<PAGE>
As filed with the Securities and Exchange Commission on October 9, 1997
Registration No. 333-
-----
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
NATIONAL CITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
----------------------------
INDIANA 6711 35-1632155
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
227 MAIN STREET
P.O. BOX 868
EVANSVILLE, INDIANA 47705-0868
(812) 464-9677
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
----------------------------
ROBERT A. KEIL
NATIONAL CITY BANCSHARES, INC.
227 MAIN STREET
P.O. BOX 868
EVANSVILLE, IN 47705-0868
(812) 464-9677
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
COPIES TO:
DAVID C. WORRELL, ESQ. MICHAEL E. WILLIAMS, ESQ.
BAKER & DANIELS KRIEG DEVAULT ALEXANDER & CAPEHART
300 NORTH MERIDIAN STREET ONE INDIANA SQUARE
SUITE 2700 SUITE 2800
INDIANAPOLIS, INDIANA 46204 INDIANAPOLIS, INDIANA 46204
(317) 237-0300 (317) 636-4341
----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value 883,333 (2) $12,465,309(2) $3,777
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the maximum number of shares of National City Bancshares, Inc.
Common Stock that may be issued in the Merger.
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act of 1933
based on the book value per share of the common stock of Fourth First
Bancorp. as of June 30, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
[Fourth First Bancorp Letterhead]
_____ __, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Fourth First Bancorp. ("FFB") to be held at ______________ a.m., local time, on
______ _, 1997 at the office of First Bank of Huntingburg located at Fourth and
Main Streets, Huntingburg, Indiana. At the Special Meeting you will be asked to
consider and vote upon a proposal to approve an Agreement and Plan of Merger
(the "Merger Agreement") dated as of August 6, 1997, which provides for the
merger (the "Merger") of FFB with and into National City Bancshares, Inc.
("NCBE").
If the Merger is approved and consummated, each issued and outstanding
share of common stock of FFB ("FFB Common"), other than shares held by
shareholders properly exercising dissenters' rights, will be converted into the
right to receive from NCBE a number of shares of NCBE common stock ("NCBE
Common") equal to the number of shares of NCBE Common having an aggregate
Average Value (as defined in the Merger Agreement) of $26,500,000, but not less
than 757,142 or more than 883,333 shares, divided by the number of shares of FFB
Common outstanding on the date of the closing of the Merger. As a result, each
share of FFB Common will be converted into the right to receive not less than
5.3044 and not more than 6.1885 shares of NCBE Common. The provisions for
converting shares of FFB Common into NCBE Common and cash in lieu of fractional
shares are set forth in the Merger Agreement and described in the accompanying
Prospectus/Proxy Statement.
After careful review and consideration, your Board of Directors believes
that the proposed Merger is in the best interests of FFB and its shareholders.
ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF THE MERGER AGREEMENT.
Please read the accompanying Prospectus/Proxy Statement which describes the
Merger and related matters in more detail. Your participation in the Special
Meeting, in person or by proxy, is important. Therefore, please mark, sign and
date the enclosed proxy card and mail it as soon as possible in the enclosed
postage-paid envelope so that your shares will be represented at the Special
Meeting. If you attend the Special Meeting, you may revoke your proxy and vote
your shares in person if you wish, even if you have previously mailed in your
proxy card.
Sincerely,
Lee Ray Olinger
President
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FOURTH FIRST BANCORP.
To be held on _____ _, 1997
TO THE SHAREHOLDERS OF FOURTH FIRST BANCORP.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Fourth First Bancorp., an Indiana corporation ("FFB"), will be held
on _____ __, 1997, at ___________ a.m., local time, at the office of First Bank
of Huntingburg located at Fourth and Main Streets, Huntingburg, Indiana, for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger (the "Merger Agreement"), dated as of August 6, 1997,
between FFB and National City Bancshares, Inc., an Indiana corporation
("NCBE"), and the transactions contemplated thereby, pursuant to
which, among other things, FFB will be merged (the "Merger") with and
into NCBE, upon the terms and conditions set forth in the Merger
Agreement, as more fully described in the accompanying
Prospectus/Proxy Statement.
2. Such other matters as may properly come before the Special Meeting or
any adjournments or postponements thereof.
A copy of the Merger Agreement is attached as Appendix A to the
accompanying Prospectus/Proxy Statement and is incorporated by reference in this
Notice.
The Board of Directors of FFB has fixed the close of business on _____ __,
1997, as the record date for determination of shareholders entitled to notice of
and to vote at the Special Meeting or at any adjournments or postponements
thereof.
THE BOARD OF DIRECTORS OF FFB HAS APPROVED THE MERGER AGREEMENT AND
BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF ITS SHAREHOLDERS. THE
BOARD, THEREFORE, UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF FFB VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT DESCRIBES THE RIGHTS OF FFB
SHAREHOLDERS TO DISSENT FROM THE MERGER AND THE PROCEDURES WHICH MUST BE
FOLLOWED IN ORDER TO PERFECT SUCH RIGHTS.
By Order of the Board of Directors,
Huntingburg, Indiana
____ __, 1997 Glen L. Sakel, Secretary
<PAGE>
NATIONAL CITY BANCSHARES, INC.
PROSPECTUS
UP TO 883,333 SHARES OF COMMON STOCK
-----------------------------------
FOURTH FIRST BANCORP.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _____ __, 1997
This Prospectus/Proxy Statement relates to the proposed acquisition of
Fourth First Bancorp., an Indiana corporation ("FFB"), by National City
Bancshares, Inc., an Indiana corporation ("NCBE"), by means of the merger (the
"Merger") of FFB with and into NCBE, pursuant to the terms of an Agreement and
Plan of Merger (the "Merger Agreement") dated as of August 6, 1997, between FFB
and NCBE. A copy of the Merger Agreement is attached hereto as Appendix A and
is incorporated by reference herein.
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of FFB to be used at the
Special Meeting of Shareholders (the "Special Meeting") of FFB to be held on
_____ __, 1997. At the Special Meeting, holders of shares of FFB's common
stock, without par value (the "FFB Common"), will be asked to consider and vote
upon approval of the Merger Agreement and the transactions contemplated thereby.
Any proxy given pursuant to this solicitation may be revoked at any time prior
to the voting thereof at the Special Meeting. Shareholders of FFB are entitled
to dissenters' rights in connection with the Merger as described herein. See
"SPECIAL MEETING" and "THE MERGER -- Dissenters' Rights." This
Prospectus/Proxy Statement and the accompanying form of proxy are first being
mailed to shareholders of FFB on or about ____ __, 1997.
Pursuant to the Merger Agreement and in connection with the Merger, each
issued and outstanding share of FFB Common, other than shares held by
shareholders properly exercising dissenters' rights, will be converted into the
right to receive shares of common stock, without par value, of NCBE (the "NCBE
Common") and cash in lieu of fractional shares. Each share of FFB Common will
be converted to a number of shares of NCBE Common equal to: (i) the number of
shares of NCBE Common which have an aggregate Average Value (as defined in the
Merger Agreement) of $26,500,000, subject to a minimum of 757,142 shares and a
maximum of 883,333 shares; (ii) divided by the number of shares of FFB Common
outstanding on the date of the closing of the Merger (the "Closing"). See "THE
MERGER -- Conversion of FFB Common." This Prospectus/Proxy Statement also
constitutes the prospectus of NCBE with respect to up to 883,333 shares of NCBE
Common issuable in the Merger.
The outstanding shares of NCBE Common are traded on the Nasdaq National
Market tier of the Nasdaq Stock Market. The last reported sale price of NCBE
Common on ____ __, 1997, was $__________.
-----------------------------------
THE SHARES OF NCBE COMMON HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------------
THE SHARES OF NCBE COMMON OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
-----------------------------------
The date of this Prospectus/Proxy Statement is _____ __, 1997
<PAGE>
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS RELATING TO NCBE BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(EXCLUDING UNINCORPORATED EXHIBITS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, TO HAROLD A. MANN, SECRETARY,
NATIONAL CITY BANCSHARES, INC., 227 MAIN STREET, P.O. BOX 868, EVANSVILLE,
INDIANA 47705-0868 (TELEPHONE NUMBER (812) 464-9675). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [FIVE BUSINESS DAYS
PRIOR TO MEETING DATE] ________ __, 1997.
-----------------------------------
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . 5
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Parties to the Merger. . . . . . . . . . . . . . . . . . . . . . . . 6
Special Meeting of FFB Shareholders. . . . . . . . . . . . . . . . . 6
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Summary Comparative Historical and Combined Per Share Data . . . . .10
Stock Price Data . . . . . . . . . . . . . . . . . . . . . . . . . .11
Comparison of Shareholder Rights . . . . . . . . . . . . . . . . . .11
SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Date, Time, Place and Purpose. . . . . . . . . . . . . . . . . . . .12
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . .12
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . . .13
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Background of the Merger . . . . . . . . . . . . . . . . . . . . . .13
Opinion of Financial Advisor to FFB. . . . . . . . . . . . . . . . .13
Reasons for the Merger; Recommendation of
FFB's Board of Directors . . . . . . . . . . . . . . . . . . . . . .17
Closing and Effective Time . . . . . . . . . . . . . . . . . . . . .17
Conversion of FFB Common . . . . . . . . . . . . . . . . . . . . . .17
Procedures for Exchange of Certificates. . . . . . . . . . . . . . .18
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . .19
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . .20
Representations and Warranties . . . . . . . . . . . . . . . . . . .21
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . .23
Termination and Waiver . . . . . . . . . . . . . . . . . . . . . . .23
No Solicitation; Fees and Expenses . . . . . . . . . . . . . . . . .23
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . .24
2
<PAGE>
Page
----
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . .25
Resale of NCBE Common. . . . . . . . . . . . . . . . . . . . . . . .25
Interests of Certain Persons in the Merger . . . . . . . . . . . . .26
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . .27
PRO FORMA CONDENSED CONSOLIDATED
COMBINED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . .30
COMPARATIVE STOCK PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . .37
INFORMATION CONCERNING NCBE. . . . . . . . . . . . . . . . . . . . . . .39
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Recent Developments. . . . . . . . . . . . . . . . . . . . . . . . .39
Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . .40
INFORMATION CONCERNING FFB . . . . . . . . . . . . . . . . . . . . . . .41
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Selected Financial Data of FFB . . . . . . . . . . . . . . . . . . .41
Management's Discussion and Analysis of
Financial Conditions and Results of Operations . . . . . . . . .43
Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . .62
DESCRIPTION OF NCBE CAPITAL STOCK. . . . . . . . . . . . . . . . . . . .64
Authorized Shares. . . . . . . . . . . . . . . . . . . . . . . . . .64
Dividend, Voting, Liquidation and Other Rights . . . . . . . . . . .64
Certain Provisions of Articles of Incorporation and By-laws. . . . .64
Certain Provisions of the IBCL . . . . . . . . . . . . . . . . . . .65
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . .65
COMPARISON OF SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . .65
Classified Board of Directors. . . . . . . . . . . . . . . . . . . .65
Business Combinations Not Involving
an Interested Shareholder. . . . . . . . . . . . . . . . . . . . . .65
Business Combinations Involving an
Interested Shareholder . . . . . . . . . . . . . . . . . . . . . . .65
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . .66
Amendments to Articles of Incorporation. . . . . . . . . . . . . . .66
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . .67
Control Share Acquisitions . . . . . . . . . . . . . . . . . . . . .67
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
INDEX TO FFB FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . F-1
3
<PAGE>
Page
----
APPENDIX A - Agreement and Plan of Merger dated as of August 6,
1997 between National City Bancshares, Inc. and
Fourth First Bancorp.. . . . . . . . . . . . . . . . . . A-1
APPENDIX B - Fairness Opinion of Professional Bank Services, Inc. . . B-1
APPENDIX C - Excerpts of the Indiana Business Corporation Law
(Dissenters' Rights) . . . . . . . . . . . . . . . . . . C-1
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN AND ANY SUCH INFORMATION OR REPRESENTATION,
IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY NCBE OR
FFB. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION OR AN
OFFERING OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR IN ANY JURISDICTION TO ANY PERSON TO WHOM IT WOULD BE UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT AT ANY TIME DOES NOT IMPLY THAT ANY INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
4
<PAGE>
AVAILABLE INFORMATION
NCBE is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, New York, New York 10048, and Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661, and copies of such
materials can be obtained from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers who file
electronically with the Commission. The address of that site is
http://www.sec.gov. In addition, the NCBE Common is included in the Nasdaq
National Market and reports, proxy statements and other information concerning
NCBE are available for inspection at the office of the National Association of
Securities Dealers, Inc., at 1735 K Street, Washington, D.C. 20006.
NCBE has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
NCBE Common to be issued pursuant to the Merger described herein. This
Prospectus/Proxy Statement does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information
may be obtained from the Commission's principal office in Washington, D.C.
Statements contained in this Prospectus/Proxy Statement or in any document
incorporated in this Prospectus/Proxy Statement by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance where reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement is qualified in all
respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by NCBE (File No.
0-13585) pursuant to the Exchange Act are incorporated by reference in this
Prospectus/Proxy Statement:
1. NCBE's Annual Report on Form 10-K for the year ended December 31,
1996;
2. NCBE's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997; and
3. The description of the NCBE Common contained in the Registration
Statement on Form 8-A under the Exchange Act, filed with the
Commission on May 13, 1985, including any amendments or reports filed
for the purpose of updating such description.
All documents and reports filed by NCBE pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference in this Prospectus/Proxy Statement and to be a part
hereof from the dates of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus/Proxy Statement to the extent that a statement contained herein or in
any other subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus/Proxy Statement.
5
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in
all respects by the information appearing elsewhere herein or incorporated by
reference into this Prospectus/Proxy Statement, the Appendices hereto and the
documents referred to herein. All information contained in this
Prospectus/Proxy Statement relating to NCBE and its subsidiaries has been
supplied by NCBE and all information relating to FFB and its subsidiary has been
supplied by FFB. Shareholders are urged to read this Prospectus/Proxy Statement
and the Appendices hereto in their entirety.
PARTIES TO THE MERGER
NCBE
National City Bancshares, Inc. is a bank holding company headquartered in
Evansville, Indiana. As of June 30, 1997, NCBE had consolidated assets of $1.1
billion, deposits of $861.5 million, net loans of $777.5 million and
shareholders' equity of $117.3 million. NCBE currently has 11 financial
institution subsidiaries which serve 27 communities from 36 locations. NCBE's
subsidiaries provide a wide range of banking services in the tri-state area of
Southwestern Indiana, Western Kentucky and Southeastern Illinois.
NCBE is an Indiana corporation. Its principal offices are located at 227
Main Street, P.O. Box 868, Evansville, Indiana 47705-0868 (telephone number
(812) 464-9677).
FFB
Fourth First Bancorp. is a one-bank holding company headquartered in
Huntingburg, Indiana. As of June 30, 1997, FFB, together with its banking
subsidiary, First Bank of Huntingburg ("First Bank"), an Indiana banking
corporation, had total assets of $105.8 million, total net loans of $80.6
million, total deposits of $90.4 million, and total shareholders' equity of
$12.5 million. First Bank has three banking offices, two in Huntingburg, and
one in Ferdinand, Indiana.
FFB is an Indiana corporation. Its principal offices are located at Fourth
and Main Streets, Huntingburg, Indiana 47542 (telephone number (812) 683-2515).
SPECIAL MEETING OF FFB SHAREHOLDERS
DATE, TIME, PLACE AND PURPOSE
The Special Meeting of FFB shareholders will be held at the office of First
Bank located at Fourth and Main Streets, Huntingburg, Indiana on ____ __, 1997,
at _______ a.m., local time to consider and vote to approve the Merger Agreement
and the transactions contemplated thereby, including the Merger. A copy of the
Merger Agreement is attached hereto as Appendix A.
RECORD DATE; VOTE REQUIRED
The record date (the "Record Date") for the Special Meeting is _____ __,
1997. There were 142,738 shares of FFB Common outstanding on the Record Date.
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of FFB Common entitled to vote on the Record Date is
necessary to constitute a quorum at the Special Meeting. The affirmative vote
of the holders of at least a majority of all of the issued and outstanding
shares of FFB Common or 71,370 shares is required to adopt the Merger Agreement
and the transactions contemplated thereby.
6
<PAGE>
SECURITY OWNERSHIP OF FFB MANAGEMENT
As of the close of business on the Record Date, the directors and executive
officers of FFB beneficially owned 60,399 shares of FFB Common, or 42.3%, of all
outstanding shares.
THE MERGER
The following summary is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached as Appendix A hereto and
incorporated by reference herein.
EFFECTIVE TIME OF THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the Indiana Business Corporation Law (the "IBCL"), the Merger
will become effective at the hour and on the date (the "Effective Time")
specified in the Articles of Merger to be filed with the Secretary of State of
Indiana following the closing (the "Closing") of the Merger. At the Effective
Time, FFB will merge with and into NCBE, and NCBE will be the surviving
corporation in the Merger and the separate corporate existence of FFB will
terminate.
OPINION OF FINANCIAL ADVISOR TO FFB
FFB engaged Professional Bank Services, Inc. ("PBS") to advise FFB's Board
of Directors as to the fairness of the consideration, from a financial
perspective, to be paid by NCBE in the Merger. PBS delivered a Fairness Opinion
to the Board of Directors on August 6, 1997. PBS has updated the Fairness
Opinion as of the date of this Prospectus/Proxy Statement. A copy of the PBS
Fairness Opinion is attached as Appendix B hereto. For a description of the
analysis performed by PBS in connection with the Fairness Opinion, see "THE
MERGER -- Opinion of Financial Advisor to FFB."
REASONS FOR THE MERGER AND RECOMMENDATION OF BOARD OF DIRECTORS
In considering the Merger, the Board of Directors of FFB collected and
evaluated a variety of economic, financial and market information regarding NCBE
and its subsidiaries, their respective businesses and NCBE's reputation and
future prospects. In the opinion of the Board of Directors of FFB, favorable
factors included NCBE's strong earnings and stock performance, its management,
the compatibility of its markets to those of FFB and the attractiveness of
NCBE's offer from a financial perspective. Consideration was further given to
the potential benefits of ownership of NCBE Common, which is traded on the
Nasdaq National Market, as compared to FFB Common, which has no established
public trading market. In addition, the Board considered the opinion of PBS,
the financial advisor to FFB, indicating that the consideration to be received
by FFB's shareholders under the Merger Agreement is fair from a financial
perspective. The Board of Directors believes that the Merger will have a
positive, long-term impact on First Bank's customers and employees and the
communities served by First Bank.
THE BOARD OF DIRECTORS OF FFB UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER.
For a discussion of the background of the Merger and the factors considered
by the Board of Directors of FFB in reaching its decision to approve the Merger
Agreement, see "THE MERGER -- Background of the Merger" and "-- Reasons for the
Merger; Recommendation of FFB's Board of Directors."
CONVERSION OF FFB COMMON
As a result of the Merger, each share of FFB Common issued and outstanding
immediately prior to the Effective Time, other than shares whose holders have
properly exercised their dissenters' rights under the IBCL, will be converted
7
<PAGE>
into the right to receive the number of shares of NCBE Common specified in the
Merger Agreement and cash in lieu of fractional shares (collectively the "Merger
Consideration"). The Merger Agreement provides that each share of FFB Common
will be converted into the right to receive that number of shares of NCBE Common
equal to: (i) the number of shares of NCBE Common having an aggregate Average
Value of $26,500,000, subject to a minimum of 757,142 shares and a maximum of
883,333 shares; (ii) divided by the number of outstanding shares of FFB Common
outstanding as of the Closing. The Merger Agreement defines the Average Value
of the NCBE Common as the average of the weighted average trading prices
(excluding trades by NCBE and its subsidiaries) of a share of NCBE Common as
reported by the Nasdaq National Market for the 10 trading days on which NCBE
Common is traded ended 3 days prior to the Closing; however, the Average Value
used for computing the number of shares of NCBE Common in the Merger
Consideration may not be less than $30.00 per share or more than $35.00 per
share. See "THE MERGER -- Conversion of FFB Common".
No fractional shares of NCBE Common will be issued in the Merger and, in
lieu thereof and as part of the Merger Consideration, each holder of shares of
FFB Common who would otherwise be entitled to a fractional share interest (after
taking into account all shares of FFB Common held by such holder) will be paid
an amount in cash equal to the product of such fractional share interest and the
Average Value.
Based upon the number of shares of FFB Common currently outstanding, each
share of FFB Common will be converted into the right to receive not less than
5.3044 and not more than 6.1885 shares of NCBE Common. It is not possible, as
of the date of this Prospectus/Proxy Statement, to determine the actual number
of shares of NCBE Common into which each share of FFB Common will be converted.
Assuming, however, for purposes of illustration, that the Closing occurred on
_____ __, 1997, each share of FFB Common would have been converted into ______
shares of NCBE Common.
For information on how shareholders of FFB will be able to exchange
certificates representing shares of FFB Common for certificates representing
shares of NCBE Common after the Effective Time, see "THE MERGER -- Procedures
for Exchange of Certificates."
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The Merger Agreement contains various customary representations and
warranties of the parties and covenants that the parties will take or refrain
from taking certain actions prior to the Effective Time. See "THE MERGER --
Representations and Warranties" and "-- Covenants."
In addition to the approval of FFB shareholders, the obligations of both
parties to consummate the Merger are subject to the satisfaction or waiver of
certain conditions. The obligations of NCBE are further conditioned upon, among
other things, (i) the absence of any material adverse change prior to Closing in
the business, assets, properties, financial condition or results of operations
of FFB or First Bank; (ii) the receipt of opinions of counsel to FFB as to
certain matters relating to FFB and the Merger; and (iii) the determination by
NCBE, after consultation with its independent auditors, that the Merger may be
accounted for using the "pooling of interests" method. The obligations of FFB
are further conditioned upon, among other things, (i) the receipt of opinions of
counsel to NCBE as to certain matters relating to NCBE and the Merger; (ii) the
receipt of opinions of its counsel as to the treatment of the Merger as a
tax-free reorganization; and (iii) the receipt, as of the date of mailing this
Prospectus/Proxy Statement, of an opinion from PBS to the effect that the Merger
is fair, from a financial viewpoint, to the FFB shareholders.
The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, before or after approval of the Merger Agreement by the FFB
shareholders: (i) by mutual consent of FFB and NCBE; (ii) by FFB, if any of the
conditions to its obligation to consummate the Merger have not been satisfied by
February 28, 1998; or (iii) by NCBE, if any of the conditions to its obligation
to consummate the Merger have not been satisfied by February 28, 1998. See "THE
MERGER -- Termination and Waiver."
8
<PAGE>
In the Merger Agreement, FFB has agreed not to solicit or conduct
negotiations or discussions with third parties regarding an acquisition of FFB
or First Bank except where such actions are required by fiduciary duties of the
FFB Board of Directors. See "THE MERGER -- No Solicitation; Fees and Expenses."
REGULATORY APPROVALS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the Bank Holding Company Act
of 1956, as amended, and the Indiana Department of Financial Institutions (the
"DFI") under the Indiana Financial Institutions Act. NCBE filed an application
seeking regulatory approval from the Federal Reserve Board on September 12,
1997. NCBE filed an application seeking regulatory approval from the DFI on
September 22, 1997. See "THE MERGER -- Regulatory Approvals."
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. The qualification of the Merger
for pooling of interests accounting is a condition to NCBE's obligation to
consummate the Merger. If such condition is not met, the Merger will not be
consummated unless the condition is waived by NCBE. See "THE MERGER --
Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Krieg DeVault Alexander & Capehart, counsel to FFB, has delivered its
opinion that if the Merger is consummated in accordance with the terms set forth
in the Merger Agreement and conditioned upon the accuracy of certain
representations made by NCBE, FFB and certain shareholders of FFB, the Merger
will constitute a "reorganization" under Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and no gain or loss will be
recognized by the holders of shares of FFB Common upon receipt of the Merger
Consideration (except for cash received in lieu of fractional shares and by
shareholders properly exercising their dissenters' rights).
EACH SHAREHOLDER OF FFB SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE POSSIBLE EFFECT OF
CHANGES IN FEDERAL AND OTHER TAX LAWS. SEE "THE MERGER -- CERTAIN FEDERAL
INCOME TAX CONSEQUENCES."
DISSENTERS' RIGHTS
The rights of dissenting shareholders of FFB are governed by the IBCL.
Under the IBCL, the applicable portions of which are attached hereto as Appendix
B, a shareholder is entitled to receive, in cash, the fair value of his or her
shares of FFB Common. If holders of more than approximately 9% of the
outstanding shares of FFB Common should properly exercise their dissenters'
rights, the Merger would not qualify as a "pooling of interests" for accounting
and financial reporting purposes, which qualification is a condition to the
obligation of NCBE to proceed with the Merger. See "THE MERGER -- Dissenters'
Rights."
9
<PAGE>
SUMMARY COMPARATIVE HISTORICAL AND COMBINED PER SHARE DATA
(Unaudited)
The following summary presents, for the periods indicated, selected
comparative historical, pro forma combined and pro forma equivalent unaudited
per share data for NCBE and FFB. The pro forma amounts assume that the Merger
had been effective during the periods presented and had been accounted for under
the pooling of interests method of accounting. For a description of the pooling
of interests method of accounting, see "THE MERGER -- Accounting Treatment."
The data presented is not necessarily indicative of the results of the
future operation of the combined organization or the actual results that would
have occurred if the Merger had been consummated prior to the periods indicated.
The data presented should be read in conjunction with the more detailed
information and financial statements included herein or incorporated by
reference in this Prospectus/Proxy Statement and with the unaudited pro forma
financial statements included elsewhere in this Prospectus/Proxy Statement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "SELECTED FINANCIAL DATA,"
"PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS," "INFORMATION CONCERNING
FFB" and "INDEX TO FFB FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income per common share:
Historical:
NCBE:
Primary $0.94 $0.80 $1.59 $1.34 $0.99
Fully diluted 0.94 0.80 1.59 1.34 0.99
FFB 4.51 4.52 8.76 9.00 7.52
Pro forma combined per NCBE share 0.94 0.81 1.60 1.36 1.02
Equivalent pro forma per FFB share (1) 4.99 4.30 8.49 7.21 5.41
Dividends per common share
Historical:
NCBE:
Primary 0.32 0.27 0.58 0.42 0.42
Fully diluted 0.32 0.27 0.58 0.42 0.42
FFB 1.30 2.60 3.90 2.52 1.40
Pro forma combined per NCBE share 0.31 0.29 0.59 0.42 0.38
Equivalent pro forma per FFB share (1) 1.64 1.54 3.13 2.17 1.99
Book value per common share:
Historical:
NCBE:
Primary 12.70 12.09 12.48 12.10 10.81
Fully diluted 12.70 12.09 12.48 12.10 10.81
FFB 87.33 80.40 83.95 79.13 70.87
Pro forma combined per NCBE share 12.99 12.88 12.72 12.30 10.99
Equivalent pro forma per FFB share (1) 68.90 68.32 67.47 65.24 58.30
</TABLE>
- ------------
(1) Equivalent pro forma per share data represents the pro forma per share data
for NCBE multiplied by the minimum number of shares of NCBE Common to be
issued in the Merger for each share of FFB Common (5.3044).
10
<PAGE>
STOCK PRICE DATA
The following table sets forth as of June 2, 1997 (the last trading day
before the public announcement of the proposed Merger), the last sale price per
share for the NCBE Common and the pro forma equivalent for a share of FFB
Common. There is no public trading market for the FFB Common. See "COMPARATIVE
STOCK PRICES AND DIVIDENDS."
PRO FORMA
NCBE FFB COMMON
COMMON FFB COMMON EQUIVALENT
------ ---------- ----------
Price Per Share
(as of June 2, 1997) $37.25 N/A $197.59*
- ------------
*Assumes that each share of FFB Common is converted into 5.3044 shares of NCBE
Common.
COMPARISON OF SHAREHOLDER RIGHTS
Although FFB and NCBE are each Indiana corporations, the rights of the
shareholders of FFB who receive shares of NCBE Common in the Merger will be
governed by the Articles of Incorporation and Bylaws of NCBE which differ, in
several respects, from those of FFB. As a result, there are material
differences between the rights of the holders of the FFB Common and the NCBE
Common, including cumulative voting on election of directors, classification of
the Board of Directors into three classes, and shareholder votes required to
approve certain business contributions. See "COMPARISON OF SHAREHOLDER RIGHTS."
11
<PAGE>
SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE
This Prospectus/Proxy Statement is being furnished to shareholders of FFB
in connection with the solicitation of proxies by the Board of Directors of FFB
for use at the Special Meeting to be held at the office of First Bank located at
Fourth and Main Streets, Huntingburg, Indiana, on _____ __, 1997, at __:00 a.m.,
local time, and at any adjournment or postponement thereof.
At the Special Meeting, the shareholders of FFB will be asked to consider
and vote upon the approval of the Merger Agreement and the transactions
contemplated thereby, including the Merger of FFB with and into NCBE.
This Prospectus/Proxy Statement, the attached Notice of Special Meeting and
the Proxy Card are first being sent to shareholders of FFB on or about _____ __,
1997.
RECORD DATE
The Board of Directors of FFB has fixed ________ __, 1997, as the Record
Date for the determination of shareholders of FFB to receive notice of and to
vote at the Special Meeting. As of the close of business on the Record Date,
there were 142,738 shares of FFB Common issued and outstanding. Only holders of
shares of FFB Common of record at the close of business on the Record Date are
entitled to notice of and to vote at the Special Meeting. No shares of FFB
Common can be voted at the Special Meeting, unless the record holder is present
in person or represented by proxy at the Special Meeting.
VOTE REQUIRED
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of FFB Common entitled to vote on the Record Date is
necessary to constitute a quorum at the Special Meeting. The affirmative vote
of the holders of at least a majority of all of the issued and outstanding
shares of FFB Common or 71,370 shares is required to approve the Merger
Agreement and the transactions contemplated thereby, including the Merger. Each
holder of FFB Common is entitled to one vote per share of FFB Common held at the
close of business on the Record Date.
VOTING AND REVOCATION OF PROXIES
Proxies for use at the Special Meeting accompany this Prospectus/Proxy
Statement. A shareholder may use his or her proxy if he or she is unable to
attend the Special Meeting in person or wishes to have his or her shares voted
by proxy even if he or she does attend the Special Meeting. Shares of FFB
Common represented by a proxy properly signed and returned to FFB at, or prior
to, the Special Meeting, unless subsequently revoked, will be voted at the
Special Meeting in accordance with instructions thereon. If a proxy is properly
signed and returned and the manner of voting is not indicated on the proxy, any
shares of FFB Common represented by such proxy will be voted FOR approval of the
Merger Agreement and the transactions contemplated thereby, including the
Merger. Any proxy given pursuant to this solicitation may be revoked at any
time prior to the voting thereof on the matters to be considered at the Special
Meeting by filing with the Secretary of FFB a written revocation or a duly
executed proxy bearing a later date. All written notices of revocation and
other communications with respect to revocation of FFB proxies should be
addressed to Fourth First Bancorp., Fourth and Main Streets, Huntingburg,
Indiana 47542, Attention: Secretary. A holder of FFB Common who previously
signed and returned a proxy and who elects to attend the Special Meeting and
vote in person may withdraw his or her proxy at any time before it is exercised
by giving notice of such revocation to the Secretary of FFB at the Special
Meeting and voting in person by ballot at the Special Meeting; however,
attendance at the Special Meeting will not in and of itself constitute a
revocation of the proxy.
12
<PAGE>
FFB intends to count holders of shares of FFB Common present in person at
the Special Meeting but not voting, and holders of shares of FFB Common for
which FFB has received proxies but with respect to which holders of shares have
abstained, as present at the Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers, if
any, who hold shares in street name for customers who are the beneficial owners
of such shares are prohibited from giving a proxy to vote shares held for such
customers with respect to the approval of the Merger Agreement and the
transactions contemplated thereby, including the Merger, without specific
instructions from such customers. Since the affirmative vote of the holders of
at least a majority of the issued and outstanding shares of FFB Common entitled
to vote at the close of business on the Record Date is required to approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger, such non-voting shares and abstentions and the failure of such customers
to provide specific instructions with respect to their shares of FFB Common will
have the effect of a vote against the approval of the Merger Agreement.
SOLICITATION OF PROXIES
In addition to solicitation of proxies from shareholders of FFB Common by
use of the mail, proxies also may be solicited personally or by telephone by
directors, officers and employees of FFB, who will not be specifically
compensated for such services.
NCBE has agreed to bear the entire cost of printing this Prospectus/Proxy
Statement and all filing fees paid to the Commission and other regulatory filing
fees incurred in connection with the Merger.
THE MERGER
GENERAL
This section of the Prospectus/Proxy Statement describes certain aspects of
the proposed Merger, including the principal provisions of the Merger Agreement.
The following information is qualified in its entirety by reference to the other
information contained elsewhere in this Prospectus/Proxy Statement, including
the Appendices hereto and the documents incorporated herein by reference. A
copy of the Merger Agreement (excluding the Disclosure Schedule thereto) is
attached hereto as Appendix A and is incorporated by reference herein and
reference is made thereto for a complete description of the terms of the Merge.
Shareholders of FFB are urged to read the Merger Agreement in its entirety.
BACKGROUND OF THE MERGER
In considering the Merger, the Board of Directors of FFB collected and
evaluated a variety of economic, financial and market information regarding NCBE
and its subsidiaries, their respective businesses and NCBE's reputation and
future prospects. In the opinion of the Board of Directors of FFB, favorable
factors included NCBE's strong earnings and stock performance, its management,
the compatibility of its markets to those of FFB and the attractiveness of
NCBE's offer from a financial perspective. Consideration was further given to
the potential benefits of ownership of NCBE Common, which is traded on the
Nasdaq National Market, as compared to FFB Common, which has no established
public trading market. In addition, the Board considered the opinion of
Professional Bank Services, Inc. ("PBS"), the financial advisor to FFB,
indicating that the consideration to be received by FFB's shareholders under the
Merger Agreement is fair from a financial perspective. The Board of Directors
believes that the Merger will have a positive, long-term impact on First Bank's
customers and employees and the communities served by First Bank.
OPINION OF FINANCIAL ADVISOR TO FFB
PBS was engaged by FFB to advise FFB's Board of Directors as to the
fairness of the Merger Consideration, from a financial perspective, to be paid
by NCBE to FFB shareholders.
13
<PAGE>
PBS is a bank consulting firm with offices in Louisville, Atlanta, Chicago,
Nashville and Washington, D.C. As part of its investment banking business, PBS
is regularly engaged in reviewing the fairness of financial institution
acquisition transactions from a financial perspective and in the valuation of
financial institutions and other businesses and their securities in connection
with mergers, acquisitions, estate settlements, and other transactions. Neither
PBS nor any of its affiliates has a material financial interest in FFB or NCBE.
PBS was selected to advise FFB's Board of Directors based upon their familiarity
with Indiana financial institutions and knowledge of the banking industry as a
whole.
PBS performed certain analyses described herein and presented the range of
values for FFB resulting from such analyses to the Board of Directors of FFB in
connection with its advice as to the fairness of the Merger Consideration.
A Fairness Opinion of PBS was delivered to the Board of Directors of FFB on
August 6, 1997, at a regular meeting of the Board of Directors and has been
updated as of the date of this Prospectus/Proxy Statement. A copy of the
Fairness Opinion, which includes a summary of the assumptions made and
information analyzed in deriving the Fairness Opinion, is attached as Appendix B
to this Prospectus/Proxy Statement and should be read in its entirety.
In arriving at its Fairness Opinion, PBS reviewed certain publicly
available business and financial information relating to FFB and NCBE. PBS
considered certain financial and stock market data of FFB and NCBE, compared
that data with similar data for certain other publicly-held bank holding
companies and considered the financial terms of certain other comparable bank
transactions in the states of Indiana, Illinois and Kentucky that had recently
been effected. PBS also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria that it
deemed relevant. In connection with its review, PBS did not independently
verify the foregoing information and relied on such information being complete
and accurate in all material respects. Financial forecasts prepared by PBS were
based on assumptions believed by PBS to be reasonable and to reflect currently
available information. PBS did not make an independent evaluation or appraisal
of the assets of FFB or NCBE. PBS took into consideration the results of FFB's
solicitation of indications of interest from other financial institutions
concerning their interest in a possible affiliation with FFB. PBS reviewed the
correspondence and information from interested financial institutions which were
contacted. PBS reviewed all offers received by FFB.
As part of preparing the Fairness Opinion, PBS performed a due diligence
review of NCBE. As part of the due diligence, PBS reviewed the following items:
minutes of the Board of Directors meetings from January 17, 1996 through May 21,
1997; reports filed with the Commission by NCBE on Forms 10-K, 8-K and 10-Q for
the year ending December 31, 1994, 1995 and 1996 and year-to-date 1997; reports
of independent auditors and management letters and response thereto, for the
year ending December 31, 1996; the most recent analysis and calculation of
allowance for loan and lease losses for each subsidiary bank; internal loan
review reports; investment portfolio activity reports; asset quality reports;
Uniform Holding Company Report for NCBE as of December 31, 1996 and March 31,
1997; March 31, 1997 reports of Condition and Income and Uniform Bank or Thrift
Performance Reports for each subsidiary bank; and discussion of pending
litigation and other issues with senior management of NCBE.
PBS reviewed and analyzed the historical performance of FFB and First Bank
contained in: audited Annual Reports and financial statements dated December
1995 and 1996 of FFB; December 31, 1996, March 31, 1997 and June 30, 1997
Consolidated Reports of Condition and Income filed by First Bank with the FDIC;
June 30, 1997 FR Y-9SP Parent Company Only financial statements filed by FFB
with the Federal Reserve Board; and March 31, 1997 Uniform Bank Performance
Report of First Bank. PBS also reviewed the historical trading activity of FFB
Common and the premises and other fixed assets of First Bank. PBS reviewed and
tabulated statistical data regarding the loan portfolio, securities portfolio
and other performance ratios and statistics. Financial projections were
prepared and analyzed as well as other financial studies, analyses and
investigations as deemed relevant for the purposes of this opinion. In review
of the aforementioned information, PBS took into account its assessment of
general market and financial conditions, its experience in other similar
transactions, and its knowledge of the banking industry generally.
In connection with rendering the Fairness Opinion and preparing its written
and oral personation to FFB's Board of Directors, PBS performed a variety of
financial analyses, including those summarized herein. The summary does not
purport to be a complete description of the analyses performed by PBS in this
regard. The preparation of a Fairness
14
<PAGE>
Opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized below, PBS believes that its analysis must be considered as a
whole and that selecting portions of its analysis and of the factors considered
by it, without considering all analysis and factors, could create an incomplete
view of the evaluation process underlying its opinion. In performing its
analysis, PBS made numerous assumptions with respect to industry performance,
business and economic conditions and other matters, many of which are beyond
FFB's or NCBE's control. The analysis performed by PBS is not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analysis. In addition, analysis
relating to the values of businesses do not purport to be appraisals or to
reflect the process by which businesses actually may be sold.
ACQUISITION COMPARISON ANALYSIS: In performing this analysis, PBS reviewed
all bank acquisition transactions in the states of Indiana, Illinois and
Kentucky (the "Regional Area") since 1990. There were 306 bank acquisition
transactions in the Regional Area announced since 1990 for which detailed
financial information was available. The purpose of the analysis was to obtain
an evaluation range based on these Regional Area bank acquisition transactions.
Median multiples of earnings and book value implied by the comparable
transactions were utilized in obtaining a range for the acquisition value of
FFB. In addition to reviewing recent Regional Area bank transactions, PBS
performed separate comparable analysis for acquisitions of bank which, like FFB,
had an equity-to-asset ratio between 11.00% and 12.00%, had total assets between
$90.0 and $110.0 million, had a return on average assets ("ROAA") between 1.20%
and 1.30%, were located in the state of Indiana, and bank transactions effected
in the Regional Area since January 1, 1996. In addition, median values for the
306 Regional Area acquisitions expressed as multiples of both book value and
earnings were 1.65 and 14.98, respectively. The median multiples of book value
and earnings for acquisitions of Regional Area banks which, like FFB, had an
equity-to-asset ratio between 11.00% and 12.00% were 1.53 and 14.03,
respectively. For acquisitions of Regional Area banks with assets between $90.0
and $110.0 million the median multiples were 1.84 and 16.73. Regional Area
acquisitions of banks with a ROAA between 1.20% and 1.30%, the median multiples
were 1.64 and 16.59, respectively. The median multiples of book value and
earnings for acquisitions of banks located in the state of Indiana were 1.69 and
17.21, respectively. For bank acquisitions in the Regional Area since January
1, 1996, the median multiples of book value and earnings were 1.75 and 15.22.
In the proposed transaction, FFB shareholders will receive between 757,142
shares of NCBE Common, when NCBE Common is trading at $35.00 per share or
greater, and 883,333, when NCBE Common is trading at $30.00 per share or less,
for all 142,738 shares of FFB Common outstanding, as further defined in the
Merger Agreement. On August 1, 1997 the average of the bid/ask price for NCBE
Common on the Nasdaq National Market was $42.875 per share. Using this average
price of $42.875 per NCBE Common, the per share value to be received by FFB
shareholders would equal $227.43 per share of FFB Common or an aggregate value
of $32,462,463 which represents a multiple of FFB's June 30, 1997 book value and
a multiple of FFB's June 30, 1997 annualized earnings of 2.61 and 25.24
respectively.
The market value of the proposed transaction's percentile ranking was
prepared and analyzed with respect to the above Regional Area comparable group.
Compared to all Regional Area bank transactions, the acquisition value ranked in
the 97th percentile as a multiple of book value and in the 92nd percentile as a
multiple of earnings. Compared to Regional Area bank transactions where the
acquired institution had an equity-to-asset ratio between 11.00% and 12.00%, the
acquisition value ranked in the 100th percentile as a multiple of book value and
the 91st percentile as a multiple of earnings. For Regional Area bank
acquisitions where the acquired institution had between $90.0 and $110.0 million
in assets, the acquisition value ranked in the 94th percentile as both a
multiple of book value and a multiple of earnings. For Regional Area bank
transactions where the acquired institution had a ROAA between 1.20% and 1.30%,
the acquisition value ranked in the 97th percentile as a multiple of book value
and the 95th percentile as a multiple of earnings. For bank transactions in the
state of Indiana, the acquisition value ranked in the 100th percentile as a
multiple of book value and in the 85th percentile as a multiple of earnings.
For Regional Area transactions effected since January 1, 1996, the acquisition
value ranked in the 100th percentile as a multiple of book value and in the 89th
percentile as a multiple of earnings.
15
<PAGE>
ADJUSTED NET ASSET VALUE ANALYSIS: PBS reviewed FFB's balance sheet data
to determine the amount of material adjustments required to the stockholders'
equity of FFB based on differences between the market value of FFB's assets and
their value reflected on FFB's financial statements. PBS determined that three
adjustments were warranted. Equity was increased $108,000 to reflect the after
tax appreciation of FFB's held to maturity securities portfolio. Equity was
reduced by $9,000 to reflect goodwill on FFB's balance sheet. PBS also valued
non-interest bearing demand deposits at approximately $2,494,000. The aggregate
adjusted net asset value of FFB was determined to be $15,051,000 or $105.45 per
FFB Common share.
DISCOUNTED EARNINGS ANALYSIS: A dividend discount analysis was performed
by PBS pursuant to which a range of stand-alone values of FFB was determined by
adding (i) the present value of estimated future dividend streams that FFB could
generate over a five-year period and (ii) the present value of the "terminal
value" of FFB's earnings at the end of the fifth year. The "terminal value" of
the FFB earnings at the end of the five-year period was determined by applying a
multiple of 17.21 times the projected terminal year's earnings. The 17.21
multiple represents the median price paid as a multiple of earnings for all bank
transactions in the state of Indiana since 1990.
Dividend streams and terminal values were discounted to present values
using a discount rate of 12%. This rate reflects assumptions regarding the
required rate of return of holders or buyers of FFB Common. The aggregate value
of FFB, determined by adding the present value of the total cash flows was
$22,748,000 or $159.37 per share. In addition, using the five-year projection
as a base, the twenty-year projection was prepared assuming that an annual
growth rate of 5% and a consistent return on assets of 1.50% would remain in
effect for the entire period, beginning in year five. Dividends were assumed to
increase from 50% of income in years one through five to 70% of income for years
six through twenty. This long-term projection results in an aggregate value of
$17,963,000 or $125.85 per FFB Common share.
SPECIFIC ACQUISITION ANALYSIS: PBS valued FFB based on an acquisition
analysis assuming a "break-even" earnings scenario to an acquiror as to price,
current interest rates and amortization of the premium paid. Based on this
analysis, an acquiring institution would pay in aggregate $18,220,000, or
$127.65 per share, assuming they were willing to accept no impact to their net
income in the initial year. This analysis was based on funding cost of 7.5%
adjusted for taxes, amortization of the acquisition premium over 15 years and a
June 30, 1997 annualized earnings level of $1,286,000. This analysis was
repeated assuming a potential acquiror would attain non-interest expense
reductions of 10% in the transaction. Based on this analysis, an acquiring
institution would pay in aggregate $19,754,000 or $138.39 per FFB Common share.
The Fairness Opinion is directed only to the question of whether the Merger
Consideration to be received by FFB shareholders is fair and equitable from a
financial perspective and does not constitute a recommendation to any FFB
shareholder to vote in favor of the affiliation. No limitations were imposed on
PBS regarding the scope of its investigation or otherwise by FFB.
Based on the results of the various analyses described above, PBS concluded
that the Merger Consideration to be received by FFB shareholders is fair and
equitable from a financial perspective to FFB shareholders.
PBS will receive fees in the amount of $25,000 for all services performed
in connection with the sale of FFB and the rendering of the Fairness Opinion.
In addition, FFB has agreed to indemnify PBS and its directors, officers and
employees, from liability in connection with the transaction, and to hold PBS
harmless from any losses, actions, claims, damages, expenses or liabilities
related to any of PBS' acts or decisions made in good faith and in the best
interest of FFB.
16
<PAGE>
REASONS FOR THE MERGER; RECOMMENDATION OF FFB'S BOARD OF DIRECTORS
Among other items considered by the Board of Directors in evaluating
whether to remain independent or whether to pursue a merger with NCBE were the
prospects of FFB and NCBE, as separate institutions and as combined; the
compatibility of NCBE's subsidiary banks' markets to First Bank's market; the
anticipated tax-free nature of the Merger to the shareholders of FFB receiving
solely NCBE Common in exchange for their shares of FFB Common; the possibility
of increased liquidity through ownership of NCBE Common as compared to FFB
Common because NCBE Common is traded on the Nasdaq National Market; the
timeliness of a merger given the state of the economy and the stock markets as
well as anticipated trends in both; regulatory requirements; relevant price
information involving recent comparable bank acquisitions which occurred in the
midwestern United States; the provisions of the Merger Agreement relating to
the future operation of First Bank as a subsidiary of NCBE; and an analysis of
alternatives to FFB merging with NCBE, including other potential acquirors. In
addition, the Board of Directors considered the opinion of PBS indicating that
the consideration to be received by FFB's shareholders under the Merger
Agreement is fair from a financial perspective.
The Board of Directors of FFB also considered the impact of the Merger on
FFB's and First Bank's customers and employees and the communities served by
First Bank. NCBE's historical practice of retaining employees of acquired
institutions with competitive salary and benefit programs was also considered,
as was the opportunity for training, education, growth and advancement of First
Bank's employees within NCBE or one of its subsidiaries. The Board of Directors
of FFB examined NCBE's continuing commitment to the communities served by the
institutions previously acquired by NCBE. Further from the standpoint of First
Bank's customers, it was anticipated that more products and services would
become available because of NCBE's greater resources.
Based upon the foregoing factors, the Board of Directors of FFB concluded
that it was advantageous to merge with NCBE. The importance of the various
factors relative to one another cannot be precisely determined or measured.
THE BOARD OF DIRECTORS OF FFB UNANIMOUSLY RECOMMENDS THAT HOLDERS OF FFB
COMMON VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Certain members of the management and Board of Directors of FFB have
interests in the Merger that are in addition to the interests of shareholders of
FFB generally. See "-- Interests of Certain Persons in the Merger."
CLOSING AND EFFECTIVE TIME
The Merger Agreement provides that, unless otherwise agreed and assuming
all conditions have been satisfied or waived, the closing of the Merger (the
"Closing") will be held on the date fixed by agreement of NCBE and FFB as soon
as practicable following the date on which all required approvals are received
and any required waiting periods have expired.
If the Merger Agreement is approved by the requisite vote of FFB
shareholders, all other conditions of the Merger Agreement are satisfied or
waived and the Closing is held, the Merger will become effective at the date and
time (the "Effective Time") specified in the Articles of Merger to be filed with
the Secretary of State of Indiana. It is presently contemplated that the
Effective Time will occur during the fourth calendar quarter of 1997. The
Merger Agreement may be terminated by either party if, among other things, the
Closing does not occur on or before February 28, 1998. See "--Termination and
Waiver."
17
<PAGE>
CONVERSION OF FFB COMMON
As a result of the Merger, each share of FFB Common issued and outstanding
immediately prior to the Effective Time, other than shares whose holders have
properly exercised their dissenters' rights under the IBCL, will be converted
into the right to receive the number of shares of NCBE Common specified in the
Merger Agreement and cash in lieu of fractional shares of NCBE Common. The
Merger Agreement provides that each eligible share of FFB Common will be
converted into the right to receive a number of shares of NCBE Common equal to:
(i) the number of shares of NCBE Common having an aggregate Average Value of
$26,500,000, subject to a minimum of 757,142 shares and a maximum of 883,333
shares; (ii) divided by the number of outstanding shares of FFB Common
outstanding as of the Closing. The Merger Agreement defines the Average Value
of the NCBE Common as the average of the weighted average trading prices
(excluding trades by NCBE and its subsidiaries) of a share of NCBE Common as
reported by the Nasdaq National Market for the 10 trading days on which NCBE
Common is traded ended 3 days prior to the Closing; however, the Average Value
used for computing the number of shares of NCBE Common in the Merger
Consideration may not be less than $30.00 per share or more than $35.00 per
share.
No fractional shares of NCBE Common will be issued in the Merger and, in
lieu thereof and as part of the Merger Consideration, holders of shares of FFB
Common who would otherwise be entitled to a fractional share interest (after
taking into account all shares of FFB Common held by such holder) will be paid
an amount in cash equal to the product of such fractional share interest and the
Average Value.
Based upon the number of shares of FFB Common expected to be outstanding as
of the Closing, each share of FFB Common will be converted into the right to
receive not less than 5.3044 and not more than 6.1885 shares of NCBE Common. It
is not possible, as of the date of this Prospectus/Proxy Statement, to determine
the actual number of shares of NCBE Common into which each share of FFB Common
will be converted. Assuming, however, for purposes of illustration, that the
Closing occurred on ____ __, 1997 , each share of FFB Common then outstanding
would have been converted into _______ shares of NCBE Common.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of FFB Common into NCBE Common (other than any shares as to
which dissenters' rights are properly exercised; see "-- Dissenters' Rights")
will occur by operation of law at the Effective Time. After the Effective Time,
certificates theretofore evidencing shares of FFB Common which may be exchanged
for shares of NCBE Common will be deemed, for all corporate purposes other than
the payment of dividends and other distributions on such shares, to evidence
ownership of and entitlement to receive such shares of NCBE Common.
Within twenty (20) business days after the Effective Time, The National
City Bank of Evansville, the exchange agent in the Merger (the "Exchange
Agent"), will send a transmittal letter and instructions to each record holder
of certificates for FFB Common whose shares were converted into the right to
receive the Merger Consideration, advising such holder of the number of shares
of NCBE Common such holder is entitled to receive pursuant to the Merger, of the
amount of cash such holder is due in lieu of a fractional share of NCBE Common,
and of the procedures for surrendering such certificates in exchange for a
certificate for the number of whole shares of NCBE Common, and a check for the
cash amount (if any) such holder is entitled to receive in lieu of a fractional
share. The letter of transmittal will also specify that delivery will be
effected, and risk of loss and title to the certificates for FFB Common will
pass, only upon proper delivery of the certificates for FFB Common to the
Exchange Agent and will be in such form and have such other provisions as NCBE
may reasonably specify. After the receipt by the Exchange Agent of a holder's
certificates for FFB Common, together with a letter of transmittal duly executed
and any other required documents, the Exchange Agent will deliver to such holder
the Merger Consideration such holder is entitled to receive under the Merger
Agreement. SHAREHOLDERS OF FFB ARE REQUESTED NOT TO SURRENDER THEIR
CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE
RECEIVED. The shares of NCBE Common into which FFB Common will be converted in
the Merger will be deemed to have been issued at the Effective Time. Unless and
until the certificates for FFB Common are surrendered, together with a letter of
transmittal duly executed and any other required documents, dividends on the
shares of NCBE Common issuable with
18
<PAGE>
respect to such FFB Common which would otherwise be payable will not be
delivered to the holders of such certificates and, in such case, upon surrender
of the certificates for FFB Common, together with a letter of transmittal duly
executed and any other required documents, there will be delivered any dividends
on such shares of NCBE Common which became payable between the Effective Time
and the time of such surrender. No interest on any such dividends will accrue
or be paid.
If a certificate for FFB Common has been lost, stolen or destroyed, the
Exchange Agent will issue the Merger Consideration properly payable in
accordance with the Merger Agreement upon receipt of an affidavit as to such
loss, theft or destruction and, if required by NCBE, the posting of a bond in an
amount reasonably determined by NCBE.
REGULATORY APPROVALS
NCBE agreed, in the Merger Agreement, to file all regulatory applications
to obtain the requisite regulatory approvals for the Merger. The Merger cannot
proceed in the absence of such regulatory approvals.
NCBE filed an application with the Federal Reserve Board seeking approval
of the Merger on September 12, 1997 and an application with the DFI on September
22, 1997. The Federal Reserve Board approved the Merger on _________________
__, 1997. The DFI approved the Merger on ___________ _, 1997.
The Merger is subject to approval by the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). The BHC Act
provides that the Federal Reserve Board may not approve any transaction (i) that
would result in a monopoly, or that would be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of banking
in any part of the United States, or (ii) the effect of which in any section of
the country may be substantially to lessen competition, or to tend to create a
monopoly, or that in any other manner would be in restraint of trade, unless the
Federal Reserve Board finds that the anticompetitive effects of the proposed
transaction are clearly outweighted in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the
communities to be served. In conducting its review of any application for
approval, the Federal Reserve Board is required to consider the financial and
managerial resources and future prospects of the company or companies and the
banks concerned, and the convenience and needs of the communities to be served.
Under the BHC Act as interpreted by the Federal Reserve Board and the courts,
the Federal Reserve Board may deny any application if it determines that the
financial or managerial resources of the acquiring bank holding company are
inadequate.
The Merger is subject to approval by the Indiana Department of Financial
Institutions (the "DFI") under the Indiana Financial Institutions Act (the
"IFIA"). The IFIA provides that, in deciding whether to approve an acquisition,
the DFI shall consider the following factors: (i) whether the banks already
controlled by NCBE are operated in a safe, sound, and prudent manner; (ii)
whether the financial condition of NCBE or any of its affiliates will jeopardize
the financial stability of FFB or First Bank; (iii) whether the Merger will
result in First Bank's having inadequate capital, unsatisfactory management, or
poor earning prospects; (iv) whether NCBE's subsidiaries have provided adequate
and appropriate services, including services contemplated by the Community
Reinvestment Act of 1977 (the "CRA"), to the communities in which they are
located; (v) whether NCBE proposes to provide adequate and appropriate services,
including services contemplated by the CRA in First Bank's community; (vi)
whether the management or principals of NCBE are qualified by character and
financial responsibility to control and operate in a legal and proper manner
First Bank; (vii) whether the interest of the depositors and creditors and the
public generally will be jeopardized by the proposed transaction; (viii) whether
NCBE furnishes all information required by the DFI to reach its decision; and
(ix) whether, if the DFI holds a public hearing in connection with the Merger,
it finds that the terms of the Merger and issuance and exchange of stock are
fair and reasonable to the shareholders of FFB.
The Merger may not be consummated until 30 days after Federal Reserve Board
approval, during which time the Department of Justice ("DOJ") may challenge the
Merger on antitrust grounds and seek the divestiture of certain assets and
liabilities. With the approval of the Federal Reserve Board and the DOJ, the
waiting period may be reduced to no less than fifteen days. The commencement of
an antitrust action by the DOJ would stay the effectiveness of Federal
19
<PAGE>
Reserve Board approval of the Merger unless a court specifically orders
otherwise. In reviewing the Merger, the DOJ could analyze the effect of the
Merger on competition differently than the Federal Reserve Board and, thus, it
is possible that the DOJ could reach a different conclusion than the Federal
Reserve Board regarding the competitive effects of the Merger.
DISSENTERS' RIGHTS
The rights of FFB shareholders who choose to dissent from the Merger are
governed by the provisions of the IBCL. The IBCL provisions relating to
dissenters' rights (Ind. Code Sections 23-1-44-1--20) are attached hereto as
Appendix C.
Any shareholder who wishes to assert dissenters' rights must deliver to FFB
a written notice indicting that shareholder's intent to demand payment for his
or her shares. This notice should be addressed to Fourth First Bancorp., P.O.
Box 128, Huntingburg, Indiana 47542-0128. The shareholder's notice must be
delivered to FFB before the vote is taken at the special meeting and the
shareholder must not vote in favor of the proposed Merger. Shareholders who
wish to exercise dissenters' rights must exercise them as to all shares they
own. Shareholders who own shares beneficially but not of record must, in
addition to the other requirements described herein, submit to FFB the consent
of the record holder of such shares no later than the time dissenters' rights
are asserted. Any shareholder who fails to deliver the shareholder's notice or
votes in favor of the proposed Merger will not be entitled to payment for his
shares under dissenters' rights according to the IBCL.
If the Merger is approved at the special meeting, FFB will deliver a
written dissenters' notice to all shareholders who notified FFB that they
intended to demand payment for their shares and who did not vote in favor of the
Merger. This dissenters' notice must be sent no later than 10 days after
approval of the Merger by shareholders and must (i) state where demand for
payment should be sent and where and when certificates for certificates shares
should be deposited; (ii) inform holders of uncertificated shares of the extent
of transfer restrictions imposed upon such shares after the demand for payment
is received; (iii) supply a form for demanding payment for shares that includes
the date of the first announcement to the news media or to shareholders of the
terms of the proposed Merger, which in the case of this proposed Merger was June
2, 1997, and requires that the person asserting dissenters' rights certify
whether or not the person acquired beneficial ownership of the shares before
that date; (iv) establish a date by which FFB must receive a demand for payment,
which date shall be no less than 30 nor more than 60 days after the dissenters'
notice is delivered; and (v) be accompanied by a copy of the provisions of the
IBCL pertaining to dissenters' rights. A dissenting shareholder must demand
payment, certify whether beneficial ownership of his shares was acquired before
the date set forth in the dissenters' notice and deposit his certificates in
accordance with the terms of such notice. Any shareholder who demands payment
and deposits shares in accordance with the terms of the dissenters' notice shall
retain all other rights as a shareholder until the rights are canceled or
modified by consummation of the Merger. Any shareholder who fails to demand
payment or deposit shares as required by the dissenters' notice by the
respective dates set forth therein will not be entitled to payment for his
shares and shall be considered to have voted in favor of the proposed Merger.
If a dissenting shareholder was the beneficial owner of his shares on or
before the date of the first announcement to news media or to shareholders of
the terms of the proposed merger (a "Pre-announcement Shareholder"), which in
this case was June 2, 1997, the IBCL requires FFB to pay such shareholder the
amount FFB estimates to be the fair value of his shares. Payment shall be made
as soon as the Merger is consummated and must be accompanied by year-end and
interim financial statements of FFB, a statement of FFB's estimate of the fair
value of the shares, a statement of the dissenting shareholder's right to demand
payment, and a copy of the provisions of the IBCL pertaining to dissenters'
rights. If a dissenting shareholder was not the beneficial owner of his shares
prior to the date of the first announcement to the news media or to shareholders
of the proposed Merger (a "Post-announcement Shareholder"), FFB may elect to
withhold payment of the fair value of the dissenting shareholder's shares. To
the extent such payment is withheld, FFB is required to estimate the fair value
of the dissenting shareholder's rights and offer to pay this amount to each
Post-announcement Shareholder who agrees to accept it in full satisfaction of
his demand. The offer must be accompanied by a statement of the Company's
estimate of value and a statement of the dissenting shareholder's right to
demand payment under the IBCL.
20
<PAGE>
The IBCL provides that a dissenting shareholder may notify FFB in writing
of his estimate of the fair value of his shares and demand payment of the amount
of such estimate (less any payment already made by FFB), or reject FFB's offer
(if a Post-announcement Shareholder) and demand payment of the fair value of his
shares if (i) the dissenter believes the amount paid or offered is less than the
fair value of his shares, (ii) FFB fails to pay Pre-announcement Shareholders
within 60 days after the date set for demanding payment, or (iii) if the
proposed Merger is not consummated, FFB fails to return the deposited
certificates or release transfer restrictions imposed on uncertificated shares
within 60 days after the date set for demanding payment. In order to exercise
these rights, a dissenter must notify FFB in writing within 30 days after FFB
made or offered payment for the dissenter's shares.
If a demand for payment by a dissenting shareholder remains unsettled
within 60 days after FFB's receipt of the demand for payment, FFB must commence
a proceeding in the circuit or superior court of DuBois County, Indiana and
petition the court to determine the fair value of the shares. If such a
proceeding is not commenced within the 60-day period, FFB must pay each
dissenting shareholder whose demand remains unsettled the amount demanded. All
dissenting shareholders whose demands remain unsettled must be made parties to
the proceeding and must be served with a copy of the petition. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. In any such proceeding, each dissenting
shareholder made a party is entitled to a judgment in the amount of the
difference between the fair value found by the court and the amount paid by FFB
plus interest on such difference, in the case of a Pre-announcement Shareholder;
or the fair value, plus accrued interest, of the dissenting shareholder's shares
for which FFB elected to withhold payment in the case of a Post-announcement
Shareholder. The court in an appraisal proceeding has the authority to
determine and assess the costs of the proceeding, including the compensation and
expenses of court-appointed appraisers, in such amounts and against such parties
as it deems equitable. The court may also assess fees and expenses of attorneys
and experts for the parties against FFB if the court finds that FFB did not
substantially comply with the requirements of the IBCL regarding dissenters'
rights, or against any party if the court finds that such party acted
arbitrarily, vexatiously or not in good faith. The IBCL also makes provision
for compensation of attorneys for any dissenting shareholder whose services
benefitted other dissenting shareholders similarly situated to be paid out of
the amounts awarded the dissenting shareholders who were benefitted, if not
assessed against FFB.
If the holders of more than approximately 9% of the outstanding shares of
FFB Common properly exercise their dissenters' rights, the Merger would not
qualify as a "pooling of interests" for accounting and financial reporting
purposes, which qualification is a condition to the obligation of NCBE to
proceed with the Merger. See "-- Accounting Treatment."
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROVISIONS OF THE IBCL RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS OF FFB,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX C.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the parties. The representations and warranties made by NCBE
relate to, among other things: (i) the organization and corporate power of NCBE,
the authorization, execution and delivery of the Merger Agreement and the Merger
Agreement's noncontravention of charter documents, material agreements, laws and
regulations; (ii) capitalization; (iii) organization of subsidiaries; (iv)
delivery of reports filed by NCBE under the Exchange Act; (v) the conformity of
financial statements in such reports to generally accepted accounting principles
("GAAP"); (vi) the absence of any undisclosed material adverse changes in NCBE's
financial condition, results of operations or business; (vii) the absence of any
litigation, claim, investigation or other proceeding which, if adversely
determined, would have a material adverse effect; (viii) the authorization and
nonassessability of the shares of NCBE Common to be issued in the Merger; and
(ix) the absence of any untrue statements or omissions of material fact on the
part of NCBE in the Merger Agreement and related documents.
21
<PAGE>
The representations and warranties made by FFB relate to, among other
things: (i) the organization, good standing and corporate power of FFB, the
capitalization of FFB, the organization and good standing of First Bank, and the
capitalization of First Bank; (ii) the authorization, execution and delivery of
the Merger Agreement and the Merger Agreement's noncontravention of charter
documents of FFB and First Bank; (iii) ownership and organization of
subsidiaries; (iv) delivery of financial statements of FFB and First Bank and
the conformity of such financial statements to GAAP; (v) the filing of tax
returns and payment of taxes; (vi) contracts, commitments or other agreements in
excess of $25,000 to which FFB or First Bank is a party; (vii) ownership of real
estate; (viii) the absence of any material adverse change in FFB's financial
condition, properties, results of operations or capitalization of FFB or First
Bank; (ix) the absence of any investigations, actions or other legal proceedings
which, if adversely determined, would have a material adverse effect and the
absence of any investigations, actions or other legal proceedings involving any
director, officer or employee of FFB or First Bank; (x) the absence of any
obligation to pay broker's or finder's fees in connection with the Merger; (xi)
the compliance of employee benefit plans with applicable laws, rules and
regulations; (xii) labor-related matters; (xiii) the absence of knowledge of
certain environmental related conditions or events; (xiv) the adequacy of First
Bank's loan loss reserve; (xv) the absence of enforcement actions and other
regulatory related matters; and (xvi) the absence of any untrue statements or
omissions of material fact on the part of FFB in the Merger Agreement and
related documents.
COVENANTS
The Merger Agreement contains covenants that the parties will take or
refrain from taking certain actions prior to the Effective Time. As to NCBE,
these covenants include, among other things, agreements to: (i) file, at its
sole expense, and prepare all regulatory applications required to consummate the
Merger and keep FFB informed of the status of such applications; (ii) file a
Registration Statement on Form S-4 with the Commission relating to the shares of
NCBE Common to be issued in the Merger and obtain all approvals required under
state securities or "Blue Sky" laws; (iii) provide FFB with access during
regular business hours to books and records relating to NCBE's assets,
properties, operations and liabilities; (iv) take certain actions regarding the
employees of First Bank, including their participation in NCBE's employee
benefit, welfare benefit and profit sharing plans; (v) elect Richard F. Welp, a
director of FFB as a director of NCBE; (vi) not take any action for a period of
one year after the Effective Time to remove any directors of First Bank or
prevent First Bank from continuing its banking operations, substantially
unchanged, under its current charter and name; (vii) honor all employment
contracts of FFB or First Bank; and (viii) make adequate public information
about NCBE available as required by Rule 144(c) of the Commission. See "--
Interests of Certain Persons in the Merger."
The covenants made by FFB include, among other things, agreements by FFB
and First Bank to: (i) conduct their business in the ordinary course, not
default in any obligations under material contracts, maintain insurance and
existing business organization and relationships; and comply with applicable
laws; (ii) notify NCBE of any event that may have a material adverse effect on
the financial condition, operations, business or assets of FFB and First Bank or
would interfere with FFB's ability to satisfy any conditions to its obligation
to consummate the Merger; (iii) not incur any obligation or liability other than
in the ordinary course of business, amend any material contract, acquire any
interest in another entity, sell or dispose of real property, expand or enhance
its data processing system, make any loan, commitment or line of credit to a
single borrower in excess of $1,000,000, make any capital expenditures except
for repairs, renewals or replacement, issue, sell or redeem any capital stock of
FFB or First Bank, pay cash dividends on the FFB Common except for dividends
that are equivalent to those paid on the NCBE Common (however, holders of FFB
Common may for any given quarter only receive cash dividends attributable either
to FFB or NCBE, not both), amend the articles of incorporation or by-laws or
similar documents of FFB or First Bank, enter into or amend an employment
agreement, compromise or settle a tax claim, open a new office, close any
existing office or knowingly take any action that would adversely affect the
ability to account for the Merger using the "pooling of interests" method of
accounting; (iv) pay and discharge current liabilities when they become due; (v)
not enter into any transaction that would create goodwill under GAAP; (vi) not
modify its practices relating to loans to directors, officers and employees;
(vii) not knowingly violate any laws, regulations, judgments or orders; (viii)
maintain all books and records in accordance with GAAP; (ix) provide NCBE with
access during regular business hours to books and records relating to FFB's and
First Bank's assets, properties, operations and liabilities; (x) provide NCBE
with copies of certain reports to
22
<PAGE>
the Board of Directors of FFB or First Bank; (xi) notify NCBE of any material
change in the operations or certain complaints, investigations or threatened
litigation; (xii) furnish NCBE with the information in FFB's possession that is
required for any regulatory applications in connection with the Merger; and
(xiii) obtain and deliver to NCBE at least 31 days prior to the Closing, an
agreement from each person who may reasonably be deemed an "affiliate" of FFB
for purposes of Rule 145 under the Securities Act, an agreement regarding
compliance with Rule 145 and restricting transfers of NCBE Common following the
Merger. See "--Resale of NCBE Common."
CONDITIONS TO THE MERGER
In addition to the approval of FFB shareholders, the obligations of both
parties to consummate the Merger are subject to the satisfaction or waiver of
certain other conditions, including, among others: (i) that all required
regulatory approvals have been obtained; (ii) that no action or proceeding has
been commenced to restrain the Merger; (iii) the the effectiveness of the
Registration Statement and the absence of a stop order with respect thereto; and
(iv) the receipt of all state securities or "Blue Sky" permits and
authorizations to issue the NCBE Common in the Merger.
The obligation of NCBE to consummate the Merger is further conditioned on
the following: (i) the continued accuracy in all material respects of the
representations and warranties of FFB in the Merger Agreement, the performance
or satisfaction in all material respects of all covenants to be performed by FFB
under the Merger Agreement, the absence of any material adverse change prior to
Closing in the business, assets, properties, financial condition or results of
operations of FFB or First Bank; (ii) the receipt of opinions of counsel to FFB
as to certain matters relating to FFB and the Merger; and (iii) the
determination by NCBE, after consultation with its independent auditors, that
the Merger may be accounted for using the "pooling of interests" method.
The obligation of FFB to consummate the Merger is further conditioned on
the following: (i) the continued accuracy in all material respects of the
representations and warranties of NCBE in the Merger Agreement and the
performance or satisfaction in all material respects of all covenants to be
performed by NCBE under the Merger Agreement; (ii) the receipt of opinions of
counsel to NCBE as to certain matters relating to NCBE and the Merger, (iii) the
receipt of an opinion of its counsel as to the treatment of the Merger as a
tax-free reorganization; and (iv) the receipt, as of the date of mailing this
Prospectus/Proxy Statement, of an opinion from PBS to the effect that the Merger
is fair, from a financial viewpoint, to the FFB shareholders.
TERMINATION AND WAIVER
The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, before or after approval of the Merger Agreement by the FFB
shareholders: (i) by mutual consent of FFB and NCBE; (ii) by FFB, if any of the
conditions to its obligation to consummate the Merger have not been satisfied by
February 28, 1998; or (iii) by NCBE, if any of the conditions to its obligation
to consummate the Merger have not been satisfied by February 28, 1998.
FFB and NCBE may, by written instrument, amend or modify the Merger
Agreement in whole or in part, or waive compliance with any of the covenants or
conditions of the Merger Agreement, before or after approval of the Merger
Agreement by the FFB shareholders, to the extent authorized by applicable law.
NO SOLICITATION; FEES AND EXPENSES
The Merger Agreement prohibits FFB, First Bank and their officers,
directors and representatives, from soliciting or authorizing the solicitation
of inquires or proposals from third parties regarding an acquisition of FFB,
First Bank, or all or substantially all of their assets, unless FFB's Board of
Directors has reasonably determined, based on the written advice of counsel,
that the failure to do so would breach their fiduciary duties. The foregoing
prohibition also extends to conducting discussions or negotiations with third
parties or furnishing confidential information to any person relating to an
acquisition proposal. FFB is required to communicate to NCBE the terms of any
such proposal.
23
<PAGE>
Except as otherwise expressly provided in the Merger Agreement, each party
is to pay its own fees and expenses incurred in connection with the Merger, the
Merger Agreement and the transactions contemplated therein.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon an opinion of Krieg DeVault
Alexander & Capehart, counsel to FFB ("Counsel"), and except as otherwise
indicated, reflects Counsel's opinion. The discussion is a summary of the
material United States federal income tax ("federal income tax") consequences of
the Merger to certain FFB shareholders and does not purport to be a complete
analysis or listing of all potential tax considerations or consequences relevant
to a decision whether to vote for the approval of the Merger Agreement. The
discussion does not address all aspects of federal income taxation that may be
applicable to FFB shareholders in light of their status or personal investment
circumstances, nor does it address the federal income tax consequences of the
Merger that are applicable to FFB shareholders subject to special federal income
tax treatment including, without limitation, foreign persons, insurance
companies, tax-exempt entities, retirement plans, or dealers in securities. In
addition, the discussion does not address the effect of any applicable state,
local or foreign tax laws, or the effect of any federal tax laws other than
those pertaining to the federal income tax. As a result, each FFB shareholder
is urged to consult his or her own tax advisor to determine the specific tax
consequences of the Merger to such shareholder. The discussion assumes that
shares of FFB Common are held as capital assets (within the meaning of Section
1221 of the Code) at the Effective Time.
FFB has received an opinion from Counsel to the effect that:
(i) Provided that the Merger of FFB with and into NCBE qualifies as
a statutory merger under applicable law, the proposed Merger will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Code.
(ii) FFB will recognize no gain or loss upon the transfer of all of
its assets to NCBE in exchange for NCBE Common issued to FFB shareholders,
cash paid to dissenting FFB shareholders, if any, or to FFB shareholders in
lieu of fractional shares of NCBE Common, and the assumption by NCBE of all
of FFB's liabilities.
(iii) No gain or loss will be recognized by NCBE on the receipt of
the assets of FFB in exchange for shares of NCBE Common.
(iv) The shareholders of FFB will recognize no gain or loss upon the
exchange of their shares of FFB Common solely for shares of NCBE Common.
Counsel's opinion is subject to the conditions and customary assumptions
that are stated therein and relies upon various representations made by the
parties to the Merger Agreement. If any of these representations or assumptions
is inaccurate, the tax consequences of the Merger could differ from those
described herein. Counsel's opinion is also based upon the Code, regulations
proposed or promulgated thereunder, judicial precedent relating thereto, and
current administrative rulings and practice, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences discussed herein. The receipt of Counsel's opinion again as of the
date of the closing of the Merger is a condition to the consummation of the
Merger. An opinion of counsel, unlike a private letter ruling from the Internal
Revenue Service ("Service"), has no binding effect. The Service could take a
position contrary to Counsel's opinion and, if the matter were litigated, a
court could reach a decision contrary to the opinion. Neither NCBE nor FFB has
requested an advance ruling as to the federal income tax consequences of the
Merger, and the Service is not expected to issue such a ruling.
THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF FFB WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF FFB SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
24
<PAGE>
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of NCBE and FFB will be carried forward after the
Effective Time into the consolidated financial statements of NCBE at their
recorded amounts, the consolidated income of NCBE will include income of NCBE
and FFB for the entire fiscal year in which the Merger occurs, the separately
reported income of NCBE and FFB for prior periods will be combined and restated
as consolidated income of NCBE, and no goodwill will be recognized.
The Merger Agreement provides that a condition to the obligation of NCBE to
consummate the Merger is that NCBE shall have determined, after consultation
with its independent auditors, that the Merger will qualify for "pooling of
interests" accounting treatment under Accounting Principles Board Opinion No.
16. In the event such condition is not met, the Merger would not be consummated
unless the condition was waived by NCBE. As of the date of this Prospectus/Proxy
Statement, NCBE and FFB are not aware of any existing facts or circumstances
which would preclude the Merger from qualifying for "pooling of interests"
accounting treatment.
The unaudited pro forma financial information contained in this
Prospectus/Proxy Statement has been prepared using the pooling of interests
accounting method to account for the Merger. See "PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS."
RESALE OF NCBE COMMON
The shares of NCBE Common issuable pursuant to the Merger will be freely
transferable under the Securities Act except for shares issued to any FFB
shareholder who may be deemed to be an "affiliate" of NCBE for purposes of Rule
144 under the Securities Act or an "affiliate" of FFB for purposes of Rule 145
under the Securities Act. Persons who may be deemed to be affiliates of FFB or
NCBE generally include individuals who, or entities which, control, are
controlled by or are under common control with FFB or NCBE and will include
directors and certain officers of FFB and NCBE and may include principal
shareholders of FFB and NCBE, if any.
Rules 144 and 145 under the Securities Act will restrict the sale of NCBE
Common received in the Merger by affiliates and certain of their family members
and related interests. Generally, during the first year following the Effective
Time, those persons who are affiliates of FFB at the time of the Special
Meeting, provided they are not affiliates of NCBE at or following the Effective
Time, may publicly resell any NCBE Common received by them in the Merger,
subject to certain limitations as to, among other things, the amount of NCBE
Common sold by them in any three-month period and as to the manner of sale.
After the one year period, such affiliates may resell their shares without such
restrictions so long as there is adequate current public information with
respect to NCBE as required by Rule 144 under the Securities Act.
The ability of affiliates to resell shares of NCBE Common received in the
Merger under Rule 144 or 145 under the Securities Act as summarized herein
generally will be subject to NCBE's having satisfied its Exchange Act reporting
requirements for specified periods prior to the time of sale. Affiliates also
would be permitted to resell shares of NCBE Common received in the Merger
pursuant to an effective registration statement under the Securities Act or
another available exemption from the Securities Act registration requirements.
Guidelines of the Commission regarding qualifying for the pooling of
interests method of accounting also limit sales of shares of the acquiring and
acquired company by affiliates of either company in a business combination.
Guidelines of the Commission indicate further that the pooling of interests
method of accounting will generally not be challenged on the basis of sales by
affiliates of the acquiring or acquired company if they do not dispose of any of
the shares of the corporation they own or shares of a corporation they receive
in connection with a merger during the period beginning
25
<PAGE>
30 days before the merger and ending when financial results covering at least 30
days of post-merger operations of the combined entity have been published.
The Merger Agreement provides that FFB will obtain and deliver to NCBE an
agreement from each person who may reasonably be deemed an affiliate of FFB
providing that such affiliate will not transfer any shares of NCBE Common
received in the Merger except in compliance with the Securities Act and in
compliance with the requirements described in the preceding paragraph regarding
the non-disposition of any shares of FFB Common or NCBE Common (or any interest
therein) during the period commencing 30 days prior to the Effective Time
through the date on which financial results covering at least 30 days of
combined operations of NCBE and FFB after the Merger have been published.
This Prospectus/Proxy Statement does not cover resales of shares of NCBE
Common received by any person who may be deemed to be an affiliate of FFB or
NCBE.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the FFB Board of Directors have certain interests in the
transactions contemplated by the Merger Agreement that are in addition to their
interests as FFB shareholders, including those referred to below.
In the Merger Agreement, NCBE has agreed that for a period of one year
after the Effective Time, it will allow First Bank to operate under its current
charter and name. NCBE also agreed not to take any action to remove any person
serving as a director of First Bank during such period. NCBE also agreed to
elect Richard F. Welp, a director of FFB and First Bank, as a director of NCBE
after the Effective Time.
26
<PAGE>
SELECTED FINANCIAL DATA
(Unaudited)
The following tables present selected unaudited consolidated historical
financial data for NCBE and pro forma combined amounts reflecting the Merger.
The pro forma amounts assume that the Merger had been effective during the
periods presented. The data presented is derived in part from the consolidated
financial statements of NCBE and FFB and should be read in conjunction with the
more detailed information and financial statements included herein or
incorporated by reference in this Prospectus/Proxy Statement and with the
unaudited pro forma financial statements included elsewhere in this
Prospectus/Proxy Statement. The pro forma amounts may not be indicative of the
results that actually would have occurred if the Merger had been in effect on
the dates indicated. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
"PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS," "INFORMATION CONCERNING
FFB" AND "INDEX TO FFB FINANCIAL STATEMENTS."
27
<PAGE>
NCBE - HISTORICAL
(Dollar amounts other than per share data in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income $ 23,175 $ 21,478 $ 44,141 $ 40,167 $ 36,008 $ 34,427 $ 34,513
Provision for loan losses 504 521 2,491 294 18 581 1,327
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 22,671 20,957 41,650 39,873 35,990 33,846 33,186
Noninterest income 4,734 3,660 8,311 6,724 4,945 6,453 6,000
Noninterest expense 14,577 12,848 27,311 26,343 26,101 25,853 25,025
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes 12,828 11,769 22,650 20,254 14,834 14,446 14,161
Income taxes 3,878 4,030 7,404 7,139 5,155 4,519 4,395
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income $ 8,950 $ 7,739 $ 15,246 $ 13,115 $ 9,679 $ 9,927 $ 9,766
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
PER SHARE DATA
Net income
Primary $ 0.94 $ 0.80 $ 1.59 $ 1.34 $ 0.99 $ 1.01 $ 0.99
Fully diluted 0.94 0.80 1.59 1.34 0.99 1.01 0.99
Book value
Primary 12.70 12.09 12.48 12.10 10.81 10.60 9.84
Fully diluted 12.70 12.09 12.48 12.10 10.81 10.60 9.84
Cash dividends declared
Primary 0.32 0.27 0.58 0.42 0.42 0.40 0.38
Fully diluted 0.32 0.27 0.58 0.42 0.42 0.40 0.38
SUMMARY OF FINANCIAL CONDITION
Total assets $1,144,996 $1,008,532 $1,069,086 $979,440 $906,506 $ 897,831 $ 913,964
Investment securities 261,041 234,393 264,675 241,287 248,660 245,793 256,195
Loans, net 777,480 694,846 717,033 658,962 570,119 511,091 494,841
Total deposits 861,514 786,007 825,371 774,720 764,451 760,729 784,529
Shareholders' equity 117,270 115,123 117,711 119,311 104,635 104,458 97,503
SELECTED FINANCIAL RATIOS
Net income to average assets 1.63% 1.61% 1.50% 1.41% 1.08% 1.11% 0.99%
Net income to average equity 15.64% 13.86% 13.08% 11.70% 9.24% 9.84% 9.90%
Dividend payout ratio 34.04% 33.75% 36.48% 31.34% 42.42% 40.00% 38.38%
Average equity to average assets 10.42% 11.62% 11.49% 12.06% 11.74% 11.30% 10.01%
Weighted average shares (primary) 9,488,085 9,646,950 9,569,810 9,809,640 9,758,011 9,858,368 9,909,484
Weighted average shares
(fully diluted) 9,499,632 9,646,950 9,569,810 9,809,640 9,758,011 9,858,368 9,909,484
</TABLE>
28
<PAGE>
NCBE - FFB PRO FORMA
(Dollar amounts other than per share data in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------- ------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income 25,487 23,669 48,606 44,434 39,929
Provision for loan losses 594 596 2,704 399 78
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 24,893 23,073 45,902 44,035 39,851
Noninterest income 4,892 3,807 8,605 7,117 5,213
Noninterest expense 15,951 14,132 29,966 28,968 28,644
----------- ----------- ----------- ----------- -----------
Income before income taxes 13,834 12,748 24,541 22,184 16,420
Income taxes 4,248 4,371 8,059 7,799 5,679
----------- ----------- ----------- ----------- -----------
Net income $ 9,586 $ 8,377 $ 16,482 $ 14,385 $ 10,741
PER SHARE DATA
Net Income
Primary $ 0.94 $ 0.81 $ 1.60 $ 1.36 $ 1.02
Fully diluted 0.94 0.81 1.60 1.36 1.02
Book value
Primary 12.99 12.88 12.72 12.30 10.99
Fully diluted 12.99 12.88 12.72 12.30 10.99
Cash dividends declared
Primary 0.31 0.29 0.59 0.42 0.41
Fully diluted 0.31 0.29 0.59 0.42 0.41
SUMMARY OF FINANCIAL CONDITION
Total assets $1,250,782 $1,109,243 $1,172,105 $1,082,013 $1,004,296
Investment securities 278,051 252,750 282,894 258,895 265,809
Loans, net 858,076 767,063 793,434 730,821 639,486
Total deposits 951,907 873,284 913,360 864,165 849,323
Shareholders' equity 129,735 126,599 129,694 130,606 114,750
SELECTED FINANCIAL RATIOS
Net income to average assets 1.58% 1.56% 1.48% 1.40% 1.09%
Net income to average equity 14.98% 13.42% 12.87% 11.73% 9.38%
Dividend payout ratio 32.99% 35.80% 36.87% 30.88% 40.19%
Average equity to average assets 10.54% 11.60% 11.48% 11.93% 11.59%
Weighted average shares (primary) 10,201,559 10,316,914 10,326,952 10,566,782 10,515,153
Weighted average shares
(fully diluted) 10,223,423 10,316,914 10,326,952 10,566,782 10,515,153
End of period shares outstanding 9,990,048 9,829,551 10,192,574 10,621,258 10,438,484
NCBE only 9,232,906 9,526,029 9,435,432 9,864,116 9,681,342
NCBE dividend declared 0.32 0.27 0.58 0.42 0.42
FFB pro forma shares 757,142 757,142 757,142 757,142 757,142
FFB dividend on pro forma shares $ 0.25 $ 0.49 $ 0.74 $ 0.48 $ 0.26
29
<PAGE>
Pro forma combined dividend 0.31 0.29 0.59 0.42 0.41
</TABLE>
PRO FORMA CONDENSED CONSOLIDATED
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated combined balance
sheet as of June 30, 1997, and the pro forma condensed consolidated combined
statements of income for the six months ended June 30, 1997 and 1996, and for
each of the years in the three-year period ended December 31, 1996, give effect
to the Merger based on the historical consolidated financial statements of NCBE
and FFB and their respective subsidiaries under the assumptions and adjustments
set forth in the accompanying notes to the pro forma financial statements.
The pro forma financial statements have been prepared based upon the
historical consolidated financial statements of NCBE and FFB. The pro forma
financial statements, which include results of operations as if the Merger had
been effected on the first day of the periods presented and had been accounted
for under the pooling of interests method of accounting, may not be indicative
of the results that actually would have occurred if the Merger had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the historical
consolidated financial statements and notes thereto of NCBE incorporated by
reference herein and the historical consolidated financial statements of FFB
contained elsewhere in this Prospectus/Proxy Statement. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "INDEX TO FFB FINANCIAL STATEMENTS."
On August 1, 1997, NCBE acquired Bridgeport Bancorp, Inc. ("BBI"), a one
bank holding company in exchange for 374,986 shares of NCBE Common in a merger
transaction accounted for as a "pooling of interests." BBI owned First National
Bank of Bridgeport, Bridgeport, Illinois ("FNBB"). At June 30, 1997, FNBB had
assets of $40 million, loans of $23 million and deposits of $33 million. The
acquisition of BBI did not have a material effect on the financial statements of
NCBE and, accordingly, financial data of BBI has not been included in the pro
forma financial statements.
30
<PAGE>
NATIONAL CITY BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED COMBINED BALANCE SHEETS
AS OF JUNE 30, 1997
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NCBE FFB ADJUSTMENTS COMBINED
---- --- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash & cash equivalents $ 38,557 $ 5,123 $ - $ 43,680
Securities available for sale 270,328 10,953 - 271,994
Securities held to maturity - 6,057 - 6,057
Fed Funds Sold 2,400 - - 2,400
Loans 783,797 81,604 - 865,401
Allowance for loan losses (6,317) (1,008) - (7,325)
----------- ----------- ----------- -----------
Net loans 777,480 80,596 - 858,076
Premises & equipment 26,700 1,942 - 28,642
Other real estate owned 207 - - 207
Intangible assets 10,370 - - 10,370
Other assets 18,991 1,115 - 20,106
----------- ----------- ----------- -----------
TOTAL ASSETS $ 1,144,996 $ 105,786 $ - $ 1,250,782
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES
Deposits
Noninterest bearing demand $ 98,979 $ 11,248 $ - $ 110,227
Interest bearing 762,535 79,145 - 841,680
----------- ----------- ----------- -----------
Total deposits 861,514 90,393 - 951,907
Fed funds sold & securities sold
under agreements to repurchase 61,908 1,125 - 63,033
Other borrowings 91,116 988 - 92,104
Dividends payable 1,485 - 1,485
Other liabilities 11,703 815 - 12,518
----------- ----------- ----------- -----------
TOTAL LIABILITIES 1,027,726 93,321 - 1,121,047
SHAREHOLDERS' EQUITY
Common stock 9,233 160 (17) (1) 9,990
614 (2)
Surplus 49,303 1,826 (576) (1) 49,939
Retained earnings 57,747 11,072 (614) (2) 68,820
Unrealized gain (loss) on
securities available for sale 987 (1) - 986
Treasury stock, at cost - (593) 593 (1) -
----------- ----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 117,270 12,465 - 129,735
----------- ----------- ----------- -----------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 1,144,996 $ 105,786 $ - $ 1,250,782
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
31
<PAGE>
NATIONAL CITY BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
(Amounts other than per share data in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NCBE FFB ADJUSTMENTS COMBINED
---- --- ----------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 33,843 $ 3,547 - $ 37,390
Interest and dividends on securities 8,101 524 - 8,625
Other interest income 140 53 - 193
-------- -------- -------- --------
Total interest income 42,084 4,124 - 46,208
INTEREST EXPENSE
Interest on deposits 15,582 1,773 - 17,355
Interest on borrowed funds 3,327 39 3,366
-------- -------- -------- --------
Total interest expense 18,909 1,812 - 20,721
Net interest income 23,175 2,312 - 25,487
-------- -------- -------- --------
Provision for loan losses 504 90 - 594
-------- -------- -------- --------
Net interest income after
provision for loan losses 22,671 2,222 - 24,893
NONINTEREST INCOME
Trust income 783 0 - 783
Service charges on deposit accounts 1,790 104 - 1,894
Securities gains (losses) 619 0 - 619
Other 1,542 53 - 1,595
-------- -------- -------- --------
Total noninterest income 4,734 157 - 4,891
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 8,204 852 - 9,056
Occupancy and equipment expenses 1,985 169 - 2,154
Other 4,388 353 - 4,741
-------- -------- -------- --------
Total noninterest expense 14,577 1,374 - 15,951
Income before taxes 12,828 1,005 - 13,833
Income taxes 3,878 362 8 (3) 4,248
-------- -------- -------- --------
NET INCOME $ 8,950 $ 643 $ (8) $ 9,585
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per common share
Primary $ 0.94 $ 4.51 $ 0.94
-------- -------- -------- --------
-------- -------- -------- --------
32
<PAGE>
Pro Forma Pro Forma
NCBE FFB Adjustments Combined
---- --- ----------- --------
Fully diluted $ 0.94 $ 4.51 $ 0.94
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
NATIONAL CITY BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
(Amounts other than per share data in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NCBE FFB ADJUSTMENTS COMBINED
---- --- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 63,467 $ 6,600 - $ 70,067
Interest and dividends on securities 14,871 1,049 - 15,920
Other interest income 302 261 - 563
-------- -------- -------- --------
Total interest income 78,640 7,910 - 86,550
INTEREST EXPENSE
Interest on deposits 29,658 3,383 - 33,041
Interest on borrowed funds 4,841 62 - 4,903
-------- -------- -------- --------
Total interest expense 34,499 3,445 - 37,944
Net interest income 44,141 4,465 - 48,606
-------- -------- -------- --------
Provision for loan losses 2,491 213 - 2,704
-------- -------- -------- --------
Net interest income after
provision for loan losses 41,650 4,252 - 45,902
NONINTEREST INCOME
Trust income 1,739 0 - 1,739
Service charges on deposit accounts 3,451 199 - 3,650
Securities gains (losses) 40 0 - 40
Other 3,081 95 - 3,176
-------- -------- -------- --------
Total noninterest income 8,311 294 - 8,605
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 15,108 1,587 - 16,695
Occupancy and equipment expenses 3,954 383 - 4,337
Other 8,249 685 - 8,934
-------- -------- -------- --------
Total noninterest expense 27,311 2,655 - 29,966
Income before taxes 22,650 1,891 - 24,541
Income taxes 7,404 641 14(3) 8,059
NET INCOME $ 15,246 $ 1,250 $ (14) $ 16,482
-------- -------- -------- --------
-------- -------- -------- --------
33
<PAGE>
Earnings per common share
Primary $1.59 $8.76 $1.60
-------- -------- --------
-------- -------- --------
Fully diluted $1.59 $8.76 $1.60
-------- -------- --------
-------- -------- --------
</TABLE>
NATIONAL CITY BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
(Amounts other than per share data in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NCBE FFB ADJUSTMENTS COMBINED
---- --- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 55,973 $ 6,335 - $ 62,308
Interest and dividends on securities 14,030 1,001 - 15,031
Other interest income 1,212 293 - 1,505
-------- -------- -------- --------
Total interest income 71,215 7,629 - 78,844
INTEREST EXPENSE
Interest on deposits 29,005 3,285 - 32,290
Interest on borrowed funds 2,043 77 - 2,120
-------- -------- -------- --------
Total interest expense 31,048 3,362 - 34,410
Net interest income 40,167 4,267 - 44,434
-------- -------- -------- --------
Provision for loan losses 294 105 - 399
-------- -------- -------- --------
Net interest income after provision
for loan losses 39,873 4,162 - 44,035
NONINTEREST INCOME
Trust income 1,494 0 - 1,494
Service charges on deposit accounts 2,775 184 - 2,959
Securities gains (losses) 26 0 - 26
Other 2,429 209 - 2,638
-------- -------- -------- --------
Total noninterest income 6,724 393 - 7,117
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 15,041 1,536 - 16,577
Occupancy and equipment expenses 3,685 378 - 4,063
Other 7,617 711 - 8,328
-------- -------- -------- --------
Total noninterest expense 26,343 2,625 - 28,968
Income before taxes 20,254 1,930 22,184
Income taxes 7,139 646 14 (3) 7,799
-------- -------- -------- --------
34
<PAGE>
NET INCOME $13,115 $1,284 $(14) $14,385
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per common share
Primary $1.34 $9.00 $1.36
-------- -------- --------
-------- -------- --------
Fully diluted $1.34 $9.00 $1.36
-------- -------- --------
-------- -------- --------
</TABLE>
NATIONAL CITY BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
(Amounts other than per share data in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NCBE FFB ADJUSTMENTS COMBINED
---- --- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 45,083 $ 5,308 - $ 50,391
Interest and dividends on securities 14,169 1,089 - 15,258
Other interest income 1,516 203 - 1,719
-------- -------- -------- --------
Total interest income 60,768 6,600 - 67,368
INTEREST EXPENSE
Interest on deposits 23,650 2,589 - 26,239
Interest on borrowed funds 1,110 90 - 1,200
-------- -------- -------- --------
Total interest expense 24,760 2,679 - 27,439
Net interest income 36,008 3,921 - 39,929
-------- -------- -------- --------
Provision for loan losses 18 60 - 78
-------- -------- -------- --------
Net interest income after provision
for loan losses 35,990 3,861 - 39,851
NONINTEREST INCOME
Trust income 1,253 0 - 1,253
Service charges on deposit accounts 2,197 163 - 2,360
Securities gains (losses) (470) 0 - (470)
Other 1,965 105 - 2,070
-------- -------- -------- --------
Total noninterest income 4,945 268 - 5,213
NONINTEREST EXPENSE
Salaries, wages and other
employee benefits 14,074 1,399 - 15,473
Occupancy and equipment expenses 3,839 355 - 4,194
Other 8,188 789 - 8,977
-------- -------- -------- --------
Total noninterest expense 26,101 2,543 - 28,644
Income before taxes 14,834 1,586 - 16,420
Income taxes 5,155 513 11 (3) 5,679
-------- -------- -------- --------
</TABLE>
35
<PAGE>
NET INCOME $ 9,679 $ 1,073 $ (11) $ 10,741
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per common share
Primary $ 0.99 $ 7.52 $ 1.02
-------- -------- --------
-------- -------- --------
Fully diluted $ 0.99 $ 7.52 $ 1.02
-------- -------- --------
-------- -------- --------
NOTES TO PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS
1. The adjustment reflects the retirement of Treasury stock.
2. The exchange ratio of NCBE Common for FFB Common is determined based upon
the market price of NCBE stock. The pro forma number of shares of NCBE
Common to be issued in the Merger is 757,142, reflecting an exchange ratio
of 5.3044 shares of NCBE Common for each share of FFB Common based upon the
current market price of NCBE Common, which is in excess of $35 per share.
The Merger Agreement calls for each share of FFB Common to be converted
into a number of shares of NCBE Common, subject to a minimum of 757,142 and
a maximum of 883,333. Assuming the average price of NCBE Common is $30 per
share or less the number of shares of NCBE Common exchanged for FFB Common
would be 883,333. If 883,333 shares of NCBE Common were exchanged for FFB
Common, the pro forma earnings per share (for each on a primary and
fully-diluted basis) would be $0.93 for the six months ended June 30,
1997, $0.80 for the six months ended June 30, 1996, $1.58 for the year
ended December 31, 1996, $1.35 for the year ended December 31, 1995 and
$1.01 for the year ended December 31, 1994.
3. The adjustment reflects an increase in the tax rate of FFB to 35%, the rate
applicable to NCBE and its subsidiaries.
36
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Shares of NCBE Common are traded on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol NCBE. The following table sets forth the
high and low sales prices of NCBE Common and cash dividends declared for the
periods indicated. Prices and dividends have been adjusted to reflect stock
dividends and splits. There is no established public trading market for the
shares of FFB Common. The following table only sets forth information regarding
those transactions as to which management of FFB has knowledge of the prices
paid. Because of the lack of a public trading market for shares of FFB Common,
the prices indicated may not reflect the prices which would be paid for such
shares on such a market.
<TABLE>
<CAPTION>
NCBE COMMON FFB COMMON
---------------------------- -----------------------------
CASH CASH
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH (1) LOW (1) DECLARED
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter $21.32 $19.16 $ 0.10 - - $ 1.22
Second Quarter 19.27 18.14 0.10 - - -
Third Quarter 19.39 17.91 0.10 - - 1.30
Fourth Quarter 23.10 18.59 0.12 - - -
1996
First Quarter 28.45 22.62 0.12 - - 1.30
Second Quarter 28.10 26.43 0.15 - - 1.30
Third Quarter 27.74 26.43 0.15 - - -
Fourth Quarter 30.00 26.67 0.16 - - 1.30
1997
First Quarter 33.88 29.25 0.16 - - 0.65
Second Quarter 42.25 31.75 0.16 - - 0.65
Third Quarter 43.75 40.50 0.16 - - 0.85
Fourth Quarter (2)
</TABLE>
- ------------
(1) Although there may have been private transactions involving FFB Common
during these periods that are not reflected in the table, neither FFB nor
any members of its management were parties to such transactions.
(2) Through October _, 1997
On June 2, 1997, the last trading day before the announcement of the
execution of the Merger Agreement, the closing sale price of NCBE Common was
$37.25 per share. Based upon the per share price of NCBE Common on such date,
the equivalent per share price of FFB Common was $197.59. The equivalent per
share price for FFB Common is calculated by multiplying the specified closing
sale price of NCBE Common by the number of shares of NCBE Common to be issued
for each share of FFB Common in the Merger. The foregoing illustration was
determined based upon the assumption that the Closing occurred on June 2, 1997,
and each share of FFB Common would be converted into 5.3044 shares of NCBE
Common. The number of shares of NCBE Common issuable in the Merger, as
described elsewhere herein, is subject to adjustment. See "THE MERGER --
Conversion of FFB Common."
On _________ __, 1997, the closing sale price of NCBE Common was $_______
per share. Based on the per share price of NCBE Common on such date, the
equivalent per share price for FFB Common was $___________. The equivalent per
share price for FFB Common is calculated by assuming that each share of FFB
Common would be converted into _____ shares of NCBE Common in the Merger (which
assumes that the Closing occurred on ________ __, 1997).
37
<PAGE>
As of ______ __, 1997, there were _____ and _____ holders of record of NCBE
Common and FFB Common, respectively.
NCBE and FFB each depend upon dividends from their financial institution
subsidiaries to pay dividends to their shareholders. The ability of the
financial institution subsidiaries to pay such dividends is limited by
applicable banking laws and regulations.
Shareholders of FFB are advised to obtain current market quotations for
NCBE Common.
38
<PAGE>
INFORMATION CONCERNING NCBE
BUSINESS
NCBE was organized in 1985 as a bank holding company for The National City
Bank of Evansville ("NCB") which remains NCBE's principal banking subsidiary.
As of June 30, 1997, NCBE had consolidated assets of $1.1 billion, deposits of
$861.5 million, net loans of $777.5 million and shareholders' equity of $117.3
million. NCBE currently has 11 financial institution subsidiaries which serve
27 communities from 36 locations and provide a wide range of banking services in
the tri-state area of Southwestern Indiana, Western Kentucky, and Southeastern
Illinois.
RECENT DEVELOPMENTS
On July 31, 1997, NCBE acquired Bridgeport Bancorp, Inc. ("BBI"),
Bridgeport, Illinois, in exchange for 374,986 shares of NCBE Common. BBI
provided banking services to the Bridgeport area through its banking subsidiary,
First National Bank of Bridgeport. At June 30, 1997, First National Bank of
Bridgeport had total assets of $40 million, total loans of $23 million, and
total deposits of $33 million.
39
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of NCBE Common
beneficially owned as of the Record Date by (i) each person or group of persons
known to NCBE to be the beneficial owner of more than five percent (5%) of the
issued and outstanding shares of NCBE Common and (ii) each director and
executive officer of NCBE. Also set forth below is such information adjusted
for the Merger (assuming the issuance of 757,142 shares of NCBE Common). Except
as otherwise noted, each person or group identified below holds sole voting and
sole investment power with respect to the shares identified as beneficially
owned.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE MERGER AFTER THE MERGER
----------------------- ----------------------
NAME SHARES PERCENT SHARES PERCENT
- ---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Janice L. Beesley 53,087 (1) * 53,087 *
Benjamin W. Bloodworth 32,411 (2) * 32,411 *
Michael F. Elliott 307,176 (3) 3.0% 307,176 2.8%
Susanne R. Emge 22,770 (4) * 22,770 *
Donald G. Harris 11,230 * 11,330 *
H. Ray Hoops 469 * 469 *
Robert A. Keil 41,939 (5) * 41,939 *
John D. Lippert 72,488 (6) * 72,488 *
Harold A. Mann 31,588 (7) * 31,588 *
Ronald G. Reherman 8,453 (8) * 8,453 *
Lawrence R. Steenberg 27,756 * 27,756 *
All directors and executive
officers as a group (11 persons) 609,367 (9) 5.9% 609,367 5.5%
</TABLE>
- -----------
* Less than 1%.
(1) All shares with shared voting and investment power with spouse.
(2) Includes 52 shares with sole voting and investment power; 2,959 shares with
sole voting and investment power by spouse; and 29,400 shares subject to
options exercisable within 60 days.
(3) Includes 238,820 shares with sole voting and investment power; 14,264
shares with shared voting and investment power with spouse; 17,924 shares
with sole voting and investment power by spouse; 3,093 shares held by a
trust with shared voting and investment power; and 33,075 shares subject to
options exercisable within 60 days.
(4) Includes 1,855 shares with sole voting and investment power; 13,829 shares
with shared voting and investment power with spouse; and 7,086 shares with
sole voting and investment power by spouse.
(5) Includes 8,864 shares with shared voting and investment powers with spouse;
and 33,075 shares subject to options exercisable within 60 days.
(6) Includes 23,814 shares with sole voting and investment power; 2,082 shares
with shared voting and investment power with spouse; 13,125 shares with
sole voting and investment power by spouse; and 33,467 shares subject to
options exercisable within 60 days.
(7) Includes 192 shares with sole voting and investment power; 1,996 shares
with shared voting and investment power with spouse; and 29,400 shares
subject to options exercisable within 60 days.
(8) Includes 2,140 shares with sole voting and investment power; and 6,313
shares with shared voting and investment power with spouse.
(9) Includes 158,417 shares subject to options exercisable within 60 days.
40
<PAGE>
INFORMATION CONCERNING FFB
BUSINESS
FFB was incorporated under the laws of the State of Indiana on December 1,
1982, to serve as a bank holding company for First Bank. First Bank is an
Indiana banking corporation whose predecessors commenced business in 1907. The
business of FFB consists solely of the ownership, supervision and control of
First Bank. First Bank has three banking offices, two in Huntingburg and one
in Ferdinand, Indiana. As of June 30, 1997, FFB had, on a consolidated basis,
total assets of $105.8 million, total net loans of $80.6 million, total deposits
of $90.4 million, and total shareholders' equity of $12.5 million.
SELECTED FINANCIAL DATA OF FFB
The selected consolidated data as of and for the years ended December 1996,
1995 and 1994 have been derived from financial statements audited by Gaither
Rutherford & Co., LLP, certified public accountants, whose report can be found
elsewhere in this Proxy Statement/Prospectus. The selected consolidated
financial data as of and for the six month periods ended June 30, 1997 and June
30, 1996 have been derived from unaudited consolidated financial statements of
FFB, and reflect, in management's opinion, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of such data. This
data should be read in conjunction with FFB's Consolidated Financial Statements
and the Notes thereto and "-- Management's Discussion and Analysis of Financial
Condition and Results of Operations."
41
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> C>
FOR THE PERIOD
Interest Income $ 4,124 $ 3,897 $ 7,910 $ 7,629 $ 6,600 $ 6,351 $ 6,766
Interest Expense 1,812 1,706 3,445 3,362 2,679 2,773 3,436
Net Interest Income 2,312 2,191 4,465 4,267 3,921 3,578 3,330
Provision for loan losses 90 75 212 105 60 155 100
Non-interest income 158 147 294 393 268 259 221
Non-interest expense 1,374 1,284 2,655 2,625 2,543 2,490 2,350
Income before income taxes 1,005 979 1,891 1,930 1,586 1,191 1,102
Net Income $ 643 $ 645 $ 1,250 $ 1,284 $ 1,073 $ 850 $ 788
PER COMMON SHARE
Net Income $ 4.51 $ 4.52 $ 8.76 $ 9.00 $ 7.52 $ 5.96 $ 5.52
Cash dividends $ 1.30 $ 2.60 $ 3.90 $ 2.52 $ 1.40 $ 1.30 $ 1.30
Weighted average shares (000) 143 143 143 143 143 143 143
AT PERIOD-END
Total loans $81,604 $73,154 $77,314 $72,712 $70,218 $63,708 $61,023
Earning assets 99,364 94,325 96,138 95,374 90,125 88,067 86,224
Total assets 105,786 100,711 103,019 102,573 97,790 95,717 94,303
Average total assets 103,483 99,658 100,359 98,134 95,890 92,722 90,462
Deposits 90,393 87,277 87,989 89,445 84,872 84,110 84,786
Long-term debt 988 1,142 988 1,142 1,312 1,500 -
Common shareholders' equity 12,465 11,476 11,983 11,295 10,115 9,517 8,852
Total shareholders' equity 12,465 11,476 11,983 11,295 10,115 9,517 8,852
Average shareholders' equity $12,233 $11,360 $11,460 $10,503 $ 9,764 $ 9,169 $ 8,563
PERFORMANCE RATIOS
Return on average total assets 1.24 1.29 1.25 1.31 1.12 0.92 0.88
Return on average common equity 10.52 11.36 10.91 12.22 10.99 9.27 9.20
Efficiency 54.68 54.73 53.56 53.87 57.62 61.39 62.08
Net overhead expense to average assets 2.30 2.27 2.36 2.24 2.35 2.35 2.41
Net interest margin 4.88 4.84 4.88 4.82 4.58 4.34 4.11
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 11.78 11.39 12.40 11.70 11.10 10.80 10.30
Tier 1 risk-adjusted capital 16.93 17.19 17.15 16.46 15.31 14.84 14.73
Total risk-adjusted capital 18.18 18.44 18.39 17.71 16.56 16.04 15.95
Dividend payout ratio 28.84 57.53 44.54 28.01 18.63 21.81 23.55
ASSET QUALITY DATA
Nonperforming loans $ 162 $ 728 $ 410 $ 107 $ 438 $ 315 $ 567
Nonperforming assets 162 728 410 107 438 315 567
Allowance for loan losses $ 1,008 $ 937 $ 913 $ 853 $ 851 $ 771 $ 743
Nonperforming loans to period-end loans 0.20 1.01 0.54 0.15 0.63 0.50 0.94
Allowance for loan losses to nonperforming
loans 622.22 128.71 222.68 797.20 194.30 244.76 131.04
Allowance for loan losses to
period-end loans 1.24 1.28 1.18 1.17 1.21 1.21 1.22
</TABLE>
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis is presented to facilitate the
understanding of the financial position and results of operations of Fourth
First Bancorp ("FFB") and its subsidiary, First Bank of Huntingburg ("First
Bank") (referred to in this discussion and analysis on a consolidated basis as
the "Consolidated Entity"). It identifies trends and material changes that
occurred during the reported periods and should be read in conjunction with the
consolidated financial statements and accompanying notes.
INTRODUCTION
The information in this financial analysis explains certain significant
financial matters over the past several years. The financial information
included in this Prospectus/Proxy Statement frequently compares current amounts
to historical amounts. Financial information is presented on a consolidated
basis including the subsidiary, First Bank, and the parent company, FFB.
BUSINESS OF FFB
FFB is a one-bank holding company which conducts no direct business
activities. All business activities are performed by First Bank.
First Bank provides a full range of banking services to individuals,
agricultural businesses, commercial businesses and light industries located in
its service area. It maintains a diversified loan portfolio, including loans to
individuals for home mortgages, automobiles and personal expenditures, and loans
to business enterprises for current operations and expansion. First Bank offers
a variety of deposit vehicles, including checking, savings, money market,
individual retirement accounts and certificates of deposit.
The principal source of revenue for FFB and First Bank is interest and fees
on loans. First Bank's results of operations depend primarily on the level of
its net interest income and other operating income and operating expenses. Net
interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them,
respectively. First Bank's results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
market interest rates, and actions of regulatory authorities. On a consolidated
basis, interest and fees on loans accounted for 82.8% of FFB's total income
(comprised of interest income and other income) during the six months ended June
30, 1997 and 80.5% in 1996, 79.0% in 1995, and 77.3% in 1994. Interest on
investments accounted for 13.5% of FFB's total revenues during the six months
ended June 30, 1997 and 16.0% in 1996, 16.1% in 1995, and 18.8% in 1994.
The principal markets for First Bank's financial services are the
Huntingburg community and the surrounding communities of Dubois County. First
Bank also serves the outlying counties adjacent to Dubois County. This market
is served through two offices located in Huntingburg and one office in
Ferdinand.
FFB and First Bank employ an aggregate of approximately 46 persons on a
full-time equivalent basis.
FINANCIAL CONDITION
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO DECEMBER 31, 1996.
Total assets increased to $105.8 million as of June 30, 1997 from $103.0
million as of December 31, 1996, an increase of $2.8 million, or 2.7%.
Shareholders' equity increased approximately $482,000, or 4.0%, from $12.0
million at December 31, 1996 to $12.5 million at June 30, 1997. The increase in
shareholders' equity was the result of $643,000 in earnings for the six month
period, less the impact of dividends declared on common shares of approximately
$186,000. Appreciation of approximately $24,000 of securities available for
sale also contributed to the increase in shareholders' equity.
43
<PAGE>
Total cash and cash equivalents and federal funds sold increased from $3.9
million at December 31, 1996 to $4.3 million at June 30, 1997. Interest-bearing
deposits and investments also decreased from $19.7 million at December 31, 1996
to $17.8 million at June 30, 1997. The decrease in interest-bearing deposits
and investments is primarily a result of increased loan activity whereby First
Bank has shifted its assets to fund loan growth.
Net loans increased $4.2 million, or 5.5%, from $76.4 million at December
31, 1996 to $80.6 million at June 30, 1997. Real estate loans for 1-4 family
housing increased by $2.1 million due to increased housing demand and higher
priced houses. Real estate loans secured by nonfarm residential properties,
farm-land, multi-family residential properties and construction and land
development increased by $1.0 million and commercial loan increased by $1.0
million primarily as the result of First Bank increasing its customer base.
Consumer loans increased $177,000 primarily due to increased financing needs
relating to personal and automobile demands.
Total deposits increased $2.4 million, or 2.7%, from $88.0 million at
December 31, 1996 to $90.4 million at June 30, 1997. The increase in deposits
was primarily the result of an increase of $2.9 million in time deposits.
Management attributes growth in time deposits to high balance customer
preferences for higher yielding instruments of deposit as opposed to the
liquidity afforded by lower yielding transactional accounts. First Bank's
pricing of deposits is consistent with that of its competitors. At June 30,
1997, First Bank had $8.9 million in time deposits with terms of one year or
less.
Other borrowings increased to $2.1 million as of June 30, 1997 from $2.3
million as of December 31, 1996, as First Bank purchased federal funds from its
correspondent banks. First Bank has established federal funds lines of credit
with its correspondent banks. These lines of credit are used to manage
short-term liquidity needs. Federal funds are purchased and sold on a daily
basis as determined by First Bank's liquidity position.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO JUNE 30, 1996
GENERAL. FFB reported net income of $643,484 in the first six months ended
June 30, 1997, a decrease of $1,603 from first six months ended June 30, 1996 of
$645,087. Return on average shareholders' equity for the first six months ended
June 30, 1997 was 10.5% compared to 11.4% for the same period in 1996. For the
first six months ended June 30, 1997, return on average assets was 1.24%
compared to 1.29% for the same period in 1996.
NET INTEREST INCOME. Net interest income is the difference between
interest earned on interest-earning assets and interest paid on interest-bearing
liabilities. Changes in the mix and volume of assets and liabilities, and the
yields and rates earned or paid, have a major impact on earnings. Table 1 shows
average balances and rates. The level of net interest income achieved is also
influenced by market rates of interest, the financial strength of loan customers
and the federal government's monetary policies. Interest income represented
96.3% of total income for the six month period ended June 30, 1997 and 96.4% for
the same period in 1996.
For the six month period ended June 30, 1997, total interest income was
$4.124 million, an increase of $227,000 from $3.897 million for the same period
in 1996. Total interest expense increased $106,000 from $1.706 million for the
six month period ended June 30, 1996 to $1.812 million for the same period in
1997. As a result, net interest income increased $121,000 from $2.191 million
for the six month period ended June 30, 1996 to $2.312 million for the same
period in 1997, as shown in Table 1.
INTEREST INCOME. On a fully taxable-equivalent basis (whereby tax-exempt
income is adjusted to be comparable to income from taxable investments), as
shown in Table 1, total interest income increased by $220,000, or 5.6%, for the
six months ended June 30, 1997. The increase is primarily due to a $4.0
million, or 4.2%, increase in average outstanding interest-earning assets ($98.5
million for June 30, 1997 and $94.5 million for June 30, 1996 before tax
adjustment). In addition, the average interest rate on earning assets increased
from 8.25% for the six month period ended June 30, 1996 to 8.37% for the same
period in 1997. The increase in the average interest rate was attributable
44
<PAGE>
to a higher yield on investment securities (6.14% for the six month period ended
June 30, 1997 versus 5.83% for the same period in 1996, before tax adjustment)
and a shift in the mix of earning assets from lower yielding investments to
higher yielding loans (average loans for the six month period ended June 30,
1997 amounted to $79.7 million compared to $72.9 million for the same period in
1996). Average loans grew by $6.8 million, or 9.3%, during the period ended
June 30, 1997 compared to the period ended June 30, 1996. The increase in loan
demand combined with nominal deposit growth caused First Bank to shift its asset
mix from lower yielding investment securities and federal funds sold to higher
yielding loans.
INTEREST EXPENSE. As shown in Table 1, increases in total interest expense
are primarily attributable to the increases in the average outstanding balances
of interest-bearing liabilities, primarily in higher priced time deposits.
Interest expense on deposits increased as a result of higher average balances
held in time deposits and an increase in the average interest rate paid on these
deposits. The average outstanding balance of time deposits increased $3.1
million, or 6.4%. Additionally, the rates paid on these deposits increased from
5.33% during the six month period ended June 30, 1996 to 5.45% for the six month
period ended June 30, 1997. The increase in interest rates paid on time
certificates of deposit reflects the competitive nature of the local market to
attract and hold these deposits. Interest rates paid on interest-bearing demand
deposits and savings accounts decreased from 2.47% and 3.17%, respectively, as
of June 30, 1996 to 2.42% and 3.16%, respectively, as of June 30, 1997.
First Bank is unable to predict the impact on future earnings as a result
of the higher rates paid on time deposits due to uncertainties regarding
economic conditions in 1997 and beyond. While First Bank does not expect a
major change in rates paid on interest bearing deposits, earnings could be
negatively impacted if interest rates on interest-earning assets fall
significantly due to changes in market interest rates. If interest rates fall
significantly, First Bank would be negatively impacted as a large portion of its
loan portfolio consists of adjustable rate loans which rates fluctuate with
changes in the capital markets.
As discussed in the Asset/Liability Management section of this financial
review, First Bank attempts to manage the structure (i.e., categories and
maturities) of the balance sheet to minimize the effects of interest rate
fluctuations. First Bank's net interest margin (net interest income divided by
total earning assets) increased from 4.84% for the six month period ended June
30, 1996 to 4.88% for the same period ended June 30, 1997, and the interest
spread (average rate earned minus average rate paid) was down slightly from
4.02% to 4.01%. While it is difficult to predict interest rates for the
upcoming year, it is anticipated that rates will remain stable or slightly
increase through 1998.
PROVISION AND ALLOWANCE FOR LOAN LOSSES. The provision for loan losses
reflects management's judgment of the cost associated with the credit risk
inherent in the loan portfolio. The provision is determined through
management's assessment of the quality of the loan portfolio, current as well as
future economic factors, and the volume of loans outstanding. Provision amounts
from year-to-year are also affected by the level of net charge-offs and
management's perception of the adequacy of the allowance for loan losses. The
activity in the allowance for loan losses is shown in Table 8. The provision
for loan losses for the first six months of 1997 was $90,000, an increase of
$15,000 over the provision of $75,000 for the same period in 1996. Net
recoveries for the first six months of 1997 amounted to $5,000 while net
recoveries for the first six months of 1996 amounted to $9,000. As a result,
First Bank's ending balance as of June 30, 1997 in its allowance for loan loss
account amounted to $1.0 million, or 1.24%, of loans outstanding. This compares
to the June 30, 1996 allowance for loan losses which amounted to $937,000, or
1.28%, of loans outstanding.
Management's determination of the adequacy of the allowance for loan losses
is based upon a continuing review of the loan portfolio which includes past loan
loss experience, current economic conditions, loan volume, composition of the
loan portfolio and additional factors. The $71,000 increase in the allowance
for loan losses from June 30, 1996 to June 30, 1997 is primarily attributable to
loan growth.
Non-accrual, past due and restructured loans decreased by $566,000, or
77.8%, from $728,000 at June 30, 1996 to $162,000 at June 30, 1997, as shown in
Table 7. Generally, the accrual of interest income on a loan is suspended when
the loan becomes 90 days past due, unless the loan is fully secured and is in
the process of collection. A restructured loan is generally one that is
accruing interest, but on which concessions in terms have been granted as a
45
<PAGE>
result of deterioration in the financial condition of the borrower. Management
believes that the allowance for loan losses is adequate as of June 30, 1997
based upon its analysis of loss potential. First Bank's policy is to maintain
an allowance sufficient to cover expected losses based on its analysis of the
loan portfolio and at a reasonable level considering historical net charge-offs
for First Bank.
At June 30, 1997 First Bank had one concentration greater than 10% of the
total loans outstanding. Outstanding loans to Commercial Real Estate Holding
Companies totaled $8.5 million, or 10.4%, of total loans.
NONINTEREST INCOME. Noninterest income primarily consists of fees for
services and products. Income related to service charges on deposit accounts
consists of fees for demand deposit accounts, overdraft and non-sufficient fund
charges, automatic teller machine transactions charges, and other miscellaneous
charges and fees. Total income from service charges on deposit accounts was
$105,000 for the six month period ended June 30, 1997 compared to $98,000 for
the same period in 1996. The increase from 1996 is primarily due to an increase
in First Bank's per item overdraft and non-sufficient funds fees.
The remaining category of noninterest income is derived from services that
include fees for the sale of credit insurance, safe deposit box rent, trust
fees, annuity sales, cashiers checks and travelers check sales and other
miscellaneous categories. Other operating income amounted to $53,000 for the
six month period ending June 30, 1997, a $4,000, or 8.3%, increase over the same
period in 1996. The increase from the six month period of 1996 is primarily due
to higher credit card and trust fees.
Due to the variety of income sources included in noninterest income,
fluctuations in the level of income occur from year to year.
NONINTEREST EXPENSE. Noninterest expense increased $90,000, or 7.0%, from
$1.28 million for the first six months of 1996 to $1.37 million for the same
period in 1997. Two primary factors resulted in this increase. First, salary
and employee benefits increased $68,000, or 8.7%, when comparing the first six
months of 1997 to the same period in 1996. The increase is attributable to a
$44,000 increase in salaries and wages, a $14,000 increase in contributions to
the profit sharing plan and bonus payments, and a $10,000 increase in health,
life, and disability insurance. Second, FFB has incurred $20,000 in merger
related expenses during the first six months of 1997. There were no merger
related expenses incurred during the same period in 1996. The holding company
anticipates it will continue to incur additional merger related expenses during
the second half of 1997. These expenses will negatively impact the earnings
performance of FFB for 1997. The amount of additional merger related expenses
to be incurred is unknown at this time.
Other noninterest expenses, such as data processing, lease, advertising,
supplies and postage, for the first six months of 1997 were slightly higher than
those expenses incurred for the same time period 1996. For the first six months
ended June 30, 1997, other non-interest expenses amounted to $502,000 or $2,000
greater than the $500,000 other non-interest expense for the same period 1996.
INCOME TAXES. The effective federal income tax rate for the first six
months of 1997 was 26.3% which is comparable to the 25.2% effective rate for the
same period 1996. The $17,000 increase in federal income taxes for the first
six months of 1997 is attributable to slightly higher earnings and less
tax-exempt interest income.
FINANCIAL CONDITION
COMPARISON OF 1996 TO 1995
Total assets increased to $103.0 million as of December 31, 1996 from
$102.6 million as of December 31, 1995, an increase of $400,000, or .4%.
Shareholders' equity increased approximately $688,000, or 6.1%, from $11.3
million at December 31, 1995 to $12.0 million at December 31, 1996. The increase
in shareholders' equity was the result of $1.250 million in earnings for the 12
month period, less the impact of dividends declared on common shares of FFB of
approximately $557,000.
46
<PAGE>
Total cash and cash equivalents and federal funds sold decreased from $8.1
million at December 31, 1995 to $3.9 million at December 31, 1996.
Interest-bearing deposits and investments increased from $19.5 million at
December 31, 1995 to $19.7 million at December 31, 1996. The decrease in cash
equivalents and federal funds is primarily a result of increased loan activity
whereby First Bank has shifted its assets to fund loan growth.
Net loans increased $4.5 million, or 6.3%, from $71.9 million at December
31, 1995 to $76.4 million at December 31, 1996. Real estate loans for 1-4
family housing increased by $2.3 million due to increased housing demand and
higher priced houses. Real estate loans secured by nonfarm residential
properties, farm-land, multi-family residential properties and construction and
land development increased by $2.0 million and commercial loans decreased by
$300,000. Consumer loans increased $500,000 primarily due to increased
financing needs relating to personal and automobile demands.
Total deposits decreased $1.5 million, or 1.7%, from $89.4 million at
December 31, 1995 to $87.9 million at December 31, 1996. The decrease in
deposits was primarily the result of a decrease of $1.9 million in time
deposits. Management attributes the decrease in time deposits to the
attractiveness of the equity markets coupled with the relatively low yields
available on certificates of deposit. First Bank's pricing of deposits is
consistent with that of its competitors.
COMPARISON OF 1995 TO 1994. Total assets increased to $102.6 million as of
December 31, 1995 from $97.8 million as of December 31, 1994, an increase of
$4.8 million, or 4.9%. Shareholders' equity increased approximately $1.2
million, or 11.7%, from $10.1 million at December 31, 1994 to $11.3 million at
December 31, 1995. The increase in shareholders' equity was the result of
$1.284 million in earnings for the 12 month period, less the impact of dividends
declared on common shares of FFB of approximately $360,000. Appreciation of
approximately $256,000 of securities available for sale also contributed to the
increase in shareholders' equity.
Total cash and cash equivalents and federal funds sold increased from $4.4
million at December 31, 1994 to $8.1 million at December 31, 1995.
Interest-bearing deposits and investments decreased from $20.8 million at
December 31, 1994 to $19.5 million at December 31, 1995. The overall increase
in cash equivalents and federal funds is primarily a result of slow loan growth
and the then current interest rate environment.
Net loans increased $2.5 million, or 3.6%, from $69.4 million at December
31, 1994 to $71.9 million at December 31, 1995. Real estate loans for 1-4
family housing increased by $1.2 million due to increased housing demand and
higher priced houses. Real estate loans secured by nonfarm residential
properties, farm-land, multi-family residential properties and construction and
land development decreased by $300,000 and commercial loans increased by $1.0
million primarily as the result of First Bank increasing its customer base.
Consumer loans increased $500,000 primarily due to increased financing needs
relating to personal and automobile demands.
Total deposits increased $4.5 million, or 5.3%, from $84.9 million at
December 31, 1994 to $89.4 million at December 31, 1995. The increase in
deposits was primarily the result of an increase of $5.0 million in time
deposits. Management attributes growth in time deposits to high balance
customer preferences for higher yielding instruments of deposit as opposed to
the liquidity afforded by lower yielding transactional accounts. First Bank's
pricing of deposits is consistent with that of its competitors.
RESULTS OF OPERATIONS
COMPARISON OF 1996 TO 1995
GENERAL. FFB reported net income of $1.250 million in 1996, a decrease of
$34,000, or 2.6%, below 1995 net income of $1.284 million. Return on average
shareholders' equity for 1996 was 10.9% compared to 12.2% for 1995. The 1996
return on average assets was 1.25% compared to 1.31% for 1995.
47
<PAGE>
NET INTEREST INCOME. For the year ended December 31, 1996, total interest
income was $7.9 million, an increase of $300,000, or 3.6%, from $7.6 million for
1995. The total interest expense increased $83,000 from $3.3 million in 1995 to
$3.4 million in 1996. As a result, net interest income increased $200,000 from
$4.3 million in 1995 to $4.5 million in 1996, as shown in Table 1a.
INTEREST INCOME. Table 1a depicts average balances and rates, and Table 2
shows the dollar effect of volume and rate changes from 1995 to 1996. On a
fully taxable-equivalent basis, total interest income increased by $267,000 from
1995 to 1996. This increase was due to a $2.5 million increase in average
earning assets outstanding ($95.4 million for 1996 and $92.9 million for 1995)
and an increase in average interest rates (8.29% for 1996 and 8.21% for 1995).
The increased average earning asset total and higher average interest rate were
attributable to a $2.8 million increase in average loans outstanding. For the
year ended 1996, loans outstanding grew by $4.5 million. The primary growth was
in 1-4 family real estate loans of $2.3 million and non- residential real estate
loans of $2.0 million. Commercial loans were down slightly. Consumer loans
grew $500,000 during the 1996 year. Average interest rates for taxable
securities increased from 5.76% in 1995 to 6.09% in 1996, largely due to the
maturity of lower-rate investments. Average interest rates for tax-exempt
securities decreased from 6.33% in 1995 to 6.26% in 1996, before tax adjustment.
The decrease in rates was attributable to both the early call and maturity of
certain tax-exempt securities. Interest income on other earning assets
decreased from $239,000 in 1995 to $224,000 in 1996. The $15,000, or 6.3%,
decrease was attributable to both lower balances and lower interest rates earned
on these assets.
INTEREST EXPENSE. Interest expense on interest bearing liabilities
increased by $83,000 from $3.362 million in 1995 to $3.445 million in 1996. The
primary reason for the increased interest expense was due to an overall increase
in average rates paid on interest bearing liabilities. The average rate on
interest bearing liabilities was 4.46% in 1996 compared to 4.38% for 1995. In
addition, the total average balance of interest bearing liabilities increased
from $76.7 million in 1995 to $77.2 million in 1996, an increase of $548,000.
Overall, First Bank experienced slightly higher deposit rates in 1996. The
average rate on savings deposits increased from 3.06% in 1995 to 3.21% in 1996,
while time deposit rates increased from 5.25% to 5.37% for the same period.
Interest bearing checking account rates decreased slightly from an average rate
of 2.64% in 1995 to 2.48% in 1996. Interest expense on First Bank's borrowed
funds also decreased. Comparing 1995 to 1996, First Bank's cost on borrowed
funds dropped from $77,000 to $62,000. The $15,000, or 19.5%, decrease was
attributable to average lower amounts of borrowed funds ($1.131 million verses
$1.376 million) and lower interest rates paid on these funds, as shown in both
Table 1a and 2.
PROVISION AND ALLOWANCE FOR LOAN LOSSES. As shown in Table 8, the
provision for loan losses for 1996 was $212,000, an increase over the 1995
provision of $105,000. First Bank experienced net charge-offs of $152,000 in
1996 and net charge-offs of $103,000 in 1995. The increased provision in 1996
compared to 1995 is the result of two factors. First, First Bank anticipated a
partial charge-off of one of its larger commercial real estate loans and,
therefore, management determined there was a need to increase the provision for
loan losses. Second, First Bank's loan portfolio grew by $4.6 million during
1996 and management determined there was a need to increase the provision due to
increased loan activity.
At December 31, 1996, the allowance for loan losses amounted to $913,000,
or 1.18%, of total loan outstanding compared to $853,000, or 1.17%, of total
loans at December 31, 1995. Although the level of non-performing loans
increased significantly from .15% of loans outstanding in 1995 to .54% in 1996,
as depicted in Table 7, the major portion of the increase was attributable to
one commercial real estate loan. Management felt it had identified its exposure
on this particular loan and that an adequate provision was made for any loss to
be sustained on this loan. In addition, First Bank's allowance was in line with
its peer group considering historical net charge-offs for First Bank and the
industry as a whole.
NONINTEREST INCOME. Total income from service charges on deposit accounts
was $199,000 for 1996 compared to $184,000 for 1995. Other operating income for
1996 amounted to $95,000 compared to $209,000 for 1995. The $114,000 decrease
in 1996 was due to a $115,000 intangible tax refund First Bank received from the
State of Indiana Department of Revenue during 1995. Without this one-time
refund, 1996's other operating income would have surpassed the 1995 other
operating income by $1,000.
48
<PAGE>
NONINTEREST EXPENSE. Salaries and employee benefits, totaling $1.6
million, changed only slightly due to employee changes at different salary
levels. Occupancy expenses for 1996 were also in line with 1995 expenses.
Occupancy expenses during 1996 amounted to $383,000 compared to $378,000 for
1995. Other operating expenses decreased during 1996 in comparison to 1995.
Other operating expenses for 1996 amounted to $686,000, a $25,000, or 3.5%,
decrease from the 1995 operating expenses of $711,000. The primary reason for
the lower 1996 other operating expenses was a $79,000 decrease in First Bank's
FDIC insurance premium. It is likely First Bank will continue to experience
lower FDIC insurance premiums into the foreseeable future due to strength of the
Bank Insurance Fund and the health of the banking industry. Partially
offsetting the FDIC insurance premium savings were higher consulting, public
relations and advertising, and loan and collection expenses.
INCOME TAXES. The effective federal income tax rate for 1996 was 25.2%,
which is compares to the 25.1% effective rate for 1995. The $8,000 decrease in
federal income taxes for 1996 is attributable to lower pre-tax earnings, but was
partially offset by slightly lower tax exempt interest income.
COMPARISON OF 1995 TO 1994
GENERAL. FFB reported net income of $1.284 million in 1995, an increase of
$211,000, or 19.7%, over 1994 net income of $1.073 million. Return on average
shareholders' equity for 1995 was 12.2% compared to 11.0% for 1994. The 1995
return on average assets was 1.31% compared to 1.12% for 1994.
NET INTEREST INCOME. As shown in Table 1a, for the year ended December 31,
1995, total interest income was $7.6 million, an increase of $1.0 million, or
15.2%, from $6.6 million for 1994. Total interest expense increased $683,000
from $2.7 million in 1994 to $3.4 million in 1995. As a result, net interest
income increased $346,000 from $3.9 million in 1994 to $4.3 million in 1995.
INTEREST INCOME. On a fully taxable-equivalent basis, total interest
income increased by $1.025 million from 1994 to 1995. This increase was due to
a $2.6 million increase in average earning assets outstanding ($92.9 million for
1995 and $90.3 million for 1994) and an increase in average interest rates
(8.21% for 1995 and 7.31% for 1994), as depicted in Table 1a and Table 2. The
increased average earning asset total and higher average interest rate was
attributable to a $4.5 million increase in average loans outstanding. For the
year 1995, loans outstanding grew by $2.5 million. The primary growth in
average loans was in 1-4 family real estate loans of $1.2 million and commercial
loans of $1.1 million. Consumer loans grew $500,000 during the year. Average
interest rates for taxable securities increased from 5.22% in 1994 to 5.76% in
1995, largely due to the maturity of lower-rate investments. Average interest
rates for tax-exempt securities decreased from 6.36% in 1994 to 6.33% in 1995,
before tax adjustment. The decrease in rates was attributable to both the early
call and maturity of certain tax-exempt securities. Interest income on other
earning assets increased from $129,000 in 1994 to $239,000 in 1995. The
$110,000, or 85.3%, increase was attributable to both higher balances and higher
interest rates earned on these assets.
INTEREST EXPENSE. Interest expense on interest bearing liabilities
increased by $683,000 from $2.679 million in 1994 to $3.362 million in 1995. As
shown in Table 1a and Table 2, the primary reason for the increased interest
expense was due to an increase in average rates paid on interest bearing
liabilities. The average rate on interest bearing liabilities was 4.38% in 1995
compared to 3.56% for 1994. In addition, the total average balance of interest
bearing liabilities increased from $75.2 million in 1994 to $76.7 million in
1995, an increase of $1.5 million. The average rate on savings deposits
increased from 2.36% in 1994 to 3.06% in 1995, while time deposit rates
increased from 4.30% to 5.25% for the same period. Interest bearing checking
account rates increased slightly from an average rate of 2.50% in 1994 to 2.64%
in 1995. Interest expense on First Bank's borrowed funds decreased. Comparing
1994 to 1995, First Bank's cost on borrowed funds dropped from $89,000 to
$77,000. The $12,000, or 13.5%, decrease was primarily attributable to average
lower amounts of borrowed funds, $1.376 million verses $1.660 million.
PROVISION AND ALLOWANCE FOR LOAN LOSSES. The provision for loan losses for
1995 was $105,000, an increase over the 1994 provision of $60,000. First Bank
experienced net charge-offs of $103,000 in 1995 and net recoveries of $20,000 in
1994, as depicted in Table 8. The increased provision in 1995 compared to 1994
is the result of an increase
49
<PAGE>
in First Bank's loan portfolio of $2.5 million during 1995 and management's
determination that there was a need to increase the provision due to increased
loan activity.
At December 31, 1995, the allowance for loan losses amounted to $853,000,
or 1.17%, of total loans outstanding compared to $851,000, or 1.21%, of total
loans at December 31, 1994. As shown in Table 7, the level of non-performing
loans decreased significantly from .53% of loans outstanding in 1994 to .15% in
1995; the major portion of the decrease was attributable to one larger
commercial real estate loan being paid off. First Bank's allowance was in line
with its peer group considering historical net charge-offs for First Bank and
the industry as a whole.
NONINTEREST INCOME. Total income from service charges on deposit accounts
was $184,000 for 1995 compared to $163,000 for 1994. Other operating income for
1995 amounted to $208,000 compared to $105,000 for 1994. The $104,000 increase
in 1995 was due to a $115,000 intangible tax refund First Bank received from the
State of Indiana Department of Revenue during 1995. Without this one-time
refund, 1995 other operating income would have been $11,000 less than 1994.
NONINTEREST EXPENSE. Salaries and employee benefits increased from $1.399
million in 1994 to $1.536 million in 1995, or 9.8%, due to increases in wages,
insurance and benefits. Occupancy expenses increased by 6.8%, or $24,000, from
$354,000 in 1994 to $378,000 in 1995, due to increased maintenance on premises.
Other operating expenses decreased during 1995 in comparison to 1994. Other
operating expenses for 1995 amounted to $711,000, a $78,000, or 9.9%, decrease
from 1994's operating expenses of $789,000. The primary reason for the lower
1995 other operating expenses was a $102,000 decrease in First Bank's FDIC
insurance premium. Partially offsetting the FDIC insurance premium savings were
higher consulting, public relations and advertising, and supplies expense.
INCOME TAXES. The effective federal income tax rate for 1995 was 25.1%
which is compares to the 23.0% effective rate for 1994. The $120,000 increase
in federal income taxes for 1995 is attributable to higher pre-tax earnings and
slightly higher tax exempt interest income.
ASSET/LIABILITY MANAGEMENT
Asset/Liability management involves developing, implementing and monitoring
strategies to maintain sufficient liquidity, maximize net interest income and
minimize the impact significant fluctuations in market interest rates have on
earnings. The Asset/Liability Committee of First Bank is responsible for
managing this process. Much of this committee's efforts are focused on
minimizing First Bank's sensitivity to changes in interest rates. One method of
gauging sensitivity is by a static gap analysis.
As seen in Table 12, First Bank had a cumulative liability gap position of
$3.0 million within the one-year time frame. This position suggests that if
market interest rates decline in the next 12 months, FFB has the potential to
earn more net interest income. A limitation of the traditional static gap
analysis, however, is that it does not consider the timing or magnitude of
noncontractual repricing. In addition, the static gap analysis treats demand
and savings accounts as repriceable within 30 days, while experience suggests
that these categories of deposits are actually comparatively resistant to rate
sensitivity. Although the static gap sensitivity varies from time frame to time
frame, management has the ability to adjust rates on deposit accounts in an
effort to achieve a neutral interest sensitivity position within the
intermediate term.
LIQUIDITY
Liquidity is generally defined as the ability to meet cash flow
requirements. FFB manages liquidity at two levels, the parent company and its
subsidiary, First Bank. FFB's primary cash requirement is to pay dividends to
FFB's shareholders. Its primary source of funds is dividends received from
First Bank.
First Bank's primary liquidity consideration is to meet the cash flow needs
of its customers, such as borrowings and deposit withdrawals. To meet cash flow
requirements, sufficient sources of liquid funds must be available. These
50
<PAGE>
sources include: short-term investments; repayments and maturities of loans and
securities; growth in deposits and other liabilities; and bank profits. At June
30, 1997, First Bank had $5.1 million in cash and due from banks and deposits in
other banks. Also, as shown in Table 4, approximately $3.1 million of
investment securities were scheduled to mature within one year. Principal
reductions received on loans also provide a continual stream of cash flows.
Another source of liquid funds is net cash provided from operating activities,
which provided $1.5 million in 1996. Also, First Bank has established federal
funds lines of credit with its correspondent banks which allow First Bank to
borrow up to $9.7 million. Finally, First Bank is a member of the of the
Federal Home Loan Bank of Indianapolis ("FHLB"). Based on First Bank's June 30,
1997 stock ownership, an additional $2.3 million borrowing capacity is available
with the FHLB.
CAPITAL RESOURCES
Management believes that a strong capital position is paramount to its
continued profitability and continued depositor and investor confidence. It
also provides First Bank with flexibility to take advantage of expansion
opportunities and to accommodate larger commercial loan customers. Regulators
have established "risk based" capital guidelines for banks and bank holding
companies. Under the guidelines, minimum capital levels are based on the
perceived risk in asset categories and certain off-balance-sheet items, such as
loan commitments and standby letters of credit. Management monitors its capital
levels to comply with regulatory requirements. In order to be considered "well
capitalized" by the FDIC, financial institutions must maintain a leverage ratio
in excess of 5% and a total risk based capital ratio in excess of 10%. First
Bank's capital ratios were well in excess of regulatory standards for
classification as "well capitalized" and approximated the capital ratios of FFB,
as depicted in Table 11. Being considered "well capitalized" is one condition
for assessing the federal deposit insurance premium at the lowest available
rate.
IMPACT OF INFLATION
The consolidated financial statements and notes thereto presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation
is reflected in the increased cost of FFB operations. Nearly all the assets and
liabilities of FFB are financial, unlike most industrial companies. As a
result, performance is directly impacted by changes in interest rates, which are
indirectly influenced by inflationary expectations. FFB's ability to match the
interest sensitivity of its financial assets to the interest sensitivity of its
financial liabilities in its asset/liability management may tend to minimize the
effect of changes in interest rates on performance. Changes in interest rates
do not necessarily move to the same extent as do changes in the prices of goods
and services.
51
<PAGE>
RATE VOLUME ANALYSIS - TABLE 1
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1997 1996
Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate
- ------ ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-earning deposits $ 959 $ 29 6.05% $ 2,023 $ 58 5.73%
Federal funds sold 572 15 5.24% 2,360 65 5.51%
Investment securities (taxable) 11,494 353 6.14% 11,123 324 5.83%
Investment securities (tax-exempt) 5,799 180 6.21% 6,089 191 6.27%
Loans (net of unearned income) (1) 79,697 3,547 8.90% 72,918 3,259 8.94%
------- -------- ------- ------- -------- -------
Total interest earning assets $98,521 $4,124 8.37% $94,513 $3,897 8.25%
Non-earning assets:
Cash and due from banks $ 3,111 $ 3,234
Other non-earning assets 2,806 2,804
Allowance for loan losses (955) (893)
-------- --------
Total Assets $103,483 $ 99,658
-------- --------
-------- --------
LIABILITIES
Interest-bearing liabilities:
Transaction accounts $12,232 $148 2.42% $12,483 $154 2.47%
Savings deposits 15,261 241 3.16% 15,667 248 3.17%
Time deposits 50,795 1,384 5.45% 47,723 1,273 5.33%
FHLB advance 988 27 5.47% 1,142 31 5.43%
Federal funds purchased 439 12 5.47% 4 0 5.15%
------- -------- ------- ------- -------- -------
Total interest-bearing liabilities $79,715 $1,812 4.55% $77,019 $1,706 4.43%
-------- ------- -------- -------
Non-interest bearing liabilities:
Demand deposits $10,855 $10,562
Other liabilities 680 717
Stockholders' equity 12,233 11,360
------- -------
Total Liabilities and
Stockholders' equity $103,483 $99,658
------- -------
------- -------
Net interest income $2,312 $2,191
------- -------
------- -------
Net interest spread 3.82% 3.82%
------- -------
------- -------
Net interest margin 4.69% 4.64%
------- -------
------- -------
Tax equivalent data: (2)
Tax equivalent adjustment 93 98
------- -------
Adjusted net interest income $2,405 $2,289
------- -------
------- -------
Net interest spread 4.01% 4.02%
Net interest margin 4.88% 4.84%
</TABLE>
(1) Average total loans include non-accrual loans and loan income includes loan
fee income on loans held in the portfolio
(2) Tax-equivalent adjustment is computed using 34% statutory tax rate for all
periods presented.
52
<PAGE>
RATE VOLUME ANALYSIS - TABLE 1a
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995 1994
Average Average Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------ ------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-earning deposits $1,840 $106 5.76% $1,236 $72 5.83% $1,662 $77 4.63%
Federal funds sold 2,156 118 5.47% 2,944 167 5.67% 1,298 52 4.01%
Investment securities (taxable) 11,621 708 6.09% 11,339 653 5.76% 14,360 749 5.22%
Investment securities (tax-exempt) 6,025 377 6.26% 6,366 403 6.33% 6,474 412 6.36%
Loans (net of unearned income) (1) 73,794 6,601 8.95% 70,985 6,334 8.92% 66,456 5,310 7.99%
------- -------- ------- ------- -------- ------- ------- -------- -------
Total interest earning assets $95,436 $7,910 8.29% $92,870 $7,629 8.21% $90,250 $6,600 7.31%
Non-earning assets:
Cash and due from banks $3,245 $3,339 $3,511
Other non-earning assets 2,712 2,782 2,930
Allowance for loan losses (934) (857) (801)
-------- ------- -------
Total Assets $100,459 $98,134 $95,890
-------- ------- -------
-------- ------- -------
LIABILITIES
Interest-bearing liabilities:
Transaction accounts $12,395 $307 2.48% $13,120 $346 2.64% $14,737 $368 2.50%
Savings deposits 15,935 512 3.21% 14,965 458 3.06% 15,831 373 2.36%
Time deposits 47,785 2,565 5.37% 47,237 2,481 5.25% 42,955 1,849 4.30%
FHLB advance 1,084 59 5.44% 1,247 69 5.53% 1,428 76 5.32%
Other borrowings - - 0.00% - - 0.00% 67 6 8.96%
Federal funds purchased 47 2 4.89% 129 8 6.20% 165 7 4.24%
------- -------- ------- ------- -------- ------- ------- -------- -------
Total interest-bearing
liabilities $77,249 $3,445 4.46% $76,698 $3,362 4.38% $75,183 $2,679 3.56%
-------- ------- -------- ------- -------- -------
Non-interest bearing liabilities:
Demand deposits $11,001 $10,130 $10,516
Other liabilities 752 803 427
Stockholders' equity 11,460 10,503 9,764
-------- ------- -------
Total Liabilities and
Stockholders' equity $100,459 $98,134 $95,890
-------- ------- -------
-------- ------- -------
Net interest income $4,465 $4,267 $3,921
-------- ------- -------
Net interest spread 3.83% 3.83% 3.75%
-------- ------- -------
-------- ------- -------
Net interest margin 4.68% 4.59% 4.34%
-------- ------- -------
-------- ------- -------
Tax equivalent data: (2)
Tax equivalent adjustment 194 208 212
-------- ------- -------
Adjusted net interest income $4,659 $4,475 $4,133
-------- ------- -------
-------- ------- -------
Net interest spread 4.03% 4.05% 3.98%
Net interest margin 4.88% 4.82% 4.58%
</TABLE>
(1) Average total loans include non-accrual loans and loan income includes loan
fee income on loans held in the portfolio
(2) Tax-equivalent adjustment is computed using 34% statutory tax rate for all
periods presented.
53
<PAGE>
RATE VOLUME ANALYSIS - TABLE 2
The effect on Fourth First's interest income (on a fully-taxable equivalent
basis) and interest expense due to the changes in volume and average rates for
the periods indicated are shown below (in thousands):
1996-1995
Change Change
Total Due To Due To
Change Volume Rate
------ ------ ------
EARNING ASSETS
Interest-earning assets:
Interest-earning deposits $ 34 $ 35 $ (1)
Federal Funds sold (49) (43) (6)
Investment Securities (taxable) 55 16 39
Investment Securities (tax-exempt) (40) (33) (7)
Loans (net of unearned income) 267 250 17
------ ------ ------
Total interest earning assets $267 $225 $ 42
INTEREST BEARING LIABILITIES
Transaction accounts $(39) $(19) $(20)
Savings deposits 54 31 23
Time deposits 84 28 56
FHLB advance (10) (10) -
Federal Funds purchased (6) (4) (2)
------ ------ ------
Total interest-bearing liabilities $ 83 $ 26 $ 57
------ ------ ------
Net interest income $184 $199 $(15)
1995-1994
Change Change
Total Due To Due To
Change Volume Rate
------ ------ ------
EARNING ASSETS
Interest-earning assets:
Interest-earning deposits $ (5) $(22) $ 17
Federal Funds sold 115 86 29
Investment Securities (taxable) (96) (169) 73
Investment Securities (tax-exempt) (13) (10) (3)
Loans (net of unearned income) 1,024 378 646
------ ------ ------
Total interest earning assets $1,025 $263 $762
INTEREST BEARING LIABILITIES
Transaction accounts $ (22) $(41) $ 19
Savings deposits 85 (21) 106
Time deposits 632 196 436
FHLB advance (7) (7) -
Other borrowing (6) (6) 0
Federal Funds purchased 1 (2) 3
------ ------ ------
Total interest-bearing liabilities $ 683 $119 $564
------ ------ ------
Net interest income $ 342 $144 $198
For purposes of this table, changes in interest due to volume and average rate
were determined as follows:
Volume Variance -- change in volume multiplied by previous average rate.
Rate Variance -- change in average rate multiplied by previous volume.
Rate/Volume Variance -- change in volume multiplied by change in average rate.
The rate/volume variances have been allocated to volume and average rate in
proportion to the relationship of the absolute dollar amounts of the change in
each.
54
<PAGE>
INVESTMENT PORTFOLIO
BOOK VALUE - TABLE 3
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies $10,823 $11,805 $10,656 $11,997 $15,495 $16,461
State and political subdivisions 5,776 6,000 6,353 6,533 6,393 5,268
Other securities 412 414 599 913 1,417 711
-----------------------------------------------------------
Total Investments $17,011 $18,219 $17,608 $19,443 $23,305 $22,440
</TABLE>
Excluding those holdings in the investment security portfolio of U.S.
Treasury and U.S. Government agency and corporation securities and various
projects notes fully-guaranteed by the U.S. Government, there were no
investments in securities of any one issuer which exceeded 10% of shareholders'
equity at June 30, 1997.
Table 4 sets forth the schedule of maturities and weighted average interest
rates of securities as of June 30, 1997 (in thousands):
MATURITIES AND WEIGHTED AVERAGE INTEREST RATES - TABLE 4
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1997
1 YEAR 1-5 5-10 AFTER
OR LESS YEARS YEARS 10 YEARS TOTAL
--------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
U.S. Treasury and agencies $ 2,800 $ 4,005 $ 3,801 $ 217 $10,823
State and political subdivisions (1) 327 1,520 2,990 939 5,776
Other securities - 65 - 347 412
-----------------------------------------------------------
Total Investments $ 3,127 $ 5,590 $ 6,791 $ 1,503 $17,011
Weighted average yield 6.20% 7.23% 7.61% 8.71%
</TABLE>
(1) The yields on tax-exempt obligations have computed on a fully-taxable
equivalent basis using a marginal federal tax rate of 34%.
55
<PAGE>
LOAN PORTFOLIO SUMMARY - TABLE 5
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
-------------------- ---------------------------------
1997 % 1996 % 1995 %
---- - ---- - ---- -
Commercial loans $14,320 17.5% $12,661 16.4% $12,840 17.7%
Real estate loans 60,094 73.6% 57,623 74.5% 53,328 73.3%
Installment loans 7,190 8.8% 7,030 9.1% 6,544 9.0%
---------------------------------------------------------
Total Loans $81,604 100.0% $77,314 100.0% $72,712 100.0%
---------------------------------------------------------
---------------------------------------------------------
DECEMBER 31,
--------------------------------------------------------
1994 % 1993 % 1992 %
---- - ---- - ---- -
Commercial loans $11,871 16.9% $16,268 25.5% $16,024 26.3%
Real estate loans 52,248 74.4% 45,765 71.8% 41,775 68.5%
Installment loans 6,099 8.7% 1,675 2.6% 3,224 5.3%
---------------------------------------------------------
Total Loans $70,218 100.0% $63,708 100.0% $61,023 100.0%
---------------------------------------------------------
---------------------------------------------------------
As of June 30, 1997, the Bank had one concentration of credit greater than
10% of the total loans outstanding: Commercial Real Estate Holding Companies
outstanding loans totaled $8.5 million or 10.4% of total loans.
56
<PAGE>
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES - TABLE 6
(DOLLARS IN THOUSANDS)
December 31, 1996
----------------------------------------------
1 Year 1-5 After
or less Years 5 Years Total
------- ----- ------- -----
Fixed rate loans $ 7,543 $10,597 $ 3,333 $21,473
Adjustable rate loans 45,647 10,194 - 55,841
-----------------------------------------------
$53,190 $20,791 $ 3,333 $77,314
-----------------------------------------------
-----------------------------------------------
NON-PERFORMING LOANS -TABLE 7
(DOLLARS IN THOUSANDS)
Nonperforming loans include loans on which interest is not being accrued
and accruing loans contractually past due ninety days or more as to interest or
principal payments.
<TABLE>
<CAPTION>
December 31,
June 30, ----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans $ 24 $ 322 $ 12 $ 249 $ 254 $ 337
Accruing loans contractually
past due 90 or more 138 88 95 189 61 230
------------------------------------------------------------------------------------
Total non-performing loans $ 162 $ 410 $ 107 $ 438 $ 315 $ 567
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Non-performing loans as a
percent of total loans 0.20% 0.54% 0.15% 0.63% 0.50% 0.94%
Non-performing loans as a
percent of total assets 0.15% 0.40% 0.10% 0.45% 0.33% 0.60%
Total Loans $ 81,604 $ 77,314 $ 72,712 $70,218 $63,708 $61,023
Total Assets $105,786 $103,019 $102,573 $97,790 $95,717 $94,303
</TABLE>
Loans are placed on non-accrual status when, in the opinion of management,
the collectibility of principal and interest is considered doubtful or when the
payment of interest and principal is 90 days past due, unless the loans are both
well secured and in the process of collection. Additional interest that would
have been earned in 1997 had the loans classified as non-accrual remained at
original terms is immaterial.
As of June 30, 1997, there are no loans which are not included in the above
nonperforming loan total for which management had serious doubt as to the
ability of the borrowers to comply with the present repayment terms.
57
<PAGE>
ALLOWANCE FOR LOAN LOSSES - TABLE 8
(DOLLARS IN THOUSANDS)
A provision is credited monthly to an allowance for loan losses which is
maintained at a level considered by management to be adequate to absorb possible
future loan losses inherent in the current portfolio. During each quarter,
management determines the level of provision necessary for an adequate
allowance. Factors considered in assessing the adequacy of the allowance for
loan losses include changes in the volume of the loan portfolio, past loan loss
experience, existing and anticipated economic conditions, and other factors
which may deserve current recognition in estimating possible future loan losses.
<TABLE>
<CAPTION>
Six
Months December 31,
ended -----------------------------------------------------------
6/30/97 1996 1995 1994 1993 1992
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance $ 913 $ 853 $ 851 $ 771 $ 743 $ 806
Loans charged off:
Commercial loans - 5 81 2 94 155
Real estate loans - 150 23 - 44 24
Installment loans 9 15 32 21 12 27
------------------------------------------------------------------------
Total Charge Offs 9 170 136 23 150 206
------------------------------------------------------------------------
Recoveries of charged-off loans:
Commercial loans - 1 1 4 10 30
Real estate loans 12 - 24 38 2 3
Installment loans 2 17 8 1 11 10
------------------------------------------------------------------------
Total Recoveries 14 18 33 43 23 43
Net Charge offs (recoveries) (5) 152 103 (20) 127 163
Provision charged to operations 90 212 105 60 155 100
------------------------------------------------------------------------
Ending Balance $ 1,008 $ 913 $ 853 $ 851 $ 771 $ 743
------------------------------------------------------------------------
------------------------------------------------------------------------
Allowance as a percent of total loans 1.24% 1.18% 1.17% 1.21% 1.21% 1.22%
Net charged-off loans to average loans -0.01% 0.21% 0.15% -0.03% 0.21% 0.26%
Allowance as a percent of
non-performing loans 622.22% 222.68% 797.20% 194.30% 244.76% 131.04%
Total loans $ 81,604 $ 77,314 $ 72,712 $ 70,218 $ 63,708 $ 61,023
Total non-performing loans $ 162 $ 410 $ 107 $ 438 $ 315 $ 567
</TABLE>
58
<PAGE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES - TABLE 9
(DOLLARS IN THOUSANDS)
The following schedule sets forth managements's allocation of the allowance
for loan losses by loan type. This allowance allocation is necessarily
judgmental and is based upon current economic conditions (in general and with
respect to certain customers or industries), past loss experience, the volume of
each loan category and its respective past due history and other factors. Since
these factors are subject to change, the following allocation is not necessarily
indicative of the breakdown of future loan losses. The amounts indicated for
each loan type include amounts allocated for specific loans as well as a general
allocation.
<TABLE>
<CAPTION>
June 30, December 31,
-------- --------------------------------------------------------------------------
1997 % 1996 % 1995 % 1994 % 1993 % 1992 %
---- - ---- - ---- - ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial loans $ 186 17.5% $145 16.4% $174 17.7% $223 16.9% $267 25.5% $301 26.3%
Real estate loans 736 73.6% 697 74.5% 588 73.3% 553 74.4% 478 71.8% 399 68.5%
Installment loans 86 8.8% 71 9.1% 91 9.0% 75 8.7% 26 2.6% 43 5.3%
---------------------------------------------------------------------------------------------
Total ALL $1,008 100% $913 100% $853 100% $851 100% $771 100% $743 100%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
DEPOSIT SUMMARY - TABLE 10
(DOLLARS IN THOUSANDS)
June 30,1997 December 31, 1996
------------ -----------------
Avg % Avg %
Avg bal rate Deposits Avg bal rate Deposits
------- ---- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 10,855 12.18% $ 11,001 12.63%
Interest bearing demand deposits 12,232 2.42% 13.72% 12,395 2.48% 14.23%
Savings deposits 15,261 3.16% 17.12% 15,935 3.21% 18.29%
Time deposits 50,795 5.45% 56.98% 47,785 5.37% 54.85%
-----------------------------------------------------------
Average total deposits $ 89,143 100.00% $ 87,116 100.00%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------------- -------------------------
Avg % Avg %
Avg bal rate Deposits Avg bal rate Deposits
------- ---- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 10,130 11.86% $ 10,516 12.51%
Interest bearing demand deposits 13,120 2.64% 15.35% 14,737 2.50% 17.54%
Savings deposits 14,965 3.06% 17.51% 15,831 2.36% 18.84%
Time deposits 47,237 5.25% 55.28% 42,955 4.30% 51.11%
-----------------------------------------------------------
Average total deposits $ 85,452 100.00% $ 84,039 100.00%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993 December 31,1992
Avg % Avg %
Avg bal rate Deposits Avg bal rate Deposits
------- ---- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing demand deposits $ 9,838 11.95% $ 8,665 10.65%
Interest bearing demand deposits 13,965 2.54% 16.96% 13,094 3.27% 16.10%
Savings deposits 15,124 2.51% 18.37% 14,434 3.30% 17.75%
Time deposits 43,416 4.60% 52.72% 45,137 5.55% 55.50%
-----------------------------------------------------------
Average total deposits $ 82,343 100.00% $ 81,330 100.00%
</TABLE>
Time Certificates of Deposit of $100,000 or more
06/30/97
--------
1.) Time deposits >= $100,000 $ 11,271
2.) 3 months or less maturity 2,713
4-6 months maturity 3,310
7-12 months maturity 2,921
over 12 months 2,327
60
<PAGE>
REGULATORY CAPITAL - TABLE 11
(DOLLARS IN THOUSANDS)
December 31,
June 30, ---------------------
1997 1996 1995
---- ---- ----
Total Assets $ 105,786 $ 103,019 $ 102,573
Risk-based Assets 73,609 69,341 68,009
Tier I Capital 12,465 11,890 11,194
Total Capital $ 13,385 $ 12,757 $ 12,045
Leverage Ratio 11.78 12.40 11.70
Tier I Risk-based Capital Ratio 16.93 17.15 16.46
Total Risk-based Capital Ratio 18.18 18.39 17.71
GAP POSITION - TABLE 12
The schedule that follows illustrates FFB's asset/liability (gap) position
as of June 30, 1997 (in thousands):
<TABLE>
<CAPTION>
Up to 3 4 to 12 1 to 2 After
Total Months Months Years 2 Years
----- ------ ------ ----- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Loans $ 81,604 $ 30,544 $ 24,399 $ 8,021 $ 18,640
Securities 17,783 2,638 1,309 2,418 11,418
Federal funds sold - - - - -
Other assets 6,399 - - - 6,399
----------------------------------------------------------------
Total assets $ 105,786 $ 33,182 $ 25,708 $ 10,439 $ 36,457
----------------------------------------------------------------
----------------------------------------------------------------
LIABILITIES
Interest-bearing deposits $ 79,145 $ 40,876 $ 19,720 $ 11,370 $ 7,179
Federal funds purchased 1,125 1,125 - - -
FHLB advance 988 138 - 125 725
Other liabilities and equity 24,528 - - - 24,528
----------------------------------------------------------------
Total liabilities and equity $ 105,786 $ 42,139 $ 19,720 $ 11,495 $ 32,432
----------------------------------------------------------------
----------------------------------------------------------------
Gap $ (8,957) $ 5,988 $ (1,056) $ 4,025
Cumulative gap $ (8,957) $ (2,969) $ (4,025) $ -
Cumulative rate sensitive ratio 0.79 0.98 0.95 1.00
</TABLE>
FOURTH FIRST BANCORP
RETURN ON EQUITY AND ASSETS -- TABLE 13
The following table sets forth, for the periods indicated, return on assets,
return on equity, dividend payout and average equity to average asset ratio:
December 31,
June 30, -------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Return on assets 1.24% 1.25% 1.31% 1.12% 0.92% 0.88%
Return on equity 10.52% 10.91% 12.22% 10.99% 9.27% 9.20%
Dividend payout ratio 28.84% 44.54% 28.01% 18.63% 21.81% 23.55%
61
<PAGE>
December 31,
June 30, ------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Average equity to average assets 11.82% 11.42% 10.70% 10.18% 9.89% 9.47%
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of FFB Common
beneficially owned as of the Record Date by (i) each person or group of persons
known to FFB to be the beneficial owner of more than five percent (5%) of the
issued and outstanding shares of FFB Common and (ii) each director and executive
officer of FFB. Except as otherwise noted, each person or group identified
below holds sole voting and sole investment power with respect to the shares
identified as beneficially owned.
Number of
of Shares Percentage of
Beneficially Outstanding Shares
Name Owned Beneficially Owned(1)
---- ----- ------------------
Ronald H. Cox 3,181 (1) 2.2%
Leroy Mundy (2) 13,033 (3) 9.1%
Edgar Mulzer 6,088 4.3%
Eric R. Olinger 3,396 (4) 2.4%
Lee Ray Olinger(5) 22,074 (6) 15.5%
Max Olinger(7) 11,195 (8) 7.8%
Norbert Olinger(9) 9,639 (10) 6.8%
Glen L. Sakel 2,174 (11) 1.5%
Gene A. Thieman 1,990 (12) 1.4%
Richard F. Welp 662 (13) *
First Bank of Huntingburg
Retirement Profit Sharing Plan(14) 7,568 5.3%
All directors and executive officers
as a group (9 persons) 60,399 42.3%
____________
* Less than 1%.
(1) Ronald Cox beneficially owns 1,350 shares directly and 1,721 shares are
beneficially owned by the estate of Roy H. Cox of which Ronald Cox is the
personal representative and over which Ronald Cox has sole voting and
investment power. Additionally, 110 shares are beneficially owned by
Phyllis Cox, the wife of Mr. Cox.
(2) The address of this shareholder is 709 Orchard Road, Huntingburg, Indiana
47542.
(3) Leroy Mundy beneficially owns 8,608 shares directly, and 4,425 shares are
beneficially owned by the Rosemary Mundy Family Trust, over which Rosemary
Mundy, the spouse of Leroy Mundy, has sole voting and investment power.
Leroy Mundy is the brother-in-law of Lee Ray Olinger, Max Olinger and
Norbert Olinger, each of whom owns more than 5% of the outstanding shares
of FFB Common.
(4) Eric Olinger beneficially owns 3,232 shares directly and 82 shares are
beneficially owned by each of Brooke A. Olinger and Michael A. Olinger, the
children of Eric Olinger. Eric Olinger is the son of Lee Ray and Martha
Olinger, who owns more than 5% of the FFB Common. Eric Olinger is the
nephew of Leroy and Rosemary Mundy, Norbert Olinger and Max Olinger, each
of whom own more than 5% of the outstanding shares of FFB Common.
(5) The address of this shareholder is 707 Orchard Road, Huntingburg, Indiana
47542.
(6) Lee Ray Olinger beneficially owns 16,660 shares directly and 5,414 shares
are beneficially owned by Martha Olinger, the spouse of Lee Ray Olinger.
Lee Ray Olinger is the brother of Norbert Olinger and Max Olinger, each of
whom own more than 5% of the outstanding shares of FFB Common and is the
brother-in-law and brother, respectively, of Leroy and Rosemary Mundy, who
own more than 5% of the outstanding shares of FFB Common. Eric Olinger is
the son of Lee Ray Olinger.
(7) The address of this shareholder is 650 West First Street, Huntingburg,
Indiana 47542.
62
<PAGE>
(8) Max Olinger beneficially owns one (1) share directly and 3,497 shares are
eneficially owned by the Max Olinger Primary Trust, over which Mr. Olinger
has sole voting and investment power. The Dorothy Olinger Primary Trust
beneficially owns 3,497 shares, over which Dorothy Olinger, the spouse of
Mr. Olinger, has sole voting and investment power. Four Thousand Two
Hundred shares (4,200) are beneficially owned by Five O Corporation, over
which Max Olinger has sole voting and investment power. Max Olinger is the
brother of Norbert Olinger and Lee Ray Olinger, each of whom own more than
5% of the outstanding shares of FFB Common and is the brother-in-law and
brother, respectively, of Leroy and Rosemary Mundy, who own more than 5% of
the outstanding shares of FFB Common. Max Olinger is the uncle of Eric
Olinger.
(9) The address of this shareholder is 400 West First Street, Huntingburg,
Indiana 47542.
(10) Norbert Olinger beneficially owns 6,251 shares directly and 3,388 shares
are beneficially owned by Judith Olinger, the spouse of Mr. Olinger.
Norbert Olinger is a brother of Max Olinger and Lee Ray Olinger, each of
whom own more than 5% of the FFB Common and is the brother-in-law and
brother, respectively, of Leroy and Rosemary Mundy, who own more than 5%
of the outstanding shares of FFB Common. Eric Olinger is the nephew of
Mr. Olinger.
(11) Glen Sakel beneficially owns one (1) share directly and 2,173 shares are
beneficially owned by the Varena L. Sakel Family Trust, over which Varena
Sakel has sole voting and investment power.
(12) Gene Thieman beneficially owns 1,820 shares directly and 170 shares are
beneficially owned by the Gene Thieman Keogh Plan, over which Mr. Thieman
has sole voting and investment power.
(13) Richard Welp beneficially owns 268 shares directly and 394 shares are
jointly held with rights of survivorship with Rosemary H. Welp, spouse of
Mr. Welp.
(14) The address of this shareholder is the same as FFB's.
63
<PAGE>
DESCRIPTION OF NCBE CAPITAL STOCK
AUTHORIZED SHARES
NCBE's Articles of Incorporation presently authorize the issuance of
20,000,000 shares of common stock, $1.00 stated value per share. As of October
_, 1997, there were __________ shares of NCBE Common issued and outstanding.
DIVIDENDS, VOTING, LIQUIDATION AND OTHER RIGHTS
Holders of NCBE's Common are entitled to receive dividends when, as and if
declared by NCBE's Board of Directors out of funds legally available therefor.
The ability of the financial institution subsidiaries of NCBE to pay cash
dividends, which are expected to be NCBE's principal source of income, is
restricted by applicable banking laws and regulations. Such dividends have
previously been NCBE's principal source of income.
Holders of NCBE Common are entitled to one vote per share on all matters to
be voted upon by the shareholders other than the election of directors. NCBE
shareholders are entitled to cumulative voting on election of directors.
Cumulative voting permits a shareholder to cast a number of votes equal to the
number of shares owned multiplied by the number of directors to be elected.
Such votes may be cast for one nominee or spread among designated nominees.
In the event of liquidation, dissolution or winding up of NCBE, whether
voluntary or involuntary, the holders of NCBE Common would be entitled to share
ratably in any of its assets or funds that are available for distribution to its
shareholders after the satisfaction of its liabilities (or after adequate
provision is made therefor).
Holders of shares of NCBE Common do not have the preemptive right to
subscribe on a pro-rata basis for any presently or subsequently authorized
shares of NCBE Common.
The shares of NCBE Common presently outstanding are, and the shares of NCBE
Common to be issued pursuant to the Merger will be, when issued and delivered
pursuant to the Merger Agreement and as described herein, duly authorized,
validly issued, fully paid and non-assessable.
CERTAIN PROVISIONS OF ARTICLES OF INCORPORATION AND BY-LAWS
Certain provisions of NCBE's Articles of Incorporation and By-laws may
delay or make more difficult unsolicited acquisitions or changes of control of
NCBE. Such provisions could have the effect of discouraging third parties from
making proposals involving an unsolicited acquisition or change in control of
NCBE, although such proposals, if made, might be considered desirable by a
majority of NCBE's shareholders. Such provisions may also have the effect of
making it more difficult for third parties to cause the replacement of the
current management of NCBE without the concurrence of the Board of Directors.
These provisions include: (i) the classification of the Board of Directors into
three classes, each class serving a "staggered" term of office of three years
(see "COMPARISON OF SHAREHOLDER RIGHTS --Classified Board of Directors"); and
(ii) requirements for advance notice for making nominations at shareholders'
meetings.
NCBE's By-laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors. Although NCBE's By-laws do not give the
Board of Directors any power to approve or disapprove shareholder nominations
for the election of directors or proposals for action, they may have the effect
of precluding a contest for the election of directors or the consideration of
shareholder proposals if the proper procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its proposals without
regard to whether consideration of such nominees or proposals might be harmful
or beneficial to NCBE and its shareholders.
64
<PAGE>
CERTAIN PROVISIONS OF THE IBCL
Certain provisions of the IBCL may delay, prevent or make more difficult
changes of control of NCBE. Such provisions also may have the effect of
preventing changes in the management of NCBE. It is possible that such
provisions could make it more difficult to accomplish transactions which
shareholders may otherwise deem to be in their best interests. See "COMPARISON
OF SHAREHOLDER RIGHTS -- Business Combinations Involving Interested Shareholder"
and "COMPARISON OF SHAREHOLDER RIGHTS -- Control Share Acquisitions."
TRANSFER AGENT
The National City Bank of Evansville, Evansville, Indiana is the transfer
agent for shares of NCBE Common.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of holders of shares of NCBE Common are governed by the IBCL and
by NCBE's Articles of Incorporation and By-laws. The rights of holders of
shares of FFB Common are governed by the IBCL and by FFB's Articles of
Incorporation and By-laws. The rights of holders of shares of FFB Common differ
in certain respects from the rights which they would have as shareholders of
NCBE. A summary of the material differences between the respective rights of
the shareholders of NCBE and FFB is set forth below.
CLASSIFIED BOARD OF DIRECTORS
NCBE. The Articles of Incorporation and By-laws of NCBE divide the Board
of Directors into three classes, as nearly equal in number as possible, with
each class of directors serving a staggered term of three years. Directors are
elected by a plurality of votes cast by shares entitled to vote. Presently
there are three directors in each of NCBE's three classes of directors. The
purpose of a classified Board of Directors is to promote stability and
continuity within the Board. However, a classified Board of Directors also has
the effect of decreasing the number of directors that may otherwise be elected
by holders of NCBE Common and, therefore, may have the effect of precluding a
contest for the election of directors or delay, prevent or make more difficult
changes in control of NCBE.
FFB. FFB does not have a classified Board of Directors. The Articles of
Incorporation and By-laws of FFB provide for a Board of Directors of eight
members, with each member serving a term until the next annual meeting of
shareholders. Presently, there are eight FFB directors.
BUSINESS COMBINATIONS NOT INVOLVING AN INTERESTED SHAREHOLDER
NCBE. NCBE's Articles of Incorporation require the affirmative vote of 80%
of the shares entitled to vote on any merger, consolidation or other business
combination transaction with another corporation that is not approved by a
majority of the members of NCBE's Board of Directors.
FFB. FFB's Articles of Incorporation and By-laws do not contain provisions
similar to those discussed above.
BUSINESS COMBINATIONS INVOLVING AN INTERESTED SHAREHOLDER
NCBE. The IBCL restricts the ability of a "resident domestic corporation"
to engage in any combination with an "interested shareholder" for five years
after the interested shareholder's date of acquiring shares unless the
combination or the purchase of shares by the interested shareholder on the
interested shareholder's date of acquiring shares is approved by the board of
directors of the resident domestic corporation before that date. If the
combination was not previously approved, the interested shareholder may effect a
combination after the five-year period only if such shareholder receives
approval from a majority of the disinterested shares or the offer meets certain
fair price criteria. A "resident domestic corporation" means an Indiana
corporation that has 100 or more shareholders. "Interested
65
<PAGE>
shareholder" means any person, other than the resident domestic corporation or
its subsidiaries, who is (i) the beneficial owner, directly or indirectly, of
10% or more of the voting power of the outstanding voting shares of the resident
domestic corporation or (ii) an affiliate or associate of the resident domestic
corporation and at any time within the five-year period immediately before the
date in question was the beneficial owner of 10% or more of the voting power of
the outstanding shares of the resident domestic corporation. The above
provisions do not apply to a corporation that so elects in an amendment to its
articles of incorporation approved by a majority of the disinterested shares.
Such an amendment, however, would not become effective for 18 months after its
passage and would apply only to stock acquisitions occurring after its effective
date. NCBE's Articles of Incorporation do not exclude it from the restrictions
imposed by such provisions.
FFB. FFB's Articles of Incorporation also do not exclude it from such
provisions of the IBCL.
REMOVAL OF DIRECTORS
NCBE. Under the IBCL, directors may be removed in any manner provided in
the corporation's articles of incorporation. In addition, unless the articles
of incorporation provide otherwise, the shareholders or directors may remove one
or more directors with or without cause. A director may be removed by the
shareholders, if they are otherwise authorized to do so, only at a meeting
called for that purpose, and such purpose must be stated in the notice of the
meeting. A director elected by a voting group of shareholders may be removed
only by that voting group. NCBE's Articles of Incorporation do not contain any
provisions relating to the removal of directors.
FFB. FFB's By-Laws provide that a majority of shareholders may remove any
or all directors with or without cause at meeting of shareholders called
expressly for that purpose.
AMENDMENTS TO ARTICLES OF INCORPORATION
NCBE. The IBCL provides that, unless a greater vote is required under a
specific provision of the IBCL or by a corporation's articles of incorporation
or its board of directors, a corporation may amend its articles of incorporation
upon the affirmative vote of the holders of a greater number of shares cast in
favor of the amendment than the holders of shares cast against the amendment,
unless the amendment would create dissenters' rights in which case a favorable
vote of the holders of a majority of the outstanding shares is required. Under
the IBCL, a corporation's board of directors may condition its submission of a
proposed amendment to the shareholders of the corporation on any basis,
including the requirement of the affirmative vote of holders of a greater
percentage of the voting shares of the corporation than otherwise would be
required under the IBCL. NCBE's Articles of Incorporation provide that
amendments must be approved by the holders of a majority of the outstanding
voting shares; except that any amendment to the provisions concerning business
combinations must be approved by the holders of eighty percent (80%) of the
outstanding voting shares.
FFB. FFB's Articles of Incorporation do not contain any provisions
establishing a vote requirement different from the IBCL.
VOTING RIGHTS
NCBE. On all matters other than the election of directors, NCBE
shareholders are entitled to cast one vote per share of NCBE Common. NCBE
shareholders are entitled to cumulative voting on election of directors.
Cumulative voting permits a shareholder to cast a number of votes equal to the
number of shares owned multiplied by the number of directors to be elected.
Such votes may be cast for one nominee or spread among designated nominees.
FFB. Holders of shares of FFB Common are entitled to one vote per share on
all other matters to be voted upon by the shareholders, including the election
of directors. This means that the holders of a majority of outstanding shares
may elect the entire board of directors.
66
<PAGE>
SPECIAL MEETINGS OF SHAREHOLDERS
NCBE. The IBCL provides that a corporation with more than 50 shareholders
must hold a special meeting of shareholders on demand of its board of directors
or the persons specifically authorized to do so by the corporation's articles or
by-laws. NCBE's By-laws provide that a special meeting of shareholders must be
held upon the request of the Chairman of the Board, the President, a majority of
the Board of Directors or the holders of 25% or more of the outstanding shares
of voting stock.
FFB. FFB's By-Laws provide that special meetings of the shareholders of a
corporation may be called at any time, for any purpose or purposes, by the Board
of Directors or the President and shall be called at the request in writing of
shareholders who own an aggregate or 25% or more of all the outstanding shares
entitled to vote on the matter for which the meeting is called.
CONTROL SHARE ACQUISITIONS
NCBE. Pursuant to the IBCL, an "acquiring person" who makes a "control
share acquisition" in an "issuing public corporation" may not exercise voting
rights on any "control shares" unless such voting rights are conferred by a
majority vote of the disinterested shareholders of the issuing corporation at a
special meeting of such shareholders held upon the request and at the expense of
the acquiring person. Unless otherwise provided in a corporation's articles of
incorporation or by-laws before a control share acquisition has occurred, in the
event that control shares acquired in a control share acquisition are accorded
full voting rights and the acquiring person acquires control shares with a
majority or more of all voting power, all shareholders of the issuing
corporation have dissenters' rights to receive the fair value of their shares.
"Control shares" means shares acquired by a person that, when added to all other
shares of the issuing public corporation owned by that person or in respect of
which that person may exercise or direct the exercise of voting power, would
otherwise entitled that person to exercise voting power of the issuing public
corporation in the election of directors within any of the following ranges: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less than
a majority or (iii) a majority or more. "Control share acquisition" means,
subject to certain exceptions, the acquisition, directly or indirectly, by any
person of ownership of, or the power to direct the exercise of voting power with
respect to, issued and outstanding control shares. Shares acquired within 90
days or pursuant to a plan to make a control share acquisition are considered to
have been acquired in the same acquisition. "Issuing public corporation" means
a corporation which is organized in Indiana, has 100 or more shareholders, its
principal place of business, its principal office or substantial assets within
Indiana and either (i) more than 10% of its shareholders resident in Indiana,
(ii) more than 10% of its shares owned by Indiana residents or (iii) 10,000
shareholders resident in Indiana. The above provisions do not apply if, before
a control share acquisition is made, the corporation's articles of incorporation
or by-laws (including a board adopted by-law) provide that said provisions do
not apply. NCBE's Articles of Incorporation and By-laws do not exclude NCBE
from the restrictions imposed by such provisions.
FFB. FFB's Articles of Incorporation and By-Laws do not exclude FFB from
the restrictions imposed by such provisions.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon by Baker
& Daniels, Indianapolis, Indiana. Certain tax consequences of the Merger and
matters on behalf of FFB in connection with the Merger will be passed upon by
Krieg DeVault Alexander & Capehart, Indianapolis, Indiana.
67
<PAGE>
EXPERTS
The consolidated financial statements of NCBE and subsidiaries as of
December 31, 1996 and 1995 and each of the three years in the three-year period
ended December 31, 1996, incorporated by reference to NCBE's Annual Report on
Form 10-K, have been audited by McGladrey & Pullen, LLP, independent certified
public accountants, as set forth in their report and incorporated herein by
reference. The financial statements referred to above are incorporated herein
by reference in reliance upon such reports and upon the authority of such firm
as experts in auditing and accounting.
The consolidated financial statements of FFB and subsidiary as of December
31, 1996 and 1995 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996, included in this Prospectus/Proxy Statement have been
audited by Gaither Rutherford & Co., LLP, certified public accountants, as set
forth in their report thereon appearing elsewhere herein and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
68
<PAGE>
INDEX TO FFB FINANCIAL STATEMENTS
Page
----
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets
as of December 31, 1996 and 1995. . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the Years
Ended December 31, 1996, 1995 and 1994. . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1996, 1995 and 1994. . . . . . . F-5
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994. . . . . . . . . . . F-6
Summary of Accounting Policies. . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-10
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996 . . . . . . . . . . . . F-25
Consolidated Statements of Income for the
Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . F-26
Consolidated Statements of Stockholders' Equity for
the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . F-27
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . F-28
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-29
F-1
<PAGE>
[Letterhead]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Fourth First Bancorp
We have audited the accompanying consolidated balance sheets of Fourth First
Bancorp and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fourth First Bancorp
and subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
GAITHER RUTHERFORD & CO., LLP
/s/ GAITHER RUTHERFORD & CO., LLP
Certified Public Accountants
Evansville, Indiana
January 24, 1997
F-2
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks (Note 1) $ 3 851 672 $ 4 105 420
Federal funds sold -- 4 025 000
- ---------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS 3 851 672 8 130 420
INTEREST-BEARING DEPOSITS 1 518 137 1 882 142
SECURITIES AVAILABLE FOR SALE (Notes 2 and 7) 11 910 603 10 583 579
SECURITIES HELD TO MATURITY (Note 2) 6 308 051 7 024 740
NET LOANS, net of allowance for loan losses of
$913,347 in 1996 and $852,624 in 1995 (Notes 3 and 4) 76 401 175 71 858 810
PREMISES AND EQUIPMENT - NET (Note 5) 1 894 844 1 985 967
ACCRUED INTEREST RECEIVABLE 919 094 874 700
OTHER ASSETS 215 565 232 988
- ---------------------------------------------------------------------------------------------
$103 019 141 $102 573 346
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS (Note 6)
Noninterest-bearing $ 11 790 539 $ 11 322 123
Interest-bearing 76 198 649 78 122 921
- ---------------------------------------------------------------------------------------------
TOTAL DEPOSITS 87 989 188 89 445 044
FEDERAL FUNDS PURCHASED (Note 7) 1 350 000 --
ACCRUED INTEREST AND OTHER LIABILITIES 709 084 691 459
FEDERAL HOME LOAN BANK ADVANCES (Note 7) 988 142 1 141 647
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 91 036 414 91 278 150
- ---------------------------------------------------------------------------------------------
COMMITMENTS, CONTINGENCIES AND CREDIT RISK (Note 11)
STOCKHOLDERS' EQUITY
Common stock, without par value (stated value
$1 per share) authorized 250,000; issued 160,000 160 000 160 000
Additional paid-in capital 1 826 028 1 826 028
Retained earnings (Note 12) 10 614 352 9 921 204
Net unrealized depreciation on securities
available for sale, net of tax effect of $12,772
in 1996 and $9,878 in 1995 (24 793) (19 176)
- ---------------------------------------------------------------------------------------------
12 575 587 11 888 056
Treasury stock, at cost, 17,262 shares (592 860) (592 860)
- ---------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 11 982 727 11 295 196
- ---------------------------------------------------------------------------------------------
$103 019 141 $102 573 346
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 6 600 489 $ 6 334 682 $ 5 307 579
Interest on investment securities:
U.S. treasury and agencies 671 492 598 924 676 219
State and municipal 377 106 402 962 412 385
Interest on federal funds sold and
interest-bearing deposits 260 620 292 764 203 433
- ------------------------------------------------------------------------------------------
7 909 707 7 629 332 6 599 616
- ------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 3 383 474 3 285 425 2 589 207
Interest on borrowings 61 560 77 105 89 451
- ------------------------------------------------------------------------------------------
3 445 034 3 362 530 2 678 658
- ------------------------------------------------------------------------------------------
NET INTEREST INCOME 4 464 673 4 266 802 3 920 958
PROVISION FOR LOAN LOSSES (Note 4) 212 500 104 750 60 000
- ------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 4 252 173 4 162 052 3 860 958
- ------------------------------------------------------------------------------------------
NONINTEREST INCOME
Service fees 198 852 184 246 162 846
Other operating income 95 216 208 607 104 677
- ------------------------------------------------------------------------------------------
294 068 392 853 267 523
- ------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and employee benefits 1 586 522 1 536 380 1 398 929
Occupancy expense 383 384 377 536 354 390
Other operating expenses 685 509 711 029 789 285
- ------------------------------------------------------------------------------------------
2 655 415 2 624 945 2 542 604
- ------------------------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME 1 890 826 1 929 960 1 585 877
TAXES ON INCOME (Note 9) 641 000 646 000 513 000
- ------------------------------------------------------------------------------------------
NET INCOME $ 1 249 826 $ 1 283 960 $ 1 072 877
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Net Income per share (Note 10) $ 8.76 $ 9.00 $ 7.52
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Additional on Securities
Common Paid-In Retained Available for Treasury
Stock Capital Earnings Sale Stock
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994, $ 160 000 $ 1 826 028 $ 8 123 901 $ 48 180 $ (592 860)
Net income for the year -- -- 1 072 877 -- --
Dividends - $1.40 per share -- -- (199 834) -- --
Net changes in unrealized
depreciation on available-
for-sale securities, net of
tax effect of $166 442 -- -- -- (323 093) --
- ------------------------------------------------------------------------------------------------------------
BALANCE, January 1, 1995, 160 000 1 826 028 8 996 944 (274 913) (592 860)
Net income for the year -- -- 1 283 960 -- --
Dividends - $2.52 per share -- -- (359 700) -- --
Net changes in unrealized
depreciation on available-
for-sale securities, net of
tax effect of $131,744 -- -- -- 255 737 --
- ------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 160 000 1 826 028 9 921 204 (19 176) (592 860)
Net income for the year -- -- 1 249 826 -- --
Dividends - $3.90 per share -- -- (556 678) -- --
Net changes in unrealized
depreciation on available-
for-sale securities, net of
tax effect of $2,894 -- -- -- (5 617) --
- ------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 $ 160 000 $ 1 826 028 $ 10 614 352 $ (24 793) $ (592 860)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1 249 826 $ 1 283 960 $ 1 072 877
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 212 500 104 750 60 000
Depreciation and amortization 182 192 168 196 166 266
Deferred income tax 4 000 (4 000) (34 000)
Amortization and accretion of security
premiums and discounts 33 486 (3 759) 3 696
(Gain) loss on sale of investment securities (2 582) 62 (4 853)
Decrease (increase) in:
Accrued interest receivable (44 394) (53 587) (97 051)
Other assets 15 181 7 312 (20 956)
Increase (decrease) in accrued interest
payable and other liabilities (167 934) 97 577 124 898
- --------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1 482 275 1 600 511 1 270 877
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from calls and maturities of
investment securities 7 501 293 4 249 954 5 325 030
Purchase of investment securities (8 151 042) (2 024 262) (1 878 124)
Proceeds from sales and maturities of
interest-bearing deposits 999 000 700 000 1 640 000
Purchase of interest-bearing deposits (634 995) (1 267 410) (1 129 919)
Excess of loan proceeds disbursed
over principal payments received (4 754 865) (2 596 735) (6 489 646)
Purchases of premises and equipment (91 069) (100 016) (31 705)
Other assets 1 135 33 747 45 904
- --------------------------------------------------------------------------------------------------
Net cash absorbed by investing activities (5 130 543) (1 004 722) (2 518 460)
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (1 455 856) 4 572 707 761 882
Federal funds purchased (repaid) 1 350 000 (900 000) 900 000
Payment on note payable -- -- (135 000)
Repayment of Federal Home Loan Bank Advances (153 505) (170 062) (188 291)
Cash dividends paid (371 119) (359 700) (199 834)
- --------------------------------------------------------------------------------------------------
Net cash provided (absorbed) by financing activities (630 480) 3 142 945 1 138 757
- --------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (4 278 748) 3 738 734 (108 826)
CASH AND CASH EQUIVALENTS, at beginning of year 8 130 420 4 391 686 4 500 512
- --------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at end of year $ 3 851 672 $ 8 130 420 $ 4 391 686
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
SUMMARY OF ACCOUNTING POLICIES
NATURE OF OPERATIONS AND The Corporation is a one-bank holding
CUSTOMER CONCENTRATION company which conducts no direct business
activities. All business activities are
performed by its wholly-owned subsidiary,
First Bank of Huntingburg.
The Bank provides a full range of banking
services to individuals, agricultural
businesses, commercial businesses and
industries located in its service area. It
maintains a diversified loan portfolio,
including loans to individuals for home
mortgages, automobiles and personal
expenditures, and loans to business
enterprises for current operations and
expansion. The Bank offers a variety of
deposit vehicles, including checking,
savings, money market, individual
retirement accounts and certificates of
deposit.
The principle markets for the Bank's
financial services are the Indiana
communities in which the Bank is located
and the areas immediately surrounding these
communities. The Bank serves these markets
through three offices located in and near
these communities.
USE OF ESTIMATES IN THE The preparation of financial statements in
PREPARATION OF FINANCIAL conformity with generally accepted
STATEMENTS accounting principles requires management
to make estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
PRINCIPLES OF The consolidated financial statements
CONSOLIDATION include the accounts of the Corporation and
its subsidiary. All significant
intercompany accounts and transactions are
eliminated.
CASH AND CASH Cash and cash equivalents include amounts
EQUIVALENTS due from banks and federal funds sold.
Generally, federal funds are purchased and
sold for one-day periods. Cash payments of
interest amounted to $3,451,924,
$3,226,642 and $2,644,588 for the years
ended December 31, 1996, 1995 and 1994,
respectively. Income tax payments of
$786,518, $679,927 and $462,990 were made
in 1996, 1995 and 1994, respectively.
SECURITIES HELD TO Securities for which management has the
MATURITY positive intent and ability to hold to
maturity are reported at cost, adjusted for
premiums and discounts that are recognized
in interest income using the interest
method over the period to maturity.
F-7
<PAGE>
Fourth First Bancorp
First Bank of Huntingburg
Summary of Accounting Policies
SECURITIES AVAILABLE Available-for-sale securities consist of
FOR SALE securities not classified as held-to-
maturity securities. Premiums and discounts
are recognized in interest income using the
interest method over the period to
maturity.
Unrealized holding gains and losses, net of
tax, on available-for-sale securities are
reported as a net amount in a separate
component of stockholders' equity until
realized. Gains and losses on the sale of
available-for-sale securities are
determined using the specific-
identification method.
PREMISES, EQUIPMENT Premises and equipment are stated at cost
AND DEPRECIATION less accumulated depreciation. Depreciation
is charged to operating expense over the
useful lives of the assets, principally by
the straight-line method. Maintenance and
repairs are expensed as incurred while
major additions and improvements are
capitalized.
FORECLOSED Real estate properties acquired as a result
PROPERTIES of foreclosure are to be sold and are
initially recorded at fair value at the
date of the foreclosure establishing a new
cost basis. After foreclosure, valuations
are periodically performed by management
and the real estate is carried at the lower
of carrying amount or fair value less costs
to sell. Revenue and expenses from
operations and changes in the valuation
allowance are included in loss on
foreclosed real estate.
INTEREST INCOME ON Interest on loans is accrued and credited
LOANS to income based on the principal amount
outstanding. For impaired loans that are on
non-accrual status, cash payments received
are generally applied to reduce the
outstanding principal balance. However, all
or a portion of a cash payment received on
a non-accrual loan may be recognized as
interest income to the extent allowed by
the loan contract, assuming management
expects to fully collect the remaining
principal balance of the loan.
ADVERTISING COSTS Advertising costs are expensed as incurred.
F-8
<PAGE>
Fourth First Bancorp
First Bank of Huntingburg
Summary of Accounting Policies
ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is provided to
absorb future loan losses, net of recoveries.
The allowance for loan losses is based on
estimated losses. These estimates are
reviewed periodically and, as adjustments
become necessary, they are reported in
earnings in the periods in which they become
known. Additions to the allowance are based
upon past loan loss experience, the character
of the loan portfolio, current economic
conditions and other factors which, in
management's judgment, should be considered
in estimating possible loan losses.
Effective January 1, 1995, the Corporation
adopted Statement of Financial Accounting
Standards (SFAS) No. 114, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN, as
amended by SFAS No. 118, ACCOUNTING FOR
CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME
RECOGNITION AND DISCLOSURES (collectively
referred to as "SFAS No. 114").
Under SFAS No. 114, a loan is considered to
be impaired when it is probable that the
Corporation will be unable to collect all
principal and interest amounts according to
the contractual terms of the loan agreement.
The allowance for loan losses related to
loans identified as impaired is primarily
based on the excess of the loan's current
outstanding principal balance over the
estimated fair market value of the related
collateral. For impaired loans that are not
collateral dependent, the allowance for loan
losses is recorded at the amount by which the
outstanding recorded principal balance
exceeds the current best estimate of the
future cash flows on the loan, discounted at
the loan's effective interest rate. Prior to
1995, the allowance for loan losses for loans
which would have qualified as impaired under
SFAS No. 114 was primarily based upon the
estimated fair market value of the related
collateral. The effect of adopting SFAS No.
114 was immaterial to the 1995 operating
results of the Corporation. Prior financial
statements have not been restated to apply
the provisions of SFAS No. 114.
INCOME TAXES Income taxes are calculated using the
liability method specified by Statement of
Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
F-9
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
Notes to Consolidated Financial Statements
1. RESTRICTIONS ON CASH The Subsidiary Bank is required to maintain an average
AND DUE FROM BANKS reserve balance on hand and with the Federal Reserve
Bank. The amount of the required reserve balance at
December 31, 1996, was approximately $503,000.
2. DEBT AND EQUITY Debt and equity securities have been classified in the
SECURITIES consolidated balance sheet according to management's
intent. The carrying amount of securities and their
approximate fair values at December 31 were as follows:
1996 SECURITIES AVAILABLE FOR SALE
---------------------------------------------------------
U.S. TREASURY
EQUITY AND AGENCY
SECURITIES SECURITIES
---------------------------------------------------------
Amortized cost $326 000 $ 11 622 168
Gross unrealized gains -- 30 027
Gross unrealized losses -- (67 592)
---------------------------------------------------------
Fair value $326 000 $ 11 584 603
---------------------------------------------------------
---------------------------------------------------------
1996 SECURITIES HELD TO MATURITY
---------------------------------------------------------
STATE AND
MUNICIPAL OTHER
SECURITIES SECURITIES
---------------------------------------------------------
Amortized cost $6 000 331 $307 720
Gross unrealized gains 310 735 15 480
Gross unrealized losses (19 181) --
---------------------------------------------------------
Fair value $6 291 885 $323 200
---------------------------------------------------------
---------------------------------------------------------
F-10
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
1995 SECURITIES AVAILABLE FOR SALE
------------------------------------------------------
U.S.TREASURY
EQUITY AND AGENCY
SECURITIES SECURITIES
------------------------------------------------------
Amortized cost 315 800 $ 10 296 833
Gross unrealized gains -- 6 994
Gross unrealized losses -- (36 048)
------------------------------------------------------
Fair value $315 800 $ 10 267 779
------------------------------------------------------
------------------------------------------------------
1995 SECURITIES HELD TO MATURITY
------------------------------------------------------
STATE AND
MUNICIPAL OTHER
SECURITIES SECURITIES
------------------------------------------------------
Amortized cost $6 353 709 $671 031
Gross unrealized gains 355 925 40 969
Gross unrealized losses (23 139) --
------------------------------------------------------
Fair value $6 686 495 $712 000
------------------------------------------------------
------------------------------------------------------
Equity securities consist of a restricted security,
Federal Home Loan Bank stock.
The scheduled maturities of debt securities held to
maturity and debt securities available for sale at
December 31, 1996, was as follows:
1996 SECURITIES AVAILABLE FOR SALE
------------------------------------------------------
AMORTIZED FAIR
COST VALUE
------------------------------------------------------
Due in one year or less $ 2 299 987 $2 297 155
Due from one year to five
years 6 008 008 6 007 399
Due from five to ten years 3 314 173 3 280 049
------------------------------------------------------
$11 622 168 $11 584 603
------------------------------------------------------
------------------------------------------------------
F-11
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
1996 SECURITIES HELD TO MATURITY
---------------------------------------------------------
AMORTIZED FAIR
COST VALUE
---------------------------------------------------------
Due in one year or less $ 361 284 $ 364 632
Due from one year to five
years 1 898 460 2 015 164
Due from five to ten years 3 283 365 3 440 088
Due after ten years 545 080 560 998
Mortgage backed
securities 219 862 234 203
---------------------------------------------------------
$6 308 051 $6 615 085
---------------------------------------------------------
---------------------------------------------------------
Securities, carried at approximately $2,200,000 at
December 31, 1996, and $3,400,000 at December 31, 1995,
were pledged to secure public deposits and for other
purposes required or permitted by law.
3. LOANS Loans consisted of the following at December 31:
1996 1995
---------------------------------------------------------
Real estate $ 57 623 226 $ 53 328 236
Commercial 12 661 069 12 839 614
Installment 7 030 227 6 543 584
---------------------------------------------------------
77 314 522 72 711 434
Less allowance for loan
losses 913 347 852 624
---------------------------------------------------------
Total $ 76 401 175 $ 71 858 810
---------------------------------------------------------
---------------------------------------------------------
F-12
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
4. ALLOWANCE FOR The allowance for loan losses is based on estimated
LOAN LOSSES losses. In the opinion of management, the allowance for
loan losses at December 31, 1996, was adequate to absorb
anticipated loan losses that may be incurred in the
collection of the present loan portfolio. It is at least
reasonably possible that ultimate losses in the near term
may vary materially from these estimates.
Activity in the allowance for loan losses account was as
follows for the years ended December 31:
1996 1995
--------------------------------------------------------
BALANCE, at January 1 $ 852 624 $ 850 842
Addition - provision charged
to operations 212 500 104 750
--------------------------------------------------------
1 065 124 955 592
--------------------------------------------------------
Deduction
Charge-offs charged
to allowance 170 018 136 071
Less recoveries 18 241 33 103
--------------------------------------------------------
Net charge-offs 151 777 102 968
--------------------------------------------------------
BALANCE, at December 31 $ 913 347 $ 852 624
--------------------------------------------------------
--------------------------------------------------------
5. PREMISES AND Premises and equipment consisted of the following at
EQUIPMENT December 31:
1996 1995
--------------------------------------------------------
Land $ 148 095 $ 148 095
Buildings and
improvements 2 374 844 2 345 344
Furniture and equipment 1 058 278 996 709
--------------------------------------------------------
3 581 217 3 490 148
Less accumulated
depreciation 1 686 373 1 504 181
--------------------------------------------------------
Net premises and
equipment $ 1 894 844 $ 1 985 967
--------------------------------------------------------
--------------------------------------------------------
F-13
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
6. DEPOSITS Deposits consisted of the following at December 31:
1996 1995
--------------------------------------------------------
Demand $ 11 790 539 $ 11 322 123
NOW accounts 13 004 115 14 546 220
Money market deposit
accounts 5 679 036 6 224 393
Savings accounts 10 186 181 10 727 766
Certificates of deposit -
$100,000 and over 8 997 875 8 326 558
Other certificates of
deposit 38 331 442 38 297 984
--------------------------------------------------------
Total deposits
$ 87 989 188 $ 89 445 044
--------------------------------------------------------
--------------------------------------------------------
7. BORROWED FUNDS Federal funds purchased generally mature within one to
ten days from the transaction date.
Federal Home Loan Bank advances consisted of the
following at December 31:
1996 1995
--------------------------------------------------------
5.71%, payable through
July 2003, plus interest $ 495 270 $ 571 733
5.34%, payable through
September 2003, plus
interest 492 872 569 914
--------------------------------------------------------
Total $ 988 142 $1 141 647
--------------------------------------------------------
--------------------------------------------------------
The aggregate amounts maturing in each of the next five
years are as follows: 1997 - $138,468; 1998 - $124,815;
1999 - $112,419; 2000 - $101,167; 2001 - $90,955.
Investment securities with an approximate market value of
$1,720,000 are pledged as collateral in connection with
the above advances.
F-14
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
8. PROFIT-SHARING The Subsidiary Bank has a trusteed retirement profit-
PLAN sharing plan covering substantially all employees.
income tax benefit sharing plan covering substantially
all employees. Contributions are based upon a percentag
of salaries. Contributions to the plan for 1996, 1995
and 1994, were $176,731, $170,609 and $150,723,
respectively.
9. TAXES ON INCOME Significant components of the provision for income taxes
in the consolidated statements of income are as follows:
1996 1995 1994
--------------------------------------------------------
Current
Federal $ 472 000 $ 488 000 $ 398 000
State 165 000 162 000 149 000
--------------------------------------------------------
637 000 650 000 547 000
Deferred
Federal 4 000 (4 000) (34 000)
--------------------------------------------------------
Total taxes on income $ 641 000 $ 646 000 513 000
--------------------------------------------------------
--------------------------------------------------------
Significant components of deferred tax liabilities and
assets consisted of the following at December 31:
1996 1995 1994
--------------------------------------------------------
Deferred tax liabilities:
Depreciation $124 000 $100 000 $104 000
Investment security
accretion 9 000 8 000 7 000
--------------------------------------------------------
Total deferred tax
liabilities 133 000 108 000 111 000
--------------------------------------------------------
Deferred tax assets:
Allowance for loan losses 179 000 158 000 157 000
Securities available for
sale 12 772 9 878 141 622
--------------------------------------------------------
Total deferred tax 191 772 167 878 298 622
asset
--------------------------------------------------------
Net deferred tax asset $ 58 772 $ 59 878 $187 622
--------------------------------------------------------
--------------------------------------------------------
F-15
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
The reconciliation of income tax computed at the federal
statutory rate (34 percent) to income tax expense is as
follows:
1996
AMOUNT PERCENT
--------------------------------------------------------
Income tax at statutory rate $643 000 34.0
Increase (decrease)
resulting from:
Tax exempt interest income (127 000) (6.7)
State taxes, net of federal
income tax benefit 109 000 5.8
for the Corporation.
Other - net 16 000 .8
--------------------------------------------------------
Total taxes on income $641 000 33.9
--------------------------------------------------------
--------------------------------------------------------
1995
Amount Percent
--------------------------------------------------------
Income tax at statutory rate $656 200 34.0
Increase (decrease) resulting
from:
Tax exempt interest income (137 000) (7.1)
State taxes, net of federal
income tax benefit 106 900 5.5
Other - net 19 900 1.1
--------------------------------------------------------
Total taxes on income $646 000 33.5
--------------------------------------------------------
--------------------------------------------------------
1994
Amount Percent
--------------------------------------------------------
Income tax at statutory rate $539 200 34.0
Increase (decrease) resulting
from:
Tax exempt interest income (129 300) (8.2)
State taxes, net of federal
income tax benefit 98 300 6.2
Other - net 4 800 .3
--------------------------------------------------------
Total taxes on income $513 000 32.3
--------------------------------------------------------
--------------------------------------------------------
F-16
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
10. NET INCOME PER Net income per common share was computed by dividing net
COMMON SHARE income by the weighted average number of common shares
outstanding during the year (142,738 in all three years).
11. COMMITMENTS, In the normal course of business, the Subsidiary Bank has
CONTINGENCIES outstanding commitments and contingent liabilities, such
AND CREDIT RISK as pending legal actions and commitments to extend
credit, which are not reflected in the financial
statements. Management does not expect any material
losses to result from these transactions.
Loan commitments and outstanding letters of credit
aggregated approximately $9,005,000 at December 31, 1996.
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 many 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. The
Subsidiary Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the
Subsidiary Bank upon extension of credit, is based on
management's credit evaluation. Collateral held varies,
but may include accounts receivable, inventory, property,
plant and equipment, and income producing commercial
properties.
12. RESTRICTIONS ON The Corporation's subsidiary, First Bank of Huntingburg,
TRANSFER FROM is subject to the provisions of the Indiana Financial
SUBSIDIARY Institutions Act. The Act provides that the Subsidiary
Bank, generally, may not pay cash dividends to the
Corporation in excess of its undivided profits, as
defined
13. RELATED PARTY The Subsidiary Bank has had, and expects to have in the
TRANSACTIONS future, transactions in the ordinary course of business
with directors, officers, employees and their associates,
on loans, as those prevailing at the same time for
comparable transactions with others, and not involving
more than the normal risk of collectibility or
presenting other unfavorable feature.
F-17
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
At December 31, 1996 and 1995, certain employees,
officers, directors and affiliates were indebted to the
Subsidiary Bank in the aggregate amount of
approximately $2,152,000 and $2,757,000, respectively.
14. DISCLOSURES ABOUT The following tables reflect a comparison of the
FAIR VALUE OF carrying amounts and fair values of financial
FINANCIAL instruments of the Corporation and its Subsidiary
INSTRUMENTS Bank at December 31, 1996 and 1995:
CARRYING FAIR
1995 AMOUNT VALUE
-------------------------------------------------
ASSETS
Cash and cash
equivalents $ 3 851 672 $ 3 851 672
Interest-bearing
deposits 1 518 137 1 519 000
Securities 18 218 654 18 525 688
Loans - net of
allowance 76 401 175 76 284 000
LIABILITIES
Deposits 87 989 188 88 293 000
Federal funds
purchased 1 350 000 1 350 000
Long-term debt 988 142 935 000
-------------------------------------------------
-------------------------------------------------
CARRYING FAIR
1995 AMOUNT VALUE
-------------------------------------------------
ASSETS
Cash and cash
equivalents $ 8 130 420 $ 8 130 420
Interest-bearing
deposits 1 882 142 1 884 000
Securities 17 608 319 17 982 074
Loans - net of
allowance 71 858 810 72 293 000
LIABILITIES
Deposits 89 445 044 90 534 000
Long-term debt 1 141 647 1 130 000
-------------------------------------------------
-------------------------------------------------
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
F-18
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
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.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents
include cash and due from banks, and federal funds
sold. For cash and cash equivalents, the carrying
amount is a reasonable estimate of fair value.
INTEREST-BEARING DEPOSITS -- Rates currently available
to the Corporation for deposits with similar terms and
remaining maturities were used to estimate fair value
of interest-bearing deposits.
SECURITIES -- For securities, fair value equals quoted
market prices if available. If a quoted market price is
not available, fair value was estimated using quoted
market prices for similar securities.
LOANS -- The fair value of loans was 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 was the amount payable on
demand. The fair value of other time deposits was
estimated using the rates currently offered for
deposits of similar remaining maturities.
FEDERAL FUND PURCHASED -- For federal funds purchased,
the carrying amount is a reasonable estimate of fair
value.
LONG-TERM DEBT -- Rates currently available to the
Corporation for debt with similar terms and remaining
maturities were used to estimate fair value of existing
debt.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF
CREDIT -- The fair value of commitments was 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
counter parties. 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 was
based on fees currently charged for similar agreements
or
F-19
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
on the estimated cost to terminate them or otherwise
settle the obligations with the counter parties.
Because all commitments and standby letters of credit
reflected current fees and interest rates, no
unrealized gains or losses are reflected in the summary
of fair values.
15. REGULATORY MATTERS The Subsidiary Bank is subject to various regulatory
capital requirements administered by federal and state
banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and
possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct
material effect on the consolidated financial
statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the
Subsidiary Bank must meet specific capital guidelines
that involve quantitative measures of the Subsidiary
Bank's assets, liabilities and certain
off-balance-sheet items as calculated under regulatory
accounting practices. The Subsidiary Bank's capital
amounts and classifications are also subject to
qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to
ensure capital adequacy require the Subsidiary Bank to
maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined),
and of Tier 1 capital (as defined) to average assets
(as defined). Management believes, as of December 31,
1996, that the Subsidiary Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification
from the Federal Deposit Insurance Corporation
categorized the Subsidiary Bank as adequately
capitalized under the regulatory framework for prompt
corrective action. To be categorized as adequately
capitalized the Subsidiary Bank must maintain minimum
total risk-based, Tier 1 risk-based, and Tier 1
leverage ratios as set forth in the table. There are no
conditions or events since that notification that
management believes have changed the institution's
category.
The Subsidiary Bank's actual capital amounts and ratios
are also presented in the table.
F-20
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
------------------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1996 Amount % Amount % Amount %
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to Risk-Weighted Assets)$12 756 653 18.39 $5 547 280 GREATER THAN OR EQUAL TO 8.0 $6 943 100 GREATER THAN OR EQUAL TO 10.0
Tier I Capital
(to Risk-Weighted Assets) 11 889 890 17.15 2 773 640 GREATER THAN OR EQUAL TO 4.0 4 165 860 GREATER THAN OR EQUAL TO 6.0
Tier I Capital
(to Average Assets) 11 889 890 11.83 4 018 338 GREATER THAN OR EQUAL TO 4.0 5 022 923 GREATER THAN OR EQUAL TO 5.0
AS OF DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capital
(to Risk-Weighted Assets) 12 044 570 17.71 5 441 920 GREATER THAN OR EQUAL TO 8.0 6 802 400 GREATER THAN OR EQUAL TO 10.0
Tier I Capital
(to Risk-Weighted Assets) 11 194 270 16.46 2 720 960 GREATER THAN OR EQUAL TO 4.0 4 081 440 GREATER THAN OR EQUAL TO 6.0
Tier I Capital
(to Average Assets) 11 194 270 11.41 3 925 377 GREATER THAN OR EQUAL TO 4.0 4 906 722 GREATER THAN OR EQUAL TO 5.0
</TABLE>
F-21
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
16. FOURTH FIRST BANCORP BALANCE SHEETS
(PARENT COMPANY ONLY) DECEMBER 31, 1996 1995
----------------------------------------------------
FINANCIAL STATEMENTS
ASSETS
Cash on deposit with
First Bank of
Huntingburg $ 7 619 $ 10 092
Investment in First
Bank of
Huntingburg 11 865 098 11 175 094
Other assets 295 569 110 010
----------------------------------------------------
TOTAL ASSETS $ 12 168 286 $ 11 295 196
----------------------------------------------------
----------------------------------------------------
LIABILITY
Dividend payable $ 185 559 $ --
----------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock,
without par value
(stated value $1
per share)
authorized
250,000; issued
160,000 160 000 160 000
Additional paid-in
capital 1 826 028 1 826 028
Retained earnings 10 614 352 9 921 204
Net unrealized
depreciation
on securities
available for sale
of subsidiary
bank, net of tax
effect $12,772
1996 and $9,878
in 1995 (24 793) (19 176)
----------------------------------------------------
12 575 587 11 888 056
Treasury stock, at cost,
17,262 shares (592 860) (592 860)
----------------------------------------------------
TOTAL STOCKHOLDERS'
EQUITY 11 982 727 11 295 196
----------------------------------------------------
$ 12 168 286 $ 11 295 196
----------------------------------------------------
----------------------------------------------------
F-22
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 1995 1994
-----------------------------------------------------------
INCOME
Dividends from First
Bank of
Huntingburg
$ 557 119$ 359 700 $ 342 000
EXPENSES
Other interest -- -- 6 312
-----------------------------------------------------------
Other expenses 3 915 2 700 3 930
-----------------------------------------------------------
Income before
income taxes and
equity in
undistributed net
income of First
Bank of
Huntingburg 553 204 357 000 331 758
Income tax benefit 1 000 1 000 4 000
-----------------------------------------------------------
Income before
equity in
undistributed net
income of First
Bank of
Huntingburg 554 204 358 000 335 758
Equity in undistributed
net income of First
Bank of Huntingburg 695 622 925 960 737 119
-----------------------------------------------------------
NET INCOME $1 249 826$1 283 960 $1 072 877
-----------------------------------------------------------
-----------------------------------------------------------
STATEMENTS OF CASH
FLOWS
YEARS ENDED DECEMBER 31, 1996 1995 1994
-----------------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash dividends
received $ 371 561$ 359 700 $ 342 000
Cash paid to
suppliers and
employees (3 915) (2 700) (3 930)
Interest paid -- -- (6 312)
Income taxes
received 1 000 4 000 7 613
-----------------------------------------------------------
Net cash provided
by operating
activities 368 646 361 000 339 371
-----------------------------------------------------------
-----------------------------------------------------------
F-23
<PAGE>
CASH FLOWS FROM
FINANCING ACTIVITIES
Payments made
under note
payable
agreement -- -- (135 000)
Cash dividends
paid (371 119) (359 700) (199 834)
-----------------------------------------------------------
Net cash absorbed
by financing
activities (371 119) (359 700) (334 834)
-----------------------------------------------------------
Net Increase
(Decrease) in Cash
and Cash Equivalents (2 473) 1 300 4 537
CASH AND CASH
EQUIVALENTS, at
beginning of year 10 092 8 792 4 255
-----------------------------------------------------------
CASH AND CASH
EQUIVALENTS, at
end of year $ 7 619$ 10 092 $ 8 792
-----------------------------------------------------------
-----------------------------------------------------------
RECONCILIATION OF NET
INCOME TO NET
CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $1 249 826$1 283 960 $1 072 877
-----------------------------------------------------------
Decrease (increase) in:
Investment in the
First Bank of
Huntingburg (695 622) (925 960) (737 119)
Other assets (185 558) 3 000 3 613
-----------------------------------------------------------
Total adjustments (881 180) (922 960) (733 506)
-----------------------------------------------------------
NET CASH PROVIDED BY
OPERATING
ACTIVITIES $ 368 646$ 361 000 $ 339 371
-----------------------------------------------------------
-----------------------------------------------------------
F-24
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (UNAUDITED)
CASH AND CASH EQUIVALENTS
Cash and due from banks $ 4 348 763 $ 3 851 672
INTEREST-BEARING DEPOSITS 773 804 1 518 137
SECURITIES AVAILABLE FOR SALE 10 952 834 11 910 603
SECURITIES HELD TO MATURITY 6 057 136 6 308 051
NET LOANS, net of allowance for loan losses of
$1,007,659 in 1997 and $937,031 in 1996 80 595 943 76 401 175
PREMISES AND EQUIPMENT - NET 1 941 861 1 894 844
ACCRUED INTEREST RECEIVABLE 842 698 919 094
OTHER ASSETS 273 055 215 565
- --------------------------------------------------------------------------------------------------
$105 786 094 $103 019 141
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
Noninterest-bearing $ 11 248 456 $ 11 790 539
Interest-bearing 79 144 621 76 198 649
- --------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 90 393 077 87 989 188
FEDERAL FUNDS PURCHASED 1 125 000 1 350 000
ACCRUED INTEREST AND OTHER LIABILITIES 815 259 709 084
FEDERAL HOME LOAN BANK ADVANCES 988 142 988 142
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 93 321 478 91 036 414
- --------------------------------------------------------------------------------------------------
COMMITMENTS, CONTINGENCIES AND CREDIT RISK
STOCKHOLDERS' EQUITY
Common stock, without par value (stated value
$1 per share) authorized 250,000; issued 160,000 160 000 160 000
Additional paid-in capital 1 826 028 1 826 028
Retained earnings 11 072 277 10 614 352
Net unrealized depreciation on securities available for
sale, net of tax effect of $427 in 1997
and $12,772 in 1996 (829) (24 793)
- --------------------------------------------------------------------------------------------------
13 057 476 12 575 587
Treasury stock, at cost, 17,262 shares (592 860) (592 860)
- --------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 12 464 616 11 982 727
- --------------------------------------------------------------------------------------------------
$105 786 094 $103 019 141
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-25
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Six Months
-------------------------
PERIODS ENDED JUNE 30, 1997 1996
- -------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 3 546 978 $ 3 259 199
Interest on investment securities:
U.S. treasury and agencies 344 318 309 678
State and municipal 179 880 191 368
Interest on federal funds sold
and interest-bearing deposits 52 927 137 000
- -------------------------------------------------------------------------------
4 124 103 3 897 245
- -------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 1 773 097 1 675 437
Interest on borrowings 39 388 30 601
- -------------------------------------------------------------------------------
1 812 485 1 706 038
- -------------------------------------------------------------------------------
NET INTEREST INCOME 2 311 618 2 191 207
PROVISION FOR LOAN LOSSES 90 000 75 000
- -------------------------------------------------------------------------------
Net interest income after provision for loan losses 2 221 618 2 116 207
- -------------------------------------------------------------------------------
NONINTEREST INCOME
Service fees 104 544 97 911
Other operating income 52 971 48 921
- -------------------------------------------------------------------------------
157 515 146 832
- -------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and employee benefits 852 301 784 386
Occupancy expense 168 593 164 220
Other operating expenses 353 055 335 346
- -------------------------------------------------------------------------------
1 373 949 1 283 952
- -------------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME 1 005 184 979 087
TAXES ON INCOME 361 700 334 000
- -------------------------------------------------------------------------------
NET INCOME $ 643 484 $ 645 087
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET INCOME PER SHARE $ 4.51 $ 4.52
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-26
<PAGE>
FOURTH FIRST BANCORP
FIRST BANK OF HUNTINGBURG
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
Additional on Securities
Common Paid-In Retained Available for Treasury
Stock Capital Earnings Sale Stock
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996, $160 000 $1 826 028 $ 9 921 204 $ (19 176) $(592 860)
Net income for the period -- -- 645 087 -- --
Dividends - $2.60 per share -- -- (371 119) -- --
Net changes in unrealized
depreciation on available-
for-sale securities, net of
tax effect of $47,756 -- -- -- (92 703) --
- ------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1996 $160 000 $1 826 028 $10 195 172 $(111 879) $(592 860)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
BALANCE, January 1, 1997 $160 000 $1 826 028 $10 614 352 $ (24 793) $(592 860)
Net income for the period -- -- 643 484 -- --
Dividends - $1.30 per share -- -- (185 559) -- --
Net changes in unrealized
depreciation on available-
for-sale securities, net of
tax effect of $12,345 -- -- -- 23 964 --
- ------------------------------------------------------------------------------------------------------------
BALANCE, June 30, 1997 $160 000 $1 826 028 $11 072 277 $ (829) $(592 860)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-27
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 643 484 $ 645 087
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 90 000 75 000
Depreciation and amortization 80 380 83 960
Deferred income tax (37 000) (3 000)
Amortization and accretion of security 17 263 12 885
premiums and discounts
(Gain) loss on sale of investment securities (4 121) --
Decrease (increase) in:
Accrued interest receivable 76 396 (71 477)
Other assets (32 835) 12 411
Increase (decrease) in accrued interest 198 954 (60 965)
payable and other liabilities
- --------------------------------------------------------------------------------
Net cash provided by operating activities 1 032 521 693 901
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from calls and maturities of investment 1 231 851 --
securities
Purchase of investment securities -- (902 133)
Proceeds from sales and maturities of interest- 744 333 --
bearing deposits
Purchase of interest-bearing deposits -- (167 261)
Excess of loan proceeds disbursed over principal (4 284 768) (433 400)
payments received
Purchases of premises and equipment (127 396) (38 602)
- --------------------------------------------------------------------------------
Net cash absorbed by investing activities (2 435 980) (1 541 396)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 2 403 889 (2 168 491)
Federal funds purchased (repaid) (225 000) --
Cash dividends paid (278 339) (185 560)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by financing activities 1 900 550 (2 354 051)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 497 091 (3 201 546)
CASH AND CASH EQUIVALENTS, at January 1 3 851 672 8 130 420
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, at June 30 $ 4 348 763 $ 4 928 874
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-28
<PAGE>
1. BASIS OF PRESENTATION The accompanying unaudited consolidated
financial statements have been prepared in
accordance with generally accepted accounting
principles for interim financial information
and Rule 10-01 of Regulation S-X.
Accordingly, footnote disclosure, which would
substantially duplicate the disclosure
contained in the most recent audited
financial statements, has been omitted. The
accompanying unaudited consolidated financial
statements should be read in conjunction with
the Summary of Accounting Policies and Notes
to Consolidated Financial Statements
contained in the December 31, 1996
Consolidated Financial Statements.
In the opinion of management of the
Corporation, the unaudited consolidated
financial statements include all adjustments
(consisting of only normal recurring
adjustments) necessary to present fairly the
consolidated financial position of the
Corporation as of June 30, 1997 and the
consolidated results of operations and cash
flows for the six months ended June 30, 1997
and 1996.
The results of operations for the six months
ended June 30, 1997 are not necessarily
indicative of the results to be expected for
the full year.
F-29
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
August 6, 1997, by and between National City Bancshares, Inc., an Indiana
corporation ("NCBE"), and Fourth First Bancorp, an Indiana corporation ("FFB").
W I T N E S S E T H:
WHEREAS, FFB owns all of the outstanding capital stock of First Bank of
Huntingburg, an Indiana banking corporation (the "Bank"); and
WHEREAS, the parties desire that FFB merge with and into NCBE (the
"Merger") in a transaction to be accounted for as a pooling-of-interests upon
the terms and conditions contained herein; and
WHEREAS, the Board of Directors of FFB deems the Merger advisable and in
the best interests of FFB and its shareholders and has adopted a resolution
approving this Agreement and directing that this Agreement be submitted for
consideration at a meeting of FFB's shareholders; and
WHEREAS, the Board of Directors of NCBE has adopted a resolution approving
this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements, representations, warranties and covenants herein contained and for
the purpose of prescribing the terms and conditions of the Merger, the mode of
carrying the Merger into effect, the manner of converting the capital stock of
FFB into shares of capital stock of NCBE, and such other provisions as are
deemed desirable in connection with the Merger, the parties, intending to be
bound, hereby agree as follows:
1. THE MERGER.
(a) THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Indiana Business Corporation Law (the
"IBCL"), at the Effective Time (as hereafter defined), FFB will be merged with
and into NCBE. FFB shall be the merging corporation under the Merger and its
separate corporate existence shall cease as of the Effective Time. NCBE shall
be the surviving corporation under the Merger (the "Surviving Corporation") and
shall succeed to and assume all rights and obligations of FFB in accordance with
the IBCL.
(b) REGULATORY APPROVALS. The parties acknowledge that certain approvals
must be received from or notices must be given to federal and state banking
regulatory agencies including: (i) the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"); (ii) the Indiana Department of
Financial Institutions (the "DFI"); and (iii) any other banking regulatory
authorities having jurisdiction over the parties or the Merger (the governmental
agencies referred to in items (i)-(iii) above are collectively referred to
herein as the "Applicable Governmental Authorities").
(c) CLOSING; EFFECTIVE TIME. The delivery of the certificates and
opinions called for by this Agreement shall take place at the offices of NCBE,
227 Main Street, Evansville, Indiana, at a closing (the "Closing")
A-1
<PAGE>
fixed by agreement of NCBE and FFB as promptly as practicable following the
latest of (i) approval by all the Applicable Governmental Authorities; (ii) the
expiration of any waiting period imposed by law; and (iii) satisfaction or
waiver (to the extent legally permissible) of the conditions set forth in
Sections 10, 11 and 12 of this Agreement. The parties shall execute and file on
or prior to the Closing, articles of merger in the form required by the IBCL
(the "Articles of Merger") relating to the Merger with the Indiana Secretary of
State. The time at which the Merger becomes effective shall be specified in the
Articles of Merger and is hereafter referred to as the "Effective Time".
(d) TAX-FREE REORGANIZATION. The parties intend for the Merger to qualify
as a tax-free reorganization within the meaning of Section 368(a)(1)(A) and
related provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). Each of the parties agree to cooperate and take such actions as may be
reasonably necessary to assure such qualification.
2. EFFECTS OF THE MERGER.
(a) EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the IBCL.
(b) ARTICLES OF INCORPORATION AND BY-LAWS. The Articles of Incorporation
and the By-Laws of NCBE as in effect at the Effective Time shall be the Articles
of Incorporation and By-Laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(c) DIRECTORS. The directors of NCBE serving at the Effective Time shall
be the directors of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(d) OFFICERS. The officers of NCBE serving at the Effective Time shall be
the officers of the Surviving Corporation until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
3. CONVERSION OF FFB COMMON. Without any action on the part of any
holders of any of FFB's shares of Common Stock, without par value (stated value
$1.00 per share) ("FFB Common"), or shares of capital stock of NCBE, the Merger
shall have the following effects on NCBE:
(a) CONVERSION OF FFB COMMON. As of the Effective Time, each issued and
outstanding share of FFB Common other than Dissenting Shares (as hereafter
defined) shall be converted into the right to receive from NCBE the following
number of shares of Common Stock, without par value (stated value $1.00 per
share) ("NCBE Common"): (i) that number of shares of NCBE Common having an
aggregate Average Value (as hereafter defined) of $26,500,000; (ii) divided by
the Fully Diluted FFB Shares (as hereafter defined); provided, however, that not
less than 757,142 shares nor more than 883,333 shares of NCBE Common shall be
issued in the Merger (taking into account shares not issued because of
Dissenting Shares or fractional interests of shares of NCBE Common). The
foregoing is referred to as the "Merger Consideration." The Average Value of
the NCBE Common shall be equal to the average of the weighted average trading
prices as reported by the Nasdaq National Market System (excluding any trades of
NCBE Common made by NCBE or any entity in which NCBE owns 50% or more of the
outstanding capital stock) for the ten (10) trading days on which NCBE Common is
traded ended three (3) days prior to the Closing; provided, however, if the
Average Value is less than $30.00, the Average Value shall be $30.00 and if the
Average Value is more than $35.00, the Average Value shall be $35.00. If
between the date hereof and the date of determination of the
A-2
<PAGE>
Average Value, the shares of NCBE Common should be changed as the result of a
stock dividend, stock split or reclassification (a "Share Adjustment"), the
Average Value and the minimum and maximum amounts shall be appropriately
adjusted to reflect the Share Adjustment. The Fully-Diluted FFB Shares shall be
equal to the sum of: (i) the number of shares of FFB Common issued and
outstanding immediately prior to the Effective Time, and (ii) the number of any
additional shares of FFB Common issuable, whether at the occurrence of future
events, upon the exercise, conversion, or exchange of any outstanding options,
warrants, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities convertible into or exchangeable for,
shares of FFB Common. NCBE shall provide to FFB all information used to compute
the Average Value at least one (1) business day prior to the Closing.
(b) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of NCBE
Common shall be issued upon the surrender for exchange of certificates
evidencing FFB Common, and such fractional share interests shall not
entitle the owner thereof to vote, to receive dividends or to any other
rights of a shareholder of NCBE.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of FFB Common exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of NCBE
Common (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of NCBE Common multiplied
by the Average Value.
(c) CANCELLATION OF TREASURY STOCK. As of the Effective Time, each share
of FFB Common that is owned by FFB shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(d) DISSENTING SHARES. "Dissenting Shares" shall mean shares of FFB
Common held by any person who properly exercises and perfects rights under the
IBCL as a dissenting stockholder. The holder of any Dissenting Shares shall
only have the rights accorded a dissenting shareholder under the IBCL and shall
not receive any part of the Merger Consideration.
4. EXCHANGE OF CERTIFICATES.
(a) SURRENDER OF CERTIFICATES. Within twenty (20) business days after the
Effective Time, The National City Bank of Evansville, as exchange agent (the
"Exchange Agent"), shall deliver to each record holder of FFB Common (except for
holders of Dissenting Shares), a letter of transmittal for use in effecting the
surrender of certificates formerly evidencing FFB Common in exchange for the
Merger Consideration. The letter of transmittal shall specify how surrender of
the certificates formerly evidencing shares of FFB Common shall be effected.
Upon surrender of a certificate formerly evidencing FFB Common to the Exchange
Agent together with such letter of transmittal and such other documentation that
reasonably may be required by NCBE or the Exchange Agent, the Merger
Consideration shall be issued, and the certificate so surrendered shall be
canceled. No interest shall accrue or be paid with respect to the Merger
Consideration. There shall be no obligation to deliver the Merger Consideration
in respect of any shares of FFB Common until (and then only to the extent that)
the holder thereof validly surrenders the certificates formerly representing the
shares of FFB Common for exchange as provided in this Section 4, or, in lieu
thereof, delivers to the Exchange Agent an appropriate affidavit of loss and an
indemnity agreement as may
A-3
<PAGE>
be required in any such case by NCBE in its reasonable discretion. If any
payment for shares of FFB Common is to be made in a name other than the
registered holder of a surrendered certificate, it shall be a condition to the
payment that the certificate shall be properly endorsed or otherwise in proper
form for transfer, that all signatures shall be guaranteed by a member of the
Medallion Signature Guarantee Program that is either a member firm of any
national securities exchange in the United States or the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
in the United States, and that the person requesting the payment shall either
(i) pay to the Exchange Agent any transfer or other taxes required by reason of
the payment to a person other than the registered holder of a surrendered
certificate or (ii) establish to the satisfaction of the Exchange Agent that
such taxes have been paid or are not payable.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to NCBE Common with a record date after the
Effective Time shall be delivered to the holder of any unsurrendered
certificate(s) evidencing shares of FFB Common with respect to the shares of
NCBE Common evidenced thereby, and no cash payment in lieu of fractional shares
shall be delivered to any such holder pursuant to Section 3, in each case until
the surrender of such certificate(s) in accordance with this Section 4. Subject
to the effect of applicable escheat laws, following surrender of any such
certificate(s) there shall be paid to the holder of such certificate(s), without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of any fractional share of NCBE Common to which such holder is entitled and
(ii) if such certificate(s) is (are) exchangeable for one or more whole shares
of NCBE Common, (x) at the time of such surrender the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of NCBE Common and (y) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of NCBE
Common.
(c) ESCHEAT. Notwithstanding anything in this Section 4 or elsewhere in
this Agreement to the contrary, neither the Exchange Agent nor any party hereto
shall be liable to a former holder of FFB Common for any property delivered to a
public official pursuant to applicable escheat or abandoned property laws.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All Merger Consideration
paid upon the surrender of a certificate evidencing shares of FFB Common in
accordance with the terms of this Section 4 (and any cash paid in lieu of any
fractional share pursuant to Section 3) shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of FFB Common
theretofore represented by such certificate(s), subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by FFB on such shares of FFB Common in accordance with the
terms of this Agreement or prior to the date of this Agreement and which remain
unpaid at the Effective Time and have not been paid prior to such surrender, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of FFB Common which were outstanding
immediately prior to the Effective Time.
(e) WITHHOLDING RIGHTS. NCBE shall be entitled to deduct and withhold
from the Merger Consideration or any dividends payable thereon to any holder of
shares of FFB Common such amounts as NCBE is required to deduct and withhold
with respect to the making of such payment under the Code (as hereafter
defined). Such withheld amounts shall be treated as having been paid by any
such holder of shares of FFB Common.
A-4
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF NCBE. NCBE represents and warrants
to FFB that:
(a) ORGANIZATION, AUTHORIZATION, NO VIOLATIONS, ET CETERA. NCBE is a
corporation duly organized and validly existing under the laws of the State of
Indiana. NCBE has all necessary corporate power to own its properties and
assets and to carry on its business as now conducted. Subject to receipt of
approvals from the Applicable Governmental Authorities, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by NCBE have been duly authorized by all necessary corporate action on
the part of NCBE, and this Agreement constitutes the legal, valid and binding
obligation of NCBE, enforceable against NCBE in accordance with its terms,
except as limited by (i) bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance laws and other similar laws affecting creditors' rights
generally, and (ii) general principles of equity, regardless of whether asserted
in a proceeding in equity or law. The execution and delivery of this Agreement
by NCBE and the consummation of the transactions contemplated by this Agreement,
will not violate the provisions of, or constitute a breach or default under, the
articles of incorporation or by-laws of NCBE or any material agreement to which
NCBE is a party or is bound, or any other material license, law, order, rule,
regulation or judgment to which NCBE is a party. NCBE is duly registered with
the Federal Reserve Board as a bank holding company under the Bank Holding
Company Act of 1956, as amended.
(b) CAPITAL STOCK. The authorized capital stock of NCBE consists of
20,000,000 shares of NCBE Common, of which 9,289,039 shares were issued and
outstanding as of May 31, 1997. All of the issued and outstanding shares of
NCBE Common are duly and validly issued and outstanding and are fully paid and
non-assessable. None of the shares of NCBE Common have been issued in violation
of any preemptive rights and there are no outstanding options, warrants, rights
to subscribe for, calls, or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, such shares or
contracts, commitments, understandings or arrangements by which NCBE is or may
be obligated to issue additional shares of capital stock or other equity
securities of NCBE other than outstanding options to purchase shares of NCBE
Common pursuant to NCBE's Incentive Stock Option Plan and commitments to issue
shares of NCBE Common in connection with the proposed acquisition of Bridgeport
Bancorp, Inc. The shares of NCBE Common to be issued in the Merger shall, when
issued and delivered in accordance with the terms of this Agreement, be duly
authorized, validly issued, fully paid and non-assessable.
(c) SUBSIDIARIES. Each of NCBE's significant subsidiaries (as such term
is defined in Rule 1-02 of Regulation S-X as promulgated by the Securities and
Exchange Commission (the "Commission")) is duly organized, validly existing and
in good standing (if applicable) under the laws of the jurisdiction of its
incorporation and has the corporate power to own its respective properties and
assets and to carry on its respective business as now being conducted.
(d) SEC DOCUMENTS. NCBE has provided FFB with copies of the following
reports filed by NCBE with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"): (i) annual report on Form 10-K for
the year ended December 31, 1996; and (ii) quarterly report on Form 10-Q for the
quarter ended March 31, 1997 (collectively, the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder and did not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
contained therein not misleading.
A-5
<PAGE>
(e) FINANCIAL INFORMATION. The consolidated balance sheets of NCBE and
its subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
three (3) years ended December 31, 1996, together with the notes thereto, and
the unaudited consolidated balance sheet of NCBE and its subsidiaries as of
March 31, 1997 and the related unaudited statements of income, changes in
shareholders' equity and cash flow for the three months then ended included in
the SEC Documents, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
disclosed therein) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations, changes in
shareholders' equity and cash flows of NCBE and its consolidated subsidiaries as
of the dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments).
(f) ABSENCE OF CHANGES. Except as disclosed in the SEC Documents, since
December 31, 1996, NCBE has not incurred any obligation or liability (absolute
or contingent), except normal trade or business obligations or liabilities
incurred in the ordinary course of business, and there has not been any material
adverse change in the financial condition, results of operations or business of
NCBE and its subsidiaries taken as whole, nor have there been any events or
transactions having such a material adverse effect which should be disclosed in
order to make the financial statements described in subsection (d) not
misleading.
(g) LITIGATION. There is no litigation, claim, investigation or other
proceeding pending, or to the best knowledge of NCBE, threatened, against NCBE
or any of its subsidiaries, or of which the property of NCBE or any of its
subsidiaries is or would be subject and which would have a material adverse
effect on the financial condition, results of operations or business of NCBE and
its subsidiaries taken as a whole.
(h) SHARES TO BE ISSUED IN THE MERGER. The Shares of NCBE Common to be
issued in the Merger are duly authorized and, when issued in accordance with
this Agreement, will be validly issued, fully paid and nonassessable.
(i) TRUE AND COMPLETE INFORMATION. No representation or warranty made by
NCBE contained in this Agreement and no statement contained in any certificate,
list, exhibit or other instrument specified in this Agreement, whether
heretofore furnished to FFB or hereinafter required to be furnished to FFB,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein not misleading.
6. REPRESENTATIONS AND WARRANTIES OF FFB. FFB represents and warrants to
NCBE that, except as disclosed in the writing delivered to NCBE concurrently
with the execution of this Agreement (the "Disclosure Schedule"):
(a)(i) ORGANIZATION AND GOOD STANDING OF FFB. FFB is a corporation
duly organized and validly existing under the laws of the State of Indiana
and has all necessary corporate power to own its properties and assets and
to carry on its business as now conducted. FFB is duly qualified to
conduct its business and is in good standing in each jurisdiction in which
the nature of the business transacted by FFB requires such qualification.
FFB is duly registered with the Federal Reserve Board as a bank holding
company under the Bank Holding Company Act of 1956, as amended.
(ii) CAPITAL STOCK. On the date hereof, FFB has 250,000 shares of FFB
Common authorized, of which 142,738 shares are issued and outstanding and
17,262 shares are held in the treasury. All of the
A-6
<PAGE>
issued and outstanding shares of FFB Common are duly and validly authorized
and issued, fully paid and nonassessable. None of the issued and
outstanding shares of FFB Common have been issued in violation of any
preemptive rights. There are no (nor will there be prior to the Effective
Time) shares of any class of capital stock or equity securities of FFB
outstanding other than the FFB Common and there are no (nor will there be
prior to the Effective Time) outstanding, options, warrants, rights to
subscribe for, calls, or commitments of any character whatsoever relating
to, or securities convertible into or exchangeable for, such shares or
contracts, commitments, understandings or arrangements by which FFB is or
may be obligated to issue additional shares of any class of capital stock
or other equity securities of FFB.
(iii) ORGANIZATION OF THE BANK. The Bank is an Indiana banking
corporation duly organized and validly existing under the Indiana Financial
Institutions Act. The deposits of the Bank are insured by the Bank
Insurance Fund administered by the FDIC up to applicable limits.
(iv) CAPITAL STOCK OF THE BANK. On the date hereof, the Bank has
85,000 shares of Common Stock, $10.00 par value per share (the "Bank
Stock") of which 85,000 shares are issued and outstanding and no shares are
held in the treasury. FFB is the record and beneficial owner of all of the
issued and outstanding shares of the Bank Stock. All of the issued and
outstanding shares of the Bank Stock are duly and validly authorized and
issued, fully paid and non-assessable. None of the issued and outstanding
shares of the Bank Stock have been issued in violation of any preemptive
rights. There are no (nor will there be prior to the Effective Time)
shares of any class of capital stock or equity securities of the Bank
outstanding other than the Bank Stock and there are no (nor will there be
prior to the Effective Time) outstanding options, warrants, rights to
subscribe for, calls, or commitments of any character whatsoever relating
to, or securities convertible into or exchangeable for, such shares or
contracts, commitments, understandings or arrangements by which the Bank is
or may be obligated to issue additional shares of any class of capital
stock or other equity securities of the Bank.
(b) AUTHORIZATION, NO VIOLATION, ET CETERA. Subject to receipt of
approvals from the Applicable Governmental Authorities and approval by the
shareholders of FFB, the execution and delivery of this Agreement by FFB and the
consummation of the transactions contemplated by this Agreement have been duly
and validly authorized by all necessary corporate action on the part of FFB and
this Agreement constitutes the legal, valid and binding obligations of FFB,
enforceable against FFB in accordance with their terms, except as limited by (x)
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance laws
and other similar laws affecting creditors' rights generally, and (y) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law. The execution of this Agreement by FFB and the consummation of the
transactions contemplated by this Agreement will not violate the provisions of,
or constitute a breach or default under (i) the articles of incorporation or
by-laws of FFB or the articles of incorporation and by-laws of the Bank, (ii)
any Material Contract (as defined in Section 6(f)) of FFB or any of the FFB
Subsidiaries (as hereafter defined) or (iii) any other material license, law,
order, rule, regulation or judgment to which FFB or any FFB Subsidiary is a
party, is bound or by which any of their respective properties or assets is
subject. The minute books of FFB accurately reflect in all material respects
all corporate actions held or taken by its shareholders and Board of Directors
(including committees of the Board of Directors).
(c) SUBSIDIARIES. The Disclosure Schedule contains a true and correct
list of all entities (including, without limitation, corporations, partnerships,
limited liability companies, joint ventures, and inactive corporations) in which
FFB has a 5% or greater direct or indirect equity or ownership interest,
including the
A-7
<PAGE>
Bank and any subsidiary of the Bank (each, a "FFB Subsidiary" and, collectively,
the "FFB Subsidiaries"). Each of the FFB Subsidiaries is validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization and has all necessary corporate power to own its properties and
assets and to carry on its business as now conducted. Each of the FFB
Subsidiaries is duly qualified to conduct its business and is in good standing
in each other jurisdiction in which the nature of the business transacted by it
requires such qualification. All of the issued and outstanding shares of
capital stock, other equity securities, preemptive rights and other agreements,
commitments and obligations relating to the issuance of additional shares of
capital stock, other equity securities or other ownership interests of any of
the FFB Subsidiaries, are owned by FFB or another FFB Subsidiary, free and clear
of all liens, security interests, charges, claims and encumbrances. There are
no shares of any other class of capital stock, other equity securities or other
ownership interests of any of the FFB Subsidiaries outstanding and there are no
outstanding or existing subscriptions, options, warrants, convertible
securities, preemptive rights or other agreements, commitments or obligations
relating to the issuance of additional shares of any class of capital stock,
other equity securities or other ownership interests of any of the FFB
Subsidiaries.
(d) FINANCIAL STATEMENTS. FFB has delivered to NCBE consolidated
statements of financial condition of FFB and the related consolidated statements
of income, stockholders' equity and cash flows for the fiscal years ended
December 31, 1996 and 1995. Such financial statements have been audited by
Gaither Rutherford & Co., LLP, independent auditors, whose report thereon is
included with such financial statements. FFB has also delivered to NCBE
unaudited interim consolidated financial statements for the three months ended
March 31, 1997. Such financial statements have been prepared in conformity with
GAAP applied on a consistent basis (except for changes, if any, required by GAAP
and disclosed therein), and the statements of income present fairly the results
of operations for the respective periods covered and the statements of condition
present fairly the consolidated financial condition of FFB as of their
respective dates except that the unaudited interim consolidated financial
statements are subject to normal year-end adjustments. At December 31, 1996,
there were no material liabilities of FFB or any of the FFB Subsidiaries
(actual, contingent or accrued) which, in accordance with GAAP applied on a
consistent basis, should have been shown or reflected in such statements of
condition or the notes thereto, but which are not so shown or reflected.
(e) TAXES AND TAX RETURNS.
(i) FFB and each FFB Subsidiary has duly filed all federal and state
tax information and tax returns (the "Returns") required to be filed by it
(all such returns being accurate and complete in all material respects) and
has duly paid or made provision for the payment of all material taxes and
other governmental charges which have been incurred and are shown to be due
on said Returns or are otherwise due or claimed to be due from it or
imposed on it or its respective properties, assets, income, franchises,
licenses, sales or use, by any federal, state or local taxing authorities
(collectively, the "Taxes") on or prior to the date hereof other than Taxes
which are being contested in good faith and by appropriate proceedings and
as to which FFB and the FFB Subsidiaries either singly or in the aggregate
have set aside adequate reserves. The amounts recorded as reserves for
Taxes on the consolidated financial statements of FFB as of December 31,
1996, are sufficient in the aggregate for the payment by FFB of all unpaid
Taxes (including any interest or penalties thereon) whether or not disputed
or accrued, for the period ended December 31, 1996 or for any year or
period prior thereto. The federal and state Returns of FFB and the FFB
Subsidiaries have been examined by the Internal Revenue Service ("IRS") or
other appropriate tax authority or the tax years have been closed without
audit and any liability with respect thereto has been satisfied for all
years to and including the year ended December 31, 1993 and,
A-8
<PAGE>
if required, the appropriate tax authorities have been apprised of such
liabilities and the satisfaction thereof. There are no material disputes
pending, or claims asserted, for Taxes upon FFB or any FFB Subsidiary.
Neither FFB nor any FFB Subsidiary has been required to give any currently
effective waivers extending the statutory period of limitation applicable
to any federal, state or local Return for any period. Neither FFB nor any
FFB Subsidiary has in effect any power of attorney or authorization to
anyone to represent it with respect to any Taxes. FFB has not filed any
consolidated federal income tax return with an "affiliated group" (within
the meaning of Section 1504 of the Code), where FFB was not the common
parent of the group. Neither FFB nor any FFB Subsidiary is, or has been, a
party to any tax allocation agreement or arrangement pursuant to which it
has any contingent or outstanding liability to anyone other than FFB or a
FFB Subsidiary. Neither FFB nor a FFB Subsidiary has filed a consent under
Section 341(f) of the Code. FFB has made available to NCBE or its
representatives complete and correct copies of its federal and state income
tax returns filed on or prior to March 15, 1997, and all examination
reports, if any, relating to the audit of such returns by the IRS or other
tax authority for each taxable year beginning on or after January 1, 1994.
(ii) All monies required to be withheld from employees of FFB and each
FFB Subsidiary for income taxes, social security and unemployment insurance
taxes or collected from customers or others as sales, use or other taxes
have been withheld or collected and paid, when due, to the appropriate
governmental authority, or if such payment is not yet due, a reserve, which
in the opinion of FFB management is adequate, has been established.
(f) MATERIAL CONTRACTS. All executory contracts, indentures, commitments,
and other agreements in excess of $25,000 to which FFB or any of the FFB
Subsidiaries is a party or to which FFB or any of the FFB Subsidiaries or any of
their properties are subject (collectively, the "Material Contracts" and each a
"Material Contract") were entered into in the ordinary course of business. FFB
and each of the FFB Subsidiaries has duly performed all its obligations
thereunder to the extent that such obligations to perform have accrued, and no
material breach or default thereunder by FFB or any of the FFB Subsidiaries or,
to the best knowledge of FFB management, any other party thereto has occurred
which will impair the ability of FFB or any of the FFB Subsidiaries to enforce
any material rights thereunder.
(g) REAL ESTATE. Except as otherwise disclosed in the Disclosure
Schedule, FFB and each of the FFB Subsidiaries has good title to all of the
assets reflected as owned by any of them in the December 31, 1996 consolidated
financial statements of FFB, and in the case of real property, transferable and
insurable title in fee simple, and in all cases free and clear of any material
liens or other encumbrances. As of the date hereof, the real properties,
structures, buildings, equipment, and the tangible personal property owned,
operated or leased by FFB or any FFB Subsidiary are (i) to the best knowledge of
FFB management, in good repair, order and condition, except for depletion,
depreciation and ordinary wear and tear, and (ii) to the best of FFB's
knowledge, free from any known structural defects. As of the date hereof, there
are no laws, conditions of record or other impediments which materially
interfere with the intended uses by FFB or any FFB Subsidiary of the real
property or tangible personal property owned or leased by it.
(h) NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, there has been
no material adverse change in the business, financial condition, properties,
results of operation, or capitalization of FFB and the FFB Subsidiaries.
(i) LITIGATION. Except as set forth on the Disclosure Schedule, there is
no litigation, claim, investigation or other proceeding pending or, to the
knowledge of FFB, threatened, against or adversely affecting FFB or
A-9
<PAGE>
any of the FFB Subsidiaries, or of which the property of FFB or any of the FFB
Subsidiaries is or would be subject and which would have a material adverse
effect on the financial condition, results of operations or business of FFB and
the FFB Subsidiaries. To the best of FFB's knowledge, there is no litigation,
claim, investigation or other proceeding to which any director, officer,
employee or agent of FFB or any FFB Subsidiary in their respective capacities as
directors, officers, employees or agents, is a party, pending or threatened
against any such director, officer, employee or agent. There is no outstanding
order, writ, injunction or decree of any court, government or governmental
agency against or, affecting FFB or any of the FFB Subsidiaries, or the assets
or business of FFB or any of the FFB Subsidiaries, which could reasonably be
expected to have a material adverse effect on the financial condition, results
of operations or business of FFB and the FFB Subsidiaries, or which challenges
the validity of the transactions contemplated by this Agreement.
(j) INSURANCE. FFB and each FFB Subsidiary has in effect insurance
coverage with reputable insurers, which in respect to amounts, types and risks
insured, is adequate in the opinion of FFB for the business in which FFB and the
FFB Subsidiaries are engaged. All policies of insurance owned or held by FFB
or any FFB Subsidiary are in full force and effect, all material premiums with
respect thereto covering all periods up to and including the date hereof is paid
(other than retrospective premiums which may be payable with respect to worker's
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy.
(k) COMPLIANCE WITH LAWS. FFB and each of the FFB Subsidiaries has
conducted its business in substantial compliance with all applicable federal,
state and local laws, regulations and orders including, without limitation,
disclosure, usury, equal credit opportunity, equal employment, fair credit
reporting, lender liability, and other laws, regulations and orders, and the
forms, procedures and practices used by FFB and each of the FFB Subsidiaries, to
the best knowledge of FFB management, are in compliance with such laws,
regulations and orders except to the extent that non-compliance with any such
law, regulation or order would not have a material adverse effect on FFB and the
FFB Subsidiaries, taken as a whole.
(l) BROKER'S AND FINDER'S FEES. Neither FFB nor any of the FFB
Subsidiaries has incurred any obligation or liability, contingent or otherwise,
for any brokers or finders in respect of the matters provided for in this
Agreement.
(m) EMPLOYEE BENEFIT PLANS.
(i) Except for FFB and the FFB Subsidiaries, there are no other
trades or businesses, whether or not incorporated, which, together with FFB
or any FFB Subsidiary, would be deemed to be a "single employer" within the
meaning of Section 414(b), (c) or (m) of the Code.
(ii) The Disclosure Schedule sets forth a true and a complete list of
(A) each employee benefit plan, as defined in Section 3 (3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") that FFB or
any FFB Subsidiary currently maintains or has maintained within the three
year period preceding the Effective Date (the "ERISA Plans"), and (B) each
other plan, arrangement, program and agreement providing employee benefits,
including, but not limited to, deferred compensation, bonuses, severance
pay or fringe benefits, and consulting or employment agreements, that are
presently maintained for the benefit of any current or former employees of
FFB or any FFB Subsidiary (the ERISA Plans and such other plans are
collectively referred to as the "Plans"). FFB has made available to NCBE
copies of all Plans and any related documents or instruments establishing
the Plans or any related trusts
A-10
<PAGE>
or funding arrangements; the most recent determination letter, or any
outstanding request for a determination letter, from the IRS with respect
to each ERISA Plan intended to satisfy the requirements of Section 401(a)
of the Code and a copy of the application on which the determination letter
or request for determination letter is based; fidelity bonds; actuarial
valuations, if applicable, for the most recent three plan years for which
such valuations are available; current summary plan descriptions; annual
returns/reports on Form 5500 and summary annual report for the three most
recent plan years; Form 5310 and any related filings with the IRS, the
Department of Labor ("DOL") or the Pension Benefit Guaranty Corporation
("PBGC") within the last year preceding the date of this Agreement; and any
material correspondence to or from the IRS, DOL or PBGC within the last
three years preceding the Effective Date in connection with any Plan.
(iii) Neither FFB nor any FFB Subsidiary currently maintains or
contributes to, or has ever maintained or contributed to, a "multi-employer
plan" as defined in Section 3(37) of ERISA.
(iv) Except as set forth on the Disclosure Schedule, no Plan provides
benefits, including without limitation death or medical benefits (whether
or not insured), with respect to current or former employees for any period
extending beyond their retirement or other termination of service other
than (A) continuation group health coverage pursuant to Section 4980B of
the Code or applicable state law; (B) benefits, the full cost of which is
borne by the current or former employee (or his or her beneficiary); or
(C) benefits which in the aggregate are not material.
(v) Each ERISA Plan intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS that
the Plan is qualified and satisfies all legal requirements, including the
requirements of the Tax Reform Act of 1986. To the best knowledge of FFB
management, nothing has occurred since the dates of the respective IRS
favorable determination letters that could adversely affect the
qualification of the Plans and their related trusts.
(vi) To the best of FFB's knowledge, all of the Plans, and any related
trust agreement, group annuity contract, insurance policy or other funding
arrangement are in substantial compliance with all applicable laws, rules
and regulations, including without limitation, the rules and regulations
promulgated by the DOL, PBGC or IRS pursuant to the provisions of ERISA and
the Code, and each of such Plans has been administered in substantial
compliance with such requirements and its own terms.
(vii) Neither FFB nor any FFB Subsidiary currently maintains or
contributes to, or has ever maintained or contributed to, a Plan that is
subject to Title IV of ERISA or the minimum funding requirements of Section
412 of the Code.
(viii) Except as set forth on the Disclosure Schedule, none of FFB,
any FFB Subsidiary, any of the Plans, any trust created thereunder, or any
trustee or administrator thereof has engaged in a transaction in connection
with which FFB or any FFB Subsidiary, any of the Plans, any such trust, or
any trustee or administrator thereof, or any party dealing with the Plans
or related trusts could be subject to either a civil penalty assessed
pursuant to Sections 409 or 502 of ERISA or a tax imposed pursuant to
Sections 4975 or 4976 of the Code. Neither FFB nor any FFB Subsidiary is,
or, as a result of any actions, omissions, occurrences or state of facts
existing prior to or at the Effective Time, may become liable for any tax
imposed under Sections 4978 or 4978(B) of the Code.
A-11
<PAGE>
(ix) There are no (A) actions, suits, arbitrations or claims (other
than routine claims for benefits), (B) legal, administrative or other
proceedings or governmental investigations or audits, or (C) complaints to
or by any governmental entity, which are pending, anticipated or
threatened, against any Plan or its assets, or against any Plan fiduciary
or administrator, or against FFB or any FFB Subsidiary or their officers or
employees with respect to any Plan.
(x) Subject to the provisions of Section 7(k) regarding the
disposition of the FFB Profit Sharing Plan, to the best of FFB's knowledge,
each ERISA Plan may be terminated directly or indirectly by the Surviving
Corporation, in its discretion, at any time after the Effective Time, in
accordance with its terms, without any liability to the Surviving
Corporation, NCBE, FFB or any FFB Subsidiary, to any person, entity or
government agency for any conduct, practice or omission of FFB or any FFB
Subsidiary which occurred prior to the Effective Time, except for
liabilities to and the rights of the employees thereunder accrued prior to
the Effective Time, or if later, the time of termination.
(xi) Except as set forth in the Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (A) result in any material payment
(including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee
of FFB or any FFB Subsidiary from FFB or any FFB Subsidiary under any Plan
or otherwise; (B) except with respect to the gain that will be realized by
the profit sharing plan sponsored by the Bank on the exchange of its FFB
Common for NCBE Common, materially increase any benefits otherwise payable
under any Plan; or (C) except as otherwise required by Section 7(k), result
in any acceleration of the time of payment or vesting of any such benefits
to any material extent.
(n) LABOR MATTERS. Neither FFB nor any of the FFB Subsidiaries is a party
to or has in effect any organized labor contract or collective bargaining
agreement.
(o) ENVIRONMENTAL MATTERS.
(i) As used herein, the term "Environmental Laws" shall mean all
local, state and federal environmental, health and safety laws and
regulations and common law standards in all jurisdictions in which FFB and
the FFB Subsidiaries have done business or owned, leased or operated
property, including, without limitation, the Federal Resource Conservation
and Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal
Clean Air Act, and the Federal Occupational Safety and Health Act.
(ii) To the best of FFB's knowledge, neither the conduct nor operation
of FFB or the FFB Subsidiaries nor any condition of any property presently
or previously owned, leased or operated by any of them violates or violated
Environmental Laws or has in any respect that would have a material adverse
effect on the financial condition, results of operations or business of FFB
and the FFB Subsidiaries and no condition has existed or event has occurred
with respect to any of them or any such property that, with notice or the
passage of time, or both, would constitute a violation of Environmental
Laws or obligate (or potentially obligate) FFB or the FFB Subsidiaries to
remedy, stabilize, neutralize or otherwise alter the environmental
condition of any such property where the aggregate cost of such actions
would have a material adverse effect on the financial condition, results of
operations or business of FFB and the FFB Subsidiaries. Except as
otherwise disclosed in the Disclosure Schedule, neither FFB nor any of the
FFB Subsidiaries has received any notice from any person or entity that FFB
or the FFB
A-12
<PAGE>
Subsidiaries or the operation or condition of any property ever owned,
leased or operated by any of them are or were in violation of any
Environmental Laws or that any of them are responsible for the cleanup or
other remediation of any pollutants, contaminants, or hazardous or toxic
wastes, substances or materials at, on or beneath any such property.
(p) LOAN LOSS RESERVES. The reserve for possible loan and lease losses
shown on the Bank's call report as of March 31, 1997, to the best knowledge of
FFB management, is adequate in all material respects to provide for all losses,
net of recoveries relating to loans previously charged off, on loans outstanding
as of the date of such report.
(q) REGULATORY COMPLIANCE. Neither FFB nor any FFB Subsidiary is a party
to any enforcement action instituted by any memorandum of understanding,
agreement, consent agreement or cease and desist order with the DFI, the Federal
Reserve Board, the FDIC or any federal or state regulatory agency, and neither
FFB nor any FFB Subsidiary has been advised by any federal or state regulatory
agency that it is considering taking such action. There is no material
unresolved violation, criticism or exception cited by any such federal or state
regulatory agency with respect to any examination of FFB or any of the FFB
Subsidiaries.
(r) TRUE AND COMPLETE INFORMATION. No representation or warranty made by
FFB or any FFB Subsidiary contained in this Agreement and no statement contained
in the Disclosure Schedule or any certificate, list, exhibit or other instrument
specified in this Agreement, whether heretofore furnished to NCBE or hereinafter
required to be furnished to NCBE, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained therein not misleading.
7. COVENANTS OF NCBE. NCBE covenants and agrees with FFB that it will:
(a) REGULATORY APPROVALS. NCBE shall, at its sole expense, be responsible
for the preparation and filing of all regulatory applications or notices to the
Applicable Governmental Authorities. NCBE shall keep FFB reasonably informed as
to the status of such applications and make available to FFB, upon reasonable
request by FFB from time to time, copies of such applications and any
supplementally filed materials.
(b) REGISTRATION STATEMENT. NCBE shall file with the Commission a
Registration Statement on Form S-4 (the "Registration Statement") relating to
the shares of NCBE Common to be issued pursuant to the Merger, and shall use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
shall comply in all material respects with the provisions of the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgations thereunder, and shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not false or misleading, and at the
time of mailing thereof to the shareholders of FFB, at the time of the FFB
shareholders meeting and at the Effective Time, the Proxy Statement/Prospectus
included as part of the Registration Statement, as amended or supplemented by
any amendment or supplement, shall not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. NCBE shall timely file all documents required to obtain all
necessary permits and approvals under state securities or "Blue Sky" laws that
are required to carry out the transactions contemplated by this Agreement, shall
pay all expenses incident thereto and shall use its reasonable efforts to obtain
such permits and approvals on a timely basis.
A-13
<PAGE>
(c) ACCESS TO INFORMATION. NCBE shall permit FFB reasonable access during
regular business hours to its properties. NCBE shall disclose and make
available to FFB and shall use its best efforts to cause its agents and
authorized representatives to disclose and make available to FFB, all books,
papers and records relating to its assets, properties, operations, obligations
and liabilities, including, but not limited to, all books of account, tax
records, minute books of directors' and shareholders' meetings, organizational
documents, material contracts and agreements, loan files, filings with any
regulatory authority, accountants' workpapers (if available and subject to the
respective independent accountants' consent), litigation files (but only to the
extent that such review would not result in a material waiver of the
attorney-client or attorney work product privileges under the rules of
evidence), plans affecting employees, and any other business activities or
prospects in which FFB may have a reasonable and legitimate interest in
furtherance of the transactions contemplated by this Agreement.
(d) EMPLOYEE-RELATED MATTERS.
(i) Subject to the continuing discretion of the Board of Directors of
the Bank, NCBE expects that, after the Effective Time, the Bank will retain
its current employees, including officers. NCBE will make available to
the employees of the Bank who continue as employees of any subsidiary of
NCBE after the Effective Time substantially the same employee benefits on
substantially the same terms and conditions that NCBE may offer to
similarly situated employees of its banking subsidiaries from time to time.
Employees of the Bank shall become covered by NCBE's welfare benefit plans
at such time(s) as shall be determined by NCBE in its sole discretion.
Until such time as the employees of the Bank become covered by the NCBE
welfare benefit plans, employees of the Bank shall remain covered by the
welfare benefit plans of the Bank, subject to the terms of such plans as in
effect prior to the Effective Time.
(ii) The annual bonus program sponsored by the Bank (the "Bonus
Plan"), as in effect prior to the Effective Time, shall remain in effect
after the Effective Time until the day (the "Termination Date") immediately
preceding the day on which the employees of the Bank are eligible to enter,
as participants, the NCBE 401(K) Employee Savings and Profit Sharing Plan,
as it may be amended from time to time, or any successor plan thereto (the
"NCBE Savings Plan"). For the year ended December 31, 1997, all employees
covered by the Bonus Plan shall, subject to the terms thereof, receive
payments thereunder, in the amount, in the form and at the time provided in
the Bonus Plan. The amount of any bonuses to be paid under the Bonus Plan
for the period commencing January 1, 1998 and ended on the Termination Date
shall be based upon the performance of the Bank for the entire 1998
calendar year; provided, however, the amount of bonus which would otherwise
be paid to participants under the Bonus Plan shall be calculated by
multiplying such payment times a fraction, the numerator of which shall be
the number of days in calendar year 1998 through the Termination Date and
the denominator of which shall be three hundred sixty-five (365). All
payments to be made under the Bonus Plan with respect to the period ended
on the Termination Date shall be made at the same time and in the same form
as such payments would have been made had the Bonus Plan not been
terminated.
(iii)Years of service, as defined in the applicable NCBE employee
welfare plan or the NCBE Savings Plan, of an employee of the Bank prior to
the Effective Time shall be credited, effective as of the date on which
such employee becomes covered by a particular NCBE employee welfare plan or
the NCBE Savings Plan, to each such employee eligible for coverage under
Section 7(d)(i) hereof for purposes of: (I) eligibility under NCBE's
employee welfare benefit plans; and (II) eligibility and vesting, but not
for purposes of benefit accrual or contributions, under the NCBE Savings
Plan. For purposes
A-14
<PAGE>
of the NCBE Employees' Plan for Pensions (the "NCBE Pension Plan")
employees of the Bank will be subject to all eligibility, vesting and
benefit accrual provisions of the NCBE Pension Plan, including years of
service, without credit for service as an employee of the Bank. Employees
of the Bank shall become covered by NCBE's welfare benefit plans at such
time(s) as shall be determined by NCBE in its sole discretion, subject to
Section 7(d)(i) hereof. Those officers and employees of the Bank who
otherwise meet the eligibility requirements of the NCBE Savings Plan, based
upon their age and years of service for the Bank, shall become participants
thereunder on the January 1st or July 1st which coincides with or next
follows the Effective Time. Those officers and employees of the Bank who
do not meet the eligibility requirements of the NCBE Savings Plan on such
date(s) shall become participants thereunder on the first plan entry date
under the NCBE Savings Plan, as the case may be, which coincides with or
next follows the date on which such eligibility requirements are satisfied.
(iv) No full-time employee of the Bank and none of the dependents of
any such employee serving as of the Effective Time shall be subject to any
pre-existing condition exclusions under any of NCBE's welfare benefit plans
if such employee or dependent was covered by the corresponding FFB welfare
benefit plan for more than two hundred seventy (270) consecutive days
immediately preceding the Effective Time.
(v) None of the provisions of this Section 7(d) shall confer upon any
employee of FFB or the Bank any right to be employed or retained in the
employment of the Bank.
(e) ELECTION OF DIRECTOR. Within thirty (30) days after the Effective
Time, NCBE shall expand its Board of Directors by one member and elect Richard
F. Welp to fill such vacancy.
(f) BOARD OF DIRECTORS AFTER THE EFFECTIVE TIME. For a period of one (1)
year after the Effective Time, NCBE shall not take any action to remove from
office any of the persons who are serving as directors of the Bank at the
Effective Time.
(g) OPERATION OF THE BANK AFTER THE EFFECTIVE TIME. For a period of one
(1) year after the Effective Time, NCBE shall allow the Bank to continue its
banking operations, substantially unchanged, under its charter and name as are
in effect at the Effective Time.
(h) EMPLOYMENT CONTRACTS. NCBE shall honor all contracts in effect as of
the date of this Agreement and that remain in effect as of the Effective Time,
relating to the compensation of any officers and employees of FFB or the Bank.
(i) RULE 144(c) INFORMATION. For not less than the one (1) year period
following the Effective Time, NCBE shall make available adequate current public
information about itself as that terminology is used and as required by Rule
144(c) of the Commission under the Securities Act.
(j) TERMS OF NCBE COMMON. NCBE shall not adopt or implement any amendment
to its Articles of Incorporation or enter into any reorganization or
recapitalization which would affect in any manner the terms and provisions of
the shares of NCBE Common or the rights of the shareholders of such shares or
reclassify the NCBE Common from the date of this Agreement until the Effective
Time. The foregoing covenant shall not prevent NCBE from declaring any stock
dividends or stock splits with respect to the NCBE Common prior to the Effective
Time.
A-15
<PAGE>
(k) DISPOSITION OF PROFIT SHARING PLAN. As of the Effective Time, all
participants with an account balance under the profit sharing plan sponsored by
the Bank (the "Profit Sharing Plan") shall become fully vested in such accounts
regardless of their vested position under the Profit Sharing Plan. The Profit
Sharing Plan shall be terminated effective as of the first June 30th or
December 31st which coincides with or immediately follows the Effective Time.
In connection therewith, NCBE shall cause the Bank to file an application with
the IRS for a determination letter to the effect that the termination of the
Profit Sharing Plan will not affect its tax qualified status. The Bank may make
a contribution to the Profit Sharing Plan for the 1997 plan year and, if
applicable, the short plan year ended June 30, 1998; provided, however, such
contribution(s) shall be calculated by the Bank on a basis which is consistent
with the method it has used to calculate contributions to the Profit Sharing
Plan for prior plan years. As soon as practicable following the issuance of a
favorable determination letter by the IRS with respect to the termination of the
Profit Sharing Plan, but not earlier than the effective date of the termination
thereof, participants' benefits under the Profit Sharing Plan shall be
distributed to them. Such distributions (or the cash proceeds thereof) may be
rolled over to the NCBE Savings Plan as provided by the terms of the NCBE
Savings Plan. The Bank shall be responsible for the termination of the Profit
Sharing Plan and for making application to the IRS for a determination letter to
the effect that the termination of the Profit Sharing Plan will not adversely
affect its tax-qualified status. NCBE also agrees that the Bank shall be
responsible for and shall pay any and all costs and expenses associated with
such termination and determination letter.
8. AGREEMENTS WITH RESPECT TO CONDUCT OF FFB AND THE FFB SUBSIDIARIES
PRIOR TO THE CLOSING. FFB covenants and agrees with NCBE that FFB and each of
the FFB Subsidiaries will:
(a) ORDINARY COURSE, INSURANCE, PRESERVATION OF BUSINESS, ET CETERA. FFB
and each of the FFB Subsidiaries will each, except as otherwise agreed to in
writing by NCBE:
(i) carry on its business only in the ordinary course and consistent
with the respective policies, procedures and practices of FFB and each FFB
Subsidiary in substantially the same manner as heretofore conducted;
(ii) except as they may terminate in accordance with their terms or
in accordance with the terms of this Agreement, keep in full force and
effect, and not cause a default of any of its obligations under, any
Material Contracts;
(iii) keep in full force and effect the insurance coverage in effect
on the date hereof to the extent that such insurance continues to be
reasonably available;
(iv) use its best efforts to maintain, renew, keep in full force and
effect and preserve its business organization and material rights and
franchises, permits and licenses and to retain its present employee force
so that it will be available to NCBE on and after the Effective Time, and
to maintain its existing, or substantially equivalent, credit arrangements
with banks and other financial institutions and to use its best efforts to
maintain the continuance of its general customer relationships; and
(v) take such action as may be necessary to maintain, preserve, renew
and keep in full force and effect its corporate existence and material
rights and franchises; and duly comply in all material respects with all
laws applicable to it and to the conduct of its business.
A-16
<PAGE>
(b) NOTICE. FFB will promptly notify NCBE of any event of which hereafter
becomes known to FFB management which may reasonably have a material adverse
effect on the financial condition, operations, business or assets of FFB and the
FFB Subsidiaries or if FFB determines that it may be unable to fulfill the
conditions set forth in Section 10 or 11 hereof.
(c) PROHIBITED ACTION WITHOUT APPROVAL. Neither FFB nor any of the FFB
Subsidiaries will do the following, except with the prior written consent of
NCBE, which consent will not be unreasonably withheld, and as otherwise required
or permitted by this Agreement:
(i) incur or agree to incur any obligation or liability (absolute or
contingent) other than the taking of deposits and other liabilities
incurred in the ordinary course of business and consistent with prior
practice, and liabilities arising out of, incurred in connection with, or
related to the consummation of this Agreement; make or permit any amendment
or termination of any Material Contract; acquire (by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership, limited
liability company or other business organization or division or substantial
part thereof; sell or otherwise dispose of any substantial part of its
assets; enter into, dispose or divest itself of any joint venture or
partnership or cause any business entity to become a subsidiary or
affiliate; sell or otherwise dispose of any real property owned or operated
by FFB or any FFB Subsidiary other than the sale of one-half of the parcel
of real estate adjacent to the Monticello branch which is subject to an
outstanding option to purchase identified in the Disclosure Schedule;
enhance, expand, modify, replace or alter any computer or data processing
system owned, leased or licensed by FFB or any FFB Subsidiary (including
any software associated with any such computer or system); make, originate
or otherwise acquire one or more loans, or one or more loan commitments for
one or more loans, or one or more lines of credit, in an aggregate amount
in excess of $1,000,000 to any person; or enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
or
(ii) make any capital expenditure, except for ordinary repairs,
renewals and replacements in excess of $25,000 individually or $100,000 in
the aggregate, except for the completion of the automated teller machine
facility to be located at 1702 North Main Street, Huntingburg, Indiana; or
(iii) issue, sell, redeem or acquire for value, or agree to do so,
any debt securities or any shares of the capital stock or other equity
securities, options or other ownership interests of FFB or of any of the
FFB Subsidiaries, or declare, issue or pay any dividend or other
distribution of assets, whether consisting of money, other personal
property, real property or other things of value, to its stockholders other
than (A) cash dividends on the FFB Common that are equivalent (for this
purpose equivalency shall be determined on the basis of converting shares
of FFB Common into NCBE Common as set forth in Section 3(a) hereof) in
amount and frequency to cash dividends hereafter paid by NCBE on shares of
NCBE Common; provided, however, that FFB and NCBE shall cooperate with each
other to coordinate the record and payment dates of their respective
dividends for the quarter in which the Effective Time occurs, such that FFB
shareholders shall receive a quarterly dividend from either FFB or NCBE but
not both during or with respect to such quarter, (B) cash dividends payable
by any FFB Subsidiary which is wholly owned by FFB to FFB or another FFB
Subsidiary which is wholly owned by FFB, (C) sinking fund or other
mandatory payments required under the terms of any indenture or loan
agreement or repurchases of any outstanding debt securities to be applied
against any such sinking fund payments in amounts which do not exceed, with
respect to any series or class of debt securities, the sinking fund
payments required within the next twelve-month period, (D) the payment of
any debt security upon the
A-17
<PAGE>
maturity thereof, and (E) obligations or liabilities permitted to be
incurred pursuant to Section 8(c)(i) hereof; or
(iv) (A) sell or pledge or otherwise encumber any stock owned by it
in any FFB Subsidiary; (B) amend its articles of incorporation or by-laws
or permit any FFB Subsidiary to amend its articles of incorporation,
by-laws or any other constitutive, organic or governing document;
(C) split, combine or reclassify any shares of its capital stock; or
(D) enter into any agreement, commitment or arrangement with respect to any
of the foregoing; or
(v) enter into or amend any employment agreement; or
(vi) enter into any transactions other than in the ordinary course of
business; or
(vii) compromise or otherwise settle or adjust any assertion or claim
of a deficiency in taxes (or interest thereon or penalties in connection
therewith) or file any appeal from an asserted deficiency, except in a form
previously approved by NCBE, which approval shall not be unreasonably
withheld, or file any federal or state tax return before furnishing a copy
to NCBE and affording NCBE an opportunity to consult with the filing
entity;
(viii) open any new office or close any current office of the Bank or
any of the FFB Subsidiaries at which business is conducted other than the
automated teller machine facility to be located at 1702 North Main Street,
Huntingburg, Indiana; or
(ix) knowingly take any action that would adversely affect the ability
of the Merger to be accounted for using the pooling-of-interests method.
(d) NO SOLICITATION.
(i) Neither FFB nor any of the FFB Subsidiaries nor any officer,
director or any representative thereof shall solicit or authorize the
solicitation of, or, unless FFB's Board of Directors has reasonably
determined in good faith based upon the written advice of counsel that the
failure to do so would cause the Board of Directors to breach their
fiduciary duties under applicable law, enter into or authorize any
discussions with any third party concerning, or furnish or authorize the
furnishing of any confidential information relating to FFB or any of the
FFB Subsidiaries to any third party for the purpose of studying,
considering, soliciting or inducing any offer or possible offer by any such
third party or any other third party to acquire FFB or any or all of the
capital stock, other equity securities or other ownership interests, or all
or substantially all of the assets, of FFB or any of the FFB Subsidiaries.
FFB will promptly communicate to NCBE the terms of any proposal or contract
it may receive with respect to any such transactions.
(ii) Upon the execution of this Agreement, FFB shall immediately
terminate all discussions then existing with any third parties regarding
any possible offer to acquire FFB or any ownership interest whatsoever in
FFB and promptly arrange for the return from or destruction by any such
third party or such third party's authorized representatives of all
documents provided by FFB or its authorized representatives pursuant to any
applicable confidentiality agreement between FFB and any such third party
or otherwise.
A-18
<PAGE>
(e) LIABILITIES. FFB and the FFB Subsidiaries shall pay or discharge
their current liabilities when the same become due and payable, except for such
liabilities as may be subject to a good faith dispute or counterclaim.
(f) GOODWILL. Neither FFB nor any FFB Subsidiary shall enter into any
transaction which will create goodwill on its books and records under GAAP.
(g) INSIDER LENDING. The Bank shall not change or modify any of its
current practices relating to the lending of money, secured or unsecured, to its
affiliated persons, including but not limited to its directors, officers and
employees.
(h) NO VIOLATION. Neither FFB nor any FFB Subsidiary will take any action
which knowingly violates any statute, code, ordinance, rule, regulation or
judgment, order, writ, arbitral award, injunction or decree of any court,
governmental agency or body or arbitrator, domestic or foreign, having
jurisdiction over its properties.
(i) ACCOUNTING. FFB and each FFB Subsidiary will maintain its books,
accounts and records in accordance with GAAP. Neither FFB nor any FFB
Subsidiary shall make any change in any method of accounting or accounting
practice, or any change in the method used in allocating income, charging costs
or accounting for income, except as may be required by law, regulation or GAAP.
Neither FFB nor any FFB Subsidiary shall change any practice or policy with
respect to the charging off or loans or the maintenance of its reserve for
possible loan losses, except as required by law, regulation or GAAP.
9. ADDITIONAL AGREEMENTS. FFB further covenants and agrees with NCBE
that it will:
(a) CONTINUING ACCESS TO INFORMATION. Through the Effective Time, FFB
shall permit NCBE and its authorized representatives reasonable access during
regular business hours to FFB's properties and those of the FFB Subsidiaries.
FFB shall make its and the FFB Subsidiaries' directors, management and other
employees and agents and authorized representatives (including counsel and
independent public accountants) available to confer with NCBE and its authorized
representatives at reasonable times and upon reasonable request, and FFB shall,
and shall cause the FFB Subsidiaries to, disclose and make available to NCBE,
and shall use its best efforts to cause its agents and authorized
representatives to disclose and make available to NCBE, all books, papers and
records relating to the assets, properties, operations, obligations and
liabilities of FFB and the FFB Subsidiaries, including, but not limited to, all
books of account, tax records, minute books of directors' and shareholders'
meetings, organizational documents, material contracts and agreements, loan
files, filings with any regulatory authority, accountants' workpapers (if
available and subject to the respective independent accountants' consent),
litigation files (but only to the extent that such review would not result in a
material waiver of the attorney-client or attorney work product privileges under
the rules of evidence), plans affecting employees, and any other business
activities or prospects in which NCBE may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by this Agreement.
(b) MANAGEMENT REPORTS. FFB shall promptly provide to NCBE copies of any
reports to the Board of Directors of FFB or the Bank or any committee thereof
and minutes of all meetings of the Board of Directors of FFB and the Bank and
each committee thereof.
(c) NOTIFICATION OF CHANGE. FFB shall promptly notify NCBE of any
material change in the ordinary course of business or in the operation of the
properties of FFB or any of the FFB Subsidiaries and of any
A-19
<PAGE>
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of litigation involving FFB or the FFB Subsidiaries which is material to, or
which might have a material adverse effect on, or of any breach by FFB or any
FFB Subsidiary of any representation, warranty, covenant or agreement set forth
in this Agreement, and will keep NCBE promptly and fully informed of such
events.
(d) INFORMATION FOR REGULATORY FILINGS. Upon request by NCBE, FFB shall
promptly furnish NCBE with any information within its possession which relates
to FFB or the FFB Subsidiaries and which is required under any applicable law or
regulation for inclusion in any filing that NCBE is required to make with any
Applicable Governmental Authority. FFB covenants and agrees that all
information so furnished shall be true and correct in all material respects
without omission of any material fact required to be stated therein or necessary
to make the information stated therein not misleading.
(e) RESTRICTION ON RESALES. FFB shall obtain and deliver to NCBE, at
least thirty-one (31) days prior to the Closing, the signed agreement, in the
form of Exhibit A hereto, of each person who may reasonably be deemed an
"affiliate" of FFB within the meaning of such term as used in Rule 145 under the
Securities Act, regarding compliance with the provisions of such Rule 145.
(f) SHAREHOLDER APPROVAL. FFB shall cause to be duly called and held a
special meeting of the holders of FFB Common for submission of this Agreement
and the Merger for approval of such shareholders as required by the IBCL. In
connection with such shareholders meeting, (i) FFB shall cooperate and assist
NCBE in preparing and filing the Registration Statement, and any amendments or
supplements thereto, including a Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") with the SEC and applicable state securities authorities,
and FFB shall mail the Proxy Statement/Prospectus to its shareholders; (ii) FFB
shall furnish NCBE all information within its possession concerning itself that
NCBE may reasonably request in connection with such Proxy Statement/Prospectus;
and (iii) the Board of Directors of FFB (subject to compliance with its
fiduciary duties as advised in writing by counsel) shall recommend to its
shareholders the approval of this Agreement and the Merger contemplated hereby
and use its best efforts to obtain such approval.
10. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES. The respective obligations
of each party to effect the Merger is subject to the satisfaction or waiver on
or prior to the Effective Time of the following conditions:
(a) SHAREHOLDER APPROVAL. The Merger shall have been approved by the
holders of a majority of the outstanding shares of FFB Common.
(b) REGULATORY APPROVAL. The transactions contemplated by this Agreement
shall have been approved by all Applicable Governmental Authorities. Such
approvals, and the transactions contemplated hereby, shall not have been
contested by any federal or state regulatory authority.
(c) NO ACTION TO PREVENT CONSUMMATION.
(i) No action or proceeding shall have been instituted before a court
or other governmental body, agency or authority or other person to restrain
or prohibit the transactions contemplated by this Agreement or to obtain
damages or other relief in connection with the execution of this Agreement
or the consummation of the transactions contemplated hereby;
A-20
<PAGE>
(ii) No governmental agency shall have notified either party in
writing to the effect that consummation of the transactions contemplated by
this Agreement would constitute a violation of any law and that it intends
to commence proceedings to restrain consummation of the Merger; and
(iii) No statute, rule, regulation or policy shall have been
promulgated or enacted by any governmental or regulatory agency of
competent jurisdiction which shall prevent or declare the Merger illegal.
(d) REGISTRATION STATEMENT. The Registration Statement shall have become
effective under the Securities Act and shall not be subject of any stop order or
proceeding seeking a stop order.
(e) BLUE SKY LAWS. NCBE shall have received all state securities or "Blue
Sky" permits and other authorizations to issue the shares of NCBE Common
comprising the Merger Consideration.
11. CONDITIONS TO OBLIGATIONS OF NCBE. The obligation of NCBE to effect
the Merger is subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions:
(a) STATUS AS OF CLOSING. At and as of the Closing:
(i) The representations and warranties of FFB contained in this
Agreement shall be true as though made at and as of the Closing;
(ii) FFB shall have performed and satisfied or otherwise complied with
all covenants made by it in this Agreement which are to be performed on or
prior to the Closing;
(iii) There shall not have occurred any material adverse change in the
business, assets, properties, financial condition or results of operations
of FFB and the FFB Subsidiaries; and
(iv) There shall be delivered to NCBE a certificate (dated the Closing
and signed by the chief executive officer of FFB) stating that to the best
of his knowledge the conditions set forth in clauses (i) through (iii)
above have been satisfied.
(b) ATTORNEY'S OPINION. NCBE shall have received an opinion, dated the
Closing, of Krieg DeVault Alexander & Capehart, counsel for FFB, in
substantially the form of Exhibit B attached hereto.
(c) POOLING-OF-INTERESTS. In the opinion of NCBE, after consultation with
its independent auditors, the Merger shall qualify for the pooling-of-interests
method under Accounting Principles Board Opinion No. 16 if consummated in
accordance with this Agreement.
12. CONDITIONS TO OBLIGATIONS OF FFB. The obligation of FFB to effect the
Merger is subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions:
(a) TRUE REPRESENTATIONS AND WARRANTIES. All representations and
warranties of NCBE contained in this Agreement shall be true as though made at
and as of the Closing, and NCBE shall have performed and satisfied in all
material respects all covenants made by it in this Agreement which are to be
performed on or prior to the Closing, and at the Closing there shall be
delivered to FFB a certificate (dated the Closing and
A-21
<PAGE>
signed by the President of NCBE) stating that to the best of his knowledge such
conditions have been satisfied.
(b) ATTORNEY'S OPINION. FFB shall have received an opinion, dated the
Closing, of Baker & Daniels, counsel for NCBE, in substantially the form of
Exhibit C attached hereto.
(c) FEDERAL TAX OPINION. FFB shall have received an opinion of its
counsel, Krieg DeVault Alexander & Capehart, to the effect that, if the Merger
is consummated in accordance with the terms hereof, the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
(d) FAIRNESS OPINION. FFB shall have received, as of the date of mailing
the Proxy Statement/Prospectus contained in the Registration Statement, an
opinion from Professional Bank Services, Inc. to the effect that the Merger is
fair, from a financial viewpoint, to the shareholders of FFB.
13. INFORMATION. The parties acknowledge the confidential and proprietary
nature of the "Information" (as hereafter defined) which has heretofore been
exchanged and which will be received from each other hereunder and agree to hold
and keep the same confidential. Such Information shall include any and all
financial, technical, commercial, marketing, customer or other information
concerning the business, operations and affairs of a party that may be provided
to the other, irrespective of the form of the communication, by such party's
employees or authorized representatives. Such Information shall not include
information which is or becomes generally available to the public other than as
a result of a disclosure by a party or its authorized representatives in
violation of this Agreement. The parties agree that the Information will be
used solely for the purposes contemplated by this Agreement and that such
Information will not be disclosed to any person other than employees and
authorized representatives of a party who are directly involved in evaluating
the Merger. The Information shall not be used in any way detrimental to a
party, including use directly or indirectly in the conduct of the other party's
business or any business or enterprise in which such party may have an interest,
now or in the future, and whether or not now in competition with such other
party. Upon termination of this Agreement without the Merger becoming
effective, each party shall: (a) deliver to the other originals and all copies
of all Information made available to such party; (b) not retain any copies,
extracts or other reproductions in whole or in part of such Information; and
(c) destroy all memoranda, notes and other writings prepared by any party or its
authorized representatives based on the Information.
14. PAYMENT OF EXPENSES. Each party hereto shall pay its own fees and
expenses incident to preparing for, entering into, and carry out this Agreement
and the transactions contemplated hereby.
15. TERMINATION OF AGREEMENT. Notwithstanding any provision to the
contrary herein, and notwithstanding the fact that the shareholders of FFB have
approved this Agreement, this Agreement may be terminated at any time on or
prior to the Closing:
(a) MUTUAL CONSENT. By mutual written consent of a majority of the
members of each of the Boards of Directors of FFB and NCBE, or
(b) OTHERWISE. (i) By the Board of Directors of FFB, upon written notice
to NCBE, if by February 28, 1998, any of the conditions set forth in Sections 10
or 12 shall not have been satisfied; or (ii) by the Board of Directors of NCBE,
upon written notice to FFB, if by February 28, 1998, any of the conditions set
forth in Sections 10 or 11 shall not have been satisfied.
A-22
<PAGE>
(c) EFFECT OF TERMINATION. Upon termination of this Agreement by either
NCBE or FFB pursuant to this Section 15, there shall be no liability by reason
of this Agreement or the termination thereof on the part of NCBE or FFB or the
respective directors, officers, employees, agents or shareholders of either of
them, unless such termination results from a party's intentional or reckless
misrepresentation or intentional or reckless breach of any covenant contained
herein.
16. PUBLICITY AND REPORTS. NCBE and FFB shall coordinate all publicity
relating to the transactions contemplated by this Agreement and, except as
otherwise required by law, neither party shall issue any press release,
publicity statement or other public notice relating to this Agreement or any of
the transactions contemplated hereby without obtaining the prior written consent
of the other, which consent shall not be unreasonably withheld.
17. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as set
forth in the following sentence, none of the representations, warranties or
covenants of the parties shall survive the Effective Time or the earlier
termination of this Agreement. The covenants contained in Sections 4, 7(d),
7(e), 7(f), 7(g), 7(h), 7(i) and 14 shall survive the Effective Time or the
earlier termination of this Agreement.
18. NOTICES. Any notice of communication required or permitted hereunder
shall be sufficiently given if in writing and (a) delivered in person; (b) sent
by facsimile transmission (with confirmation of receipt by the recipient) or
express delivery service; or (c) mailed by certified or registered mail, postage
prepaid, as follows:
If to NCBE, addressed to:
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, Indiana 47705-0868
Attn: Robert A. Keil
Fax No. (812) 464-9825
With a copy addressed to:
Baker & Daniels
300 North Meridian Street, Suite 2700
Indianapolis, Indiana 46204-1782
Attn: David C. Worrell
Fax No. (317) 237-1000
If to FFB, addressed to:
Fourth First Bancorp
Fourth and Main Streets
Huntingburg, Indiana 47542-9607
Attn: Eric R. Olinger
Fax No. (812) 683-2129
A-23
<PAGE>
With a copy addressed to:
Krieg DeVault Alexander & Capehart
One Indiana Square, Suite 2800
Indianapolis, Indiana 46204
Attn: Michael E. Williams
Fax No. (317) 636-1507
19. MISCELLANEOUS.
(a) ASSIGNMENT. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assignable by either party, in whole or in part,
without the consent of the other party, and any attempted assignment in
violation of this prohibition shall be null and void.
(b) LAW GOVERNING. This Agreement will be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Indiana.
(c) COUNTERPARTS. This Agreement may be executed in several counterparts
and one or more separate documents, all of which together shall constitute one
and the same instrument with the same force and effect as though all of the
parties had executed the same documents.
(d) AMENDMENT AND WAIVER. Any of the terms or conditions of this
Agreement may be waived, amended or modified in whole or in part at any time
before or after the approval of this Agreement by the shareholders of FFB, to
the extent authorized by applicable law, by a writing signed by FFB and NCBE.
(e) ENTIRE AGREEMENT. All exhibits and the Disclosure Schedule referred
to in this Agreement are integral parts hereof, and this Agreement, such
exhibits and Disclosure Schedule, constitute the entire agreement among the
parties hereto with respect to the matters contained herein and therein, and
supersede all prior agreements and understandings between the parties with
respect thereto.
(f) REMEDIES. Subject to the terms hereof, in the event of any willful
breach of this Agreement in any material respect by any of the parties hereto,
any other party hereto damaged shall have all the rights, remedies and causes of
action available at law or in equity.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
NATIONAL CITY BANCSHARES, INC.
By:/s/ ROBERT A. KEIL
-------------------------
Robert A. Keil, President
ATTEST:
/s/ HAROLD A. MANN
- -------------------------
Harold A. Mann, Secretary
FOURTH FIRST BANCORP
By: /s/ LEE RAY OLINGER
------------------------------
Lee Ray Olinger, President
ATTEST:
/s/ GLEN L. SAKEL
- ------------------------------
Glen L. Sakel, Secretary
A-24
<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
Gentlemen:
In connection with the merger (the "Merger") of Fourth First Bancorp, an
Indiana corporation ("FFB"), with and into National City Bancshares, Inc., an
Indiana corporation ("NCBE"), pursuant to the Agreement and Plan of Merger dated
as of August 6, 1997 (the "Agreement"), I have been advised that I may be deemed
to be an "affiliate" within the meaning of Rule 145 promulgated by the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended (the "1933 Act"), for the purposes of any resales of shares of the
common stock, without par value ($1.00 stated value per share), of NCBE to be
issued to me in the Merger (the "Shares"). I have also been advised that I may
be deemed an "affiliate" of FFB for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board. Based on such advice and in order to induce NCBE and FFB to
cause the Merger to be consummated, I hereby represent and warrant to, and agree
with NCBE and FFB as follows:
A. I hereby consent to the placing of a legend on the certificate or
certificates evidencing the Shares referring to the issuance thereof in a
transaction to which Rule 145 under the 1933 Act is applicable and to the
giving of stop transfer instructions to the transfer agent for the Shares
with respect to such certificate or certificates. The legend will state in
substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933 applies
and may be sold or otherwise transferred only in compliance with the
terms of such Rule.
B. I understand that NCBE is under no obligation to take any action
to facilitate the sale, transfer, or other disposition by me or on my
behalf of any of the Shares.
C. In the event of any sale or transfer of any of the Shares in a
transaction not involving a sale pursuant to Rule 145 or a sale in a
registered public offering, I will obtain from each transferee of the
Shares in such transaction a letter agreement substantially similar hereto,
or a letter containing such other information reasonably required by NCBE
to evidence an exception from the applicable registration requirements of
federal or state securities laws, which is binding and enforceable by NCBE
against the transferee.
It is understood and agreed that the legend set forth in Paragraph A above
shall be removed, and the related stock transfer restrictions shall be lifted
forthwith (i) if the sale or other transfer by me or on my behalf of my Shares
shall have been registered under the 1933 Act, (ii) if the sale or other
transfer by me or on my behalf of my Shares is not so registered, such sale is
exempt from the registration requirements of the 1933 Act, or (iii) upon the
expiration of the period specified in Rule 145(d)(3) under the 1933 Act, as it
may be amended from time to time.
I further represent to and covenant with NCBE that I have not, within the
preceding 30 days, sold, transferred or otherwise disposed of any shares of FFB
Common Stock held by me and that I will not sell, transfer or otherwise dispose
of any of the Shares received by me in the Merger until after such time as
A-25
<PAGE>
results covering at least 30 days of combined operations of FFB and NCBE have
been published by NCBE, in the form of a quarterly earnings report, an effective
registration statement filed with the SEC, a report to the SEC on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
combined results of operations.
Very truly yours,
------------------------------
A-26
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL FOR FFB
Capitalized terms used and not otherwise defined herein have the meanings
given them in the Plan and Agreement of Merger (the "Agreement").
1. FFB is a corporation organized and validly existing under the laws of
the State of Indiana and is registered as a bank holding company with the
Federal Reserve Board under the Bank Holding Company Act of 1956, as amended.
The Bank is an Indiana banking corporation duly organized and validly existing
under the Indiana Financial Institutions Act. To our knowledge, there are no
FFB Subsidiaries other than the Bank.
2. FFB and each of the FFB Subsidiaries have all requisite corporate
power and authority necessary to carry out their respective businesses as
currently conducted.
3. The authorized capital stock of FFB consists of 250,000 shares of FFB
common stock, without par value (stated value $1.00 per share). Based on FFB's
stock transfer records, on the date hereof, there are 142,738 shares of FFB
Common issued and outstanding and 17,262 shares in the treasury.
4. The authorized capital stock of the Bank consists of 85,000 shares of
common stock, $10.00 par value per share. Based on the Bank's stock transfer
records, on the date hereof, there are 85,000 shares of Bank Stock issued and
outstanding, all of which are owned of record by FFB.
5. All the outstanding shares of FFB Common and Bank Stock have been duly
authorized and validly issued and are fully paid and non-assessable and, to our
knowledge, were not issued in violation of any preemptive rights.
6. The Agreement has been duly executed and delivered by FFB and
constitutes a valid and binding obligation of FFB, enforceable against FFB in
accordance with its terms, except to the extent limited by general principles of
equity and by bankruptcy, insolvency, reorganization, liquidation, fraudulent
conveyance, moratorium, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights.
7. All consents or approvals of any Applicable Governmental Authorities
required to be obtained by FFB in connection with the Merger have been obtained.
8. The execution and delivery by FFB of, and the performance by FFB of
its agreements in, the Agreement do not: (a) violate its articles of
incorporation or by-laws or the articles of incorporation or by-laws of the
Bank, or (b) to our knowledge, and except as set forth in the Disclosure
Schedule, violate, result in a breach of or constitute a default under any
material contract, agreement or other instrument to which FFB is a party or by
which its properties are bound.
9. The meeting of shareholders of FFB held on ________ __, 1997, was duly
held in accordance with all applicable requirements, and the Agreement was duly
adopted by the affirmative vote of the holders of
a majority of the outstanding shares of FFB Common, which is the only vote on
the part of the holders of any class of FFB capital stock required in order to
approve the Merger.
A-27
<PAGE>
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR NCBE
Capitalized terms used and not otherwise defined herein have the meanings
given them in the Plan and Agreement of Merger (the "Agreement").
1. NCBE is a corporation organized and validly existing under the laws of
Indiana and is registered as a bank holding company with the Federal Reserve
Board under the Bank Holding Company Act of 1956, as amended.
2. The authorized capital stock of NCBE consists of 20,000,000 shares of
common stock, without par value (stated value $1.00 per share). All shares of
NCBE Common issued to shareholders of FFB pursuant to the Merger will be, when
so issued, duly authorized, fully paid and non-assessable.
3. The Agreement has been duly executed and delivered by each NCBE and
constitutes a valid and binding obligation of NCBE, enforceable against NCBE in
accordance with its terms, except to the extent limited by general principles of
equity and by bankruptcy, insolvency, reorganization, liquidation, fraudulent
conveyance, moratorium, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights.
4. All consents or approvals of any Applicable Governmental Authorities
required to be obtained by NCBE in connection with the Merger have been
obtained.
5. The execution and delivery by NCBE of, and the performance by NCBE of
its agreements in, the Agreement do not: (a) violate its articles of
incorporation or by-laws; or (b) to our knowledge, violate, result in a breach
or constitute a default under any material contract, agreement or other
instrument to which NCBE is a party or by which its respective properties are
bound.
6. Upon the filing and acceptance of the Articles of Merger under the
IBCL as required by the Agreement, the Merger will become effective under the
laws of the State of Indiana.
7. The Registration Statement has become effective under the Securities
Act and, to our knowledge, is not the subject of any stop order or proceedings
seeking a stop order.
8. All state securities or "Blue Sky" permits and other authorizations
required in connection with the issuance of the shares of NCBE Common in the
Merger have been received.
A-28
<PAGE>
APPENDIX B
[Date of Prospectus/Proxy Statement]
Board of Directors
Fourth First Bancorp
4th and Main Street
Huntingburg, Indiana 47542-9607
Dear Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial perspective, to the common shareholders of Fourth First Bancorp,
Huntingburg, Indiana (the "Company") of the proposed merger of the Company with
National City Bancshares, Inc., Evansville, Indiana ("NCBE"). In the proposed
merger, Company shareholders will receive an aggregate of between 757,142 and
883,333 NCBE common shares for all 142,738 Company common shares outstanding as
further defined in the Agreement and Plan of Merger between NCBE and the Company
(the "Agreement"). On August 1, 1997, the proposed consideration to be received
represents an aggregate value of $32,462,463 or $227.43 per Company common share
based on the average of the bid / ask price for NCBE common stock of $42.875 as
quoted on the National Association of Securities Dealers Automated Quotation
System.
Professional Bank Services, Inc. ("PBS") is a bank consulting firm and as part
of its investment banking business is continually engaged in reviewing the
fairness, from a financial perspective, of bank acquisition transactions and in
the valuation of banks and other businesses and their securities in connection
with mergers, acquisitions, estate settlements and other purposes. We are
independent with respect to the parties of the proposed transaction.
For purposes of this opinion, PBS performed a review and analysis of the
historic performance of the Company and its wholly owned subsidiary The First
Bank of Huntingburg, Huntingburg, Indiana (the "Bank") contained in: (i) March
31, 1997 and December 31, 1996 Consolidated Reports of Condition and Income
filed by the Bank with the Federal Reserve; (ii) December 31, 1996 and 1995
audited annual reports of the Company; and (iii) March 31, 1997 Uniform Bank
Performance Report of the Bank. We have reviewed and tabulated statistical data
regarding the loan portfolio, securities portfolio and other performance ratios
and statistics. Financial projections were prepared and analyzed as well as
other financial studies, analyses and investigations as deemed relevant for the
purposes of this opinion. In review of the aforementioned information, we have
taken into account our assessment of general market and financial conditions,
our experience in other transactions, and our knowledge of the banking industry
generally. We have also taken into consideration other offers received by the
Company.
We have not compiled, reviewed or audited the financial statements of the
Company or NCBE, nor have we independently verified any of the information
reviewed; we have relied upon such information as being
B-1
<PAGE>
complete and accurate in all material respects. We have not made independent
evaluation of the assets of the Company or NCBE.
Based on the foregoing and all other factors deemed relevant, it is our opinion
as investment bankers, that, as of the date hereof, the consideration proposed
to be received by the shareholders of the Company under the Agreement is fair
and equitable from a financial perspective.
Very truly yours,
/s/ Professional Bank Services, Inc.
B-2
<PAGE>
APPENDIX C
EXCERPTS OF THE INDIANA BUSINESS CORPORATION LAW
(DISSENTERS' RIGHTS)
23-1-44-1 "CORPORATION" DEFINED
Sec. 1. As used in this chapter, "corporation" means the issuer of
the shares held by a dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer.
23-1-44-2 "DISSENTER" DEFINED
Sec. 2. As used in this chapter, "dissenter" means a shareholder who
is entitled to dissent from corporate action under section 8 of this chapter and
who exercises that right when and in the manner required by sections 10
through 18 of this chapter.
23-1-44-3 "FAIR VALUE" DEFINED
Sec. 3. As used in this chapter, "fair value", with respect to a
dissenter's shares, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
23-1-44-4 "INTEREST" DEFINED
Sec. 4. As used in this chapter, "interest" means interest from the
effective date of the corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank loans or, if none,
at a rate that is fair and equitable under all the circumstances.
23-1-44-5 "RECORD SHAREHOLDER" DEFINED
Sec. 5. As used in this chapter, "record shareholder" means the
person in whose name shares are registered in the records of a corporation or
the beneficial owner of shares to the extent that treatment as a record
shareholder is provided under a recognition procedure or a disclosure procedure
established under IC 23-1-30-4.
23-1-44-6 "BENEFICIAL SHAREHOLDER" DEFINED
Sec. 6. As used in this chapter, "beneficial shareholder" means the
person who is a beneficial owner of shares held by a nominee as the record
shareholder.
C-1
<PAGE>
23-1-44-7 "SHAREHOLDER" DEFINED
Sec. 7. As used in this chapter, "shareholder" means the record
shareholder or the beneficial shareholder.
23-1-44-8 RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
Sec. 8. (a) A shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholder's shares in the event of, any of
the following corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party if:
(A) shareholder approval is required for the merger by
IC 23-1-40-3 or the articles of incorporation; and
(B) the shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and
regular course of business, if the shareholder is entitled to vote on
the sale or exchange, including a sale in dissolution, but not
including a sale pursuant to court order or a sale for cash pursuant
to a plan by which all or substantially all of the net proceeds of the
sale will be distributed to the shareholders within one (1) year after
the date of sale.
(4) The approval of a control share acquisition under
IC 23-1-42.
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting shareholders
are entitled to dissent and obtain payment for their shares.
(b) This section does not apply to the holders of shares of any class
or series if, on the date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting of shareholders at which the merger,
plan of share exchange, or sale or exchange of property is to be acted on, the
shares of that class or series were:
(1) registered on a United States securities exchange registered
under the Exchange Act (as defined in IC 23-1-43-9); or
(2) traded on the National Association of Securities Dealers,
Inc. Automated Quotations System Over-the-Counter Markets -- National
Market Issues or a similar market.
C-2
<PAGE>
(c) A shareholder:
(1) who is entitled to dissent and obtain payment for the
shareholder's shares under this chapter; or
(2) who would be so entitled to dissent and obtain payment but
for the provisions of subsection (b);
may not challenge the corporate action creating (or that, but for the provisions
of subsection (b), would have created) the shareholder's entitlement.
23-1-44-9 DISSENTERS' RIGHTS OF BENEFICIAL SHAREHOLDER
Sec. 9. (a) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in the shareholder's name only if the
shareholder dissents with respect to all shares beneficially owned by any one
(1) person and notifies the corporation in writing of the name and address of
each person on whose behalf the shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are determined as if the
shares as to which the shareholder dissents and the shareholder's other shares
were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on the shareholder's behalf only if:
(1) the beneficial shareholder submits to the corporation the
record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights; and
(2) the beneficial shareholder does so with respect to all the
beneficial shareholder's shares or those shares over which the
beneficial shareholder has power to direct the vote.
23-1-44-10 PROPOSED ACTION CREATING DISSENTERS' RIGHTS; NOTICE
Sec. 10. (a) If proposed corporate action creating dissenters' rights
under section 8 of this chapter is submitted to a vote at a shareholders'
meeting, the meeting notice must state that shareholders are or may be entitled
to assert dissenters' rights under this chapter.
(b) If corporate action creating dissenters' rights under section 8
of this chapter is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in
section 12 of this chapter.
23-1-44-11 PROPOSED ACTION CREATING DISSENTERS' RIGHTS; ASSERTION OF
DISSENTERS' RIGHTS
Sec. 11. (a) If proposed corporate action creating dissenters' rights
under section 8 of this chapter is submitted to a vote at a shareholders'
meeting, a shareholder who wishes to assert dissenters' rights:
C-3
<PAGE>
(1) must deliver to the corporation before the vote is taken
written notice of the shareholder's intent to demand payment for the
shareholder's shares if the proposed action is effectuated; and
(2) must not vote the shareholder's shares in favor of the
proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for the shareholder's shares under
this chapter.
23-1-44-12 DISSENTERS' NOTICE; CONTENTS
Sec. 12. (a) If proposed corporate action creating dissenters' rights
under section 8 of this chapter is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 11 of this chapter.
(b) The dissenters' notice must be sent no later than ten (10) days
after approval by the shareholders, or if corporate action is taken without
approval by the shareholders, then ten (10) days after the corporate action was
taken. The dissenters' notice must:
(1) state where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(3) supply a form for demanding payment that includes the date
of the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the person
asserting dissenters' rights certify whether or not the person
acquired beneficial ownership of the shares before that date;
(4) set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than
sixty (60) days after the date the subsection (a) notice is delivered;
and
(5) be accompanied by a copy of this chapter.
23-1-44-13 DEMAND FOR PAYMENT AND DEPOSIT OF SHARES BY SHAREHOLDER
Sec. 13. (a) A shareholder sent a dissenters' notice described in
IC 23-1-42-11 or in section 12 of this chapter must demand payment, certify
whether the shareholder acquired beneficial ownership of the shares before the
date required to be set forth in the dissenter's notice under section 12(b)(3)
of this chapter, and deposit the shareholder's certificates in accordance with
the terms of the notice.
(b) The shareholder who demands payment and deposits the
shareholder's shares under subsection (a) retains all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
C-4
<PAGE>
(c) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter and is considered, for purposes of this article, to have
voted the shareholder's shares in favor of the proposed corporate action.
23-1-44-14 UNCERTIFICATED SHARES; RESTRICTION ON TRANSFER; DISSENTERS'
RIGHTS
Sec. 14. (a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment is received
until the proposed corporate action is taken or the restrictions released under
section 16 of this chapter.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
23-1-44-15 PAYMENT TO DISSENTER
Sec. 15. (a) Except as provided in section 17 of this chapter, as
soon as the proposed corporate action is taken, or, if the transaction did not
need shareholder approval and has been completed, upon receipt of a payment
demand, the corporation shall pay each dissenter who complied with section 13 of
this chapter the amount the corporation estimates to be the fair value of the
dissenter's shares.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal
year ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) a statement of the corporation's estimate of the fair value
of the shares; and
(3) a statement of the dissenter's right to demand payment under
section 18 of this chapter.
23-1-44-16 FAILURE TO TAKE ACTION; RETURN OF CERTIFICATES; NEW ACTION BY
CORPORATION
Sec. 16. (a) If the corporation does not take the proposed action
within sixty (60) days after the date set for demanding payment and depositing
share certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 12 of this chapter and repeat the payment
demand procedure.
C-5
<PAGE>
23-1-44-17 WITHHOLDING PAYMENT BY CORPORATION; CORPORATION'S ESTIMATE OF
FAIR VALUE; AFTER-ACQUIRED SHARES
Sec. 17. (a) A corporation may elect to withhold payment required by
section 15 of this chapter from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares and shall pay this amount to each dissenter who
agrees to accept it in full satisfaction of the dissenter's demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares and a statement of the dissenter's right to demand payment
under section 18 of this chapter.
23-1-44-18 DISSENTERS' ESTIMATE OF FAIR VALUE; DEMAND FOR PAYMENT; WAIVER
Sec. 18. (a) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's shares and demand
payment of the dissenter's estimate (less any payment under section 15 of this
chapter), or reject the corporation's offer under section 17 of this chapter and
demand payment of the fair value of the dissenter's shares, if:
(1) the dissenter believes that the amount paid under section 15
of this chapter or offered under section 17 of this chapter is less
than the fair value of the dissenter's shares;
(2) the corporation fails to make payment under section 15 of
this chapter within sixty (60) days after the date set for demanding
payment; or
(3) the corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty (60) days
after the date set for demanding payment.
(b) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (a) within thirty (30) days after the corporation made
or offered payment for the dissenter's shares.
23-1-44-19 COURT PROCEEDING TO DETERMINE FAIR VALUE; JUDICIAL APPRAISAL
Sec. 19. (a) If a demand for payment under IC 23-1-42-11 or under
section 18 of this chapter remains unsettled, the corporation shall commence a
proceeding within sixty (60) days after receiving the payment demand and
petition the court to determine the fair value of the shares. If the
corporation does not commence the proceeding within the sixty (60) day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit or
superior court of the county where a corporation's principal office (or, if none
in Indiana, its registered office) is located. If the corporation is a foreign
corporation without a registered office in Indiana, it shall commence the
proceeding
C-6
<PAGE>
in the county in Indiana where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend decision
on the question of fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment:
(1) for the amount, if any, by which the court finds the fair
value of the dissenter's shares, plus interest, exceeds the amount
paid by the corporation; or
(2) for the fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation elected to
withhold payment under section 17 of this chapter.
23-1-44-20 COSTS; FEES; ATTORNEY FEES
Sec. 20. (a) The court in an appraisal proceeding commenced under
section 19 of this chapter shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against such parties and in such
amounts as the court finds equitable.
(b) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of sections 10 through 18 of this
chapter; or
(2) against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated and that the fees for those services should not be assessed
against the corporation, the court may award to these counsel
reasonable fees to be paid out of the amounts awarded the dissenters
who were benefitted.
C-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Indiana Business Corporation Law provides in regard to indemnification
of directors and officers as follows:
23-1-37-8. [BASIS.] (a) A corporation may indemnify an individual made a
party to a proceeding because the individual is or was a director against
liability incurred in the proceeding if:
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official
capacity with the corporation, that the individual's conduct was
in its best interest; and
(B) in all other cases, that the individual's conduct was
at least not opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual
either:
(A) had reasonable cause to believe the individual's
conduct was lawful; or
(B) had no reasonable cause to believe the individual's
conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (a)(2)(B).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
23-1-37.9. [AUTHORIZED.] Unless limited by its articles of incorporation, a
corporation shall indemnify a director who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which the director was a party
because the director is or was a director of the corporation against reasonable
expenses incurred by the director in connection with the proceeding.
23-1-37-13. [OFFICERS, EMPLOYEES OR AGENTS.] Unless a corporation's
articles of incorporation provide otherwise:
II-1
<PAGE>
(1) An officer of the corporation, whether or not a director, is
entitled to mandatory indemnification under section 9 of this chapter,
and is entitled to apply for court-ordered indemnification under
section 11 of this chapter, in each case to the same extent as a
director;
(2) The corporation may indemnify and advance expenses under
this chapter to an officer, employee or agent of the corporation,
whether or not a director, to the same extent as to a director; and
(3) A corporation may also indemnify and advance expenses to an
officer, employee or agent whether or not a director, to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of
directors, or contract.
23-1-37-15. [REMEDY NOT EXCLUSIVE OF OTHER RIGHTS.] (a) The indemnification
and advance for expenses provided for or authorized by this chapter does not
exclude any other rights to indemnification and advance for expenses that a
person may have under:
(1) A corporation's articles of incorporation or bylaws;
(2) A resolution of the board of directors or of the
shareholders; or
(3) Any other authorization whether adopted, after notice, by a
majority vote of all the voting shares then issued and outstanding.
(b) If the articles of incorporation, bylaws, resolutions of the
board of directors or of the shareholders, or other duly adopted authorization
of indemnification or advance for expenses limit indemnification or advance for
expenses, indemnification and advance or expenses are valid only to the extent
consistent with the articles, bylaws, resolutions of the board of directors or
of the shareholders, or other duly adopted authorization of indemnification or
advance for expenses;
(c) This chapter does not limit a corporation's power to pay or
reimburse expenses incurred by a director, officer, employee, or agent in
connection with the person's appearance as a witness in a proceeding at a time
when the person has not been made a named defendant or respondent to the
proceeding.
The Registrant's Articles of Incorporation generally provide for the
indemnification of NCBE's directors, officers, employees and agents to the
extent permitted by the foregoing provisions of the Indiana Business Corporation
Law.
In addition, the Registrant has a directors' and officers' liability and
company reimbursement policy that insures against certain liabilities, including
liabilities under the Securities Act, subject to applicable retentions.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits: The list of exhibits is incorporated by reference to
the Index to Exhibits on page II-6.
(b) Financial Statement Schedules: All financial statements
schedules are omitted since the required information is not applicable
or is not present in amounts sufficient to require submission of the
schedules.
II-2
<PAGE>
Item 22. Undertakings.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities hereunder through use of a prospectus
which is a part of this Registration Statement, by a person or party who is
deemed to be an underwriter within the making of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
other Items of the applicable form.
II-3
<PAGE>
4. The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
5. Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable, in the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
6. The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
7. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF EVANSVILLE, STATE OF
INDIANA, ON OCTOBER 7, 1997.
NATIONAL CITY BANCSHARES, INC.
By: /S/ JOHN D. LIPPERT
-----------------------------------
John D. Lippert, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints John D. Lippert and Robert A. Keil and each of
them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
Signature Title Date
--------- ----- ----
/s/ John D. Lippert Chairman of the Board, October 7, 1997
- ------------------------- Chief Executive Officer
John D. Lippert and Director(Principal
Executive Officer)
/s/ Robert A. Keil President, Chief Financial October 7, 1997
- ------------------------- Officer and Director
Robert A. Keil (Principal Financial Officer)
/s/ Michael F. Elliott Vice Chairman and Director October 7, 1997
- -------------------------
Michael F. Elliott
/s/ Harold A. Mann Secretary and Treasurer October 7, 1997
- ------------------------- (Principal Accounting Officer)
Harold A. Mann
/s/ Janice L. Beesley Director October 7, 1997
- -------------------------
Janice L. Beesley
/s/ Susan R. Emge Director October 7, 1997
- -------------------------
Susan R. Emge
/s/ Donald G. Harris Director October 7, 1997
- -------------------------
Donald G. Harris
/s/ Dr. H. Ray Hoops Director October 7, 1997
- -------------------------
Dr. H. Ray Hoops
/s/ Ronald G. Reherman Director October 7, 1997
- -------------------------
Ronald G. Reherman
Signature Title Date
--------- ----- ----
/s/ Lawrence R. Steenberg Director October 7, 1997
- -------------------------
Lawrence R. Steenberg
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- ----------------------------------------------------------------------
2 Agreement and Plan of Merger dated August 6, 1997 between the
Registrant and Fourth First Bancorp., (incorporated by reference to
Appendix A to the Proxy Statement/Prospectus included in this
Registrant Statement).
3(a) Articles of Incorporation of the Registrant, as amended (incorporated
by reference to Exhibit (3)(i) to Form 10-K for the year ending
December 31, 1996).
3(b) By-Laws of the Registrant, as amended (incorporated by reference to
Exhibit 3(ii) to Form 10-K for the year ending December 31, 1994).
5* Opinion of Baker & Daniels, counsel for Registrant, regarding legality
of securities offered hereby.
8* Opinion of Krieg DeVault Alexander & Capehart, counsel for FFB,
regarding tax matters.
10(a) Term Loan Agreement, dated as of June 26, 1996 between
Twenty-OneSoutheast Third Corporation, the Registrant and The Northern
Trust Company (incorporated by reference to Exhibit 10(a) to Form 10-Q
for the period ending June 30, 1996).
10(b) Incentive Stock Option Plan (incorporated by reference to Exhibit 10(b)
to Form 10-Q for the period ending June 30, 1996).
10(c) Incentive Stock Option Plan, First Amendment, dated as of December 18,
1996 (incorporated by reference to Exhibit 10(c) to Form 10-K for the year
ending December 31, 1996).
10(d) Incentive Stock Option Plan, Second Amendment, dated as of March 19,
1997 (incorporated by reference to Exhibit 10(d) to Form 10-K for the
year ending December 31, 1996).
10(e) Supplemental Retirement Benefit Agreement between John D. Lippert and
the Registrant (incorporated by reference to Exhibit 10(e) to Form 10-K
for the year ending December 31, 1996).
10(f) Term Loan Agreement, First Amendment, dated as of January 31, 1997
(incorporated by reference to Exhibit 10(f) to Form 10-K for the year
ending December 31, 1996).
21 Subsidiaries of Registrant.
23(a) Consent of McGladrey & Pullen, LLP.
23(b) Consent of Gaither Rutherford & Co., LLP.
23(c)* Consent of Baker & Daniels - included in its opinion to be filed as
Exhibit 5.
23(d)* Consent of Krieg DeVault Alexander & Capehart - included in its opinion
to be filed as Exhibit 8.
24 Power of Attorney - included on page II-5.
99 Form of BBI Proxy.____________
- ----------
* To be filed by amendment.
II-6
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME JURISDICTION OF INCORPORATION
The National City Bank of Evansville United States
Evansville, Indiana
The Peoples National Bank of Grayville United States
Grayville, Illinois
First Federal Savings Bank of Leitchfield United States
Leitchfield, Kentucky
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
Alliance Bank State of Indiana
Vincennes, Indiana
White County Bank State of Indiana
Carmi, Illinois
The First National Bank of Wayne City United States
Wayne City, Illinois
NCBE Leasing Corp. State of Indiana
Evansville, Indiana
Twenty-One Southeast Third Corporation State of Indiana
Evansville, Indiana
First National Bank of Bridgeport United States
Bridgeport, Illinois
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus/Proxy
Statement forming a part of the Registration Statement on Form S-4 filed by
National City Bancshares, Inc. of our report dated January 31, 1997, on our
audit of the consolidated statements of financial position of National City
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years ended December 31, 1996, which are incorporated by
reference in the December 31, 1996 Form 10-K of National City Bancshares, Inc.
and to the reference of our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
MCGLADREY & PULLEN, LLP
Champaign, Illinois
October 8, 1997
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Prospectus/Proxy Statement forming a
part of the Registration Statement on Form S-4 filed by National City
Bancshares, Inc. of our report dated January 24, 1997, on our audit of the
consolidated balance sheets of Fourth First Bancorp and subsidiary, as of
December 31, 1996 and 1995, and the related statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. We also consent to the reference to our firm under the
caption "Experts" in the Prospectus/Proxy Statement.
GAITHER RUTHERFORD & CO., LLP
Evansville, Indiana
October 6, 1997
<PAGE>
EXHIBIT 99
REVOCABLE PROXY
FOURTH FIRST BANCORP.
SPECIAL MEETING OF SHAREHOLDERS
_______________ __, 1997
The undersigned, a shareholder of FOURTH FIRST BANCORP. ("FFB") hereby
constitutes and appoints __________________________ and _______________________
and each of them acting individually as the attorney and proxy of the
undersigned, with full power of substitution, for and in the name and stead of
the undersigned to attend the Special Meeting of Shareholders of FFB to be held
on ___________________ __, 1997 at __________ a.m., and any adjournment or
postponement thereof, to vote all shares which the undersigned would be entitled
to cast if personally present, upon such business as may properly come before
the meeting, including the following items, as set forth in the notice of
meeting and proxy statement.
1. A proposal to approve an Agreement
and Plan of Merger between FFB and
National City Bancshares, Inc., as more
fully described in the accompanying For Against Abstain
Proxy Statement/Prospectus. [ ] [ ] [ ]
2. To transact such other business as
may properly come before the meeting.
If not otherwise specified, the shares will be voted FOR Proposal 1. The
undersigned hereby revokes all previous proxies for such meeting, and hereby
acknowledges receipt of the notice of the meeting and the Proxy
Statement/Prospectus furnished herewith.
Please be sure to sign and date Date ______________, 1997
this Proxy in the box below.
------------------------------ --------------------------------
(Shareholder sign above) Co-holder (if any) sign above
NOTE: If shares are registered in more than one name, all owners should
sign. If signing in a fiduciary or representative capacity, please
give full title and attach evidence of authority. Corporations please
sign with full corporate name by a duly authorized officer and affix
the corporate seal.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
