ------- --------
Net cash flows (used in)
financing activities (6,740) (5,153) (4,633)
Net increase (decrease) in
cash and due from banks (953) 381 18
Cash and due from banks
at beginning of year 1,157 776 758
-------- ------- --------
Cash and due from banks
at end of year $ 204 $ 1,157 $ 776
======== ======= ========
SUPPLEMENTAL DISCLOSURE
OF NONCASH INVESTING
ACTIVITIES
Change in unrealized
gain (loss) on
securities available
for sale, net $ (2,664) $ 551 $ (44)
Employee Stock Ownership
Plan obligation guaranty
note payment 541 108 109
Sale of subsidiary:
Loan receivable 300 - -
</TABLE>
29
<PAGE> 31
Official Organization
National City Bancshares, Inc. and Subsidiaries
NATIONAL CITY
BANCSHARES, INC.
EVANSVILLE, INDIANA
BOARD OF DIRECTORS
Donald B. Cox
Michael F. Elliott
Mrs. N. Keith Emge
Michael D. Gallagher
Donald G. Harris
Edgar P. Hughes
R. Eugene Johnson, Esq.
Robert A. Keil
John D. Lippert
John Lee Newman
Ronald G. Reherman
Laurence R. Steenberg
C. Wayne Worthington
George A. Wright
SENIOR OFFICERS
John D. Lippert
Robert A. Keil
Benjamin W. Bloodworth
Michael F. Elliott
Harold A. Mann
Nancy G. Epperson
Byron W. Jett
THE BANK OF MITCHELL
MITCHELL, INDIANA
BOARD OF DIRECTORS
Robert J. Burton
Dana J. Dunbar
Max D. Elliott
C. Wayne Hatfield
Dr. James F. King
E. Joseph Kremp
John E. Yager, Jr.
Randall L. Young
SENIOR OFFICER
Randall L. Young
THE FARMERS AND
MERCHANTS BANK
FORT BRANCH, INDIANA
BOARD OF DIRECTORS
Roger M. Duncan
Harvey J. Hirsch
Michael J. Hirsch
Marlene A. Obert
Cletus M. Oing
James A. Pfister
Barbara A. Wilson
SENIOR OFFICERS
James A. Pfister
Barbara A. Wilson
FIRST KENTUCKY BANK
STURGIS, KENTUCKY
BOARD OF DIRECTORS
Garland Certain
Charles Hamilton Floyd
Charles L. Pryor
Joseph W. Sprague
Slaton Sprague
William R. Sprague
James D. Syers
James B. Vaughn
I. Dix Winston, Jr.
Joe Woodring
POOLE ADVISORY BOARD
Eugene R. Bradley
Garland Certain
William B. Norment, Jr., Esq.
James B. Vaughn
Wayne L. Willson
SENIOR OFFICER
Garland Certain
LINCOLNLAND BANK
DALE, INDIANA
BOARD OF DIRECTORS
Eric Ayer, Esq.
Benjamin W. Bloodworth
Narl Conner
Donald E. Kirkland
Edgar Mulzer
Albert W. Raven
Wm. Stephen Schroer
Lon Youngblood
SENIOR OFFICERS
Edgar Mulzer
Wm. Stephen Schroer
Donald E. Kirkland
Albert W. Raven
Scott K. Neff
THE NATIONAL CITY
BANK OF EVANSVILLE
EVANSVILLE, INDIANA
BOARD OF DIRECTORS
Donald B. Cox
Michael F. Elliott
Michael D. Gallagher
Dr. H. Ray Hoops
Edgar P. Hughes
R. Eugene Johnson, Esq.
John D. Lippert
John Lee Newman
Edward E. Peyronnin
Peter L. Stevenson, M.D.
C. Wayne Worthington
George A. Wright
SENIOR OFFICERS
John D. Lippert
Michael F. Elliott
Thomas L. Austerman
Benjamin W. Bloodworth
Paul N. Hocking
Thomas R. Lampkins
Larry J. Northernor
30
<PAGE> 32
THE PEOPLES NATIONAL
BANK OF GRAYVILLE
GRAYVILLE, ILLINOIS
BOARD OF DIRECTORS
Lyndle Barnes, Jr.
John C. Blood, Jr.
Benjamin W. Bloodworth
Sam Broster
Richard L. Elliott
Victor R. Gallagher, Jr.
William H. Mitchell
Joseph M. Siegert
Herbert W. Sutter
SENIOR OFFICER
Lyndle Barnes, Jr.
PIKE COUNTY BANK
PETERSBURG, INDIANA
BOARD OF DIRECTORS
Max D. Elliott
Michael F. Elliott
Denver Gladish
John L. Hayes
Karl O. Schafer
John E. Yager, Jr.
SENIOR OFFICER
Max D. Elliott
THE SPURGEON
STATE BANK
SPURGEON, INDIANA
BOARD OF DIRECTORS
Roger M. Duncan
Max D. Elliott
Michael F. Elliott
Anthony P. Uebelhor
John E. Yager, Jr.
SENIOR OFFICER
Roger M. Duncan
THE STATE BANK OF WASHINGTON
WASHINGTON, INDIANA
BOARD OF DIRECTORS
John P. Cavanaugh
Max D. Elliott
Michael F. Elliott
Harry W. Hanson, Esq.
John L. Hayes
E. Joseph Kremp
Dr. Jerry D. McClarren
Harvey W. Pinney
SENIOR OFFICERS
Harvey W. Pinney
Patricia A. Paul
NCBE LEASING CORP.
EVANSVILLE, INDIANA
BOARD OF DIRECTORS
Benjamin W. Bloodworth
Michael D. Gallagher
Dr. H. Ray Hoops
Charles J. Kelly, Jr.
John Lee Newman
SENIOR OFFICERS
Benjamin W. Bloodworth
Charles J. Kelly, Jr.
Harold A. Mann
[PHOTO]
BANK MANAGEMENT
Seated left to right: Lyndle Barnes, Jr., President & CEO, The Peoples National
Bank of Grayville
Wm. Stephen Schroer, President & CEO, Lincolnland Bank
Randall L. Young, President & CEO, The Bank of Mitchell
Thomas L. Austerman, Executive Vice President, The National City Bank of
Evansville
Standing left to right: James A. Pfister, President & CEO, The Farmers and
Merchants Bank
Roger M. Duncan, President & CEO, The Spurgeon State Bank
Harvey W. Pinney, President & CEO, The State Bank of Washington
Garland Certain, President & CEO, First Kentucky Bank
Max D. Elliott, President & CEO, Pike County Bank
31
<PAGE> 33
Shareholder Information
STOCK AND DIVIDEND INFORMATION
The common stock of the Corporation trades on
The Nasdaq Stock Market under the symbol: NCBE.
The following table lists the stock price for the past two years and dividend
information for the Corporation's common stock.
<TABLE>
<CAPTION>
Range of Stock Price Dividend
--------------------
Quarter Low High Declared
------- ------- ------ --------
<S> <C> <C> <C>
1993
1st $29.00 $34.00 $0.22
2nd 32.50 37.25 0.22
3rd 35.00 37.50 0.22
4th 35.00 37.50 0.22
1994
1ST $34.50 $37.00 $0.22
2ND 35.00 41.00 0.22
3RD 39.75 43.50 0.22
4TH 41.75 46.25 0.27
</TABLE>
DIVIDEND REINVESTMENT PLAN
As a service to its shareholders, the Corporation provides an easy way for a
shareholder to acquire additional shares of National City Bancshares, Inc.
common stock through its DIVIDEND REINVESTMENT PLAN. The plan allows a
shareholder to purchase this stock without brokerage fees using dividends and
additional voluntary cash investments. For information about this plan, a
shareholder can contact the Corporation's TRANSFER AGENT.
MARKET MAKERS
The following firms make a market in the
stock of National City Bancshares, Inc.:
The Ohio Company
J. J. B. Hilliard, W. L. Lyons, Inc.
Raffensperger, Hughes & Co.
Herzog, Heine, Geduld, Inc.
FOR FURTHER INFORMATION
The Corporation's
TRANSFER AGENT and REGISTRAR is
The National City Bank of Evansville
Trust Department
227 Main Street
P. O. Box 868
Evansville, IN 47705-0868
Telephone (812) 464-9665
The Corporation's
HEADQUARTERS is located at
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, IN 47705-0868
Telephone (812) 464-9677
ALL SUBSIDIARY BANKS OF NATIONAL CITY BANCSHARES, INC.
ARE MEMBERS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.
[RECYCLED LOGO] THIS REPORT IS PRINTED ENTIRELY ON RECYCLED PAPER.
32
<PAGE> 1
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
NAME JURISDICTION OF INCORPORATION
The National City Bank United States
of Evansville
Evansville, Indiana
The Peoples National Bank United States
of Grayville
Grayville, Illinois
The Farmers and Merchants Bank State of Indiana
Fort Branch, Indiana
First Kentucky Bank Commonwealth of Kentucky
Sturgis, Kentucky
Lincolnland Bank State of Indiana
Dale, Indiana
The Bank of Mitchell State of Indiana
Mitchell, Indiana
Pike County Bank State of Indiana
Petersburg, Indiana
The Spurgeon State Bank State of Indiana
Spurgeon, Indiana
The State Bank of Washington State of Indiana
Washington, Indiana
NCBE Leasing Corp. State of Indiana
Evansville, Indiana
<PAGE> 1
EXHIBIT 23A
CONSENT OF MCGLADREY & PULLEN, LLP
We hereby consent to the incorporation by reference in this Annual Report on
Form 10-K of our report dated January 18, 1995, which appears on Page 15 of the
annual report to stockholders.
/s/ MCGLADREY & PULLEN LLP
Champaign, Illinois
March 22, 1995
<PAGE> 1
EXHIBIT 23B
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to (1) the
inclusion in this Form 10-K of our Report (Gaither Koewler Rohlfer Luckett & Co.
as predecessor to Gaither Rutherford & Co., LLP) dated January 13, 1993, on the
consolidated financial statements of National City Bancshares, Inc. 1992 for
the year ended December 31, 1992, and (2) the incorporation of our report
included in this Form 10-K into the Corporation's previously filed Registration
Statement Commission File No. 0-13585.
As independent certified public accountants, we hereby consent to the inclusion
in this Form 10-K of our report (Gaither Koewler Rohlfer Luckett & Co. as
predecessor to Gaither Rutherford & Co., LLP) dated January 22, 1993, on the
consolidated financial statements of Lincolnland Bancorp, Inc. for the year
ended December 13, 1992.
/s/ GAITHER RUTHERFORD & CO., LLP
Certified Public Accountants
Evansville, Indiana
March 24, 1995
<PAGE> 1
EXHIBIT 23C
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Annual Report on
Form 10-K of National City Bancshares, Inc., of our report dated February 19,
1993, on the consolidated statements of income, changes in stockholders' equity
and cash flows of Sure Financial Corporation for the year ended December 31,
1992, from Form S-4 (33-69050) of National City Bancshares, Inc., effective
November 5, 1993.
/s/ GEO. S. OLIVE & CO. LLC
Indianapolis, Indiana
March 23, 1995
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