<PAGE>
As filed with the Securities and Exchange Commission on April 30, 1998
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 jurisdiction (Primary Standard (IRS Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
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, INDIANA 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.
BAKER & DANIELS
300 NORTH MERIDIAN STREET
SUITE 2700
INDIANAPOLIS, INDIANA 46204
(317) 237-0300
--------------------------
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. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
--------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED 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 736,278 (1) (2) $8,532,353 (2) $2,517
- ----------------------------------------------------------------------------------------------------------------------------------
</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 Trigg Bancorp,
Inc. as of December 31, 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>
[Trigg Bancorp, Inc. Letterhead]
, 1998
------------ --
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
of Trigg Bancorp, Inc. ("TBI") to be held at 11:00 a.m., local time, on
________________ _, 1998 at the office of Trigg County Farmers Bank located
at 38 Main Street, Cadiz, Kentucky. 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 February 11, 1998, which
provides for the merger (the "Merger") of TBI with and into National City
Bancshares, Inc. ("NCBE").
If the Merger is approved and consummated, each issued and outstanding
share of common stock of TBI, other than shares held by shareholders properly
exercising dissenters' rights, will be converted into the right to receive 73
shares of NCBE common stock. The provisions for converting shares of TBI
common stock into NCBE common stock 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 TBI and its
shareholders. ACCORDINGLY, YOUR BOARD OF DIRECTORS 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,
Ben L. Cundiff
Chairman and CEO
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TRIGG BANCORP, INC.
To be held on________ _, 1998
TO THE SHAREHOLDERS OF TRIGG BANCORP, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of Trigg Bancorp, Inc., a Kentucky corporation ("TBI"),
will be held on _______________ __, 1998, at 11:00 a.m., local time, at the
office of Trigg County Farmers Bank, 38 Main Street, Cadiz, Kentucky, 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 February 11, 1998,
between TBI and National City Bancshares, Inc., an Indiana corporation
("NCBE"), and the transactions contemplated thereby, pursuant to
which, among other things, TBI 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 TBI has fixed the close of business on
_____________ __, 1998, 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 TBI HAS APPROVED THE MERGER AGREEMENT AND
BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF ITS SHAREHOLDERS. THE
BOARD, THEREFORE, RECOMMENDS THAT THE SHAREHOLDERS OF TBI VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT DESCRIBES THE RIGHTS OF TBI
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,
Cadiz, Kentucky
______________ __, 1998 Jim J. Carr, Secretary
<PAGE>
NATIONAL CITY BANCSHARES, INC.
PROSPECTUS
UP TO 736,278 SHARES OF COMMON STOCK
------------------------------
TRIGG BANCORP, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD __________________ __, 1998
This Prospectus/Proxy Statement relates to the proposed acquisition of
Trigg Bancorp, Inc., a Kentucky corporation ("TBI"), by National City
Bancshares, Inc., an Indiana corporation ("NCBE"), by means of the merger
(the "Merger") of TBI with and into NCBE, pursuant to the terms of an
Agreement and Plan of Merger (the "Merger Agreement") dated as of February
11, 1998, between TBI 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 TBI to be used at
the Special Meeting of Shareholders (the "Special Meeting") of TBI to be held
on ___________________ __, 1998. At the Special Meeting, holders of shares
of TBI's common stock, par value $25.00 per share ("TBI 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 TBI 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 TBI on
or about ________________ __, 1998.
Pursuant to the Merger Agreement and in connection with the Merger, each
issued and outstanding share of TBI Common, other than shares held by
shareholders properly exercising dissenters' rights, will be converted into
the right to receive 73 shares of common stock, $1.00 stated value per share,
of NCBE ("NCBE Common"). See "THE MERGER -- Conversion of TBI Common." This
Prospectus/Proxy Statement also constitutes the prospectus of NCBE with
respect to up to 736,278 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 under the symbol, "NCBE." The last
reported sale price of NCBE Common on _________________ __, 1998, was
$__________.
SEE "RISK FACTORS RELATING TO NCBE COMMON" BEGINNING ON PAGE 12 FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT ON NCBE COMMON.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NCBE COMMON OR 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 __________________ __, 1998
<PAGE>
ALL INFORMATION CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT WITH
RESPECT TO NCBE HAS BEEN SUPPLIED BY NCBE AND ALL INFORMATION WITH RESPECT TO
TBI HAS BEEN SUPPLIED BY TBI.
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 STEPHEN C. BYELICK,
JR., SECRETARY, NATIONAL CITY BANCSHARES, INC., 227 MAIN STREET, P.O. BOX
868, EVANSVILLE, INDIANA 47705-0868 (TELEPHONE NUMBER (812) 464-9864). IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY [FIVE BUSINESS DAYS PRIOR TO MEETING DATE] _______________ __, 1998.
------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . 5
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Parties to the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Special Meeting of TBI Shareholders. . . . . . . . . . . . . . . . . . . . 6
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Summary Comparative Historical and Combined Per Share Data . . . . . . . . 10
Risk Factors Relating to NCBE Common . . . . . . . . . . . . . . . . . . . 11
Stock Price Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Comparison of Shareholder Rights . . . . . . . . . . . . . . . . . . . . . 11
RISK FACTORS RELATING TO NCBE COMMON. . . . . . . . . . . . . . . . . . . . . 12
Status of NCBE as a Bank Holding Company . . . . . . . . . . . . . . . . . 12
Risks Associated with Acquisitions . . . . . . . . . . . . . . . . . . . . 12
Impact of Interest Rate Changes. . . . . . . . . . . . . . . . . . . . . . 13
Credit Risk and Loan Concentration . . . . . . . . . . . . . . . . . . . . 13
Regulatory Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exposure to Local Economic Conditions. . . . . . . . . . . . . . . . . . . 13
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Date, Time, Place and Purpose. . . . . . . . . . . . . . . . . . . . . . . 14
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . 14
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Reasons for the Merger; Recommendation of TBI's Board of Directors . . . . 16
Closing and Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 16
Conversion of TBI Common . . . . . . . . . . . . . . . . . . . . . . . . . 17
Procedures for Exchange of Certificates. . . . . . . . . . . . . . . . . . 17
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 20
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 22
Termination and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 22
No Solicitation; Fees and Expenses . . . . . . . . . . . . . . . . . . . . 22
Indemnity By Majority Shareholder. . . . . . . . . . . . . . . . . . . . . 23
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . 23
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Resale of NCBE Common. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . 25
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
COMPARATIVE STOCK PRICES AND DIVIDENDS. . . . . . . . . . . . . . . . . . . . 28
INFORMATION CONCERNING NCBE . . . . . . . . . . . . . . . . . . . . . . . . . 29
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Recent Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Year 2000 Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Security Ownership of Certain Beneficial Owners and Management . . . . . . 32
INFORMATION CONCERNING TBI. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Selected Financial Data of TBI . . . . . . . . . . . . . . . . . . . . . . 34
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
DESCRIPTION OF NCBE CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . 49
Authorized Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Dividends, Voting, Liquidation and Other Rights. . . . . . . . . . . . . . 49
Certain Provisions of Articles of Incorporation and By-Laws. . . . . . . . 49
Certain Provisions of the Indiana Law. . . . . . . . . . . . . . . . . . . 50
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
COMPARISON OF SHAREHOLDER RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 50
Classified Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 50
Business Combinations Not Involving an Interested Shareholder. . . . . . . 50
Business Combinations Involving an Interested Shareholder. . . . . . . . . 51
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Amendments to Articles of Incorporation. . . . . . . . . . . . . . . . . . 52
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . 52
Shareholder Action by Written Consent. . . . . . . . . . . . . . . . . . . 53
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Control Share Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . 53
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Limitation of Liability of Directors . . . . . . . . . . . . . . . . . . . 54
Consideration of Non-Shareholder Interests . . . . . . . . . . . . . . . . 54
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
INDEX TO TBI FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A- Agreement and Plan of Merger dated as of
February 11, 1998 between National City
Bancshares, Inc. and Trigg Bancorp, Inc. . . . . . . . . . . . A-1
APPENDIX B- Excerpts of the Kentucky Business
Corporation Act (Dissenters' Rights) . . . . . . . . . . . . . B-1
</TABLE>
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
TBI. 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. 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,
1997, as amended by the Form 10-K/A filed March 26, 1998;
2. NCBE's Current Reports on Form 8-K dated March 11, 1998 and April 30,
1998;
3. NCBE's Proxy Statement dated April 22, 1998, relating to the 1998
annual meeting of shareholders; and
4. 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 TBI and its subsidiary has
been supplied by TBI. 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 December 31, 1997, NCBE had total consolidated
assets of $1.3 billion, total loans of $916.4 million, total deposits of
$964.0 million, and total shareholders' equity of $146.8 million. As of
March 6, 1998, NCBE owned 13 financial institution subsidiaries serving 33
communities from 44 locations. NCBE's subsidiaries provide a wide range of
banking services in the tri-state area of Indiana, Kentucky and Illinois
surrounding Evansville, Indiana.
NCBE is an Indiana corporation. Its principal offices are located at
227 Main Street, Evansville, Indiana 47708 (telephone number (812) 464-9677).
TBI
Trigg Bancorp, Inc. is a one-bank holding company headquartered in
Cadiz, Kentucky. As of December 31, 1997, TBI, together with its banking
subsidiary, Trigg County Farmers Bank, a Kentucky banking corporation (the
"Bank"), had total consolidated assets of $96.4 million, total deposits of
$72.5 million, net loans of $52.1 million and total shareholders' equity of
$8.5 million. The Bank has three banking offices, all located in Cadiz,
Kentucky.
TBI is a Kentucky corporation. Its principal offices are located at 38
Main Street, Cadiz, Kentucky (telephone number (502) 522-6021).
SPECIAL MEETING OF TBI SHAREHOLDERS
DATE, TIME, PLACE AND PURPOSE
The Special Meeting of TBI shareholders will be held at the office of
the Bank located at 38 Main Street, Cadiz, Kentucky on _____________ __,
1998, at 11:00 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
______________ __, 1998. There were 10,086 shares of TBI 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 TBI Common entitled to vote on the Record
Date is necessary to constitute a quorum at the Special Meeting. Pursuant to
the Kentucky Business Corporation Act, as amended (the "Kentucky Law"), the
affirmative vote of the holders of a majority of the issued and outstanding
shares of TBI Common, or 5,044 shares, is required to adopt the Merger
Agreement and the transactions contemplated thereby.
6
<PAGE>
SECURITY OWNERSHIP OF TBI MANAGEMENT
As of the close of business on the Record Date, the directors and
executive officers of TBI and their affiliates beneficially owned 8,219
shares of TBI Common, or 81.5%, of all outstanding shares. As of such date,
no shares of TBI Common were beneficially owned by the directors and
executive officers of NCBE or their affiliates
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 Kentucky Law and the Indiana Business Corporation Law, as
amended (the "Indiana Law"), the Merger will become effective at the hour and
on the date (the "Effective Time") specified in the Articles of Merger to be
filed pursuant to the Kentucky Law and the Indiana Law with the Secretaries
of State of Kentucky and Indiana following the closing (the "Closing") of the
Merger. At the Effective Time, TBI will merge with and into NCBE, and NCBE
will be the surviving corporation in the Merger and the separate corporate
existence of TBI will terminate. The parties expect that the Effective Time
will occur during the second or third quarter of 1998.
REASONS FOR THE MERGER AND RECOMMENDATION OF BOARD OF DIRECTORS
The recommendation of TBI's Board of Directors is based upon a number of
factors, including, but not limited to: (i) the value of the Merger
Consideration; (ii) the terms of other recent reported acquisitions of
financial institutions in the Midwestern United States; (iii) information
concerning the business, financial condition, results of operations, and
prospects of TBI and NCBE; (iv) recent market prices for the shares of NCBE
Common; (v) the tax-free nature of the Merger; and (vi) the public market for
the shares of NCBE Common.
THE BOARD OF DIRECTORS OF TBI 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 TBI in reaching its decision to
approve the Merger Agreement, see "THE MERGER -- Background of the Merger"
and "-- Reasons for the Merger; Recommendation of TBI's Board of Directors."
CONVERSION OF TBI COMMON
As a result of the Merger, each share of TBI Common issued and
outstanding immediately prior to the Effective Time, other than shares whose
holders have properly exercised their dissenters' rights under the Kentucky
Law, will be converted into the right to receive 73 shares of NCBE Common
(the "Merger Consideration"). See "THE MERGER -- Conversion of TBI Common".
For information on how shareholders of TBI will be able to exchange
certificates representing shares of TBI Common for certificates representing
shares of NCBE Common after the Effective Time, see "THE MERGER -- Procedures
for Exchange of Certificates."
7
<PAGE>
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 Date. See "THE MERGER
- -- Representations and Warranties" and "-- Covenants."
The obligations of both parties to consummate the Merger are subject to
the satisfaction or waiver of certain conditions including: (i) approval by
TBI's shareholders; (ii) approval by regulatory authorities having
jurisdiction over the parties or the Merger; (iii) no action taken by
governmental authorities to prevent consummation of the Merger; (iv) the
registration statement containing this Prospectus/Proxy Statement having been
declared effective and no stop order having been issued; and (v) the receipt
of an opinion of counsel to NCBE as to the treatment of the Merger as a
tax-free reorganization for federal income tax purposes. The obligations of
NCBE are further conditioned upon, among other things, (i) the continued
accuracy of representations and warranties made by TBI and its majority
shareholder and the absence of any material adverse change prior to Closing
in the business, assets, properties, financial condition or results of
operations of TBI and the Bank, taken as a whole; (ii) the determination by
NCBE that the Merger may be accounted for as a pooling of interests, and
(iii) the resignation by Ben L. Cundiff from his positions as an employee of
TBI and the Bank. The obligations of TBI are further conditioned upon, among
other things, (i) the continued accuracy of representations and warranties
made by NCBE; and (ii) the receipt of an opinion of counsel to NCBE as to
certain matters relating to NCBE and the Merger. See "THE MERGER
- -- Conditions."
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
TBI shareholders: (i) by mutual consent of TBI and NCBE; (ii) by TBI if TBI
or its Board of Directors accepts or approves a "Competing Transaction" (as
defined below); (iii) by TBI, if any of the conditions to its obligation to
consummate the Merger have not been satisfied by September 30, 1998; or (iii)
by NCBE, if any of the conditions to its obligation to consummate the Merger
have not been satisfied by September 30, 1998. See "THE MERGER --
Termination and Waiver."
In the Merger Agreement, TBI has agreed not to solicit or conduct
negotiations or discussions with third parties regarding an acquisition of
TBI or the Bank except where such actions are required by fiduciary duties of
TBI's Board of Directors. If the Merger Agreement is terminated in certain
circumstances upon the occurrence of a Triggering Event, TBI is required to
reimburse NCBE for all out-of-pocket expenses incurred by NCBE in connection
with the transactions contemplated by the Merger Agreement up to a maximum of
$150,000. "Triggering Event" means the termination of the Merger Agreement
for any reason other than certain specified conditions and the occurrence of
any of the following events within one year from termination: (i) TBI enters
into an agreement with a third party for a Competing Transaction; (ii) the
Board of Directors of TBI recommends a Competing Transaction to TBI's
shareholders; or (iii) following the announcement of a Competing Transaction,
the Board of Directors of TBI withdraws or modifies its recommendation.
"Competing Transaction" means any of the following (other than the
transactions contemplated by the Merger Agreement): (i) an offer for 25% or
more of the outstanding capital stock of TBI or the Bank; (ii) a proposal for
a merger, consolidation, share exchange, business combination or similar
transaction involving TBI; or (iii) a proposal for the sale, lease, exchange
or other disposition of 25% or more of TBI's assets. 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"), and by the Kentucky
Department of Financial Institutions (the "KDFI"). Regulatory approval is
not anticipated until after the Special Meeting. See "THE MERGER --
Regulatory Approvals."
8
<PAGE>
ACCOUNTING TREATMENT
The Merger is intended 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
The Merger is intended to qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
If the Merger so qualifies, no gain or loss will be recognized by the holders
of shares of TBI Common upon receipt of the Merger Consideration (except for
cash received by shareholders properly exercising their dissenters' rights).
Consummation of the Merger is conditioned on there being delivered to the
parties at the Closing an opinion of counsel to NCBE to the effect that the
Merger will qualify as a tax-free reorganization.
EACH SHAREHOLDER OF TBI 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 TBI are governed by the
Kentucky Law. Under Kentucky Law, the applicable portions of which are
attached hereto as Appendix B, a shareholder will be entitled to receive, in
cash, the fair value of shares of TBI Common if such shareholder properly
exercises dissenters' rights. If holders of more than approximately 9% of
the outstanding shares of TBI Common should properly exercise 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
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 TBI. 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," "INFORMATION CONCERNING
TBI" and "INDEX TO TBI FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per common share:
Historical:
NCBE:
Basic $ 1.72 $ 1.52 $ 1.30
Diluted 1.69 1.52 1.30
TBI 138.39 125.32 127.17
Pro forma combined per NCBE share
Basic 1.73 1.53 1.33
Diluted 1.71 1.53 1.33
Equivalent pro forma per TBI share (1)
Basic 126.29 111.69 97.09
Diluted 124.83 111.69 97.09
Dividends per common share:
Historical:
NCBE 0.64 0.55 0.40
TBI 75.00 75.00 30.00
Pro forma combined per NCBE share 46.72 40.15 29.20
Equivalent pro forma per TBI share (1)
Book value per common share:
Historical:
NCBE $ 13.69 $ 12.12 $ 11.71
TBI 845.96 742.41 713.86
Pro forma combined per NCBE share 13.55 11.99 11.59
Equivalent pro forma per TBI share (1) 989.15 875.27 846.07
</TABLE>
- ---------
(1) Equivalent pro forma per share data represents the pro forma per share data
for NCBE multiplied by the number of shares of NCBE Common (73) to be
issued in the Merger for each share of TBI Common.
10
<PAGE>
RISK FACTORS RELATING TO NCBE COMMON
An investment in NCBE Common involves certain risks, including those
described in this Prospectus/Proxy Statement. See "RISK FACTORS RELATING TO
NCBE COMMON."
STOCK PRICE DATA
The following table sets forth as of February 10, 1998 (the day before
the first public announcement of the terms of the proposed acquisition), the
last sale price per share for the NCBE Common and the pro forma equivalent
for a share of TBI Common. There is no public trading market for the TBI
Common. See "COMPARATIVE STOCK PRICES AND DIVIDENDS."
<TABLE>
<CAPTION>
PRO FORMA
NCBE TBI TBI COMMON
COMMON COMMON EQUIVALENT
------ ------ ----------
<S> <C> <C> <C>
Price Per Share
(as of February 10, 1998) $42.00 N/A $3,066.00*
</TABLE>
- ------------
* Assumes that each share of TBI Common is converted into 73 shares of NCBE
Common.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the holders of TBI Common and NCBE Common differ in
certain respects. The rights of the shareholders of TBI who receive shares
of NCBE Common in the Merger will be governed by the Indiana Law and by the
Articles of Incorporation and Bylaws of NCBE. The governing law and
constituent documents of NCBE differ, in several respects, from those which
apply to TBI. As a result, there are material differences between the
rights of the holders of TBI Common and NCBE Common, including: shareholder
votes required for approving certain business combinations, removing
directors, and amending Articles of Incorporation; the circumstances under
which a shareholder may dissent from corporate action and receive fair value
for his or her shares; and certain Indiana statutory takeover provisions.
See "COMPARISON OF SHAREHOLDER RIGHTS."
11
<PAGE>
RISK FACTORS RELATING TO NCBE COMMON
TBI SHAREHOLDERS SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER
INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY
STATEMENT, THE FOLLOWING RISK FACTORS IN EVALUATING THE NCBE COMMON TO BE
ISSUED IN THE MERGER. CERTAIN STATEMENTS IN THIS PROSPECTUS/PROXY STATEMENT
AND IN DOCUMENTS INCORPORATED BY REFERENCE HEREIN, INCLUDING, WITHOUT
LIMITATION, THIS SECTION AND "INFORMATION CONCERNING NCBE", CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF NCBE TO DIFFER
MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
SUCH FACTORS INCLUDE, AMONG OTHER THINGS, THE FOLLOWING: THE FACTORS
SET FORTH IN THIS SECTION; GENERAL AND LOCAL ECONOMIC CONDITIONS; RISKS
ASSOCIATED WITH ACQUISITIONS, LEGISLATIVE AND REGULATORY INITIATIVES;
MONETARY AND FISCAL POLICIES OF THE FEDERAL GOVERNMENT; DEPOSIT FLOWS; THE
COST OF FUNDS; GENERAL MARKET RATES OF INTEREST; INTEREST RATES ON COMPETING
INVESTMENTS; DEMAND FOR LOAN PRODUCTS; DEMAND FOR FINANCIAL SERVICES; CHANGES
IN ACCOUNTING POLICIES OR GUIDELINES; AND CHANGES IN THE QUALITY OR
COMPOSITION OF NCBE'S LOAN AND INVESTMENT PORTFOLIOS. NCBE DOES NOT
UNDERTAKE AND SPECIFICALLY DISCLAIMS ANY OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.
STATUS OF NCBE AS A BANK HOLDING COMPANY
NCBE is a legal entity separate and distinct from its subsidiaries,
although the principal source of NCBE's cash revenues is dividends from its
subsidiaries. The right of NCBE to participate in the assets of any
subsidiary upon the latter's liquidation, reorganization or otherwise will be
subject to the claims of the subsidiaries' creditors, which will take
priority except to the extent that NCBE may itself be a creditor with a
recognized claim.
NCBE's principal source of funds is dividends received from its banking
subsidiaries. Regulations limit the amount of dividends that may be paid by
such subsidiaries without prior approval. During 1998, approximately $3.3
million plus any 1998 net profits can be paid by the banking subsidiaries to
NCBE without prior regulatory approval.
The banking subsidiaries are also subject to legal restrictions which
limit the transfer of funds by any of the banking subsidiaries to NCBE and
its nonbanking subsidiaries, whether in the form of loans, extensions of
credit, investments, asset purchases or otherwise. Such transfers by any
banking subsidiary to NCBE or any of NCBE's nonbanking subsidiaries are
limited in amount to 10% of such subsidiary's capital and surplus and, with
respect to NCBE and all such nonbanking subsidiaries, to an aggregate of 20%
of such banking subsidiary capital and surplus. Furthermore, such loans and
extensions of credit are required to be secured in specified amounts.
RISKS ASSOCIATED WITH ACQUISITIONS
NCBE has experienced significant growth as a result of acquisitions.
Since January 1, 1995, NCBE has acquired ten financial institutions or
branches of financial institutions. As the banking industry continues to
consolidate, NCBE expects to pursue other acquisitions in the future. NCBE's
pending acquisitions are subject to various conditions, including shareholder
and regulatory approval. No assurance can be given that the pending
acquisitions will be consummated. The future profitability of NCBE will
depend upon management's ability to improve the profitability of acquired
institutions and to realize expected operational synergies. Acquisitions
involve numerous risks, including difficulties in the assimilation of the
operations of the acquired company, a diversion of management's attention
from other business concerns, risks of entering new geographic markets, the
potential loss of key employees of the acquired company and the assumption of
undisclosed liabilities. Future acquisitions may result in dilutive
issuances of equity securities, the incurrence of additional debt and the
amortization of expenses related to goodwill and intangible assets, any of
which could have a material adverse effect on NCBE. In addition, as
consolidation of the banking industry continues, the competition for suitable
acquisition candidates can be expected to increase. NCBE competes with other
banking companies for acquisition opportunities and many of these competitors
have greater financial resources and
12
<PAGE>
acquisition experience than NCBE. In addition, the "needs improvement"
rating from a banking regulatory agency received with respect to Year 2000
compliance efforts could adversely affect NCBE's plans to grow by
acquisition. See "INFORMATION CONCERNING NCBE - Recent Developments."
IMPACT OF INTEREST RATE CHANGES
NCBE's results of operations are derived from the operations of its
subsidiaries and are principally dependent on net interest income, calculated
as the difference between interest earned on loans and investments and the
interest expense paid on deposits and other borrowings. Like other banks and
financial institutions, NCBE's interest income and interest expense are
affected by general economic conditions and by the policies of regulatory
authorities, including the monetary policies of the Federal Reserve Board.
While management has taken measures intended to manage the risks of operating
in a changing interest rate environment, there can be no assurance that such
measures will be effective in avoiding undue interest rate risk.
CREDIT RISK AND LOAN CONCENTRATION
NCBE is exposed to the risk that customers to whom its subsidiaries have
made loans will be unable to repay those loans according to their terms and
that collateral securing such loans (if any) may not be sufficient in value
to assure repayment. Credit losses could have a material adverse effect on
NCBE's operating results.
A primary risk facing NCBE, and financial institutions in general, is
credit risk, that is, the risk of losing principal and interest due to a
borrower's failure to perform according to the terms of such borrower's loan
agreement. As of December 31, 1997, NCBE's total loan portfolio was
approximately $916.4 million or 70.6% of its total assets. The three largest
components of the loan portfolio are real estate loans, $501.9 million or
54.7% of total loans, commercial and industrial loans, $201.4 million or
22.0% of total loans, and consumer loans, $149.5 million or 16.3% of total
loans. NCBE's credit risk with respect to its consumer installment loan
portfolio and commercial loan portfolio relates principally to the general
creditworthiness of individuals and businesses within its market area.
NCBE's credit risk with respect to its real estate mortgage and construction
loan portfolio relates principally to the general creditworthiness of
individuals and the value of real estate serving as security for the
repayment of the loans.
REGULATORY RISKS
The banking industry is heavily regulated. These regulations are
primarily intended to protect depositors and the FDIC, not shareholders or
other creditors. Regulations affecting financial institutions are undergoing
continuous change, and the ultimate effect of such changes cannot be
predicted. Regulations and laws affecting NCBE and its subsidiaries may be
modified at any time, and new legislation affecting financial institutions
may be proposed and enacted. There is no assurance that such modifications or
new laws will not materially and adversely affect the business, condition or
operations of NCBE and its subsidiaries.
EXPOSURE TO LOCAL ECONOMIC CONDITIONS
The success of NCBE and its subsidiaries is dependent to a certain
extent upon the general economic conditions of the geographic markets they
serve. Unlike larger banks which are more geographically diversified, NCBE's
subsidiaries provide financial and banking services to customers in the
tri-state area of Indiana, Kentucky and Illinois surrounding Evansville,
Indiana. No assurance can be given concerning the economic conditions which
will exist in such markets.
COMPETITION
NCBE's subsidiaries face substantial competition for deposit, credit and
trust relationships, as well as other sources of funding in the communities
they serve. Competing providers include other national and state banks,
thrifts and trust companies, insurance companies, mortgage banking
operations, credit unions, finance companies, money market funds
13
<PAGE>
and other financial and nonfinancial companies which may offer products
functionally equivalent to those offered by NCBE's subsidiaries. Competing
providers may have greater financial resources than NCBE and offer services
within and outside the market areas served by NCBE's subsidiaries.
SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE
This Prospectus/Proxy Statement is being furnished to shareholders of
TBI in connection with the solicitation of proxies by the Board of Directors
of TBI for use at the Special Meeting to be held at the office of the Bank
located at 38 Main Street, Cadiz, Kentucky, on _____________ __, 1998, at
11:00 a.m., local time, and at any adjournment or postponement thereof.
At the Special Meeting, the shareholders of TBI will be asked to
consider and vote upon the approval of the Merger Agreement and the
transactions contemplated thereby, including the Merger of TBI 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 TBI on or about
_____________ __, 1998.
RECORD DATE
The Board of Directors of TBI has fixed _____________ __, 1998, as the
Record Date for the determination of shareholders of TBI to receive notice of
and to vote at the Special Meeting. As of the close of business on the
Record Date, there were 10,086 shares of TBI Common issued and outstanding.
Only holders of TBI 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 TBI 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 TBI Common entitled to vote on the Record
Date is necessary to constitute a quorum at the Special Meeting. Pursuant to
the Kentucky Law, the affirmative vote of the holders of a majority of the
issued and outstanding shares of TBI Common, or 5,044 shares, is required to
approve the Merger Agreement and the transactions contemplated thereby,
including the Merger. Each holder of TBI Common is entitled to one vote per
share of TBI 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
TBI Common represented by a proxy properly signed and returned to TBI 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 TBI 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 TBI 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 TBI proxies should be addressed to Trigg Bancorp, Inc., P.O.
Box 500, Cadiz, Kentucky 42211, Attention: Corporate Secretary. A holder of
TBI Common who previously signed and returned a proxy and who elects to
attend the Special Meeting and vote in person may withdraw
14
<PAGE>
his or her proxy at any time before it is exercised by giving notice of such
revocation to the Secretary of TBI 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.
TBI intends to count holders of shares of TBI Common present in person
at the Special Meeting but not voting, and holders of shares of TBI Common
for which TBI 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 TBI 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 TBI 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 TBI Common
by use of the mail, proxies also may be solicited personally or by telephone
by directors, officers and employees of TBI, 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 Merger. Shareholders of TBI are urged to read
the Merger Agreement in its entirety.
15
<PAGE>
BACKGROUND OF THE MERGER
In late Fall, 1997, TBI did an extensive analysis of potential
technology expenditures required over the next two to three years to update
the Bank's hardware and software, its local area network, its ability to
provide additional services to clients, and its Year 2000 status. After
estimating the cost of all potential expenditures, management reached the
conclusion that it would be managing poorly if it proceeded to spend a large
amount of money on technology changes and improvements and later decided that
it would benefit TBI and its shareholders to affiliate with a larger holding
company; management of TBI felt that those technology expenditures might not
be compatible with the larger holding company's systems. Therefore, TBI
management contacted four regional holding companies, including NCBE, to
discuss a possible affiliation. These preliminary contacts were made in the
fourth quarter of 1997. TBI management considered and compared the apparent
value of any merger to TBI shareholders, performance history of the holding
companies, and willingness of the holding companies to commit to TBI
regarding continuation of local management of virtually all aspects of TBI's
operation.
Management of TBI felt that the apparent value of any stock swap with
NCBE, based upon the price at which NCBE stock traded and the manner in which
NCBE would calculate a share exchange, would exceed the likely value of
affiliation with other regional holding companies. Additionally, NCBE was
willing to make more concrete guarantees of local control, maintenance of
local Board of Directors and charter, and treatment of TBI employees. TBI
management felt that the merger as proposed would benefit TBI's customers,
protect TBI's employees, guarantee the maintenance of the greatest amount of
local control of TBI, and provide more value to TBI shareholders than
appeared to be possible through an affiliation with any of the other
interested companies.
TBI was presented a draft merger agreement by NCBE in December, 1997,
providing for a rate of exchange of shares based upon the earnings of TBI for
calendar 1997 and the projected earnings of NCBE for calendar 1998.
Management of NCBE and TBI each investigated the operations of the other
party.
On February 10, 1998, the TBI Board of Directors met and authorized the
Chairman and Chief Executive Officer of TBI to accept the NCBE offer. The
terms of the Merger Agreement were agreed upon at this time.
REASONS FOR THE MERGER; RECOMMENDATION OF TBI'S BOARD OF DIRECTORS
Among the factors considered by the Board of Directors of TBI in
recommending to TBI shareholders the approval of the Merger Agreement and
Merger were: (i) the value of the Merger Consideration; (ii) the terms of
other recent reported acquisitions of other financial institutions in the
Midwestern United States; (iii) information concerning the business,
financial condition, results of operations and prospects of TBI and NCBE; and
(iv) the public market for the shares of NCBE Common. The TBI Board of
Directors did not assign any relative weights to the foregoing factors.
For the foregoing reasons, the Board of Directors of TBI concluded that
the affiliation through the Merger of TBI with NCBE is in the best interest
of TBI and its shareholders and in the best interest of the customers and
communities that the Bank serves.
THE TBI BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF TBI COMMON VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Certain members of the management and Board of Directors of TBI have
interests in the Merger that are in addition to the interests of shareholders
of TBI 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 TBI as
soon
16
<PAGE>
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 TBI
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 which are
required by the Merger Agreement to be filed with the Offices of the
Secretaries of State of the States of Kentucky and Indiana. It is presently
contemplated that the Effective Time will occur during the second or third
calendar quarter of 1998. The Merger Agreement may be terminated by either
party if, among other things, the Closing does not occur on or before
September 30, 1998. See "-- Termination and Waiver."
CONVERSION OF TBI COMMON
As a result of the Merger, each share of TBI Common issued and
outstanding immediately prior to the Effective Time, other than shares whose
holders have properly exercised their dissenters' rights under the Kentucky
Law, will be converted into the right to receive 73 shares of NCBE Common.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of TBI Common into the right to receive the Merger
Consideration will occur by operation of law at the Effective Time. After
the Effective Time, certificates theretofore evidencing shares of TBI 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 five (5) 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 TBI 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 and of the procedures for surrendering such certificates in exchange
for a certificate for NCBE Common. The letter of transmittal will also
specify that delivery will be effected, and risk of loss and title to the
certificates for TBI Common will pass, only upon proper delivery of the
certificates for TBI Common to the Exchange Agent and will be in such form
and have such other provisions as the Merger Agreement contains and as NCBE
may reasonably specify. After the receipt by the Exchange Agent of a
holder's certificates for TBI 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 TBI ARE REQUESTED NOT TO
SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL SUCH LETTER OF TRANSMITTAL
AND INSTRUCTIONS ARE RECEIVED. Unless and until the certificates for TBI
Common are surrendered, together with a letter of transmittal duly executed
and any other required documents, dividends or other distributions on the
shares of NCBE Common issuable with respect to such TBI 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 TBI
Common, together with a letter of transmittal duly executed and any other
required documents, there will be delivered any dividends or other
distributions 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 TBI Common has been lost, 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 and an indemnity
agreement, if required by NCBE.
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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.
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
outweighed 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.
Following a recent examination, a rating of "needs improvement" was
received with respect to NCBE's Year 2000 compliance efforts. If the
examining agency does not issue a more satisfactory rating, Federal Reserve
Board approval will be delayed, perhaps substantially. While NCBE expects to
receive an improved rating in the near future, such improvement cannot be
assured.
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 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.
The Merger is also subject to approval by the Kentucky Department of
Financial Institutions ("KDFI") under the following criteria: (i) the terms
of the acquisition are in accordance with the laws of the state; (ii) the
financial condition, or the competence, experience and integrity of the
acquiring company or its principals are such as will not jeopardize the
financial stability of the acquired bank or bank holding company; (iii) the
public convenience and advantage will be served by the acquisition; and (iv)
no federal regulatory authority whose approval is required has disapproved
the transaction because it would result in a monopoly or substantially lessen
competition. The commissioner of the KDFI will approve the Merger within 90
days of submission of a complete application if he finds the forgoing
criteria have been satisfied.
NCBE filed applications for approval of the Merger with the Federal
Reserve Board and KDFI on _______ __, 1998. Approval by each is not
anticipated until after the Special Meeting.
DISSENTERS' RIGHTS
The rights of TBI shareholders who choose to dissent from the Merger are
governed by the provisions of the Kentucky Law. A copy of the provisions of
the Kentucky Law governing dissenters' rights (KRS 271B.13-010 to
271B.13-280) is attached hereto as Appendix B.
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Any shareholder who wishes to assert dissenters' rights must deliver to
TBI a written notice indicting that shareholder's intent to demand payment
for his or her shares. This notice should be addressed to Trigg Bancorp,
P.O. Box 500, Cadiz, Kentucky 42211. The shareholder's notice must be
delivered to TBI 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
beneficially own. Shareholders who own shares beneficially but not of record
must, in addition to the other requirements described herein, submit to TBI
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 Merger will not be entitled to
payment for his shares under dissenters' rights according to the Kentucky Law.
If the Merger is approved at the special meeting, TBI will deliver a
written dissenters' notice to all shareholders who notified TBI 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 certificated
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 occurred on February
11, 1998 with respect to the Merger, 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 TBI
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 Kentucky Law 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 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
occurred on February 11, 1998 with respect to the Merger, the Kentucky Law
requires TBI to pay such shareholder the amount TBI estimates to be the fair
value of his shares plus accrued interest. Payment shall be made as soon as
the Merger is consummated and must be accompanied by year-end and interim
financial statements of TBI, a statement of TBI's estimate of the fair value
of the shares, an explanation of how interest was calculated, a statement of
the dissenting shareholder's right to demand payment under the Kentucky Law.
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"), TBI may elect to
withhold payment of the fair value of the dissenting shareholder's shares.
To the extent such payment is withheld, TBI is required to estimate the fair
value of the dissenting shareholder's rights plus interest 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 TBI's estimate of value, an explanation of how interest was
calculated and a statement of the dissenting shareholder's right to demand
payment under the Kentucky Law.
The Kentucky Law provides that a dissenting shareholder may notify TBI
in writing of his estimate of the fair value of his shares and interest due
and demand payment of the amount of such estimate (less any payment already
made by TBI), or reject TBI'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, or the
interest due is incorrectly calculated, (ii) TBI 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, TBI fails to
return the deposited certificates or release transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding
payment.
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In order to exercise these rights, a dissenter must notify TBI in writing
within 30 days after TBI made or offered payment for the dissenter's shares.
If a demand for payment by a dissenting shareholder remains unsettled
within 60 days after TBI's receipt of the demand for payment, TBI must
commence a proceeding in the circuit or superior court of Trigg County,
Kentucky and petition the court to determine the fair value of the shares.
If such a proceeding is not commenced within the 60-day period, TBI 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 TBI 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 TBI elected to
withhold payment in the case of a Post-announcement Shareholder. The court
in an appraisal proceeding will determine and assess the costs of the
proceeding, including the compensation and expenses of court-appointed
appraisers, against TBI, except the court may assess costs against dissenters
to the extent the dissenters acted arbitrarily, vexatiously, or not in good
faith in demanding payment. The court may also assess fees and expenses of
attorneys and experts for the parties against TBI if the court finds that TBI
did not substantially comply with the requirements of the Kentucky Law
regarding dissenters' rights, or against any party if the court finds that
such party acted arbitrarily, vexatiously or not in good faith. The Kentucky
Law 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 TBI.
If the holders of more than approximately 9% of the outstanding shares
of TBI 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 KENTUCKY LAW RELATING TO THE RIGHTS OF DISSENTING
SHAREHOLDERS OF TBI, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
EXCERPTS FROM THE KENTUCKY LAW INCLUDED HEREIN AS APPENDIX B.
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) the absence of any requirement to
obtain the approval of NCBE's shareholders in connection with the Merger;
(iii) capitalization; (iv) organization of subsidiaries; (v) delivery of
reports filed by NCBE under the Exchange Act; (vi) the conformity of
financial statements in such reports to generally accepted accounting
principles ("GAAP"); (vii) the absence of any undisclosed material
liabilities and any material adverse change in NCBE's financial condition,
results of operations or business; (viii) the absence of any litigation,
claim, investigation, or other proceeding which, if adversely determined,
would have a material adverse effect; (ix) the authorization and
nonassessability of the shares of NCBE Common to be issued in the Merger; (x)
the absence of any circumstances that would prevent the Merger from
qualifying as a pooling of interests; and (xi) the absence of any untrue
statements or omissions of material fact on the part of NCBE in the Merger
Agreement and related documents.
The representations and warranties made by TBI relate to, among other
things: (i) the organization, good standing and corporate power of TBI, the
capitalization of TBI, the organization and good standing of the Bank, and
the capitalization of the Bank; (ii) the authorization, execution and
delivery of the Merger Agreement and the Merger
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Agreement's noncontravention of charter documents of TBI and the Bank; (iii)
ownership and organization of subsidiaries; (iv) delivery of audited
financial statements of TBI 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 TBI or the Bank
is a party; (vii) ownership of real estate; (viii) the absence of any
material adverse change in the Bank's financial condition, properties,
results of operations or capitalization of the Bank; (ix) the absence of any
litigation, claim, investigation or other proceeding which, if adversely
determined, would have a material adverse effect on the business or financial
condition of TBI or the Bank and the absence of any investigations, actions
or other legal proceedings involving any director, officer or employee of TBI
or the Bank; (x) insurance; (xi) substantial compliance with applicable laws
and regulations; (xii) the absence of any obligation to pay broker's or
finder's fees in connection with the Merger; (xiii) compliance of employee
benefit plans with applicable laws, rules and regulations; (xiv)
labor-related matters; (xv) the absence of knowledge of certain environmental
related conditions or events; (xvi) the absence of enforcement actions and
other regulatory related matters; (xvii) the absence of any circumstances
that would prevent the Merger from qualifying as a pooling of interests; and
(xviii) the absence of any untrue statements or omissions of material fact on
the part of TBI 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 TBI 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; (iii) list the shares of
NCBE Common to be issued in the Merger on the Nasdaq National Market; (iv)
provide TBI with access during regular business hours to books and records
relating to NCBE's assets, properties, operations and liabilities; (v) permit
the Bank to maintain certain employee benefit related plans through December
31, 1998; and (vi) elect Ben L. Cundiff, the Chairman of the Board and CEO of
TBI, as a director of NCBE. See "-- Interests of Certain Persons in the
Merger."
The covenants made by TBI include, among other things, agreements by TBI
and the 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 TBI and the
Bank or would interfere with TBI'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 replacements in
excess of $25,000 individually or $100,000 in the aggregate and the purchase
of an automated teller machine, issue, sell or redeem any capital stock of
TBI or the Bank, pay cash dividends on the TBI Common in excess of $75.00 per
share per year (however, holders of TBI Common may for any given quarter only
receive cash dividends attributable either to TBI or NCBE, not both), amend
the articles of incorporation or by-laws or similar documents of TBI or the
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 as a
pooling of interests; (iv) not modify its practices relating to loans to
directors, officers and employees; (v) not knowingly violate any laws,
regulations, judgments or orders; (vi) maintain all books and records in
accordance with GAAP; (vii) provide NCBE with access during regular business
hours to books and records relating to TBI's and the Bank's assets,
properties, operations and liabilities; (viii) provide NCBE with copies of
certain reports to the Board of Directors of TBI or the Bank and confer with
NCBE on the general status of ongoing operations; (ix) notify NCBE of any
material change in the operations or certain complaints, investigations or
threatened litigation; (x) furnish NCBE with the information in TBI's
possession that is required for any regulatory applications in connection
with the Merger; (xi) obtain and deliver to NCBE, at least 31 days prior to
the Closing, an agreement from each person who is an officer, director or the
owner of 10% or more of outstanding shares of TBI Common, an agreement
regarding transfers of NCBE Common following the Merger; and (xii) cause a
special meeting of TBI shareholders to be held and recommend approval of the
Merger Agreement and the Merger.
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CONDITIONS TO THE MERGER
In addition to the approval of TBI 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 absence of any notice
from any governmental agency indicating that the Merger would violate any
law; (iv) the effectiveness of the Registration Statement and the absence of
a stop order with respect thereto; and (v) the receipt of an opinion of Baker
& Daniels to the effect that the Merger will constitute a tax-free
reorganization for federal income tax purposes.
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 TBI and its majority shareholder in the
Merger Agreement, the performance or satisfaction in all material respects of
all covenants to be performed by TBI under the Merger Agreement, and the
absence of any material adverse change prior to Closing in the business,
assets, properties, financial condition or results of operations of TBI and
the Bank, taken as a whole; (ii) the determination by NCBE that the Merger
may be accounted for as a pooling of interests; and (iii) the resignation by
Ben L. Cundiff from his position as an employee of TBI and the Bank.
The obligation of TBI 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, the
performance or satisfaction in all material respects of all covenants to be
performed by NCBE under the Merger Agreement, and the absence of any material
adverse change prior to the Closing in the business, assets, properties,
financial condition or results of operations of NCBE and its subsidiaries,
taken as a whole; and (ii) the receipt of opinions of counsel to NCBE as to
certain matters relating to NCBE and the Merger.
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
TBI shareholders: (i) by mutual consent of TBI and NCBE; (ii) by TBI if TBI
or its Board of Directors accepts or approves a "Competing Transaction";
(iii) by TBI, if any of the conditions to its obligation to consummate the
Merger have not been satisfied by September 30, 1998; or (iv) by NCBE, if any
of the conditions to its obligation to consummate the Merger have not been
satisfied by September 30, 1998.
TBI 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 TBI shareholders, to the extent authorized by applicable law.
NO SOLICITATION; FEES AND EXPENSES
The Merger Agreement prohibits TBI, the Bank and their officers,
directors and representatives, from soliciting or authorizing the
solicitation of inquiries or proposals from third parties regarding an
acquisition of TBI, the Bank, or all or substantially all of their assets,
unless TBI's Board of Directors has reasonably determined, based on the
written advice of counsel, that the failure to do so would breach its
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. TBI is
required to communicate to NCBE the terms of any such proposal.
Except as described below or 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.
Upon the occurrence of a Triggering Event, TBI is required to reimburse
NCBE for all out-of-pocket expenses incurred by NCBE in connection with the
transactions contemplated by the Merger Agreement up to a maximum of
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$150,000. "Triggering Event" means the termination of the Merger Agreement
for any reason other than certain specified conditions to the Merger and the
occurrence of any of the following events within one year: (i) TBI enters
into an agreement with a third party for a Competing Transaction; (ii) the
recommendation of a Competing Transaction by the TBI Board of Directors; or
(iii) the withdrawal or modification of the recommendation of the Merger
Agreement by the TBI Board of Directors following the announcement of a
Competing Transaction. "Competing Transaction" means any of the following
(other than the transactions contemplated by the Merger Agreement): (i) an
offer for 25% or more of the outstanding capital stock of TBI or the Bank;
(ii) a proposal for a merger, share exchange, business combination or similar
transaction involving TBI; or (iii) a proposal for the sale, lease, exchange
or other disposition of 25% or more of TBI's assets.
INDEMNITY BY MAJORITY SHAREHOLDER
Ben L. Cundiff, the holder of 5,262 shares of TBI Common and the
Chairman of the Board and CEO of TBI (the "Shareholder"), has agreed in the
Merger Agreement to indemnify and hold NCBE harmless against any liabilities
(including attorneys' fees) incurred by NCBE as a result of (i) a breach of
any representation of TBI or the Shareholder in the Merger Agreement; (ii) a
breach of any covenant made by TBI or the Shareholder in the Merger
Agreement; or (iii) any inaccuracy in any certificate delivered by TBI under
the Merger Agreement. The Shareholder's liability to NCBE, if any, does not
apply until NCBE's damages exceed $250,000, in which case the Shareholder is
liable for all such damages up to a maximum of $3,000,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax ("federal income tax") consequences of the Merger to certain TBI
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 TBI
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 TBI shareholders subject to special federal income tax
treatment including, without limitation, foreign persons, insurance
companies, tax-exempt entities, retirement plans, dealers in securities,
persons who acquired their TBI Common pursuant to the exercise of employee
stock options or otherwise as compensation. 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 TBI 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 TBI Common are held
as capital assets (within the meaning of Section 1221 of the Code) at the
Effective Time.
It is a condition to the Merger that as of the Closing the parties
receive an opinion from Baker & Daniels, counsel to NCBE ("Counsel"), to the
effect that, assuming the Merger occurs in accordance with the Merger
Agreement, the Merger will constitute a reorganization for federal income tax
purposes under Section 368(a) of the Code, with the following federal income
tax consequences:
(i) TBI shareholders will recognize no gain or loss as a result of
the exchange of their TBI Common solely for shares of NCBE Common pursuant
to the Merger.
(ii) The aggregate adjusted tax basis of the shares of NCBE Common
received by each TBI shareholder in the Merger will be equal to the
aggregate adjusted tax basis of the shares of TBI Common surrendered.
(iii) The holding period of the shares of NCBE Common received by
each TBI shareholder in the Merger will include the holding period of the
shares of TBI Common exchanged therefor.
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(iv) Cash received by TBI shareholders exercising dissenters' rights
will be treated as (a) a distribution in full payment of such shares,
resulting in capital gain or loss, or (b) ordinary income, as the case may
be, depending upon such shareholder's individual situation.
Counsel's opinion will be subject to certain conditions and customary
assumptions and will rely upon various representations made by NCBE, TBI and
certain shareholders of TBI. If any of these representations or assumptions
is inaccurate, the tax consequences of the Merger could differ from those
described herein. Counsel's opinion will also be 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. 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 TBI 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.
Based upon the advice of Counsel, the parties believe that the Merger
will qualify as a reorganization for federal income tax purposes.
Accordingly, the material federal income tax consequences to a holder of TBI
Common will be as described in (i) through (iv) above.
THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO SHAREHOLDERS OF TBI WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH SHAREHOLDER OF TBI 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 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 TBI 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 TBI for the entire fiscal year in which the Merger
occurs, the separately reported income of NCBE and TBI 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 determine that the Merger will qualify
as a pooling of interests. 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 TBI are not aware of
any existing facts or circumstances which would preclude the Merger from
qualifying as a pooling of interests.
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.
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 TBI
shareholder who may be deemed to be an "affiliate" of NCBE for purposes of
Rule 144 under the Securities Act or an "affiliate" of TBI for purposes of
Rule 145 under the Securities Act. Persons who may be deemed to be
affiliates of TBI or NCBE generally include individuals who, or entities
which, control, are
24
<PAGE>
controlled by or are under common control with TBI or NCBE and will include
directors and certain officers of TBI and NCBE and may include principal
shareholders of TBI 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 TBI 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 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 TBI will obtain and deliver to NCBE
an agreement from each person who is an officer, director or the owner of 10%
or more of the outstanding shares of TBI Common providing that such person
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 TBI 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 TBI 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 TBI or
NCBE.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the TBI Board of Directors have certain interests in
the transactions contemplated by the Merger Agreement that are in addition to
their interests as TBI shareholders, including those referred to below.
Pursuant to his employment agreement with the Bank, Teddy L. Hudson, the
President of the Bank and a director of TBI, will be entitled to receive
additional compensation if the Merger is consummated. Under the terms of
such agreement, Mr. Hudson would be entitled to receive as additional
compensation an amount equal to: (a) the value of the per share Merger
Consideration; (b) minus $1,100; and (c) multiplied by 200. Using the
closing sale price of NCBE Common on ________ __, 1998, the amount of the
additional compensation payable to Mr. Hudson would be $__________. The
payment of such additional compensation will be deferred until Mr. Hudson's
termination of employment by the Bank unless the Board of Directors of the
Bank elects to pay such amount earlier. While deferred, the amount payable
to Mr. Hudson will be credited with interest at the rate specified in his
employment agreement.
In the Merger Agreement, NCBE has agreed to elect Ben L. Cundiff as a
director of NCBE after the Effective Time.
25
<PAGE>
SELECTED FINANCIAL DATA
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 from the consolidated
financial statements of NCBE and TBI 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," "INFORMATION CONCERNING TBI" AND "INDEX TO TBI FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
NCBE - HISTORICAL
(Dollar amounts other than per share data in thousands)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income $ 51,995 $ 48,606 $ 44,433 $ 39,933 $ 38,010
Provision for loan losses 1,891 2,704 399 78 736
--------------------------------------------------------------------------------
Net interest income after provision
for loan losses 50,104 45,902 44,034 39,855 37,274
Noninterest income 10,088 8,606 7,117 5,209 6,707
Noninterest expense 34,390 29,966 28,968 28,644 28,343
--------------------------------------------------------------------------------
Income before income taxes 25,802 24,542 22,183 16,420 15,638
Income taxes 7,451 8,046 7,784 5,668 4,861
------------- ------------- ------------- ------------- ------------
Net income $ 18,351 $ 16,496 $ 14,399 $ 10,752 $ 10,777
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
PER SHARE DATA
Net income
Basic $ 1.72 $ 1.52 $ 1.30 $ 0.97 $ 0.97
Diluted 1.69 1.52 1.30 0.97 0.97
Book value 13.69 12.12 11.71 10.47 10.23
Cash dividends declared 0.64 0.55 0.40 0.40 0.38
SUMMARY OF FINANCIAL CONDITION
Total assets $ 1,298,260 $ 1,172,057 $ 1,081,921 $ 1,004,160 $ 993,468
Securities 279,328 282,894 258,895 268,103 269,098
Loans, net 916,356 800,622 736,997 645,235 579,556
Deposits 964,046 913,350 864,136 849,306 844,808
Shareholders' equity 146,803 129,694 130,606 114,750 113,975
SELECTED FINANCIAL RATIOS
Net income to average assets 1.47% 1.48% 1.40% 1.09% 1.09%
Net income to average equity 13.42 12.89 11.74 9.39 9.79
Cash dividend payout ratio 36.74 37.05 30.05 36.77 31.65
Average equity to average assets 10.98 11.48 11.93 11.59 11.14
Weighted average shares (basic) 10,679,448 10,843,295 11,095,116 11,040,906 11,146,280
Weighted average shares (diluted) 10,832,943 10,843,295 11,095,116 11,040,906 11,146,280
</TABLE>
26
<PAGE>
NCBE - TBI PRO FORMA
(Dollar amounts other than per share data in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income $ 55,781 $ 52,470 $ 48,173
Provision for loan losses 2,003 2,935 474
Net interest income after provision
for loan losses 53,778 49,535 47,699
Noninterest income 10,652 9,176 7,717
Noninterest expense 36,720 32,442 31,279
Income before income taxes 27,710 26,269 24,137
Income taxes 7,963 8,509 8,456
Net income 19,747 17,760 15,681
PER SHARE DATA
Net income
Basic 1.73 1.53 1.33
Diluted 1.71 1.53 1.33
Book value 13.55 12.51 12.61
Cash dividends declared 1.67 1.58 0.81
SUMMARY OF FINANCIAL CONDITION
Total assets 1,394,639 1,263,979 1,171,646
Securities 303,254 307,068 287,619
Loans, net 960,478 848,770 785,881
Deposits 1,036,498 983,373 933,438
Shareholders' equity 155,335 137,182 137,806
SELECTED FINANCIAL RATIOS
Net income to average assets 1.47 1.47 1.41
Net income to average equity 13.64 13.12 12.14
Dividend payout ratio 0.38 0.39 0.30
Average equity to average assets 10.81 11.23 11.61
Weighted average shares (basic) 11,415,726 11,579,573 11,831,029
Weighted average shares (diluted) 11,569,221 11,579,573 11,831,029
End of period shares outstanding - Pro forma 11,463,525 11,438,476 11,888,229
NCBE only 10,727,247 10,702,198 11,152,316
NCBE dividend declared 0.64 0.55 0.40
TRIGG pro forma shares 736,278 736,278 735,913
TRIGG dividend on pro forma shares 1.03 1.03 0.41
</TABLE>
27
<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 TBI Common. The following table only sets
forth information regarding those transactions as to which management of TBI
has knowledge of the prices paid. Because of the lack of a public trading
market for shares of TBI Common, the prices indicated may not reflect the
prices which would be paid for such shares on such a market.
<TABLE>
<CAPTION>
NCBE COMMON TBI COMMON
----------------------------------------- ----------------------------------------
CASH CASH
DIVIDENDS DIVIDENDS
LOW HIGH DECLARED LOW (1) HIGH (1) DECLARED
--- ---- -------- --- ---- --------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter $21.54 $27.10 $0.11 N/A N/A 30.00
Second Quarter 25.17 26.76 0.14 1/2 N/A N/A 15.00
Third Quarter 25.17 26.42 0.14 1/2 N/A N/A 15.00
Fourth Quarter 25.40 28.57 0.15 N/A N/A 15.00
1997
First Quarter 27.86 32.26 0.15 1/4 N/A N/A 30.00
Second Quarter 30.24 40.24 0.15 1/4 N/A N/A 15.00
Third Quarter 38.57 41.67 0.15 1/4 N/A N/A 15.00
Fourth Quarter 40.00 51.19 0.18 N/A N/A 15.00
1998
First Quarter 38.50 45.50 0.18 N/A N/A 30.00
Second Quarter(2) --- --- --- N/A N/A 15.00
</TABLE>
- -----------
(1) Although there may have been private transactions involving TBI Common
during these periods that are not reflected in the table, neither TBI nor
any members of its management were parties to such transactions.
(2) Through April _, 1998.
On February 10, 1998, the last trading day before the first public
announcement of the terms of the proposed acquisition, the closing sale price
of NCBE Common, was $42.00 per share. Based upon the per share price of NCBE
Common on such date, the equivalent per share price of TBI Common was
$3,066.00. The equivalent per share price for TBI Common is calculated by
multiplying the specified closing sale price of NCBE Common by 73, the number
of shares of NCBE Common to be issued for each share of TBI Common in the
Merger.
On _________ _, 1998, 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 TBI Common was $___________.
As of ____________ __, 1998, there were _____ and _____ holders of
record of NCBE Common and TBI Common, respectively.
Both NCBE and TBI 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 TBI are advised to obtain current market quotations for
NCBE Common.
28
<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 March 6, 1998, NCBE owned 12 commercial banks, including
NCB, one savings bank, a leasing subsidiary, and a property management
company. As of December 31, 1997, NCBE had total consolidated assets of $1.3
billion, total loans of $916.4 million, total deposits of $964.0 million, and
total shareholders' equity of $146.8 million. NCBE's 13 financial
institution subsidiaries serve 33 communities from 44 locations and provide a
wide range of banking services in the tri-state area of Indiana, Kentucky,
and Illinois surrounding Evansville, Indiana.
RECENT DEVELOPMENTS
The following is a brief description of the two acquisitions that NCBE
has completed since December 31, 1997:
MAYFIELD BRANCH. On January 8, 1998, NCBE's subsidiary, First Kentucky
Bank, through an affiliate acquired the Mayfield, Kentucky Branch of Republic
Bank & Trust Company. First Kentucky Bank assumed deposit liabilities of
$65.7 million in consideration of a deposit premium of $4.6 million. First
Kentucky Bank also purchased the office facility and certain loans of the
branch.
VERNOIS BANCSHARES, INC. On March 6, 1998, NCBE acquired Vernois
Bancshares, Inc. ("VBI"), the holding company for Bank of Illinois in Mt.
Vernon ("BOI"), an Illinois banking corporation with three offices in Mount
Vernon, Illinois. NCBE paid $27.5 million in cash for all of the outstanding
stock of VBI. As of December 31, 1997, BOI had total assets of $163.5
million, net loans of $109.3 million and total deposits of $127.7 million.
The acquisition was accounted for using the purchase method of accounting and
the results of operations of BOI will be included in NCBE's consolidated
results of operations from the date of acquisition.
The following is a brief description of the terms of two other pending
acquisitions:
ILLINOIS ONE BANK, NATIONAL ASSOCIATION. NCBE is a party to an
Agreement and Plan of Merger dated December 15, 1997 with Illinois One
Bancorp, Inc. ("IOBI"), the holding company for Illinois One Bank, National
Association ("IOB"), a national banking association with offices in
Shawneetown, Elizabethtown and Golconda, Illinois. The agreement relates
to the acquisition of IOBI in a merger transaction in which up to 577,417
shares of NCBE Common would be issued. As of December 31, 1997, IOB had
total assets of $88.1 million, net loans of $48.4 million, total deposits of
$76.4 million and total shareholders' equity of $10.9 million. The
acquisition is subject to the approval of the shareholders of IOBI. The
acquisition is expected to qualify for the pooling of interests method of
accounting. The parties expect to close the merger in the second quarter of
1998.
COMMUNITY FIRST BANK OF KENTUCKY AND COMMUNITY FIRST BANK, N.A. NCBE is
a party to an Agreement and Plan of Merger dated March 9, 1998, with
Community First Financial, Inc. ("CFF"), the holding company for Community
First Bank of Kentucky, a Kentucky banking corporation, which has two offices
in Warsaw and Dry Ridge, Kentucky, and Community First Bank, National
Association, a national banking association, which has six offices in
Maysville, May's Lick and Mount Olivet, Kentucky and Aberdeen and Ripley,
Ohio. The agreement relates to the acquisition of CFF in a merger
transaction in which up to 1,441,862 shares of NCBE Common would be issued to
shareholders of CFF. As of December 31, 1997, CFF's subsidiary banks had
total assets of $129.7 million, net loans of $101.9 million, total deposits
of $114.0 million and total shareholders equity of $12.6 million. The
acquisition of CFF is subject to the approval of the shareholders of CFF, the
Federal Reserve and the KDFC. The acquisition is expected to qualify for the
pooling of interests method of accounting. The parties expect to close the
merger in the second or third quarter of 1998.
29
<PAGE>
THE RIPLEY COUNTY BANK. NCBE is a party to an Agreement and Plan of
Merger dated April 21, 1998, with Hoosier Hills Financial Corporation
("HHFC"), the holding company for The Ripley County Bank ("RCB"), an Indiana
banking corporation, which has offices in Milan, Osgood, and Versailles,
Indiana. The agreement relates to the acquisition of HHFC in a merger
transaction in which up to 775,625 shares of NCBE Common (subject to increase
under certain circumstances, at NCBE's election) would be issued. As of
December 31, 1997, RCB had total assets of $108.9 million, net loans of $86.6
million, total deposits of $85.7 million and total shareholders' equity of
$11.3 million. The acquisition is subject to the approval of the
shareholders of HHFC and the Federal Reserve. The acquisition is expected to
qualify for the pooling of interests method of accounting. The parties
expect to close the merger in the third or fourth quarter of 1998.
The following is a description of a recent securities offering.
TRUST PREFERRED OFFERING. On March 30, 1998, NCBE Capital Trust I (the
"Trust"), an affiliate of NCBE, completed a $34.5 million public offering of
its cumulative preferred trust securities. The Trust used the proceeds of
the public offering and funds from NCBE to purchase $34.5 principal interest
of subordinated debentures issued by NCBE. NCBE used the net proceeds it
received from the sale of its subordinated debentures to repay indebtedness
incurred in the acquisition of VBI discussed above.
YEAR 2000 ISSUE
The year 2000 has posed a unique set of challenges to those industries
reliant on information technology. As a result of methods employed by early
programmers, many software applications and operational programs may be
unable to distinguish the year 2000 from the year 1900. If not effectively
addressed, this problem could result in the production of inaccurate data,
or, in the worst cases, the inability of the systems to continue to function
altogether. Financial institutions are particularly vulnerable due to the
industry's dependence on electronic data processing systems.
In 1996, NCBE started the process of identifying the hardware and
software issues required to be addressed to assure year 2000 compliance.
NCBE began by assessing the issues related to the year 2000 and the potential
for those issues to adversely affect NCBE's own operations and those of its
subsidiaries. Since that time, NCBE has established a Year 2000 Compliance
Team (the "Team") composed of representatives from key areas throughout the
organization. It is the mission of this Team to identify areas subject to
complications related to the year 2000 and to initiate remedial measures
designed to eliminate any adverse effects on NCBE's operations. The Team has
identified all mission-critical software and hardware that may be adversely
affected by the year 2000 and has required vendors to represent that the
systems and products provided are or will be year 2000 compliant. Management
of NCBE expects that all mission critical software will be upgraded to
achieve year 2000 compliance and tested by December 31, 1998. In addition,
the Team is developing contingency plans to address systems which do not
become year 2000 compliant by December 31, 1998.
NCBE is committed to a plan for achieving compliance, focusing not only
on its own data processing systems, but also on its customers. The Team has
taken steps to educate and assist its customers with identifying their year
2000 compliance problems. In addition, the Team has proposed policy and
procedure changes to help identify potential risks to NCBE and to gain an
understanding of how customers are managing the risks associated with the
year 2000.
Management of NCBE believes that the expenditures required to bring
systems into compliance will not have a materially adverse effect on NCBE's
performance. However, the year 2000 problem is pervasive and complex and can
potentially affect any computer process. Accordingly, no assurance can be
given that year 2000 compliance can be achieved without additional
unanticipated expenditures and uncertainties that might affect future
financial results.
NCBE and its banking subsidiaries are subject to examination with
respect to their year 2000 compliance, by various state and federal agencies
including the Federal Reserve Board, the Comptroller of the Currency, the
Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and
state banking agencies. Following a recent examination, a rating of "needs
improvement" was received with regard to NCBE's Year 2000 compliance efforts.
If
30
<PAGE>
the examining agency does not issue a more satisfactory rating, NCBE will not
qualify for expedited processing of regulatory applications seeking approval
of future acquisitions or such approvals may only be given subject to
additional conditions. While management expects to devote sufficient
corporate resources to address regulatory concerns in this area, there can be
no assurance that Year 2000 compliance issues will not delay the consummation
of this acquisition, other pending acquisitions (other than the acquisition
of Illinois One Bank, N.A., which was approved by the Federal Reserve Board
on March 12, 1998) or future acquisitions or otherwise adversely affect
NCBE's ability to continue to grow through acquisition.
31
<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 736,278 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 60,678 (1) * 60,678 *
Michael F. Elliott 338,328 (2) _.__% 338,328 _.__%
Susanne R. Emge 24,479 (3) * 24,479 *
Donald G. Harris 12,042 * 12,042 *
H. Ray Hoops 848 * 848 *
Robert A. Keil 57,177 (4) * 57,177 *
John D. Lippert 71,797 (5) * 71,797 *
Ronald G. Reherman 9,065 (6) * 9,065 *
Curtis D. Ritterling 151 (7) * 151 *
Laurence R. Steenberg 29,402 (8) * 29,402 *
Richard F. Welp 3,686 (9) * 3,686 *
All directors and executive
officers as a group (12 persons) 607,868 (10) _.__% 607,868 _.__%
</TABLE>
- -----------------
* Less than 1%.
(1) Includes 56,268 shares with shared voting and investment power with spouse
and 4,410 shares that may be purchased pursuant to options exercisable
within 60 days.
(2) Includes 251,807 shares with sole voting and investment power;
16,793 shares with shared voting and investment power with spouse;
20,727 shares with sole voting and investment power by spouse; and
3,248 shares held by a trust with shared voting and investment power; and
45,753 shares subject to options exercisable within 60 days.
(3) Includes 2,020 shares with sole voting and investment power; 14,829 shares
with shared voting and investment power with spouse; and 7,630 shares with
sole voting and investment power by spouse.
(4) Includes 11,424 shares with shared voting and investment powers with
spouse; and 45,753 shares subject to options exercisable within 60 days.
(5) Includes 15,695 shares with sole voting and investment power; 8,274 shares
with sole voting and investment power by spouse; and 47,828 shares subject
to options exercisable within 60 days.
(6) Includes 3,386 shares with sole voting and investment power; and
5,679 shares with shared voting and investment power with spouse.
(7) Shares voting and investment power for all shares with spouse.
(8) All shares are held in trust for a limited partnership of which
Mr. Steenberg is a general partner with sole voting and investment power.
(9) Includes 1,492 shares with sole voting and investment power; and
2,194 shares with shared voting and investment power with spouse.
(10) Includes 143,744 shares subject to options exercisable within 60 days.
32
<PAGE>
INFORMATION CONCERNING TBI
BUSINESS
TBI was incorporated under the laws of the Commonwealth of Kentucky on
March 19, 1984 to serve as a bank holding company for the Bank. The Bank is
a state banking association that commenced business on January 18, 1890. The
business of TBI consists solely of the ownership, supervision, and control of
the Bank. The Bank has a total of three banking offices, all in Cadiz,
Kentucky. As of December 31, 1997, TBI had, on a consolidated basis, total
assets of $96,379,000, loans, net of the allowance for loan losses, of
$52,091,000, total deposits of $72,452,000 and stockholders' equity of
$8,532,000 and employed 37 full-time employees and 5 part-time employees.
The Bank is a full-service community bank that offers banking services
to commercial and residential customers mostly in Trigg and adjoining
counties in western Kentucky. Such banking services include commercial, real
estate, and personal loans; money market accounts; trust and investment
services; and checking, savings, and time deposit accounts. The lending
portion of the Bank's business relates primarily to the activities of
small-to medium-sized businesses, local community residents, and other
consumer purposes.
The Bank is subject to vigorous competition from major banking
institutions as well as other financial institutions in its principal service
area, such as savings and loan associations, insurance companies, credit
unions, and finance companies.
TBI is subject to supervision, regulation, and examination by the
Federal Reserve Board, and the Bank is subject to supervision, regulation,
and examination by the Kentucky Department of Financial Institutions and the
Federal Deposit Insurance Corporation. The deposits of the Bank are
primarily insured by the Bank Insurance Fund (BIF) of the Federal Deposit
Insurance Corporation.
In the following pages, statistical information about TBI is presented.
Such information should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements of TBI included elsewhere herein.
33
<PAGE>
SELECTED FINANCIAL DATA OF TBI
The selected consolidated data as of and for the two years ended
September 30, 1997 and 1996 have been derived from financial statements
audited by independent public accountants, whose reports can be found
elsewhere in this Prospectus/Proxy Statement. This data should be read in
conjunction with TBI's Consolidated Financial Statements and the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
THREE-MONTH PERIOD FISCAL YEAR
(DOLLAR AMOUNTS OTHER THAN ENDED DECEMBER 31, ENDED SEPTEMBER 30,
PER SHARE DATA IN THOUSANDS) ------------------ -------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net interest income $ 955 $ 974 $ 3,805 $ 3,912
Provision for loan losses 2 66 176 225
Noninterest income 163 112 456 509
Noninterest expense 535 593 2,332 2,459
Income before income taxes 581 427 1,753 1,737
Income taxes 122 108 498 530
-------------------------------------------
Net income $ 459 $ 319 $ 1,255 $ 1,207
-------------------------------------------
-------------------------------------------
PER COMMON SHARE
Basic Earnings $ 45.54 $ 31.63 $ 124.48 $ 119.71
Book value 845.96 742.41 799.18 710.24
Cash dividends declared 15.00 15.00 75.00 75.00
TOTALS
Loans $ 52,960 $ 55,337 $ 55,078 $ 56,624
Allowance for loan losses 869 800 843 741
Securities 35,297 29,665 33,391 28,152
Total assets $ 96,379 $ 91,922 $ 94,346 $ 91,480
Deposits 72,452 70,023 69,484 69,407
Stockholders' equity 8,532 7,488 8,060 7,164
SELECTED FINANCIAL RATIOS
Net income to average assets .48% 0.35% 1.34% 1.37%
Net income to average equity 6.57% 5.13% 16. 89% 17.36%
Cash dividend payout 32.94% 47.42% 60.25% 62.64%
Average equity to average assets 8.85% 8.14% 8.54% 7.91%
Tangible equity to tangible assets 8.85% 8.14% 8.54% 7.91%
Total capital to risk-weighted assets 15.00% 14.47% 15.48% 14.41%
OTHER DATA
Weighted average shares 10,086 10,086 10,086 10,082
Risk-weighted assets $ 58,168 $ 56,618 $ 56,636 $ 56,783
</TABLE>
34
<PAGE>
OTHER INFORMATION
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY,
AND INTEREST RATES. The following table shows the condensed average balance
sheets for the periods presented and the percentage of each principal
category of assets, liabilities, and stockholders' equity to total assets.
Also shown are the average yield on each category of interest-earning assets
and the average rate paid on interest-bearing liabilities for each of the
periods presented.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997
---------------------------------------------------------------------
PERCENT
AVERAGE OF TOTAL INCOME/ AVERAGE
BALANCE ASSETS EXPENSE YIELD/RATE
- ----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans (1) $ 55,194 59.01% $ 5,384 9.75%
Taxable investment securities 26,156 27.96 1,815 6.94
Nontaxable investment securities (2) 6,499 6.95 450 6.92
Federal funds sold 860 0.92 47 5.47
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 88,709 94.84% 7,696 8.68%
Noninterest-earning assets:
Cash and due from banks 2,337 2.50
Premises and equipment, net 598 0.64
FHLB Stock 1,461 1.56
Other assets 1,248 1.34
Allowance for loan losses (819) (0.88)
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 93,534 100.00
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW and money market
demand accounts $ 18,545 19.83% $ 533 2.87%
Savings 6,004 6.42 161 2.74
Time deposits 35,831 38.31 2,061 5.75
Notes payable 15,519 16.59 1,016 6.55
Federal Funds Purchased 365 0.39 21 5.75
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 76,264 81.54% 3,792 4.98%
Noninterest-bearing liabilities:
Demand deposits 9,097 9.73
Other liabilities 743 0.79
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 86,104 92.06%
Stockholders' equity 7,430 7.94%
Total liabilities and stockholders' equity $ 93,534 100.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 3,904
- ----------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.71%
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest rate margin 4.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities to
earning assets ratio 85.97%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------
1996
---------------------------------------------------------------------
PERCENT
AVERAGE OF TOTAL INCOME/ AVERAGE
BALANCE ASSETS EXPENSE YIELD/RATE
- ----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Loans (1) $ 55,864 63.53% $ 5,628 10.07%
Taxable investment securities 23,615 26.86 1,621 6.86
Nontaxable investment securities (2) 2,895 3.29 213 7.36
Federal funds sold 1,116 1.27 53 4.75
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 83,490 94.95% 7,515 9.00%
Noninterest-earning assets:
Cash and due from banks 2,402 2.73
Premises and equipment, net 562 0.64
FHLB Stock 919 1.05
Other assets 1,236 1.41
Allowance for loan losses (682) (0.78)
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 87,927 100.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and stockholders' equity:
Interest-bearing liabilities:
NOW and money market
demand accounts $ 18,442 20.97% $ 559 3.03%
Savings 6,381 7.26 187 2.93
Time deposits 35,345 40.20 2,093 5.92
Notes payable 10,280 11.69 678 6.60
Federal Funds Purchased 727 0.83 38 5.23
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 71,175 80.95% 3,555 4.99%
Noninterest-bearing liabilities:
Demand deposits 9,199 10.46
Other liabilities 600 0.68
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 80,974 92.09%
Stockholders' equity 6,953 7.91%
Total liabilities and stockholders' equity $ 87,927 100.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 3,960
- ----------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 4.01%
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest rate margin 4.74%
- ----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities to
earning assets ratio 85.25%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
(1) Average balances include nonaccrual loans. The income on such loans is
included in interest income and is recognized only upon receipt.
(2) Nontaxable investment income presented on a fully tax-equivalent basis.
The tax effect resulted in an increase in interest income of $99,000 and
$47,000 for the years ended September 30, 1997 and 1996, respectively.
35
<PAGE>
INTEREST DIFFERENTIAL. The following table sets forth, on a
tax-equivalent basis for the periods presented, a summary of the changes in
interest income and expenses resulting from changes in yields-rates. The
change in interest due to both rate and volume has been allocated to rate and
volume changes in proportion to the relationship of the absolute dollar
amounts of the changes in each.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AMOUNT OF 1997 INCREASE (DECREASE)
COMPARED TO 1996
INCREASE (DECREASE) DUE TO:
------------------------------------
VOLUME (1) RATE (2) NET
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest earned on:
Loans $ (67) (177) (244)
Taxable investment securities 175 19 194
Nontaxable investment securities 250 (13) 237
Federal funds sold (13) 7 (6)
- --------------------------------------------------------------------------------
Total interest-earning assets 345 (164) 181
Interest paid on:
NOW and money market demand accounts 3 (29) (26)
Savings (11) (15) (26)
Time deposits 29 (61) (32)
Notes payable 343 (5) 338
Federal funds purchased (21) 4 (17)
- --------------------------------------------------------------------------------
Total interest-bearing liabilities 343 (106) 237
- --------------------------------------------------------------------------------
Net interest income $ 2 (58) (56)
</TABLE>
- ----------
(1) Change in volume multiplied by yield/rate of prior period.
(2) Change in yield/rate multiplied by volume of prior period.
(3) Nontaxable investment securities are presented on a fully tax-equivalent
basis, assuming a tax rate of 34%.
INVESTMENT PORTFOLIO. The carrying value of investment securities is
summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30,
1997 1996
----------------------------- ------------------------------
PERCENT PERCENT
OF TOTAL OF TOTAL
AMOUNT SECURITIES AMOUNT SECURITIES
- -------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 1,243 3.72% $ 2,464 8.75%
U.S. Government agencies 9,988 29.91 12,090 42.95
Obligations of states and political subdivisions 7,969 23.87 4,715 16.75
Mortgage-backed securities 11,855 35.50 6,272 22.28
Corporate securities 2,336 7.00 2,611 9.27
- -------------------------------------------------------------------------------------------------------------------------------
Total $ 33,391 100.00% $ 28,152 100.00%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
The following table summarizes maturity and yield information on investment
securities at September 30, 1997:
<TABLE>
<CAPTION>
SEPTEMBER 30,
MATURING
---------------------------------------------------------------------------------------------
AFTER ONE AFTER FIVE
THROUGH THROUGH
IN ONE YEAR OR LESS FIVE YEARS TEN YEARS AFTER TEN YEARS TOTAL
------------------- ----------------- ------------------- ------------------- --------
AMOUNT YIELD (1) AMOUNT YIELD (1) AMOUNT YIELD (1) AMOUNT YIELD (1) AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $751 5.89% $492 5.61% $1,243
Securities of U.S. Government
agencies 2,197 6.70 $6,284 6.20% 1,004 3.37 $503 7.38% 9,988
Obligations of states and
political
subdivisions 211 7.72 1,253 6.68 817 6.06 5,688 5.51 7,969
Mortgage-backed securities 358 7.24 8,712 6.66 2,785 6.45 11,855
Corporate securities 2,090 6.07 246 6.00 2,336
- ---------------------------------------------------------------------------------------------------------------------------------
Total $3,517 6.44% $18,339 6.33% $5,344 5.50% $6,191 5.66% $33,391
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
____________
(1) Nontaxable investment income presented on a full tax-equivalent basis,
assuming a tax rate of 34%.
(2) Equity securities of $1,653,000 in Federal Home Loan Bank stock are not
included in this table, as these securities have no stated maturity.
LOAN PORTFOLIO. The composition of the loan portfolio is summarized as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------
1997 1996
----------------------------------------------
PERCENT OF PERCENT OF
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
--------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and agricultural $27,891 50.64% $27,155 47.96%
Real estate mortgage 24,129 43.81 25,177 44.46
Installment 3,058 5.55 4,292 7.58
--------------------------------------------------------------------------------------
Total $55,078 100.00% $56,624 100.00%
--------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
The following table summarizes maturity and yield information on loans at
September 30, 1997:
<TABLE>
<CAPTION>
AFTER ONE
IN ONE YEAR THROUGH AFTER FIVE
OR LESS FIVE YEARS YEARS TOTAL
- ------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Rate Loans:
Commercial and agricultural (including municipal) $ 6,967 $ 2,337 $ 6,068 $15,372
Real estate mortgage 1,989 1,752 12,562 16,303
Installment 302 2,724 32 3,058
-------------------------------------------------
Total $ 9,258 $ 6,813 $18,662 $34,733
Variable Rate Loans:
Commercial and agricultural (including municipal) $ 1,264 $ 4,268 $ 6,987 $12,519
Real estate mortgage 31 524 7,271 7,826
-------------------------------------------------
Total $ 1,295 $ 4,792 $14,291 $20,345
- ------------------------------------------------------------------------------------------------------------
Total Loans:
Commercial and agricultural (including municipal) $ 8,231 $ 6,605 $13,055 $27,891
Real estate mortgage 2,020 2,276 19,833 24,129
Installment 302 2,724 32 3,058
-------------------------------------------------
Total $10,553 $11,605 $32,920 $55,078
- ------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
RISK ELEMENTS INVOLVED IN LENDING ACTIVITIES. The following table details
the nonperforming asset information for the periods presented:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30,
------------ --------------------
1997 1997 1996
- ----------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans $107 $12 $111
Loans past due 90 days or more 0 0 0
- ----------------------------------------------------------------------------------------------------------
Total nonperforming loans 107 12 111
Foreclosed property 0 3 0
- ----------------------------------------------------------------------------------------------------------
Nonperforming loans to loans 0.2% 0.02% 0.19%
- ----------------------------------------------------------------------------------------------------------
Nonperforming assets to loans plus
foreclosed property 0.2% 0.02% 0.19%
Nonperforming assets to total assets 0.11% 0.01% 0.12%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
It is generally the policy of TBI to discontinue the accrual of interest
on loans when principal or interest is due and has remained unpaid for 90
days or more, unless the loan is well secured and in the process of
collection. If interest on nonaccrual loans had been accrued, such income
would have amounted to $30,000 and $13,000 for the years ended September 30,
1997 and 1996 respectively. TBI received and recognized interest income on
nonaccrual loans for the years ended September 30, 1997 and 1996 of $1,000
and $5,000, respectively.
POTENTIAL PROBLEM LOANS. Certain loans may require frequent management
attention and are reviewed on a monthly or more frequent basis. Although
payments on these loans are less than 90 days past due or in many cases are
current, the borrowers have or have had a history of financial difficulties and
management has concern as to the borrower's ability to comply with present loan
repayment terms. As such, these loans may result in classification at some
future point as nonperforming. At December 31, 1997 and September 30, 1997,
such loans (excluding all nonperforming loans described above) amounted to
$1,010,000 and $1,038,000, respectively.
FOREIGN LOANS OUTSTANDING. TBI had no loans to any foreign countries on
any of the dates specified in the tables.
39
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE. The following table summarizes changes in
the allowance for loan loss arising from loans charged off and recoveries from
loans previously charged off, by loan category, and additions to the allowance
that have been charged to expense.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ------------------------
1997 1997 1996
- ------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $ 843 $ 741 $ 624
Loans charged off:
Commercial and agricultural (including municipal) 2 69 81
Real estate mortgage 13 66 18
Installment and other 14 68 122
Total charge-offs 29 203 221
- ------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial and agricultural
(including municipal) 28 32 15
Real estate mortgage 1 12 14
Installment and other 24 85 84
- ------------------------------------------------------------------------------------------------------------
Total recoveries 53 129 113
- ------------------------------------------------------------------------------------------------------------
Net charge-offs (24) 74 108
- ------------------------------------------------------------------------------------------------------------
Additions to allowance charged to operations 2 176 225
- ------------------------------------------------------------------------------------------------------------
Balance at end of period $ 869 $ 843 $ 741
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Net charge-offs to average loans (annualized for December 31, 1997) (0.18%) 0.13% 0.19%
- ------------------------------------------------------------------------------------------------------------
Allowance for loan losses to loans 1.64% 1.53% 1.31%
- ------------------------------------------------------------------------------------------------------------
Allowance for loan losses to nonperforming loans 812.15% 7,025.00% 667.57%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The level of the allowance for loan losses is reviewed at least quarterly
by management. Management's analysis involves specific allocation percentages
based upon loans' risk ratings, together with allocation of a percentage of all
loans outstanding.
40
<PAGE>
Management views the allowance for loan losses as being available for all
potential or previously unidentified loan losses that may occur in the future.
The risk of future losses inherent in the loan portfolio is not precisely
attributable to a particular loan or category of loans. Based on its review of
adequacy, TBI's management has estimated those portions of the allowance that
could be attributable to major categories of loans as detailed in the following
table:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------
1997 1996
----------------------- ----------------------
PERCENT OF PERCENT OF
LOANS IN LOANS IN
EACH EACH
CATEGORY CATEGORY
TO TOTAL TO TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS
- ----------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and agricultural $426 50.6% $368 47.4%
Real estate mortgage 138 43.8 90 44.0
Installment 194 5.6 198 8.6
Unallocated 85 85
- ----------------------------------------------------------------------------------
Total $843 100.00% $741 100.00%
- ----------------------------------------------------------------------------------
</TABLE>
Allocations estimated for the loan categories do not specifically represent
that loan chargeoffs of that magnitude necessarily will be incurred. The
allocation does not restrict future loan losses attributable to other
categories. The risk factors considered when determining the overall level of
the allowance for loan losses are the same when estimating the allocation by
major category, as specified in the allowance category.
DEPOSITS. The following table shows, for each type of deposit, the average
balance on each type of deposit for the years ended September 30, 1997 and 1996.
The average rates paid as of these dates is not available.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
SEPTEMBER 30,
--------------------------------------------------
1997 1996
----------------------- ----------------------
AVERAGE INTEREST AVERAGE INTEREST
BALANCE EXPENSE BALANCE EXPENSE
- ---------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 9,097 $ 9,199
NOW and money market demand accounts 18,545 $ 533 18,442 $ 559
Savings 6,004 161 6,381 187
Time deposits 35,831 2,061 35,345 2,093
- ---------------------------------------------------------------------------------------
Total $69,477 $2,755 $69,367 $2,839
- ---------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
The following table shows the maturity of time deposits of $100,000 or more
at September 30, 1997:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less $ 896
Over three through twelve months 2,237
Over 12 months 3,124
- --------------------------------------------------------------
Total $6,257
- --------------------------------------------------------------
</TABLE>
RETURN ON EQUITY AND ASSETS. The following ratios are among those commonly
used in analyzing the performance of banks and bank holding companies.
<TABLE>
<CAPTION>
- --------------------------------------------------
SEPTEMBER 30,
1997 1996
- --------------------------------------------------
<S> <C> <C>
Return on average assets 1.34% 1.37%
Return on average equity 16.89 17.36
- --------------------------------------------------
</TABLE>
PROPERTIES. Both TBI's and the Bank's principal offices are located at 38
Main Street, Cadiz, Kentucky 42211. The Bank also operates two branch
facilities; its East Cadiz branch at 331 E. Main Street, Cadiz, Kentucky 42211
and its West Cadiz branch at 1197 Canton Road, Cadiz, Kentucky 42211.
LEGAL PROCEEDINGS. During the normal course of business, various legal
claims have arisen that, in the opinion of the management of TBI, will not
result in any material liability on the part of TBI.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INTRODUCTION. The following discussion and analysis is intended to review
the significant factors affecting the financial condition and results of
operation of TBI for the three months ended December 31, 1997 and the years
ended September 30, 1997 and 1996. It provides a comprehensive review of
factors not otherwise apparent from the consolidated financial statements of TBI
alone. This analysis should be read in conjunction with the consolidated
financial statements and selected financial data presented elsewhere herein to
assist in evaluating TBI's performance.
NET INCOME ANALYSIS. TBI's net income for the year ended September 30,
1997 was $1,255,000, compared to $1,207,000 for the year ended September 30,
1996. The increase in net income was due primarily to reductions in noninterest
expense and provision for loan losses, offset by a decrease in net interest
income and a reduction in other income.
For the three months ended December 31, 1997 and 1996, net income was
$459,000 and $319,000, respectively. The increase was due primarily to
reductions in noninterest expense and the provision for loan losses, together
with an increase in other income, offset by a decrease in net interest income.
YEAR 2000. TBI in June 1997 began analyzing its exposure to potential data
processing problems relating to the year 2000. Because of software and hardware
formats using only the last two digits for year dates, systems of banks and
virtually all other business and government computer systems are at risk of
serious malfunction in the year 2000. TBI and the Bank have completed an
assessment of the issues and put an action plan into place, dedicating
sufficient assets to ensure resolution of the potential problem. TBI and the
Bank believe that modification and testing of their systems will be completed by
October 15, 1998 and that the cost of modification and testing will not be
material to their financial results. TBI has a written agreement with its
primary software vendor under which the vendor will provide services relating to
Year 2000 modifications in consideration of $8,000. TBI has budgeted $15,000 in
total for resolving Year 2000 issues. TBI does not believe that the Year 2000
issue will affect future financial results materially or cause reported
financial information not to be indicative of future operating results or future
financial condition.
42
<PAGE>
NET INTEREST INCOME. Net interest income is the largest component of
earnings and is affected by the volume of the sources and uses of funds, the
respective rates earned and paid on those funds, the mix of those funds, and the
volume of nonperforming assets. TBI's net interest income decreased
approximately 1.4% to $3,904,000 on a tax-equivalent basis for fiscal 1997 from
fiscal 1996. The net interest margin, which is calculated by dividing tax-
equivalent net interest income by average interest-earning assets, was 4.40% in
1997, compared to 4.74% in 1996. TBI's yield on interest-earning assets
decreased to 8.68% in 1997 from 9.00% in 1996, while the cost of funds increased
to 4.28% in 1997 from 4.26% in 1996. The decrease in net interest margin was
attributable to a decrease in the loan portfolio and increased competition
during the year ended September 30, 1997.
During fiscal 1997, decreases in the average outstanding volume of loans
resulted in a decrease in interest income of $67,000. This decrease was offset
by a $425,000 increase in interest income due to increases in the average volume
of taxable and nontaxable investment securities. Changes in interest rates on
the average volume of taxable and nontaxable investment securities and loans
reduced interest income by $171,000. Increases in the average volume of time
deposits and notes payable resulted in an increase in interest expense of
$372,000, which was partially offset by a decrease due to changes in the average
volume of savings. Changes in interest rates on the average volume of NOW,
money market, savings, time deposits, and notes payable decreased interest
expense by $110,000. The net effect of the volume and rate changes associated
with all categories of interest-earning assets during 1997 as compared to 1996
increased interest income $181,000, while the net effect of the volume and rate
changes associated with all categories of interest-bearing liabilities increased
interest expense by $237,000.
Net interest income was $955,000 for the three-month period ended December
31, 1997, a 2% decrease from the same period in 1996. Interest income decreased
$4,000 for the three-month period ending December 31, 1997, and interest expense
increased $15,000. The decrease was primarily attributable to continually
increasing levels of competition for good loans in TBI's market area.
PROVISION FOR LOAN LOSSES. The provision for loan losses charged to
expense was $176,000 in fiscal 1997, compared to $225,000 in fiscal 1996.
The provision for loan losses was $2,000 for the three months ended
December 31, 1997, compared to $66,000 for the same period in 1996.
The allowance for loan losses is maintained at a level considered adequate
to provide for potential losses. The provision for loan losses is based on
periodic analysis considering, among other factors, current economic conditions,
loan portfolio composition, past loan loss experience, independent appraisals,
loan collateral, and payment experience. In addition to the allowance for
losses on identified problem loans, an overall unallocated allowance is
established to provide for unidentified credit losses inherent in the portfolio.
As adjustments become necessary, they are reflected in the results of operations
in the periods in which they become known.
Management believes the allowance for loan losses is adequate to absorb
losses in the loan portfolio. While management uses available information to
recognize loan losses, future additions to the allowance may be necessary based
on changes in economic conditions. In addition, various regulatory agencies, as
an integral part of the examination process, periodically review the allowance
for loan losses. Such agencies may require TBI to increase the allowance for
loan losses based on their judgments and interpretations of information
available to them at the time of their examinations.
The ratio of nonperforming loans to total loans for 1997 and 1996 has
remained at a relatively low level as a result of aggressive account collections
and of success in working with problem credits.
43
<PAGE>
NONINTEREST INCOME. TBI's fiscal 1997 noninterest income was $457,000, as
compared to $509,000 in 1996. The decrease is due primarily to a reduction in
trust department fees, because of the collection of fees in 1996 for the
settlement of a few large estates.
Noninterest income for the three months ended December 31,1997 was
$163,000, a 46.4% increase from 1996. The increase relative to 1996 was due
primarily to a nonrecurring expense of approximately $72,000 in 1996,
representing an imbalance in a correspondent account. Approximately $53,000 of
that amount was recovered in fiscal 1997.
NONINTEREST EXPENSE. Noninterest expense decreased 5.2% in fiscal 1997 to
$2,332,000. This decrease was the result of more-effective control of
noninterest expenses.
Noninterest expense for the three months ended December 31, 1997 was
$535,000, compared to $592,000 for the same period in 1996. The decrease
primarily was the result of improved control of the majority of TBI's
noninterest operating expenses.
INCOME TAXES. Income tax expense was $498,000 for fiscal 1997 and $530,000
for fiscal 1996. The effective income tax rates were 28.4% and 30.5% for these
periods, respectively. The decrease in effective income tax rate primarily is
attributable to a substantial increase in the percentage of the investment
portfolio represented by tax-free securities.
Income tax expense of $122,000 and $108,000 was recorded for the three
months ended December 31, 1997, and 1996, respectively.
44
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY. Liquidity is provided to TBI
through earning assets, including short-term investments in federal funds sold,
and through maturities in the investment and loan portfolios. In addition,
liquidity is provided by borrowed funds and may be supplemented by the ability
to liquidate securities in the investment portfolio, all of which are designated
as available for sale.
The asset/liability management process, which involves management of the
components of the balance sheet to allow assets and liabilities to reprice at
approximately the same time, is a dynamic process essential to minimizing the
effect of interest rate fluctuation on net interest income. The following
tables reflect TBI's gap analysis (rate-sensitive assets minus rate-sensitive
liabilities) as of December 31, 1997 and September 30, 1997, respectively.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------
OVER 3
MONTHS OVER 1 YEAR
3 MONTHS OR THROUGH 12 THROUGH 5 OVER 5
LESS MONTHS YEARS YEARS TOTAL
- -----------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ 696 $ 2,545 $ 19,142 $12,914 $35,297
Loans 3,553 4,691 13,469 31,247 52,960
Federal funds sold 1,370 1,370
Interest bearing deposits 700 700
Total interest-sensitive assets 5,619 7,936 32,611 44,161 90,327
- -----------------------------------------------------------------------------------------------------------
Liabilities:
NOW and MMDA 4,668 5,800 9,269 19,737
Savings 208 2,535 2,812 5,555
Time deposits 8,496 11,847 16,735 37,078
FHLB notes payable 294 912 5,671 7,944 14,821
Total interest-sensitive liabilities 13,666 21,094 34,487 7,944 77,191
- -----------------------------------------------------------------------------------------------------------
Interest-sensitivity gap
Incremental $(8,047) $(13,158) $(1,876) $36,217 $13,136
- -----------------------------------------------------------------------------------------------------------
Cumulative $(8,047) $(21,205) $(23,081) $13,136
- ---------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1997
-------------------------------------------------------------
OVER 3
MONTHS OVER 1 YEAR
3 MONTHS OR THROUGH 12 THROUGH 5 OVER 5
LESS MONTHS YEARS YEARS TOTAL
- -----------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Assets:
Investments in debt and equity securities $ 1,179 $ 2,353 $ 18,325 $11,534 $33,391
Loans 4,151 6,420 11,946 32,561 55,078
Federal funds sold 485 485
-------------------------------------------------------------
Total interest-sensitive assets 5,815 8,773 30,271 44,095 88,954
- -----------------------------------------------------------------------------------------------------------
Liabilities:
NOW and MMDA 4,450 5,529 8,982 18,961
Savings 455 2,606 2,946 6,007
Time deposits 3,789 13,546 17,674 251 35,260
FHLB notes payable 321 952 5,937 8,739 15,949
-------------------------------------------------------------
Total interest-sensitive liabilities 9,015 22,633 35,539 8,990 76,177
- -----------------------------------------------------------------------------------------------------------
Interest-sensitivity gap:
Incremental $(3,200) $(13,860) $ (5,268) $35,105 $12,777
Cumulative $(3,200) $(17,060) $(22,328) $12,777
</TABLE>
- ------------
(1) TBI's experience with NOW, money market demand accounts, and savings
accounts has been that, although these deposits are subject to immediate
withdrawal or repricing, a portion of these balances have remained
relatively constant in periods of both rising and falling rates.
Therefore, a portion of these deposits is included in the "over 1 year
through 5 years" category. Time deposits have been categorized based on
contractual maturity dates.
As indicated in the preceding tables, TBI was liability sensitive on a
cumulative basis in the near term (one year or less) at December 31, 1997 and
September 30, 1997, based on contractual maturities and earliest repricing
dates. In this regard, a decrease in the general level of interest rates
generally would have a positive effect on TBI's net interest income, as the
repricing of the larger volume of interest-sensitive liabilities would create a
larger decrease in interest expense than the decrease in interest income
created by the repricing of the smaller volume of interest-sensitive assets.
The following table summarizes certain trends in TBI's consolidated balance
sheet at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SEPTEMBER 30,
----------------------
1997 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total assets $94,346 $91,480
Earning assets 88,954 87,127
Deposits 69,484 69,407
Loans to deposits (net loans) 78.1% 80.5%
Loans to total assets (net loans) 57.5 61.1
Debt and equity securities to total assets 35.4 30.8
- -------------------------------------------------------------------
</TABLE>
46
<PAGE>
The composition of total assets and earning assets changed during 1997 as
total investment securities increased to reflect both an increase in deposits
and a decrease in total loans. TBI's earning assets increased $1,827,000 from
September 30, 1996 to September 30, 1997. Investment securities were
$33,391,000 at September 30, 1997 as compared to $28,152,000 at September 30,
1996. Loans, net of the allowance for loan losses, were $54,235,000 at
September 30, 1997, compared to $55,883,000 at September 30, 1996. Deposits
increased $77,000 from September 30, 1996 to September 30, 1997, while long-term
debt increased $1,770,000.
CAPITAL ADEQUACY. TBI's equity capital was $8,532,000, $8,060,000 and
$7,164,000 at December 31, 1997 and September 30, 1997 and 1996, respectively.
From September 30, 1997 to December 31, 1997, equity capital increased $472,000
as a result of net income of $459,000, offset by cash dividends of $151,000.
From September 30, 1996 to September 30, 1997, equity capital increased $896,000
as a result of net income of $1,255,000, offset by cash dividends of $756,000.
The other differences in total equity resulted from increases in the unrealized
gain on securities available for sale.
Risk-based capital guidelines for financial institutions were adopted by
regulatory authorities and were effective January 1, 1991. These guidelines
were designed to relate regulatory capital requirements to the risk profile
of the specific institutions and to provide for uniform requirements from the
various regulators. Currently, the risk-based capital guidelines require the
Bank to meet a minimum total capital ratio of 8.0%, of which at least 4.0%
must consist of Tier 1 capital. Tier 1 capital generally consists of (a)
common shareholders' equity, (b) qualifying perpetual preferred stock and
related surplus, subject to certain limitations specified by the FDIC, and
(c) minority interest in the equity accounts of consolidated subsidiaries,
less goodwill and any other intangible assets and investments in subsidiaries
that the FDIC determines should be deducted from Tier 1 capital. The FDIC
also requires a minimum leverage capital ratio of 3.0%, defined as the ratio
of Tier 1 capital less purchased mortgaged servicing rights to total assets,
for banking organizations deemed the strongest and most highly rated by
banking regulators. A higher minimum leverage ratio is required of less
highly rated banking organizations.
The following tables summarize the Bank's risk-based capital and leverage
ratios:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
RISK-BASED CAPITAL RATIOS
- -------------------------------------------------------------------------------------------------------------------
TOTAL TIER 1 LEVERAGE RATIOS
- ----------------------------------- -------------------------------------- --------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------- ------------- ---------------
1997 1997 1996 1997 1997 1996 1997 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.2 15.1 14.0 14.0 13.8 12.8 8.4 8.2 8.0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
RISK MANAGEMENT. TBI's management objective in structuring the balance
sheet is to maximize the return on stockholders' equity while minimizing the
associated risks. The major risks involved in the banking industry are market,
credit, and liquidity risks. The following is a discussion of TBI's management
of these risks.
MARKET RISK MANAGEMENT. TBI's management believes its loan and investment
portfolios are sufficiently diversified to minimize the effect of a downturn in
any particular industry or market. Although TBI has a diversified loan
portfolio, a substantial portion of its borrowers' abilities to honor their
contractual obligations is dependent upon the agribusiness economic sector and
the automobile industry in its geographic lending area.
47
<PAGE>
Commercial and agricultural loans at September 30, 1997 totaled
$27,181,000 or 51% of the loan portfolio, while real estate loans totaled
$24,129,000 or 44% of the loan portfolio; and installment, municipal, and
other loans totaled $3,058,000 or 6% of the loan portfolio. The commercial
and agricultural loan portfolio, which includes loans made primarily to
businesses located in Trigg and adjoining counties, generally is secured by
business assets such as farm equipment, crops, inventory, accounts
receivable, equipment, and real estate. At December 31, 1997, the total
investment portfolio was $35,297,000. Approximately 2% of the portfolio is
composed of U.S. Government issues, approximately 24% is composed of State
and Municipal Bonds, and the remaining portion is composed of mortgage-backed
securities, corporate securities, and other securities.
CREDIT RISK MANAGEMENT. The risks TBI's management assumes in providing
credit products to customers are fundamental to its business operation.
Credit risk management includes defining an acceptable level of risk in
return, establishing policies and procedures to govern the credit process,
and managing a thorough portfolio review function. Credit policies are
ultimately the responsibility of TBI's Board of Directors and, as such, are
reviewed and approved by the Board of Directors. Of equal importance in this
risk management process are the ongoing monitoring procedures performed by
management.
Nonperforming loans represented .02%, .19% and .20% of total loans at
September 30, 1997 and 1996, and December 31, 1997, respectively.
LIQUIDITY RISK MANAGEMENT. Liquidity is a measurement of TBI's ability
to meet the borrowing needs and the deposit withdrawal requirements of its
customers. TBI actively manages the composition of its assets and
liabilities to maintain the appropriate level of liquidity in the balance
sheet. Management is guided by regularly reviewed policies when determining
the appropriate portion of total assets that should constitute readily
marketable assets available to meet future liquidity needs. Additionally,
the Bank's entire investment portfolio is classified as available for sale
under regulatory accounting guidelines.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS. Statement of Financial
Accounting Standards (SFAS) 125 established accounting and reporting
standards for transfers and servicing of financial assets and extinguishment
of liabilities. The standards established by SFAS 125 are based on consistent
applications of a "financial components" approach that focuses on control.
Under such approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities
that it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. SFAS 125
provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS 125
was effective for TBI in 1997 and did not have a material effect on the
consolidated financial position or results of operations. Earlier or
retroactive application is not permitted. The adoption of SFAS 125 did not
have a material effect on the consolidated financial position or results of
operations. There are no other new accounting pronouncements that are
expected to have a material effect on TBI's financials statements.
EFFECT OF INFLATION. Persistent high rates of inflation can have a
significant effect on the reported financial condition and results of
operations of all industries. However, the asset and liability structure of
commercial banks is substantially different from that of an industrial
company in that virtually all assets and liabilities of commercial banks are
monetary in nature. Accordingly, changes in interest rates may have a
significant impact on a commercial bank's performance. Interest rates do not
necessarily move in the same direction or in the same magnitude as the
prices of goods and services.
Inflation does have an impact on the growth of total assets in the
banking industry, often resulting in a need to increase equity capital at
higher than normal rates to maintain an appropriate equity-to-assets ratio.
48
<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, without par value. As of ____________ __,
1998, 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 "staggered" terms
of office of three years (see "COMPARISON OF SHAREHOLDER RIGHTS -- Classified
Board of Directors"); (ii) the requirements that any business combination be
approved by the holders of 80% of the shares entitled to vote thereon; and
(iii) 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.
49
<PAGE>
CERTAIN PROVISIONS OF THE INDIANA LAW
The Indiana Law applies to NCBE as an Indiana corporation. Certain
provisions of the Indiana Law 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
Indiana Law and by NCBE's Articles of Incorporation and By-laws. The rights
of holders of shares of TBI Common are governed by the Kentucky Law and by
TBI's Articles of Incorporation and By-laws. The rights of holders of shares
of TBI 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 TBI is set forth below.
At NCBE's 1998 annual meeting of shareholders, which is to be held May
20, 1998, holders of NCBE Common will be asked to consider changes to NCBE's
Articles of Incorporation. Such changes are described in NCBE's Proxy
Statement dated April 22, 1998, which is incorporated by reference herein.
The following summary does not reflect any of the changes to NCBE's Articles
of Incorporation that may be approved on May 20, 1998.
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. 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.
TBI. Although TBI's Articles of Incorporation provide that the board
may be classified when it has nine or more members, TBI does not currently
have a classified Board of Directors.
BUSINESS COMBINATIONS NOT INVOLVING AN INTERESTED SHAREHOLDER
NCBE. Under the Indiana Law, a majority of the shares entitled to vote
on a proposed plan of merger or share exchange is required for approval
unless any class or series of shares is entitled to vote as a class on the
plan. However, the vote of the shareholders of the surviving corporation on
a plan of merger is not required if (i) the articles of incorporation of the
surviving corporation will not differ from its articles before the merger,
(ii) each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold the
same proportionate number of shares held by all such shareholders (except for
shares of the surviving corporation received solely as a result of the
shareholder's proportionate shareholdings in the other corporations party to
the merger), with identical designations, preferences, limitations and
relative rights, immediately after the merger, (iii) the number of voting
shares outstanding immediately after the merger, plus the number of voting
shares issuable as a result of the merger (either by the conversion of
securities issued pursuant to the merger or the exercise of rights and
warrants issued
50
<PAGE>
pursuant to the merger), will not exceed by more than 20% the total number of
voting shares of the surviving corporation outstanding immediately before the
merger, and (iv) the number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a
result of the merger (either by the conversion of securities issued pursuant
to the merger or the exercise of rights and warrants issued pursuant to the
merger), will not exceed by more than 20% the total number of participating
shares of the surviving corporation outstanding immediately before the
merger. The articles of incorporation of any corporation may supersede the
majority vote requirement by specifying a greater vote requirement. 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.
TBI. The Kentucky Law is substantially the same as the Indiana Law.
TBI's Articles of Incorporation do not contain any provisions that would
affect the vote required under the Kentucky Law to approve a business
combination.
BUSINESS COMBINATIONS INVOLVING AN INTERESTED SHAREHOLDER
NCBE. The Indiana Law 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 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.
TBI. The Kentucky Law imposes a greater minimum share voting
requirement for a "business combination" which is defined as merger, sale of
assets or sale of shares to an "interested shareholder." However these
provisions would not apply to the Merger because TBI does not have 500 or
more beneficial owners of TBI Common.
REMOVAL OF DIRECTORS
NCBE. Under the Indiana Law, 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 changing the statutory provisions
relating to the removal of directors.
TBI. The Kentucky Law is substantially the same as the Indiana Law.
TBI's Articles of Incorporation do not contain any provisions changing the
statutory provisions relating to the removal of directors.
51
<PAGE>
AMENDMENTS TO ARTICLES OF INCORPORATION
NCBE. The Indiana Law provides that, unless a greater vote is required
under a specific provision of the Indiana Law 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. Certain amendments, unless
provided otherwise in a corporation's articles of incorporation, do not
require shareholder approval. Under the Indiana Law, 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 Indiana Law.
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.
TBI. The Kentucky Law is substantially the same as the Indiana Law.
TBI's Articles of Incorporation do not contain any provisions changing the
statutory provisions relating to amendments of its Articles of Incorporation.
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.
TBI. Holders of shares of TBI Common are entitled to one vote per share
on all matters to be voted upon by the shareholders.
RIGHTS OF FIRST REFUSAL OR TRANSFER OF SHARES.
NCBE. Under the Indiana Law, a corporation's articles of incorporation
or by-laws, or an agreement among shareholders or an agreement between
shareholders and the corporation may impose restrictions on the transfer or
registration of transfer of shares. There are no such restrictions
applicable to shares of NCBE Common.
TBI. The Kentucky Law is substantially the same as the Indiana Law.
TBI's Articles of Incorporation provide that no shares of TBI Common or any
interests therein may be sold, conveyed or transferred by any person,
including TBI, until such shares have been offered for sale to the other
shareholders of TBI in proportion to their ownership. The Articles of
Incorporation require TBI to purchase any shares which remain unsold after
the exercise of such purchase rights by the shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
NCBE. The Indiana Law provides that a corporation with more than 50
shareholders shall hold a special meeting of shareholders on call of its
board of directors or the persons authorized to do so in the corporation's
articles of incorporation 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.
TBI. The Kentucky Law provides that a corporation must hold a special
meeting of shareholders on the call of its board of directors or the persons
authorized to do so in the corporation's articles of incorporation or by-laws
or at the request of the holders of at least 33 1/3% (or such higher or lower
percentage specified in the articles of incorporation) of the votes entitled
to be cast at a special meeting. TBI's By-Laws provide that special meetings
of the shareholders
52
<PAGE>
of a corporation may be called at any time, for any purpose or purposes, by
the Board of Directors, the President or the holders of 20% or more of all
the outstanding shares.
SHAREHOLDER ACTION BY WRITTEN CONSENT
NCBE. Under the Indiana Law, any action required or permitted to be
taken at a meeting of shareholders may be taken without a meeting if a
written consent to such action is signed by all shareholders entitled to vote
thereon.
TBI. The Kentucky Law is substantially the same as the Indiana Law.
DISSENTERS' RIGHTS
NCBE. Under the Indiana Law, a shareholder of a corporation is entitled
(subject to certain exceptions) to receive payment for the fair value of his
shares if, among other things, such shareholder dissents from a plan of share
exchange, sale or exchange of all or substantially all of the property of the
corporation, or a merger or control share acquisition to which such
corporation is a party. NCBE's shareholders are not required to vote on the
Merger nor are they entitled to exercise dissenters' rights in connection
with the Merger.
TBI. The Kentucky Law is substantially the same as the Indiana Law.
Shareholders of TBI are entitled to exercise such rights in connection with
the Merger. See "THE MERGER -- Dissenters' Rights."
CONTROL SHARE ACQUISITIONS
NCBE. Pursuant to the Indiana Law, 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 entitle
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, has 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.
TBI. There is no similar provision under the Kentucky Law.
INDEMNIFICATION
NCBE. Pursuant to the Indiana Law, NCBE is obligated to indemnify
certain officers and directors in connection with liabilities arising from
legal proceedings resulting from such person's service to NCBE in certain
circumstances. NCBE may also voluntarily undertake to indemnify certain
persons acting on NCBE's behalf in certain circumstances.
53
<PAGE>
The Indiana Law provides for mandatory indemnification of directors and
officers of Indiana corporations and permissive indemnification of directors,
officers, employees and agents of corporations who are made parties to
proceedings as a result of their relationship with such corporation. The
Indiana Law also applies to individuals who are serving at such corporation's
request as directors, officers, employees and agents of such corporation's
subsidiaries. The Indiana Law requires corporations, unless limited by their
articles of incorporation, to indemnify any director or officer against
reasonable expenses incurred in connection with any proceeding to which such
person was a party if the individual is wholly successful on the merits. The
Indiana Law authorizes corporations to indemnify any director, officer,
employee or agent against liability incurred in such a proceeding generally
if the individual's conduct was in good faith and the individual reasonably
believed, in the case of conduct in the individual's official capacity, that
his or her conduct was in the corporation's best interests and in all other
cases that his or her conduct was not opposed to the best interests of such
corporation. The Indiana Law further authorizes any court of competent
jurisdiction, unless the articles of incorporation provide otherwise, to
order indemnification generally if the court determines a director or officer
of a corporation is entitled to mandatory indemnification or is otherwise
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances. The Indiana Law also authorizes corporations to advance
reasonable expenses in advance of final disposition of a proceeding generally
if the individual affirms in writing a good faith belief that he satisfies
the standard of conduct for permissive indemnification, the individual
undertakes in a signed writing to repay the advance if it is determined he
does not satisfy the standard of conduct for permissive indemnification and
the corporation determines that the facts then known do not preclude
indemnification. Finally, the Indiana Law authorizes further indemnification
to the extent that the corporation may provide in its articles of
incorporation, by-laws, a resolution of the board of directors or the
shareholders or any other authorization, whenever adopted, after notice, by a
majority vote of holders of all the voting shares then issued and
outstanding. NCBE's Articles of Incorporation generally provide for the
indemnification of NCBE's directors, officers, employees and agents to the
extent permitted by the Indiana Law.
TBI. The Kentucky Law is substantially similar to the Indiana Law.
TBI's By-Laws contain provisions requiring indemnification of directors and
officers generally in accordance with the Kentucky Law.
LIMITATION OF LIABILITY OF DIRECTORS
NCBE. The Indiana Law provides that a director is not liable for any
action taken as a director, or any failure to act, unless the director has
breached or failed to perform the duties of the director's office in
compliance with the Indiana Law and the breach or failure to perform
constitutes willful misconduct or recklessness. Subject to this standard, a
director who votes for or assents to distributions in violation of the
Indiana Law is personally liable to the corporation for the amount of the
illegal distribution and is entitled to contribution from the other directors
who voted for or assented to such distribution and the shareholders who
received the distribution.
TBI. The Kentucky Law provides that a director who votes for or assents
to distributions in violation of the Kentucky Law is personally liable to the
corporation for the amount of the illegal distribution and is entitled to
contribution from the other directors who voted for or assented to such
distribution and the shareholders who received the distribution.
CONSIDERATION OF NON-SHAREHOLDER INTERESTS
NCBE. The Indiana Law specifically authorizes directors, in considering
the best interests of a corporation, to consider the short-term and long-term
interests of the corporation as well as the effects of any action on
shareholders, employees, suppliers and customers of the corporation and
communities in which offices or other facilities of the corporation are
located, and any other factors the directors consider pertinent. Under the
Indiana Law, directors are not required to approve a proposed corporate
action if the directors determine in good faith after considering and
weighing as they deem appropriate the effect of such action on the
corporation's constituents that such approval is not in the best interest of
the corporation. In addition, the Indiana Law states that directors are not
required to redeem any rights under or render inapplicable a shareholder
rights plan or to take or decline to take any other action solely because of
the effect such action might have on a proposed acquisition of control of a
corporation or the amounts to be paid to shareholders
54
<PAGE>
under such an acquisition. The Indiana Law explicitly provides that the
different or higher degree of scrutiny imposed under the Delaware General
Corporation Law with respect to Delaware corporations and certain other
jurisdictions upon director actions taken in response to potential changes in
control will not apply. Any determination made with respect to the foregoing
by a majority of the disinterested directors will conclusively be presumed to
be valid unless it can be demonstrated that such determination was not made
in good faith.
TBI. There is similar provision under the Kentucky Law.
LEGAL MATTERS
The legality of the securities offered hereby and certain tax
consequences of the Merger will be passed upon by Baker & Daniels,
Indianapolis, Indiana.
EXPERTS
The consolidated financial statements of NCBE and subsidiaries as of
December 31, 1997 and 1996 and each of the three years in the three-year
period ended December 31, 1997, 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 TBI as of September 30, 1997
and the year ended September 30, 1997, included in this Prospectus/Proxy
Statement have been audited by Geo. S. Olive & Co. LLC, independent auditors,
as set forth in a 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.
The consolidated financial statements of TBI as of September 30, 1996 and
the year ended September 30, 1996, included in this Prospectus/Proxy Statement
have been audited by Eskew & Gresham, PSC, independent auditors, as set forth in
a 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.
55
<PAGE>
INDEX TO TRIGG BANCORP, INC. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
INDEPENDENT AUDITOR'S REPORT--SEPTEMBER 30, 1997 F-1
INDEPENDENT AUDITOR'S REPORT--SEPTEMBER 30, 1996 F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of December 31, 1997 (unaudited)
and September 30, 1997 and 1996 F-3
Consolidated Statement of Income for the Three-Month Periods
Ended December 31, 1997 and 1996 (unaudited) and the Years
Ended September 30, 1997 and 1996 F-4
Consolidated Statement of Changes in Stockholders' Equity for the
Three-Month Period Ended December 31, 1997 (unaudited) and
the Years Ended September 30, 1997 and 1996 F-5
Consolidated Statement of Cash Flows for the Three-Month Periods
Ended December 31, 1997 and 1996 (unaudited) and the Years
Ended September 30, 1997 and 1996 F-6
Notes to Consolidated Financial Statements at September 30, 1997 and 1996 F-7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Trigg Bancorp, Inc.
Cadiz, Kentucky
We have audited the consolidated balance sheet of Trigg Bancorp, Inc.
and subsidiary as of September 30, 1997, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements described above
present fairly, in all material respects, the consolidated financial
position of Trigg Bancorp, Inc. and subsidiary as of September 30, 1997,
and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
GEO. S. OLIVE & CO. LLC
Evansville, Indiana
October 29, 1997
(F-1)
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Trigg Bancorp, Inc.
Cadiz, Kentucky
We have audited the accompanying consolidated balance sheet of Trigg Bancorp,
Inc. and Subsidiary as of September 30, 1996, and the related statements of
income, stockholders' equity and cash flows for the fiscal year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides 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 Trigg
Bancorp, Inc. and Subsidiary as of September 30, 1996, and the results of
their operations and their cash flows for the fiscal year ended September 30,
1996, in conformity with generally accepted accounting principles.
ESKEW & GRESHAM, PSC
Louisville, Kentucky
October 11, 1996
(F-2)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30
--------------------
1997 1997 1996
- ------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 3,462,006 $ 2,605,838 $ 1,768,351
Federal funds sold 1,370,000 485,000 2,350,000
------------------------------------------
Cash and cash equivalents 4,832,006 3,090,838 4,118,351
Interest bearing time deposits 700,000
Investment securities available for sale 35,297,275 33,391,260 28,152,368
Loans 52,959,755 55,077,992 56,624,293
Allowance for loan losses (868,835) (842,690) (741,359)
------------------------------------------
Net loans 52,090,920 54,235,302 55,882,934
Premises and equipment 604,912 643,080 583,155
Federal Home Loan Bank stock 1,653,100 1,623,500 1,275,700
Interest receivable 1,155,827 1,189,483 1,202,947
Other assets 44,887 172,355 264,208
------------------------------------------
Total assets $96,378,927 $94,345,818 $91,479,663
------------------------------------------
------------------------------------------
LIABILITIES
Deposits
Noninterest bearing $10,081,265 $ 9,256,124 $ 8,571,415
Interest bearing 62,370,240 60,227,760 60,835,125
------------------------------------------
Total deposits 72,451,505 69,483,884 69,406,540
Long-term debt 14,821,397 15,948,568 14,178,838
Interest payable 338,558 315,268 326,811
Other liabilities 235,144 537,599 403,969
------------------------------------------
Total liabilities 87,846,604 86,285,319 84,316,158
------------------------------------------
STOCKHOLDERS' EQUITY
Common stock
Authorized--25,000 shares
Issued and outstanding--10,086 shares 2,526,615 2,526,615 2,526,615
Retained earnings 5,625,043 5,316,986 4,817,957
Net unrealized gain (loss) on securities
available for sale 380,665 216,898 (181,067)
------------------------------------------
Total stockholders' equity 8,532,323 8,060,499 7,163,505
------------------------------------------
Total liabilities and stockholders' equity $96,378,927 $94,345,818 $91,479,663
------------------------------------------
------------------------------------------
</TABLE>
See notes to consolidated financial statements.
(F-3)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
DECEMBER 31 SEPTEMBER 30
---------------------------------------------------------
1997 1996 1997 1996
---------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable $1,338,823 $1,373,318 $5,383,332 $5,627,975
Investment securities
Taxable 442,554 454,199 1,815,055 1,621,165
Tax exempt 112,590 68,326 351,172 166,143
Federal funds sold 23,378 25,171 47,157 52,350
---------------------------------------------------------
Total interest income 1,917,345 1,921,014 7,596,716 7,467,633
---------------------------------------------------------
INTEREST EXPENSE
Deposits 706,532 708,520 2,754,458 2,839,045
Short-term borrowings 21,205 38,423
Long-term debt 255,830 238,987 1,016,121 677,712
---------------------------------------------------------
Total interest expense 962,362 947,507 3,791,784 3,555,180
---------------------------------------------------------
NET INTEREST INCOME 954,983 973,507 3,804,932 3,912,453
Provision for loan losses 2,110 65,974 175,974 225,000
---------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 952,873 907,533 3,628,958 3,687,453
---------------------------------------------------------
OTHER INCOME
Service charges on deposit accounts 99,878 93,966 348,797 385,937
Net realized gains on sales of
available-for-sale securities 2,667 3,821 9,306
Other income 63,486 14,977 103,658 113,631
---------------------------------------------------------
Total other income 163,364 111,610 456,276 508,874
---------------------------------------------------------
OTHER EXPENSES
Salaries and employee benefits 305,075 264,091 1,397,804 1,484,474
Net occupancy expenses 44,618 43,939 171,958 195,045
Bank franchise tax 27,000 21,000 88,663 80,000
Office supplies 12,778 25,866 72,127 97,058
Legal and professional fees 36,493 33,017 142,119 82,677
Other expenses 109,026 204,011 459,004 520,080
---------------------------------------------------------
Total other expenses 534,990 591,924 2,331,675 2,459,334
---------------------------------------------------------
INCOME BEFORE INCOME TAX 581,247 427,219 1,753,559 1,736,993
Income tax expense 121,900 108,236 498,080 530,077
---------------------------------------------------------
NET INCOME $ 459,347 $ 318,983 $1,255,479 $1,206,916
---------------------------------------------------------
---------------------------------------------------------
BASIC EARNINGS PER SHARE $45.54 $31.63 $124.48 $119.71
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
(F-4)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON STOCK GAIN (LOSS) ON
----------------------- SECURITIES
SHARES RETAINED AVAILABLE FOR
OUTSTANDING AMOUNT EARNINGS SALE TOTAL
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, OCTOBER 1, 1995 10,081 $2,523,115 $4,367,097 $ 97,025 $6,987,237
Net income for 1996 1,206,916 1,206,916
Cash dividends ($75 per share) (756,056) (756,056)
Issuance of five shares of common stock 5 3,500 3,500
Net change in unrealized gain (loss)
on securities available for sale (278,092) (278,092)
----------------------------------------------------------------------
BALANCES, SEPTEMBER 30, 1996 10,086 2,526,615 4,817,957 (181,067) 7,163,505
Net income for 1997 1,255,479 1,255,479
Cash dividends ($75 per share) (756,450) (756,450)
Net change in unrealized gain (loss)
on securities available for sale 397,965 397,965
----------------------------------------------------------------------
BALANCES, SEPTEMBER 30, 1997 10,086 2,526,615 5,316,986 216,898 8,060,499
Net income (unaudited) 459,347 459,347
Cash dividends ($15 per share)
(unaudited) (151,290) (151,290)
Net change in unrealized gain (loss)
on securities available for sale
(unaudited) 163,767 163,767
----------------------------------------------------------------------
BALANCES, DECEMBER 31, 1997 (UNAUDITED) 10,086 $2,526,615 $5,625,043 $380,665 $8,532,323
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
(F-5)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
DECEMBER 31 SEPTEMBER 30
----------------------------------------------------------
1997 1996 1997 1996
----------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 459,347 $ 318,983 $1,255,479 $1,206,916
Adjustments to reconcile net income to net
cash provided by operating
activities
Provision for loan losses 2,110 65,974 175,974 225,000
Depreciation 24,450 22,638 87,338 70,175
Deferred income tax 50,680 (33,564) (62,000) (35,218)
Gain on sale of premises and equipment (5,485) (5,485)
Investment securities amortization (accretion), net 15,075 (9,041) 29,002 (15,338)
Investment securities (gains) (2,667) (3,821) (9,306)
Net change in
Interest receivable 33,656 119,826 13,464 (129,632)
Interest payable 23,290 9,850 (11,543) (1,897)
Other assets (7,577) (2,026) (51,159) (5,202)
Other liabilities (302,455) (231,136) 133,630 (14,240)
----------------------------------------------------------
Net cash provided by operating activities 298,576 253,352 1,560,879 1,291,258
----------------------------------------------------------
INVESTING ACTIVITIES
Net change in interest bearing deposits (700,000)
Purchases of securities available for sale (3,649,403) (3,757,493) (14,045,559) (20,236,817)
Proceeds from maturities of securities available
for sale 1,976,445 2,077,636 5,526,498 1,550,000
Proceeds from sales of securities
available for sale 416,810 3,857,965 12,317,664
Net change in loans 2,142,272 479,656 1,471,658 (2,747,547)
Purchases of premises and equipment (7,955) (157,778) (85,388)
Proceeds from sale of premises and equipment 13,718 16,000 16,000
Purchase of Federal Home Loan Bank stock (29,600) (42,300) (347,800) (463,300)
----------------------------------------------------------
Net cash used by investing activities (246,568) (817,646) (3,679,016) (9,665,388)
----------------------------------------------------------
FINANCING ACTIVITIES
Net change in
Noninterest-bearing, interest-bearing demand
and savings deposits 1,149,570 1,455,388 1,705,200 (672,423)
Certificates of deposit 1,818,051 (838,753) (1,627,856) 3,976,577
Proceeds of long-term debt 3,000,000 5,750,000
Repayment of long-term debt (1,127,171) (277,481) (1,230,270) (891,831)
Cash dividends (151,290) (151,290) (756,450) (756,056)
Sale of stock 3,500
----------------------------------------------------------
Net cash provided by financing activities 1,689,160 187,864 1,090,624 7,409,767
----------------------------------------------------------
</TABLE>
(F-6)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
DECEMBER 31 SEPTEMBER 30
1997 1996 1997 1996
----------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
NET CHANGE IN CASH AND CASH EQUIVALENTS $1,741,168 $ (376,430) $ (1,027,513) (964,363)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 3,090,838 4,118,351 4,118,351 5,082,714
----------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $4,832,006 $3,741,921 $ 3,090,838 $ 4,118,351
----------------------------------------------------------
----------------------------------------------------------
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 939,072 $ 937,657 $ 3,803,327 $ 3,557,077
Income tax paid 160,000 161,300 486,157 595,492
</TABLE>
See notes to consolidated financial statements.
(F-7)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
- - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Trigg Bancorp, Inc. (Company) and its
wholly owned subsidiary, Trigg County Farmers Bank (Bank), conform to generally
accepted accounting principles and reporting practices followed by the banking
industry. The more significant of the policies are described below.
The preparation of financial statements in conformity with generally accepted
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
The Company is a bank holding company whose principal activity is the ownership
and management of the Bank. The Bank operates under a state bank charter and
provides full banking services, including trust services. As a state bank, the
Bank is subject to regulation by the Kentucky Department of Financial
Institutions and the Federal Deposit Insurance Corporation.
The Bank generates commercial, mortgage and consumer loans and receives
deposits from customers located primarily in Trigg County, Kentucky and
surrounding counties. The loans are generally secured by specific items of
collateral including real property, consumer assets and business assets.
The unaudited consolidated financial statements as of December 31, 1997 and for
the three-month periods ended December 31, 1997 and 1996 include the accounts
of the Company and Bank after elimination of material intercompany transactions
and have been prepared by the Company without audit. In the opinion of
management all adjustments necessary to fairly present these statements have
been made. Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted for these statements. The results of operations for the three months
ended December 31, 1997 and 1996 are not necessarily indicative of the
operating results for the full year.
CONSOLIDATION--The consolidated financial statements include the accounts of
the Company and the Bank after elimination of all material intercompany
transactions and accounts.
INVESTMENT SECURITIES--Debt securities are classified as available for sale and
are carried at fair value with unrealized gains and losses reported separately
in stockholders' equity, net of tax.
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net security
gains (losses). Gains and losses on sales of securities are determined on the
specific-identification method.
(F-8)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
LOANS are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans, except for installment loans with
add-on interest, for which a method that approximates the level yield method is
used. The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as they
become due. When interest accrual is discontinued, all unpaid accrued interest
is reversed. Interest income is subsequently recognized only to the extent
cash payments are received.
ALLOWANCE FOR LOAN LOSSES is maintained to absorb loan losses based on
management's continuing review and evaluation of the loan portfolio and its
judgment as to the impact of economic conditions on the portfolio. The
evaluation by management includes consideration of past loss experience,
changes in the composition of the portfolio, the current condition and amount
of loans outstanding and the probability of collecting all amounts due.
Impaired loans are measured by the present value of expected future cash flows,
or the fair value of the collateral of the loan, if collateral dependent.
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. Management believes that as of
September 30, 1997 the allowance for loan losses is adequate based on
information currently available. A worsening or protracted economic decline in
the area within which the Bank operates would increase the likelihood of
additional losses due to credit and market risks and could create the need for
additional loss reserves.
PREMISES AND EQUIPMENT are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method based principally on
the estimated useful lives of the assets. Maintenance and repairs are expensed
as incurred while major additions and improvements are capitalized. Gains and
losses on dispositions are included in current operations.
FEDERAL HOME LOAN BANK (FHLB) STOCK is a required investment for institutions
that are members of the FHLB system. The required investment in the common
stock is based on a predetermined formula.
INCOME TAX in the consolidated statement of income includes deferred income tax
provisions or benefits for all significant temporary differences in recognizing
income and expenses for financial reporting and income tax purposes. The
Company files consolidated income tax returns with its subsidiary.
(F-9)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
- - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1997
Available for sale
U. S. Treasury $ 1,258 $ 1 $16 $ 1,243
Federal agencies 9,958 57 27 9,988
State and municipal 7,692 281 4 7,969
Mortgage-backed securities 11,800 80 25 11,855
Other securities 2,354 18 2,336
------------------------------------------------------
Total available for sale $33,062 $419 $90 $33,391
------------------------------------------------------
------------------------------------------------------
SEPTEMBER 30, 1996
Available for sale
U. S. Treasury $ 2,510 $ 1 $ (47) $ 2,464
Federal agencies 12,206 52 (168) 12,090
State and municipal 4,664 86 (35) 4,715
Mortgage-backed securities 6,369 23 (120) 6,272
Other securities 2,677 2 (68) 2,611
------------------------------------------------------
Total available for sale $28,426 $164 $(438) $28,152
------------------------------------------------------
------------------------------------------------------
</TABLE>
The amortized cost and fair value of securities available for sale at September
30, 1997, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------------------------
<S> <C> <C>
Within one year $ 3,146 $ 3,159
One to five years 9,620 9,627
Five to ten years 2,567 2,559
After ten years 5,929 6,191
--------------------------
21,262 21,536
Mortgage-backed securities 11,800 11,855
--------------------------
Totals $33,062 $33,391
--------------------------
--------------------------
</TABLE>
Securities with a carrying value of $8,936,000 and $6,137,000 were pledged at
September 30, 1997 and 1996 to secure certain deposits and for other purposes
as permitted or required by law.
Proceeds from sales of securities available for sale during fiscal 1997 were
$3,857,965. Gross gains of $19,372 and gross losses of $15,551 were realized
on those sales.
(F-10)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
Proceeds from sales and calls of securities available for sale during fiscal
1996 were $12,317,664. Gross gains of $45,229 and gross losses of $35,923 were
realized on those sales or calls.
In December 1995, the Bank transferred certain securities from held to maturity
to available for sale in accordance with a transition reclassification allowed
by the Financial Accounting Standards Board. Such securities had a carrying
value of $8,700,000.
- - LOANS AND ALLOWANCES
<TABLE>
<CAPTION>
SEPTEMBER 30 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Commercial and real estate mortgages $52,020 $52,332
Loans to individuals for household and
other personal expenditures 3,428 4,896
-------------------------
55,448 57,228
Unearned interest on loans (370) (604)
-------------------------
Total loans $55,078 $56,624
-------------------------
-------------------------
Allowance for loan losses
Balances, October 1 $ 741 $ 624
Provision for losses 176 225
Recoveries on loans 129 113
Loans charged off (203) (221)
-------------------------
Balances, September 30 $ 843 $ 741
-------------------------
-------------------------
</TABLE>
Impaired loans had a carrying value of $216,700 at September 30, 1996. The
average recorded investment in the impaired loans during 1996 was approximately
$250,000. The total allowance for loan losses related to those loans was
approximately $42,200.
Interest income recognized on impaired loans, which equaled the cash received,
was $29,000 for fiscal year 1996. The Company had no impaired loans during
1997.
The Bank has entered into transactions with certain directors, executive
officers, significant stockholders and their affiliates or associates (related
parties). Such transactions were made in the ordinary course of business on
substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with other customers and did not, in the opinion of management, involve more
than normal credit risk or present other unfavorable features. As defined,
total loans to directors, executive officers and significant stockholders were
as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, October 1, 1996 $1,122
New loans, including renewals 1,070
Payments, including renewals (826)
---------
Balance, September 30, 1997 $1,366
---------
---------
</TABLE>
(F-11)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
- - PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Land $ 128 $ 128
Buildings 924 917
Equipment 1,208 1,097
---------------------
Total cost 2,260 2,142
Accumulated depreciation (1,617) (1,559)
---------------------
Net $ 643 $ 583
---------------------
---------------------
</TABLE>
- - DEPOSITS
<TABLE>
<CAPTION>
SEPTEMBER 30 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Demand deposits $28,217 $26,459
Savings deposits 6,007 6,060
Certificates and other time deposits of $100,000 or more 6,257 6,562
Other certificates and time deposits 29,003 30,326
----------------------
Total deposits $69,484 $69,407
----------------------
----------------------
Certificates maturing in years ending September 30
1998 $17,335
1999 6,638
2000 5,102
2001 2,060
2002 2,177
Thereafter 1,948
-------
$35,260
-------
-------
</TABLE>
Certain officers and directors maintain deposit accounts with the Company. The
amount of these deposits was $707,000 and $763,000 at September 30, 1997 and
1996.
- - LONG-TERM DEBT
The Company's FHLB advances are at variable rates due at various dates through
September 2010. At September 30, 1997, the FHLB advances are secured by first-
mortgage loans totaling approximately $23,924,000, or 150%, of outstanding
advances and $1,000,000 of investments. Advances are subject to restrictions
or penalties in the event of prepayment.
(F-12)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Maturities in years ending September 30
<S> <C>
1998 $1,273
1999 1,345
2000 1,437
2001 1,536
2002 1,619
Thereafter 8,739
-------
$15,949
-------
-------
</TABLE>
- - LINES OF CREDIT
At September 30, 1997, the Bank had available federal funds purchased lines
with two financial institutions totaling $4,000,000. There were no borrowings
against these lines.
- - INCOME TAX
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Income tax expense
Currently payable $560 $565
Deferred (62) (35)
----------------------
Total income tax expense $498 $530
----------------------
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34% $596 $591
Tax-exempt interest (132) (63)
Other 34 2
----------------------
Actual tax expense $498 $530
----------------------
----------------------
</TABLE>
(F-13)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
A cumulative net deferred tax asset is included in other assets. The
components of the asset are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Differences in accounting for loan losses $182 $148
Differences in accounting for FHLB stock dividends (45) (45)
Differences in depreciation methods (9) (10)
Deferred compensation 22 24
Unrealized gain/loss on securities available for sale (112) 93
Other (29)
----------------------
$ 38 $181
----------------------
Assets $204 $265
Liabilities (166) (84)
----------------------
----------------------
$ 38 $181
----------------------
----------------------
</TABLE>
- - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby
letters of credit, which are not included in the accompanying financial
statements. The exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual or notional amount
of those instruments. The Bank uses the same credit policies in making such
commitments as it does for instruments that are included in the consolidated
balance sheet.
Financial instruments whose contract amount represents credit risk as of
September 30 were as follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit $2,575 $3,661
Standby letters of credit 147 260
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation. Collateral held varies but may include
accounts receivable, inventory, property and equipment, and income-producing
commercial properties.
(F-14)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party.
The Company has an agreement with a key executive which requires the payment of
additional compensation in the event of a change in control.
The Company and subsidiary are also subject to claims and lawsuits which arise
primarily in the ordinary course of business. It is the opinion of management
that the disposition or ultimate resolution of such claims and lawsuits will
not have a material adverse effect on the consolidated financial position of
the Company.
- - RESTRICTION ON DIVIDENDS
Without prior approval, the Bank is restricted by the laws and regulations of
the Department of Financial Institutions, the Commonwealth of Kentucky, the
Federal Reserve Bank and the Federal Deposit Insurance Corporation as to the
maximum amount of dividends it can pay to the parent. The Bank normally
restricts dividends to a lesser amount because of the need to maintain an
adequate capital structure.
- - REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate actions by the regulatory agencies that, if undertaken, could have a
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitatitve judgments by the regulators
about components, risk weightings and other factors.
At September 30, 1997, the management of the Company believes that it meets all
capital adequacy requirements to which it is subject. The most recent
notification from the regulatory agency categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. There
have been no conditions or events since that notification that management
believes have changed this categorization.
(F-15)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
The Bank's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------------------
REQUIRED FOR TO BE WELL
ACTUAL ADEQUATE CAPITAL* CAPITALIZED*
------------------------------------------------------------
SEPTEMBER 30 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total capital* (to risk-weighted assets) $8,525 15.1% $4,531 8.0% $5,664 10.0%
Tier I capital* (to risk-weighted assets) 7,815 13.8 2,265 4.0 3,398 6.0
Tier I capital* (to average assets) 7,815 8.2 3,813 4.0 4,767 5.0
</TABLE>
*As defined by regulatory agencies
- - 401(K) PLAN
The Company has a retirement savings Section 401(k) plan in which substantially
all employees may participate. The Company's expense for the plan was
approximately $22,000 and $46,000 for the years ended September 30, 1997 and
1996.
- - CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
Presented below is condensed financial information as to financial position,
results of operations and cash flows of the Company.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 6 $ 7
Investment in subsidiary 8,031 7,133
Other assets 24 24
-----------------------
Total assets $8,061 $7,164
-----------------------
-----------------------
STOCKHOLDERS' EQUITY
Common stock $2,527 $2,527
Retained earnings 5,317 4,818
Net unrealized gain (loss) on securities
available for sale 217 (181)
-----------------------
Total stockholders' equity $8,061 $7,164
-----------------------
-----------------------
</TABLE>
(F-16)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INCOME
Dividends from subsidiary $ 756 $ 756
EXPENSES
Other expenses 1 1
-----------------------
INCOME BEFORE INCOME TAX AND EQUITY IN
UNDISTRIBUTED INCOME OF SUBSIDIARY 755 755
INCOME TAX BENEFIT (1) (7)
-----------------------
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 756 762
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY 499 445
-----------------------
NET INCOME $1,255 $1,207
-----------------------
-----------------------
</TABLE>
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,255 $1,207
Equity in undistributed earnings of subsidiary (499) (445)
Net change in other liabilities (7)
Other (1) 2
-----------------------
Net cash provided by operating activities 755 757
-----------------------
FINANCING ACTIVITIES
Cash dividend (756) (756)
Issuance of common stock 4
-----------------------
Net cash used by financing activities (756) (752)
-----------------------
NET CHANGE IN CASH (1) 5
CASH, BEGINNING OF YEAR 7 2
-----------------------
CASH, END OF YEAR $ 6 $ 7
-----------------------
-----------------------
</TABLE>
(F-17)
<PAGE>
TRIGG BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
- - SUBSEQUENT EVENT (UNAUDITED)
On February 11, 1998, the Company entered into an Agreement and Plan of Merger
(Merger Agreement) with National City Bancshares, Inc. (National City) to merge
into National City. As of December 31, 1997, National City, which is
headquartered in Evansville, Indiana, had total assets of $1.3 billion. The
Merger Agreement with National City will be effected by converting each share
of the Company's common stock into the right to receive 73 shares of National
City stock. The merger is contingent upon approval of various regulatory
agencies and the affirmative vote of the holders of a majority of the
outstanding Company common stock.
(F-18)
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
the 11th day of February, 1998, by and among National City Bancshares, Inc., an
Indiana corporation ("NCBE"), Trigg Bancorp, Inc., a Kentucky corporation
("TBI"), and the undersigned shareholder of TBI (the "Shareholder").
W I T N E S S E T H:
WHEREAS, TBI owns all of the outstanding capital stock of Trigg County
Farmers Bank, a Kentucky banking corporation located in Cadiz, Kentucky (the
"Bank"); and
WHEREAS, the parties desire that TBI 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 Shareholder owns in excess of 50% of the outstanding capital
stock of TBI, will directly benefit from the Merger and is willing to make
certain representations, warranties and indemnities to NCBE; and
WHEREAS, the Board of Directors of TBI deems the Merger advisable and in
the best interests of TBI and its shareholders and has adopted a resolution
approving this Agreement and directing that this Agreement be submitted for
consideration at a meeting of TBI's shareholders; and
WHEREAS, the Board of Directors of NCBE has adopted a resolution approving
the Merger and 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
TBI, 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) 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") and the Kentucky Business Corporation Act (the "KBCA" and, together with
the IBCL, the "Statutes"), at the Effective Time (as hereafter defined), TBI
will be merged with and into NCBE. TBI 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 TBI
in accordance with the Statutes.
(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 Kentucky Department of
Financial Institutions; 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") fixed by
agreement of NCBE and TBI 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 11, 12 and
13 of this Agreement. The parties shall execute and file on or prior to the
Closing, articles of merger in the form required by the Statutes (the "Articles
of Merger") relating to
A-1
<PAGE>
the Merger with the Indiana Secretary of State and the Kentucky 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".
The Effective Time may not occur later than the fifth business day following
the Closing.
2. EFFECTS OF THE MERGER.
(a) EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the Statutes.
(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 TBI COMMON. Without any action on the part of any
holders of any of TBI's shares of Common Stock, $25.00 par value per share ("TBI
Common"), or shares of capital stock of NCBE, the Merger shall have the
following effects with regard to the TBI Common:
(a) CONVERSION OF TBI COMMON. As of the Effective Time, each issued and
outstanding share of TBI Common other than Dissenting Shares (as hereafter
defined) shall be converted into the right to receive seventy-three (73) shares
of NCBE's Common Stock, without par value ("NCBE Common"). If between the date
hereof and prior to the Closing, the number of outstanding shares of NCBE Common
should be changed as the result of a stock dividend, stock split or
reclassification (a "Share Adjustment"), the number of shares of NCBE Common to
be received by holders of TBI Common shall be appropriately adjusted to reflect
the Share Adjustment. The shares of NCBE to be issued in the Merger are
referred to as the "Merger Consideration."
(b) CANCELLATION OF TREASURY STOCK. As of the Effective Time, each share
of TBI Common that is owned by TBI in its treasury shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor. The foregoing shall not apply to any issued and
outstanding shares held by TBI in a fiduciary or similar capacity.
(c) DISSENTING SHARES. "Dissenting Shares" shall mean shares of TBI
Common held by any person who properly exercises and perfects rights under the
KBCA as a dissenting shareholder. The holder of any Dissenting Shares shall
only have the rights accorded a dissenting shareholder under the KBCA and shall
not receive any part of the Merger Consideration.
4. EFFECT ON NCBE COMMON. The Merger shall have no effect on the shares
of NCBE Common issued and outstanding immediately prior to the Effective Time.
5. EXCHANGE OF CERTIFICATES.
(a) SURRENDER OF CERTIFICATES. Within five (5) business days after the
Effective Time, The National City Bank of Evansville (the "Exchange Agent"),
shall send to each record holder of TBI Common (except for holders of Dissenting
Shares), a letter of transmittal for use in effecting the surrender of
certificates formerly evidencing TBI Common
A-2
<PAGE>
in exchange for the Merger Consideration. The letter of transmittal shall
specify how surrender of the certificates formerly evidencing shares of TBI
Common shall be effected. Upon surrender of a certificate formerly
evidencing TBI 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 TBI Common
until (and then only to the extent that) the holder thereof validly
surrenders the certificates formerly representing the shares of TBI Common
for exchange as provided in this Section 5, or, in lieu thereof, delivers to
the Exchange Agent an appropriate affidavit of loss and an indemnity
agreement as may be required in any such case by NCBE in its reasonable
discretion. If any payment for shares of TBI 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 TBI 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 5.
(c) ESCHEAT. Notwithstanding anything in this Section 5 or elsewhere in
this Agreement to the contrary, neither the Exchange Agent nor any party hereto
shall be liable to a former holder of TBI 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. The Merger Consideration
paid upon the surrender of a certificate evidencing shares of TBI Common in
accordance with the terms of this Section 5 shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of TBI 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 TBI on such shares of TBI 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 TBI Common which were outstanding
immediately prior to the Effective Time.
(e) WITHHOLDING RIGHTS. NCBE shall be entitled to deduct and withhold
from any dividends payable to former holders of TBI Common such amounts as NCBE
is required to deduct and withhold with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"). Such withheld
amounts shall be treated as having been paid by any such former holder of shares
of TBI Common.
6. REPRESENTATIONS AND WARRANTIES OF NCBE. NCBE represents and warrants
to TBI as follows:
(a) ORGANIZATION, AUTHORIZATION AND NO VIOLATION. 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
A-3
<PAGE>
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) NO SHAREHOLDER VOTE. No vote by the holders of any of the capital
stock of NCBE to approve the Merger is required under Indiana law, the articles
of incorporation or by-laws of NCBE or any rules of the National Association of
Securities Dealers, Inc. which apply to Nasdaq National Market issuers.
(c) CAPITAL STOCK. The authorized capital stock of NCBE consists of
20,000,000 shares of NCBE Common, of which 10,727,247 shares were issued and
outstanding as of December 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. As of the date hereof, 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 (i) options to
purchase an aggregate of 451,394 shares of NCBE Common which have been granted
pursuant to NCBE's Incentive Stock Option Plan and remain unexercised as of
December 31, 1997, and (ii) a commitment to issue up to 577,417 shares of NCBE
Common in connection with the Plan and Agreement of Merger dated as of
December 15, 1997, between NCBE and Illinois One Bancorp, Inc.
(d) 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.
(e) SEC DOCUMENTS. NCBE has provided TBI 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 reports on Form 10-Q for
the quarters ended March 31, June 30 and September 30, 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.
(f) FINANCIAL INFORMATION. NCBE has delivered to TBI 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 September 30, 1997 and the related unaudited statements of
income, changes in shareholders' equity and cash flow for the three months then
ended that are included in the SEC Documents. Such financial statements (other
than for interim periods) have been audited by McGladrey & Pullen, LLP,
independent auditors, whose report thereon is included with such financial
statements. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except for changes, if any, required by GAAP and 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). At December 31, 1996, there were no
material liabilities of NCBE and its subsidiaries (actual, contingent or
accrued) which, in accordance with GAAP applied on a consistent basis, should
have been shown or reflected in such financial statements or the notes thereto,
but which are not so reflected.
(g) 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
A-4
<PAGE>
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
(f) not misleading.
(h) LITIGATION. There is no litigation, claim, investigation or other
proceeding pending or, to the knowledge of NCBE, threatened, against or
adversely affecting 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. To the best of NCBE's
knowledge, there is no litigation, claim, investigation or other proceeding to
which any director, officer, employee or agent of NCBE or any of its
subsidiaries in their respective capacities as directors, officers, employees or
agents, is a party, pending of 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 NCBE or any
of its subsidiaries, or the assets or business of NCBE or any of its
subsidiaries, which could reasonably be expected to have a material adverse
effect on the financial condition, results of operations or business of NCBE and
its subsidiaries, taken as a whole, or which challenges the validity of the
transactions contemplated by this Agreement.
(i) 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.
(j) POOLING-OF-INTERESTS. As of the date of this Agreement, NCBE has no
reason to believe that the Merger will not qualify for the pooling-of-interests
method of accounting under Accounting Principles Board No. 16 ("APB 16").
(k) 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 TBI or hereinafter required to be furnished to TBI,
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. REPRESENTATIONS AND WARRANTIES OF TBI AND THE SHAREHOLDER. TBI and
the Shareholder, jointly and severally, represent and warrant to NCBE, except as
disclosed in the writing delivered to NCBE concurrently with the execution of
this Agreement (the "Disclosure Schedule") as follows:
(a)(i) ORGANIZATION AND GOOD STANDING OF TBI. TBI is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky and has all necessary corporate power to own its
properties and assets and to carry on its business as now conducted. TBI
is duly qualified to conduct its business and is in good standing in each
jurisdiction in which the nature of the business transacted by TBI requires
such qualification. TBI 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, TBI has 25,000 shares of TBI
Common authorized, of which 10,086 shares are issued and outstanding and 5
shares are held in the treasury. All of the issued and outstanding shares
of TBI Common are duly and validly authorized and issued, fully paid and
nonassessable. None of the issued and outstanding shares of TBI Common
have been issued in violation of any preemptive rights. There are no
shares of any class of capital stock or equity securities of TBI
outstanding other than the TBI Common and there are no 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 TBI is or may be obligated to issue additional shares
of any class of capital stock or other equity securities of TBI.
A-5
<PAGE>
(iii) ORGANIZATION OF THE BANK. The Bank is a banking corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky. 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
1,000 shares of Common Stock, $200.00 par value per share ("Bank Stock") of
which 1,000 shares are issued and outstanding and no shares are held in the
treasury. TBI is the record and beneficial owner of all of the issued and
outstanding shares of Bank Stock. All of the issued and outstanding shares
of Bank Stock are duly and validly authorized and issued, fully paid and
non-assessable. None of the issued and outstanding shares of Bank Stock
have been issued in violation of any preemptive rights. There are no
shares of any class of capital stock or equity securities of the Bank
outstanding other than Bank Stock and there are no 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 AND NO VIOLATION. Subject to receipt of approvals
from the Applicable Governmental Authorities and approval by the shareholders
of TBI, the execution and delivery of this Agreement by TBI 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
TBI and this Agreement constitutes the legal, valid and binding obligation of
TBI, enforceable against TBI in accordance with its 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 TBI 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 TBI or the articles of incorporation
and by-laws of the Bank, (ii) any Material Contract (as defined in Section
7(f)) of TBI or the Bank or (iii) any other material license, law, order,
rule, regulation or judgment to which TBI or the Bank is a party, is bound or
by which any of their respective properties or assets is subject. The minute
books of TBI 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 only entity (including, without limitation,
corporations, partnerships, limited liability companies and joint ventures) in
which TBI has a direct or indirect equity or ownership interest is the Bank.
(d) FINANCIAL STATEMENTS. TBI has delivered to NCBE consolidated balance
sheets of TBI as of September 30, 1997 and the related consolidated statements
of income, stockholder's equity and cash flows for the year ended September 30,
1997. Such financial statements have been audited by Geo. S. Olive & Co. LLC,
independent auditors, whose report thereon is included with such financial
statements. 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), the balance sheet presents fairly the consolidated
financial condition of TBI as of its date and the statement of income presents
fairly the results of operations for the period covered. At September 30, 1997,
there were no material liabilities of TBI (actual, contingent or accrued) which,
in accordance with GAAP applied on a consistent basis, should have been shown or
reflected in such financial statements or the notes thereto, but which are not
so shown or reflected.
(e) TAXES AND TAX RETURNS.
(i) To the best of TBI's knowledge, each of TBI and the Bank 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 TBI and the Bank either singly or
in the aggregate have set aside adequate reserves. To the best of TBI's
knowledge, the
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amounts recorded as reserves for Taxes on the consolidated financial
statements of TBI as of September 30, 1997, are sufficient in the
aggregate for the payment of all unpaid Taxes (including any interest or
penalties thereon) whether or not disputed or accrued, for the period ended
September 30, 1997 or for any year or period prior thereto. The federal
and state Returns of TBI and the Bank 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 September 30,
1994 and, 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 TBI or the Bank.
Neither TBI nor the Bank 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 TBI nor the Bank
has in effect any power of attorney or authorization to anyone to represent
it with respect to any Taxes. TBI has not filed any consolidated federal
income tax return with an "affiliated group" (within the meaning of Section
1504 of the Code), where TBI was not the common parent of the group.
Neither TBI nor the Bank 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 TBI or the Bank. Neither TBI nor
the Bank has filed a consent under Section 341(f) of the Code. TBI 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
December 31, 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 October 1, 1994.
(ii) All monies required to be withheld from employees of TBI and the
Bank 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 TBI management is adequate, has been established.
(f) MATERIAL CONTRACTS. All executory contracts, indentures, commitments,
and other agreements in excess of $25,000 to which TBI or the Bank is a party or
to which TBI or the Bank 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. Each of TBI and the Bank 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 TBI or the Bank
or, to the best knowledge of TBI management, any other party thereto has
occurred which will impair the ability of TBI or the Bank to enforce any
material rights thereunder.
(g) REAL ESTATE. The Bank has good title to all of the assets reflected
as owned by it in TBI's financial statements as of September 30, 1997, 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 TBI or the Bank are (i)
to the best knowledge of TBI management, in good repair, order and condition,
except for depletion, depreciation and ordinary wear and tear, and (ii) to the
best of TBI'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 TBI or the Bank of the real
property or tangible personal property owned or leased by either of them.
(h) NO MATERIAL ADVERSE CHANGE. Since September 30, 1997, there has been
no material adverse change in the business, financial condition, properties,
results of operation, or capitalization of the Bank.
(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 TBI, threatened, against or adversely affecting TBI or the Bank, or
of which the property of TBI or the Bank is or would be subject and which would
have a material adverse effect on the financial condition, results of operations
or business of TBI and the Bank, taken as a whole. To the best of TBI's
knowledge, there is no litigation, claim, investigation or other proceeding to
which any director, officer, employee or agent of TBI or the Bank 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 TBI or the Bank, or the
assets or business of TBI or the
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Bank, which could reasonably be expected to have a material adverse effect on
the financial condition, results of operations or business of TBI and the
Bank, taken as a whole, or which challenges the validity of the transactions
contemplated by this Agreement.
(j) INSURANCE. Each of TBI and the Bank has in effect insurance coverage
with reputable insurers, which in respect to amounts, types and risks insured,
is adequate in the opinion of TBI for the business in which TBI and the Bank are
engaged. All policies of insurance owned or held by TBI or the Bank 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. Each of TBI and the Bank 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 TBI and the Bank, to the best of TBI's
knowledge, 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 TBI and the Bank, taken as a whole.
(l) BROKER'S AND FINDER'S FEES. Neither TBI nor the Bank 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 TBI and the Bank, there are no other trades or
businesses, whether or not incorporated, which, together with TBI or the
Bank, 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 TBI or
the Bank currently maintains or has maintained within the three year period
preceding the date hereof (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 TBI or the
Bank (the ERISA Plans and such other plans are collectively referred to as
the "Plans"). TBI has made available to NCBE copies of all Plans and any
related documents or instruments establishing the Plans or any related
trusts 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 date hereof in connection with any Plan.
(iii) Neither TBI nor the Bank 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) 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
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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) Except as disclosed in the Disclosure Schedule, 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 of TBI's knowledge and except as disclosed
in the Disclosure Schedule, 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 TBI'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 TBI nor the Bank 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) To the best of TBI's knowledge, none of TBI, the Bank, any of
the Plans, any trust created thereunder, or any trustee or administrator
thereof has engaged in a transaction in connection with which TBI or the
Bank, 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.
To the best of TBI's knowledge, neither TBI nor the Bank 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.
(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 TBI or the Bank or their officers or employees
with respect to any Plan.
(x) To the best of TBI'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 on the part of the Surviving Corporation, NCBE, TBI or the
Bank, to any person, entity or government agency for any conduct, practice
or omission of TBI or the Bank 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 disclosed 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 TBI or the Bank from TBI or the Bank under any Plan or otherwise; (B)
materially increase any benefits otherwise payable under any Plan; or (C)
result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
(n) LABOR MATTERS. Neither TBI nor the Bank 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 TBI and
the Bank
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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 TBI's knowledge, neither the conduct nor operation
of TBI or the Bank 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 TBI
and the Bank, taken as a whole, 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) TBI or the Bank 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 TBI and the Bank, taken as a whole. Neither TBI
nor the Bank has received any notice from any person or entity that TBI or
the Bank 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) REGULATORY COMPLIANCE. Neither TBI nor the Bank is a party to any
enforcement action instituted by any memorandum of understanding, agreement,
consent agreement or cease and desist order with the Kentucky Department of
Financial Institutions, the Federal Reserve Board, the FDIC or any federal or
state regulatory agency, and neither TBI nor the Bank 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 TBI
or the Bank.
(q) POOLING-OF-INTERESTS. As of the date of this Agreement, TBI has no
reason to believe that the Merger will not qualify for the pooling-of-interests
method of accounting under APB 16.
(r) TRUE AND COMPLETE INFORMATION. No representation or warranty made by
TBI 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.
8. COVENANTS OF NCBE. NCBE agrees with TBI as follows:
(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 use reasonable efforts to
obtain the approvals of the Applicable Governmental Authorities for the
transactions contemplated by this Agreement; however, NCBE's obligation to use
its reasonable efforts to obtain the approvals of the Applicable Governmental
Authorities shall not be construed as including an obligation to accept any
unreasonable terms of or conditions to an approval of any Applicable
Governmental Authority, to change the business practices of NCBE or any NCBE
subsidiary in any material respect or to institute any litigation in connection
with such approvals. NCBE shall keep TBI informed as to the status of such
applications and make available to TBI, upon reasonable request by TBI 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,
including the Proxy Statement/Prospectus included therein (the "Proxy
Statement/Prospectus"), as amended or supplemented, 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 promulgated thereunder, and
the information in the Proxy Statement/Prospectus furnished by NCBE for
inclusion therein shall not contain any untrue
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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.
(c) LISTING. NCBE shall use its best efforts to list the shares of NCBE
Common to be issued in the Merger on the Nasdaq National Market.
(d) ACCESS TO INFORMATION. NCBE shall permit TBI reasonable access
during regular business hours to its properties. NCBE shall disclose and
make available to TBI and shall use its best efforts to cause its agents and
authorized representatives to disclose and make available to TBI, 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 TBI may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by this Agreement.
(e) EMPLOYEE-RELATED MATTERS.
(i) Subject to the continuing discretion of the Board of Directors of
the Bank following the Merger, NCBE expects that the Bank will retain its
current employees, including the officers.
(ii) The Plans currently maintained by the Bank that are listed on
the Disclosure Schedule shall remain in effect, subject to the terms of
such Plans as in effect on the date hereof, after the Effective Time
through December 31, 1998 and until such date as NCBE may determine as the
date on which employees of the Bank shall become covered by NCBE employee
benefit plans. After January 1, 1999, the 401(k) plan currently sponsored
by the Bank shall either: (A) be merged into the NCBE Employees' Savings
and Profit Sharing Plan (the "NCBE Plan") if such merger is possible under
the terms of such plans and applicable law or (B) be terminated and the
participants' benefits distributed to them so that such distributions (or
the cash proceeds thereof) may be rolled over to the NCBE Plan.
(iii) None of the provisions of this Section 8(e) shall confer upon
any employee of TBI or the Bank any right to be employed or retained in the
employment of the Bank.
(f) ELECTION OF ADDITIONAL DIRECTOR OF NCBE. After the Effective Time,
NCBE agrees to use its best efforts to expand its Board of Directors by one
member and to elect Ben L. Cundiff to fill the vacancy created by such action.
9. AGREEMENTS WITH RESPECT TO CONDUCT OF TBI AND THE BANK PRIOR TO THE
CLOSING. TBI agrees with NCBE as follows:
(a) ORDINARY COURSE, INSURANCE AND PRESERVATION OF BUSINESS. Each of TBI
and the Bank will, except as otherwise agreed to in writing by NCBE:
(i) carry on its respective business in the ordinary course and
consistent with its respective policies, procedures and practices as
heretofore conducted;
(ii) except as terminated 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;
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(iv) maintain, renew, keep in full force and effect and preserve its
business organization, material rights, franchises, permits and licenses,
retain its present employee force, maintain its existing, or substantially
equivalent, credit arrangements with banks and other financial institutions
and use its best efforts to continue its general customer relationships;
and
(v) duly comply in all material respects with all laws applicable to
it and to the conduct of its business.
(b) NOTICE. TBI will promptly notify NCBE of any event which hereafter
becomes known to TBI management which may reasonably have a material adverse
effect on the financial condition, operations, business or assets of TBI and the
Bank, taken as a whole, or if TBI determines that it may be unable to fulfill
the conditions set forth in Section 11 or 12 hereof.
(c) PROHIBITED ACTION WITHOUT APPROVAL. Neither TBI nor the Bank will,
except with the prior written consent of NCBE, do any of the following:
(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 TBI or the Bank; enhance, expand, modify, replace or alter any computer
or data processing system owned, leased or licensed by TBI or the Bank
(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 other than renewals
or restructurings of loans in existence on the date hereof; 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 purchase of one (1) automated teller machine;
or
(iii) issue, sell, redeem or acquire for value, or agree to do so,
any shares of the capital stock or other equity securities, options or
other ownership interests of TBI or debt securities, 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 TBI Common in an
amount not to exceed $75.00 per share per year, payable in accordance with
past practices; provided, however, that TBI 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 TBI
shareholders shall receive a quarterly dividend from either TBI or NCBE but
not both during or with respect to such quarter, (B) cash dividends payable
by the Bank, (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
maturity thereof, and (E) obligations or liabilities permitted to be
incurred pursuant to Section 9(c)(i) hereof; or
(iv) sell, pledge or redeem any of the Bank Stock; amend its
articles of incorporation or by-laws or permit the Bank to amend its
articles of association or by-laws; split, combine or reclassify any
shares of capital stock; or enter into any agreement, commitment or
arrangement with respect to any of the foregoing; or
(v) enter into or amend any employment agreement; or
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(vi) 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, 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; or
(vii) open any new office or close any current office of the Bank at
which business is conducted; or
(viii) knowingly take any actions that would adversely affect the
ability of the Merger to be accounted for using the pooling-of-interests
method of accounting under APB 16.
(d) NO SOLICITATION.
(i) Neither TBI nor the Bank nor any officer, director or any
representative thereof shall solicit or authorize the solicitation of, or,
unless TBI'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 its 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 TBI or the Bank 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
TBI or any or all of the capital stock, other equity securities or other
ownership interests, or all or substantially all of the assets, of TBI or
the Bank. TBI 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, TBI shall immediately
terminate all discussions then existing with any third parties regarding
any possible offer to acquire TBI or the Bank.
(e) 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.
(f) NO VIOLATION. Neither TBI nor the Bank 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.
(g) ACCOUNTING. Each of TBI and the Bank will maintain its books,
accounts and records in accordance with GAAP. Neither TBI nor the Bank 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 TBI nor
the Bank 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.
10. ADDITIONAL AGREEMENTS.
(a) CONTINUING ACCESS TO INFORMATION. Through the Effective Time, TBI
shall permit NCBE and its authorized representatives reasonable access during
regular business hours to TBI's properties and those of the Bank. TBI shall
make its and the Bank's 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 TBI shall, and shall cause the
Bank 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 TBI and the Bank, 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
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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. TBI shall promptly provide to NCBE copies of any
reports to the Board of Directors of TBI or the Bank or any committee thereof
and minutes of all meetings of the Board of Directors of TBI and the Bank and
each committee thereof. Throughout the period prior to the Effective Time, TBI
and the Bank will cause one or more designated representatives to confer with
representatives of NCBE on the ongoing operations of TBI and the Bank.
(c) NOTIFICATION OF CHANGE. TBI shall promptly notify NCBE of any
material change in the ordinary course of business or in the operation of the
properties of TBI or the Bank and of any governmental complaints, investigations
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of litigation involving TBI or Bank which is
material to, or which might have a material adverse effect on TBI and the Bank,
taken as a whole, or of any breach by TBI or the Bank 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, TBI shall
promptly furnish NCBE with any information within its possession which relates
to TBI or the Bank 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. TBI 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. TBI 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 of its officers and directors and shall use
its best efforts to obtain similar agreements from each other person who owns
10% or more of the outstanding shares of TBI Common and any other persons who
may reasonably be deemed by NCBE to be an "affiliate" of TBI within the meaning
of such term as used in Rule 145 under the Securities Act.
(f) SHAREHOLDER APPROVAL. TBI shall cause to be duly called and held a
special meeting of the holders of TBI Common for submission of this Agreement
and the Merger for approval of such shareholders as required by the KBCA. In
connection with such shareholders' meeting, (i) TBI shall cooperate and assist
NCBE in preparing and filing the Registration Statement, and any amendments or
supplements thereto, including the Proxy Statement/Prospectus with the SEC and
applicable state securities authorities, and TBI shall mail the Proxy
Statement/Prospectus to its shareholders; (ii) TBI shall furnish NCBE all
information within its possession concerning itself that NCBE may reasonably
request in connection with the Proxy Statement/Prospectus; (iii) the Board of
Directors of TBI (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; and (iv) TBI agrees that the information furnished to NCBE for
inclusion in the Proxy Statement/Prospectus 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.
(g) AGREEMENT BY THE SHAREHOLDER TO INDEMNIFY NCBE. The Shareholder
agrees to indemnify and hold NCBE harmless from and against the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable attorneys' fees) incurred or suffered by NCBE
arising out of or resulting from (i) any breach of a representation or warranty
made by TBI or the Shareholder in or pursuant to this Agreement, (ii) any breach
of the covenants or agreements made by TBI or the Shareholder in or pursuant to
this Agreement, or (iii) any inaccuracy in any certificate delivered by TBI
pursuant to this Agreement (collectively, "Indemnifiable Damages"). The
Shareholder shall not be liable to NCBE with respect to any claim for
Indemnifiable Damages unless the aggregate amount of such Indemnifiable Damages
incurred by NCBE exceeds an aggregate of $250,000, in which case the Shareholder
shall be liable to NCBE for the entire amount of such Indemnifiable Damages up
to a maximum aggregate amount of $3,000,000.
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11. 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 Closing of the following conditions:
(a) SHAREHOLDER APPROVAL. The Merger shall have been approved by the
holders of a majority of the outstanding shares of TBI Common.
(b) REGULATORY APPROVAL. The transactions contemplated by this Agreement
shall have been approved by all Applicable Governmental Authorities and all
applicable waiting periods shall have expired.
(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 which is
reasonably expected to (i) result in an order enjoining the Merger, (ii)
result in a determination that a party has failed to comply with applicable
legal requirements in connection with the Merger; or (iii) have a material
adverse effect on the future conduct of the business of a party;
(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) FEDERAL TAX OPINION. The parties shall have received an opinion of
Baker & Daniels to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code and such opinion shall
not have been withdrawn or modified in any material respect prior to the
Effective Time.
12. 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 Closing
of the following conditions:
(a) STATUS AS OF CLOSING. All representations and warranties of TBI and
the Shareholder contained in this Agreement shall be true as though made at and
as of the Closing except for such untruths or inaccuracies which individually or
in the aggregate would not have a material adverse effect on TBI and the Bank,
taken as a whole; TBI 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; there shall not have occurred any material adverse change
in the business, assets, properties, financial condition or results of
operations of TBI and the Bank, taken as a whole; and there shall be delivered
to NCBE a certificate (dated the Closing and signed by the chief executive
officer of TBI) stating that to the best of his knowledge such conditions have
been satisfied.
(b) POOLING-OF-INTERESTS. In the opinion of NCBE, after consultation
with its independent auditors, the Merger shall qualify for the
pooling-of-interests method of accounting under APB 16 if consummated in
accordance with this Agreement.
(c) RESIGNATION OF EMPLOYEE. Ben L. Cundiff shall have resigned from his
positions as an employee of TBI and the Bank. In connection with such
resignation, Mr. Cundiff shall not resign as a director of the Bank and may be
compensated after the Effective Time for his services as a director in
accordance with the Bank's compensation policies for outside directors.
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13. CONDITIONS TO OBLIGATIONS OF TBI. The obligation of TBI to effect the
Merger is subject to the satisfaction or waiver on or prior to the Closing of
the following conditions:
(a) STATUS OF CLOSING. All representations and warranties of NCBE
contained in this Agreement shall be true as though made at and as of the
Closing except for such truths or inaccuracies which individually or in the
aggregate would not have a material adverse effect on NCBE and its subsidiaries,
taken as a whole; NCBE shall have performed and satisfied all covenants made by
it in this Agreement which are to be performed on or prior to the Closing; there
shall not have occurred any material adverse change in the business, assets,
properties, financial condition or results of operations of NCBE and its
subsidiaries, taken as a whole; and there shall be delivered to TBI a
certificate (dated the Closing and signed by the President of NCBE) stating that
to the best of his knowledge such conditions have been satisfied.
(b) ATTORNEY'S OPINION. TBI shall have received an opinion, dated the
Closing, of Baker & Daniels, counsel for NCBE, in substantially the form of
Exhibit B attached hereto.
14. 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.
15. PAYMENT OF EXPENSES.
(a) EXPENSES GENERALLY. Except as otherwise provided in subsection (b)
below, each party hereto shall pay its own fees and expenses incident to
preparing for, entering into, and carrying out this Agreement and the
transactions contemplated hereby.
(b) REIMBURSEMENT OF NCBE. Upon the occurrence of a Triggering Event (as
hereafter defined), TBI shall reimburse NCBE for all of its out-of-pocket
expenses and costs, including fees of accountants and attorneys, incurred in
connection with the transactions contemplated by this Agreement up to a maximum
of $150,000. As used herein, the term "Triggering Event" shall mean both (i)
the termination of this Agreement for any reason other than a failure of any of
the conditions set forth in Sections 11(b), 11(c), 11(d), 11(e) or pursuant to
Section 16 hereof and (ii) the occurrence of any of the following within one (1)
year of the date of termination: (A) TBI enters into any agreement with respect
to a Competing Transaction; (B) the Board of Directors of TBI recommends a
Competing Transaction to TBI's shareholders; or (C) following the announcement
of a Competing Transaction, the Board of Directors of TBI withdraws or modifies
its recommendation of the Merger or this Agreement. The term "Competing
Transaction" means any of the following: (x) an offer by any person or group of
persons (other than NCBE) to acquire ownership of twenty-five percent (25%) or
more of the TBI Common or the Bank Stock; or (y) a proposal for a merger,
consolidation, share exchange, business combination, or similar transaction
involving TBI; or (z) a proposal for a sale, lease, exchange, transfer or other
disposition of twenty-five percent (25%) or more of the assets of TBI shall
occur. The terms "person"
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and "group of persons" shall have the meanings conferred thereon by Sections
3(a)(9) and 13(d)(3) of the Exchange Act and the regulations promulgated
thereunder.
16. TERMINATION OF AGREEMENT. Notwithstanding any provision to the
contrary herein, and notwithstanding the fact that the shareholders of TBI 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 TBI and NCBE,
(b) COMPETING TRANSACTION. By the Board of Directors of TBI if TBI or its
Board of Directors accepts, approves or recommends a Competing Transaction to
its shareholders, provided that TBI has simultaneously delivered to NCBE the
amounts payable pursuant to Section 15(b), or
(c) OTHERWISE. (i) By the Board of Directors of TBI, upon written notice
to NCBE, if by September 30, 1998, any of the conditions set forth in Sections
11 or 13 shall not have been satisfied or are no longer capable of being
satisfied; or (ii) by the Board of Directors of NCBE, upon written notice to
TBI, if by September 30, 1998, any of the conditions set forth in Sections 11 or
13 shall not have been satisfied or are no longer capable of being satisfied.
(d) EFFECT OF TERMINATION. Upon termination of this Agreement by either
NCBE or TBI pursuant to this Section 16, there shall be no liability by reason
of this Agreement or the termination thereof on the part of NCBE or TBI or the
respective directors, officers, employees, agents or stockholders of either of
them except for any liability under Section 15(b) or unless such termination
results from a party's intentional or reckless misrepresentation or intentional
or reckless breach of any covenant contained herein.
17. PUBLICITY AND REPORTS. NCBE and TBI 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.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Except as provided in subsection (b), each of the representations,
warranties and indemnities made by the parties in this Agreement or pursuant
hereto shall expire upon termination of this Agreement, if terminated prior to
the Closing, or if not so terminated, two (2) years after the Effective Time,
except that (i) the representations and warranties contained in Section 7(e),
7(m) and 7(o) shall expire at the time the latest period of limitations expires
for the enforcement by any governmental authority of any remedy, penalty or
claim arising out of the matters addressed therein. No claim for the recovery
of Indemnifiable Damages may be asserted by NCBE against the Shareholders after
such representations, warranties and indemnities so expire; provided, however,
that claims for Indemnifiable Damages asserted within the applicable period
shall not thereafter be barred.
(b) The covenants of the parties contained in Sections 5, 8(d), 8(f) and
15(b) shall survive the Effective Time or earlier termination of this Agreement.
(c) Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant and agreement of
the parties contained in this agreement is independent of each other
representation, warranty, covenant and agreement.
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19. 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 TBI, addressed to:
Trigg Bancorp, Inc.
P. O. Box 500
(38 Main Street)
Cadiz, Kentucky 42211
Attn: Ben L. Cundiff
Fax No. (502) 522-9984
20. 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 TBI, to
the extent authorized by applicable law, by a writing signed by TBI 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.
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(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.
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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/ Stephen C. Byelick, Jr.
- ----------------------------------
Stephen C. Byelick, Jr., Secretary
TRIGG BANCORP, INC.
By: /s/ Ben L. Cundiff
-----------------------------
Ben L. Cundiff, Chairman and CEO
ATTEST:
/s/ Jim J. Carr
- ----------------------------------
Jim J. Carr, Secretary
SHAREHOLDER:
/s/ Ben L. Cundiff
----------------------------------
Ben L. Cundiff
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EXHIBIT A
FORM OF AFFILIATE LETTER
Gentlemen:
In connection with the merger (the "Merger") of Trigg Bancorp, Inc., a
Kentucky corporation ("TBI"), with and into National City Bancshares, Inc., an
Indiana corporation ("NCBE"), pursuant to the Agreement and Plan of Merger dated
as of ________ __, 1998 (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 TBI 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 TBI to
cause the Merger to be consummated, I hereby represent and warrant to, and agree
with NCBE and TBI 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 within the limits and in accordance with
the applicable provisions of 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 TBI 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 results covering at least 30 days of combined operations
of TBI 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,
______________________________
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APPENDIX B
Excerpts of the Kentucky Business Corporation Act
(Dissenters' Rights)
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010 DEFINITIONS. - As used in this subtitle:
(1) "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.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right when and in
the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "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. In
any transaction subject to the requirements of KRS 271B.12-210 or exempted by
KRS 271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
(4) "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.
(5) "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 of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020 RIGHT TO DISSENT - (1) A shareholder shall be entitled to
dissent from, and obtain payment of the fair value of his shares in the event
of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party:
1. If shareholder approval is required for the merger by KRS 271B.11-040
or the articles of incorporation and the shareholder is entitled to vote on the
merger; or
2. If the corporation is a subsidiary that is merged with its parent
under KRS 271B.11-040;
(b) 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;
(c) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the ususal 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;
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(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any matter other
than a limitation by dilution through issuance of shares or other securities
with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a fraction of
a share if the fractional share so created is to be acquired for cash under KRS
271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) 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.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030 DISSENT BY NOMINEE AND BENEFICIAL OWNERS - (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he shall dissent with respect to all shares
beneficially owned by any one (2) person and notify the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection shall be
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He 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
(b) He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200 NOTICE OF DISSENTERS' RIGHTS - (1) If proposed corporate action
creating dissenters' rights under KRS 271B.13-020 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 subtitle and the
corporation shall undertake to provide a copy of this subtitle to any
shareholder entitled to vote at the shareholders' meeting upon request of that
shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
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 KRS 271B.13-220.
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271B.13-210 NOTICE OF INTENT TO DEMAND PAYMENT - (1) If proposed corporate
action creating dissenters' rights under KRS 271B.13-020 is submitted to a vote
at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights:
(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section shall not be entitled to payment for his shares under this
chapter.
271B.13-220 DISSENTERS' NOTICE - (1) If proposed corporate action creating
dissenters' rights under KRS 271B.13-020 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after
the date the proposed corporate action was authorized by the shareholders or, if
no shareholder authorization was obtained, by the board of directors, and shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(c) 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 he acquired beneficial ownership of the shares before
that date;
(d) 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 notice provided in subsection (1) of this section is
delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 DUTY TO DEMAND PAYMENT - (1) A shareholder who is sent a
dissenters' notice described in KRS 271B.13-220 shall demand payment, certify
whether he acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to subsection (2)(c) of KRS
271B.13-220, and deposit his certificates in accordance with the terms of the
notice.
(2) The shareholder who demands payment and deposits his share
certificates under subsection (1) of this section shall retain all other rights
of a shareholder until these rights are cancelled or modified by the taking of
the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
shall not be entitled to payment for his shares under this subtitle.
271B.13-240 SHARE RESTRICTIONS - (1) 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 KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
B-3
<PAGE>
271B.13-250 PAYMENT - (1) Except as provided in KRS 271B.13-270, as soon as
the proposed corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with KRS 271B.13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
(2) The payment shall be accompanied by:
(a) 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;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenters' right to demand payment under KRS
271B.13-280.
271B.13-260 FAILURE TO TAKE ACTION - (1) 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.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270 AFTER-ACQUIRED SHARES - (1) A corporation may elect to withhold
payment required by KRS 271B.13-250 from a dissenter unless he 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.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment under KRS
271B.13-280.
271B.13-280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER -
(1) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under KRS 271B.13-250), or reject the
corporation's offer under KRS 271B.13-270 and demand payment of the fair
value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS 271B.13-250 or
offered under KRS 271B.13-270 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250 within
sixty (60) days after the date set for demanding payment; or
(c) 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 afer the date set for demanding
payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under subsection
(1) of this section within thirty (30) days after the corporation made or
offered payment for his shares.
B-4
<PAGE>
JUDICIAL APPRAISAL OF SHARES
271B.13-300 COURT ACTION - (1) If a demand for payment under KRS
271B.13-280 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 and accrued interest. 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.
(2) The corporation shall commence the proceeding in the circuit court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) 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 shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be 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 shall be entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under KRS
271B.13-270.
271B.13-310 COURT COSTS AND COUNSEL FEES - (1) The court in an appraisal
proceeding commenced under KRS 271B.13-300 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 the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) 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 KRS 271B.13-200 to 271B.13-280; or
(b) 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 subtitle.
(3) 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.
B-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Indiana Business Corporation Law provides that a corporation, unless
limited by its Articles of Incorporation, is required to indemnify its
directors and officers against reasonable expenses incurred in the successful
defense of any proceeding to which the director or officer was a party
because of serving as a director or officer of the corporation.
As permitted by the Indiana Business Corporation Law, the Registrant's
Articles of Incorporation provide for indemnification of directors, officers
and employees of the Registrant against any and all liability and reasonable
expense that may be incurred by them, arising out of any claim or action,
civil, criminal, administrative or investigative, in which they may become
involved by reason of being or having been a director, officer, or employee.
To be entitled to indemnification, those persons must have been wholly
successful in the claim or action or the Board of Directors must have
determined that such persons acted in good faith in what they reasonably
believed to be the best interests of the Registrant (or at least not opposed
to its best interests) and, in addition, in any criminal action, had
reasonable cause to believe their conduct was lawful (or had no reasonable
cause to believe that their conduct was unlawful).
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 E-1.
(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.
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;
II-1
<PAGE>
(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.
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-2
<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 APRIL 30, 1998.
NATIONAL CITY BANCSHARES, INC.
By: /s/ Michael F. Elliott
--------------------------------
Michael F. Elliott, 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 Michael F. Elliott 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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael F. Elliott Chairman of the Board,
- ------------------------------------ Chief Executive Officer and April 30, 1998
Michael F. Elliott Director (Principal Executive
Officer)
/s/ Robert A. Keil President, Chief
- ------------------------------------ Financial Officer and April 30, 1998
Robert A. Keil Director (Principal
Financial Officer)
/s/ Stephen C. Byelick, Jr. Secretary and Treasurer
- ------------------------------------ (Principal Accounting April 30, 1998
Stephen C. Byelick, Jr. Officer)
- ------------------------------------
Janice L. Beesley Director _____ __, 1998
/s/ Susanne R. Emge
- ------------------------------------
Susanne R. Emge Director April 30, 1998
- ------------------------------------
Donald G. Harris Director _____ __, 1998
/s/ Dr. H. Ray Hoops
- ------------------------------------
Dr. H. Ray Hoops Director April 30, 1998
/s/ John D. Lippert
- ------------------------------------
John D. Lippert Director April 30, 1998
/s/ Ronald G. Reherman
- ------------------------------------
Ronald G. Reherman Director April 30, 1998
/s/ Laurence R. Steenberg
- ------------------------------------
Laurence R. Steenberg Director April 30, 1998
/s/ Richard F. Welp
- ------------------------------------
Richard F. Welp Director April 30, 1998
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------ ------------------------------------------------------------------------
2 Agreement and Plan of Merger dated February 11, 1998 between the
Registrant and Trigg Bancorp., Inc., (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 3A 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, 1997).
5 Opinion of Baker & Daniels, counsel for Registrant, regarding legality of
securities offered hereby.
8 Opinion of Baker & Daniels, counsel for Registrant, regarding tax
matters.
23(a) Consent of McGladrey & Pullen, LLP.
23(b) Consent of Geo. S. Olive & Co. LLC.
23(c) Consent of Eskew & Gresham, PSC.
23(d) Consent of Baker & Daniels - included in its opinions filed as Exhibits 5
and 8.
24 Power of Attorney - included on page II-5.
99 Form of TBI Proxy.
E-1
<PAGE>
EXHIBIT 5
[LETTERHEAD OF BAKER & DANIELS]
April 30, 1998
National City Bancshares, Inc.
227 Main Street
P.O. Box 868
Evansville, Indiana 47705-0868
Ladies and Gentlemen:
We have examined the corporate records and proceedings of National City
Bancshares, Inc., an Indiana corporation (the "Company"), with respect to (a)
the organization of the Company, and (b) the legal sufficiency of all corporate
proceedings of the Company taken in connection with the authorization, issuance,
form, validity and nonassessability of the authorized but unissued shares of the
Common Stock, without par value (the "Common Stock"), of the Company issuable in
connection with the Merger, as that term is defined in the Registration
Statement on Form S-4 (the "Registration Statement"), which is being filed by
the Company under the Securities Act of 1933, as amended (the "Act").
Based on such examination, we are of the opinion that:
1. The Company is a duly organized and validly existing corporation under
the laws of the State of Indiana.
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock.
3. The shares of Common Stock to be issued in the Merger have been duly
and validly authorized, and such shares will, upon consummation of the Merger
described in the Registration Statement and issuance and delivery of such shares
in accordance with the terms of the Merger, be validly issued and outstanding,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the references to us in the Prospectus/Proxy
Statement which is a part of the Registration Statement. In giving this
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Yours very truly,
BAKER & DANIELS
<PAGE>
EXHIBIT 8
[LETTERHEAD OF BAKER & DANIELS]
April 30, 1998
National City Bancshares, Inc.
227 Main Street
P.O. Box 868
Evansville, Indiana 47705-0868
Trigg Bancorp, Inc.
38 Main Street
P. O. Box 500
Cadiz, Kentucky 42211
Ladies and Gentlemen:
This opinion is delivered to you in connection with the Registration
Statement on Form S-4 (the "Registration Statement"), which is being filed by
National City Bancshares, Inc. under the Securities Act of 1933, as amended (the
"Act"). Capitalized terms not defined herein shall have the meanings given such
terms in the Registration Statement.
We have examined the Registration Statement and such other documents as we
have deemed relevant and necessary as a basis for this opinion. In addition, we
have made such other and further investigations as we have deemed appropriate.
Based on the foregoing, and subject to the qualifications and limitations
stated herein, we hereby advise you that in our opinion the statements made in
the Registration Statement under the caption "The Merger--Certain Federal Income
Tax Consequences", insofar as they purport to constitute summaries of matters of
United States federal income tax law or legal conclusions with respect thereto,
constitute accurate summaries of the matters described therein in all material
respects.
The foregoing opinion is based on current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service and other
relevant authorities, all of which are subject to change. Accordingly, no
assurance can be given that the Internal Revenue Service will not alter its
present views, either prospectively or retroactively, or adopt new views with
regard to any of the matters upon which we are rendering an opinion, nor can any
assurance be given that the Internal Revenue Service will not challenge the
positions which the parties intend to take. No opinions are expressed
concerning any matters other than those specifically addressed herein.
We hereby consent to the filing of this opinion as Exhibit 8 to the
Registration Statement and to the references to us in the Prospectus/Proxy
Statement which is a part of the Registration Statement. In giving this
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Yours very truly,
BAKER & DANIELS
<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 February 5, 1998, on our
audits of the consolidated statements of financial position of National City
Bancshares, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years ended December 31, 1997, which are incorporated by
reference in the December 31, 1997 Form 10-K of National City Bancshares, Inc.
and to the reference of our firm under the heading "Experts" in the
Prospectus/Proxy Statement.
McGLADREY & PULLEN, LLP
Champaign, Illinois
April 30, 1998
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion of our report dated October 29, 1997, on the
consolidated financial statements of Trigg Bancorp, Inc. and subsidiary, as of
September 30, 1997 and for the year then ended in the Registration Statement on
Form S-4 filed by National City Bancshares, Inc. and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
GEO. S. OLIVE & CO. LLC
Evansville, Indiana
April 30, 1998
<PAGE>
EXHIBIT 23(c)
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 October 11, 1996, on our audit of the
consolidated balance sheets of Trigg Bancorp, Inc. and subsidiary, as of
September 30, 1996, and the related statements of income, shareholders' equity,
and cash flows for the fiscal year ended September 30, 1996. We also consent to
the reference to our firm under the caption "Experts" in the Prospectus/Proxy
Statement.
ESKEW & GRESHAM, PSC
Louisville, Kentucky
April 30, 1998
<PAGE>
EXHIBIT 99
REVOCABLE PROXY
TRIGG BANCORP, INC.
SPECIAL MEETING OF SHAREHOLDERS
_______________ __, 1998
The undersigned, a shareholder of TRIGG BANCORP, INC. ("TBI") 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 TBI to be held on
___________________ __, 1998 at 11:00 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 TBI 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 ______________, 1998
this Proxy 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
