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As Filed with the Securities and Exchange Commission on January 23, 1998
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------------
PREMIER FINANCIAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-1206757
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
6022
(Primary Standard Industrial
Classification Code Number)
120 N. Hamilton Street
Georgetown, Kentucky 40324
(502) 863-7500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
J. Howell Kelly
President and Chief Executive Officer
Premier Financial Bancorp, Inc.
120 N. Hamilton Street
Georgetown, Kentucky 40324
(502) 863-7500
Fax: (502) 863-7503
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
COPY TO:
David W. Harper, Esq.
2450 Meidinger Tower
Louisville, Kentucky 40202
(502) 583-3081
Fax: (502) 583-2418
Approximate date of commencement of proposed sale to public:
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As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [_].
________________________________________________________________________________
CALCULATION OF REGISTRATION FEE
________________________________________________________________________________
________________________________________________________________________________
Title of Each Proposed
Class of Proposed Maximum
Securities to Maximum Aggregate Amount of
be Amount to be Offering Price Offering Registration
Registered(1) Registered Per Unit(2) Price(2) Fee(2)
________________________________________________________________________________
Common Shares
without par
value 300,000 $14.33 $4,299,000 $1,268.21
________________________________________________________________________________
________________________________________________________________________________
(1) This Registration Statement relates to the securities of the
Registrant issuable to holders of Common Stock of Ohio River Bank, Ironton, Ohio
("Ohio River Bank"), an Ohio corporation, in the proposed merger of Ohio River
Bank with a wholly owned subsidiary of the Registrant.
(2) Pursuant to Rule 457(f)(2), the registration fee was computed on the
basis of the book value of Ohio River Bank Common Stock at December 31, 1997.
The registration fee payable upon the filing of this Registration Statement is
$1,268.21.
______________________________________________________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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OHIO RIVER BANK
PROXY STATEMENT
-----------------------------
PREMIER FINANCIAL BANCORP, INC.
PROSPECTUS
This Proxy Statement/Prospectus is being furnished to shareholders of
Ohio River Bank, Ironton, Ohio ("Ohio River Bank"), in connection with the
solicitation of proxies by the Board of Directors of Ohio River Bank for use
at its Special Meeting of Shareholders (including any adjournments or
postponements thereof) to be held on March ___, 1998 (the "Special Meeting").
This Proxy Statement/Prospectus relates to the proposed merger of Ohio River
Interim Bank ("Merger Sub"), a wholly owned subsidiary of Premier Financial
Bancorp, Inc. ("Premier") formed for the purpose of effecting such proposed
merger, with and into Ohio River Bank (the "Merger") pursuant to the Amended
and Restated Agreement and Plan of Merger dated as of November 24, 1997 among
Premier, Merger Sub and Ohio River Bank (the "Merger Agreement"). Upon the
effectiveness of the Merger, Ohio River Bank will be a wholly owned
subsidiary of Premier and each outstanding Common Share of Ohio River Bank
will be converted into the right to receive 1.2 Common Shares of Premier.
This Proxy Statement/Prospectus also constitutes a prospectus of Premier
with respect to 300,000 Common Shares of Premier issuable to Ohio River Bank
shareholders in the Merger.
This Proxy Statement/Prospectus and the form of proxy and other
materials accompanying this Proxy Statement/Prospectus are first being mailed
to shareholders of Ohio River Bank on or about February __, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE
------------------------------------------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS FEBRUARY __, 1998
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TABLE OF CONTENTS
PAGE
Available Information. . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents by Reference. . . . . . . . . . . .
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Consolidated Financial Data of Premier. . . . . . . . . . . .
Selected Financial Data of Ohio River Bank . . . . . . . . . . . . . .
Comparative Stock Prices and Dividends . . . . . . . . . . . . . . . .
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . . .
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management and Operations After the Merger . . . . . . . . . . . . . .
The Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Premier Capital Stock . . . . . . . . . . . . . . . . .
Comparison of Rights of Holders of Premier Common Shares
and Ohio River Bank Common Stock . . . . . . . . . . . . . . . . . .
Ohio River Bank Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . .
Principal Holders of Ohio River Bank Common Stock and Ownership of
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Financial Statements of Ohio River Bank . . . . . . . . . . . F-1
2
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ANNEXES
Annex A Agreement and Plan of Merger
Annex B Opinion of Austin Financial Services, Inc.
Annex C Excerpt from the Ohio General Corporation Law Relating to Dissenters'
Rights (Sections 1115.19 and 1701.85)
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NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR
TO OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, IN ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF OHIO
RIVER BANK OR PREMIER SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Premier 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"). Such reports, proxy
statements and other information filed with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the following Regional Offices of the Commission: 7 World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates. Premier files it reports, proxy statements and other information
electronically with the Commission and such material can be found at a Web
site maintained by the Commission (http://www.sec.gov.) The Premier Common
Shares are listed on The Nasdaq Stock Market, Inc's National Market (trading
symbol PFBI) and such material relating to Premier may also be inspected at
the offices of The Nasdaq Stock Market, Inc., 1735 K. Street N.W.,
Washington, D.C. 20006.
Premier has filed with the Commission a registration statement on Form
S-4 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the Premier Common Shares that will be issued
to holders of Ohio River Bank Common Stock in connection with the Merger.
See "The Merger --Conversion of Ohio River Bank Common Stock." This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement filed by Premier with the Commission, certain portions
of which are omitted in accordance with the rules and regulations of the
Commission. Such additional
4
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information is available for inspection and copying at the offices of the
Commission. Statements contained in this Proxy Statement/Prospectus or in
any document incorporated into this Proxy Statement/Prospectus 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 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 being
qualified in all respects by such reference.
5
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Premier with the Commission
under the Exchange Act, or where indicated certain portions thereof, are
incorporated herein by reference:
1. Premier's Annual Report on Form 10-K for the year ended December
31, 1996 (the "Premier Form 10-K");
2. Premier's Quarterly Reports on Form 10-Q for the periods ended
March 31, June 30 and September 30, 1997 (the "Premier Form 10-Qs");
3. Premier's Current Reports on Form 8-K dated June 13 and December
19, 1997 (the "Premier Form 8-Ks"); and
4. The information contained in Premier's Annual Report to
Shareholders for the 1996 fiscal year (the "1996 Annual Report") on pages 19
through 58 under the captions "Management's Discussion and Analysis,"
"Independent Auditor's Report" and "Audited Consolidated Financial
Statements."
5. The information contained in Premier's Proxy Statement for its
Annual Meeting of Shareholders held on March 6, 1997 (the "1997 Proxy
Statement") on pages 1 through 11 under the captions "INTRODUCTION --
Principal Shareholders"; "ELECTION OF DIRECTORS"; "CERTAIN INFORMATION
CONCERNING THE BOARD OF DIRECTORS"; "EXECUTIVE OFFICERS OF THE COMPANY";
"EXECUTIVE COMPENSATION"; and "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
All documents filed by Premier pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the Special Meeting should be deemed to be incorporated by
reference into this Proxy Statement/Prospectus and to be part hereof from the
date of filing of such documents. See "Available Information."
Any statement contained in a document incorporated or deemed to be
incorporated by reference should be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes such previous statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus relating to Premier or Merger Sub has been supplied by
Premier, and all such information relating to Ohio River Bank has been
supplied by Ohio River Bank.
6
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THIS PROXY STATEMENT/PROSPECTUS IS ACCOMPANIED BY PREMIER'S 1996 ANNUAL
REPORT, ITS 1997 PROXY STATEMENT AND ITS FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1997. EXCEPT FOR THE INFORMATION PROVIDED IN PREMIER'S 1996
ANNUAL REPORT AND 1997 PROXY STATEMENT UNDER THE CAPTIONS SPECIFICALLY
IDENTIFIED ABOVE, NO INFORMATION CONTAINED ELSEWHERE IN EITHER THE 1996
ANNUAL REPORT OR THE 1997 PROXY STATEMENT IS INCORPORATED BY REFERENCE IN,
AND SUCH INFORMATION SHALL NOT CONSTITUTE A PART OF, THIS PROXY
STATEMENT/PROSPECTUS.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON ORAL OR WRITTEN
REQUEST BY ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN
DELIVERED FROM PREMIER FINANCIAL BANCORP, INC., 120 N. HAMILTON STREET,
GEORGETOWN, KENTUCKY 40324, ATTENTION: J. HOWELL KELLY; TELEPHONE NUMBER
(502) 863-7500. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
SUCH REQUEST SHOULD BE MADE BY FEBRUARY __, 1998.
7
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and the summary is
qualified in its entirety by, the more detailed information contained or
incorporated by reference in this Proxy Statement/Prospectus and the Annexes
hereto. Shareholders are urged to read this Proxy Statement/Prospectus and
the Annexes hereto in their entirety.
THE SPECIAL MEETING
Meeting of Shareholders.......... A special meeting of the shareholders of The
Ohio River Bank ("Ohio River Bank") will be
held at the executive offices of Ohio River
Bank at 221 Railroad Street, Ironton, Ohio on
__________, March __, 1998, at ______ __.m.
Eastern Standard Time.
Matters to be Considered
at the Special Meeting.......... At the Special Meeting, holders of Ohio River
Bank Common Shares, par value $8 per share
("Ohio River Bank Common Stock"), will
consider and vote upon (i) a proposal to
adopt the Agreement and Plan of Merger
attached as Annex A to this Proxy
Statement/Prospectus (the "Merger Agreement")
providing for the merger of Ohio River
Interim Bank ("Merger Sub"), a wholly owned
subsidiary of Premier Financial Bancorp, Inc.
("Premier"), into Ohio River Bank (the
"Merger"), with Ohio River Bank becoming a
wholly owned subsidiary of Premier, and the
issuance to Ohio River Bank shareholders of
1.2 Premier Common Shares for each share of
Ohio River Bank in connection therewith, and
(ii) any other matters that may properly come
before the Special Meeting.
8
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Record Date..................... The record date for the Special Meeting is
February __, 1998 (the "Record Date").
Vote Required..................... The affirmative vote of the holders of
two-thirds of the outstanding shares of Ohio
River Bank Common Stock entitled to vote
thereon is required to adopt the Merger
Agreement. Ohio River Bank has 250,000
shares of Ohio River Bank Common Stock
outstanding and entitled to vote on the
Merger Agreement. The directors and
executive officers of Ohio River Bank, who
with their affiliates may be deemed to
beneficially own approximately 27.7% of the
outstanding Ohio River Bank Common Stock,
have indicated that they intend to vote their
shares for approval of the Merger Agreement.
Voting of Proxies; Revocation.. All shares of Ohio River Bank Common Stock
represented at the Special Meeting by
properly executed proxies received prior to
or at the Special Meeting, and not revoked,
will be voted in accordance with the
instructions indicated on such proxies. If
no instructions are indicated, such proxies
will be voted FOR the adoption of the Merger
Agreement
Any proxy given may be revoked by the person
giving it at any time, without affecting any
vote previously taken, by (i) giving notice
to the Secretary of Ohio River Bank in
writing or in open meeting or (ii) duly
executing a later dated proxy relating to the
same shares and delivering it to the
Secretary of Ohio River Bank before the
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taking of the vote at the Special Meeting.
Any written notice of revocation or
subsequent proxy should be sent and delivered
to Ohio River Bank, 221 Railroad Street,
Ironton, Ohio 45638, Attention: Secretary,
or hand delivered to the Secretary of Ohio
River Bank at or before the taking of the
vote at the Special Meeting.
Security Ownership of
Management.................... As of the Record Date, directors and
executive officers of Ohio River Bank and
their affiliates may be deemed to be
beneficial owners of approximately 69,189
shares of Ohio River Bank Common Stock, or
approximately 27.7% of the outstanding Ohio
River Bank Common Stock.
THE COMPANIES
Premier Financial
Bancorp, Inc................. Premier, a Kentucky corporation, is a bank
holding company with six banking subsidiaries
(the "Banks"). At December 31, 1997, Premier
had total assets of $425.4 million, total
deposits of $324.6 million and total
shareholders' equity of $47.8 million. The
Banks are managed on a decentralized basis
that enables each Bank to offer local and
timely decision-making that provides
flexibility with respect to operating
procedures and credit policies, limited only
by a framework of centralized risk controls
provided by Premier. Each Bank maintains its
community orientation by, among other things,
having selected members of its communities as
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members of its board of directors.
On December 30, 1997, Premier entered into an
agreement with Community Trust Bancorp, Inc.,
Pikeville, Kentucky ("Community Trust") to
purchase selected assets and assume all of
the deposits of three branch banking
facilities currently operated by Bank One,
West Virginia N.A. ("Bank One") in Madison,
Philippi and Van, West Virginia immediately
following the acquisition by Community Trust
of such assets and the assumption of such
deposits pursuant to an agreement entered
into on December 30, 1997 between Community
Trust and Bank One (the "Proposed Branch
Purchases"). The Proposed Branch Purchases
will include approximately $22 million of
loans and $152.6 million of deposits.
Consummation of the Proposed Branch Purchases
is subject to receipt of regulatory approvals
and satisfaction of certain other conditions.
Premier expects to complete the Proposed
Branch Purchases in the second quarter of
1998.
The executive offices of Premier are located
at 120 N. Hamilton Street, Georgetown,
Kentucky 40324, and Premier's telephone
number is (502) 863-7500.
Ohio River Interim
Bank.............. Merger Sub is a wholly owned commercial bank
subsidiary formed by Premier under the laws
of the State of Ohio for the purpose of
engaging in the transactions contemplated by
the Merger Agreement. Merger Sub does not,
and will not
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prior to the Merger, engage in any business
activities or conduct any operations other
than in connection with the transactions
contemplated by the Merger Agreement.
Ohio River Bank................... Ohio River Bank is an Ohio banking
corporation established in 1995. Ohio River
Bank conducts a full service commercial
banking business, including the origination
of residential mortgage, commercial,
agricultural and consumer loans, and the
offering of checking, savings and NOW deposit
accounts. At December 31, 1997, Ohio River
Bank had assets of $39.5 million, deposits of
$34.1 million and shareholders' equity of
$4.3 million.
The executive offices of Ohio River Bank are
located at 221 Railroad Street, Ironton, Ohio
45638, and Ohio River Bank's telephone number
is (614) 533-4505.
THE MERGER
Effect of Merger................ At the effective time of the Merger (the
"Effective Time"), subject to certain
exceptions as described herein with respect
to shares owned by Premier or its
subsidiaries, and shares owned by holders
properly exercising dissenters' rights
("Dissenting Shares"), each outstanding share
of Ohio River Bank Common Stock will be
automatically converted (subject to certain
provisions described herein with respect to
fractional shares) into 1.2 Common Shares of
Premier and Ohio River Bank will become a
wholly owned subsidiary of Premier.
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Recommendation of the Board
of Directors of Ohio River Bank
and Reasons for the Merger... The Board of Directors of Ohio River Bank
believes that the terms of the Merger are
fair to and in the best interests of the Ohio
River Bank shareholders, and has unanimously
approved the Merger Agreement. OHIO RIVER
BANK BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT ITS SHAREHOLDERS ADOPT THE
MERGER AGREEMENT. The Board of Directors of
Ohio River Bank believes that the Merger,
which will allow Ohio River Bank to affiliate
with a publicly held multi-bank holding
company with a community banking philosophy
and greater financial and managerial
resources, will result in Ohio River Bank
being more capable of competing effectively
in the rapidly changing marketplace for
banking and financial services and will
enable the shareholders of Ohio River Bank to
receive in a tax-free exchange Premier Common
Shares that trade in an established trading
market and, consequently, represent a more
liquid investment than shares of Ohio River
Bank Common Stock.
Opinion of Financial Advisor
to Ohio River Bank........... Austin Financial Services, Inc., Toledo, Ohio
("AFSI") has delivered its written opinion to
the Board of Directors of Ohio River Bank
that, as of November 25, 1997, the exchange
ratio of 1.2 shares of Premier Common Stock
for each share of Ohio River Bank Common
Stock was fair to the holders of Ohio River
Bank Common Stock from a financial
perspective.
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For information on the assumptions made,
matters considered and limits of the review
by AFSI, see "The Merger -- Opinion of
Financial Advisor to Ohio River Bank."
Shareholders are urged to read in its
entirety the fairness opinion of AFSI
attached as Annex B to this Proxy
Statement/Prospectus.
Conditions to the Merger;
Termination.................. The Merger is subject to various conditions,
including: requisite shareholder and
regulatory approval; the absence of any
materially burdensome requirement or
condition imposed in connection with any
regulatory approval; approval for listing on
the Nasdaq National Market, subject to
official notice of issuance, of the Premier
Common Shares to be issued pursuant to the
Merger; receipt of opinions in respect of
certain federal income tax consequences of
the Merger; receipt of a letter from
Premier's independent accountants to the
effect that the Merger qualifies for "pooling
of interests" accounting treatment;
Dissenting Shares not constituting more than
10% of the outstanding Ohio River Bank Common
Stock.
The Merger Agreement may be terminated at any
time prior to the Effective Time by mutual
consent of Premier and Ohio River Bank, or by
either party if any regulatory agency (i)
shall have denied approval of the Merger or
if any other governmental authority shall
have prohibited consummation of the Merger,
(ii) the Merger shall not have been
consummated
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on or before April 30, 1998 or
(iii) the approval of the shareholders of
Ohio River Bank required for consummation of
the Merger shall not have been obtained at
the Special Meeting (although upon any such
failure to obtain such shareholder approval,
Ohio River Bank will become obligated to
reimburse Premier for its out-of-pocket
expenses in connection with the Merger
Agreement and the transactions contemplated
thereby, up to a maximum amount of $100,000).
Ohio River Bank also has the right to
terminate the Merger Agreement if concurrent
with such termination it enters into a
definitive agreement providing for the
implementation of another merger or other
transaction that the Ohio River Bank Board of
Directors has determined is more favorable to
the shareholders of Ohio River Bank than the
Merger contemplated by the Merger Agreement,
and in connection with such termination Ohio
River Bank pays to Premier a fee of $350,000.
NASDAQ Listing................. It is a condition to the Merger that the
Premier Common Shares to be issued in the
Merger be authorized for listing on the
Nasdaq National Market, subject to official
notice of issuance. The Common Shares of
Premier currently outstanding are listed on
the Nasdaq National Market (trading symbol
PFBI).
Post-Merger Dividend Policy.... It is the current intention of the Board of
Directors of Premier to continue the
declaration of dividends on the Premier
Common Shares following the Merger initially
in the amount of at least $0.15 per
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quarter or $0.60 per year, in each case per
share. It should be noted that no such
dividends have been declared and that future
dividends will be determined by Premier's
Board of Directors in light of the earnings
and financial condition of Premier and its
subsidiaries and other factors, including
applicable governmental regulations and
policies.
Regulatory Approvals Required.. The Merger is subject to the prior approval
by the Federal Reserve Board, the Federal
Deposit Insurance Corporation and the banking
authorities of the Commonwealth of Kentucky
and the State of Ohio.
Dissenters' Rights............. Holders of Ohio River Bank Common Stock have
the right to dissent from the Merger and to
receive payment of the fair cash value of
their shares upon full compliance with
Section 1701.85 of the Ohio General
Corporation Law ("OGCL"). A copy of Section
1701.85 of the OGCL is attached to this Proxy
Statement/Prospectus as Annex C.
Shareholders of Ohio River Bank that desire
to exercise dissenters' rights must satisfy
fully and precisely certain procedural
requirements set forth in Annex C and
summarized in the "Dissenters' Rights"
section of this Proxy Statement/Prospectus,
including among other things not voting in
favor of the Merger Agreement, or else
dissenters' rights will be lost.
Certain Federal Income Tax
Consequences................. The Merger is intended to be a tax-free
reorganization so that
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no gain or loss would be recognized by
Premier, Merger Sub or Ohio River Bank, and
no gain or loss would be recognized by Ohio
River Bank shareholders, except in respect
of cash received for fractional shares and
except for holders who receive cash payments
upon properly exercising dissenters' rights.
Consummation of the Merger is conditioned
upon there being delivered an opinion dated
as of the closing date of the Merger of
Eskew & Gresham, PSC, Premier's independent
accountants, to the Merger, to the effect
that the Merger will constitute a
reorganization within the meaning of
Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
Anticipated Accounting
Treatment.................... The Merger is expected to qualify as a
"pooling of interests" for accounting and
financial reporting purposes. The receipt of
a letter of Eskew & Gresham, PSC, the
independent accountants of Premier,
confirming that the Merger will qualify for
pooling of interests accounting treatment, is
a condition to consummation of the Merger.
MANAGEMENTS AND OPERATIONS AFTER
THE MERGER................... Following the Merger, the respective
directors, officers and employees of Premier
and Ohio River Bank serving immediately prior
to consummation of the Merger are expected to
continue in such positions. However, the
number of directors of Ohio River Bank may be
increased to permit J. Howell Kelly,
Premier's president and chief executive
officer, or such other person
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as may be designated by Premier, to serve as
a director of Ohio River Bank.
The Merger is not expected to substantially
alter the operations of Ohio River Bank.
Ohio River Bank will retain its separate
corporate existence, charter and name.
Premier has informed Ohio River Bank that
following the Merger it intends for Ohio
River Bank to retain its commitment to local
orientation and direction, and to be managed
on a decentralized basis conducive to local
and timely decision-making and flexibility
with respect to operating procedures and
credit policies.
SELECTED FINANCIAL DATA,
COMPARATIVE STOCK PRICES AND
COMPARATIVE PER SHARE DATA... Set forth on the following pages are certain
selected financial data for Premier and Ohio
River Bank, comparative stock prices, and
comparative per share data for Premier and
Ohio River Bank (including certain pro forma
data for Premier and pro forma equivalent
data for Ohio River Bank).
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF PREMIER
(IN THOUSANDS EXCEPT PER SHARE AND RATIO DATA)
The following summary information regarding Premier should be read in
conjunction with the consolidated financial statements of Premier and the
notes thereto contained in its 1996 Annual Report accompanying this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
Consolidated historical financial and other data regarding Premier at or for
the nine months ended September 30, 1997 and 1996 have been prepared by
Premier without audit and may not be indicative of results on an annualized
basis or any other period. In the opinion of management, all adjustments
(consisting of normal recurring accruals) that are necessary for a fair
presentation for such periods or dates have been made. The selected
consolidated financial data presented below has been retroactively adjusted
to reflect all prior stock splits or share dividends and has been restated to
reflect acquisitions accounted for under the pooling of interests method.
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS
Net interest income . . . . . $ 11,900 $ 8,531 $ 12,426 $ 7,697 $ 7,319 $ 6,974 $ 6,118
Provision for
loan losses . . . . . . . . 992 407 760 196 335 389 499
Non-interest income . . . . . 2,948 1,222 1,721 1,018 870 936 750
Non-interest expense. . . . . 8,354 5,696 8,075 5,943 5,464 5,304 4,732
Income taxes. . . . . . . . . 1,646 1,066 1,588 146 567 582 501
Net income. . . . . . . . . 3,856 2,584 3,724 2,430 1,823 1,635 1,136
FINANCIAL POSITION
Total assets. . . . . . . . . 504,574 323,207 329,127 192,273 154,653 151,975 145,270
Loans, net of
unearned income . . . . . . 272,263 238,514 242,625 137,550 106,431 97,521 91,968
Allowance for loan
losses . . . . . . . . . . . 3,133 2,868 2,854 1,997 1,172 1,192 1,349
Goodwill. . . . . . . . . . . 5,218 5,629 5,490 248 8 16 24
Securities. . . . . . . . . . 192,978 53,740 52,660 33,919 30,619 35,582 31,324
Deposits. . . . . . . . . . . 285,105 264,795 267,208 168,170 136,613 137,538 132,177
Repurchase Agreements . . . . 116,023 6,163 5,599 747 -0- -0- -0-
Debt. . . . . . . . . . . . . 28,750 -0- -0- 5,000 1,500 -0- -0-
Stockholders' equity . . . . 47,061 44,037 44,625 15,603 13,617 12,767 11,274
SHARE DATA
Net income. . . . . . . . . . 0.82 0.75 0.99 1.02 0.77 0.69 0.48
Book value. . . . . . . . . . 10.04 9.40 9.52 6.54 5.77 5.42 4.78
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash dividend . . . . . . . . 0.38 0.34 0.48 0.42 0.32 0.25 0.18
RATIOS
Return on average
assets . . . . . . . . . . . 1.28% 1.42% 1.42% 1.48% 1.19% 1.06% 0.91%
Return on average
equity . . . . . . . . . . . 11.26% 12.06% 11.39% 16.49% 13.70% 13.02% 10.53%
Dividend payout . . . . . . . 45.84% 52.09% 53.22% 41.01% 33.60% 36.24% 38.31%
Stockholders' equity
to total assets at
period-end . . . . . . . . . 9.33% 13.63% 13.56% 8.12% 8.80% 8.40% 7.76%
Average stockholders'
equity to average
total assets . . . . . . . . 11.38% 11.90% 12.48% 8.90% 8.69% 8.14% 8.62%
CAPITAL RATIOS
Equity to assets . . . . . . 9.33% 13.63% 13.56% 8.12% 8.80% 8.40% 7.76%
Leverage ratio. . . . . . . . 11.45% 12.14% 12.11% 8.13% 8.84% 8.39% 7.74%
</TABLE>
20
<PAGE>
SELECTED FINANCIAL DATA OF OHIO RIVER BANK
(IN THOUSANDS, EXCEPT PER SHARE, RATIO AND UNIT DATA)
The following summary information regarding Ohio River Bank should be
read in conjunction with the financial statements of Ohio River Bank and the
notes thereto. See "Financial Statements of Ohio River Bank". Historical
financial and other data regarding Ohio River Bank at or for the nine months
ended September 30, 1997 and 1996 have been prepared by Ohio River Bank
without audit and may not be indicative of results on an annualized basis or
any other period. In the opinion of management, all adjustments (consisting
of normal recurring accruals) that are necessary for a fair presentation for
such periods or dates have been made.
<TABLE>
<CAPTION>
AT OR FOR THE
PERIOD SINCE
AT OR FOR THE INCEPTION (MAY
AT OR FOR THE NINE MONTHS YEAR ENDED 22, 1995) TO
ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995(1)
<S> <C> <C> <C> <C>
EARNINGS
Net interest income $ 1,000 $ 726 $ 1,028 $ 282
Provision for
possible loan losses 123 134 193 118
Non-interest income 108 74 114 24
Non-interest expense 891 865 1,155 580
Income taxes 0 0 0 0
------- ------- ------- -------
Net income (loss) $ 94 $ (199) $ (206) $ (393)
FINANCIAL POSITION
Total assets $39,606 $32,134 $34,612 $16,229
Loans 26,964 21,751 22,828 9,771
Allowance for loan losses 306 232 273 117
Securities 7,921 4,583 5,593 1,005
Deposits 34,479 27,850 29,908 11,622
Other short-term borrowings 695 0 415 0
Stockholders' equity 4,176 4,068 4,069 4,280
SHARE DATA
Net income (loss) $ 0.38 $ (0.80) $ (0.82) $ (1.57)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Book value $ 16.70 $ 16.27 $ 16.28 $ 17.12
Cash dividend $ 0 $ 0 $ 0 $ 0
</TABLE>
(1) Does not include preopening expenses of $342,091 or interest income on
escrowed stock subscription funds of $41,799.
<TABLE>
<CAPTION>
AT OR FOR THE
PERIOD FROM DATE OF
AT OR FOR THE INCEPTION (MAY
AT OR FOR THE NINE MONTHS YEAR ENDED 22, 1995) TO
ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995(1)
<S> <C> <C> <C> <C>
RATIOS(2)
Return on average assets 0.34% (1.08)% (0.77)% (3.72)%
Return on average equity 3.05% (6.41)% (4.99)% (8.83)%
Dividend payout 0% 0% 0% 0%
Shareholders equity to total
assets at period end 10.54% 12.66% 11.76% 26.37%
Average shareholders equity
to average total assets 11.23% 16.90% 15.59% 42.10%
CAPITAL RATIOS
Equity to assets 10.54% 12.66% 11.76% 26.37%
Leverage ratio 10.39% 12.47% 11.57% 25.93%
</TABLE>
(1) Does not include preopening expenses of $342,091 or interest income on
escrowed stock subscription funds of $41,799.
(2) Annualized where appropriate.
22
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Premier Common Shares are listed on the Nasdaq National Market under the
trading symbol "PFBI." Prior to an underwritten public offering and the
commencement of trading on the Nasdaq National Market in May 1996 pursuant
thereto (the "Premier IPO"), Premier Common Shares did not trade in any
established trading market and rarely traded. Shares of Ohio River Bank
Common Stock do not trade in any established trading market and rarely trade.
The following table sets forth, for the periods indicated, the high and low
closing sales prices per Premier Common Share as reported on the Nasdaq
National Market following the Premier IPO, and the high and low sales prices
per Premier Common Share prior to the Premier IPO and per share of Ohio River
Bank Common Stock in transactions of which management of Premier or Ohio
River Bank, as applicable, is aware (there possibly being transactions in
Premier Common Shares or in Ohio River Bank Common Stock of which management
of Premier or Ohio River Bank, as applicable, is not aware). Prices for
Premier Common Shares have been retroactively adjusted to reflect all prior
stock splits or share dividends.
STOCK PRICES
<TABLE>
<CAPTION>
PREMIER COMMON SHARES OHIO RIVER BANK COMMON STOCK
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1996 First Quarter $12.50 $12.50 $ * $ *
Second Quarter 14.25 13.50 23.00 23.00
Third Quarter 14.00 12.25 * *
Fourth Quarter 14.125 12.25 26.00 26.00
1997 First Quarter $15.625 $13.50 $27.00 $27.00
Second Quarter 18.25 14.25 * *
Third Quarter 21.25 17.00 27.00 27.00
Fourth Quarter 27.50 20.125 * *
1998 First Quarter $25.75 $23.125 * *
(through
January 20, 1998)
</TABLE>
_____________________
* No known trades
On October 30, 1997, the last trading day before the announcement of the
Merger Agreement, the last sales price of a Premier Common Share as reported
on the Nasdaq National Market was $26 per share. On January 20, 1998, the
last sales price of a Premier Common Share as reported on the Nasdaq National
Market was $23.25 per share.
23
<PAGE>
The last sales price per share of Ohio River Bank Common Stock in a
transaction known to management of Ohio River Bank was $27.00 per share and
related to a sale of 926 shares of Ohio River Bank Common Stock on September
19, 1997.
On December 31, 1997, there were approximately 565 holders of record of
Premier Common Shares and approximately 329 holders of record of Ohio River
Bank Common Stock.
DIVIDENDS
The following table sets forth the cash dividends declared per share on
Premier Common Shares and Ohio River Bank Common Stock for the periods
indicated. Such information regarding Premier has been retroactively
adjusted to reflect all prior stock splits or share dividends.
<TABLE>
<CAPTION>
PREMIER COMMON SHARES OHIO RIVER BANK COMMON STOCK
<S> <C> <C>
1996 First Quarter $0.125 $ 0
Second Quarter 0.125 0
Third Quarter 0.125 0
Fourth Quarter 0.125 0
1997 First Quarter $0.125 $ 0
Second Quarter 0.125 0
Third Quarter 0.15 0
Fourth Quarter 0.15 0
1998 First Quarter -- $ 0
(through
January 20,1998)
</TABLE>
It is the current intention of the Board of Directors of Premier to
declare dividends on the Premier Common Shares following the Merger initially
in the amount of at least $0.15 per quarter or $0.60 per year, in each case
per share. It should be noted that no such dividends have been declared and
that future dividends will be determined by Premier's Board of Directors in
light of the earnings and financial condition of Premier and its subsidiaries
and other factors, including applicable governmental regulations and policies.
24
<PAGE>
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table sets forth for Premier Common Shares and Ohio River
Bank Common Stock certain historical, pro forma and pro forma equivalent per
share financial information for the nine months ended September 30, 1997 and
1996 and years ended December 31, 1996 and 1995. The information presented
herein should be read in conjunction with the other financial information for
Premier and Ohio River Bank appearing elsewhere in or incorporated by
reference in this Proxy Statement/Prospectus. See, "Incorporation of Certain
Documents by Reference"; "Selected Consolidated Financial Data of Premier";
"Selected Consolidated Financial Data of Ohio River Bank"; "Financial
Statements of Ohio River Bank." The data presented below regarding Premier
has been retroactively adjusted to reflect all prior stock splits or share
dividends and has been restated to reflect acquisitions accounted for under
the pooling of interests method.
AT OR FOR THE NINE
MONTHS ENDED AT OR FOR THE YEAR
SEPTEMBER 30, ENDED DECEMBER 31,
------------------ -------------------
1997 1996 1996 1995(d)
---- ---- ---- ------
PREMIER COMMON STOCK
Net income per share:
Historical . . . . . . . . $ 0.82 $ 0.75 $ 0.99 $ 1.02
Pro forma(a) . . . . . . . 0.77 0.64 0.87 0.76
Dividends per share:
Historical . . . . . . . . 0.38 0.34 0.48 0.42
Pro forma(b) . . . . . . . 0.38 0.34 0.48 0.42
Book value per share at
period-end:
Historical . . . . . . . . 10.04 9.40 9.52 6.54
Pro forma. . . . . . . . . 10.28 9.65 9.77 7.40
OHIO RIVER BANK COMMON
STOCK
Net income (loss) per
share:
Historical . . . . . . . . 0.38 (0.80) (0.82) (1.57)
Pro forma equivalent(c). . 0.92 0.77 1.04 0.91
Dividends per share:
Historical . . . . . . . . 0.00 0.00 0.00 0.00
Pro forma equivalent(c). . 0.46 0.41 0.58 0.50
25
<PAGE>
AT OR FOR THE NINE
MONTHS ENDED AT OR FOR THE YEAR
SEPTEMBER 30, ENDED DECEMBER 31,
------------------ -------------------
1997 1996 1996 1995(d)
---- ---- ---- ------
Book value per share at
period-end:
Historical . . . . . . . . 16.70 16.27 16.28 17.12
Pro forma equivalent(c). . 12.34 11.58 11.72 8.88
________________________
(a) Pro forma net income per share is based on pro forma consolidated combined
net income of Ohio River Bank and Premier divided by 4,985,390 and
3,750,300 weighted average shares outstanding for the nine months ended
September 30, 1997 and 1996, and 4,063,805 and 2,679,560 pro forma weighted
average shares outstanding for the years ended December 31, 1996 and 1995.
(b) The Premier pro forma dividends per share amounts represent historical
dividends per share.
(c) Ohio River Bank pro forma equivalent per share amounts are calculated by
multiplying the Premier pro forma per share amounts by the exchange ratio
of 1.2.
(d) Ohio River Bank commenced business operations on May 22, 1995.
26
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Ohio River Bank, Ironton, Ohio ("Ohio River Bank") in connection with the
solicitation of proxies by Ohio River Bank Board of Directors for use at the
Special Meeting of Shareholders of Ohio River Bank (the "Special Meeting") to
be held at the principal offices of Ohio River Bank at 221 Railroad Street,
Ironton, Ohio 45638, on March ___, 1998, at ______ __.m. Eastern Daylight
Time, and at any adjournment or postponement thereof. At the Special
Meeting, the shareholders of Ohio River Bank will be asked to adopt the
Agreement and Plan of Merger dated as of October 31, 1997 (the "Merger
Agreement") among Premier Financial Bancorp, Inc. ("Premier"), Ohio River
Interim Bank, a wholly owned subsidiary of Premier ("Merger Sub"), and Ohio
River Bank, a copy of which is attached as Annex A hereto and more fully
described herein. This Proxy Statement/Prospectus and the form of proxy and
other materials accompanying this Proxy Statement/Prospectus are first being
sent to shareholders of Ohio River Bank on or about February ___, 1998.
THE COMPANIES
PREMIER FINANCIAL BANCORP, INC.
Premier, a Kentucky corporation, is a bank holding company headquartered
in Georgetown, Kentucky with six banking subsidiaries (the "Banks"). At
December 31, 1997 Premier had total assets of $425.4 million, total deposits
of $324.6 million, and total shareholders' equity of $47.8 million. The
Banks' deposits are federally insured by the Federal Deposit Insurance
Corporation ("FDIC") through the Bank Insurance Fund ("BIF"). The principal
business of Premier is to serve as a holding company for its bank
subsidiaries. See "Available Information"; "Incorporation of Certain
Documents by Reference"; "Selected Consolidated Financial Data of Premier."
Premier was incorporated in 1991. It was organized in connection with
the reorganization of Citizens Deposit Bank and Trust Company, Vanceburg,
Kentucky (the "Vanceburg Bank") into a holding company structure. The
Vanceburg Bank is a banking corporation organized under the laws of Kentucky,
resulting from the merger in 1930 of Deposit Bank, chartered in 1894, with
Citizens Bank, chartered in 1903. In 1992, Premier acquired Bank of
Germantown, Germantown, Kentucky (the "Germantown Bank"), a banking
corporation organized under the laws of Kentucky in 1900. Premier in March,
1995 acquired Georgetown Bancorp, Inc. and its subsidiary, Georgetown Bank
and Trust Company, Georgetown, Kentucky (the "Georgetown Bank"), a banking
corporation organized under the laws of Kentucky in 1988, and in October,
1995, acquired Citizens Bank, Sharpsburg, Kentucky (the "Sharpsburg Bank"), a
banking corporation organized under the laws of Kentucky in 1903. On July
27
<PAGE>
1, 1996, Premier acquired Farmers Deposit Bank, Eminence, Kentucky (the
"Eminence Bank"), a banking corporation organized under the laws of Kentucky
in 1867. On November 14, 1997, Premier acquired The Sabina Bank, Sabina,
Ohio (the "Sabina Bank"), a banking corporation organized under the laws of
Ohio in 1875.
Premier focuses on providing quality community banking services to
individuals and small-to-medium sized businesses primarily in non-urban
areas. By seeking to provide such banking services in non-urban areas,
Premier believes that it can minimize the competitive effect of larger
financial institutions that typically are focused on large metropolitan
areas. Through its experience in acquiring the Banks, Premier has
successfully developed and implemented a strategy that allows community banks
to affiliate with it, while retaining their commitment to local orientation
and direction, and receive the benefit of Premier's capital base to promote
growth and staff assistance to promote safety, soundness and regulatory
compliance. The Banks are managed on a decentralized basis, offering
customers direct access to the Banks' presidents and other officers in an
environment conducive to friendly, informed and courteous service. This
decentralized approach also enables each Bank to offer local and timely
decision-making that provides flexibility with respect to operating
procedures and credit policies, limited only by a framework of centralized
risk controls provided by Premier to promote prudent banking practices. Each
Bank maintains its community orientation by, among other things, having
selected members of its community as members of its board of directors, who
assist in the introduction of prospective customers to the Bank and in the
development or modification of products and services to meet customer needs.
As a result of developing strong banking relationships with their customers,
through convenient and personalized service, the Banks have been successful
in funding loan demand through growth in core deposits.
The Banks provide community banking services through 12 locations in
Central Kentucky and Central Ohio. The Banks offer a wide variety of
consumer and commercial lending and deposit services. The loans offered by
the Banks include commercial, real estate, agricultural and consumer loans.
The Banks' range of deposit services includes checking accounts, NOW
accounts, savings accounts, money market accounts, club accounts, individual
retirement accounts, certificates of deposit and overdraft protection. The
Georgetown Bank, the Eminence Bank and the Vanceburg Bank also offer limited
trust services and act as executor, administrator, trustee and in various
other fiduciary capacities. Through Premier Data Services, Inc., Premier's
data processing subsidiary, Premier currently provides centralized data
processing services to five of the Banks as well as Ohio River Bank and one
other non-affiliated bank.
28
<PAGE>
On December 30, 1997, Premier entered into an agreement with Community
Trust Bancorp, Inc., Pikeville, Kentucky ("Community Trust") to purchase
selected assets and assume all of the deposits of three branch banking
facilities currently operated by Bank One, West Virginia N.A. ("Bank One") in
Madison, Philippi and Van, West Virginia immediately following the
acquisition by Community Trust of such assets and the assumption of such
deposits pursuant to an agreement entered into on December 30, 1997 between
Community Trust and Bank One (the "Proposed Branch Purchases"). The Proposed
Branch Purchases will include approximately $22 million of loans and $152.6
million of deposits. Consummation of the Proposed Branch Purchases is subject
to receipt of regulatory approvals and satisfaction of certain other
conditions. Premier expects to complete the Proposed Branch Purchases in the
second quarter of 1998.
The executive offices of Premier are located at 120 N. Hamilton Street,
Georgetown, Kentucky 40324, and Premier's telephone number is (502) 863-7500.
OHIO RIVER INTERIM BANK
Merger Sub is a wholly owned commercial bank subsidiary formed by
Premier under the laws of the State of Ohio for the purpose of engaging in
the transactions contemplated by the Merger Agreement. Merger Sub does not,
and will not prior to the Merger, engage in any business activities or
conduct any operations other than in connection with the transactions
contemplated by the Merger Agreement.
OHIO RIVER BANK
Ohio River Bank is located in Ironton, Lawrence County, Ohio and was
established in 1995. Ohio River Bank is a full service commercial bank whose
principal business is the origination of 1-4 family residential mortgage
loans, commercial and agricultural loans and consumer loans. In addition,
Ohio River Bank engages in an array of traditional banking activities,
including the acceptance of savings and time deposit accounts, as well as
checking and NOW deposit accounts and safety deposit box rentals. Ohio River
Bank's lending services include the making of secured real estate loans, home
improvement loans, agricultural loans, commercial real estate, commercial and
industrial loans, and consumer loans. Operating revenues are derived
primarily from interest and fees on lending activities, as well as interest
on securities of the United States Government and federal agencies. See
"Ohio River Bank Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Ohio River Bank owns its main office located at 221 Railroad Street,
Ironton, Ohio 45638 (telephone number: (614) 533-4505). At December 31, 1997,
Ohio River Bank had assets of $39.5 million,
29
<PAGE>
deposits of $34.1 million, and shareholders' equity of $4.3 million. At
December 31, 1997, Ohio River Bank had 15 full-time employees and two part
time employees. Management considers employee relations to be good.
Ohio River Bank is a commercial bank chartered under the laws of the
State of Ohio. Ohio River Bank's deposits are insured by the BIF of the
FDIC. Ohio River Bank is subject to extensive regulation by the FDIC and the
Ohio Division of Financial Institutions. The lending, investment and other
activities of Ohio River Bank are subject to federal and state laws and the
regulations and requirements of the FDIC. Ohio River Bank is also required
to maintain certain minimum capital levels. The FDIC regularly examines Ohio
River Bank for compliance, and Ohio River Bank must file reports on a regular
basis with the FDIC providing financial and other operating data.
Ohio River Bank, as a commercial bank, from time to time may be a party
to various legal proceedings arising in the ordinary course of business from
its operations. Currently, however, Ohio River Bank is not a party to any
legal proceedings in which claims have been asserted against Ohio River Bank.
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of the Common Stock, par value $8 per
share, of Ohio River Bank ("Ohio River Bank Common Stock") will consider and
vote upon a proposal to adopt the Merger Agreement and such other matters as
may properly be brought before the Special Meeting. Management of Ohio River
Bank is not aware of any other matters to be brought before the Special
Meeting.
THE BOARD OF DIRECTORS OF OHIO RIVER BANK HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS THE SHAREHOLDERS VOTE FOR ADOPTION OF THE
MERGER AGREEMENT. SEE "THE MERGER -- REASONS FOR THE MERGER; RECOMMENDATION
OF THE OHIO RIVER BANK BOARD OF DIRECTORS."
Record Date; Shares Entitled to Vote; Quorum
Only shareholders of record of Ohio River Bank at the close of business
on February __, 1998 (the "Record Date") will be entitled to receive notice
of the Special Meeting, and only holders of record of Ohio River Bank Common
Stock at that time will be entitled to vote at the Special Meeting. At the
Record Date, Ohio River Bank had outstanding 250,000 shares of Ohio River
Bank Common Stock. A majority of the outstanding shares of Ohio River Bank
Common Stock must be represented by person or by proxy at the Special Meeting
in order for a quorum to be present.
30
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of two-thirds of the outstanding
shares of Ohio River Bank Common Stock entitled to vote thereon is required
to adopt the Merger Agreement. Each share of Ohio River Bank Common Stock is
entitled to one vote.
As of the Record Date, Ohio River Bank's directors, executive officers
and their affiliates may be deemed to be beneficial owners of approximately
69,189 shares of Ohio River Bank Common Stock, or approximately 27.7% of the
outstanding Ohio River Bank Common Stock. The directors and executive
officers of Ohio River Bank have indicated that they intend to vote their
shares for adoption of the Merger Agreement.
VOTING OF PROXIES
All shares of Ohio River Bank Common Stock represented at the Special
Meeting by properly executed proxies received prior to or at the Special
Meeting, and not revoked, will be voted in accordance with the instructions
indicated on such proxies. If no instructions are indicated, such proxies
will be voted FOR the adoption of the Merger Agreement.
If any other matters are properly presented for consideration at the
Special Meeting, the persons named in the form of proxy and acting thereunder
will have discretion to vote on those matters in accordance with their best
judgment to the same extent as the person signing the proxy would be entitled
to vote.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time, without affecting any vote previously taken, by
(i) giving notice to the Secretary of Ohio River Bank in writing or in open
meeting or (ii) duly executing a later dated proxy relating to the same
shares and delivering it to the Secretary of Ohio River Bank before the
taking of the vote at the Special Meeting. Any written notice of revocation
or subsequent proxy should be sent and delivered to Ohio River Bank, 221
Railroad Street, Ironton, Ohio, 45638, Attention: Secretary; or hand
delivered to the Secretary of Ohio River Bank at or before the taking of the
vote at the Special Meeting.
DISSENTERS' RIGHTS
Holders of Ohio River Bank Common Stock have the right to dissent from
the Merger and to receive payment of the fair cash value of their shares upon
full compliance with Section 1115.19 and Section 1701.85 of the Ohio General
Corporation Law ("OGCL"). See "Dissenters' Rights." A copy of Section
1115.19 and Section 1701.85 of the OGCL is attached hereto as Annex C. If
holders of
31
<PAGE>
more than 10% of the outstanding shares of Ohio River Bank Common Stock
properly demand dissenters' rights, Premier has the right to decline to
consummate the Merger. See "The Merger Agreement -- Conditions to the
Merger."
SOLICITATION OF PROXIES
All expenses of solicitation of proxies from Ohio River Bank
shareholders will be borne by Ohio River Bank. Ohio River Bank will solicit
proxies by mail, and Ohio River Bank's directors, officers and employees may
also solicit proxies by telephone, telegram, facsimile or personal interview.
These persons will receive no additional compensation for these services but
may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Continuing arrangements also will be made with custodians,
nominees and fiduciaries for the forwarding of proxy solicitation materials
to beneficial owners of shares held of record by such custodians, nominees
and fiduciaries, and Ohio River Bank will reimburse such custodians, nominees
and fiduciaries for reasonable expenses incurred in connection therewith.
HOLDERS OF OHIO RIVER BANK COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING SHARES OF OHIO RIVER BANK COMMON STOCK WITH THE ENCLOSED PROXY
CARD. IF THE MERGER IS CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE MAILED
TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING SHARES OF OHIO RIVER BANK
COMMON STOCK IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE MERGER. OHIO RIVER
BANK SHAREHOLDERS SHOULD SEND CERTIFICATES REPRESENTING OHIO RIVER BANK
COMMON STOCK TO THE EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE
WITH THE INSTRUCTIONS CONTAINED IN, THE LETTER OF TRANSMITTAL.
THE MERGER
MERGER CONSIDERATION
Upon consummation of the Merger, each outstanding share of Ohio River
Bank Common Stock will be automatically converted (subject to the provisions
with respect to fractional shares described under "Conversion of Ohio River
Bank Common Stock" below) into 1.2 Premier Common Shares. The exchange ratio
of 1.2 Premier Common Shares for each share of Ohio River Bank Common Stock
(the "Exchange Ratio") was determined through negotiations between Premier
and Ohio River Bank.
Based upon the capitalization of Premier and Ohio River Bank as of
December 31, the shareholders of Ohio River Bank will own Premier Common
Shares representing approximately 6.02% of the outstanding voting power of
Premier following consummation of the Merger.
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BACKGROUND AND REASONS FOR THE MERGER
In mid-July 1997, the Ohio River Bank Board of Directors, as part of the
Bank's strategic planning process, met to discuss the long-term goals of the
Ohio River Bank. The Board recognized that changes to the Bank and the
manner in which it conducted business were necessary to (i) attain the Bank's
growth goals, (ii) support the Bank's customers and staff with the technology
necessary to continue offering superior products and services, (iii) produce
satisfactory returns to the Bank's shareholders, (iv) offer the Bank's
employees more diverse opportunities for career advancements, and (v) provide
liquidity for the shareholders' investment in the Bank's Common Stock. The
Board continued its discussions on these matters through August, 1997 and
concluded that the desired results could be achieved through an affiliation
with a bank holding company that shared the Bank's community banking
philosophy and one that would facilitate Ohio River Bank's continued
operations as a separate bank.
In late Summer, 1997, representatives of Premier approached certain
members of management of Ohio River Bank regarding a possible affiliation
with Premier. Management discussed this opportunity with the Board of
Directors, and in September, 1997, the Board selected Austin Financial
Services Inc. of Toledo, Ohio ("AFSI") to act as its financial advisor and
prepare a valuation report for the Bank in anticipation of an acquisition.
At a regular Board meeting held on October 16, 1997, copies of the AFSI
report were distributed to the Board.
On October 23, 1997, Ohio River Bank's Board met to consider the
proposed terms of the Merger. This meeting included an oral report of the
due diligence findings by Ohio River Bank's management as well as a review of
the proposed definitive agreement. After considering and weighing various
factors, the Board unanimously approved the Merger.
The Board approved the Merger for a number of reasons. Among them was
the asset size of Premier. Premier is large enough to support the staff and
the technology necessary to offer products and services that the Ohio River
Bank does not offer. While its size enables Premier to conduct these
activities effectively and profitably, Premier, like Ohio River Bank, has
served the financial service needs of small communities, and there are many
similarities between the business philosophy and customer-service orientation
of Ohio River Bank and Premier. Moreover, because of its size, Premier can
offer Ohio River Bank's employees more diverse opportunities for career
advancement.
In addition, the Merger presents an opportunity to Ohio River Bank
shareholders to exchange their Ohio River Bank Common Shares in a non-taxable
transaction for Premier's publicly-traded shares at a premium relative to
Ohio River Bank's book value per share.
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Also, after a review of Premier's financial information, the Board evaluated
favorably Premier's prospects for increased profitability and growth.
The Board also considered the proposal to maintain Ohio River Bank as a
separate subsidiary. The Board viewed the ability to operate Ohio River Bank
as a separate bank as a situation that would allow Ohio River Bank to
continue its commitment to the community and to preserve the employment
opportunities for the employees of Ohio River Bank.
Premier's Common Shares are listed on the Nasdaq National Market under
the symbol "PFBI" and are held by over 2000 beneficial owners. These
characteristics and historical trading volumes indicate a ready market for
Ohio River Bank shareholders who want to sell all or part of their Premier
Common Shares after the Merger.
Based on all of the foregoing, the Directors of Ohio River Bank
concluded that the terms of the Merger, as set forth in the Merger Agreement
were in the best interests of Ohio River Bank and its shareholders.
OPINION OF FINANCIAL ADVISOR TO OHIO RIVER BANK
Ohio River Bank's board of directors retained Austin Financial Services,
Inc. ("AFSI") to act as exclusive financial advisor with respect to
determining the value of Ohio River Bank as it related to a possible merger
involving all or a substantial amount of the business, securities, or assets
of Ohio River Bank. Ohio River Bank selected AFSI as its financial advisor
because of its reputation and because AFSI has significant experience in
transactions similar to the Merger Agreement. AFSI analyzed Ohio River Bank
and its operations, historical performance and future prospects, and provided
an opinion as to the fairness, from a financial point of view, of the terms
of the Merger Agreement. AFSI, due to the nature of this reorganization,
also analyzed Premier and its operations, historical performance and future
prospects.
AFSI is a nationally recognized investment banking firm specializing in
the banking and financial services industry. AFSI is continually engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, private placements and valuations for estate, corporate and
other purposes. AFSI has not previously provided professional services
and/or products to Ohio River Bank or Premier in the ordinary course of
business. Furthermore, AFSI does not contemplate any future business with
Ohio River Bank and/or Premier arising from this engagement, nor has its
opinion concerning the fairness, from a financial point of view, of the terms
of the Merger Agreement been
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subject to indications of future business with either Ohio River Bank or
Premier.
AFSI has rendered a written opinion to the Ohio River Bank board of
directors to the effect that, as of the date of this Proxy
Statement/Prospectus/Prospectus, the terms of the Merger Agreement are fair,
from a financial point of view, to the shareholders of Ohio River Bank. No
limitations were imposed by the board of directors of Ohio River Bank upon
AFSI with respect to the investigations made or procedures followed by AFSI
in rendering its opinion. The full text of the opinion of AFSI, which sets
forth assumptions made, matters considered and limits on the review
undertaken by AFSI, is attached as Appendix C. OHIO RIVER BANK STOCKHOLDERS
ARE URGED TO READ THIS OPINION IN ITS ENTIRETY.
AFSI's opinion is directed only to the fairness, from a financial point
of view, of the terms of the Merger Agreement and does not constitute a
recommendation to any Ohio River Bank shareholder as to how such shareholder
should vote at the special meeting of Ohio River Bank shareholders or any
other matter.
In connection with its opinion, AFSI reviewed material bearing upon the
financial operating condition of Ohio River Bank and Premier including, but
not limited to: (1) the Annual Report of Ohio River Bank for the year ending
1996 and the Annual Report of Premier for the years ending 1995-1996; (2)
Consolidated Reports of Condition and Income of Ohio River Bank for the years
ending 1995-1996 and for September 30, 1997; (3) Consolidated Financial
Statements Form FR Y-9C of Premier for September 30, 1997; (4) SEC form 10Q
of Premier for September 30, 1997; (5) Uniform Bank Performance Report of
Ohio River Bank for June 30, 1997; (6) Bank Holding Company Performance
Report of Premier for June 30, 1997; (7) certain other public information on
Ohio River Bank and Premier; (8) other internal financial and operating
information which was provided to AFSI by Ohio River Bank and Premier; (9)
publicly available information concerning certain other banks and bank
holding companies, the trading markets for their securities and the nature
and terms of certain other merger and acquisition transactions believed
relevant to its inquiry; (10) reviewed the reported price and trading
activity for Ohio River Bank Common Stock and Premier Common Stock, compared
certain financial and stock market information for Ohio River Bank and
Premier with similar information of certain other companies whose securities
are publicly traded; (11) discussed the foregoing as well as other matters
relevant to its inquiry, including the past and current business operations
and acquisitions, results of regulatory examinations, financial condition,
current loan quality and trends, and future prospects of Ohio River Bank and
Premier with certain officers and representatives of Ohio River Bank and
Premier; (12) the Merger Agreement; and (13) this Proxy Statement/Prospectus.
AFSI also took into account its assessment of general economic, market and
financial conditions and its experience in other
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transactions, as well as, its experience in securities valuation and general
knowledge of the banking industry. AFSI's opinion was necessarily based upon
conditions as they existed and could be evaluated on the date of the opinion
and the information made available to AFSI through that date.
AFSI relied upon and assumed without independent verification the
accuracy and completeness of all of the financial and other information
provided to it by Ohio River Bank and Premier or from public sources. AFSI
has not made an independent evaluation of the assets of Ohio River Bank or
Premier, but has relied upon the books and records of Ohio River Bank,
Premier, and the audited financial statements as presented to AFSI as the
valuators of the fair market value of Ohio River Bank. In addition, AFSI did
not independently verify and relied on and assumed the aggregate allowances
for loan losses set forth in the balance sheets of Ohio River Bank and
Premier at September 30, 1997, were adequate to cover such losses and
complied fully with applicable law, regulatory policy, and sound banking
practice as of the date of such financial statements. Furthermore, AFSI did
not independently verify the carrying values of other real estate owned and
loans classified as in-substance foreclosures of each of Ohio River Bank and
Premier in their respective September 30, 1997, balance sheets, and AFSI
assumed that such carrying values complied fully with applicable law,
regulatory policy and sound banking practice as of such date. AFSI was not
retained to and did not conduct a physical inspection of any of the
properties of facilities of Ohio River Bank or Premier, nor did AFSI make any
independent evaluation or appraisal of the assets, liabilities or prospects
of Ohio River Bank or Premier, was not furnished with any such evaluation or
appraisal, and did not review any individual credit files. AFSI also assumed
that the Merger Agreement is, and will be, in compliance with all laws and
regulations that are applicable to Ohio River Bank and Premier.
In connection with rendering its opinion to Ohio River Bank's board,
AFSI performed a variety of financial analyses which are summarized below.
AFSI's summary of such analyses as set forth in this Proxy
Statement/Prospectus does not purport to be a complete description of such
analyses. AFSI believes that its analyses and the summary set forth in this
Proxy Statement/Prospectus must be considered as a whole and that selecting
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and the process underlying AFSI's opinion. The preparation of a
fairness opinion is a complex process involving AFSI's subjective judgments
and is not necessarily susceptible to partial analysis or summary
description. In its analyses, AFSI made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters,
many of which are beyond the control of Ohio River Bank and Premier. Any
estimates contained in AFSI's analyses are not necessarily indicative of
future results or value, which may be significantly more or less
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favorable than such estimates. AFSI's estimates of values of companies do
not purport to be appraisals or necessarily reflect the price at which
companies or their securities actually may be sold. No company or
transaction utilized in AFSI's analyses was identical to Ohio River Bank or
Premier or the Merger Agreement. Accordingly, such analyses are not based
solely on arithmetic calculations; rather, they involve complex
considerations and judgments by AFSI concerning differences in financial and
operating characteristics of the relevant companies, the timing of the
relevant transactions and prospective buyer interest, as well as other
factors that could affect the public trading markets of the company or
companies to which they are being compared. None of the analyses performed
by AFSI was assigned a greater significance by AFSI than any other.
The following is a brief description of the analyses performed by AFSI
in connection with its opinion as described to Ohio River Bank's board of
directors by AFSI:
Summary: The terms of the Merger Agreement between Ohio River Bank and
Premier, each share of Ohio River Bank Common Stock outstanding immediately
prior to consummation of the reorganization will be exchanged for 1.2 shares
of Premier Common Stock. Furthermore, each share of common stock of Interim
Bank outstanding immediately prior to consummation of the reorganization will
be converted into 1,000 shares of common stock of Ohio River Bank. The
reorganization will result in the Interim Bank merging with and into Ohio
River Bank and Ohio River Bank surviving as a wholly-owned subsidiary of
Premier. Ohio River Bank will continue to carry on its banking business in
substantially the same manner as before the reorganization.
Discounted Cash Flow Analysis: AFSI utilized a discounted cash flow
analysis in order to determine the fair market value of Ohio River Bank.
AFSI projected Ohio River Bank's cash flow from September 30, 1997, through
September 30, 2002, assuming a minimum equity capital to asset ratio of
6.00%. The present value per fully diluted share of Ohio River Bank Common
Stock resulting from this analysis was $29.80.
Adjusted Book Value Analysis: AFSI also determined the adjusted book
value of Ohio River Bank as an alternative valuation method. The adjusted
book value approach requires a three-step process. First, the book value is
determined. This figure is derived from the September 30, 1997, balance
sheet, and it represents the summary measure of shareholders' claims against
the assets, on a historical cost basis. Second, assets and liabilities are
restated to their fair market values. The adjusted book value calculation
considers each major asset and liability account classification. Finally,
additional "off-balance sheet" adjustments are calculated, if necessary. The
fair market value
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per fully diluted share of Ohio River Bank Common Stock resulting from this
analysis was $23.68.
Weighted Value Analysis: AFSI applied a 75% weighting to the discounted
cash flow value and a 25% weighting to the adjusted book value. The
weightings were based on AFSI's review of the financial position, history and
recent performance of Ohio River Bank. The sum of the weighted values or
$28.27 per share equates to the fair market value of Ohio River Bank.
Based on the $28.27 per share value of Ohio River Bank Common Stock and
a closing price per share of $26.50 for Premier's Common Stock as of November
25, 1997, the resulting exchange ratio of each share of Ohio River Bank
Common Stock outstanding would be for 1.067 shares of Premier Common Stock.
Therefore, the exchange terms of the Merger Agreement provide an additional
0.133 shares of Premier Common Stock for each share of Ohio River Bank Common
Stock in comparison to the exchange ratio based on the value of Ohio River
Bank determined by AFSI.
Analysis of Other Merger Transactions: AFSI analyzed certain other
mergers and acquisitions that have consummated over the past twelve months in
Ohio as well as other nearby states (including the states of Kentucky, West
Virginia, and Tennessee) involving financial institutions with assets less
than $250 million. AFSI compared the multiples produced by this
reorganization to the mean multiples for the transactions analyzed. AFSI's
analysis showed that the range of implied valuations of Ohio River Bank,
applying the mean transaction multiples described above to Ohio River Bank's
earnings and book value was $8.63 to $32.96 per share. The results produced
in this analysis do not purport to be indicative of actual values or expected
values of Ohio River Bank or shares of Ohio River Bank Common Stock.
Analysis of Comparable Companies: AFSI examined the operating and
trading performance of Ohio River Bank in comparison to selected publicly
traded bank/bank holding companies located in Ohio, Kentucky, West Virginia,
and Tennessee with total assets less than $250 million. AFSI analyzed the
relative performance and outlook for Ohio River Bank by comparing certain
financial and trading market information of Ohio River Bank with the group
of comparable banks. AFSI compared Ohio River Bank with the comparable banks
based upon selected operating statistics, including capitalization,
profitability and credit quality. Using data at, or near the 12 months
ended, September 30, 1997, the multiple of mean market price to latest 12
months earnings was 21.14 for the comparable banks. The mean price to stated
book value was 126.20 percent for the comparable banks. The implied market
trading values for Ohio River Bank derived from such comparable company
analysis utilizing the resulting mean valuation ratios ranged from
approximately $7.36 to $21.08 per share.
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Ohio River Bank and AFSI have entered into an arrangement relating to
the services to be provided by AFSI in connection with the Merger Agreement.
In regards to AFSI's services in determining an opinion as to the fairness,
from a financial point of view, of the terms of the Merger Agreement, the
cost is a contractual $10,000. In addition, Ohio River Bank also has agreed
to indemnify AFSI and its officers, directors, shareholders, employees and
agents for all of its time, expenses, and any liability incurred as a result
of AFSI's proposed engagement by means of legal action, administrative
proceedings or threat thereof, unless such action, pending or threat thereof
is caused by AFSI's own unlawful conduct, breach of duty or negligence during
the course of performing AFSI's services.
AFSI, in rendering its opinion, has assumed that the transaction will be
a tax-free reorganization with no material adverse tax consequences to any of
the parties involved, or to Ohio River Bank shareholders receiving Premier
Common Stock. In addition, AFSI has assumed that in the course of obtaining
the necessary regulatory approvals for the transaction, no condition will be
imposed upon Ohio River Bank or Premier that will have a materially adverse
impact on the contemplated benefits of the proposed transaction to Ohio River
Bank and Premier and their shareholders.
EFFECTIVE TIME
The Merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Ohio (the "Effective
Time") or such later time as is specified on such certificate. The filing
with respect to the Merger will occur on the first day that is five business
days after satisfaction or waiver of the latest to occur of the conditions to
the Merger unless another date is agreed to in writing by Premier and Ohio
River Bank.
The Merger Agreement may be terminated by either party if, among other
reasons, the Merger shall not have been consummated on or before April 30,
1998. See "The Merger Agreement -- Conditions to the Merger."
CONVERSION OF OHIO RIVER BANK COMMON STOCK; PROCEDURES FOR EXCHANGE OF
CERTIFICATES; FRACTIONAL SHARES
The conversion of Ohio River Bank Common Stock (other than shares as to
which dissenters' rights are properly exercised ("Dissenting Shares")) into
Premier Common Shares will occur automatically at the Effective Time.
As soon as practicable after the Effective Time, Mid-America Bank of
Louisville and Trust Company, Louisville, Kentucky, or another bank or trust
company designated by Premier and reasonably
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acceptable to Ohio River Bank, in its capacity as exchange agent (the
"Exchange Agent"), will send a letter of transmittal to each Ohio River Bank
shareholder. The letter of transmittal will contain instructions with
respect to the surrender of certificates representing Ohio River Bank Common
Stock to be exchanged for Premier Common Shares.
OHIO RIVER BANK SHAREHOLDERS SHOULD NOT FORWARD OHIO RIVER BANK STOCK
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A LETTER OF
TRANSMITTAL. OHIO RIVER BANK SHAREHOLDERS SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
Until certificates representing Ohio River Bank Common Stock are
surrendered for exchange after consummation of the Merger, holders thereof
will not be shareholders of Premier entitled to notice of or to vote on
matters submitted to the shareholders of Premier, and each outstanding
certificate representing Ohio River Bank Common Stock shall represent after
consummation of the Merger only the right to receive, upon surrender of such
certificate, the merger consideration. Until the certificates representing
Ohio River Bank Common Stock are surrendered for exchange after consummation
of the Merger, holders of such certificates will not be paid dividends on the
Premier Common Shares into which such shares have been converted, but any
such unpaid dividends will be paid, without interest, when such certificates
are properly surrendered.
All Premier Common Shares issued upon conversion of shares of Ohio River
Bank Common Stock shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Ohio River Bank Common Stock,
subject, however, to Ohio River Bank's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
that may have been declared or made by Ohio River Bank on Ohio River Bank
Common Stock in accordance with the Merger Agreement on or prior to the
Effective Time and which remains unpaid at the Effective Time.
No fractional Premier Common Shares will be issued to any Ohio River
Bank shareholder upon consummation of the Merger. For each fractional share
that would otherwise be issued, Premier will pay by check an amount equal to
the product obtained by multiplying the fractional share interest to which
such holder would otherwise be entitled by the closing price for a Premier
Common Share on the Nasdaq National Market on the business day immediately
preceding the Effective Time.
NASDAQ NATIONAL MARKET LISTING
It is a condition to the Merger that the Premier Common Shares to be
issued in the Merger be authorized for listing on the Nasdaq National Market,
subject to official notice of issuance.
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CONDUCT OF BUSINESS PENDING MERGER
Pursuant to the Merger Agreement, Ohio River Bank has agreed to carry on
its business in the usual, regular and ordinary course and substantially in
the same manner as conducted prior to the execution of the Merger Agreement.
See "The Merger Agreement -- Certain Covenants."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of Premier and Ohio River Bank to consummate the Merger
are subject to various conditions, including: obtaining requisite
shareholder and regulatory approvals; the absence of any materially
burdensome requirement or condition imposed in connection with the obtaining
of any such regulatory approvals; approval for listing on the Nasdaq National
Market, subject to official notice of issuance, of the Premier Common Shares;
receipt of opinions in respect of certain Federal income tax consequences of
the Merger and receipt of a letter from Premier's independent accountants to
the effect that the Merger qualifies for "pooling of interests" accounting
treatment; and any Ohio River Bank shareholders properly exercising
dissenters' rights not owning more than 10% of the outstanding Ohio River
Bank Common Stock. See "The Merger Agreement -- Conditions to the Merger."
REGULATORY APPROVALS REQUIRED
The Merger is subject to the prior approval of the Federal Reserve
Board, the FDIC and the banking authorities of the Commonwealth of Kentucky
and the State of Ohio.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal
income tax consequences of the Merger to holders of Ohio River Bank Common
Stock who hold such stock as a capital asset. This summary is based on the
Code, Treasury regulations thereunder, and administrative rulings and court
decisions in effect as of the date hereof, all of which are subject to change
at any time, possibly with retroactive effect. This summary is not a
complete description of all of the consequences of the Merger and, in
particular, may not address U.S. federal income tax considerations applicable
to shareholders subject to special treatment under U.S. federal income tax
law (including, for example, non-U.S. persons, financial institutions,
dealers in securities, insurance companies or tax-exempt entities, holders
who acquired Ohio River Bank Common Stock pursuant to the exercise of an
employee stock option or right or otherwise as compensation, and holders who
hold Ohio River Bank Common Stock as part of a hedge, straddle or conversion
transaction). In addition, no information is provided herein with respect to
the tax consequences of the Merger under applicable foreign, state or local
laws. HOLDERS OF OHIO RIVER BANK COMMON STOCK ARE URGED TO CONSULT WITH
THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM,
INCLUDING THE EFFECTS OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
In connection with the filing of the Registration Statement, Eskew &
Gresham, PSC, independent accountants to Premier, has delivered to Premier
its opinion, dated the date hereof and based upon certain customary
assumptions and representations, to the effect that, and, at the Effective
Time Eskew & Gresham, PSC will, subject to the qualifications discussed in
the following paragraph, deliver to Premier and Ohio River Bank,
respectively, its opinion (the "Tax Opinion"), dated as of the Effective
Time, to the effect that, in each case for U.S. federal income tax purposes:
(i) The Merger will be treated as a reorganization within the meaning
of Section 368(a) of the Code;
(ii) No gain or loss will be recognized by Premier or Ohio River Bank as
a result of the Merger;
(iii) No gain or loss will be recognized by the holders of Ohio River
Bank Common Stock who exchange all of their Ohio River Bank Common Stock
solely for Premier Common Stock pursuant to the Merger (except with respect
to cash received in lieu of a fractional share interest in Premier Common
Stock); and
(iv) The aggregate tax basis of the Premier Common Stock received by
holders of Ohio River Bank Common Stock who exchange all of their Ohio River
Bank Common Stock solely for Premier Common Stock pursuant to the Merger will
be the same as the aggregate tax basis of the Ohio River Bank Common Stock
surrendered in exchange
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therefor (reduced by any basis amount allocable to the fractional share
interest in Premier Common Stock for which cash is received).
Each party's obligation to consummate the Merger is conditioned upon the
receipt by each of Premier and Ohio River Bank of its respective Tax Opinion
in form and substance reasonably satisfactory to the party to whom such Tax
Opinion is addressed. Eskew & Gresham, PSC will render its Tax Opinion on
the basis of facts, representations and assumptions set forth or referred to
in such opinion that are consistent with the state of facts existing at the
Effective Time. In rendering the Tax Opinion, such accounting firm may
require and rely upon representations and covenants, including those
contained in certificates of officers of Premier, Ohio River Bank and others,
reasonably satisfactory in form and substance to such firm. The Tax Opinion
is not binding on the Internal Revenue Service (the "IRS") or the courts, and
the parties do not intend to request a ruling from the IRS with respect to
the Merger. Accordingly, there can be no assurance that the IRS will not
challenge such conclusion or that a court will not sustain such challenge.
In the event that (i) either Ohio River Bank or Premier fails to receive
its Tax Opinion, (ii) Ohio River Bank determines to waive the condition to
its obligation to consummate the Merger relating thereto, and (iii) the
material federal income tax consequences to Ohio River Bank shareholders are
different from those described above, Ohio River Bank will resolicit the Ohio
River Bank shareholders prior to proceeding with consummation of the Merger.
Based upon the current ruling position of the IRS, cash received by a
holder of Ohio River Bank Common Stock in lieu of a fractional share interest
in Premier Common Stock will be treated as received in redemption of such
fractional share interest, and a Ohio River Bank shareholder should generally
recognize capital gain or loss for federal income tax purposes measured by
the difference between the amount of cash received and the portion of the tax
basis of the share of Premier Common Stock allocable to such fractional share
interest. Such gain or loss should be a long-term capital gain or loss if
the holding period for such share of Ohio River Bank Common Stock is greater
than one year at the Effective Time. In certain circumstances, holders of
Ohio River Bank Common Stock that are individuals may be entitled to
preferential treatment for net long-term capital gains, including, as a
result of recently enacted legislation, in the case of a capital asset held
for more than 18 months at the time of the disposition. The holding period
of a share of Premier Common Stock received in the Merger (including
fractional share interests deemed received and redeemed as described above)
will include the holder's holding period in the Ohio River Bank Common Stock
surrendered in exchange therefor.
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ANTICIPATED 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 recorded assets and liabilities of Premier and Ohio River Bank will be
carried forward to Premier at their recorded amounts, and income of Premier will
include income of Premier and Ohio River Bank for the entire fiscal year in
which the Merger occurs. The reported income of the separate corporations for
prior periods will be combined and may be restated as income of Premier.
The Merger Agreement provides that a condition to the consummation of the
Merger is the receipt of a letter from the independent accountants of Premier to
the effect that the Merger qualifies as a "pooling of interests" for accounting
and financial reporting purposes. In the event such condition is not met, the
Merger would not be consummated unless the condition were waived and approval of
those shareholders entitled to vote on the Merger was resolicited.
EFFECT ON OHIO RIVER BANK'S EMPLOYEE BENEFITS
After the Effective Time, the officers and employees of Ohio River Bank
will be provided with such employee benefits as Premier, directly or through its
subsidiaries, generally provides to officers and employees. For purposes of
providing such benefits, Premier will credit such officers and employees for
years of service at Ohio River Bank prior to the Effective Time for all purposes
for which such service was recognized by Ohio River Bank.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
From a period of three years from the Effective Time of the Merger, Premier
has agreed to indemnify each officer, director or employee of Ohio River Bank
against losses, claims and liabilities arising out of acts or omissions
occurring prior to the Effective Time to the extent that Ohio River Bank is
permitted under Ohio law and its articles of incorporation and code of
regulations to indemnify such person.
The security ownership of directors and officers of Ohio River Bank is set
forth under "Principal Holders of Ohio River Bank Common Stock and Ownership of
Management."
RESALE OF PREMIER COMMON SHARES
The Premier Common Shares issued pursuant to the Merger will be freely
transferable under the Securities Act except for shares issued to any Ohio River
Bank shareholder who may be deemed to be an "affiliate" of Ohio River Bank for
purposes of Rule 145 under the Securities Act. It is expected that each such
affiliate will
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enter into an agreement with Premier providing that such affiliate will not
transfer any such Premier Common Shares received in the Merger except in
compliance with the Securities Act and Accounting Series Releases of the
Commission relating to the "pooling of interests" method of accounting. This
Proxy Statement/Prospectus does not cover resales of Premier Common Shares.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
OHIO RIVER BANK
Following the Merger, the directors, officers and employees of Ohio River
Bank serving immediately prior to consummation of the Merger will continue to
serve in such positions. However, the number of directors of Ohio River Bank
may be increased to permit J. Howell Kelly, Premier's President and Chief
Executive Officer, or such other person as may be designated by Premier, to
serve as a director of Ohio River Bank.
The Merger is not expected to substantially alter the operations of Ohio
River Bank. Ohio River Bank will retain its separate corporate existence,
charter and name, although it will be a wholly owned subsidiary of Premier.
Premier has informed the Board of Directors of Ohio River Bank that its strategy
following the Merger is to allow Ohio River Bank to retain its commitment to
local orientation and direction, while having the benefit of Premier's capital
for growth and staff assistance to promote safety, soundness and regulatory
compliance. Premier has further informed the Board of Directors of Ohio River
Bank that it intends for Ohio River Bank to be managed on a decentralized basis,
allowing customers direct access to Ohio River Bank's officers in an environment
conducive to friendly, informed and courteous service, local and timely
decision-making, and flexibility with respect to operating procedures and credit
policies limited only by a framework of centralized risk controls provided by
Premier to promote prudent banking practices.
PREMIER
Following the Merger, the directors and executive officers of Premier
serving immediately prior to consummation of the Merger will continue to serve
in such positions. See "Incorporation of Certain Documents by Reference."
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is Annex A to this Proxy Statement/Prospectus. The following
summary is qualified in its entirety by reference to the complete text of the
Merger Agreement, which is incorporated herein by reference.
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THE MERGER
Pursuant to the Merger Agreement and on the terms and subject to the
conditions set forth in the Merger Agreement, Merger Sub will be merged into
Ohio River Bank. Following the Merger, Ohio River Bank will be a wholly owned
subsidiary of Premier. The closing of the Merger (the "Closing") will take
place on the first day that is five business days after the satisfaction or
waiver of the conditions to the Merger unless another date is agreed to in
writing by Premier and Ohio River Bank (the "Closing Date"). The Effective Time
of the Merger will occur upon the filing of a certificate of merger with the
Secretary of State of the State of Ohio on the Closing Date or at such later
time as is specified on such certificate.
CONVERSION OF OHIO RIVER BANK COMMON STOCK
At the Effective Time of the Merger, pursuant to the Merger Agreement, (i)
each issued and outstanding share of Ohio River Bank Common Stock, other than
shares held directly or indirectly by Premier (excluding shares in trust
accounts, managed accounts and the like held by any subsidiary of Premier that
are beneficially owned by third parties) and shares with respect to which
dissenters' rights are properly exercised, will be converted into the right to
receive 1.2 Premier Common Shares, and upon such conversion all such outstanding
shares of Ohio River Bank Common Stock will be canceled and retired and will
cease to exist and (ii) each issued and outstanding share of Merger Sub held by
Premier will be converted into 1,000 shares of common stock of Ohio River Bank,
the surviving corporation in the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties by
both Premier and Ohio River Bank as to, among other things, (i) due
organization, good standing and absence of violations of constitutive documents,
(ii) ownership of subsidiaries and other investments, (iii) capital structure,
(iv) requisite corporate power and authority to enter into the Merger Agreement
and to consummate the transactions contemplated by the Merger Agreement, due
authorization, execution and delivery of the Merger Agreement, validity and
enforceability of the Merger Agreement and the compliance of the Merger with
constitutive documents, agreements and applicable laws, (v) required filings and
approvals, (vi) financial statements (in the case of Ohio River Bank) and
financial and other disclosure contained in documents filed with the Commission
(in the case of Premier) and the absence of undisclosed liabilities, (vii)
absence of certain material changes or events, (viii) information to be supplied
by each in connection with the Registration Statement and this Proxy
Statement/Prospectus and (ix) corporate documents, books and records.
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The Merger Agreement also contains representations and warranties by Ohio
River Bank as to (i) its allowance for credit losses, (ii) environmental
matters, (iii) the absence of material violations or defaults under constitutive
documents, contracts, other agreements and judicial or administrative orders,
(iv) compliance with licenses, permits and applicable laws, (v) certain
litigation, (vi) tax matters, (vii) material contracts, (viii) employee benefit
plans, (ix) subsidiaries, (x) agreements with bank regulators, (xi) title to
properties, (xii) insurance and (xiii) potential competing interests by any
director, officer, key employee or 10% or more shareholder of Ohio River Bank.
CERTAIN COVENANTS
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
Ohio River Bank has agreed to operate according to its ordinary and usual course
of business consistent with past practice, to seek to preserve intact its
current business organization and keep available the services of its current
directors, officers and employees, and to preserve its relationships with
customers, suppliers and others having business dealings with it so as not to
impair its goodwill and ongoing business prior to the Effective Time. Ohio
River Bank has agreed, among other things, not to (i) declare any dividends or
make any other distributions in respect of Ohio River Bank Common Stock, (ii)
issue or sell any shares of Ohio River Bank Common Stock, (iii) amend its
articles of incorporation or its code of regulations, (iv) sell or otherwise
dispose of its properties or assets other than in the ordinary course of a
commercial banking business consistent with past practice, (v) incur any
indebtedness for borrowed money or make any loans, advances or capital
contributions to, or investments in, any other person, other than in the
ordinary course of a commercial banking business consistent with past practice,
(vi) increase the compensation payable to its officers or employees, grant any
severance or termination pay to, or enter into any employment or severance
arrangement with, any director, officer or employee, or establish, adopt, enter
into or amend in any material respect or take action to accelerate any rights or
benefits under any employee benefit plan, or (vii) make any capital
expenditures.
Pursuant to the Merger Agreement, Premier and Ohio River Bank have each
agreed that it will not take any action that would, or that could reasonably be
expected to, result in (i) any representations and warranties of such party set
forth in the Merger Agreement that are qualified as to materiality becoming
untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
to the Merger not being satisfied.
SOLICITATION OF ACQUISITIONS PROPOSALS. Pursuant to the Merger Agreement,
Ohio River Bank has agreed that it will not, and
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that it will direct and use its best efforts to cause its officers,
directors, employees and any investment banker, attorney or other advisor or
representative of it not to, (i) initiate, solicit or encourage the
submission of any Acquisition Proposal (as defined below), (ii) enter into
any agreement with respect to any Acquisition Proposal or (iii) engage in any
negotiations or discussions with or furnish any information or data to, any
third party relating to an Acquisition Proposal. Ohio River Bank and the Ohio
River Bank Board of Directors, however, may (a) furnish information to, and
participate in discussions or negotiations with, any person in connection
with an unsolicited bona fide written Acquisition Proposal to Ohio River Bank
or its shareholders if and to the extent the Board of Directors determines in
good faith based on written advice of its outside legal counsel that such
action is necessary for the Board of Directors to comply with its fiduciary
duties to Ohio River Bank shareholders under applicable law, and (b) comply
with Rule 14e-2 under the Exchange Act with respect to any Acquisition
Proposal. For purposes of the Merger Agreement, "Acquisition Proposal" means
any proposal or offer to Ohio River Bank or its shareholders with respect to
a merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, Ohio River Bank.
OTHER ACTIONS. Pursuant to the Merger Agreement, each party has agreed to
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other party in doing, all
things necessary, proper or advisable to consummate and make effective the
Merger and other transactions contemplated by the Merger Agreement.
INDEMNIFICATION. Pursuant to the Merger Agreement, Premier has agreed to
indemnify for a period of three years from the Effective Time each officer,
director and employee of Ohio River Bank against losses, claims and liabilities
arising out of acts or omissions occurring prior to the Effective Time to the
fullest extent Ohio River Bank is permitted under Ohio law and its articles of
incorporation and code of regulations to indemnify such person.
ACCESS TO INFORMATION. Pursuant to the Merger Agreement, each of Premier
and Ohio River Bank has agreed to afford to the other and to its officers,
employees, accountants, counsel and other representatives reasonable access
during normal business hours prior to the Effective Time to all of its
respective properties, books, contracts, personnel and records. Except as
required by law, Premier and Ohio River Bank have agreed to hold any non-public
information in confidence.
CERTAIN OTHER COVENANTS. The Merger Agreement also contains customary
covenants applicable to transactions like the Merger, including covenants
relating to (i) each party's obligation to pay
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its own fees and expenses, (ii) execution and delivery of closing
documentation and (iii) use of reasonable efforts to cause the Merger to
qualify as a "reorganization" within the meaning of Section 368(a) of the
Code and to be recorded for accounting purposes as a "pooling of interests."
CONDITIONS TO THE MERGER
The obligations of Premier and Merger Sub, on the one hand, and Ohio
River Bank, on the other hand, to consummate the Merger are subject to
certain conditions, including the following: (i) approval and adoption of
the Merger Agreement by the affirmative vote of a majority of the outstanding
shares of Ohio River Bank Common Stock; (ii) the receipt of all
authorizations, consents, orders or approvals of any governmental or
regulatory authorities that are necessary for the consummation of the Merger;
(iii) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order; (iv) the receipt by Parent, Merger Sub and Ohio River
Bank of a letter from Eskew & Gresham, PSC, Premier's independent
accountants, to the effect that the Merger qualifies for "pooling of
interests" accounting treatment; (v) the absence of any temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger; (vi) the absence of any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any governmental or regulatory authority that, in
connection with the grant of any governmental or regulatory approval, imposes
any condition or restriction upon Premier or its subsidiaries, or Ohio River
Bank, that materially adversely impacts the economic or business benefits of
the Merger so as to render inadvisable the consummation of the Merger; and
(vii) the Premier Common Shares issuable pursuant to the Merger shall have
been approved for listing on the Nasdaq National Market subject to official
notice of issuance.
The obligations of Premier and Merger Sub to consummate the Merger are
also subject to certain additional conditions, including the following: (i)
the accuracy of the representations and warranties of Ohio River Bank set
forth in the Merger Agreement; (ii) Ohio River Bank having performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Closing Date; (iii) the obtaining by Ohio
River Bank of the consent or approval of each person whose consent or
approval shall be required in order to permit the succession by Ohio River
Bank, as the surviving corporation pursuant to the Merger, to any obligation,
right or interest of Ohio River Bank under any material contract, agreement
or instrument; (iv) receipt by Premier of the Tax Opinion of Eskew & Gresham,
PSC, to the effect that the Merger will be treated for
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federal income tax purposes as a reorganization within the meaning Section
368(a) of the Code; (v) the receipt by Premier from each affiliate of Ohio
River Bank of an "affiliate's letter"; and (vi) the shareholders of Ohio
River Bank who properly exercise dissenters' rights in connection with the
Merger, if any, owning not more than 10% of the outstanding shares of Ohio
River Bank Common Stock.
The obligation of Ohio River Bank to consummate the Merger is also
subject to additional conditions, including the following: (i) the accuracy
of the representations and warranties of Premier and Merger Sub set forth in
the Merger Agreement; (ii) Premier and Merger Sub having performed in all
material respects all obligations required to be performed by them under the
Merger Agreement at or prior to the Closing Date; (iii) the obtaining by
Premier of the consent or approval of each person whose consent or approval
shall be required in connection with the Merger under any material contract,
agreement or instrument; (iv) receipt by Ohio River Bank of the Tax Opinion
of Eskew & Gresham, PSC to the effect that the Merger will treated for
federal income tax purposes as a reorganization within the meaning Section
368(a) of the Code; (v) the receipt by Ohio River Bank from each affiliate of
Premier of an "affiliate's letter.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the
Effective Time of the Merger pursuant to the mutual written consent of
Premier and Ohio River Bank and at the option of either Premier or Ohio River
Bank under certain circumstances, including the following: (i) if at the
Special Meeting the Merger Agreement is not approved and adopted by the
shareholders of Ohio River Bank; (ii) if the Merger shall not have been
consummated on or before April 30, 1998, unless the failure to consummate the
Merger is the result of a willful and material breach of the Merger Agreement
by the party seeking to terminate the Merger Agreement; (iii) if any court or
other governmental agency shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger; (iv) in the event of a material breach by the other
party to the Merger Agreement; or (v) if (a) all the conditions to the Merger
that are conditions to the obligations of both Premier and Ohio River Bank
have been satisfied and (b) any of the conditions to the obligations of the
terminating party to consummate the Merger cannot be satisfied on or before
April 30, 1998.
In addition, the Merger Agreement may be terminated at the option of Ohio
River Bank if the Ohio River Bank Board of Directors determines that an
Acquisition Proposal is more favorable to the shareholders of Ohio River Bank
than the transactions contemplated by the Merger Agreement and such Board of
Directors shall concurrently approve, and Ohio River Bank shall concurrently
enter
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into, a definitive agreement providing for the implementation of the
transactions contemplated by such Acquisition Proposal. In order to
terminate the Merger Agreement under this provision, Ohio River Bank must
give Premier at least five business days' notice of its intention to
terminate, and the Ohio River Bank Board of Directors is required to take
into account the terms of any revised proposal made by Premier during such
five business-day period.
EFFECTS OF TERMINATION
If any person makes an Acquisition Proposal with respect to Ohio River
Bank and thereafter (i) the Merger Agreement is terminated (a) for failure to
obtain the approval and adoption of the Merger Agreement by the shareholders
of Ohio River Bank, (b) because the Closing shall not have occurred on or
before April 30, 1998 (if at the time of termination Ohio River Bank is in
material breach of the Merger Agreement and such breach cannot be or has not
been cured within 30 days after Ohio River Bank becomes aware of such breach
or such shorter period as may elapse between the date Ohio River Bank becomes
aware of such breach and the time of termination, (c) because a court of
competent jurisdiction or other governmental agency shall have issued an
order, decree or ruling or taken any action permanently enjoining,
restraining or otherwise prohibiting the Merger (if at the time of
termination Ohio River Bank is in material breach of the Merger Agreement and
such breach cannot be or has not been cured within 30 days after Ohio River
Bank becomes aware of such breach or such shorter period that may elapse
between the date Ohio River Bank becomes aware of such breach and the time of
termination), (d) by Premier as a result of the breach of the Merger
Agreement by Ohio River Bank, (e) by Premier because any of the conditions to
its obligations is not capable of being satisfied prior to April 30, 1998 or
(f) by Ohio River Bank to permit Ohio River Bank to enter into a definitive
agreement providing for the implementation of another Acquisition Proposal,
and (ii) a definitive agreement with respect to an Acquisition Proposal is
executed or an Acquisition Proposal is consummated at or within 12 months
after such termination, then Ohio River Bank shall pay to Premier a fee of
$350,000 (reduced by any amount actually paid by Ohio River Bank pursuant to
the next paragraph in connection with such termination).
If the Merger Agreement is terminated for the failure to obtain approval
of the Merger Agreement by the shareholders of Ohio River Bank, then Ohio
River Bank shall reimburse Premier for all its reasonable out-of-pocket
expenses actually incurred in connection with the Merger Agreement and the
transactions contemplated thereby, up to a maximum of $100,000.
In the event of termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Premier, Merger Sub or Ohio River
Bank, other than (i) liability with respect to
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termination payments and reimbursement of fees and expenses as described
above, (ii) each party's obligation to pay its own fees and expenses (except
as set forth above with respect to reimbursement of fees and expenses), (iii)
certain obligations of confidentiality and (iv) liability resulting from any
willful and material breach by any party to the Merger Agreement.
DESCRIPTION OF PREMIER CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Premier consists of 11 million shares,
of which 10 million are Common Shares, without par value, and 1 million are
Preferred Shares, without par value. Premier has 4,685,390 Common Shares
issued and outstanding, 100,000 Common Shares reserved for issuance under the
Premier 1996 Employee Stock Ownership Incentive Plan and 300,000 Common
Shares reserved for issuance in connection with the Merger. No Preferred
Shares are outstanding or reserved for issuance.
COMMON SHARES
Holders of Common Shares will be entitled to one vote for each share on
all matters voted on by shareholders, other than the election of directors,
and, except as required by law or provided in any resolution adopted by
Premier's Board of Directors with respect to any series of Preferred Shares,
will exclusively possess all voting power. In the election of directors,
holders of Common Shares have cumulative voting rights whereby each holder is
entitled to vote the number of shares held multiplied by the number of
directors to be elected, and each holder may cast the whole number of votes
for one candidate or distribute such votes among two or more candidates.
Holders of Common Shares do not have any conversion, redemption or preemptive
rights. Subject to any preferential rights of any outstanding series of
Preferred Shares designated by Premier's Board of Directors from time to
time, the holders of Common Shares will be entitled to such dividends as may
be declared from time to time by the Board of Directors from funds available
therefor, and upon liquidation will be entitled to receive pro rata all
assets of Premier available for distribution to such holders.
PREFERRED SHARES
The Board of Directors of Premier is authorized to provide for the
issuance of Preferred Shares, in one or more series, and to fix for each such
series such voting powers, designations, and relative, participating,
optional and other special rights, and such qualifications, limitations or
restrictions, as are stated in the resolution adopted by the Board of
Directors providing for the issuance of such series and as are permitted by
the Kentucky Business Corporation Act (the "KBCA").
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SHARES AVAILABLE FOR FUTURE ISSUANCE
Following the Merger, Premier will have 4,914,610 Common Shares
authorized and unissued (or reserved for issuance) and all of its authorized
Preferred Shares remaining available for issuance as the need arises in
connection with future acquisitions, combinations, equity financings, share
distributions and dividends, employee benefit plans and other corporate
purposes. The issuance of additional Common Shares and the issuance of any
Preferred Shares may occur without further authorization by shareholders on
such terms as Premier's Board of Directors, subject to its fiduciary duties,
may lawfully determine. The effect of the issuance of additional Common
Shares (other than on a pro rata basis among holders of Common Shares) would
be to dilute the present voting power and, depending on the terms of
issuance, possibly the book or market value of the Common Shares from that
prior to such issuance.
The ability to issue additional Common Shares or any Preferred Shares,
in addition to the other corporate purposes described above, could enable the
Premier Board of Directors to make more difficult the replacement of
incumbent directors or the accomplishment of certain business combinations or
takeover attempts opposed by the Board of Directors, even though any such
business combination or takeover attempt may be supported by holders of a
significant percentage of Premier's outstanding Common Shares.
Premier presently has no plan, understanding or arrangement to issue
additional Common Shares, other than in connection with the Merger or upon
the proper exercise of stock options granted pursuant to Premier's 1996
Employee Stock Ownership Incentive Plan. However, in view of Premier's
strategy to aggressively pursue acquisitions of bank holding companies, banks
(or their branches), thrift institutions (or their branches) or companies
conducting businesses deemed closely related to banking or managing or
controlling banks or thrift institutions, Premier believes that it is likely
that additional Common Shares and possibly Preferred Shares may be issued in
the future in connection with acquisitions that Premier may be able to make
in the future.
COMPARISON OF RIGHTS OF HOLDERS OF PREMIER COMMON SHARES
AND OHIO RIVER BANK COMMON STOCK
The rights of Ohio River Bank shareholders are governed principally by
the OGCL, and the articles of incorporation and code of regulations of Ohio
River Bank. The rights of shareholders of Premier are governed principally
by the KBCA and the articles of incorporation and bylaws of Premier. In many
instances, including dividend rights, removal of directors, indemnification
of directors and officers, rights of appraisal, rights of inspection of
corporate books and records and liquidation rights, the rights of
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the holders of Ohio River Bank Common Stock are substantially the same as the
rights of the holders of Common Shares of Premier. The following summary
compares certain rights of the holders of Ohio River Bank Common Stock to the
rights of holders of Premier Common Shares in areas where those rights are
materially different.
CUMULATIVE VOTING IN ELECTION OF DIRECTORS
Under the OGCL, shareholders have cumulative voting rights in an
election of directors unless the corporation's articles of incorporation
provide otherwise (which the articles of incorporation of Ohio River Bank do
not). Consequently, shareholders of Ohio River Bank are not entitled to
cumulative voting in an election of directors.
Under the KBCA and the Constitution of the Commonwealth of Kentucky,
shareholders of Kentucky corporations (as is Premier) are entitled to
cumulative voting rights in an election of directors. In an election of
directors, each shareholder has a number of votes equal to the product of (i)
the number of shares that such shareholder is entitled to vote in such
election, multiplied by (ii) the number of positions on the board of
directors to be filled in such election. The shareholder may divide such
votes among two or more nominees in such manner as he shall determine or he
may cumulate such votes and vote all of them for one nominee.
LIABILITY OF DIRECTORS
Under the OGCL, a director is liable in damages for any action he or she
takes or fails to take as a director only if it is proved by clear and
convincing evidence that such action or failure to act involved an act or
omission undertaken with either deliberate intent to cause injury to the
corporation or reckless disregard for the best interests of the corporation.
The limitation on liability will not apply to the improper payment of
dividends, distribution of assets, redemption or purchases of the
corporation's own shares, the making of certain loans or certain transactions
between the corporation and one or more interested directors. Moreover, the
statutory limitation on liability will not apply if at the time of the
relevant act or failure to act a corporation's articles of incorporation or
regulations specifically so provide. Neither the Ohio River Bank articles of
incorporation nor its code of regulations contain a provision denying the
statutory limitation on liability.
The KBCA permits a corporation to include in its articles of
incorporation a provision eliminating the liability of its directors to such
corporation or its shareholders for monetary damages arising from a breach of
fiduciary duty, except for: (i) any transaction in which the director's
personal financial interest is in conflict with the financial interests of
the corporation or its shareholders, (ii) acts or omissions not in good faith
or which
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involve intentional misconduct or are known to the director to be a violation
of law, (iii) any vote for or assent to an unlawful distribution to
shareholders as prohibited under the KBCA, or (iv) any transaction from which
the director derives an improper personal benefit. The articles of
incorporation of Premier contain such a provision eliminating the liability
of its directors to Premier or its shareholders for monetary damages.
CALL OF SPECIAL MEETINGS
Under the OGCL, a special meeting of shareholders may be called by (i)
the holders of 25% of the outstanding shares of a corporation entitled to
vote at such meeting, unless the corporation's regulations specify another
percentage, which in no event may be greater than 50%; (ii) the directors by
action at a meeting or a majority of the directors acting without a meeting;
or (iii) the chairman of the board, the president or, in case of the
president's absence, death or disability, the vice president authorized to
exercise the authority of the president. Ohio River Bank code of regulations
provides that special meetings of Ohio River Bank shareholders may be called
by the Chairman of the Board, the President and Chief Executive Officer, the
Ohio River Bank Board or the holders of 25% of the outstanding Ohio River
Bank Common Stock.
Under the KBCA, a special meeting of shareholders may be called by (i)
the holders of one-third of the outstanding shares of a corporation entitled
to vote at such meeting, unless the corporation's bylaws specify another
percentage (which the Premier bylaws do not); (ii) the directors; or (iii)
the person or persons authorized to do so by the articles of incorporation or
bylaws of the corporation. The Premier bylaws provide that special meetings
of Premier shareholders may be called by the chief executive officer, a
majority of the directors or the holders of one-third of the outstanding
shares entitled to vote at such meeting.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Under the OGCL, unless the articles of incorporation or the regulations
of the corporation provide otherwise, any action that may be authorized or
taken by shareholders at a meeting may be authorized or taken without a
meeting with the unanimous written consent of all shareholders who would be
entitled to notice of a meeting of shareholders held for such purpose.
Neither the articles of incorporation nor the code of regulations of Ohio
River Bank eliminate the ability of shareholders of Ohio River Bank to act by
unanimous written consent in lieu of a meeting.
Under the KBCA, unless the articles of incorporation or bylaws of the
corporation provide otherwise (neither the articles of incorporation or
bylaws of Premier provide otherwise), any action that may be authorized or
taken by shareholders at a meeting may be
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authorized or taken without a meeting with the unanimous written consent of
all shareholders who would be entitled to notice of a meeting of shareholders
held for such purpose. Further, where the articles of incorporation so
provide (and the articles of incorporation of Premier do so provide), any
action except the election of directors that may be authorized or taken by
shareholders at a meeting may be authorized or taken without a meeting with
the written consent of shareholders holding at least 80% of the voting power
of the corporation who would be entitled to notice of a meeting of
shareholders held for such purpose.
AMENDMENT TO ARTICLES OF INCORPORATION
To approve an amendment to the articles of incorporation proposed by the
Ohio River Bank Board, the OGCL requires the approval of shareholders holding
two-thirds of the voting power of the corporation, unless the corporation's
articles of incorporation permits approval by the affirmative vote of a
greater or lesser proportion, but not less than a majority of such voting
power (which the articles of incorporation of Ohio River Bank do not).
To approve a charter amendment proposed by the Premier Board, the KBCA
requires the approval of shareholders holding a majority of the voting power
of the corporation, unless the corporation's charter permits approval by the
affirmative vote of a greater proportion (which the articles of incorporation
of Premier do not).
AMENDMENT TO CODE OF REGULATIONS OR BYLAWS
The OGCL provides that only shareholders of a corporation have the
power, by the affirmative vote of the holders of a majority of the voting
power, by the written consent of the holders of two-thirds of the voting
power or by such greater or lower proportion of the voting power specified in
the articles of incorporation, but not less than a majority, to adopt or
amend that corporation's code of regulations. The Ohio River Bank code of
regulations requires that such amendments be approved by the affirmative vote
of the holders of a majority of the voting power entitled to vote on such
matter at a meeting held for such purpose or by the written consent of the
holders of shares representing two-thirds of the voting power.
Under the KBCA, a corporation's board of directors may amend or repeal
the corporation's bylaws unless the corporation's articles of incorporation
reserve this power exclusively to the shareholders in whole or in part (the
articles of incorporation of Premier do not) or the shareholders in amending
or repealing a particular bylaw provide expressly that the board of directors
may not amend or repeal that bylaw. A corporation's shareholders may amend
or repeal the corporation's bylaws, even though the bylaws may also be
amended or repealed by the board of directors, by the affirmative vote of the
holders of a majority of the voting power
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exercised with respect to such proposal to amend or repeal the bylaws, unless
the articles of incorporation or bylaws require a greater affirmative vote
(which the articles of incorporation or bylaws of Premier do not).
APPROVAL OF MERGERS, ASSET SALES AND CERTAIN OTHER TRANSACTIONS
In addition to Board approval, the OGCL requires approval of certain
mergers, consolidations, dissolutions, dispositions of all or substantially
all of a corporation's assets, majority share acquisitions and combinations
involving the issuance of shares with one-sixth or more of the voting power
of the corporation, by the affirmative vote of holders of two-thirds of the
voting power of the corporation, unless the articles of incorporation or the
regulations specify a different proportion (but not less than a majority).
Neither the articles of incorporation nor code of regulations of Ohio River
Bank provide for a different proportion of voting power to approve any of
such matters.
In addition to Board approval, the KBCA requires approval of certain
mergers, consolidations, dissolutions, dispositions of all or substantially
all of a corporation's assets and share exchanges by the affirmative vote of
a majority of the voting power of the corporation, unless the articles of
incorporation specify a different proportion (which the articles of
incorporation of Premier do not). The KBCA does not require approval of
share acquisitions (majority or otherwise) or combinations involving the
issuance of shares with a certain percentage of the voting power of the
corporation.
AUTHORIZED CAPITAL STOCK
Ohio River Bank has only one class of capital stock authorized in its
articles of incorporation, Ohio River Bank Common Stock. Of the 275,000
shares of Ohio River Bank Common Stock authorized, 250,000 shares of Ohio
River Bank Common Stock are issued and outstanding and, consequently, Ohio
River Bank is able to issue only 25,000 additional shares of capital stock
without an amendment to its articles of incorporation, which requires
shareholder approval.
Premier has two classes of capital stock authorized in its articles of
incorporation, Common Shares and Preferred Shares. Following the Merger,
Premier will have 4,914,610 authorized Common Shares and 1,000,000 authorized
Preferred Shares remaining available for issuance, any of which may be issued
without further authorization by shareholders on such terms as Premier's
Board of Directors, subject to its fiduciary duties, may lawfully determine.
The ability to issue such shares could enable the Premier Board of Directors
to make more difficult the replacement of incumbent directors or the
accomplishment of certain business combinations or takeover attempts opposed
by the Board of Directors. See
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"Description of Premier Capital Stock - Shares Available for Future
Issuance."
OHIO RIVER BANK MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion presents management's analysis of the primary factors
affecting the performance and financial condition of Ohio River Bank. It
should be read in conjunction with the accompanying audited financial
statements beginning on page F-1 of this Proxy Statement/Prospectus. This
discussion contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. There are a number of important
factors that could cause Ohio River Bank's actual results to differ
materially from those contemplated by such forward-looking statements. These
factors include, without limitation, Ohio River Bank's continued ability to
originate quality loans, fluctuation of interest rates, real estate market
conditions in Ohio River Bank's lending areas, general and local economic
conditions, Ohio River Bank's continued ability to attract and retain
deposits, Ohio River Bank's ability to control costs, new accounting
pronouncements, and changing regulatory requirements.
RESULTS OF OPERATIONS
EARNINGS SUMMARY. Net income for the nine months ended September 30, 1997 of
$94,000 or $0.38 per share was $293,000 more than the net loss of $199,000 or
$(0.80) per share for the nine months ended September 30, 1996. This increase
was due primarily to a $274,000 increase in net interest income generated by
a 48% increase in average total assets. The return on average stockholders
equity and return on average assets were 3.05% and .34%, respectively, for
the nine months ended September 30, 1997, compared to (6.41)% and (1.08)%,
respectively, for the same period in 1996.
Ohio River Bank s net loss for 1996 was $206,000 or $(0.82) per share,
an improvement of 47.6% over the $393,000 net loss recorded in 1995 from its
inception on May 22, 1995 through December 31, 1995 (excluding pre-opening
expenses of $342,000 and interest income on escrowed stock subscription funds
of $42,000). The decrease in net loss from 1995 to 1996 was primarily due to
a $746,000 increase in net interest income and a $90,000 increase in
non-interest income partially offset by a $575,000 increase in non-interest
expenses and a $75,000 increase in the provision for loan losses. These
increases in income and expense are attributable to the 150% growth in
average total assets from $10.6 million in 1995 to $26.5 million in 1996 and
1996 was the Bank s first full year whereas 1995 only included approximately
seven and a half months of operations. The return on average shareholders
equity and return
58
<PAGE>
on average assets were (4.99)% and (0.77)%, respectively, for the year ended
December 31, 1996, compared to (8.83)% and (3.72)%, respectively, for 1995.
NET INTEREST INCOME. Ohio River Bank s primary source of revenue is its net
interest income, which is the difference between the interest received on its
earning assets and the interest paid on the funds acquired to support those
assets. Loans made to businesses and individuals are the primary interest
earning assets, followed by investment securities and federal funds sold in
the inter-bank market. Deposits are the primary interest bearing liabilities
used to support the interest earning assets. The level of net interest income
is affected by both the balances and mix of interest earning assets and
interest bearing liabilities, the changes in their corresponding yields and
costs, by the volume of interest earning assets funded by noninterest bearing
deposits, and the level of capital. Ohio River Bank s long term objective is
to manage its net interest income to provide the largest possible amount of
income while balancing interest rate, credit and liquidity risks.
Ohio River Bank anticipated incurring tax losses in its first two years
of operations therefore chose not to invest in any tax-exempt investment
securities until the tax advantages of such investments could be utilized
immediately. The discussion that follows regarding net interest income is not
influenced by tax-exempt income or any resultant tax-equivalent adjustment
that would be appropriate if the Bank earned tax-exempt income.
The table below shows, for the periods indicated, the average
distribution of assets, liabilities and the interest earned or incurred on
those items, together with the level of shareholders equity, as well as Ohio
River Bank s net yield on interest earning assets (net interest income
divided by average earning assets). The net interest margin for the first
nine months of 1997 declined to 3.99% versus 4.38% for the year ended
December 31, 1996, and the interest spread declined to 3.30% in 1997 from
3.54% in 1996.
The decrease in net interest spread was caused by a 13 basis point
decrease in the rate earned on interest earning assets and an 11 basis point
increase in the rate paid on interest bearing liabilities. This narrowing of
the interest rate spread from 1996 to 1997 was primarily due to the Bank s
continued emphasis on growth. The Bank's average balance of higher yielding
time deposits, which are generally easier to attract, to average total
interest bearing deposits increased from 59.9% in 1996 to 68.6% in 1997 and
the Bank's average balance of lower rate real estate mortgage loans to
average total loans increased from 34.1% in 1996 to 39.5% in 1997.
59
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
(Dollars in thousands)
FOR THE PERIOD FROM
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED INCEPTION (MAY 22, 1995)
SEPTEMBER 30, 1997 DECEMBER 31, 1996 TO DECEMBER 31, 1995
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest earning assets:
U.S. Treasury and federal
agency securities $ 6,512 $ 277 5.67% $ 3,416 $ 188 5.51% $ 45 $ 1 4.80%
Federal funds sold 1,961 78 5.30 2,273 119 5.23 4,039 141 5.71
Loans, net of unearned
income (1)(2)
Commercial 6,460 469 9.68 4,209 411 9.76 1,760 108 10.04
Real estate mortgage 9,858 645 8.72 6,057 528 8.72 1,670 96 9.41
Installment 8,648 628 9.68 7,520 746 9.92 965 71 12.04
------- ------ ---- ------- ------ ---- ------- ------ -----
Total loans $24,966 $1,742 9.30% $17,786 $1,685 9.47% $ 4,395 $ 275 10.24%
Total interest-earning assets $33,439 $2,097 8.36% $23,475 $1,992 8.49% $ 8,479 $ 417 8.05%
Allowance for loan losses (271) (192) (50)
Cash and due from banks 1,132 1,051 823
Premises and equipment 1,590 1,747 1,085
Other assets 489 407 240
------- ------- -------
Total assets $36,379 $26,488 $10,577
LIABILITIES:
Interest bearing deposits:
NOW and money market $ 5,844 $ 151 3.44% $ 5,461 $ 195 3.57% $ 1,462 $ 27 2.99%
Savings 3,057 71 3.10 2,281 72 3.16 982 20 3.25
Certificate of deposit
and other time deposits 19,407 852 5.85 11,563 689 5.96 2,120 85 6.53
------- ------ ---- ------- ------ ---- ------- ------ -----
Total interest-bearing
deposits $28,308 $1,074 5.06% $19,305 $ 956 4.95% $ 4,564 $ 132 4.73%
Other borrowings 624 23 4.91 151 8 5.30 84 3 5.85
Total interest-bearing
liabilities $28,932 $1,097 5.06% $19,456 $ 964 4.95% $ 4,648 $ 135 4.75%
Non-interest bearing
demand deposits $ 3,140 $ 2,754 $ 1,398
Other liabilities 194 149 78
------- ------- -------
Total liabilities $32,266 $22,359 $ 6,124
Shareholders' Equity: $ 4,113 $ 4,129 $ 4,453
60
<PAGE>
Total liabilities and
shareholders' equity $36,379 $26,488 $10,577
Net interest income 1,000 1,028 282
Net interest spread 3.30% 3.54% 3.30%
Net interest margin 3.99% 4.38% 5.44%
(1) Includes loan fees, immaterial in amount, in both interest income and the calculation of yield on loans.
(2) Includes loans on nonaccrual status.
</TABLE>
61
<PAGE>
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES. The Bank maintains its
allowance for possible loan losses (allowance) at a level that is considered
sufficient to absorb potential losses in the loan portfolio. The allowance is
increased by the provision for possible loan losses as well as recoveries of
previously charged-off loans, and is decreased by loan charge-offs. The
provision is the necessary charge to expense to provide for current loan
losses and to maintain the allowance at an adequate level commensurate with
management's evaluation of the risks inherent in the loan portfolio. Various
factors are taken into consideration when the Bank determines the amount of
the provision and the adequacy of the allowance. Some of the factors include:
- Past due and nonperforming assets;
- Specific internal analyses of loans requiring special attention;
- The current level of regulatory classified and criticized assets
and the associated risk factors with each;
- Examinations and reviews by the Bank's independent accountants
and internal loan review personnel; and
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<PAGE>
- Examinations of the loan portfolio by federal and state
regulatory agencies.
The data collected from these sources is evaluated with regard to
current national and local economic trends, prior loss history, underlying
collateral values, credit concentrations, and industry risks. An estimate of
potential future loss on specific loans is developed in conjunction with an
overall risk evaluation of the total loan portfolio.
The following table is a summary of the Bank's loan loss experience for
the periods indicated.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in Thousands)
<TABLE>
<CAPTION>
PERIOD
FROM
NINE INCEPTION
MONTHS (MAY 22,
ENDED YEAR ENDED 1995)
SEPTEMBER DECEMBER TO DECEMBER
30, 31, 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ 273 $ 117 $ 0
Amounts charged off:
Commercial 0 2 1
Real estate mortgage 0 0 0
Consumer 104 37 0
------ ------ ----
Total loans charged off $ 104 $ 39 $ 1
Recoveries on amounts previously charged off:
Commercial $ 0 $ 2 $ 0
Real estate mortgage 0 0 0
Consumer 14 0 0
------ ------ ----
Total recoveries $ 14 $ 2 $ 0
Net charge-offs 90 37 1
Provision for loan losses 123 193 118
------ ------ ----
Balance at end of period $ 306 $ 273 $117
Total loans, net of unearned income:
Average 24,966 17,786 4,395
At period end 26,964 22,828 9,771
As a percentage of average loans:
Net charge-offs .36% .21% .02%
Provision for possible loan losses .49% 1.09% 2.68%
Allowance as a percentage of period-end
net loans 1.13% 1.20% 1.20%
Allowance as a multiple of net charge-offs 3.4x 7.4x 117x
</TABLE>
63
<PAGE>
The provision for loan losses and net charge offs were $123,000 and
$90,000, respectively, for the first nine months of 1997, compared to
$134,000 and $19,000, respectively, for the first nine months of 1996. The
increase in net charge offs from 1996 to 1997 was primarily due to the aging
of certain indirect consumer loans included in the loan portfolio. The
allowance for possible loan losses at September 30, 1997 was 1.13% of
outstanding loans and management believes it is adequate to absorb any future
loan losses. The provision for loan losses was $193,000 in 1996 compared to
$118,000 in 1995, an increase of $75,000. In 1996, net charge offs were
$37,000 compared to $1,000 in 1995. The allowance at December 31, 1996 was
$273,000 or 1.20% of outstanding loans.
The following table sets forth an allocation for the allowance for
possible loan losses by category of loan and a percentage distribution of the
allowance allocation. In making the allocation, consideration was given to
such factors as management's evaluation of risk in each category, current
economic conditions and charge-off experience. An allocation for the
allowance for possible loan losses is an estimate of the portion of the
allowance that will be used to cover future charge-offs in each major loan
category, but it does not preclude any portion of the allowance allocated to
one type of loan being used to absorb losses of another loan type.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31, AT DECEMBER 31,
1997 1996 1995
AMOUNT % AMOUNT % AMOUNT %
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 65 21.24 $ 57 20.88 $ 37 31.62
Real estate mortgage 65 21.24 56 20.51 29 24.79
Installment 120 39.22 113 41.39 30 25.64
Unallocated 56 18.30 47 17.22 21 17.95
----- ---------------------- ------ ------ ------
Total $ 306 100.00 $ 273 100.00 $ 117 100.00
</TABLE>
NON-INTEREST INCOME AND EXPENSE. The Bank's non-interest income includes
deposit service charges, ATM fees, credit life insurance premiums, and fees
from other corporate and retail products. Non-interest income has increased
steadily since the Bank's inception on May 22, 1995 as the Bank's deposit and
customer base has grown. Non-interest income increased 46% or $34,000 from
$74,000 for the nine months ended September 30, 1996 to $108,000 for the same
period in 1997. Service charges on deposit accounts, the largest component of
non-interest income, increased 65% or $30,000 from $46,000 for the nine
months ended September 30, 1996 to $76,000 for the same period in 1997. For
the full year 1996 non-interest income totaled $114,000 and
64
<PAGE>
for the period from inception (May 22, 1995) through December 31, 1995
non-interest income totaled $24,000.
Non-interest expense includes all personnel, occupancy, data processing,
and other ordinary operating expenses associated with financial institutions.
Non-interest expenses for the nine months ended September 30, 1997 increased
only 3% or $26,000 to $891,000 from $865,000 in the same period in 1996. The
Bank has been successful in controlling its non-interest expenses during the
nine months ended September 30, 1997 even though the Bank grew in average
total assets from $24.5 million for the nine months ended September 30, 1996
to $36.4 million in the same period in 1997. The increase in non-interest
expenses is primarily due to the 8.1% or $33,000 increase in salaries and
employee benefits over these time periods partially offset by a 3.3% or
$10,000 decrease in other operating expenses. Occupancy expenses remained
relatively stable with an increase of $3,000 or 1.9%.
The Bank's efficiency continues to improve as non-interest expense net
of non-interest income as a percent of average total assets has declined from
3.93% for the year ended December 31, 1996 to 2.87% for the nine months ended
September 30, 1997.
Non-interest expense for the full year 1996 was $1,155,000 and for the
period from inception (May 22, 1995) through December 31, 1995 was $580,000.
65
<PAGE>
The following table is a summary of non-interest income and expense for
the periods indicated.
<TABLE>
<CAPTION>
NON-INTEREST INCOME AND EXPENSE
(Dollars in thousands)
FOR THE PERIOD
FOR THE NINE INCREASE FOR THE FROM INCEPTION
MONTHS ENDED (DECREASE) YEAR ENDED (MAY 22, 1995)
SEPTEMBER 30 1997 VS. DECEMBER 31 TO DECEMBER 31
--------------------- -------- ----------- --------------
1997 1996 1996 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-Interest Income:
Service charges on deposit
accounts $ 76 $ 46 $ 30 $ 82 $ 15
Other 32 28 4 32 9
----- ----- ----- ------ -----
Total non-interest income $ 108 $ 74 $ 34 $ 114 $ 24
Non-Interest Expense:
Salaries and employee
benefits $ 438 $ 405 $ 33 $ 559 $ 301
Net occupancy and equipment 159 156 3 211 82
Other 294 304 (10) 385 197
----- ----- ----- ------ -----
Total non-interest
expenses $ 891 $ 865 $ 26 $1,155 $ 580
Net non-interest expenses as a percent of
average assets (annualized where
appropriate) 2.87% 4.31% 3.93% 8.60%
</TABLE>
INCOME TAXES. The Bank has recorded no provisions for income taxes for any
period since its inception. Net losses were incurred in 1996 and 1995,
however no income tax benefits were recorded due to the establishment of a
valuation allowance for the realization of deferred tax assets.
During the nine months ended September 30, 1997, no income tax expense
has been recorded due to the utilization of a portion of the established
valuation allowance.
At September 30, 1997, the Bank had a tax net operating loss
carryforward of approximately $730,000 available to reduce any future taxable
income.
66
<PAGE>
FINANCIAL CONDITION
LENDING ACTIVITIES. Loans are the Bank's primary use of financial resources
and represent the largest component of earning assets. The Bank's loans are
made predominantly within the Bank's market area and the portfolio is
diversified. Credit risk is inherent in each financial institution's loan and
investment portfolio. In an effort to minimize credit risk, the Bank utilizes
a credit administration network, including specific lending authorities for
each loan officer, a system of loan committees to review and approve loans,
and internal loan review. This network assists in the evaluation of the
quality of new loans and in the identification of problem or potential
problem credits and provides information to aid management in determining the
adequacy of the allowance for possible loan losses.
Total loans, net of unearned income, were $27.0 million at September 30,
1997 compared to $21.8 million at September 30, 1996, an increase of 24%.
Total loans, net of unearned income, averaged $17.8 million in 1996
compared with $4.4 million in 1995. At year end 1996, loans net of unearned
income totaled $22.8 million compared to $9.8 million at December 31, 1995,
an increase of 134%.
Commercial loans generally are made to small-to-medium size businesses
located within the Bank's defined market area and typically are generally
secured by business assets and guarantees of the principal owners. Real
estate mortgage loans include residential properties and generally do not
exceed 80% of the value of the real property securing the loan, based on
recent independent appraisals. The Bank's real estate mortgage loan portfolio
primarily consists of adjustable rate residential mortgage loans. Consumer
loans generally are made to individuals living in a Bank's defined market
area. Consumer loans are made on a secured or unsecured basis.
The following table sets forth the maturity distribution and interest
sensitivity of selected loan categories at December 31, 1996. Maturities are
based upon contractual terms. The Bank's policy is to specifically review and
approve any loan renewed; no loans are automatically rolled over.
67
<PAGE>
LOAN MATURITIES AND INTEREST SENSITIVITY
DECEMBER 31, 1996
(Dollars in thousands)
ONE YEAR ONE THROUGH OVER TOTAL
OR LESS FIVE YEARS FIVE LOANS
YEARS
Commercial, secured by
real estate $165 $ 132 $3,168 $3,465
Commercial, other 338 1,131 747 2,216
Real estate construction 285 100 0 385
Agricultural 20 0 0 20
------- ------- ------- -------
Total $808 $1,363 $3,915 $6,086
Fixed rate loans $263 $ 389 $ 429 $1,081
Floating rate loans 545 974 3,486 5,005
------- ------- ------- -------
Total $808 $1,363 $3,915 $6,086
68
<PAGE>
The following table presents a summary of the Bank s loan portfolio by
category for the periods indicated. Other than the categories noted, there is
no concentration of loans in any industry greater than 5% in the portfolio.
The Bank has no foreign loans or highly leveraged transactions in its loan
portfolio.
LOAN PORTFOLIO COMPOSITION
LOANS OUTSTANDING
(Dollars in thousands)
<TABLE>
<CAPTION>
At September 30 At December 31 At December 31
1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Commercial, secured by real estate $ 4,619 17.1% $ 3,465 15.2% $ 315 3.2%
Commercial, other 3,871 14.4 2,216 9.7 2,415 24.7
Real estate construction 461 1.7 385 1.7 116 1.2
Real estate mortgage 8,898 33.0 6,947 30.4 2,677 27.4
Agricultural 20 0.1 20 0.1 0 0.0
Consumer 8,761 32.5 9,665 42.3 4,248 43.5
Other 334 1.2 130 0.6 0 0.0
-------- ----- -------- ----- ------- ----
Total loans 26,964 100.0% $ 22,828 100.0% $ 9,771 100.0%
Less unearned income 0 0 0
-------- -------- -------
Total loans net of unearned income $ 26,964 $ 22,828 $ 9,771
</TABLE>
69
<PAGE>
NONPERFORMING ASSETS. Nonperforming assets consist of loans on which
interest is no longer accrued, certain restructured loans where interest rate
or other terms have been renegotiated, accruing loans past due 90 days or
more and real estate acquired through foreclosure.
The Bank will discontinue the accrual of interest on loans that become
90 days past due as to principal or interest unless they are adequately
secured and in the process of collection. A loan will remain in a nonaccrual
status until doubts concerning the collectibility no longer exist. A loan is
classified as a restructured loan when the interest rate is materially
reduced or the term is extended beyond the original maturity date because of
the inability of the borrower to service the loan under the original terms.
Other real estate is recorded at the lower of cost or fair value less
estimated costs to sell.
A summary of the components of nonperforming assets, including certain
ratios using period-end data, is shown below:
NONPERFORMING ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31 December 31
1997 1996 1995
<S> <C> <C> <C>
Nonaccrual loans $ 0 $ 0 $ 0
Accruing loans which are contractually
past due 90 days or more 3 6 0
Restructured loans 0 0 0
-------- -------- --------
Total nonperforming and
restructured loans $ 3 $ 6 $ 0
Other real estate and in-substance
foreclosures 0 0 0
-------- -------- --------
Total nonperforming and restructured
loans and other real estate $ 3 $ 6 $ 0
Nonperforming and restructured loans
as a percentage of net loans .01% .03% 0%
Nonperforming and restructured loans
and other real estate as a percentage
of total assets .01% .02% 0%
</TABLE>
70
<PAGE>
Nonaccrual loans at September 30, 1997, December 31, 1996 and December
31, 1995 were zero. Total nonperforming assets declined from $6,000 or 0.02%
of total assets at December 31, 1996 to $3,000 or .01% at September 30, 1997.
The following table reflects interest income on nonaccrual and
restructured loans for the periods indicated.
INTEREST INCOME ON NON-ACCRUAL AND RESTRUCTURED LOANS
(Dollars in thousands)
FOR THE PERIOD
NINE MONTHS FROM INCEPTION
MONTHS ENDED YEAR ENDED (MAY 22, 1995)
SEPTEMBER 30 DECEMBER 31 TO DECEMBER 31
1997 1996 1995
Contractual interest $ 0 $ 0 $ 0
Interest recognized 0 0 0
INVESTMENT ACTIVITIES. The securities portfolio consists of debt securities
issued by the U. S. Treasury and Federal agencies which provide the Bank with
a long-term, relatively stable source of income. Additionally, the investment
portfolio provides a balance to interest rate and credit risks in other
categories of the balance sheet. The securities portfolio is also used as a
secondary source of liquidity by the Bank. The Bank has classified all
securities as available for sale. The U. S. Treasury and Agency securities
can be used as collateral to secure municipal deposits and repurchase
agreements. The securities portfolio does not contain any holdings in
mortgage-backed securities, collateralized mortgage obligations or other
mortgage-related derivative products and/or structured notes. There are no
tax-exempt municipal obligations within the securities portfolio due to the
availability of tax net operating loss carryforwards.
Securities as a percentage of average interest-earning assets totaled
19.5% during the nine months ended September 30, 1997 and 14.6% during 1996.
At September 30, 1997, investment securities represented 21.6% of
interest-earning assets.
LIQUIDITY. Liquidity for a financial institution can be expressed in terms
of maintaining sufficient cash flows to meet both existing and unplanned
obligations in a cost effective manner. Adequate liquidity allows the Bank to
meet the demands of both the borrower and the depositor on a timely basis, as
well as pursuing other business opportunities as they arise. Thus, liquidity
management embodies both an asset and liability aspect. Liquidity is
maintained through the Bank s ability to convert assets into cash, manage the
maturities of liabilities and generate funds through the attraction of local
deposits.
The Bank prefers to manage its liquidity requirements primarily through
the matching of maturities of assets and liabilities. As a second source of
funds, the Bank has availability to overnight federal funds which can be
purchased from correspondent institutions.
The cash flow statements for the periods presented in the financial
statements provide an indication of the Bank s sources and uses of cash as
well as an indication of the ability of the Bank to maintain an adequate
level of liquidity. A discussion of the cash flow statements for the nine
months ended September 30, 1997 ("1997"), the year ended December 31, 1996
("1996"), and the period from inception (May 22, 1995) to December 31, 1995
("1995") follows.
71
<PAGE>
Cash used in investing activities was $5.4 million, $18.4 million and
$14.9 million for 1997, 1996 and 1995, respectively. The cash used in
investing activities is primarily due to the funding of new loans generated.
Cash provided by financing activities was $4.9 million, $18.6 million
and $16.6 million for 1997, 1996 and 1995, respectively. In each period, the
cash provided by financing activities was primarily attributable to the
growth in deposits and in 1995, the net proceeds received from the initial
capitalization of the Bank. Liquidity risk is the possibility that the
Bank may not be able to meet its cash requirements. Management of liquidity
risk includes maintenance of adequate cash and sources of cash to fund
operations and meet the needs of borrowers, depositors and creditors.
Liquidity must be maintained at a level which is adequate but not excessive.
Excess liquidity has a negative impact on earnings resulting from the lower
yields on short-term assets.
In addition to cash, cash equivalents and Federal funds sold, the
securities portfolio provides an important source of liquidity. The total of
securities maturing within one year along with cash, due from banks and
Federal funds sold totaled $7.3 million as of September 30, 1997.
Additionally, securities available-for-sale with maturities greater than one
year totaled $3.6 million at September 30, 1997. These securities are
available to meet liquidity needs on a continuing basis.
To maintain a desired level of liquidity, the Bank has several sources
of funds available. One is the cash flow generated daily from the Bank s
loan portfolio in the form of principal and interest payments. Another source
is its deposit base. The Bank continues to develop its base of customer
deposits. Due to the nature of the market served by the Bank, management
believes that the majority of certificates of deposit of $100,000 or more are
no more volatile than its core deposits. Certificates of deposits and other
time deposits of $100,000 or more represented approximately 15.1% and 17.8%
of total deposits for at September 30, 1997 and December 31, 1996,
respectively. A number of techniques are used to measure the liquidity
position, including the utilization of certain ratios that are presented
below.
72
<PAGE>
LIQUIDITY RATIOS
September 30 December 31 December 31
1997 1996 1995
Total loans/total deposits 78.2% 76.3% 84.1%
Net short-term borrowings/
total assets 1.87% 1.20% 0.00%
INTEREST RATE SENSITIVITY. The interest spread and liability funding
discussed above are directly related to changes in asset and liability mixes,
volumes, maturities and repricing opportunities of interest-earning assets
and interest-bearing liabilities. Interest-sensitive assets and liabilities
are those which are subject to being repriced in the near term, including
both floating or adjustable rate instruments and instruments approaching
maturity. The interest sensitivity gap is the difference between total
interest-sensitive assets and total interest-sensitive liabilities. Interest
rates on the Bank s various asset and liability categories do not respond
uniformly to changing market conditions. Interest rate risk is the degree to
which interest rate fluctuations in the marketplace can affect net interest
income.
The need for interest sensitivity gap management is most critical in
times of a significant change in overall interest rates. Management generally
seeks to limit the exposure of the Bank to interest rate fluctuations by
maintaining a relatively balanced mix of rate sensitive assets and
liabilities on a one-year time horizon. This mix is altered periodically
depending upon management s assessment of current business conditions and the
interest rate outlook.
One tool which is used to monitor interest rate risk is the interest
sensitivity analysis as shown in the table below. This analysis reflects the
repricing characteristics of assets and liabilities over various time
periods. The gap indicates the level of assets and liabilities that are
subject to repricing over a given time period.
As shown by the interest rate sensitivity analysis as of September 30,
1997, the total amount of the Bank s interest earning assets repricing during
the first year is less than the total amount of its interest bearing
liabilities repricing during this period. This position, which is normally
termed a negative interest sensitivity gap, generally allows for enhanced net
interest income during periods of decreasing interest rates. This negative
gap is outside the Bank's internal policy guidelines of
73
<PAGE>
15%, however is not expected to impact significantly the Bank s net interest
income during a period of rising interest rates.
The following table provides an analysis of the Bank's interest rate
sensitivity at September 30, 1997.
INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in Thousands)
THROUGH 1 - 5 OVER 5
1 YEAR YEARS YEARS TOTAL
Assets
Fed Funds sold $ 1,770 $ 0 $ 0 $ 1,770
Loans, net of unearned
income 8,141 17,298 1,525 26,964
Investment securities 4,302 3,619 0 7,921
------- ------- ------- -------
Total earning assets $14,213 $20,916 $ 1,525 $36,654
Sources of Funds
NOW, money market
and savings $ 3,282 $ 0 $ 7,066 $10,348
Time deposits 16,132 4,825 0 20,957
Other borrowings 695 46 0 741
------- ------- ------- -------
Total interest 20,109 $ 4,871 $ 7,066 $32,046
bearing liabilities
Interest Sensitivity Gap
For the period $(5,896) $16,045 $(5,541) $ 4,608
Cumulative (5,896) 10,149 4,608
Cumulative as a percent
of earning assets (16.08)% 27.69% 12.57%
The following tables present the carrying values and maturity distribution
of investment securities.
CARRYING VALUE OF SECURITIES
(Dollars in thousands)
September 30 December 31 December 31
1997 1996 1995
U.S. Treasury and Federal
agencies:
Available for sale $ 7,921 $ 5,593 $ 1,005
Held to maturity 0 0 0
Total securities:
Available for sale 7,921 5,593 1,005
Held to maturity 0 0 0
--------- -------- --------
Total $ 7,921 $ 5,593 $ 1,005
74
<PAGE>
MATURITY DISTRIBUTION OF SECURITIES
September 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
ONE FIVE
YEAR THROUGH THROUGH OVER
OR FIVE TEN TEN OTHER MARKET
LESS YEARS YEARS YEARS SECURITIES TOTAL VALUE
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Federal agencies:
Available for sale $ 4,300 $ 3,609 $ 0 $ 0 $ 0 $ 7,909 $ 7,921
Held to maturity 0 0 0 0 0 0 0
Total securities:
Available for sale 4,300 3,609 0 0 0 0 0
Held to maturity 0 0 0 0 0 0 0
------- ------- ----- ---- ---- -------- -------
Total $ 4,300 $ 3,609 $ 0 $ 0 $ 0 $ 7,909 $ 7,921
Percent of total 54.37% 45.63% 0% 0% 0% 100% 100.15%
Weighted average yield* 5.51 6.73 0% 0% 0%
</TABLE>
*The weighted average yields are calculated on historical cost.
75
<PAGE>
DEPOSIT ACTIVITIES. Managing the mix and repricing of deposit liabilities is
an important factor affecting the Bank s ability to maximize its net interest
margin. The strategies used to manage interest-bearing deposit liabilities
are designed to adjust as the interest rate environment changes. In this
regard, management of the Bank regularly assesses its funding needs, deposit
pricing, and interest rate outlooks.
For the nine months ended September 30, 1997, total deposits averaged
$31.4 million. Total deposits averaged $22.1 million in 1996 and $6.0 million
in 1995. Non-interest bearing deposits averaged 9.9% of total deposits during
the first nine months of 1997 compared to 12.5% in 1996 and 23.4% in 1995.
Deposits totaled $34.5 million at September 30, 1997, compared to $29.9
million at December 31, 1996 and $11.6 million at December 31, 1995.
The table below provides information on the maturities of time deposits
of $100,000 or more at September 30, 1997 and December 31, 1996.
MATURITY OF TIME
DEPOSITS OF $100,000 OR MORE
(IN THOUSANDS)
September 30 December 31
1997 1996
------------ -----------
Maturing 3 months or less $ 1,436 $ 1,008
Maturing over 3 months through 12 months 2,746 2,576
Maturing over 12 months 1,038 1,738
--------- --------
$ 5,220 $ 5,322
76
<PAGE>
The following table sets forth the average amount of and average rate
paid on selected deposit categories during the periods indicated.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE NINE MONTHS FOR THE YEAR INCEPTION (MAY 22, 1995)
ENDED SEPTEMBER 30, ENDED DECEMBER 31, TO DECEMBER 31,
1997 1996 1995
AMOUNT RATE (%) AMOUNT RATE (%) AMOUNT RATE (%)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand $ 3,140 0% $ 2,754 0% $ 1,398 0%
NOW and money market accounts 5,844 3.44% 5,461 3.57% 1,462 2.99%
Savings 3,057 3.10% 2,281 3.16% 982 3.25%
Certificates of deposit and
other time 19,407 5.85% 11,563 5.96% 2,120 6.53
------- ---- ------- ---- ------- ----
Total $31,448 4.55% $22,059 4.33% $ 5,962 3.62%
</TABLE>
77
<PAGE>
SHORT-TERM BORROWINGS. Information regarding short-term borrowings for the
periods indicated presented in the following table.
SHORT-TERM BORROWINGS
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
FOR THE INCEPTION
NINE FOR THE (MAY 22,
MONTHS YEAR ENDED 1995),
SEPTEMBER DECEMBER TO DECEMBER
30, 1997 31, 1996 31, 1995
<S> <C> <C> <C>
Securities sold under agreements to
repurchase
Balance at period end $ 695 $ 415 $ 0
Weighted average rate at period end 5.61% 5.92% 0%
Average balance during the period $ 565 $ 101 $ 0
Weighted average rate during the period 4.87% 4.59% 0%
Maximum month-end balance $ 695 $ 415 $ 0
</TABLE>
CAPITAL. The various regulatory agencies having supervisory authority over
financial institutions have adopted risk-based capital guidelines which define
the adequacy of the capital levels of regulated institutions. These risk-based
capital guidelines require minimum levels of capital based upon the risk rating
of assets and certain off-balance-sheet items. Assets and off-balance-sheet
items are assigned regulatory-risk weights ranging from 0% to 100% depending on
their level of credit risk. The guidelines classify capital in two tiers, Tier I
and Tier II, the sum of which is total capital. Tier I capital is essentially
common equity, less intangible assets. Tier II capital is essentially qualifying
long-term debt and a portion of the allowance for possible loan losses. The
Bank's capital ratios significantly exceed all regulatory minimums.
78
<PAGE>
The Bank's capital ratios were as follows:
SELECTED CAPITAL INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
AMOUNT RATIO AMOUNT RATIO
<S> <C> <C> <C> <C>
Total Capital (to risk weighed assets) $4,415 16.2% $4,342 18.6%
Tier I Capital (to risk weighed assets) 4,109 15.1% $4,069 17.4%
Tier I Leverage 4,109 10.4% $4,069 13.3%
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS 129") and Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS No. 129 establishes standards for disclosing information about an entity's
capital structure. SFAS 129 is effective for financial statements for the
periods ending after December 15, 1997. Ohio River Bank will adopt SFAS 129 in
the year ending December 31, 1997 and has not yet determined the effect of the
adoption.
SFAS 128 simplifies the standards for computing earnings per share ("EPS")
previously found in APB No. 15, "Earnings per Share," and makes them comparable
to international EPS standards. It replaces the presentation of primary EPS
with a presentation of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the financial statements for all entities with
complex capital structures. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS is computed similarly
to fully diluted EPS under APB Opinion No. 15. SFAS 128 is effective for Ohio
River Bank's year ending December 31, 1997 and is not expected to have a
material impact on the financial statements.
PRINCIPAL HOLDERS OF OHIO RIVER BANK COMMON STOCK AND
OWNERSHIP OF MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of the Record Date the persons known
by Ohio River Bank to own beneficially (as determined in accordance with the
rules and regulations of the Commission) more than 5% of the outstanding Ohio
River Bank Common Stock.
NAME AND ADDRESS OF SHARES PERCENTAGE
BENEFICIAL OWNER(1) BENEFICIALLY OWNED
79
<PAGE>
Richard F. Marshall 14,615(2) 5.8%
1638 N. Second Street
Ironton, OH 45638
Charles G. Forth 12,750 5.1%
6617 Clark Drive
Barboursville, WV 25504
(1) Beneficial ownership as reported in the above table has been determined
in accordance with Rule 13d-3 under the Exchange Act. Unless otherwise
indicated, beneficial ownership includes both sole or shared voting power and
sole or shared investment power.
(2) Includes 12,640 shares owned jointly with his spouse.
SECURITY OWNERSHIP OF MANAGEMENT
OHIO RIVER BANK MANAGEMENT. The following table sets forth as of the
Record Date information concerning Ohio River Bank Common Stock that each of
the directors of Ohio River Bank (excluding Messrs. Marshall and Forth, who
are listed in the preceding table), and all current directors and executive
officers of Ohio River Bank as a group, may be deemed to beneficially own.
NAME SHARES BENEFICIALLY PERCENTAGE
OWNED(1)
Steven F. Bartram 10,752 4.3%
Dale Burcham 1,776 0.7%(2)
Betty May Ferrell-Kelly 3,000 1.2%
Edwin L. Graham 2,700 1.1%
James V. Hayes 2,688 1.1%
Keith F. Molihan 4,300 1.7%
Harley F. Mooney, Jr. 500 0.2%(2)
Patrick L. Ray 10,010 4.0%
Daniel H. Wiley 5,398 2.2%
Joseph C. Worth 100 0.04(2)
All directors and 69,189 27.7%
executive officers as a
group (13 persons)
(1) Beneficial ownership as reported in the above table has been determined
in accordance with Rule 13d-3 under the Exchange Act. Unless otherwise
indicated,
80
<PAGE>
beneficial ownership includes both sole or shared voting power and
sole or shared investment power.
(2) Less than 1%.
PREMIER MANAGEMENT. As of the Record Date, Premier's Chairman of the
Board, Marshall T. Reynolds, beneficially owned 12,250 shares of Ohio River
Bank Common Stock and Toney K. Adkins, a director of Premier, beneficially
owned 250 shares of Ohio River Bank Common Stock. No other current director
or executive officer of Premier beneficially owns any outstanding Ohio River
Bank Common Stock.
81
<PAGE>
DISSENTERS' RIGHTS
Holders of Ohio River Bank Common Stock have the right to dissent from
the Merger and to receive payment of the fair value of their shares pursuant
to Section 1115.19 of the Ohio Revised Code and upon full compliance with
Section 1701.85 of the OGCL. Ohio River Bank shareholders seeking to
exercise dissenters' rights are referred to herein as "Dissenting
Shareholders."
The following is a summary of the principal steps a Ohio River Bank
shareholder must take to perfect dissenters' rights under Section 1701.85 of
the OGCL. This summary does not purport to be complete and is qualified in
its entirety by reference to Section 1701.85, a copy of which is attached
hereto as Annex C. Any Ohio River Bank shareholder contemplating the
exercise of dissenters' rights is urged to review carefully such provisions
and to consult an attorney, since dissenters' rights will be lost if the
procedural requirements under Section 1701.85 are not fully and precisely
satisfied. To perfect dissenters' rights with respect to any shares of Ohio
River Bank Common Stock so that they become Dissenting Shares as described in
this Proxy Statement/Prospectus, a Dissenting Shareholder must satisfy each
of the following conditions:
NO VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT. Ohio River Bank
Common Stock held by the Dissenting Shareholder must be voted at the Special
Meeting against the adoption of the Merger Agreement. This requirement will
be satisfied if a proxy is signed and returned with instructions to vote
against the Merger or votes against adoption of the Merger Agreement at the
Special Meeting. A vote in favor of adoption of the Merger Agreement at the
Special Meeting constitutes a waiver of dissenters' rights. A proxy that is
returned signed but on which no voting instruction is indicated will be voted
in favor of adoption of the Merger Agreement and will constitute a waiver of
dissenters' rights. A Dissenting Shareholder may revoke his or her proxy at
any time prior to its exercise by complying with the procedures set forth
herein under "The Special Meeting -- Revocability of Proxies."
FILING WRITTEN DEMAND. Not later than 10 days after the taking of the
vote on the proposal to approve and adopt the Merger Agreement, a Dissenting
Shareholder must deliver to Ohio River Bank a written demand (the "Demand")
for payment of the fair cash value of the shares of Ohio River Bank Common
Stock with respect to which the Dissenting Shareholder seeks payment. Each
Demand should be delivered to Ohio River Bank at 221 Railroad Street,
Ironton, Ohio 45638, Attention: Secretary. It is recommended, although not
required, that such Demand be sent by registered or certified mail, return
receipt requested. Voting against approval of the Merger Agreement will not
itself constitute a Demand. Ohio River Bank will not send any further notice
to Ohio River Bank shareholders as to the date on which such 10-day period
expires.
82
<PAGE>
A Demand must identify the name and address of the holder of record of
the shares of Ohio River Bank Common Stock with respect to which payment is
sought, the number and class of such shares and the amount claimed by such
holder as the fair cash value thereof. A beneficial owner of shares must, in
all cases, have the record holder of such shares submit the Demand in respect
thereof. A Demand must be signed by the shareholder of record (or by the
duly authorized representative of such shareholder) exactly as the
shareholder's name appears on the shareholder records of Ohio River Bank. A
Demand with respect to shares owned jointly by more than one person must
identify and be signed by all of the holders of record. Any person signing a
Demand on behalf of a partnership or corporation or in any other
representative capacity (such as an attorney-in-fact, executor,
administrator, trustee or guardian) must indicate the nature of the
representative capacity and, if requested, must furnish written proof of his
or her capacity and his or her authority to sign such Demand.
Because only holders of record of Ohio River Bank Common Stock at the
close of business on the Record Date may exercise dissenters' rights, any
person who beneficially owns shares that are held of record by a broker,
fiduciary, nominee or other holder and who wishes to exercise dissenters'
rights must instruct the record holder of the shares to satisfy the
conditions outlined above. If a record holder does not satisfy, in a timely
manner, all of the conditions outlined in this section, the dissenters'
rights for all of the shares held by such record holder will be lost.
From the time the Demand is given until the termination of the rights
and obligations arising from such Demand or the purchase of the related
shares of Ohio River Bank Common Stock by Ohio River Bank, all rights
accruing to the holder thereof, including voting and dividend or distribution
rights, will be suspended. If any dividend or distribution is paid in money
on Ohio River Bank Common Stock or Premier Common Shares during the
suspension, an amount equal to the dividend or distribution that would have
been payable on such shares, but for such suspension, will be paid to the
holder of record thereof as a credit against the fair cash value of such
shares. If the right to receive the fair cash value is terminated other than
by the purchase of such shares by Ohio River Bank, all rights will be
restored to the Dissenting Shareholder and any distribution that would have
been made to the holder of record of such shares, but for the suspension,
will be made to the holder of record at the time of the termination.
If Ohio River Bank sends to a Dissenting Shareholder, at the address
specified in the Demand, a request for the certificates representing the
related shares of Ohio River Bank Common Stock, the Dissenting Shareholder,
within 15 days from the date of sending such request, is required to deliver
to Ohio River Bank the certificates requested. Ohio River Bank will then
endorse the certificates with a legend to the effect that a demand for the
fair
83
<PAGE>
cash value of the shares has been made, and promptly return such endorsed
certificates to the Dissenting Shareholder. Failure on the part of the
Dissenting Shareholder to deliver such certificates upon such request will
terminate his or her rights as a Dissenting Shareholder, at the option of
Ohio River Bank, exercised by written notice to the Dissenting Shareholder
within 20 days after the lapse of the 15-day period, unless a court, for good
cause shown, otherwise directs.
PETITION TO BE FILED IN COURT. Within three months after the service of
the Demand, if Ohio River Bank and the Dissenting Shareholder do not reach an
agreement on the fair cash value of the shares of Ohio River Bank Common
Stock subject to the Demand, the Dissenting Shareholder or Ohio River Bank
may file a complaint in the Court of Common Pleas in Lawrence County, Ohio
(the "Common Pleas Court"), or join or be joined in an action similarly
brought by another Dissenting Shareholder, for a judicial determination of
the fair cash value of the shares of Ohio River Bank Common Stock held by
such Dissenting Shareholder(s). Ohio River Bank does not intend to file any
complaint for a judicial determination of the fair cash value of any shares
of Ohio River Bank Common Stock.
Upon the motion of the complainant, the Common Pleas Court will hold a
hearing to determine whether the Dissenting Shareholder is entitled to be
paid the fair cash value of his or her shares of Ohio River Bank Common
Stock. If the Common Pleas Court finds that the Dissenting Shareholder is so
entitled, it may appoint one or more appraisers to receive evidence and to
recommend a decision on the amount of such fair cash value. The Common Pleas
Court is thereafter required to make a finding as to the fair cash value of
such shares and to render a judgment against Ohio River Bank for the payment
thereof, with interest at such rate and from such date as the Common Pleas
Court considers equitable. Costs of the proceeding, including reasonable
compensation to the appraiser or appraisers, to be fixed by the Common Pleas
Court, are to be apportioned or assessed as the Common Pleas Court considers
equitable. Payment of the fair cash value of such shares is required to be
made within 30 days after the date of final determination of such value or
the Effective Time of the Merger, whichever is later, only upon surrender to
Ohio River Bank of the certificates representing the shares of Ohio River
Bank Common Stock for which payment is made.
Fair cash value is the amount that a willing seller, under no compulsion
to sell, would be willing to accept, and that a willing buyer, under no
compulsion to purchase, would be willing to pay, but in no event may the fair
cash value exceed the amount specified in the Demand. Because the Merger
requires the approval of the Ohio River Bank shareholders, the fair cash
value is to be determined as of the day prior to the day of the Special
Meeting. In computing this value, any appreciation or depreciation in the
84
<PAGE>
market value of the shares of Ohio River Bank Common Stock held by the
Dissenting Shareholder resulting from the Merger is excluded.
The dissenters' rights of any Dissenting Shareholder will terminate if,
among other things, (i) he or she has not complied with Section 1701.85 of
the OGCL (unless the Ohio River Bank Board of Directors waives compliance),
(ii) the Merger is abandoned or otherwise not carried out or such Dissenting
Shareholder withdraws his or her Demand with the consent of the Ohio River
Bank Board of Directors or (iii) no agreement has been reached between Ohio
River Bank and the Dissenting Shareholder as to the fair cash value for the
shares and neither the Dissenting Shareholder nor Ohio River Bank shall have
timely filed or joined in a complaint in the Common Pleas Court. For a
discussion of the tax consequences to a shareholder exercising dissenters'
rights, see "The Merger -- Certain Federal Income Tax Consequences."
If holders of more than 10% of the outstanding shares of Ohio River Bank
Common Stock properly demand dissenters' rights, Premier has the right to
decline to consummate the Merger. See "The Merger Agreement -- Conditions to
the Merger."
BECAUSE A PROXY CARD THAT DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT, A OHIO RIVER BANK SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS'
RIGHTS MUST EITHER NOT SIGN AND RETURN A PROXY CARD OR, IF HE OR SHE SIGNS
AND RETURNS A PROXY CARD, HE OR SHE MUST VOTE AGAINST THE PROPOSAL TO ADOPT
THE MERGER AGREEMENT.
EXPERTS
The consolidated financial statements of Premier as of December 31, 1996
and 1995, and for the years ended December 31, 1996 and 1995, incorporated
herein by reference to the Premier 1996 Annual Report accompanying this Proxy
Statement/Prospectus, have been examined by Eskew & Gresham, PSC, independent
certified public accountants, as stated in their report thereon, and have
been so incorporated in reliance on the report of Eskew & Gresham, PSC set
forth therein, given on the authority of said firm as experts in accounting
and auditing. The consolidated financial statements of Premier for the year
ended December 31, 1994, incorporated herein by reference to the 1996 Premier
Annual Report, have been examined by McNeal, Williamson & Co., independent
certified public accountants, as stated in their report thereon, and have
been so incorporated in reliance on the report of McNeal Williamson & Co. set
forth therein, given on the authority of such firm as experts in accounting
and auditing.
The financial statements of Ohio River Bank as of December 31, 1996 and
1995, and for the year ended December 31, 1996 and from May 22, 1995 (date of
inception) to December 31, 1995, included in this Proxy Statement/Prospectus,
have been examined by Kelly
85
<PAGE>
Galloway & Company PSC independent certified public accountants, as stated in
their report thereon appearing in this Proxy Statement/Prospectus, and have
been included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Premier Common Shares being offered hereby will be
passed upon on for Premier by David W. Harper, Esq., Louisville, Kentucky.
OTHER MATTERS
The Ohio River Bank Board of Directors is not aware of any business that
will be presented at the Special Meeting other than as set forth herein and
in the accompanying Notice of Special Meeting. However, if any other matters
are properly presented at the Special Meeting, the persons designated in the
proxies will have discretion to vote thereon. It is anticipated that such
persons will vote on any such matters in accordance with the recommendation
of the Ohio River Bank Board of Directors.
86
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF OHIO RIVER BANK
SEPTEMBER 30, 1997 and 1996 (UNAUDITED)
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . .F-2
Statements of Operations . . . . . . . . . . . . . .F-3
Statements of Cash Flows . . . . . . . . . . . . . F-4
DECEMBER 31, 1996 and FROM MAY 22, 1995 (DATE OF INCEPTION) TO
DECEMBER 31, 1995
Independent Auditor's Report. . . . . . . . . . . . . . .F-5
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . F-6
Statements of Operations . . . . . . . . . . . . . .F-7
Statements of Changes in Shareholders' Equity. . . .F-8
Statements of Cash Flows . . . . . . . . . . . . . .F-9
Notes to Financial Statements. . . . . . . . . . . F-10
F-1
<PAGE>
OHIO RIVER BANK
BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September 30
1997 1996
--------- --------
ASSETS
Cash and due from banks $ 1,261 $ 1,535
Federal funds sold 1,770 2,427
Investment securities:
Available for sale 7,921 4,583
Loans $ 26,964 $ 21,751
Less: Unearned interest 0 0
Allowance for loan losses 306 232
--------- --------
Net loans $ 26,658 $ 21,519
Premises and equipment, net 1,608 1,754
Other assets 388 316
--------- --------
TOTAL ASSETS $ 39,606 $ 32,134
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 3,174 $ 3,048
Time deposits, $100,000 and over 5,220 4,472
Other interest bearing 26,085 20,330
--------- --------
Total deposits $ 34,479 $ 27,850
Securities sold under agreements to repurchase 695 0
Other liabilities 256 216
--------- --------
Total liabilities $ 35,430 $ 28,066
SHAREHOLDERS' EQUITY:
Common stock, $8 par value; 275,000 shares
authorized and 250,000 issued and outstanding $ 2,000 $ 2,000
Surplus 2,974 2,974
Retained deficit (806) (893)
Net unrealized gains or losses on investment
securities available for sale 8 (13)
--------- --------
Total shareholders' equity $ 4,176 $ 4,068
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 39,606 $ 32,134
F-2
<PAGE>
OHIO RIVER BANK
STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1997 1996
--------- --------
INTEREST INCOME:
Loans, including fees $ 1,742 $ 1,161
Investment securities -
Taxable 277 119
Federal funds sold and other 78 76
--------- --------
Total interest income $ 2,097 $ 1,356
INTEREST EXPENSE:
Deposits $ 1,074 $ 630
Repurchase agreements and other borrowings 23 0
--------- --------
Total interest expense $ 1,097 $ 630
Net interest income $ 1,000 $ 726
Provision for loan losses 123 134
--------- --------
Net interest income after provision for
loan losses $ 877 $ 592
NON-INTEREST INCOME:
Service charges on deposit accounts $ 76 $ 46
Other 32 28
--------- --------
$ 108 $ 74
NON-INTEREST EXPENSE
Salaries and employee benefits $ 438 $ 405
Occupancy and equipment expenses 159 156
Other operating expenses 294 304
--------- --------
$ 891 $ 865
Income (loss) before income taxes $ 94 $ (199)
Provision for income taxes 0 0
--------- --------
NET INCOME (LOSS) $ 94 $ (199)
Earnings (loss) per share $ 0.38 $ (0.80)
F-3
<PAGE>
OHIO RIVER BANK
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
1997 1996
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 94 $ (199)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization, net 118 148
Provision for loan losses 123 134
Change in:
Other assets (65) (144)
Other liabilities 36 (111)
--------- --------
Net cash provided by (used in) operating activities $ 306 $ (172)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale $(4,212) $ (4,103)
Proceeds from maturities of securities
available for sale 1,900 500
Net change in federal funds sold 1,193 (194)
Net change in loans (4,226) (12,017)
Purchases of bank premises and equipment, net (7) (5)
--------- -------
Net cash used in investing activities $(5,352) $ (15,819)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits $ 4,571 $ 16,228
Net change in repurchase agreements 280 0
--------- --------
Net cash provided by financing activities $ 4,851 $ 16,228
Net increase (decrease) in cash and cash equivalents $ (195) $ 237
Cash and cash equivalents at beginning of period 1,456 1,298
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,261 $ 1,535
F-4
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Ohio River Bank
Ironton, Ohio
We have audited the accompanying balance sheets of Ohio River Bank as of
December 31, 1996 and 1995, and the related statements of operations, changes
in stockholders' equity, and cash flows for the year ended December 31, 1996
and from May 22, 1995 (date of inception) to December 31, 1995. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ohio River Bank as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the year ended December 31, 1996 and from May 22, 1995 (date of
inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
[SIG]
January 10, 1997
F-5
<PAGE>
OHIO RIVER BANK
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
----------- -----------
CASH AND DUE FROM BANKS $ 1,456,420 $ 1,297,955
FEDERAL FUNDS SOLD 2,963,000 2,233,000
INVESTMENT SECURITIES AVAILABLE FOR SALE,
at market 5,593,313 1,005,487
LOANS, less allowance for loan losses of
$272,885 and $117,104, respectively 22,555,052 9,654,262
BANK PREMISES AND EQUIPMENT, net of
accumulated depreciation 1,720,653 1,866,521
ACCRUED INTEREST RECEIVABLE 220,489 65,555
OTHER ASSETS 102,820 106,183
----------- -----------
Total assets $34,611,747 $ 16,228,963
----------- -----------
----------- -----------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
DEPOSITS:
Demand $ 2,822,126 $ 2,341,052
Interest bearing checking 6,190,921 2,567,821
Savings 2,852,669 1,481,123
Time, $100,000 and over 5,217,415 1,420,689
Other time 12,824,792 3,811,228
----------- ------------
29,907,923 11,621,913
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE 415,000 -
ACCRUED INTEREST PAYABLE 115,521 23,781
OTHER LIABILITIES 104,489 303,134
----------- ------------
Total liabilities 30,542,933 11,948,828
----------- ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock; $8 par value; 275,000 shares
authorized and 250,000 issued and outstanding 2,000,000 2,000,000
Surplus 2,973,513 2,973,513
Retained deficit (899,076) (693,378)
Net unrealized loss on investment securities available
for sale, net of applicable deferred income taxes of $2,897 (5,623) -
----------- ------------
Total stockholders' equity 4,068,814 4,280,135
----------- ------------
Total liabilities and stockholders' equity $34,611,747 16,228,963
----------- ------------
----------- ------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
F-6
<PAGE>
OHIO RIVER BANK
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FROM MAY 22, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995
1996 1995
----------- -----------
INTEREST INCOME:
Interest and fees on loans $ 1,685,171 $ 274,833
Interest on Federal funds sold 118,800 140,866
Interest on escrowed stock subscription funds - 41,799
Interest on U.S. Treasury securities 188,337 1,315
----------- -----------
Total interest income 1,992,308 458,813
INTEREST EXPENSE:
Interest on deposits 964,313 135,170
----------- -----------
Net interest income 1,027,995 323,643
PROVISION FOR LOAN LOSSES 193,128 118,380
----------- -----------
Net interest income after provision
for loan losses 834,867 205,263
----------- -----------
OTHER INCOME:
Service charges on deposit accounts 81,552 15,078
Other service charges, commissions, and fees 23,165 4,105
Other operating income 9,305 4,328
----------- -----------
114,022 23,511
----------- -----------
OTHER EXPENSES:
Salaries and employee benefits 559,171 300,562
Net occupancy expense 211,362 82,464
Pre-opening expenses - 342,091
Federal Reserve fees 16,477 5,216
Insurance 18,587 6,770
Data processing 120,352 64,831
Legal and accounting 30,158 22,869
Advertising and marketing 37,390 38,996
Supplies 40,063 31,606
Franchise tax 64,202 -
Other operating expenses 56,825 26,747
----------- -----------
1,154,587 922,152
----------- -----------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (205,698) (693,378)
PROVISION FOR INCOME TAXES - -
----------- -----------
NET LOSS $ (205,698) $ (693,378)
----------- -----------
----------- -----------
NET LOSS PER SHARE $ (.82) $ (2.77)
----------- -----------
----------- -----------
The accompanying notes to financial statements
are an integral part of these statements.
F-7
<PAGE>
OHIO RIVER BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FROM MAY 22, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Net unrealized loss
on investment
securities Total
Common Retained available Stockholders'
Stock Surplus Deficit for sale Equity
------------ ---------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCES, at inception
May 22, 1995 $2,000,000 $2,973,513 $ - $ - $ 4,973,513
Net loss, period ended
December 31, 1995 - - (693,378) - (693,378)
------------ ---------- --------- ------------- --------------
BALANCES,
December 31, 1995 2,000,000 2,973,513 (693,378) - 4,280,135
Net loss, year ended
December 31, 1996 - - (205,698) - (205,698)
Net change in unrealized
loss on investment securities
available for sale, net of
applicable deferred income
taxes of $2,897 - - - (5,623) (5,623)
------------ ---------- --------- ------------- --------------
BALANCES,
December 31, 1996 $2,000,000 $2,973,513 $(899,076) $(5,623) $ 4,068,814
========== ========== ========== ======== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-8
<PAGE>
OHIO RIVER BANK
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FROM MAY 22, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
OPERATING ACTIVITIES: 1996 1995
----------- ------------
<S> <C> <C>
Net loss $ (205,698) $(693,378)
Adjustments to reconcile net loss to net
cash used for operating activities -
Provision for loan losses 193,128 118,380
Provision for depreciation 156,676 44,157
Premium amortization, net of discount accretion 11,654 138
Changes in:
Accrued interest receivable (154,934) (65,555)
Other assets 6,260 (106,183)
Accrued interest payable and
other liabilities ( 46,053) 290,233
----------- ------------
Net cash used for operating activities ( 38,967) (412,208)
----------- ------------
INVESTING ACTIVITIES:
Net increase in Federal funds sold (730,000) (2,233,000)
Net increase in loans (13,118,570) (9,772,642)
Purchases of investment securities
available for sale (5,608,000) (1,005,625)
Proceeds from maturities of investment
securities available for sale 1,000,000 -
Purchases of bank premises and equipment (10,808) (1,910,678)
Proceeds from sale of repossessed assets 24,652 -
----------- ------------
Net cash used for investing activities (18,442,726) (14,921,945)
----------- ------------
FINANCING ACTIVITIES:
Net increase in demand deposits,
interest bearing checking, and savings accounts 5,475,720 6,389,996
Net increase in time deposits 12,810,290 5,231,917
Net increase in securities sold under agreements
to repurchase 415,000 -
Payments on liability incurred under capital
lease obligation (15,989) (11,382)
Net increase (decrease) in other borrowed funds (44,863) 48,064
Net proceeds from issuance of stock - 4,973,513
----------- ------------
Net cash provided by financing activities 18,640,158 16,632,108
----------- ------------
INCREASE IN CASH AND DUE FROM BANKS 158,465 1,297,955
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 1,297,955 -
----------- ------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 1,456,420 $ 1,297,955
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURE:
Cash paid during the year for interest $ 872,573 $ 111,389
----------- ------------
----------- ------------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Liability incurred under capital lease
obligation for purchase of equipment $ - $ 86,431
----------- ------------
----------- ------------
Net unrealized loss on investment securities available
for sale $ (8,520) $ -
----------- ------------
----------- ------------
Loans transferred to repossessed assets during the year $ 24,652 $ -
----------- ------------
----------- ------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-9
<PAGE>
OHIO RIVER BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FROM MAY 22, 1995 (DATE OF INCEPTION) TO DECEMBER 31, 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Ohio River Bank (the "Bank") is a state bank providing a full range
of banking products and services, such as commercial, installment and other
types of loans, residential mortgages, certificates of deposit, other
traditional deposit accounts and other banking products and services to
individuals and businesses, primarily those residing in or otherwise closely
associated with Lawrence County, Ohio, or its surrounding communities. The
Bank commenced business on May 22, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Material estimates that are particularly
susceptible to significant change relate to determination of the allowance
for losses on loans. Actual results could differ from those estimates.
INVESTMENT SECURITIES
Investment securities "available for sale" are carried at estimated
market value (See Note 2). Unrealized holding gains and losses, net of
applicable income taxes, are reported as a separate component of
stockholders' equity until realized.
The Bank does not have any investment securities classified as held
to maturity or as trading securities.
Realized gains and losses on the sale of securities are recognized
in the statement of operations using the specific identification method.
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
LOANS AND INTEREST INCOME
Loans are stated at the amount of unpaid principal, reduced by an
allowance for loan losses. Interest on loans is calculated by using the
simple interest method on daily balances of the principal amount outstanding.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts,
that the borrowers' financial condition is such that collection of interest
is doubtful.
Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal
balance. Interest income on other nonaccrual loans is recognized only to the
extent of interest payments received.
F-10
<PAGE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision
for loan losses charged to expenses. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management believes
will be adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans. These
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrowers'
ability to pay.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost, net of accumulated
depreciation and amortization. Depreciation is computed over the estimated
useful lives of the assets using the straight-line method.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 109. Income taxes are
provided for the tax effects of the transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes.
Provisions or credits for deferred income taxes are made as a result of
temporary differences between the financial statement and tax basis of assets
and liabilities. Temporary differences relate principally to the allowance
for loan losses and net operating loss carryforwards. A valuation allowance
is established to reduce deferred tax assets if it is more likely than not
that a deferred tax asset will not be realized.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents are
defined as those amounts included in the balance sheet caption "Cash and Due
From Banks".
LOAN ORIGINATION FEES AND COSTS
Loan origination and commitment fees along with certain direct loan
origination expenses are deferred and the net amount is amortized using the
interest method over the life of the loan.
ORGANIZATIONAL COSTS
Organizational costs represent direct costs incurred in chartering
the Bank. Organizational costs of $104,749 are being amortized to expense
using the straight-line method over five years.
NET LOSS PER SHARE
Net loss per share is calculated on the basis of the weighted
average number of shares outstanding.
(2) INVESTMENT SECURITIES
Investment securities as reflected in the accompanying balance
sheets consist of investments "available for sale" which are stated at
estimated market values. The amortized cost and estimated market values of
these investment securities at December 31, 1996 and 1995 are as follows:
F-11
<PAGE>
<TABLE>
<CAPTION>
INVESTMENTS CLASSIFIED AS AVAILABLE FOR SALE
---------------------------------------------------
Carrying
Gross Gross Value
Amortized Unrealized Unrealized (Estimated
Cost Gains Losses Market)
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
December 31, 1996
- -----------------
U.S. Treasury securities $5,601,833 $4,614 $ (13,134) $ 5,593,313
=========== ======== ============ ============
December 31, 1995
- -----------------
U.S. Treasury securities $1,005,487 $ - $ - $ 1,005,487
=========== ======== ============ ============
</TABLE>
There were no realized gains or losses for the periods ended
December 31, 1996 and 1995.
The amortized cost and estimated market value of investment
securities at December 31, 1996 and 1995, by contractual maturity, are shown
below.
Investments Classified as Available For Sale
1996 1995
------------------ --------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ----------- ----------
Due in one year or less $1,904,982 $1,906,532 $ 1,005,487 $1,005,487
Due after one year
through five years 3,696,851 3,686,781 - -
---------- ---------- ----------- ----------
$5,601,833 $5,593,313 $ 1,005,487 $1,005,487
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Investment securities carried at approximately $5,100,000 at December
31, 1996 were pledged to secure public deposits and securities sold under
agreements to repurchase.
(3) LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans at December 31, 1996 and 1995 are as
follows:
1996 1995
------------ -----------
Commercial $ 5,571,567 $ 2,605,193
Real estate 8,157,522 3,754,846
Installment 8,993,694 3,370,745
------------ -----------
22,722,783 9,730,784
Deferred loan costs, net 105,154 40,582
------------ -----------
22,827,937 9,771,366
Allowance for loan losses (272,885) (117,104)
------------ -----------
Loans, net $22,555,052 $ 9,654,262
------------ -----------
------------ -----------
Changes in the allowance for loan losses were as follows:
1996 1995
------------ -----------
Balance, beginning of period $ 117,104 $ -
Loans charged off (39,151) (1,276)
Recoveries 1,804 -
Provision charged to expense 193,128 118,380
---------- ---------
Balance, end of period $ 272,885 $ 117,104
========== =========
There were no impaired loans or loans on nonaccrual at December 31, 1996
or 1995.
F-12
<PAGE>
(4) BANK PREMISES AND EQUIPMENT
A summary of the cost and accumulated deprecation of bank premises
and equipment and their estimated useful lives at December 31, 1996 and 1995
is as follows:
Estimated
Life
(Years) 1996 1995
--------- ---------- -----------
Land - $ 68,010 $ 68,010
Land improvements 7-15 62,148 60,300
Bank buildings and improvements 30 955,215 950,352
Furniture, fixtures and
equipment 5-20 836,113 832,016
---------- -----------
1,921,486 1,910,678
Less -- Accumulated depreciation (200,833) (44,157)
---------- -----------
$ 1,720,653 $ 1,866,521
---------- -----------
---------- -----------
Depreciation expense for the periods ending December 31, 1996 and 1995,
was $156,676 and $44,157, respectively.
(5) TIME DEPOSITS
A summary of time deposit accounts by maturity at December 31, 1996 is
as follows:
Maturity Amount Percent
---------- ----------- --------
0-1 year $ 7,457,661 41.4%
1-2 years 9,834,249 54.5
2-3 years 619,468 3.4
3-4 years 26,000 0.1
4-5 years 104,829 0.6
----------- -----
$18,042,207 100.0%
----------- -----
----------- -----
(6) INCOME TAXES
There were no current income taxes payable at December 31, 1996
or 1995 and no change in deferred taxes related to income items, thereby
creating no provision for income taxes for the period ended December 31, 1996
or 1995. The Bank has a net tax operating loss carryforward of approximately
$855,000 which will be available to reduce future taxable income, if any.
Deferred tax assets (liabilities) have been provided for temporary
differences between transactions recognized for financial reporting and
income tax reporting purposes. The net deferred tax asset included in other
assets in the accompanying balance sheets as of December 31, include the
following components:
1996 1995
--------- ----------
Allowance for loan losses $ 40,991 $ 39,815
Deferred loan fees 11,169 8,813
Accumulated depreciation (18,575) 393
Organizational costs 79,479 102,741
Net operating loss carryforward 177,936 135,238
Unrealized holding loss on investments
available for sale 2,897 -
--------- ----------
293,897 287,000
Deferred tax asset valuation allowance (291,000) (287,000
--------- ----------
Net deferred tax asset $ 2,897 $ -
--------- ----------
--------- ----------
F-13
<PAGE>
(7) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED
FUNDS
Securities sold under agreements to repurchase generally are held
until canceled by either party. Securities underlying the agreements are
under the Bank's control. Other borrowed funds included in other liabilities
consist of $3,201 and $48,064 of treasury tax and loan deposits at December
31, 1996 and 1995, respectively, and generally are repaid daily.
Information concerning securities sold under agreements to
repurchase is summarized as follows:
1996 1995
-------- -------
Average monthly balance during the year $405,000 $ -
Average interest rate during the year 4.59% -
Maximum month-end balance during the year $415,000 -
U.S. Treasury note underlying the agreements
at year-end:
Carrying value $417,216 -
Estimated fair value $415,000 -
The securities sold under agreements to repurchase were outstanding from
October through December of 1996. The above monthly average balance was
calculated for that period.
(8) PENSION PLAN
The Bank sponsors a defined contribution pension plan.
Participation in the plan is available to all employees completing one year
of service and having attained twenty-one years of age. The service
requirements were waived for employees who were employed on the plan's
effective date. Bank contributions to the plan are based on a percentage of
employee contributions. The cost of the plan in 1996 and 1995 was $12,507
and $7,421, respectively.
(9) CREDIT RISKS, COMMITMENTS AND CONTINGENCIES
The Bank primarily grants residential mortgage and consumer loans
to customers in Southern Ohio, Eastern Kentucky and Western West Virginia.
The Bank is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
in the forms of unused lines of credit and unfunded loan commitments. The
Bank uses the same credit policies in making conditional obligations and
commitments as they do for on-balance sheet instruments. Such commitments
approximated $1,300,547 and $2,306,324 at December 31, 1996 and 1995,
respectively.
Normally the Bank requires collateral or other security to support
financial instruments with credit risk.
Throughout the year ending December 31, 1996, the Bank has
maintained cash balances in other financial institutions in excess of
federally insured limits. The Bank is required to maintain a compensating
balance of $100,000 with a correspondent bank.
F-14
<PAGE>
(10) RELATED PARTY TRANSACTIONS
Included in loans at December 31, 1996 and 1995 are loans to
directors, officers and their related interests. Management's opinion is
that these loans are comparable to other loans made in the ordinary course of
business. A summary of these related party loans is as follows:
1996 1995
-------- ---------
Beginning balance $829,693 $ -
New loans advanced 388,525 838,090
Repayments and reclassifications (398,863) (8,397)
-------- ---------
Ending balance $819,355 $829,693
-------- ---------
-------- ---------
(11) REGULATORY MATTERS
Banking regulations limit the amount of dividends that may be paid
without approval of the Bank's regulatory agency. Under such restrictions,
the Bank may not declare dividends in excess of the sums of the current
year's earnings (as defined) plus the retained earnings (as defined) from the
prior two years.
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a
direct material effect on the 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 qualitative
judgements by the regulators about components risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1996, that the Bank meets all capital adequacy requirements to which it
is subject.
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the
institution's category.
F-15
<PAGE>
<TABLE>
<CAPTION>
To be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes: Action Provisions:
Amount Ratio Amount Ratio Amount Ratio
----------- ------ ------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996 IS GREATER IS GREATER IS GREATER IS GREATER
Total Capital OR EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO
(to Risk Weighted Assets) $4,341,699 18.6% $1,871,840 8.0% $2,339,800 10.0%
IS GREATER IS GREATER IS GREATER IS GREATER
Tier I Capital OR EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO
(to Risk Weighted Assets) $4,068,814 17.4% $ 935,920 4.0% $1,403,880 6.0%
IS GREATER IS GREATER IS GREATER IS GREATER
Tier I Capital OR EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO
(to Average Assets) $4,068,814 13.3% $1,221,240 4.0% $1,526,550 5.0%
As of December 31, 1995 IS GREATER IS GREATER IS GREATER IS GREATER
Total Capital OR EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO
(to Risk Weighted Assets) $4,397,239 33.2% $1,061,237 8.0% $1,326,546 10.0%
IS GREATER IS GREATER IS GREATER IS GREATER
Tier I Capital OR EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO
(to Risk Weighted Assets) $4,280,135 32.3% $ 530,618 4.0% $ 795,928 6.0%
IS GREATER IS GREATER IS GREATER IS GREATER
Tier I Capital OR EQUAL TO OR EQUAL TO OR EQUAL TO OR EQUAL TO
(to Average Assets) $4,280,135 41.2% $ 412,184 4.0% $ 515,230 5.0%
</TABLE>
(12) CAPITAL LEASE
The Bank has a capital lease obligation relating to EDP equipment
for five years expiring in the year 2000. The obligation of $59,059 and
$75,049 at December 31, 1996 and 1995, respectively, is included in other
liabilities in the accompanying balance sheets.
As of December 31, 1996, bank premises and equipment includes
$86,431 in furniture, fixtures and equipment that is under the capital lease.
Accumulated depreciation related to the equipment is $27,370.
Future minimum lease payments as of December 31, 1996 were:
1997 $20,137
1998 20,137
1999 20,137
2000 5,034
--------
Future minimum lease payments 65,445
Less amount representing interest 6,386
Present value of future minimum --------
lease payments $59,059
========
(13) RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial
statements in order to conform to the 1996 presentation. These
reclassifications were between "OTHER EXPENSES" on the Statement of
Operations and had no effect on net earnings.
F-16
<PAGE>
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of November 24, 1997, among PREMIER FINANCIAL BANCORP, INC., a Kentucky
corporation ("Parent"), OHIO RIVER INTERIM BANK, an Ohio banking corporation
in organization and a wholly owned subsidiary of Parent ("Merger Sub"), and
OHIO RIVER BANK, an Ohio banking corporation (the "Company").
R E C I T A L S:
A. The Boards of Directors of Parent, Merger Sub and the Company each
have determined that a business combination involving the merger of Merger
Sub into the Company and the Company becoming a wholly owned subsidiary of
Parent is in the best interests of their respective companies and
shareholders and presents an opportunity for Parent and the Company and their
respective shareholders to achieve long-term strategic and financial
benefits, and accordingly have agreed to effect the merger provided for
herein (the "Merger") upon the terms and subject to the conditions set forth
herein.
B. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger.
C. For federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
D. It is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
E. Pursuant to the foregoing, the parties have entered into an
Agreement and Plan of Merger dated as of October 31, 1997 (the "Original
Agreement") providing for the Merger. The Original Agreement does not
provide that the shares of Parent to be issued in the Merger will be
registered under the Securities Act of 1933, as amended (the "Securities
Act").
F. The parties desire to amend the Original Agreement to provide that
the shares of Parent to be issued in the Merger will be registered under the
Securities Act and to restate the agreement of the parties by entering into
this Agreement.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger") shall be
duly executed and acknowledged by Merger Sub and the Company and thereafter
delivered to the Secretary of State of the State of Ohio, for filing, as
provided in the General Corporation Law of the State of Ohio (the "OGCL"), as
soon as practicable on or after the Closing Date (as defined in Section 1.2).
The Merger shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Ohio or at such time
thereafter as is provided in the Certificate of Merger (the "Effective Time").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date to be specified by the parties, which shall be the
first day which is five business days after satisfaction of the latest to
occur of the conditions set forth in Sections 6.1, 6.2(b) and 6.3(b) (other
than the delivery of the officers' certificates referred to in Sections
6.2(b) and 6.3(b)), provided that the other closing conditions set forth in
Article VI have been met or waived as provided in Article VI at or prior to
the Closing (the "Closing Date"), at the offices of Ohio River Bank, 221
Railroad Street, Ironton, Ohio, unless another time, date or place is agreed
to in writing by the parties hereto.
1.3 EFFECTS OF THE MERGER. At the Effective Time, (a) the separate
existence of Merger Sub shall cease and Merger Sub shall be merged with and
into the Company, (b) the articles of incorporation of the Company as in
effect immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law and (c) the code of
regulations of the Company as in effect immediately prior to the Effective
Time shall be the code of regulations of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. As
used in this Agreement, "Surviving Corporation" shall mean the Company. At
and after the Effective Time, the Merger will have the effects set forth in
Section 1701.82 of the OGCL. At the Effective Time, the principal place of
business of the Surviving Corporation shall be the address of the Company set
forth in Section 8.2(b) and the Board of Directors of the Surviving
Corporation shall be those individuals whose names and addresses are set
forth in Exhibit 1.3; PROVIDED, HOWEVER, that if any of such individuals
shall then be unable or unwilling to serve, such other person(s) as shall be
substituted by the remaining individuals who are listed in Exhibit 1.3 shall
serve as a member(s) of the Board of Directors of the Surviving Corporation
at the Effective Time.
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ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF THE COMPANY
AND MERGER SUB; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any common stock,
$8.00 par value, of the Company ("Company Common Stock"):
(a) CANCELLATION OF CERTAIN SHARES. All Company Common Stock that is
owned by the Company as treasury stock or by Parent, Merger Sub or any other
Subsidiary (as defined in Section 3.1(a)) of Parent (other than shares in trust
accounts, managed accounts and the like that are beneficially owned by third
parties (any such shares, "trust account shares")) shall be cancelled and shall
cease to exist and no shares of common stock of Parent or other consideration
shall be delivered in exchange therefor.
(b) CONVERSION OF MERGER SUB COMMON STOCK. Each of the shares of
common stock of Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
1,000 shares of common stock of the Surviving Corporation, $8.00 par value per
share.
(c) CONVERSION OF COMPANY COMMON STOCK. Each of the shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time of the Merger shall be converted into 1.2 (such number being referred to as
the "Conversion Number") fully paid and non-assessable shares of common stock
of Parent, without par value ("Parent Common Stock"), all in accordance with
Section 2.2.
(d) DISSENTING SHARES. Notwithstanding any other provisions of this
Agreement to the contrary, Company Common Stock that is outstanding immediately
prior to the Effective Time and which is held by shareholders who shall not have
voted in favor of the Merger or consented thereto in writing and who shall have
properly demanded in writing appraisal for such shares in accordance with
Section 1701.85 of the OGCL (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the consideration provided in
Section 2.1(c). Such shareholders ("Dissenting Holders") shall be entitled to
receive payment of the appraised value of such Company Common Stock held by them
in accordance with the provisions of Section 1701.85 of the OGCL, except that
all Dissenting Shares held by shareholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to appraisal of such
Company Common Stock under such Section 1701.85 shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the consideration provided in Section
2.1(c), without any interest thereon, upon surrender of the certificate or
certificates that formerly evidenced such Company Common Stock in accordance
with Section 2.2.
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(e) ADJUSTMENT TO CONVERSION NUMBER. If, prior to the Effective
Time of the Merger, Parent shall pay a dividend in, subdivide, combine into a
smaller number of shares or issue by reclassification of its shares any
Parent Common Stock, the Conversion Number shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Parent Common Stock
outstanding immediately after, and the denominator of which shall be the
number of such shares outstanding immediately before, the occurrence of such
event, and the product shall be the Conversion Number for purposes of Section
2.1(c).
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall authorize a commercial bank (or
such other person or persons as shall be acceptable to Parent and the
Company) to act as exchange agent hereunder (the "Exchange Agent"). As soon
as practicable, but not later than three business days after the Effective
Time, Parent shall deposit with the Exchange Agent, in trust for the holders
of certificates which immediately prior to the Effective Time represented
Company Common Stock converted in the Merger (the "Company Certificates"),
certificates representing the shares of Parent Common Stock (such shares of
Parent Common Stock, together with any dividends or distributions with
respect thereto in accordance with Section 2.2(c), being hereinafter referred
to as the "Exchange Fund") issuable pursuant to Section 2.1(c) in exchange
for the outstanding Company Common Stock (the "Parent Certificates").
(b) EXCHANGE PROCEDURES.
(i) Prior to the Effective Time, the Exchange Agent shall
mail to each recordholder of a Company Certificate a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Company Certificates shall pass, only upon consummation of the
Merger and the actual delivery of such letter of transmittal to the Exchange
Agent and shall contain instructions for use in effecting the surrender of
the Company Certificates in exchange for the consideration described in the
next sentence). At or after the Effective Time and upon surrender for
cancellation to the Exchange Agent of all Company Certificates held by any
recordholder of a Company Certificate, together with such letter of
transmittal duly executed, such holder shall be entitled to receive in
exchange therefor a Parent Certificate(s) representing the number of whole
shares of Parent Common Stock into which the Company Common Stock represented
by the surrendered Company Certificate(s) shall have been converted at the
Effective Time pursuant to this Article II, cash in lieu of any fractional
share of Parent Common Stock in accordance with Section 2.2(e) and certain
dividends and other distributions
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in accordance with Section 2.2(c), and the Company Certificate(s) so
surrendered shall forthwith be cancelled; PROVIDED, HOWEVER, that Company
Certificates surrendered for exchange by any person constituting an
"affiliate" of the Company for purposes of Rule 145(c) under the Securities
Act shall not be exchanged for Parent Certificates until Parent has received
a written agreement from such person as provided in Section 5.6.
(ii) Until Company Certificates have been surrendered and
exchanged for Parent Certificates as herein provided, each outstanding
Company Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender a Parent
Certificate(s) representing a whole number of shares of Parent Common Stock
and cash in lieu of any fractional share as contemplated by this Section 2.2.
No transfer taxes shall be payable in connection with any such exchange,
except that if any Parent Certificate (or any check representing cash in lieu
of a fractional share) is to be issued in the name other than that in which
the Company Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes required
by reason of the issuance of the Parent Certificate (or check) in a name
other than that of the registered holder of the Company Certificate, or shall
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as Parent or the
Exchange Agent are required to deduct and withhold under the Code, or any
provision of state, local or foreign tax law, with respect to the making of
such payment. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Company Common Stock
in respect of whom such deduction and withholding was made by Parent or the
Exchange Agent. If outstanding Company Certificates are not surrendered
prior to six years after the Effective Time of the Merger (or, in any
particular case, prior to such earlier date on which dividends and other
distributions, if any, described above would otherwise escheat to or become
the property of any governmental unit or agency), the amount of dividends and
other distributions, if any, that have become payable and that thereafter
become payable on Parent Common Stock evidenced by such Company Certificates
as provided herein shall, to the extent permitted by applicable law, become
the property of Parent (and, to the extent not in its possession, shall be
paid over to it), free and clear of all claims or interest of any person
previously entitled thereto.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record
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date after the Effective Time shall be paid to the holder of any
unsurrendered Company Certificate with respect to the Parent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 2.2(e), until the holder of
such Company Certificate shall surrender it. Subject to the effect of
applicable laws, following surrender of any such Company Certificate, there
shall be paid to the holder of the Parent Certificate representing whole
shares of Parent Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender or promptly thereafter as is practicable,
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole number of shares
of Parent Common Stock and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective
Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole number of shares of Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Parent Common Stock issued upon conversion of Company Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.2(e)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Company Common Stock, 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 that may have
been declared or made by the Company on Company Common Stock in accordance
with the terms of this Agreement on or prior to the Effective Time and which
remain unpaid at the Effective Time. At the Effective Time, the stock
transfer books of the Company shall be closed to holders of Company Common
Stock immediately prior to the Effective Time and no transfer of Company
Common Stock by any such holder shall thereafter be made or recognized. If,
after the Effective Time, Company Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(e) NO FRACTIONAL SHARES.
(i) Notwithstanding any other provision hereof, no fractional
share of Parent Common Stock and no certificate or scrip therefor, or other
evidence of ownership thereof, will be issued, and no right to receive cash
in lieu thereof shall entitle the holder thereof to any voting or other
rights of a holder of shares or fractional share interests.
(ii) Each holder of Company Common Stock shall be paid an amount in
cash equal to the product obtained by multiplying the fractional share interest
to which such holder (after taking into
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account all shares of Company Common Stock then held by such holder) would
otherwise be entitled by the midpoint between the highest "bid" and lowest
"asked" price for a share of Parent Common Stock in the over-the-counter
market for the business day immediately preceding the Closing Date.
(iii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Company Common Stock with respect
to any fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Company Common Stock subject to and in
accordance with the terms of Section 2.2(b).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the shareholders of the Company for six
months after the Effective Time shall be delivered to Parent, upon demand,
and any shareholders of the Company who have not theretofore complied with
this Article II shall thereafter look only to Parent for payment of their
claim for Parent Common Stock, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions with respect to Parent
Common Stock.
(g) NO LIABILITY. Neither Parent, Merger Sub, the Company nor the
Surviving Corporation shall be liable to any holder of Company Common Stock
for any amount paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and Merger Sub, as of the date of the
Original Agreement, that:
(a) ORGANIZATION, STANDING AND POWER. The Company is a banking
corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio. The Company is a bank duly organized under
Chapter 1113 of the Ohio Revised Code validly existing and in good standing
under the laws of the State of Ohio, and all of its deposits are insured by
the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC")
to the maximum extent permitted by law. The Company has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect
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on the Company. For purposes of this Agreement: (i) "Material Adverse
Change" or "Material Adverse Effect" means, when used with respect to Parent,
the Company or the Surviving Corporation, as the case may be, any change or
effect that is or would reasonably be expected (so far as can be foreseen at
the time) to be materially adverse to the business, properties, assets,
liabilities, condition (financial or otherwise) or results of the operations
of Parent and its Subsidiaries taken as a whole, the Company, or the
Surviving Corporation, as the case may be; provided, however, that no
Material Adverse Change or Material Adverse Effect shall be deemed to have
occurred by reason of a change or effect resulting from general economic
conditions, general industry conditions, changes in banking laws or
regulations of general applicability or interpretations thereof, or a general
deterioration in the financial markets; and (ii) "Subsidiary" means any
corporation, partnership, joint venture or other legal entity of which Parent
or the Company, as the case may be (either alone or through or together with
any other Subsidiary), owns, directly or indirectly, 50% or more of the
capital stock or other equity interest the holders of which are generally
entitled to vote for the election of the board of directors or other
governing body of such corporation, partnership, joint venture or other legal
entity.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of the Company consists of
275,000 shares of Company Common Stock, 250,000 of which are outstanding.
(ii) No bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into or exercisable for securities having
the right to vote) on any matters on which shareholders of the Company may
vote ("Voting Debt") are issued or outstanding. All outstanding shares of
Company Common Stock are, and any Company Common Stock that may be issued
pursuant to the exercise of any outstanding stock option will be, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(iii) Except as set forth in the letter dated and delivered
to Parent on November 4, 1997 (the "Company Letter"), which relates to this
Agreement and is designated therein as being the Company Letter, there is no
option, warrant, call, right (including any preemptive right), commitment or
any other agreement of any character that the Company is a party to, or may
be bound by, requiring it to issue, transfer, sell, purchase or redeem any
shares of capital stock, any Voting Debt, or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for
any shares of capital stock of the Company, or to provide funds to, or make
an investment, in the form of a loan, capital contribution or otherwise
(excepting loans made in the ordinary course of a commercial banking
business), in any other
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corporation, partnership, firm, individual, trust or other legal entity
(each, and any group of any two or more of the foregoing, a "Person").
(iv) Except as set forth in the Company Letter, there is no
voting trust or other agreement or understanding to which the Company is a
party, or may be bound by, with respect to the voting of the capital stock of
the Company.
(v) Since October 31, 1995, except as set forth in the
Company Letter, the Company has not (A) issued or permitted to be issued any
shares of capital stock, or securities exercisable for or convertible into
shares of capital stock, of the Company; (B) repurchased, redeemed or
otherwise acquired any shares of capital stock of the Company (other than the
acquisition of trust account shares); or (C) declared, set aside, made or
paid to shareholders of the Company dividends or other distributions on the
outstanding shares of capital stock of the Company.
(c) AUTHORITY.
(i) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than
the approval of this Agreement by the shareholders of the Company in
accordance with the OGCL and the Company's articles of incorporation). This
Agreement has been duly and validly executed and delivered by the Company
and, assuming this Agreement constitutes the valid and binding agreement of
Parent and Merger Sub, constitutes the valid and binding agreement of the
Company, enforceable in accordance with its terms, except that the
enforcement hereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect,
relating to creditors' rights generally, (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law) and (C) judicial discretion.
(ii) Except as set forth in the Company Letter, the execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby (subject to approval by the shareholders of
the Company of this Agreement) will not, conflict with or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation,
acceleration or payment of any obligation or the loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge or other
encumbrance on assets (any such conflict, violation, default,
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right of termination, amendment, cancellation, acceleration or payment, loss
or creation, a "Violation") pursuant to, any provisions of the articles of
incorporation or code of regulations of the Company or, except as set forth
in the Company Letter, and subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in Subsection (iii) below, result in any Violation of any loan or
credit agreement, note, mortgage, indenture, lease, Benefit Plan (as defined
in Section 3.1(o)) or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") is required by or with respect to
the Company in connection with the execution and delivery of this Agreement,
or the consummation by the Company of the transactions contemplated hereby,
the failure to obtain which would have a Material Adverse Effect on the
Company, except for (A) the filing by Parent of an application with the Board
of Governors of the Federal Reserve System (the "Federal Reserve") under the
Bank Holding Company Act of 1956, as amended ("BHC Act"), and approval of
same, (B) the filing by Merger Sub and/or the Company of an application with
the FDIC under the Bank Merger Act and approval of same, (C) the filing by
the Company of the Certificate of Merger with the Secretary of State of the
State of Ohio, and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, (D) the filing
of applications by Parent and/or Merger Sub with the Ohio Superintendent of
Financial Institutions (the "Superintendent"), and approval thereof, (E) the
filing of an application by Parent with the Commissioner of the Department of
Financial Institutions of the Commonwealth of Kentucky ("KDFI"), and approval
thereof, (F) notices to or filings with the Small Business Administration
("SBA"), or the Internal Revenue Service (the "IRS") or the Pension Benefit
Guaranty Corporation (the "PBGC") with respect to any Benefit Plans, (G) such
filings and approvals as may be required under the "blue sky" laws of various
states and (H) the filing by Parent of a Registration Statement on Form S-4
("S-4") with the Securities and Exchange Commission ("SEC"), and the
declaration by the SEC of its effectiveness.
(d) FINANCIAL STATEMENTS. The Company has made available to Parent
true and complete copies of the audited statements of financial position and the
related statements of operations, shareholders' equity and cash flows (including
the related notes thereto) of the Company for the years ended December 31, 1996
and 1995, certified by Kelley Galloway & Company P.S.C., independent certified
public accountants (the "Company Audited Financial Statements"). The Company
also has made available to Parent true and
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complete copies of the monthly and quarterly unaudited statements of
financial position and the related statements of operations, shareholders'
equity and cash flows of the Company for the monthly and quarterly periods
ended during the period of January 1, 1997 through September 30, 1997 (the
"Company Unaudited Financial Statements"). (The Company Audited Financial
Statements, the Company Unaudited Financial Statements and those audited and
unaudited financial statements that the Company hereafter shall make
available to Parent pursuant to Section 5.5 are collectively referred to as
the "Company Financial Statements"). Except as set forth in the Company
Letter, the Company Financial Statements are or, as the context requires
shall be, in compliance as to form in all material respects with applicable
accounting requirements, have been (or shall be) prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as otherwise noted therein) and fairly (or shall
fairly) present (subject, in the case of unaudited financial statements, to
normal year-end audit adjustments and any other adjustments described therein
which individually or in the aggregate will not be material in amount or
effect) the financial position of the Company as of their respective dates
and the results of its operations and cash flows for the periods presented
therein.
(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the Company Letter, since December 31, 1996, the Company has not incurred any
material liability or obligation (indirect, direct or contingent), except in
the ordinary course of its business consistent with past practices, taken any
of the prohibited actions set forth in Section 4.1, or suffered any change,
or any event involving a prospective change, in its business, financial
condition or results of operations that has had, or is reasonably likely to
have, a Material Adverse Effect on the Company.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
Company Letter or reflected or reserved against in the Company Audited Financial
Statements for the 1996 year, the Company has no obligations or liabilities
(contingent or otherwise) that might reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company has set forth in the Company Letter, as of the date hereof, all interest
rate and currency exchange agreements, and all trading positions regarding any
form or type of derivative financial product the value of which is linked to, or
derived from, the value of an underlying asset, rate or index.
(g) ALLOWANCE FOR CREDIT LOSSES. Except as set forth in the Company
Letter, the allowance for credit losses (the "Allowance") shown on the
statements of financial position of the Company as of September 30, 1997
included in the Company Financial Statements was, and the Allowance shown on
each of the statements of condition of the Company as of a date subsequent to
the
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execution of this Agreement will be, in each case as of the dates thereof,
determined in accordance with safe and sound banking practices and the
guidelines and policies of the FDIC, and are (and will be) adequate, in the
reasonable judgment of management, to provide for losses relating to or
inherent in the loan and lease portfolios (including accrued interest
receivable) of the Company and other extensions of credit (including letters
of credit and commitments to make loans or extend credit) by the Company.
(h) ENVIRONMENTAL MATTERS. Except as set forth in the Company
Letter, to the knowledge of the Company, neither the Company nor any
properties presently or previously owned or operated by the Company has been
or is in violation of or liable under any Environmental Law (as hereinafter
defined). There are no actions, suits or proceedings, or demands, claims,
notices or, to the knowledge of the Company, investigations (including
notices, demand letters or requests for information from any environmental
agency), instituted or pending, or to the knowledge of the Company,
threatened, relating to the liability of any properties owned or operated by
the Company under any Environmental Law. "Environmental Law" means any
federal, state or local law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order, judgment, decree,
injunction or agreement between the Company and any Governmental Entity
relating to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
ground water, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, whether by type or by quantity, including
any material containing any such substance as a component; and includes,
without limitation, the Resource Conservation and Recovery Act, the Clean Air
Act, the Federal Water Pollution Control Act, the Toxic Substances Control
Act and the Comprehensive Environmental Response, Compensation and Liability
Act.
(i) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company for inclusion in (i) the S-4 to be filed with the SEC by
Parent in connection with the issuance of Parent Common Stock in the Merger
will, at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the proxy statement of the
Company contained within the S-4 (the "Proxy Statement") will, at the date of
mailing to shareholders of the Company and at the time of the meeting of
shareholders of the Company to be held in connection with the
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Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Proxy Statement (except for such portions thereof that
relate only to Parent and Merger Sub) will comply as to form in all material
respects with the provisions of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder, to
the extent applicable. The information set forth in the Company Letter by
the Company for purposes of this Agreement is true and accurate in all
material respects.
(j) NO DEFAULT. Except as set forth in the Company Letter, no
Violation exists on the part of the Company with respect to any term,
condition or provision of (i) its articles of incorporation or bylaws, (ii)
any note, mortgage, indenture, other evidence of indebtedness, guaranty,
license, agreement or other contract, instrument or contractual obligation to
which the Company is now a party or by which it or any of its properties or
assets may be bound, or (iii) any order, writ, injunction or decree
applicable to the Company, except for possible Violations that, individually
or in the aggregate, do not, and, insofar as reasonably can be foreseen, in
the future will not, have a Material Adverse Effect on the Company.
(k) COMPLIANCE WITH LICENSES, PERMITS AND APPLICABLE LAWS. The
Company has received such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
governmental entities (the "Company Permits") as are necessary to own or
lease and operate its properties and to conduct its business as currently
owned or leased and conducted, and all such Company Permits are valid and in
full force and effect. The Company is in compliance in all material respects
with its obligations under the Company Permits, with only such exceptions as,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company, and no event has occurred that
allows, or after notice of lapse of time, or both, would allow, revocation or
termination of any material Company Permit. Except as set forth in the
Company Letter, the business of the Company is not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity,
except for possible violations that individually or in the aggregate do not,
and in the future will not, have a Material Adverse Effect on the Company.
Except for routine examinations by Governmental Entities charged with the
supervision or regulation of banks or bank holding companies or the insurance
of bank deposits ("Bank Regulators"), as of the date of this Agreement, to
the knowledge of the Company, no investigation by any Governmental Entity
with respect to the Company is pending or threatened.
(l) ACTIONS AND PROCEEDINGS. Except as set forth in the Company
Letter, there are no outstanding orders, judgments,
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injunctions, awards or decrees of any Governmental Entity against or
affecting the Company, any of its current or former directors, employees,
consultants, agents or shareholders, as such, any of its properties, assets
or business or any Company Benefit Plan (as defined in Section 3.1(o)).
Except as set forth in the Company Letter, there are no actions, suits or
claims or legal, administrative or arbitration proceedings or, to the
knowledge of the Company, investigations pending or threatened, against or
affecting the Company, any of its current or former directors, officers,
employees, consultants, agents or shareholders, as such, any of its
properties, assets or business or any Company Benefit Plan that if brought
(if not now pending) would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. There are no
actions, suits or claims or legal, administrative or arbitration proceedings
or, to the knowledge of the Company, investigations or labor disputes pending
or threatened, against or affecting the Company, any of its current or former
directors, officers, employees, consultants, agents or shareholders, as such,
any of its properties, assets or business or any Company Benefit Plan
relating to the transactions contemplated by this Agreement.
(m) TAXES. To the Company's knowledge, the Company has filed all
tax returns required to be filed by it and has paid, or has set up an
adequate reserve for the payment of, all Taxes required to be paid as shown
on such returns, and the most recent Company Financial Statements reflect an
adequate reserve for all Taxes payable by the Company accrued through the
date of such financial statements. No material deficiencies for any Taxes
have been proposed, asserted or assessed against the Company that are not
adequately reserved for. Except with respect to claims for refund, the
federal income tax returns of the Company have been examined by and settled
with the IRS, or the statute of limitations with respect to such years has
expired (and no waiver extending the statute of limitations has been
requested or granted), for all years through 1993. For the purpose of this
Agreement, the term "Taxes" (including, with correlative meaning, the term
"tax") shall include, except where the context otherwise requires, all
federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, unemployment (including unemployment insurance
premiums or contributions), use, property, withholding, excise, occupancy,
and other taxes, duties or assessments of any nature whatsoever, together
with all interest, penalties and additions imposed with respect to such
amounts.
(n) CERTAIN AGREEMENTS. Except as set forth in the Company Letter,
and except for this Agreement, as of the date of this Agreement, the Company is
not a party to any oral or written (i) employment or other agreement, contract,
commitment, program, policy or arrangement requiring the Company to pay
compensation (including any salary, bonus, deferred compensation, incentive
compensation, severance, vacation or sick pay, or any other fringe
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benefit payment) or any other type of remuneration to any Person, (ii)
agreement or plan, including any stock option plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, (iii) contract or agreement not terminable on 30 days' or less
notice involving the payment of more than $5,000 in any 12 month period; (iv)
contract or agreement that materially limits the ability of Company to
compete in any line of business or with any Person or in any geographic area
or during any period of time, or (v) any other material contract the
disclosure and inclusion as an exhibit of which would be required by Item 601
of Regulation S-K of the SEC if the Company were a corporation making filings
with the SEC under the periodic reporting requirements of Section 13 of the
Exchange Act and the rules and regulations of the SEC thereunder.
(o) BENEFIT PLANS.
(i) The Company has disclosed in the Company Letter each
employee benefit plan (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, ("ERISA")) (all the foregoing being herein called
"Benefit Plans"), maintained or contributed to by the Company (the "Company
Benefit Plans"). The Company will make available to Parent a true and
correct copy of (a) the most recent annual report (Form 5500) filed with the
IRS, (B) each such Company Benefit Plan, (C) each trust agreement relating to
such Company Benefit Plan, (D) the most recent summary plan description for
each Company Benefit Plan for which a summary plan description is required,
(E) the most recent actuarial report or valuation relating to a Company
Benefit Plan subject to Title IV of ERISA and (F) the most recent
determination letter issued by the IRS with respect to any Company Benefit
Plan qualified under Section 401(a) of the Code.
(ii) With respect to the Company Benefit Plans, individually
and in the aggregate, except as set forth in the Company Letter, no event has
occurred and, to the knowledge of the Company, there exists no condition or
set of circumstances, in connection with which the Company could be subject
to any liability (except liability for benefits, claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
(p) SUBSIDIARIES. The Company has no Subsidiaries.
(q) AGREEMENTS WITH BANK REGULATORS. The Company is not a party
to any written agreement or memorandum of understanding with, or a party to
any commitment letter or similar undertaking to, or subject to any order or
directive by, nor is it a recipient
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of any extraordinary supervisory letter from, any Bank Regulator which
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, its credit policies or its management, nor has the
Company been advised by any Bank Regulator that it is contemplating issuing
or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter or similar
submission.
(r) VOTE REQUIRED. The affirmative vote of the holders of
two-thirds of the outstanding shares of Company Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of Company
capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
(s) PROPERTIES.
(i) Except as set forth in the Company Letter, the Company (A)
has good, valid and marketable title to all the properties and assets
reflected in the latest audited financial statements included in the Company
Financial Statements as being owned by the Company, or acquired after the
date thereof (except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of all mortgages,
pledges, security interests, claims, liens, charges, options or other
encumbrances of any nature whatsoever (including, without limitation, in the
case of real property, easements and rights-of-way) (collectively, "Liens"),
except (x) statutory Liens securing payments not yet due, (y) Liens on assets
of the Company incurred in the ordinary course of a commercial banking
business and (z) such Liens and imperfections or irregularities of title that
do not materially affect the use of the properties or assets subject thereto
or affected thereby or otherwise materially impair business operations at
such properties, and (B) is the lessee of all leasehold estates reflected in
the latest audited financial statements included in the Company Financial
Statements or acquired after the date thereof (except for leases that have
expired by their terms since the date thereof) and is in possession of the
properties purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to the Company's knowledge, the
lessor.
(ii) The Company has set forth in the Company Letter the
street address of all real property currently owned by the Company, including
properties held by the Company as a result of foreclosure or repossession or
carried on the Company's books as "other real estate owned" (the "Current
Real Properties"). Except as set forth in the Company Letter, the Current
Real Properties are in generally good condition and have been well maintained
in accordance with reasonable and prudent business practices applicable to
like facilities. Except as set forth in the Company Letter, there are no
proceedings, claims, disputes or conditions affecting any
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of the Current Real Properties or leasehold interests of the Company that,
insofar as reasonably can be foreseen, may curtail or interfere with the use
of such property.
(t) CORPORATE DOCUMENTS, BOOKS AND RECORDS. The Company has made
available to Parent true and complete copies of the articles of incorporation
and code of regulations of the Company. The minute books of the Company
contain complete and accurate records in all material respects of all
meetings and other corporate actions of its shareholders and Board of
Directors (including committees of the Board of Directors). The stock
transfer records of the Company are, to the knowledge of the Company,
complete and accurate in all material respects.
(u) INSURANCE. The Company maintains with financially sound and
reputable insurance companies insurance policies and bonds in force in such
amounts and against such liabilities and risks as companies engaged in a
similar business, in accordance with good business practice, customarily
would be insured. Except as set forth in the Company Letter, to the
Company's knowledge, the Company is not liable for any material, retroactive
premium adjustments. All such insurance policies and bonds are valid,
enforceable and in full force and effect and, except as set forth in the
Company Letter, the Company has not received any notice of premium increases
or cancellation and, to the Company's knowledge, no grounds for any
cancellation notice exists. Except as set forth in the Company Letter, since
October 31, 1995, the Company has not failed to make a timely claim with
respect to any matter giving rise to a claim or potential claim under any
such insurance policies and bonds where such failure to make a timely claim
would have a Material Adverse Effect on the Company.
(v) POTENTIAL COMPETING INTERESTS. Except as set forth in the
Company Letter, (i) no director, officer or key employee or, to the Company's
knowledge, any beneficial owner of 10% or more of any class of capital stock
of the Company (a "Ten Percent Owner"), directly or indirectly beneficially
owns a 5% or more interest in any institution that is engaged in the business
of making loans and/or taking deposits, (ii) no director, officer or key
employee of the Company or, to the Company's knowledge, any Ten Percent Owner
has any interest, direct or indirect, in any contract or agreement with,
commitment or obligation of or to, or claim against, the Company (excluding
contracts, agreements or obligations with respect to monies borrowed from, or
claims for deposits maintained with, the Company in the ordinary course of a
commercial banking business consistent with safe and sound banking
practices), and (iii) the Company does not use any real or personal property
in which any director, officer or key employee or, to the Company's
knowledge, Ten Percent Owner directly or indirectly beneficially owns a 5% or
more interest in any such real or personal property.
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(w) POOLING OF INTERESTS. To the Company's knowledge, the Company
has not taken or failed to take any action that would prevent the accounting
for the Merger as a pooling of interests in accordance with Accounting
Principles Board Opinion No. 16, the interpretive releases issued pursuant
thereto, and the pronouncements of the SEC.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub jointly and severally represent and warrant to the
Company, as of the date of the Original Agreement, as follows:
(a) ORGANIZATION, STANDING AND POWER. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky. Each of Parent's Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation or organization. Each of Parent and its Subsidiaries
has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, except where the failure to be so
qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of Parent consists of
10,000,000 shares of common stock, without par value ("Parent Common Stock"),
and 1,000,000 shares of preferred stock, without par value ("Parent Preferred
Stock"), of which 4,209,090 shares of Common Stock are outstanding, 476,300
shares of Common Stock are reserved for issuance in connection with Parent's
acquisition of The Sabina Bank, Sabina, Ohio, 100,000 shares of Common Stock
are reserved for issuance under Parent's 1996 Employee Stock Ownership
Incentive Plan and no shares of Common Stock are held by Parent in its
treasury. There are no shares of Parent Preferred Stock outstanding,
reserved for issuance or held by Parent in its treasury.
(ii) No Voting Debt of Parent is issued or outstanding. All
outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
(iii) Except as set forth in the Parent SEC Documents (as
defined in Section 3.2(d)) or the letter dated and delivered to the Company
on the date of the Original Agreement (the "Parent Letter"), which relates to
this Agreement and is designated therein as the Parent Letter, there is no
option, warrant, call,
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right (including any preemptive right), commitment or any other agreement of
any character that Parent or any Subsidiary is a party to, or may be bound
by, requiring it to issue, transfer, sell, purchase or redeem any shares of
capital stock, any Voting Debt, or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of
capital stock of Parent or any Subsidiary, or to provide funds to, or make an
investment (in the form of a loan, capital contribution or otherwise) in, any
of Parent's Subsidiaries or (excepting loans made in the ordinary course of a
commercial banking business) any other Person.
(iv) Except as set forth in the Parent SEC Documents or the
Parent Letter, and except for this Agreement, there is no voting trust or other
agreement or understanding to which Parent or any Subsidiary is a party, or may
be bound by, with respect to the voting of the capital stock of Parent or any
Subsidiary.
(v) Since December 31, 1994, except as set forth in the Parent
SEC Documents or the Parent Letter, Parent has not (A) issued or permitted to be
issued any shares of capital stock, or securities exercisable for or convertible
into shares of capital stock, of Parent or any Subsidiary; (B) repurchased,
redeemed or otherwise acquired, directly or indirectly through any Subsidiary,
any shares of capital stock of Parent or any Subsidiary (other than the
acquisition of trust account shares); or (C) declared, set aside, made or paid
to shareholders of Parent dividends or other distributions on the outstanding
shares of capital stock of Parent, other than regular quarterly cash dividends.
(c) AUTHORITY.
(i) Each of Parent and Merger Sub has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Parent and Merger Sub,
and by Parent as the shareholder of Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Parent and
Merger Sub, and assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes the valid and binding agreement of
Parent and Merger Sub, enforceable in accordance with its terms, except that
the enforcement hereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect,
relating to creditors' rights generally, (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law) and (C) judicial discretion.
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(ii) The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will not, create
any Violation under any provisions of the articles of incorporation or bylaws
of Parent or any Subsidiary or, except as set forth in the Parent Letter and
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
Subsection (iii) below, result in any Violation of any loan or credit
agreement, note, mortgage, indenture, lease, Benefit Plan (as defined in
Section 3.1(o)) or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any Subsidiary or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to Parent or any Subsidiary in connection with the
execution and delivery of this Agreement, or the consummation by Parent and
Merger Sub of the transactions contemplated hereby, the failure to obtain
which would have a Material Adverse Effect on Parent, except for (A) the
filing by Parent of an application with the Federal Reserve under the BHC
Act, and approval of same, (B) the filing by Merger Sub and/or the Company of
an application with the FDIC under the Bank Merger Act and approval of same,
(C) the filing by the Company of the Certificate of Merger with the Secretary
of State of the State of Ohio and appropriate documents with the relevant
authorities of other states in which the Company or any Subsidiary is
qualified to do business, (D) the filing of applications by Parent and/or
Merger Sub with the Superintendent, and the approval thereof, (E) the filing
of an application by Parent with the KDFI, and approval thereof, (F) notices
to or filings with the SBA, or the IRS or the PBGC with respect to any
Benefit Plans, (G) such filings and approvals as may be required under the
"blue sky" laws of various states and (H) the filing by Parent of the S-4
with the SEC, and the declaration by the SEC of its effectiveness.
(d) SEC DOCUMENTS: FINANCIAL STATEMENTS. Parent has made
available to the Company each document filed by it since December 31, 1996
with the SEC under the Securities Act or the Exchange Act, including without
limitation, (i) Parent's Annual Report on Form 10-K for the year ended
December 31, 1996, (ii) Parent's Quarterly Report on Form 10-Q for the period
ended June 30, 1997, and (iii) Parent's definitive proxy statement for its
1997 Annual Meeting of Shareholders held May 6, 1997, each in the form
(including exhibits and any amendments) filed with the SEC (collectively, the
"Parent SEC Documents"). As of their respective dates, each of the Parent
SEC Documents did not, and each of the Parent SEC Documents filed with the
SEC subsequent to the date hereof will 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 made therein, in light of the
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circumstances in which they were made, not misleading, provided, that Parent
makes no representation with respect to information supplied by the Company
for use in Parent SEC Documents after the date hereof. Each of the
consolidated balance sheets included in or incorporated by reference into the
Parent SEC Documents (including their related notes and schedules) fairly
presents the consolidated financial condition of Parent and its consolidated
Subsidiaries as of its date and each of the consolidated statements of income
and of changes in financial position included or incorporated by reference
into the Parent SEC Documents (including any related notes and schedules)
fairly presents the results of operations, retained earnings and changes in
financial position, as the case may be, of Parent and its consolidated
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements to normal year-end adjustments and any other adjustments
described therein which individually or in the aggregate will not be material
in amount or effect), in each case in accordance with generally accepted
accounting principals consistently applied during the periods involved,
except as may be noted therein.
(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the Parent Letter, since December 31, 1996, neither Parent nor any
Subsidiary has incurred any material liability or obligation (indirect,
direct or contingent), except in the ordinary course of its business
consistent with past practices, or suffered any change, or any event
involving a prospective change, in its business, financial condition or
results of operations that has had, or is reasonably likely to have, a
Material Adverse Effect on Parent.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
the Parent Letter or disclosed in the Parent SEC Documents, neither Parent
nor any Subsidiary has any obligations or liabilities (contingent or
otherwise) that might reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Parent has set forth in the
Parent Letter, as of the date hereof, all interest rate and currency exchange
agreements, and all trading positions regarding any form or type of
derivative financial product the value of which is linked to, or derived
from, the value of an underlying asset, rate or index.
(g) INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Parent for inclusion in (i) the S-4 to be filed with the SEC
by Parent in connection with the issuance of Parent Common Stock in the
Merger will, at the time the S-4 is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement will, at the date of mailing to shareholders of the
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Company and at the time of the meeting of shareholders of the Company to be
held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy
Statement (except for such portions thereof that relate only to the Company)
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. The information set
forth in the Parent Letter by Parent for purposes of this Agreement is true
and accurate in all material respects.
(h) POOLING OF INTERESTS. To Parent's knowledge, neither Parent
nor any Subsidiary has taken or failed to take any action that would prevent
the accounting for the Merger as a pooling of interests in accordance with
Accounting Principles Board Opinion No. 16, the interpretive releases issued
pursuant thereto, and the pronouncements of the SEC.
(i) INDEPENDENT OPERATION. It has been the practice of Parent
since its formation to maintain the separate charters of commercial banks
that become affiliated with, and Subsidiaries of, Parent. It has also been
the practice of Parent to continue the directorships of directors and the
employment of officers and employees of commercial banks that become
affiliated with, and Subsidiaries of, Parent following consummation of
transactions resulting in such affiliations with Parent.
ARTICLE IV
CONDUCT OF THE COMPANY PRIOR TO CLOSING
4.1 CONDUCT OF BUSINESS.
(a) Except as set forth in the Company Letter, the Company agrees
that during the period from the date of this Agreement to the Effective Time
(unless Parent shall otherwise agree in writing and except as otherwise
contemplated by this Agreement), the Company will conduct its operations
according to its ordinary and usual course of business consistent with past
practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organization, keep available the service
of its current directors, officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that goodwill and ongoing business shall not be impaired
in any material aspect at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise permitted in this
Agreement prior to the Effective Time or except as set forth in the Company
Letter, the Company will not, without the prior written consent of Parent:
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(i) issue, sell, grant, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge
or other encumbrance of (A) any additional shares of capital stock of any
class (including shares of Company Common Stock), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for
any shares of capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire
any shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), or (B) any other securities in respect of,
in lieu of, or in substitution for, shares of Company Common Stock
outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding shares of
Company Common Stock (except for the acquisition of trust account shares);
(iii) split, combine, subdivide or reclassify any shares of
Company Common Stock or declare, set aside for payment or pay any dividend,
or make any other actual, constructive or deemed distribution, whether in
cash, stock, property or otherwise, in respect of any shares of Company
Common Stock or otherwise make any payments to shareholders in their capacity
as such;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company (other than the Merger);
(v) adopt any amendments to its articles of incorporation or
code of regulations;
(vi) make any acquisition or disposition of assets or
securities, except in the ordinary course of business consistent with past
practices;
(vii) incur any indebtedness for borrowed money or guarantee
any such indebtedness or make any loans, advances or capital contributions
to, or investments in, any other Person, other than in the ordinary course of
a commercial banking business consistent with past practices, it being
understood and agreed that the incurrence of indebtedness in the ordinary
course of a commercial banking business shall include the creation of deposit
liabilities, purchases of federal funds, sales of certificates of deposit and
entering into repurchase agreements;
(viii) offer any new deposit or loan product or service or
change its lending, investment, liability management,
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loan loss provision, loan loss charge-off or other material banking policies;
(ix) grant any increases in the compensation of any of its
directors, officers or employees, except in the ordinary course of business and
in accordance with past practice or as may be approved on a case by case basis
by Parent;
(x) pay or agree to pay any pension, retirement allowance,
severance or other employee benefit not required or contemplated by any of
the existing Company Benefit Plans or any agreements or arrangements as in
effect on the date hereof to any such director, officer or employee, whether
past or present;
(xi) enter into any new or amend any existing employment or
severance or termination agreement with any director, officer or employee;
(xii) except in the ordinary course of business consistent
with past practice or as may be required to comply with applicable law,
become obligated under any new Benefit Plan or amend any Company Benefit Plan
in existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder;
(xiii) make any capital expenditures or commitments for any
capital expenditures, other than capital expenditures or commitments for any
capital expenditures set forth in the Company Letter;
(xiv) make any material changes in its customary methods of
marketing;
(xv) take, or agree to commit to take, any action that would make
any representation or warranty of the Company contained herein inaccurate in any
respect at, or as of any time prior to, the Effective Time; or
(xvi) change its method of accounting in effect at December 31,
1996, except as required by changes in generally accepted accounting principles
as concurred in by each party's independent auditors, or change its fiscal year;
(xvii) take any action that would, or reasonably might be
expected to, adversely affect the ability of the Company or Parent to obtain
any of the Requisite Regulatory Approvals (as defined in Section 6.1(b))
without imposition of a condition or restriction of the type referred to in
Section 6.1(e);
(xviii) authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any
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contract, agreement, commitment or arrangement to do any of the foregoing.
4.2 ACQUISITION PROPOSALS.
(a) The Company shall not, and the Company shall direct and use its
best efforts to cause its officers, directors, employees, agents and
representatives (including without limitation any attorney, accountant,
investment banker or other advisor retained by it) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its shareholders) with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, the Company (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations or discussions with, or furnish any information or data to, any
third party relating to an Acquisition Proposal. The Company and its officers,
directors, employees, agents and representatives shall immediately cease any
existing discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal.
(b) Notwithstanding anything to the contrary contained in this
Section 4.2, the Company and the Board of Directors of the Company (A) may
furnish information to, and participate in discussions or negotiations with any
third party that after the date hereof submits an unsolicited bona fide written
Acquisition Proposal to the Company if the Company's Board of Directors
determines in good faith, based upon the written advice of outside legal
counsel, that the failure to furnish such information or participate in such
discussions or negotiations may reasonably constitute a breach of the Board's
fiduciary duties under applicable law, and (B) shall be permitted to (y) take
and disclose to the Company's shareholders a position with respect to the Merger
or an Acquisition Proposal, or amend or withdraw such position, or (z) make
disclosure to the Company's shareholders, in each case either with respect to or
as a result of an Acquisition Proposal, if the Company's Board of Directors
determines in good faith, based upon the written advice of outside legal
counsel, that the failure to take such action may reasonably constitute a breach
of the Board's fiduciary duties under applicable law; PROVIDED, that the Company
shall not enter into any acquisition agreement with respect to any Acquisition
Proposal except concurrently with the termination of this Agreement in
accordance with the provisions of Section 7.1(d) and shall not enter into any
other agreements with respect to an Acquisition Proposal except concurrently
with such termination unless, and only to the extent that, such other agreements
would facilitate the process of providing information to, or conducting
discussions or negotiations with, the parties submitting such an
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Acquisition Proposal, such as confidentiality and standstill agreements.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 ACCESS TO INFORMATION. Upon reasonable notice, the Company and
Parent shall each (and Parent shall cause its Subsidiaries to) afford to the
officers, directors, employees, accountants, counsel and other authorized
representatives of the other ("Representatives") reasonable access, during
normal business hours throughout the period prior to the Effective Time, to
its books and records, properties, officers, directors, employees, counsel,
accountants and other representatives, and, during such period, shall (and
Parent shall cause its Subsidiaries to) make available to such
Representatives (i) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws or federal or state banking laws
(other than reports or documents that such party is not permitted to disclose
under applicable law) and (ii) all other information concerning its business,
properties and personnel and all financial operating and other data as may
reasonably be requested. The parties will hold any such information that is
non-public in confidence and, without limitation on its obligations under the
preceding clause, Parent will hold any such information in confidence until
such time that such information is or becomes generally available to the
public other than as a result of a disclosure by Parent or any of its
Representatives; PROVIDED, HOWEVER, that this sentence shall not prohibit
disclosure of such information to the extent required or reasonably
contemplated by any subpoena, civil investigative demand or other similar
process. No investigation by either Parent or Merger Sub, on the one hand,
or the Company on the other hand, shall affect the representations and
warranties of the other, except to the extent such representations and
warranties are by their terms qualified by information set forth in the
Parent Letter (in the case of Parent and Merger Sub) or the Company Letter
(in the case of the Company) to the other party.
5.2 PREPARATION OF S-4 AND THE PROXY STATEMENT. Parent shall prepare
and file with the SEC the S-4, in which the Proxy Statement will be included
as a prospectus. Parent shall use all reasonable efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger and the Company shall furnish
all information concerning the Company and the
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holders of Company Common Stock as may be reasonably requested in connection
with any such action.
5.3 SHAREHOLDER MEETING. The Company shall duly call, give notice of,
convene and hold a meeting of its shareholders to be held for the purpose of
voting upon the approval of this Agreement and the transactions contemplated
hereby. Unless the Company has determined to recommend an Acquisition Proposal
in accordance with Section 4.2(b), the Company will, through its Board of
Directors, unanimously recommend to its shareholders approval of this Agreement
and the transactions contemplated hereby. The Company shall cooperate with
Parent with respect to the timing of such meeting and shall use its best efforts
to hold such meeting as soon as reasonably practicable after the date of this
Agreement.
5.4 REASONABLE EFFORTS. Each of the Company and Parent shall, and Parent
shall cause its Subsidiaries to, use all reasonable efforts to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements that may be imposed on such party or (in the case of Parent)
its Subsidiaries with respect to the Merger and to consummate and make effective
the transactions contemplated by this Agreement, subject to the appropriate vote
of shareholders of the Company described in Section 3.2(r), including using all
reasonable efforts (i) to obtain (and to cooperate with the other party to
obtain) any necessary or appropriate consent, authorization, order or approval
of, or any exemption by, any Governmental Entity and/or any other public or
private third party in connection with the Merger and the transactions
contemplated by this Agreement, (ii) to effect all necessary registrations,
filings and submissions and (iii) to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible), subject, however, to the requisite vote of the shareholders of the
Company.
5.5 POST-SEPTEMBER 30, 1997 COMPANY FINANCIAL STATEMENTS. The Company
shall make available to Parent true and complete copies of the following:
(a) UNAUDITED FINANCIAL STATEMENTS. Any monthly and quarterly
unaudited balance sheet and the related statements of income, changes in
shareholders' equity and statements of cash flows of the Company for any monthly
or quarterly period ended subsequent to September 30, 1997 and prior to the
Effective Time; and
(b) AUDITED FINANCIAL STATEMENTS. Any audited balance sheet and the
related statements of income, changes in shareholders' equity and statements of
cash flows of the Company for any year ended after December 31, 1996 and prior
to the Effective Time.
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5.6 AFFILIATES.
(a) OF THE COMPANY. At least 30 days prior to the Closing Date, the
Company shall deliver to Parent a list of names and addresses of those persons
who were, in the Company's reasonable judgment, at the record date for its
meeting of shareholders to approve the Merger, "affiliates" (each such person,
an "Affiliate") of the Company within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company shall use all reasonable efforts
to deliver or cause to be delivered to Parent and the Company, prior to the
Closing Date, from each of the Affiliates of the Company identified in the
foregoing list, an Affiliate Letter in the form attached hereto as Exhibit
5.6(a). Parent shall be entitled to place legends as specified in such
Affiliate Letters on the certificates evidencing any Parent Common Stock to be
received by such Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for Parent
Common Stock, consistent with the terms of such Affiliate Letters.
(b) OF PARENT. At least 30 days prior to the Closing Date, Parent
shall deliver to the Company a list of names and addresses of those persons who
were, in Parent's reasonable judgment, at the record date for the meeting of
shareholders of the Company to approve the Merger, Affiliates of Parent. Parent
shall provide the Company such information and documents as the Company shall
reasonably request for purposes of reviewing such list. Parent shall use all
reasonable efforts to deliver or cause to be delivered to Parent, prior to the
Closing Date, from each of the Affiliates of Parent identified in the foregoing
list, an Affiliate Letter in the form attached hereto as Exhibit 5.6(b).
5.7 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, except as
expressly provided herein and except that expenses incurred in connection with
printing and mailing the Proxy Statement shall be shared equally by Parent and
the Company.
5.8 BROKERS OR FINDERS. Except as set forth in the Company Letter or the
Parent Letter, each of Parent and the Company respectively represents, as to
itself, its Subsidiaries (in the case of Parent) and its affiliates, that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement. Each party agrees to indemnify the other party and hold the other
party harmless from and against any and all claims, liabilities or obligations
with
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respect to any fees, commissions or expenses asserted by any Person on the
basis of any act or statement alleged to have been made by such first party or
its Subsidiary or affiliate.
5.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Company or Merger Sub, the proper officers and directors of the Company and
Merger Sub shall take all such necessary action.
5.10 INDEMNIFICATION. For a period of three years from and after the
Effective Time, Parent shall indemnify, defend and hold harmless each person who
is now or who becomes prior to the Effective Time, an officer, director or
employee of the Company (each, an "Indemnified Party" and, collectively, the
"Indemnified Parties") against (i) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement with the
approval of Parent (which approval shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of the Company, whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities") and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent the Company would have been permitted under Ohio law and its articles of
incorporation and code of regulations to indemnify such person (and Parent shall
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law upon
receipt of any undertaking required by Section 1701.13(E)(5) of the OGCL).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against Indemnified Parties (whether
arising before or after the Effective Time), (i) any counsel retained by the
Indemnified Parties for any period after the Effective Time shall be reasonably
satisfactory to Parent; (ii) after the Effective Time, Parent shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective
Time, Parent will use all reasonable efforts to assist in the vigorous defense
of any such matter, provided that Parent shall not be liable for any settlement
of any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent (but the
failure so to notify Parent shall not relieve it from any
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liability which it may have under this Section 5.10 except to the extent such
failure materially prejudices Parent), and shall deliver to Parent the
undertaking, if any, required by Section 1701.13(E)(5) of the OGCL. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties. In any case in which the
approval by the Surviving Corporation is required to effectuate any
indemnification, Parent shall cause the Surviving Corporation to direct, at
the election of any Indemnified Party (or, if more than one Indemnified
Party, a majority of the Indemnified Parties), that the determination of any
such approval shall be made by independent counsel mutually satisfactory to
the Surviving Corporation and the Indemnified Party (or, if applicable, a
majority of the Indemnified Parties).
5.11 POOLING AND TAX-FREE REORGANIZATION TREATMENT. Neither Parent nor
the Company shall intentionally cause to be taken any action, whether before
or after the Effective Time, that would disqualify the Merger as a "pooling
of interests" for accounting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Code.
5.12 EMPLOYEE BENEFIT PLANS. As soon as administratively feasible after
the Effective Time, the officers and employees of the Company shall be
provided with such employee benefits as Parent, directly or through its
Subsidiaries, generally provides to officers and employees from time to time,
including life, medical, hospitalization and disability insurance and sick
pay, personal leave and retirement plan benefits, on a non-discriminatory and
substantially similar basis. For purposes of providing such benefits to
officers and employees of the Company and its Subsidiaries after the
Effective Time, Parent shall credit such officers and employees for years of
service at the Company prior to the Effective Time for purposes of (i)
eligibility to participate, vesting and eligibility to receive benefits under
any Parent Benefit Plan and (ii) benefit accrual under any sickness, personal
leave or vacation pay plan. At and after the Effective Time, the directors
and officers of the Company and its Subsidiaries shall be provided with such
directors' and officers' liability insurance coverage as Parent from time to
time determines to provide to its directors and officers.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
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(a) SHAREHOLDER APPROVAL. This Agreement shall have been
respectively approved and adopted by the affirmative vote of the holders of
the outstanding shares of Company Common Stock.
(b) OTHER APPROVALS. Other than the filing of the Certificate of
Merger provided for by Section 1.1, all authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any Governmental Entity (all of the foregoing,
"Consents") that are necessary for the consummation of the Merger, other than
immaterial Consents the failure to obtain which would not have a significant
adverse effect on the consummation of the Merger or on Parent and its
Subsidiaries, taken as a whole, after consummation of the Merger, shall have
been filed, occurred or been obtained (all such permits, approvals, filings
and consents and the lapse of all such waiting periods being referred to as
the "Requisite Regulatory Approvals") and all such Requisite Regulatory
Approvals shall be in full force and effect. Parent shall have complied with
all state securities or blue sky laws necessary to issue without registration
thereunder the Parent Common Stock in exchange for Company Common Stock and
to consummate the Merger.
(c) POOLING. Parent, Merger Sub and the Company shall have
received a letter from Eskew & Gresham, P.S.C., Parent's independent
certified public accountants, to the effect that the Merger qualifies for
"pooling of interests" accounting treatment under Accounting Principles Board
Opinion No. 16, the interpretive releases issued pursuant thereto, and the
pronouncements of the SEC if consummated in accordance with this Agreement.
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") preventing the consummation of the Merger shall
be in effect, nor shall any proceeding by any Governmental Entity seeking any
of the foregoing be pending. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(e) BURDENSOME CONDITION. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which, in connection
with the grant of a Requisite Regulatory Approval, imposes any condition or
restriction upon Parent or its Subsidiaries, the Company or the Surviving
Corporation that would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger.
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(f) S-4. The S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceeding seeking a
stop order.
(g) NASDAQ LISTING. The shares of Parent Common Stock issuable
pursuant to this Agreement shall have been approved for listing on The Nasdaq
Stock Market, Inc.'s National Market, subject to official notice of issuance.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions or waiver by Parent on or prior to the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement, and as of the Closing Date as though made on and as of the Closing
Date, except to the extent such representation or warranty expressly relates to
an earlier date (in which case as of such date), and Parent shall have received
a certificate signed on behalf of the Company by the Chief Executive Officer and
the Chief Financial Officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement, at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) CONSENTS UNDER AGREEMENTS. The Company shall have obtained the
consent or approval of each person (other than the Governmental Entities
referred to in Section 6.1(b)) whose consent or approval shall be required in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of the Company under any loan or
credit agreement, note, mortgage, indenture, lease, license or other agreement
or instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of Parent, individually or in the
aggregate, have a Material Adverse Effect on the Surviving Corporation or upon
the consummation of the transactions contemplated hereby.
(d) TAX OPINION. Parent shall have received an opinion of Eskew &
Gresham, P.S.C., dated the Closing Date, in form and substance satisfactory to
Parent, to the effect that the Merger
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will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code.
(e) LETTERS FROM THE COMPANY AFFILIATES. Parent shall have
received from each person named in the letter referred to in Section 5.6(a) an
executed copy of an agreement in the form of Exhibit 5.6(a).
(f) APPRAISAL RIGHTS. Holders who properly demand appraisal or
dissenter's rights pursuant to the OGCL, if any, shall not be the holders of
more than 10% of the outstanding shares of Company Common Stock.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the Merger are subject to the satisfaction or waiver by the
Company on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the representations
and warranties of Parent and Merger Sub set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except to the extent such representation or warranty
expressly relates to another date (in which case as of such date), and the
Company shall have received a certificate signed on behalf of Parent and Merger
Sub by the Chief Executive Officer and the Chief Financial Officer of Parent and
Merger Sub to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Parent and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent and Merger Sub by the Chief Executive Officer and the Chief Financial
Officer of Parent and Merger Sub to such effect.
(c) CONSENTS UNDER AGREEMENTS. Parent and Merger Sub shall have
obtained the consent or approval of each person (other than the Governmental
Entities referred to in Section 6.1(b)) whose consent or approval shall be
required in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, in the reasonable opinion of the Company, individually
or in the aggregate, have a Material Adverse Effect on Parent or upon the
consummation of the transactions contemplated hereby.
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(d) TAX OPINION. The Company shall have received an opinion of Eskew
& Gresham, P.S.C., dated the Closing Date, in form and substance satisfactory to
Parent and its counsel, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code.
(e) LETTERS FROM PARENT AFFILIATES. The Company shall have received
from each person named in the letter referred to in Section 5.6(b) an executed
copy of an agreement substantially in the form of Exhibit 5.6(b).
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after the approval of this
Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if, at a duly held shareholders meeting of the Company or
any adjournment thereof at which approval of this Agreement is voted upon, the
approval of the shareholders of the Company shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before
April 30, 1998, unless the failure to consummate the Merger is the result of a
willful and material breach of this Agreement by the party seeking to terminate
this Agreement;
(iii) if any court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and non-appealable;
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set forth in
Section 6.2(a) or 6.2(b) or Section 6.3(a) or 6.3(b), as applicable, and (B)
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach ("Material Breach") (PROVIDED that
the terminating party is not then in breach of any representation, warranty,
covenant or other agreement that would give rise to a failure of a condition
described in clause (A) above);
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(c) by either Parent or the Company in the event that (i) all
the conditions to the obligation of such party to effect the Merger set forth
in Section 6.1 shall have been satisfied and (ii) any condition to the
obligation of such party to effect the Merger set forth in Section 6.2 (in
the case of Parent) or Section 6.3 ( in the case of the Company) is not
capable of being satisfied prior to the date on which this Agreement may be
terminated pursuant to Section 7.1(b)(ii); or
(d) by the Company, subject to Section 7.5(b), if the Board of
Directors of the Company shall concurrently approve, and the Company shall
concurrently enter into, a definitive agreement providing for the
implementation of the transactions contemplated by an Acquisition Proposal;
PROVIDED, HOWEVER, that (i) the Company is not then in breach of Section 4.2
or in breach of any other representation, warranty, covenant or agreement
that would give rise to a failure of a condition set forth in Section 6.2(a)
or 6.2(b); (ii) the Board of Directors of the Company shall have complied
with Section 7.5(b) in connection with such Acquisition Proposal and (iii) no
termination pursuant to this Section 7.1(d) shall be effective unless the
Company shall simultaneously make the payment required by Section 7.2(a).
7.2 EFFECT OF TERMINATION.
(a) In the event that any person shall make an Acquisition
Proposal with respect to the Company and thereafter (i) this Agreement is
terminated (A) pursuant to Section 7.1(b)(i), (B) pursuant to Section
7.1(b)(ii) (if at the time of termination (x) the Company is in breach of any
representation, warranty, covenant or other agreement that would give rise to
a failure of a condition set forth in Section 6.2(a) or 6.2(b) and (y) such
breach cannot be or has not been cured within 30 days after the Company
becomes aware of such breach or such shorter period that may elapse between
the date the Company becomes aware of such breach and the time of
termination), (C) pursuant to Section 7.1(b)(iii) (if at the time of
termination (x) the Company is in breach of any representation, warranty,
covenant or other agreement that would give rise to a failure of a condition
set forth in Section 6.2(a) or 6.2(b) and (y) such breach cannot be or has
not been cured within 30 days after the Company becomes aware of such breach
or such shorter period that may elapse between the date the Company becomes
aware of such breach and the time of termination), (D) by Parent pursuant to
Section 7.1(b)(iv), (E) by Parent pursuant to Section 7.1(c) or (F) by the
Company pursuant to Section 7.1(d), and (ii) a definitive agreement with
respect to an Acquisition Proposal is executed, or an Acquisition Proposal is
consummated, at or within 12 months after such termination, then Parent shall
be paid a fee of $350,000 (reduced by any amount actually paid by the Company
pursuant to Section 7.2(b) in connection with such termination), which amount
shall be payable by wire transfer of same day funds on the date such
agreement is executed, or such Acquisition Proposal
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is consummated, as applicable. The Company acknowledges that the agreements
contained in this Section 7.2(a) are an integral part of the transactions
contemplated by this Agreement, and that without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails to
promptly pay the amount due pursuant to this Section 7.2(a), and, in order to
obtain such payment, Parent commences a suit that results in a judgment
against the Company for the fees set forth in this Section 7.2(a), the
Company shall also pay to Parent its costs and expenses (including reasonable
attorneys' fees) in connection with such suit.
(b) In the event of termination of this Agreement by either Parent
or the Company pursuant to Section 7.1(b)(i), then the Company shall
reimburse Parent for all its reasonable out-of-pocket expenses actually
incurred in connection with this Agreement and the transactions contemplated
hereby, up to a maximum of $100,000, which amount shall be payable by wire
transfer of same day funds within three business days of written demand,
accompanied by a reasonably detailed statement of such expenses and
appropriate supporting documentation therefor.
(c) In the event of termination of this Agreement by either Parent
or the Company as provided in Section 7.1, this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the
part of Parent, Merger Sub or the Company, other than the provisions of
Section 5.1 (penultimate sentence), Section 5.7, this Section 7.2 and Article
VIII and except to the extent that such termination results from the willful
and material breach by a party of any its representations, warranties,
covenants or other agreements set forth in this Agreement.
7.3 AMENDMENT. This Agreement may be amended by the parties at any
time before or after the approval of this Agreement by the shareholders of
the Company; PROVIDED, HOWEVER, that after such approval by the shareholders
of the Company, there shall be made no amendment that pursuant to the OGCL
requires further approval by the shareholders of the Company without the
further approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time of the
Merger, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties; (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement; or (iii) subject to the proviso
of Section 7.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of
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its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER.
(a) A termination of this Agreement pursuant to Section 7.1, an
amendment of this Agreement pursuant to Section 7.3 or an extension or waiver
pursuant to Section 7.4 shall, in order to be effective, require, in the case
of Parent, Merger Sub or the Company, action by its Board of Directors or, in
the case of an extension or waiver pursuant to Section 7.4, the duly
authorized designee of its Board of Directors.
(b) The Company shall provide to Parent written notice prior to
any termination of this Agreement pursuant to Section 7.1(d) advising Parent
(i) that the Board of Directors of the Company in the exercise of its good
faith judgment as to its fiduciary duties to the shareholders of the Company
under applicable law, after receipt of written advice of outside legal
counsel, has determined (on the basis of such Acquisition Proposal and the
terms of this Agreement, as then in effect) that such termination is required
in connection with an Acquisition Proposal that is more favorable to the
shareholders of the Company than the transactions contemplated by this
Agreement (taking into account all terms of such Acquisition Proposal and
this Agreement, including all conditions) and (ii) as to the material terms
of any such Acquisition Proposal. At any time after five business days
following receipt of such notice, the Company may terminate this Agreement as
provided in Section 7.1(d) only if the Board of Directors of the Company
determines that such Acquisition Proposal is more favorable to the
shareholders of the Company than the transactions contemplated by this
Agreement (taking into account all terms of such Acquisition Proposal and
this Agreement, including all conditions, and which determination shall be
made in light of any revised proposal made by Parent prior to the expiration
of such five business day period) and concurrently enters into a definitive
agreement providing for the implementatation of the transactions contemplated
by such Acquisition Proposal.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger. This
Section 8.1 shall not limit any covenant or agreement of the parties that by its
terms contemplates performance after the Effective Time of the Merger.
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8.2 NOTICES. All notices and other communications required to be given
hereunder shall be in writing and shall be deemed given upon (i)
transmitter's confirmation of receipt of a facsimile transmission, (ii)
confirmed delivery by a standard overnight carrier or when delivered by hand
or (iii) the expiration of five business days after the day when mailed by
certified or registered mail, postage prepaid, addressed to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) If to Parent or
Merger Sub, to: Premier Financial Bancorp, Inc.
120 N. Hamilton Street
Georgetown, Kentucky 40324
Attn: J. Howell Kelly,
President and
Chief Executive Officer
Telecopy No. (502) 863-7503
With a copy (which
shall not constitute
notice) to: David W. Harper, Esq.
2450 Meidinger Tower
Louisville, Kentucky 40202
Telecopy No. (502) 583-2418
and
(b) If to Company, to: Ohio River Bank
221 Railroad Street
Ironton, Ohio 45638
Attn: Daniel H. Wiley,
President and Chief Executive Officer
Telecopy No. (614) 533-5494
With a copy (which
shall not constitute
notice) to: Susan B. Zaunbrecher
Dinsmore & Shohl LLP
1900 Chemed Center
255 E. Fifth Street
Cincinnati, Ohio 45202-4719
Telecopy No. (513) 977-8141
8.3 INTERPRETATION. Unless the context otherwise requires, words
describing the singular number shall include the plural and
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<PAGE>
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and other entities and
vice versa. The table of contents, index of terms and headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. When a reference is
made in this Agreement to any "Section" or "Exhibit," such reference shall be
to a section or exhibit to this Agreement unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever the words "or any Subsidiary", "or any Subsidiaries,"
"nor any Subsidiary" or "nor any Subsidiaries" are used in this Agreement in
connection with a preceding reference to Parent, they shall be deemed to
refer to a Subsidiary or Subsidiaries Parent. The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available, and the correlative phrase "make available" shall mean that such
information shall be promptly made available if so requested. The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to October
31, 1997, the date of the Original Agreement.
8.4 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article II and Sections 5.10 and 5.12 (collectively, the "Third Party
Provisions"), nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third
Party Provisions may be enforced on behalf of the Company or the other
respective beneficiaries thereof by those individuals who were the directors of
the Company immediately prior to the Effective Time and also by the holder of
Company Common Stock converted in the Merger, the Indemnified Party or the
officer or employee that such provisions respectively are intended to benefit
and their respective heirs and representatives. Parent shall pay all expenses,
including attorneys' fees, that may be incurred by such directors or other
persons in enforcing the Third Party Provisions.
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<PAGE>
8.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
8.6 COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. Each counterpart
may consist of a number of copies hereof each signed by less than all, but
together signed by all of the parties hereto. It shall not be necessary, in
making proof of this Agreement or any counterpart hereof, to produce or account
for any of the other counterparts.
8.7 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
8.8 INCORPORATION OF DOCUMENTS. The Company Letter, Parent Letter, and all
Annexes, Exhibits and Schedules, if any, attached hereto and referred to herein
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
8.9 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Ohio or in Ohio state court, this being in addition to
any other remedy to which they are entitled at law or in equity.
8.10 WAIVERS. Except as provided in this Agreement or in any waiver
pursuant to Section 7.4, no action taken pursuant to this Agreement, including
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
8.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter
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<PAGE>
hereof and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
signed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
PREMIER FINANCIAL BANCORP, INC.
By: /s/ J. Howell Kelly
_____________________________________
J. Howell Kelly, President and Chief
Executive Officer
OHIO RIVER INTERIM BANK
By: /s/ J. Howell Kelly
_____________________________________
J. Howell Kelly, on behalf of and as President of
Premier Financial Bancorp, Inc., Incorporator
OHIO RIVER BANK
By: /s/ Daniel H. Wiley
______________________________________
Daniel H. Wiley, President and
Chief Executive Officer
A-41
<PAGE>
ANNEX B
November 26, 1997
Board of Directors
Ohio River Bank
221 Railroad Street
Ironton, OH 45638
Members of the Board:
You have requested our opinion, from a financial point of view, as to
the fairness to Ohio River Bank, ("ORB") Ironton, Ohio and its shareholders
of the terms of the Amended and Restated Agreement and Plan of Merger
("Agreement") dated as of November 24, 1997 among Premier Financial Bancorp,
Inc., ("PFB") Georgetown, Kentucky, Ohio River Interim Bank ("Interim Bank")
and ORB. The terms of the Agreement provide for an affiliation and merger of
ORB, PFB, and Interim Bank, which is an Ohio banking corporation in
organization and a wholly-owned subsidiary of PFB. The reorganization will
result in the merger of Interim Bank with and into ORB and ORB becoming a
wholly-owned subsidiary of PFB. ORB will continue to carry on its banking
business in substantially in the same manner as before the reorganization.
Austin Financial Services, Inc., ("AFSI") is a nationally recognized
investment banking firm specializing in the banking and financial services
industry. AFSI is continually engaged in the valuation of business and
securities in connection with mergers and acquisitions, private placements
and valuations for estate, corporate and other purposes. In the past, AFSI
has not provided professional services and/or products to ORB or PFB in the
ordinary course of business. Furthermore, AFSI does not contemplate any
future business with ORB and/or PFB, arising from this engagement, nor has
its opinion concerning the fairness, from a financial point of view, of the
terms of the Agreement has been subject to indications of future business
with either ORB or PFB.
In connection with its opinion, AFSI reviewed material bearing upon the
financial operating condition of ORB and PFB including, but not limited to :
(1) the Annual Report of ORB for the year ending 1996 and the Annual Reports
of PFB for the years ending 1995-1996; (2) Consolidate Reports of Condition
and Income of ORB for the years ending 1995-1996 and for September 30, 1997;
(3) Consolidated Financial Statements Form FR Y-9C of PFB for September 30,
1997; (4) SEC for 10Q of PFB for September 30, 1997; (5) Uniform Bank
Performance Report of ORB for June 30, 1997; (6) Bank Holding Company
Performance Report of PFB for June 30, 1997; (7) certain other public
information on ORB and PFB; (8) other internal financial and operating
information which was provided to AFSI by ORB and PFB; (9) publicly available
information concerning certain other banks and bank holding companies, the
trading markets for their securities and the nature and terms of certain
other merger
<PAGE>
Board of Directors
November 26, 1997
Page 2
and acquisition transactions believed relevant to its inquiry;
(10) reviewed the reported price and trading activity for ORB common stock
and PFB common stock, compared certain financial and stock market information
for ORB and PFB with similar compared certain financial and stock market
information for ORB and PFB with similar information of certain other
companies whose securities are publicly-traded; (11) discussed the foregoing
as well as other matters relevant to its inquiry, including the past and
current business operations and acquisitions, results of regulatory
examinations, financial condition, current loan quality and trends, and
future prospects of ORB and PFB with certain officers and representatives of
ORB and PFB; (12) the Agreement; and (13) this Proxy Statement. AFSI also
took into account its assessment of general economic, market and financial
conditions and its experience in other transactions, as well as, its
experience in securities valuation and general knowledge of the banking
industry. AFSI's opinion was necessarily based upon conditions as they
existed and could be evaluated on the date of the opinion and the information
made available to AFSI through that date.
AFSI relied upon and assumed without independent verification the accuracy
and completeness of all of the financial and other information provided to it by
ORB and PFB or from public sources. AFSI has not made an independent evaluation
of the assets of ORB or PFB, but has relied on valuators of the fair market
value of ORB. In addition, AFSI did not independently verify and relied on and
assumed the aggregate allowances for loan losses set forth in the balance sheet
of each of ORB and PFB at September 30, 1997, were adequate to cover such losses
and complied fully with applicable law, regulatory policy, and sound banking
practice as of the date of such financial statements. Furthermore, AFSI did not
independently verify the carrying values of other real estate owned and loans
classified as in-substance foreclosures of each of ORB and PFB in their
respective September 30, 1997, balance sheets, and AFSI assumed that such
carrying values complied fully with applicable law, regulatory policy and sound
banking practice as of such date. AFSI was not retained to and did not conduct
any physical inspection of any of the properties or facilities of ORB or PFB,
nor did AFSI make any independent evaluation or appraisal of the assets,
liabilities or prospects of ORB or PFB, was not furnished with any such
evaluation or appraisal, and did not review any individual credit files. AFSI
also assumed that the Agreement is, and will be, in compliance with all laws and
regulations that are applicable to ORB and PFB.
In its analyses, AFSI made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of ORB and PFB. Any estimate contained in AFSI's
analyses are not necessarily
<PAGE>
Board of Directors
November 26, 1997
Page 3
indicative of future results or value, which may be significantly more or
less favorable than such estimates. AFSI's estimates of values of companies
do not purport to be appraisals or necessarily reflect the price at which
companies or their securities actually may be sold. No company or
transaction utilized in AFSI's analyses was identical to ORB or PFB or the
Agreement. Accordingly, such analyses are not based solely on arithmetic
calculations; rather, they involve complex considerations and judgments by
AFSI concerning differences in financial and operating characteristics of the
relevant factors that could affect the public trading markets of the company
or companies to which they are being compared. Non of the analyses performed
by AFSI was assigned a greater significance by AFSI than any other.
The following is a brief description of the analyses performed by AFSI in
connection with its opinion as described to ORB's board of directors by AFSI:
Under the terms of the Agreement between ORB and PFB, each share of common
stock of ORB outstanding immediately prior to consummation of the reorganization
will be exchanged for 1.20 shares of PFB common stock. Furthermore, each share
of common stock of Interim Bank outstanding immediately prior to consummation of
the reorganization will be exchanged for 1,000.00 shares of PFB common stock.
The reorganization will result in the Interim Bank merging with and into ORB and
ORB surviving as a wholly-owned subsidiary of PFB. ORB will continue to carry
on its banking business in substantially the same manner as before the
reorganization.
Using a discounted cash flow analysis, AFSI projected ORB's cash flow from
September 30, 1997, through September 30, 2002, assuming a minimum equity
capital to asset ratio of 6.00%. AFSI also estimated the residual value of
ORB's common equity as of September 30, 2002. The steps involved in determining
the discounted cash flow value of ORB included the following: (1) the projected
earnings in excess over the amount necessary to maintain a 6.00% equity capital
to asset ratio were added to book charges such as depreciation less any
projected capital expenditures in order to determine future cash flows: (2) the
future cash flows were then converted to a present value equivalent using a
discount rate of 17.41%, which was determined from the use of the Capital Asset
Pricing Model ("CAPM"); (3) the residual value was then calculated by dividing
the projected cash flows for the year 2002 by the capitalization rate. The
capitalization rate not only includes all aspects of the CAPM but also reflects
the long-term income growth prospects of ORB, as well as specific company risk
factors; (4) the present value equivalent of the projected residual value was
calculated using the 17.41% discount rate; and (5) the
<PAGE>
Board of Directors
November 26, 1997
Page 4
present value of the cash flows and the residual value were added together.
The present value per fully diluted share of ORB common stock resulting from
this analysis was $29.80.
AFSI also determined the adjusted book value of ORB as an alternative
valuation method. The adjusted book value approach requires a three-step
process. First, the book value is determined. This figure is derived from the
September 30, 1997, balance sheet, and its represents the summary measure of
stockholders' claims against the assets, on a historical cost basis. Second,
assets and liabilities are restated to their fair market values. The adjusted
book value calculation considers each major asset and liability account
classification. Finally, additional "off-balance sheet" adjustments are
calculated, if necessary. The fair market value per fully diluted share of ORB
common stock resulting for this analysis was $23.68.
AFSI applied a 75% weighting to the discounted cash flow and a 25%
weighting to the adjusted book value. The weightings were based on AFSI's
review of the financial position, history and recent performance of ORB. The
sum of the weighted values or $28.27 per share equates to the fair market value
of ORB.
Based on the $28.27 per share value of ORB common stock and a closing price
per share of $26.50 for PFB's common stock as of November 25, 1997, the
resulting exchange ratio of each share of common stock of ORB outstanding would
be for 1.067 shares of PFB common stock. Therefore, the exchange terms of the
Agreement provide an additional 0.133 shares of PFB stock for each share of ORB
stock in comparison to the exchange ratio based on the value of ORB determined
by AFSI.
AFSI analyzed certain other mergers and acquisitions that have consummated
over the past twelve months in Ohio as well as other nearby states (including
the states of Kentucky, West Virginia and Tennessee) involving financial
institutions with assets under $250 million. AFSI compared the multiple
produced by this reorganization (based on PFB's November 25, 1997, closing price
per share of $26.50) to the mean multiples for the transactions analyzed. Set
forth below are the mean transaction multiples.
Selected
Bank
Acquisitions ORB
------------ -----
Price/Earnings Multiple 24.81 91.38
Price/Book Value Multiple 197.30 190.37
<PAGE>
Board of Directors
November 26, 1997
Page 5
The financial institution acquisition transactions announced for the
four-state area during the past twelve months included in the above multiples
are:
State of Buyer State of Target Buyer Target
-------------- --------------- ----- ------
Chippewa Valley
OH OH Wayne Bancorp, Inc. Bancshares, Inc.
OH OH First Financial Union State Bank
Bancorp
MS TN Deposit Guaranty Victory Bancshares
Corp.
IN OH American Bancorp Cardinal State Bank
Commercial Gateway Bancshares,
WV WV Bancshares, Inc. Inc.
OH Camco Financial
OH Corporation GF Bancorp, Inc.
OH OH Citizens Banchares, Unibank
Inc.
Enterprise Federal North Cincinnati
OH OH Bancorp, Inc. Savings Bank
First Citizens Banc Farmers State Bank of
OH OH Corp. New Wash.
Premier Financial
KY OH Bancorp Sabina Bank
WV WV Horizon Bancorp Beckley Bancorp
OH OH Oak Hill Financial, Unity Savings Bank
Inc.
OH KY Peoples Bancorp, Gateway Bancorp
Inc.
Cornerstone
TN TN Bancshares, Inc. East Ridge Bancshares
Suburban
OH OH Fifth Third Bancorp Bancorporation, Inc.
First Bank of East
KY TN Southeast Bancorp, Tennessee
Inc.
First Fed. Fin. Svcs
OH OH Corp. Summit Bancorp
WV WV WesBanco, Inc. Shawnee Bank, Inc.
Citizens of Hardeman
TN TN Union Planters Corp. County
Commercial
KY KY Bancshares, Inc. Commercial Bank
AFSI's analysis showed that the range of implied valuations of ORB,
applying the mean transaction multiples described above to ORB's earnings and
book value was $8.63 to $32.96 per share. The results produced in this analysis
do not purport to be indicative of actual values or expected values of ORB or
shares of ORB common stock.
<PAGE>
Board of Directors
November 26, 1997
Page 6
AFSI also examined the operating and trading performance of ORB in
comparison to selected publicly-traded bank/bank holding companies located in
the same four-state area with total assets under $250 million. The group of
companies included:
<TABLE>
<CAPTION>
<S> <C> <C>
Advance Financial Bancorp ASB Financial Corp CFK Bancrop, Inc.
Classic Bancshares, Inc. Community Fin. Group, Inc. Community Investors Bancorp
Delphos Citizens Bancorp, Inc. FFD Financial Corp. First Federal Bancorp, Inc.
First Franklin Corp. First Lancaster Bancshares First WV Bancorp, Inc.
Fort Thomas Financial Corp. Frankfort First Bancorp, Inc. Gateway Bancorp, Inc.
Harrisburg First Fin. Bancorp Harvest Home Financial Corp. Home City Financial Corp.
Kentucky First Bancorp, Inc. London Financial Corp. Market Financial Corp.
Milton Federal Financial Corp. Ohio State Financial Services OHSL Financial Corp.
Peoples Financial Corp. Peoples-Sidney Financial Corp. Potters Financial Corp.
Twin City Bancorp United Bancorp, Inc. Westwood Homestead Fin. Corp.
Wood Bancorp, Inc.
</TABLE>
AFSI analyzed the relative performance and outlook for ORB by comparing
certain financial and trading market information of ORB with the group of
comparable banks. AFSI compared ORB with the comparable banks based upon
selected operating statistics, including capitalization, profitability and
credit quality. Using data at, or near the 12 months ended, September 30, 1997,
the multiple of mean market price to latest 12 months earnings was 21.14 for the
comparable banks. The mean price to stated book value was 126.20 percent for
the comparable banks. The implied market trading values for ORB derived from
such comparable company analysis utilizing the resulting mean valuation ratios
ranged from approximately $7.36 to $21.08 per share.
ORB and AFSI have entered into an arrangement relating to the services to
be provided by AFSI in connection with the Agreement. In regards to AFSI's
services in determining an opinion as to the fairness, from a financial point of
view, of the terms of the Agreement, the cost is a contractual $10,000. In
addition, ORB also has agreed to indemnify AFSI and its officers, directors,
shareholders, employees and agents for all of its time, expenses, and any
liability incurred as a result of AFSI's proposed engagement by means of legal
action, administrative proceedings or threat thereof, unless such action,
pending or threat thereof is caused by AFSI's own lawful conduct, breach of duty
or negligence during the course of performing AFSI's services.
AFSI, in rendering its opinion, has assumed that the transaction will be
a tax-free reorganization with no material adverse tax consequences to any of
the parties involved, or to ORB shareholders receiving holding company stock
of PFB. In addition, AFSI has assumed that in the course of obtaining the
necessary regulatory approvals for the transaction, no condition will be
imposed upon ORB or PFB that will have a materially adverse impact on the
contemplated benefits of the proposed transaction to ORB and PFB and their
shareholders.
<PAGE>
Board of Directors
November 26, 1997
Page 7
Based upon AFSI's analysis and subject to the qualifications described
herein, considering all circumstances known to us and based upon other matters
considered relevant, AFSI believes that as of the date of this letter, the terms
of the Agreement from a financial point of view are fair to ORB and its
shareholders.
AFSI hereby consents to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our opinion
as an exhibit to the proxy statement or prospectus related to the merger
transaction.
On behalf of Austin Financial Services, Inc.
/s/ Dr. Douglas V. Austin
- -------------------------------------
Dr. Douglas V. Austin
President and CEO
<PAGE>
ANNEX C
SECTION 1701.85 OF THE OHIO GENERAL CORPORATION LAW
(A)(1) A shareholder of a domestic corporation is entitled to relief as
a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the
date on which the vote on the proposal was taken at the meeting of the
shareholders, the dissenting shareholder shall deliver to the corporation a
written demand for payment to him of the fair cash value of the shares as to
which he seeks relief, which demand shall state his address, the number and
class of such shares, and the amount claimed by him as the fair cash value of
the shares.
(3) The dissenting shareholder entitled to relief under division (C)
of section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder entitled to
relief under division (E) of section 1701.84 of the Revised Code in the case of
a merger pursuant to section 1701.801 of the Revised Code shall be a record
holder of the shares of the corporation as to which he seeks relief as of the
date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 of the Revised Code, the dissenting shareholder
shall deliver to the corporation a written demand for payment with the same
information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing
the shares as to which he seeks relief, the dissenting shareholder, within
fifteen days from the date of the sending of such request, shall deliver to
the corporation the certificates requested so that the corporation may
forthwith endorse on them a legend to the effect that demand for the fair
cash value of such shares has been made. The corporation promptly shall
return such endorsed certificates to the dissenting
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<PAGE>
shareholder. A dissenting shareholder's failure to deliver such certificates
terminates his rights as a dissenting shareholder, at the option of the
corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court
for good cause shown otherwise directs. If shares represented by a
certificate on which such a legend has been endorsed are transferred, each
new certificate issued for them shall bear a similar legend, together with
the name of the original dissenting holder of such shares. Upon receiving a
demand for payment from a dissenting shareholder who is the record holder of
uncertificated securities, the corporation shall make an appropriate notation
of the demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee of the
shares so endorsed, or of uncertificated securities where such notation has
been made, acquires only such rights in the corporation as the original
dissenting holder of such shares had immediately after the service of a
demand for payment of the fair cash value of the shares. A request under
this paragraph by the corporation is not an admission by the corporation that
the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have
come to an agreement on the fair cash value per share of the shares as to
which the dissenting shareholder seeks relief, the dissenting shareholder or
the corporation, which in case of a merger or consolidation may be the
surviving or new entity, within three months after the service of the demand
by the dissenting shareholder, may file a complaint in the court of common
pleas of the county in which the principal office of the corporation that
issued the shares is located or was located when the proposal was adopted by
the shareholders of the corporation, or, if the proposal was not required to
be submitted to the shareholders, was approved by the directors. Other
dissenting shareholders, within that three-month period, may join as
plaintiffs or may be joined as defendants in any such proceeding, and any two
or more such proceedings may be consolidated. The complaint shall contain a
brief statement of the facts, including the vote and the facts entitling the
dissenting shareholder to the relief demanded. No answer to such a complaint
is required. Upon the filing of such a complaint, the court, on motion of the
petitioner, shall enter an order fixing a date for a hearing on the complaint
and requiring that a copy of the complaint and a notice of the filing and of
the date for hearing be given to the respondent or defendant in the manner in
which summons is required to be served or substituted service is required to
be made in other cases. On the day fixed for the hearing on the complaint or
any adjournment of it, the court shall determine from the complaint and from
such evidence as is submitted by either party whether the dissenting
shareholder is entitled to be paid the fair cash value
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<PAGE>
of any shares and, if so, the number and class of such shares. If the court
finds that the dissenting shareholder is so entitled, the court may appoint
one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such
power and authority as is specified in the order of their appointment. The
court thereupon shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of it, with
interest at such rate and from such date as the court considers equitable.
The costs of the proceeding, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable. The proceeding is a special proceeding and final
orders in it may be vacated, modified, or reversed on appeal pursuant to the
Rules of Appellate Procedure and, to the extent not in conflict with those
rules, Chapter 2505 of the Revised Code. If, during the pendency of any
proceeding is or has been instituted to enjoin or otherwise to prevent the
carrying out of the action as to which the shareholder has dissented, the
proceeding instituted under this section shall be stayed until the final
determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a
holder of uncertificated securities entitled to such payment. In the case of
holders of shares represented by certificates, payment shall be made only
upon and simultaneously with the surrender to the corporation of the
certificates representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders
of the corporation, fair cash value as to those shareholders shall be determined
as of the day prior to the day on which the vote by the shareholders was taken,
and, in the case of a merger pursuant to section 1701.80 or 1701.801 of the
Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
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<PAGE>
(D)(1) The right and obligation of a dissenting shareholder to
receive such fair cash value and to sell such shares as to which he seeks
relief, and the right and obligation of the corporation to purchase such
shares and to pay the fair cash value of them terminates if any of the
following applies:
(a) The dissenting shareholder has not complied with this the
section, unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders
rescind their adoption, of the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come
to an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation filed or joined in a complaint under
division (B) of this section within the period provided in that
division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the
demand until either the termination of the rights and obligations arising from
it or the purchase of the shares by the corporation, all other rights accruing
from such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon any securities issued in extinguishment of or in substitution for
such shares, an amount equal to the dividend, distribution, or interest which,
except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated
other than by the purchase of the shares by the corporation, all rights of the
holder shall be restored and all distributions which, except for the suspension,
would have been made shall be made to the holder of record of the shares at the
time of termination. (Last amended by S.B. 74, L.'94, eff. 7-1-94.)
C-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 271B.2-020(2)(d) of Kentucky Business Corporation Act (the
"Act") enables a Kentucky corporation to provide in its articles of
incorporation, and the Registrant has so provided in its Articles of
Incorporation, for the elimination or limitation of the personal liability of
a director to the corporation or its shareholders for monetary damages for
breach of his fiduciary duty as a director; provided, however, that a
director's liability is not eliminated or limited: (1) for any transaction
in which the director's personal financial interest is in conflict with the
financial interests of the corporation or its shareholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or are
known to the director to be a violation of law; (3) for any vote or assent to
an unlawful distribution to shareholders as prohibited under Section
271B.8-330 of the Act (which imposes liability on directors for payments of
dividends, purchases, redemptions or other acquisitions of shares, and
distributions of indebtedness that are unlawful); or (4) for any transaction
from which the director derived an improper personal benefit.
Section 271B.8-510 of the Act permits the indemnification by a
corporation of any director who is made party to a threatened, pending or
completed action, suit or proceeding because he is or was a director of such
corporation. To be eligible for indemnification, such person must have
conducted himself in good faith and reasonably believed that his conduct, if
undertaken in his official capacity with the corporation, was in the
corporation's best interests, and, if not in his official capacity, was at
least not opposed to the corporation's best interests. In the case of a
criminal proceeding, the director must also not have reasonable cause to
believe his conduct was unlawful. A director may not be indemnified under the
above-referenced section in connection with a proceeding by or in the right
of the corporation in which the director was adjudged liable to the
corporation or in connection with any other proceeding charging improper
personal benefit by him, whether or not involving action in his official
capacity, in which he was adjudged liable on the basis that personal benefit
was improperly received by him. Indemnification permitted under Section
271B.8-510 of the Act in connection with a proceeding by or in the right of
the corporation shall be limited to reasonable expenses incurred in
connection with the proceeding. Section 271B.8-560 of the Act provides that a
Kentucky corporation may indemnify its officers, employees and agents to the
same extent as directors. Mandatory indemnification against reasonable
expenses incurred in connection with a proceeding is provided for
II-1
<PAGE>
by the Act, unless otherwise limited by the corporation's articles of
incorporation, where a director or officer has been wholly successful on the
merits or otherwise, in the defense of any proceeding to which he was a party
because he is or was a director or officer of the corporation. A court of
competent jurisdiction may also order indemnification if the director is
fairly and reasonably entitled thereto in view of all relevant circumstances,
whether or not he met the applicable standard of conduct or was adjudged
liable to the corporation.
The Act provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise. Additionally, the Act provides that a corporation
may purchase and maintain insurance on behalf of directors, officers,
employees and agents of the corporation against liability asserted against or
incurred by such party in their respective capacity with the corporation.
Articles X of the Registrant's Articles of Incorporation and Article
VIII of the Registrant's By-Laws require Registrant to indemnify its
directors and officers to the fullest extent permitted by the Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The Exhibit Index appearing on the page following the signature
page of this Registration Statement is hereby incorporated by reference.
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(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
II-2
<PAGE>
in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
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.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
Insofar as indemnification 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
II-3
<PAGE>
the Act and will be governed by the final adjudication of such issue.
(b) 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.
(c) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Georgetown, Commonwealth of Kentucky, on the 23rd day of January, 1998.
PREMIER FINANCIAL BANCORP, INC.
By: /s/ J. Howell Kelly
-----------------------------
(J. Howell Kelly, President)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Howell Kelly his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, 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
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, 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 agent 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.
Name Capacity Date
---- -------- -----
/s/ Marshall T. Reynolds
- ---------------------------
(Marshall T. Reynolds) Chairman and Director January 22, 1998
President (Principal Executive
/s/ J. Howell Kelly Officer, Principal Financial
- ---------------------------
(J. Howell Kelly) Officer and Principal Accounting
Officer) and Director January 23, 1998
/s/ Toney K. Adkins
- ---------------------------
(Toney K. Adkins) Director January 22, 1998
/s/ Gardner E. Daniel
- ---------------------------
(Gardner E. Daniel) Director January 22, 1998
/s/ E.V. Holder Jr.
- ---------------------------
(E.V. Holder, Jr.) Director January 22, 1998
/s/ Wilbur M. Jenkins
- ---------------------------
(Wilbur M. Jenkins) Director January 22, 1998
/s/ Benjamin T. Pugh
- ---------------------------
(Benjamin T. Pugh) Director January 22, 1998
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
2 Amended and Restated Agreement and Plan of Merger dated as of
November 24, 1997 among Premier Financial Bancorp, Inc.
("Registrant"), Ohio River Interim Bank and Ohio River Bank
(included as Annex A to the Proxy Statement/Prospectus that is
part of the Registration Statement to which this Exhibit Index
relates).
3.1 Form of Articles of Incorporation of Registrant (included as Exhibit
3.1 to Registrant's Registration Statement on Form S-1, Registration
No. 333-1702, filed on February 28, 1996 with the Commission and
incorporated herein by reference).
3.2 Form of Articles of Amendment to Articles of Incorporation effective
March 15, 1996 re: amendment to Article IV (included as Exhibit 3.2 to
Registrant's Amendment No. 1 to Registration Statement on Form S-1,
Registration No. 333-1702, filed on March 25, 1996 with the Commission
and incorporated herein by reference).
3.3 Bylaws of registrant (included as Exhibit 3.2 to Registrant's
Registration Statement on Form S-1, Registration No. 333-1702, filed
on February 28, 1996 with the Commission and incorporated herein by
reference).
5 Opinion of David W. Harper, Esq.
8 Tax Opinion of Eskew & Gresham P.S.C.
10.1 Form of Junior Subordinated Indenture dated as of June 6, 1997 between
Registrant and Bankers Trust Company (as Trustee (included as Exhibit
4.1 to Registrant's Registration Statement on Form S-1, Registration
No. 333-27943, filed on May 28, 1997 with the Commission and
incorporated herein by reference).
10.2 Form of 9.75% Junior Subordinated Deferrable Interest Debentures due
June 30, 2027 (included as Exhibit 4.2 to Registrant's Registration
Statement on Form S-1, Registration No. 333-27943, filed on May 28,
1997 with the Commission and incorporated herein by reference).
10.3 Form of Trust Agreement dated as of May 27, 1997 between Registrant
and Bankers Trust (Delaware) as Trustee (included as Exhibit 4.3 to
Registrant's Registration Statement on Form S-1, Registration
No. 333-27943, filed on May 28, 1997 with the Commission and
incorporated herein by reference).
<PAGE>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
10.4 Form of Amended and Restated Trust Agreement among Registrant, Bankers
Trust Company, as Property Trustee, Bankers Trust (Delaware), as
Delaware Trustee and various holders of Trust Securities dated as of
June 6, 1997 (included as Exhibit 4.4 to Registrant's Registration
Statement on Form S-1, Registration No. 333-27943, filed on May 28,
1997 with the Commission and incorporated herein by reference).
10.5 Form of Guarantee Agreement between Registrant, as Guarantor, and
Bankers Trust Company, as Trustee, dated as of June 6, 1997 (included
as Exhibit 4.6 to Registrant's Registration Statement on Form S-1,
Registration No. 333-27943, filed on May 28, 1997 with the Commission
and incorporated herein by reference).
10.6 Amended and Restated Preferred Stock Purchase Agreement dated as of
September 29, 1994 between First Guaranty Bank, Hammond, Louisiana,
and Registrant (included as Exhibit 10.3 to Registrant's Registration
Statement on Form S-1, Registration No. 333-1702, filed on February
28, 1996 with the Commission and incorporated herein by reference).
10.7 Employment Agreement dated March 16, 1992, between Georgetown Bank &
Trust Company and Gardner E. Daniel (included as Exhibit 10.4 to
Registrant's Registration Statement on Form S-1, Registration
No. 333-1702, filed on February 28, 1996 with the Commission and
incorporated herein by reference).
10.8 Deferred Compensation Agreement dated December 17, 1992, between
Georgetown Bank and Trust Company and Gardner E. Daniel (included as
Exhibit 10.5 to Registrant's Registration Statement on Form S-1,
Registration No. 333-1702, filed on February 28, 1996 with the
Commission and incorporated herein by reference).
10.9 Premier Financial Bancorp, Inc. 1996 Employee Stock Ownership
Incentive Plan (included as Exhibit 10.6 to Registrant's Registration
Statement on Form S-1, Registration No. 333-1702, filed on February
28, 1996 with the Commission and incorporated herein by reference).
13.1 Annual Report to Shareholders for the year ended December 31, 1996
(included within Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, filed on March 31, 1997 with the Commission
(Commission File No. 0-20908) and incorporated herein by reference).
<PAGE>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
13.2 Quarterly Report on Form 10-Q for the nine month period ended
September 30, 1997 (filed on November 13, 1997 with the Commission
(Commission File No. 0-20908) and incorporated herein by reference).
16 Letter of McNeal, Williamson & Co. regarding change in certifying
accountant (included as Exhibit 16 to Registrant's Amendment No. 1 to
Registration Statement on Form S-1, Registration No. 333-1702, filed
on March 25, 1996 with the Commission and incorporated herein by
reference).
20.1 Letter from President of Ohio River Bank to shareholders regarding
Special Meeting of Shareholders.
20.2 Notice of Special Meeting of Shareholders of Ohio River Bank.
20.3 Form of Proxy for Special Meeting of Shareholders of Ohio River Bank.
20.4 Fairness Opinion of Austin Financial Services, Inc., (included as
Annex B to the Proxy Statement/Prospectus that is part of the
Registration Statement to which this Exhibit Index relates).
21 Subsidiaries of Registrant.
23.1 Consent of Eskew & Gresham, PSC as to financial statements of
Registrant.
23.2 Consent of McNeal, Williamson & Co. as to financial
statements of Registrant.
23.3 Consent of Kelley Galloway & Company, PSC as to financial statements
of Ohio River Bank.
23.4 Consent of David W. Harper, Esq. (included in Exhibit 5).
23.5 Consent of Austin Financial Services, Inc.
23.6 Consent of Eskew & Gresham, PSC as to tax opinion (included in Exhibit
8).
24 Power of Attorney (included in the Signature Page to the Registration
Statement to which this Exhibit Index relates).
27 Financial Data Schedules.*
____________
* Omitted because they are not required or applicable or the required
information is shown in the financial statements or the notes thereto.
<PAGE>
(EXHIBIT 5 TO S-4)
January 23, 1998
Premier Financial Bancorp
120 N. Hamilton Street
Georgetown, KY 40324
Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") being filed by Premier Financial Bancorp, Inc., a
Kentucky corporation ("Premier"), with the Securities and Exchange Commission
under the Securities Act of 1933 (as amended, the "Securities Act"), relating to
the registration of 300,000 Common Shares of Premier, without par value
("Premier Common Stock"), issuable in connection with a merger (the "Merger") of
Ohio River Interim Bank, an Ohio banking corporation wholly owned by Premier
("Merger Sub"), into Ohio River Bank, Ironton, Ohio, an Ohio banking corporation
("Ohio River Bank"), as set forth in the Amended and Restated Agreement and Plan
of Merger dated as of November 24, 1997 among Premier, Merger Sub and Ohio River
Bank (the "Merger Agreement"). As a result of the Merger, holders of common
stock of Ohio River Bank, $8.00 par value per share ("Ohio River Bank Common
Stock"), will receive Premier Common Shares in exchange for their shares of Ohio
River Bank Common Stock, and Ohio River Bank will become a wholly owned
subsidiary of Premier, as is set forth in the Merger Agreement.
I am familiar with the proceedings to date with respect to the proposed
issuance of Premier Common Shares and the Merger and have examined such records,
documents and questions of law, and satisfied myself as to such matters of fact
as I consider relevant, that are necessary as a basis for this opinion.
Based on the foregoing, it is my opinion that:
1. Premier is duly incorporated and validly existing under the laws of
the Commonwealth of Kentucky; and
2. The Premier Common Shares to be issued in the Merger will be
legally issued, fully paid and nonassessable when: (i) the Registration
Statement shall have become effective under the Securities Act, (ii) the
Merger shall have become effective and (iii) certificates representing such
Premier Common Shares shall have been duly executed, countersigned and
registered and duly delivered in accordance with the Merger Agreement. In
rendering the opinion in this paragraph 2., I have assumed without
investigation that the Ohio River Bank Common Stock outstanding at the time
of effectiveness of the Merger is legally issued, fully paid and
nonassessable.
I hereby consent to the reference to me under the heading "Legal Matters"
and to the inclusion of this opinion as an exhibit to the Registration
Statement. In giving such consent, I do not admit that I come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ David W. Harper
-----------------------
David W. Harper, Esq.
DWH/pgf
<PAGE>
(EXHIBIT 8 TO S-4)
[LETTERHEAD OF ESKEW & GRESHAM, PSC]
January 23, 1998
Premier Financial Bancorp, Inc. Ohio River Interim Bank
120 North Hamilton Street 221 Railroad Street
Georgetown, KY 40324 Ironton, OH 45638
Ohio River Bank
221 Railroad Street
Ironton, OH 45638
Ladies and Gentlemen:
You have requested our opinion concerning the federal income tax
consequences of the proposed merger of Ohio River Interim Bank ("Merger
Sub"), a newly formed, wholly owned subsidiary of Premier Financial Bancorp,
Inc. ("Parent"), with and into Ohio River Bank (the "Company"), pursuant to
the terms and conditions set forth in the Amended and Restated Agreement and
Plan of Merger dated as of November 24, 1997 by and among Parent, Merger Sub
and the Company (the "Agreement"). Capitalized terms used in this opinion
letter and not defined herein shall have the meanings given them in the
Agreement.
A summary of the pertinent facts and assumptions upon which we have
relied in rendering this opinion is set forth below.
FACTS
Parent is a corporation organized and existing under the laws of the
Commonwealth of Kentucky. Each of the Merger Sub and the Company is a
corporation organized and existing under the laws of the State of Ohio. All
issued and outstanding shares of capital stock of Merger Sub are held by
Parent and are fully paid and nonassessable. The Company's authorized
capital stock consists of 275,000 shares of common stock ("Company Common
Stock"), of which at the date hereof 250,000 shares are validly issued and
outstanding and fully paid and nonassessable.
Pursuant to the terms and conditions set forth in the Agreement and the
Ohio General Corporation Law, Merger Sub will be merged with and into the
Company as of the Effective Time. Except in the case of shares of Company
Common Stock held by Company shareholders who elect to dissent from the
Merger ("Dissenting Shares"), each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time will,
<PAGE>
January 23, 1998
Page 2
automatically, by virtue of the Merger and at the Effective Time, be
converted into the right to receive 1.2 fully paid and nonassessable Common
Shares of Parent ("Parent Common Stock"). Company shareholders will receive
cash in lieu of any fractional shares of Parent Common Stock. Company
shareholders who hold Dissenting Shares will receive payment for such shares
in accordance with the Ohio General Corporation Law.
ASSUMPTIONS
1. The fair market value of the Parent Common Stock received by each
Company shareholder who does not dissent from the Merger will be approximately
equal to the fair market value of the Company Common Stock surrendered in the
Merger.
2. There is no plan or intention by the shareholders of the Company who
own one percent or more of the Company Common Stock, and to the knowledge of the
management of the Company, there is no plan or intention on the part of the
remaining shareholders of the Company to sell, exchange, or otherwise dispose of
a number of shares of Parent Common Stock received in the Merger that would
reduce the Company shareholders' ownership of Parent Common Stock to a number of
shares having a value, as of the Effective Time, of less than 50 percent of the
value of all of the formerly outstanding stock of the Company as of the same
time. For purposes of this assumption, shares of Company Common Stock exchanged
for cash or other property surrendered by dissenters or exchanged for cash in
lieu of fractional shares of Parent Common Stock will be treated as outstanding
Company Common Stock at the Effective Time. Moreover, shares of the Company
Common Stock and shares of Parent Common Stock held by Company shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the Effective
Time are considered for purposes of this assumption.
3. Following the Merger, the Company will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair market
value of its gross assets and at least 90 percent of the fair market value of
Merger Sub's net assets and at least 70 percent of the fair market value of
Merger Sub's gross assets held immediately prior to the Merger. For purposes of
this assumption, amounts paid by the Company or Merger Sub to dissenters,
amounts paid by the Company or Merger Sub to shareholders who receive cash or
other property, amounts used by the Company or Merger Sub to pay reorganization
expenses, and all redemptions and distributions (except for regular, normal
dividends) made by the Company will be included as assets of the Company or
Merger Sub, respectively, immediately prior to the Merger.
<PAGE>
January 23, 1998
Page 3
4. Prior to the Merger, Parent will be in control of Merger Sub within
the meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended
(the "Code").
5. The Company has no plan or intention to issue additional shares of its
stock that would result in Parent losing control of the Company within the
meaning of Section 368(c) of the Code.
6. Parent has no plan or intention to reacquire any of its stock issued
in the Merger.
7. Parent has no plan or intention to liquidate the Company, to merge the
Company with or into another corporation, or to sell or otherwise dispose of the
Company Common Stock except for transfers of such stock to corporations
controlled by Parent; or to cause the Company to sell or otherwise dispose of
any of its assets or of any of the assets acquired from Merger Sub, except for
dispositions made in the ordinary course of business or transfers of assets to a
corporation controlled by the Company.
8. Merger Sub will have no liabilities assumed by the Company, and will
not transfer to the Company any assets subject to liabilities, in the Merger.
9. Following the Merger, the Company will continue its historic business
or use a significant portion of its historic business assets in a business.
10. Except as otherwise provided in Sections 5.7 or 7.2 of the Agreement,
Parent, Merger Sub, the Company and the shareholders of the Company will pay
their respective expenses, if any, incurred in connection with the Merger.
11. There is no intercorporate indebtedness existing between Parent and
the Company or between Merger Sub and the Company that was issued, acquired, or
will be settled at a discount.
12. In the Merger, shares of Company stock representing control of the
Company, as defined in Section 368(c) of the Code, will be exchanged solely for
voting stock of Parent. For purposes of this assumption, shares of Company
Common Stock exchanged for cash or other property originating with Parent will
be treated as outstanding Company Common Stock on the date of the Merger.
13. At the time of the Merger, the Company will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in the Company that, if exercised or
converted, would affect Parent's acquisition or retention of control of the
Company, as defined in Section 368(c) of the Code.
<PAGE>
January 23, 1998
Page 4
14. Parent does not own, nor has it owned during the past five years, any
shares of the stock of the Company.
15. No two parties to the Merger are investment companies as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
16. On the date of the Merger, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject.
17. The Company is not under the jurisdiction of a court in Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
18. The payment of cash in lieu of fractional shares of Parent Common
Stock is solely for the purposes of avoiding the expense and inconvenience to
Parent of issuing fractional shares and does not represent separately
bargained-for-consideration. The total cash consideration that will be paid
in the transaction to Company shareholders instead of issuing fractional
shares of Parent Common Stock will not exceed one percent of the total
consideration that will be issued in the transaction to Company shareholders
in exchange for their shares of Company Common Stock. The fractional share
interests of each holder of Company Common Stock will be aggregated and no
holder of Company Common Stock (other than dissenters to the Merger) will
receive cash in an amount equal to or greater than the value of one full
share of Parent Common Stock.
19. The Company's authorized capital stock consists of 275,000 shares of
Company Common Stock, 250,000 of which are issued and outstanding at the date
hereof.
OPINION
Based upon the information submitted and the assumptions set forth above,
it is our opinion that:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and (a)(2)(E) of the Code. Parent, Merger Sub and the
Company will each be "a party to a reorganization" within the meaning of Section
368(b) of the Code.
2. No gain or loss will be recognized by Company shareholders upon the
exchange of their Company Common Stock solely for Parent Common Stock. (Section
354(a)(1) of the Code).
3. The basis of the Parent Common Stock to be received by Company
shareholders will be the same, in each instance, as the basis of the Company
Common Stock (reduced by any amount allocable to fractional share interests
for which cash is received) surrendered in exchange therefor (Section
358(a)(1) of the Code).
<PAGE>
January 23, 1998
Page 5
4. The holding period of the Parent Common Stock to be received by
Company shareholders will include the holding period of the Company Common Stock
surrendered in exchange therefor, provided the Company Common Stock was held as
a capital asset on the date of the exchange (Section 1223(1) of the Code).
5. Where a Company shareholder receives cash by exercising statutory
dissenter's rights, the cash will be treated as having been received by such
shareholder as a distribution with respect to such shareholder's Dissenting
Shares, subject to the provisions and limitations of Sections 302 and 318 of the
Code.
6. The payment of cash in lieu of fractional share interests of Parent
Common Stock will be treated as if the fractional shares were distributed as
part of the exchange and then redeemed by Parent. These cash payments will be
treated as having been received as distributions in full payment in exchange for
the stock redeemed under Section 302(a) of the Code.
7. No gain or loss will be recognized by Parent, Merger Sub or the
Company as a result of the Merger (Sections 361 and 1032 of the Code).
CONCLUSION
The foregoing opinion is premised and conditioned upon the validity of the
assumptions set forth herein and the accuracy and validity of the facts
described herein, including the fact that the Merger will be consummated in the
manner described in the Agreement.
Our opinion is based upon the federal income tax laws in effect as of
this date. Future legislation, administrative pronouncements or judicial
decisions (some of which may have retroactive application) could have a
material effect on the validity of our conclusions. Our opinion is expressly
limited to the validity of our conclusions and the issues specifically
addressed herein, and we render no opinion regarding other issues that have
not been specifically addressed. Our opinion cannot be relied upon by anyone
other than the addressees hereof and the shareholders of the Company without
our prior express written consent. We hereby consent to the filing of this
Opinion, or copies hereof, as an Exhibit to the Registration Statement on
Form S-4 to be issued by Parent (the "Registration Statement") pursuant to
the Agreement and to the statement made regarding our Firm under
<PAGE>
January 23, 1998
Page 6
the caption "Summary -- Certain Federal Income Tax Consequences" and "The
Merger -- Certain Federal Income Tax Consequences" in the Proxy
Statement/Prospectus constituting part of the Registration Statement.
Sincerely,
/s/ Eskew & Gresham PSC
---------------------------
ESKEW & GRESHAM PSC
<PAGE>
(EXHIBIT 20.1 TO S-4)
February __, 1998
Dear Shareholder:
You are cordially invited to attend a special meeting (the "Special Meeting") of
shareholders of Ohio River Bank to be held on March __, 1998 at _______ p.m.
(EDT) at the main office of Ohio River Bank, 221 Railroad Street, Ironton, Ohio.
At the Special Meeting, you will be asked to consider the vote upon a proposal
to adopt the Agreement and Plan of Merger dated as of October 31, 1997 (the
"Merger Agreement") among Premier Financial Bancorp, Inc., a Kentucky
corporation ("Premier"), Ohio River Bank Interim Bank, an Ohio Banking
Corporation and a wholly owned subsidiary of Premier formed for the purpose of
effecting the transactions contemplated by the Merger Agreement ("Merger Sub"),
and Ohio River Bank, which provides for the merger of Merger Sub with and into
Ohio River Bank, with Ohio River Bank surviving as a wholly owned subsidiary of
Premier (the "Merger"). Subject to the terms of the Merger Agreement and
certain exceptions provided in the Merger, each Common Share of Ohio River Bank
will be converted into 1.2 Common Shares of Premier ("Premier Common Shares").
It is intended that the Merger will be a tax-free reorganization for purposes of
the U.S. federal income tax laws and that, among other things, holders
exchanging Ohio River Bank Common Shares for Premier Common Shares pursuant to
the Merger will recognize no gain or loss for federal income tax purposes.
Premier Common Shares are listed for trading under the symbol PFBI on the Nasdaq
National Market. On February ____, 1998, two trading days prior to the date of
the accompanying Proxy Statement/ Prospectus, the last reported sale price for a
Premier Common Share, as reported on the Nasdaq National Market, was $____ per
share.
Premier is a bank holding company headquartered in Georgetown, Kentucky with
six banking subsidiaries (the "Banks"). Premier focuses on providing quality
community banking services to individuals and small-to-medium sized
businesses primarily in non-urban areas. The Banks are managed on a
decentralized basis that enables each Bank to offer local and timely
decision-making that provides flexibility with respect to operating
procedures and credit policies, limited only by a framework of centralized
risk controls provided by Premier. Each Bank maintains its community
orientation by, among other things, having selected members of its
<PAGE>
communities as members of its board of directors. Following the Merger, the
directors, officers and employees of Ohio River Bank serving immediately
prior to the Merger will continue in such positions, and Ohio River Bank will
retain its separate corporate existence, charter and name.
The Board of Directors of Ohio River Bank has unanimously determined that the
Merger is advisable and fair to and in the best interests of Ohio River Bank and
its shareholders and has unanimously approved the Merger Agreement. THE OHIO
RIVER BANK BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF
OHIO RIVER BANK VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL
MEETING.
At the close of business on the record date for the Special Meeting, directors
and executive officers of Ohio River Bank and their affiliates may be deemed to
be the beneficial owners of an aggregate of 69,189 (approximately 27.7%) of the
outstanding Common Shares of Ohio River Bank. Ohio River Bank believes that its
directors, executive officers and their affiliates intend to vote all shares of
Ohio River Bank Common Stock beneficially owned by them in favor of adoption of
the Merger Agreement.
The accompanying Proxy Statement/Prospectus constitutes the Proxy Statement of
Ohio River Bank for the Special Meeting and also the Prospectus of Premier
relating to the issuance of Premier Common Shares pursuant to the Merger
Agreement.
Please give these materials your careful attention because the discussion
included therein is important to your decision on the matters being presented.
Whether or not you plan to attend the Special Meeting in person, please promptly
mark, sign and date the enclosed proxy and return it in the enclosed envelope to
ensure that your shares will be represented at the Special Meeting. If you
attend the Special Meeting in person, you may revoke your proxy at the meeting
by voting in person.
We look forward to seeing you at the Special Meeting.
Sincerely yours,
Daniel H. Wiley
President and CEO
DHW/lam
Enclosure
<PAGE>
(EXHIBIT 20.2 TO S-4)
OHIO RIVER BANK
221 RAILROAD STREET
IRONTON, OHIO 45638-0095
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO ALL SHAREHOLDERS OF OHIO RIVER BANK:
Notice is hereby given that a Special Meeting of the Shareholders of
Ohio River Bank will be held at ______ p.m. on __________, ____________, 1998
at the Main Office of the Bank located at 221 Railroad Street, Ironton, Ohio,
45638-0095 for the following purposes:
1. To consider and act upon a proposal to adopt an Amended and
Restated Agreement and Plan of Merger providing for the merger of
Ohio River Interim Bank, a wholly-owned subsidiary of Premier
Financial Bancorp, Inc. ("Premier") into Ohio River Bank with
Ohio River Bank becoming a wholly-owned subsidiary of Premier
(the "Merger") and the issuance to Ohio River Bank shareholders
of 1.2 Premier Common Shares in connection with the Merger.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE
FOREGOING MERGER PROPOSAL AND RECOMMENDS ITS APPROVAL BY THE
SHAREHOLDERS.
The Board of Directors has fixed the close of business on ____________,
1998 as the record date for the purpose of determining the shareholders entitled
to notice of and to vote at the Special Meeting and any adjournment thereof.
Transferees after said date will not be entitled to vote at the annual meeting.
Also enclosed with the proxy materials contained herein is the 1997 Annual
Report to Shareholders.
You are cordially invited to attend the Special Meeting in person. Whether
or not you plan to attend, you are urged to complete, date, sign and return the
enclosed Proxy (on yellow paper) in the envelope provided as soon as possible.
Daniel H. Wiley
President and Chief Executive Officer
<PAGE>
(EXHIBIT 20.3 TO S-4)
PROXY
OHIO RIVER BANK
221 RAILROAD STREET
IRONTON, OHIO 45638-0095
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS CALLED FOR
______________, 1998
THIS PROXY IS SOLICITED BY MANAGEMENT AND UNLESS OTHERWISE MARKED WILL BE VOTED
FOR THE PROPOSAL.
The undersigned, having received notice of the Special Meeting of Shareholders
of Ohio River Bank, Ironton, Ohio to be held at ______ p.m., ____________,
______________, 1998, hereby designates and appoints _____________, ____________
and _______________, or any of them, as attorneys and proxies for the
undersigned, with full power of substitution, to vote for and in the name of the
undersigned all shares of the Common Stock of Ohio River Bank, Ironton, Ohio,
which the undersigned is entitled to vote at such Special Meeting of
Shareholders, or at any adjournment thereof, such proxies being directed to vote
as specified below on the following proposal:
Management recommends a vote FOR the proposal.
PROPOSAL To vote on the approval of the following Resolution:
RESOLVED, That the Amended and Restated Agreement and Plan of Merger, dated
as of November 24, 1997, among Ohio River Bank, Ohio River Interim Bank and
Premier Financial Bancorp, Inc., providing for the merger of Ohio River
Interim Bank into Ohio River Bank (the "Merger") and the issuance to the
Ohio River Bank shareholders of 1.2 Premier Bancorp, Inc. Common Shares in
connection with the Merger, is hereby approved, ratified, adopted and
confirmed.
FOR______ AGAINST______ ABSTAIN______
If this Proxy is properly signed but the above ballot is not marked, such
proxies are authorized to vote the shares represented by this proxy in
accordance with their discretion. It is the present intention of such proxies
to vote FOR the merger proposal, and in the best interest of the Bank, in the
judgment of the proxies, concerning any other matters presented at the meeting.
(over)
<PAGE>
The undersigned reserves the right to revoke this Proxy at any time until the
Proxy is voted at the Special Meeting. The Proxy may be revoked by a
later-dated Proxy, by giving written notice to the Bank at any time before
the Proxy is voted, or in open meeting.
DATED:_____________________ ______________________________________________
Signature
Name__________________________________________
(Please Print)
___________________________ ______________________________________________
(Number of Shares) Signature
Name__________________________________________
(Please Print)
(Please sign Proxy as your name appears on your
stock certificate(s). Joint owners should each
sign personally. When signing as attorney,
executor, administrator, trustee, guardian or
corporate officer, please give your full title as
such.)
ALL FORMER PROXIES
ARE HEREBY REVOKED
PLEASE DATE, SIGN, AND MAIL THIS PROXY TO THE PROXY COMMITTEE, IN CARE OF OHIO
RIVER BANK, 221 RAILROAD STREET, IRONTON, OHIO 45638-0095. A PRE-ADDRESSED
ENVELOPE IS ENCLOSED.
2
<PAGE>
(Exhibit 21 to S-4)
SUBSIDIARIES OF PREMIER FINANCIAL BANCORP, INC.
Bank of Germantown, Germantown, Kentucky
Citizens Bank, Sharpsburg, Kentucky
Citizens Deposit Bank & Trust Company, Vanceburg, Kentucky
County Finance, Inc., Vanceburg, Kentucky
Farmers Deposit Bank & Trust Company, Eminence, Kentucky
Farmers Deposit Bancorp, Inc., Eminence, Kentucky
Georgetown Bank & Trust Company, Georgetown, Kentucky
Georgetown Bancorp, Inc., Georgetown, Kentucky
Premier Data Services, Inc., Vanceburg, Kentucky
The Sabina Bank, Sabina, Ohio
<PAGE>
(Exhibit 23.1 to S-4)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Proxy Statement/Prospectus constituting
part of this Registration Statement on Form S-4 of our report dated February 20,
1997 relating to the consolidated financial statements of Premier Financial
Bancorp, Inc. and Subsidiaries as of December 31, 1996 and 1995 and for the
years then ended, incorporated therein by reference, and to the reference to our
firm under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ Eskew & Gresham, PSC
ESKEW & GRESHAM, PSC
January 23, 1998
Lexington, Kentucky
<PAGE>
(Exhibit 23.2 to S-4)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Proxy Statement/Prospectus constituting
part of this Registration Statement on Form S-4 of our report dated February 10,
1995 relating to the consolidated financial statements of Premier Financial
Bancorp, Inc. and Subsidiaries as of December 31, 1994 and for the year then
ended, incorporated therein by reference, and to the reference to our firm under
the heading "Experts" in such Proxy Statement/Prospectus.
/s/ McNeal Williamson & Co.
McNEAL WILLIAMSON & CO.
January 23, 1998
Logan, West Virginia
<PAGE>
(EXHIBIT 23.3 TO S-4)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our independent auditor's report dated
January 10, 1997 with respect to the financial statements of Ohio River Bank
as of December 31, 1996 and 1995, and the related statements of operations,
changes in stockholders' equity and cash flows for the year ended December
31, 1996 and from May 22, 1995 (date of inception) to December 31, 1995,
included in the Registration Statement on Form S-4 of Premier Financial
Bancorp, Inc., filed with the Securities and Exchange Commission. We also
consent to the reference to our Firm in the Registration Statement under the
caption "Experts."
/s/ Kelley, Galloway & Company, PSC
KELLEY, GALLOWAY & COMPANY, PSC
January 23, 1998
Ashland, Kentucky
<PAGE>
(Exhibit 23.5 to S-4)
CONSENT OF AUSTIN FINANCIAL SERVICES, INC.
We consent to the use of our opinion dated November 26, 1997 and included
as Annex B to the Proxy Statement/Prospectus included in the Registration
Statement on Form S-4 relating to the proposed merger of a wholly owned
subsidiary of Premier Financial Bancorp, Inc. into Ohio River Bank, Ironton,
Ohio, and to the reference to our firm name under the captions "Summary -
Opinion of Financial Advisor to Ohio River Bank" and "The Merger - Opinion of
Financial Advisor to Ohio River Bank" in such Proxy Statement/Prospectus. In
giving such consent we do not admit and we disclaim that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 and the rules and regulations issued thereunder.
AUSTIN FINANCIAL SERVICES, INC.
/s/ Dr. Douglas V. Austin
_________________________
Dr. Douglas V. Austin, President
& Chief Executive Officer
January 23, 1998
Toledo, Ohio
