As
filed with the Securities and Exchange Commission on __________,
2008
|
Registration
No. 333-
|
Kentucky
|
6022
|
61-1206757
|
||
(State
or Other Jurisdiction
|
(Primary
Standard Industrial
|
(I.
R. S. Employer
|
||
of
Incorporation or Organization)
|
Classification
Code Number)
|
Identification
Number)
|
Thomas
J. Murray, Esq.
|
Charles
D. Dunbar, Esq.
|
|
Daniel
J. Konrad, Esq.
|
Elizabeth
Osenton Lord, Esq.
|
|
Huddleston
Bolen LLP
|
Jackson
Kelly PLLC
|
|
611
Third Avenue
|
1600
Laidley Tower
|
|
P.O.
Box 2185
|
P.O.
Box 553
|
|
Huntington,
West Virginia 25722-2185
|
Charleston,
West Virginia 25322
|
|
(304)
691-8398
|
(304)
340-1196
|
Title
of Each Class of
Securities
to Be Registered
|
Amount
to Be
Registered (1)
|
Proposed
Maximum
Offering
Price Per
Unit
|
Proposed
Maximum
Aggregate
Offering
Price(2)
|
Amount
of
Registration
Fee
|
Common
Stock, no par value per share
|
1,290,000
shares
|
Not
applicable
|
$
16,376,550
|
$
668.10
|
(1)
|
|
The
number of shares of common
stock, no
par value per
share of Premier Financial
Bancorp, Inc. to be registered pursuant to this Registration Statement
represents the maximum number of shares issuable by Premier Financial
Bancorp, Inc. upon consummation of the mergerof
(i)
a
wholly owned subsidiary of
Premier Financial Bancorp, Inc. and Citizens First Bank, Inc.and (ii) a
wholly owned subsidiary
of Premier Financial Bancorp, Inc. and Traders Bankshares,
Inc.
|
(2)
|
|
The
proposed maximum aggregate
offering price is estimated solely to determine the registration
fee and
reflects the market price of Premier Financial Bancorp, Inc. common
stock
to be issued in connection with the mergers,
computed in accordance with Rule
457(c) and Rule 457(f) under the Securities Act of 1933, as amended,
based
upon the average of the high and low
sales prices ($ 12.99
and $ 12.40)
of Premier Financial Bancorp,
Inc. common stock as reported on The Nasdaq on February 15,
2008.
|
Thomas
M.
Lookabaugh
|
||
|
President
and Chief Executive Officer
|
|
Citizens First Bank, Inc |
|
1.
|
|
A
proposal to approve and adopt
the Agreement of Merger dated as of October 24,
2007, between Premier Financial
Bancorp, Inc. and Citizens First Bank, Inc. and CFB Interim Bank,
Inc.
(hereinafter the “Merger Agreement”) and the transactions contemplated
thereby. The Merger Agreement provides that Citizens First Bank,
Inc. will
merge with and into a subsidiary of Premier Financial Bancorp, Inc.,
upon
the terms and subject to the conditions set forth in the Merger Agreement,
as more fully described in the accompanying proxy
statement/prospectus.
|
|
2.
|
|
A
proposal to adjourn the meeting
to a later date or dates, if necessary, to permit further solicitation
of
proxies in the event there are not sufficient votes at the time of
the
meeting to approve the matters to be considered by the shareholders
at the
meeting, as more fully described in the accompanying proxy
statement/prospectus.
|
|
3.
|
|
Such
other matters as may properly
come before the special
meeting.
|
By
Order of the Board of Directors
|
||
Thomas
M.
Lookabaugh
|
||
___________,
2008
|
President
and Chief Executive Officer
|
|
Page
|
|
ADDITIONAL
INFORMATION
|
|
|
|
|
|
QUESTIONS
AND ANSWERS
ABOUT THE SHAREHOLDER MEETING AND THE MERGER
|
|
|
|
|
|
SUMMARY
|
|
|
|
|
|
RISK
FACTORS
|
|
|
FORWARD-LOOKING STATEMENTS | ||
PRICE RANGE OF COMMON STOCK AND DIVIDENDS | ||
SUMMARY SELECTED FINANCIAL DATA | ||
THE SPECIAL MEETING | ||
General | ||
Matters to be Considered | ||
Proxies | ||
Solicitation of Proxies | ||
Record Date and Voting Rights | ||
Vote Required | ||
Recommendation of the Citizens First Board of Directors | ||
APPROVAL OF THE MERGER | ||
Merger | ||
Merger Consideration | ||
No Fractional Shares | ||
Dissenters’ Appraisal Rights | ||
Background of the Merger; Board Recommendations and Reasons for the Merger | ||
Premier Financial’s Reasons for the Merger | ||
Interests of Certain Persons in the Merger | ||
Conditions of the Merger | ||
Representations and Warranties | ||
Termination of the Merger Agreement | ||
Termination Fee | ||
Waiver and Amendment | ||
Indemnification; Directors’ and Officers’ Insurance | ||
Closing Date; Effective Time | ||
Regulatory Approvals | ||
Conduct of Business Pending the Merger | ||
Accounting Treatment | ||
Management and Operations after the Merger | ||
Resales of Premier Financial Common Stock | ||
PROPOSED ACQUISITION | ||
Regulatory Matters Regarding Traders | ||
Officers of Traders Entitled to Severance | ||
Traders Bank Signage and Board Members | ||
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER | ||
General | ||
The Merger | ||
Consequences to Shareholders | ||
Backup Withholding and Reporting Requirements | ||
INFORMATION ABOUT PREMIER FINANCIAL BANCORP, INC. AND CITIZENS FIRST BANK, INC. | ||
PREMIER FINANCIAL BANCORP, INC. | ||
Description of Business | ||
Business - General | ||
Competition | ||
Regulatory Matters | ||
Number of Employees | ||
Properties | ||
Legal Proceedings | ||
Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Year End 2006 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations – September 30, 2007 | ||
CITIZENS FIRST BANK, INC. | ||
DESCRIPTION OF PREMIER FINANCIAL COMMON STOCK | ||
General | ||
Common Stock | ||
Preemptive Rights | ||
Certain Provisions of the Bylaws | ||
Shares Eligible for Future Sale | ||
COMPARATIVE RIGHTS OF SHAREHOLDERS | ||
ADJOURNMENT OF THE MEETING | ||
LEGAL MATTERS | ||
EXPERTS | ||
WHERE YOU CAN FIND MORE INFORMATION | ||
OTHER MATTERS | ||
PREMIER CONSOLIDATED FINANCIAL STATEMENTS | ||
December 31, 2006, 2005, 2004 (Audited) | ||
PREMIER CONSOLIDATED FINANCIAL STATEMENTS | ||
September 30, 2007 and December 31, 2006 (Unaudited) |
Appendix
I
|
–
|
Agreement
of Merger dated as of October 24, 2007, between Premier Financial
Bancorp,
Inc. and Citizens First Bank, Inc. and CFB Interim Bank, Inc.
|
Appendix
II
|
–
|
West
Virginia Code 31D-13-1301, et seq. - Appraisal Rights
|
Brien
M. Chase
|
||
Premier
Financial Bancorp, Inc.
|
||
2883
Fifth Avenue
|
||
Huntington,
WV
25702
|
||
(304)
525-1600
|
Q:
|
What
will shareholders be voting on at the special meeting?
|
||
A:
|
Shareholders
will be voting on the following matters:
|
||
• |
A
proposal to
approve and adopt the Merger Agreement between Premier Financial
Bancorp,
Inc. (“Premier Financial”) and Citizens First Bank, Inc. (“Citizens
First”) and CFB Interim Bank, Inc. (“CFB Interim Bank”) and the
transactions contemplated thereby.
|
||
• | A proposal to adjourn the meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the matters to be considered by the shareholders at the meeting. |
Shareholders
will also consider any other matters that may properly come before
the
meeting.
|
|||
Q:
|
Why
is Citizens First proposing the Merger?
|
||
A:
|
We
believe the proposed Merger is in the best interests of Citizens
First and
its shareholders. Our board of directors believes that combining
with
Premier Financial provides significant value to our shareholders
and
provides shareholders the opportunities for growth offered by the
combined
company. Additionally, Premier Financial is a publicly-traded
company, so Citizens First shareholders will have a greater market
access
in the event the shareholder wishes to sell the shares received by
the
shareholder.
|
||
You
should review the reasons for the Merger described in greater detail
under
the caption “Background of the Merger; Board Recommendations and Reasons
for the Merger” beginning on page __.
|
|||
Q:
|
When
and where is the shareholder meeting?
|
||
A:
|
The
special meeting is scheduled to take place on ,
_____________ ___, 2008, at ______ a.m., local time, at the offices
of Citizens First, 601 Washington Street, Ravenswood, West
Virginia.
|
||
Q:
|
What
does the Citizens First board of directors recommend?
|
||
A:
|
The
Citizens First board of directors has approved the Merger Agreement.
The
Citizens First board recommends that shareholders vote “FOR” the proposal
to approve the Merger Agreement and the transactions contemplated
thereby.
|
||
Q:
|
What
will shareholders receive for their stock?
|
||
A:
|
For
each share of Citizens First common stock that you own, you will
receive:
|
||
(1) | 1.20 shares of Premier Financial common stock; and | ||
(2) |
cash;
the amount of cash will be
determined by taking the volume-weighted average of the closing
price of Premier Common Stock for the five (5) trading days ending
with
the fifth business day before the Effective Time multiplied by 1.20
and
subtracting that amount from $29.25. The difference shall be
the cash consideration; in no event, however, shall the cash consideration
exceed $13.25 per share.
|
Q:
|
Is
my vote needed to adopt the Merger Agreement and to approve the
transactions contemplated thereby?
|
|
A:
|
Yes. The
presence of a majority of the outstanding shares of Citizens First
Common
Stock, by person or by proxy, is necessary to constitute a quorum
in order
to have a special meeting. A favorable vote by a majority of
shares voting at the special meeting is required to approve the Merger
Agreement.
|
|
The
special meeting may be adjourned, if necessary, to solicit additional
proxies in the event there are not sufficient votes at the time of
the
special meeting to approve the Merger Agreement. The
affirmative vote of the holders of a majority of the common shares
represented, in person or proxy, at the special meeting is required
to
adjourn such special meeting.
|
Q:
|
How
do I vote?
|
||
A:
|
If
you were the record holder of Citizens First common shares as of
______________, 2008, you may vote in person by attending the special
shareholders meeting or, to ensure that your common shares are represented
at the special meeting, you may vote your common shares by signing
and
returning the enclosed proxy card in the postage-paid envelope
provided.
|
||
If
you hold Citizens First common shares in the name of a broker, bank
or
other nominee, please see the discussion below regarding common shares
held in “street name.”
|
|||
Q:
|
What
will happen if I fail to vote or abstain from voting?
|
||
A:
|
If
you are a Citizens First shareholder, your failure to vote may prevent
Citizens First from attaining the quorum necessary to hold the special
meeting. A vote to abstain will have the same effect as a vote
“AGAINST”
the
proposal to adopt the Merger Agreement and the transactions contemplated
thereby. A vote to abstain will have the same effect as a vote “AGAINST”
the proposal
to
approve the adjournment of the Citizens First special meeting, if
necessary, to solicit additional proxies. The failure to vote,
however, will have no effect on the proposal to approve the adjournment
of
the Citizens First special meeting, if necessary, to solicit additional
proxies.
|
||
Q:
|
If
my common shares are held in a stock brokerage account or by a bank
or
other nominee (in “street name”), will my broker, bank or other nominee
vote my common shares for me?
|
||
A:
|
No.
You must provide your broker, bank or nominee (the record holder
of your
common shares) with instructions on how to vote your common
shares. Please follow the voting instructions provided by your
broker, bank or nominee.
|
||
If
you do not provide voting instructions to your broker, bank or nominee,
then your common shares will not be voted by your broker, bank or
nominee.
|
|||
Q:
|
How
will my common shares be voted if I return a blank proxy
card?
|
||
A:
|
If
you sign, date and return your proxy card and do not indicate how
you want
your common shares to be voted, then:
|
||
|
|
•
|
your
Citizens First common shares
will be vote “FOR”the
adoption of the Merger
Agreement and the approval of the transactions contemplated thereby;
and
|
|
•
|
your
Citizens First common shares
will be voted “FOR”the
approval, if necessary, of the
adjournment of the special meeting to solicit additional
proxies.
|
|
Q: | Can I change my vote after I have submitted my proxy? | ||
A: | Yes. You may revoke your proxy at any time before a vote is taken at the special meeting by: | ||
• | filing a written notice of revocation with the Secretary of Citizens First, at 601 Washington Street, Ravenswood, West Virginia, 26164; | ||
• | executing and returning a later-dated proxy card; or | ||
• | attending the special meeting and giving notice of revocation in person. | ||
Attendance at the special meeting will not, by itself, revoke your proxy. | |||
If you have instructed your broker, bank or nominee to vote your common shares, you must follow directions received from your broker, bank or nominee to change your vote. | |||
Q: | If I do not favor the adoption of the Merger Agreement, what are my rights? | ||
A: |
If
you are a Citizens First shareholder as of the ______________,
2008, record date and you do not vote in favor of the adoption of
the
Merger Agreement, you will have the right under Section 13D-13-1301,
et
seq. of the West Virginia Business Corporation Act to demand the
fair cash
value for your Citizens First common shares. The right to make
this demand is known as “dissenters’ rights.” For additional
information regarding your dissenters’ rights, see “Dissenters’ Rights” on
Page ___ of this prospectus/proxy statement and the complete text
of the
West Virginia Business Corporation Act article concerning Dissenters’
Rights, which is attached to this prospectus/proxy statement as Appendix
II.
|
Q:
|
When
do you expect the Merger to be completed?
|
||
A:
|
We
are working to complete the Merger as quickly as we can. We
expect to complete the Merger on or before __________, 2008, assuming
shareholder approval and all applicable governmental approvals have
been
received by that date and all conditions precedent to the Merger
have been
satisfied or waived.
|
||
Q:
|
When
should I send in my Citizens First share certificate?
|
||
A:
|
Please
do not send in your Citizens First share certificates with your proxy
card. Should the Merger be approved, at a later date, Premier
Financial’s exchange agent will mail to you a Transmittal Form that you
should use to surrender your Citizens First share
certificates. You should not surrender your Citizens First
share certificates for exchange until you receive the Transmittal
Form
from the exchange agent.
|
||
Q:
|
Where
will my Premier Financial common shares be listed?
|
||
A:
|
Premier
Financial common shares currently trade on the NASDAQ Global Market
under
the symbol “PFBI”.
|
||
Q:
|
What
do I need to do now?
|
||
A:
|
After
carefully reviewing this prospectus/proxy statement, including its
appendixes, please sign and date the enclosed proxy card and return
it in
the enclosed postage-paid envelope as soon as possible. By
submitting your proxy, you authorize the individuals named in the
proxy to
vote your common shares at the Citizens First special shareholders
meeting
in accordance with your instructions. Your
vote
is very important. Whether or not you plan to attend the
special meeting, please submit your proxy with voting instructions
to
ensure that your common shares will be voted at the Citizens First
special
shareholder meeting.
|
||
Q:
|
Who
can answer my questions?
|
||
A:
|
Citizens
First shareholders who have questions about the Merger or desire
additional copies of this prospectus/proxy statement or additional
proxy
cards should contact:
|
||
Thomas
M. Lookabaugh
B.
Scott Miller
Citizens
First Bank, Inc.
601
Washington Street
Ravenswood,
WV 26164
(304)
273-1100
|
|
•
|
|
the
value to be received by the
shareholders under the Merger Agreement relative to the historical
trading
price of Citizens First common stock represented a premium of
approximately __% over the closing price of Citizens First common
stock on
October 23,
2007, the last trading day
before the Merger Agreement was signed;
|
|
•
|
|
the
per share value of the
consideration to Citizens First shareholders and the fact that a
portion
of the consideration will be in the form of
cash;
|
|
•
|
|
the
anticipated tax-free exchange
of Citizens First common stock for Premier Financial common stock
for that
portion of consideration;
|
|
•
|
|
the
ability of Citizens First
shareholders, through the Premier Financial common stock component
of the
Merger consideration, to participate in the potential growth of the
combined institutions following consummation of the transaction;
and
|
|
•
|
|
the
Merger is less risky than the
potential alternatives available to Citizens First, including other
potential Merger transactions and the alternative of remaining
independent.
|
|
•
|
|
to
approve the Merger Agreement
and the transactions contemplated thereby; and
|
|
•
|
|
if
necessary, to consider and vote
upon a proposal to adjourn the meeting to a later date or dates,
to permit
further solicitation of proxies in the event that there are not sufficient
votes at the time of the meeting to approve the Merger
Agreement.
|
|
•
|
|
Citizens
First’s shareholders’
approval of the Merger Agreement;
|
|
•
|
|
approval
of the Merger by the
necessary federal and state regulatory
authorities;
|
|
•
|
|
absence
of any law or court order
prohibiting the Merger;
|
|
•
|
|
receipt
of opinions from counsel
to Citizens First and Premier Financial that the Merger will qualify
as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
|
|
•
|
|
the
continued accuracy of certain
representations and
warranties.
|
•
|
there
has been a material adverse
change in the financial condition of Premier Financial, any Premier
Financial Subsidiary Bank, or Citizens First since December 31, 2006;
or
|
||
|
•
|
|
either
party breaches any of its
representations or obligations under the Merger Agreement, and does
not
cure the breach within 30 days if such breach individually or in the
aggregate with other breaches results in a material adverse effect;
or
|
|
•
|
|
the
approval of any governmental
entity required for consummation of the Merger is denied or the
shareholders of Citizens First do not approve the Merger
Agreement.
|
|
|
|
|
•
|
|
timely
and successfully integrate
the operations of Premier Financial and Citizens
First;
|
|
•
|
|
maintain
existing relationships
with depositors in Citizens First to minimize withdrawals of deposits
subsequent to the Merger;
|
|
•
|
|
maintain
and enhance existing
relationships with borrowers to limit potential losses from loans
made by
Citizens First;
|
|
•
|
|
control
the incremental
non-interest expense of the integrated operations to maintain overall
operating efficiencies;
|
|
•
|
|
retain
and attract qualified
personnel at Premier Financial and Citizens First;
and
|
|
•
|
|
compete
effectively in the
communities served by Premier Financial and Citizens First and in
nearby
communities.
|
|
•
|
|
the
ability of Citizens First to
obtain the required shareholder approval or the companies to obtain
the
required regulatory approvals for the Merger;
|
|
•
|
|
the
ability of the companies to
consummate the Merger;
|
|
•
|
|
the
ability to successfully
integrate Citizens First into Premier Financial following the
Merger;
|
|
•
|
|
a
material adverse change in the
financial condition, results of operations or prospects of either
Citizens
First or Premier Financial;
|
|
•
|
|
the
ability to fully realize any
cost savings and/or revenue enhancements or the ability to realize
them on
a timely basis;
|
|
•
|
|
the
risk of borrower, depositor
and other customer attrition after the transaction is
completed;
|
|
•
|
|
a
change in general business and
economic conditions;
|
|
•
|
|
changes
in the interest rate
environment, deposit flows, loan demand, real estate values, and
competition;
|
|
•
|
|
changes
in accounting principles,
policies or guidelines;
|
|
•
|
|
changes
in legislation and
regulation;
|
|
•
|
|
other
economic, competitive,
governmental, regulatory, geopolitical, and technological factors
affecting the companies’ operations, pricing, and services;
and
|
|
•
|
|
other
risk factors described on
pages __ to __ of this proxy
statement/prospectus.
|
Premier
Financial
|
Citizens
First
|
|||||||||||||||||||||||
Cash
|
Cash
|
|||||||||||||||||||||||
Sales
Price
|
Dividend
|
Sales
Price
|
Dividend
|
|||||||||||||||||||||
High
|
Low
|
Declared
|
High
|
Low
|
Declared
|
|||||||||||||||||||
2005
|
||||||||||||||||||||||||
First
Quarter
|
$
|
12.75
|
$
|
10.78
|
$
|
-
|
$
|
20.00
|
$
|
20.00
|
$
|
0.01
|
||||||||||||
Second
Quarter
|
13.00
|
10.00
|
-
|
*
|
*
|
0.01
|
||||||||||||||||||
Third
Quarter
|
14.93
|
11.90
|
-
|
*
|
*
|
0.01
|
||||||||||||||||||
Fourth
Quarter
|
15.98
|
12.66
|
-
|
*
|
*
|
0.01
|
||||||||||||||||||
2006
|
||||||||||||||||||||||||
First
Quarter
|
$
|
16.44
|
$
|
14.01
|
$
|
-
|
$
|
*
|
$
|
*
|
$
|
-
|
||||||||||||
Second
Quarter
|
16.50
|
13.25
|
-
|
*
|
25.00
|
0.04
|
||||||||||||||||||
Third
Quarter
|
15.40
|
13.90
|
0.05
|
25.00
|
*
|
-
|
||||||||||||||||||
Fourth
Quarter
|
14.90
|
13.40
|
0.05
|
*
|
*
|
0.04
|
||||||||||||||||||
2007
|
||||||||||||||||||||||||
First
Quarter
|
$
|
16.49
|
$
|
13.36
|
$
|
0.10
|
$
|
*
|
$
|
*
|
$
|
-
|
||||||||||||
Second
Quarter
|
16.50
|
15.03
|
0.10
|
*
|
*
|
0.04
|
||||||||||||||||||
Third
Quarter
|
16.45
|
13.23
|
0.10
|
*
|
*
|
-
|
||||||||||||||||||
Fourth
Quarter
|
14.77
|
12.10
|
0.10
|
*
|
*
|
0.65
|
||||||||||||||||||
2008
|
||||||||||||||||||||||||
First
Quarter (through Jan. 31)
|
$
|
13.59
|
$
|
12.20
|
$
|
-
|
$
|
*
|
$
|
*
|
$
|
-
|
||||||||||||
*
No reported trades
|
Dollars
in thousands,
except
per share amounts
|
As
of or for the
Nine
Months
Ended
September
30,
|
At
or for the Years Ended December 31,
|
||||||||||||||||||||||||||
2007
|
2006
|
2006
|
|
2005
|
2004
|
2003
|
2002
|
|||||||||||||||||||||
|
(Unaudited)
|
|||||||||||||||||||||||||||
Summary
Statements of Income
|
||||||||||||||||||||||||||||
Net
interest
income
|
$ | 16,652 | $ | 15,941 | $ | 21,395 | $ | 19,852 | $ | 18,064 | $ | 19,182 | $ | 20,838 | ||||||||||||||
Provision
for loan
losses
|
(103 | ) | (1,051 | ) | (1,161 | ) | 4 | 1,026 | 20,513 | 9,453 | ||||||||||||||||||
Non-interest
income
|
3,461 | 3,031 | 4,165 | 3,920 | 3,606 | 4,064 | 2,717 | |||||||||||||||||||||
Non-interest
expense
|
12,232 | 12,736 | 16,937 | 17,305 | 17,782 | 17,632 | 17,831 | |||||||||||||||||||||
Income
taxes
(benefit)
|
2,601 | 2,445 | 3,283 | 2,029 | 899 | (5,282 | ) | (1,522 | ) | |||||||||||||||||||
Income
(loss) from
continuing
operations
|
5,383 | 4,842 | 6,501 | 4,434 | 1,963 | (9,617 | ) | (2,207 | ) | |||||||||||||||||||
Income
(loss) from
discontinued
operations
|
- | - | - | - | 4,734 | (80 | ) | (1,130 | ) | |||||||||||||||||||
Net
income
(loss)
|
$ | 5,383 | $ | 4,842 | $ | 6,501 | $ | 4,434 | $ | 6,697 | $ | (9,697 | ) | $ | (3,337 | ) | ||||||||||||
Per
Share Information
|
||||||||||||||||||||||||||||
Income (loss) from
continuing
operations
- basic
|
$ | 1.03 | $ | 0.92 | $ | 1.24 | $ | 0.85 | $ | 0.37 | $ | (1.84 | ) | $ | (0.42 | ) | ||||||||||||
Income
(loss) from
continuing
operations
- diluted
|
1.02 | 0.92 | 1.24 | 0.84 | 0.37 | (1.84 | ) | (0.42 | ) | |||||||||||||||||||
Net
income –
basic
|
1.03 | 0.92 | 1.24 | 0.85 | 1.28 | (1.85 | ) | (0.64 | ) | |||||||||||||||||||
Net
income –
diluted
|
1.02 | 0.92 | 1.24 | 0.84 | 1.28 | (1.85 | ) | (0.64 | ) | |||||||||||||||||||
Book
value
|
12.50 | 11.35 | 11.65 | 10.37 | 9.75 | 8.70 | 10.73 | |||||||||||||||||||||
Cash
dividends
|
0.30 | 0.05 | 0.10 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Selected
Balance Sheet Information
|
||||||||||||||||||||||||||||
Total
assets of continuing
operations
|
$ | 547,002 | $ | 539,701 | $ | 535,452 | $ | 528,324 | $ | 537,255 | $ | 543,229 | $ | 590,868 | ||||||||||||||
Total
assets of discontinued
operations
|
- | - | - | - | - | 79,163 | 84,406 | |||||||||||||||||||||
Loans,
net of unearned
income
|
346,502 | 346,037 | 343,797 | 328,717 | 324,937 | 331,794 | 373,099 | |||||||||||||||||||||
Allowance
for loan
losses
|
6,499 | 6,941 | 6,661 | 7,892 | 9,384 | 14,300 | 9,698 | |||||||||||||||||||||
Goodwill
and other
intangibles
|
15,816 | 15,816 | 15,816 | 15,816 | 15,816 | 15,816 | 15,816 | |||||||||||||||||||||
Securities
|
123,347 | 129,510 | 121,367 | 137,419 | 153,892 | 147,646 | 144,698 | |||||||||||||||||||||
Deposits
|
450,960 | 445,820 | 438,950 | 435,843 | 437,798 | 455,474 | 477,724 | |||||||||||||||||||||
Other
borrowings
|
26,711 | 23,693 | 33,091 | 19,053 | 20,536 | 18,307 | 32,600 | |||||||||||||||||||||
Subordinated
debentures
|
- | 8,505 | - | 15,722 | 20,876 | 26,546 | 29,639 | |||||||||||||||||||||
Stockholders’
equity
|
65,472 | 59,393 | 61,002 | 54,287 | 51,029 | 45,540 | 56,124 | |||||||||||||||||||||
As
of or for the
Nine
Months Ended
September
30,
|
At
or for the Years Ended December 31,
|
||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
(Unaudited)
|
|||||||||||||||||||||
Selected
Ratios
|
|||||||||||||||||||||
Return
on average assets (1),
(2)
|
1.30 | % | 1.19 | % | 1.21 | % | 0.82 | % | 0.36 | % | (1.66 | )% | (0.37 | )% | |||||||
Return
on average equity
(2)
|
11.25 | % | 11.31 | % | 11.31 | % | 8.42 | % | 4.06 | % | (18.46 | )% | (3.77 | )% | |||||||
Dividend
payout
(2)
|
29.41 | % | 5.43 | % | 8.06 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||
Stockholders’
equity
to total
assets assets
at period-end (3)
|
11.97 | % | 11.00 | % | 11.39 | % | 10.28 | % | 9.50 | % | 8.38 | % | 9.50 | % | |||||||
Average
stockholders’ equity to
average total assets (1)
|
11.57 | % | 10.58 | % | 10.74 | % | 9.77 | % | 8.23 | % | 7.88 | % | 8.44 | % | |||||||
(1) Computed
based on average assets from continuing operations
(2) Computed
based on income (loss) from continuing operations
(3) Shareholders’
equity at period-end divided by assets from continuing
operations
(4) A
2003 investigation into the conduct of the former president of Farmers
Deposit Bank by Premier and the FDIC, resulted in the charge-off
of over
$17.2 million of loans. The resulting depletion of the allowance
for loan
losses together with the analysis of additional risk in the loan
portfolio
warranted significant additional provisions for loan losses at the
Bank.
In addition to the provision for loan losses, interest income reversals
and other non-interest expenses, including bad check write-offs and
loan
review expenses, were recorded.
|
Dollars
in thousands,
except
per share amounts
|
As
of or for the
Nine
Months
Ended
September
30,
|
At
or for the Years Ended December 31,
|
||||||||||||||||||||||||||
2007
|
2006
|
2006
|
2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
Summary
Statements of Income
|
||||||||||||||||||||||||||||
Net
interest
income
|
$ | 1,871 | $ | 1,921 | $ | 2,559 | $ | 2,524 | $ | 2,357 | $ | 1,978 | $ | 1,223 | ||||||||||||||
Provision
for loan
losses
|
35 | 100 | 130 | 166 | 200 | 123 | 245 | |||||||||||||||||||||
Non-interest
income
|
232 | 217 | 294 | 243 | 203 | 85 | 60 | |||||||||||||||||||||
Non-interest
expense
|
1,388 | 1,288 | 1,716 | 1,675 | 1,615 | 1,395 | 1,137 | |||||||||||||||||||||
Income
taxes
(benefit)
|
306 | 317 | 433 | 360 | 281 | 199 | (61 | ) | ||||||||||||||||||||
Net
income
(loss)
|
$ | 374 | $ | 433 | $ | 575 | $ | 565 | $ | 465 | $ | 346 | $ | (38 | ) | |||||||||||||
Per
Share Information
|
||||||||||||||||||||||||||||
Net
income –
basic
|
0.94 | 1.08 | 1.44 | 1.41 | 1.17 | 0.87 | (0.09 | ) | ||||||||||||||||||||
Net
income -
diluted
|
0.94 | 1.08 | 1.44 | 1.41 | 1.17 | 0.87 | (0.09 | ) | ||||||||||||||||||||
Book
value
|
14.86 | 13.66 | 13.97 | 12.62 | 11.24 | 10.08 | 9.22 | |||||||||||||||||||||
Cash
dividends
|
0.04 | 0.04 | 0.08 | 0.04 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Selected
Balance Sheet Information
|
||||||||||||||||||||||||||||
Total
assets
|
$ | 59,062 | $ | 61,130 | $ | 62,683 | $ | 56,782 | $ | 52,105 | $ | 47,210 | $ | 39,679 | ||||||||||||||
Loans,
net of
unearned
income
|
47,290 | 46,008 | 47,060 | 47,350 | 46,461 | 38,990 | 31,166 | |||||||||||||||||||||
Allowance
for loan
losses
|
581 | 527 | 558 | 556 | 537 | 428 | 350 | |||||||||||||||||||||
Securities
|
3,984 | 2,996 | 898 | 2,132 | 127 | 0 | 0 | |||||||||||||||||||||
Deposits
|
52,493 | 55,341 | 56,813 | 51,422 | 47,415 | 42,928 | 35,887 | |||||||||||||||||||||
Other
borrowings
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Stockholders’
equity
|
5,942 | 5,464 | 5,589 | 5,047 | 4,497 | 4,033 | 3,686 | |||||||||||||||||||||
Shares
outstanding
|
400 | 400 | 400 | 400 | 400 | 400 | 400 | |||||||||||||||||||||
Selected
Ratios
|
||||||||||||||||||||||||||||
Return
on average
assets
|
0.84 | % | 0.94 | % | 0.92 | % | 0.99 | % | 0.89 | % | 0.73 | % | (0.10 | )% | ||||||||||||||
Return
on average
equity
|
8.39 | % | 10.57 | % | 10.29 | % | 11.19 | % | 10.34 | % | 8.58 | % | (1.03 | )% | ||||||||||||||
Dividend
payout
|
4.26 | % | 3.70 | % | 5.56 | % | 2.84 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||
|
•
|
|
to
approve the Merger Agreement
and the transactions contemplated thereby; and
|
|
•
|
|
to
consider and vote upon a
proposal to adjourn the meeting to a later date or dates, if necessary,
to
permit further solicitation of proxies in the event there are not
sufficient votes at the time of the meeting to approve the Merger
Agreement.
|
|
•
|
|
1.20
shares of Premier Financial
common stock; and
|
|
•
|
|
cash;
the amount of cash will be
determined by taking the volume-weighted average of the closing
price of Premier Common Stock for the five (5) trading days ending
with
the fifth business day before the Effective Time multiplied by 1.20
and
subtracting that amount from $29.25. The difference shall be
the cash consideration; in no event, however, shall the cash consideration
exceed $13.25 per share.
|
|
·
|
You
must deliver a written demand for appraisal to Citizens First before
the
vote is taken on the Merger Agreement at Citizens First’s special
meeting. This written demand for appraisal must be in addition
to and separate from any proxy or vote against the Merger
Agreement. Merely voting against, abstaining from voting or
failing to vote in favor of adoption of the Merger Agreement will
not
constitute a demand for appraisal within the meaning of
§31D-13-1321. See “Requirements for Written Demand for
Appraisal” below for more details on making a demand for appraisal.
|
|
·
|
You
must not vote in favor of approval and adoption of the Merger Agreement.
A
failure to vote will satisfy this requirement, but a vote in favor
of the
Merger Agreement will constitute a waiver of your right of appraisal.
Accordingly, if you want to maintain your appraisal rights you must
either
check the “Against” box or the “Abstain” box on the proxy card or refrain
from executing and returning the enclosed proxy card.
|
|
·
|
You
must continuously hold your shares of Citizens First stock from the
date
you make the demand for appraisal through the effective date of the
Merger. A stockholder who is the record holder of shares of Citizens
First
common stock on the date the written demand for appraisal is made,
but who
thereafter transfers these shares prior to completion of the Merger,
will
lose any right to appraisal in respect of those shares.
|
|
•
|
|
the
value to be received by the
shareholders under the Merger Agreement relative to the historical
trading
price of Citizens First common stock represented a premium of
approximately 17.0% over the closing price of Citizens First common
stock
on October 23,
2007, the last trading day
before the Merger Agreement was signed;
|
|
•
|
|
the
per share value of the
consideration to Citizens First shareholders and the fact that at
least a
portion of the consideration will be in the form of
cash;
|
|
•
|
|
the
anticipated tax-free exchange
of Citizens First common stock for Premier Financial common stock
for that
portion of consideration;
|
|
•
|
|
the
ability of Citizens First
shareholders, through the Premier Financial common stock component
of the
merger consideration, to participate in the potential growth of the
combined institutions following consummation of the
transaction;
|
|
•
|
|
the
competitive environment facing
community banks like Citizens First, and management’s belief that its
customers and employees would benefit from a combination with Premier
Financial due to the combined company’s enhanced ability to serve its
customers more broadly and effectively because of the combined company’s
greater scale, broader product mix, stronger platform and robust
systems;
|
|
|
|
|
|
•
|
|
the
result of the due diligence
investigation of Premier Financial conducted by Citizens
First;
|
|
•
|
|
the
board’s familiarity with and
review of the business, financial condition, results of operations,
and
prospects of Premier Financial, including among others, its growth
and
profitability potential;
|
|
•
|
|
management’s
belief that the
Merger would likely be approved by the appropriate regulatory authorities
without undue conditions of delay and in accordance with the terms
proposed; and
|
|
•
|
|
the
potential alternatives
available to Citizens First, including other potential merger transactions
and the alternative of remaining independent, and the risks and challenges
inherent in successfully implementing its business
plan.
|
|
•
|
|
The
directors and officers of the surviving bank at the Effective Time
shall
be those persons who are directors and officers respectively of Citizens
First immediately before the Effective Time. The committees of
the Board of Directors of the surviving bank at the Effective Time
shall
be the same as and shall be composed of the same persons who are
serving
on committees appointed by the Board of Directors of Citizens First
as
they exist immediately before the Effective Time. The
committees of officers of the surviving bank at the Effective Time
shall
be the same as and shall be composed of the same officers who are
serving
on the committees of officers of Citizens First as they exist immediately
before the Effective Time.
|
|
•
|
|
The
shareholders of Citizens First
approve the Merger Agreement and the transactions contemplated thereby,
described in the proxy statement/prospectus at the special meeting
of
shareholders of Citizens First;
|
|
•
|
|
All
regulatory approvals required
by law to consummate the transactions contemplated by the Merger
Agreement
are obtained from the Federal Reserve Board, the Federal Deposit
Insurance
Corporation, the
West Virginia Board of Banking
and Financial Institutions and any other appropriate federal and/or
state
regulatory agencies without unreasonable conditions, and all waiting
periods after such approvals required by law or regulation
expire;
|
|
•
|
|
The
registration statement (of
which this proxy statement/prospectus is a part) registering shares
of
Premier Financial common stock to be issued in the Merger is declared
effective and not subject to a stop order or any threatened stop
order;
|
|
•
|
|
There
shall be no actual or
threatened litigation, investigations or proceedings challenging
the
validity of, or damages in connection with, the Merger that would
have a
material adverse effect with respect to the interests of Premier
Financial
or Citizens First or impose a term or condition that shall be deemed
to
materially adversely impact the economic or business benefits of
the
Merger;
|
|
•
|
|
The
absence of any statute, rule,
regulation, judgment, decree, injunction or other order being enacted,
issued, promulgated, enforced or entered by a governmental authority
effectively prohibiting consummation of the
Merger;
|
|
•
|
|
All
permits or other
authorizations under state securities laws necessary to consummate
the
Merger and to issue the shares of Premier Financial common stock
to be
issued in the Merger being obtained and remaining in full force and
effect.
|
|
•
|
|
The
representations and warranties
of Citizens First made in the Merger Agreement are true and correct
as of
the date of the Merger Agreement and as of the effective time of
the
Merger and Premier Financial receives a certificate of the chief
executive
officer and the chief financial officer of Citizens First to that
effect;
|
|
•
|
|
Citizens
First performs in all
material respects all obligations required to be performed under
the
Merger Agreement prior to the effective time of the Merger and delivers
to
Premier Financial a certificate of its chief executive officer and
chief
financial officer to that effect; and
|
|
•
|
|
Premier
Financial shall have
received an opinion of Huddleston Bolen LLP, counsel to Premier Financial,
dated as of the effective time of the Merger, that the Merger constitutes
a “reorganization” under Section 368 of the Internal Revenue
Code.
|
|
•
|
|
The
representations and warranties
of Premier Financial made in the Merger Agreement are true and correct
as
of the date of the Merger Agreement and as of the effective time
of the
Merger and Citizen First receives a certificate of the chief executive
officer and chief financial officer of Premier Financial to that
effect;
|
|
•
|
|
Premier
Financial performs in all
material respects all obligations required to be performed under
the
Merger Agreement prior to the effective time of the Merger and delivers
to
Citizens First a certificate of its chief executive officer and chief
financial officer to that effect; and
|
|
•
|
|
Citizens
First shall have received
an opinion of Jackson Kelly
PLLC, counsel to Citizens
First, stating that, among other things, as of the effective time
of the
Merger, the Merger constitutes a “reorganization” under Section 368
of the Internal Revenue Code and that no gain or loss will be recognized
by the shareholders of Citizens First to the extent that they receive
Premier Financial common stock in exchange for their Citizens First
common
stock in the Merger.
|
|
•
|
|
organization
and good standing of
each entity and its subsidiaries;
|
|
•
|
|
each
entity’s capital
structure;
|
|
•
|
|
each
entity’s authority relative
to the execution and delivery of, and performance of its obligations
under, the reorganization agreement;
|
|
•
|
|
absence
of material adverse
changes since December 31, 2006;
|
|
•
|
|
consents
and approvals
required;
|
|
•
|
|
regulatory
matters;
|
|
•
|
|
accuracy
of documents, including
financial statements and other reports, filed with the
SEC;
|
|
•
|
|
absence
of defaults under
contracts and agreements;
|
|
•
|
|
absence
of environmental
problems;
|
|
•
|
|
absence
of conflicts between each
entity’s obligations under the Merger Agreement and its charter documents
and contracts to which it is a party or by which it is
bound;
|
|
•
|
|
litigation
and related
matters;
|
|
•
|
|
taxes
and tax regulatory
matters;
|
|
•
|
|
employee
benefit matters;
and
|
|
•
|
|
books
and records fully and
accurately maintained and fairly present events and
transactions;
|
|
•
|
|
By
mutual consent in writing of Citizens First and Premier Financial;
or
|
|
•
|
|
By
Citizens First by giving written notice thereof to Premier Financial
if
(i) a material adverse change shall have occurred in the financial
condition, results of operations or business of Premier Financial
or any
Premier Financial Subsidiary Bank since December 31, 2006, or (ii)
Premier
Financial has in any material respect breached any covenant, undertaking,
representation or warranty contained in the Merger Agreement and
such
breach has not been cured within thirty (30) days after the giving
of such
notice; or
|
|
•
|
|
By
Premier Financial by giving written notice thereof to Citizens First
if
(i) a material adverse change shall have occurred in the financial
condition, results of operations or business of Citizens First since
December 31, 2006 or (ii) Citizens First has in any material respect
breached any covenant, undertaking, representation or warranty contained
in the Merger Agreement and such breach has not been cured within
thirty
(30) days after the giving of such notice; or
|
•
|
By
either Citizens First or Premier Financial upon written notice to
the
other if any regulatory agency whose approval of the transactions
contemplated by the Merger Agreement is required denies such application
for approval by final order or ruling (which order or ruling shall
not be
considered final until expiration or waiver of all periods for review
or
appeal); or
|
||
•
|
By
either Citizens Bank or Premier Financial upon written notice to
the other
if any condition precedent to either party's performance under the
Merger
Agreement is not satisfied or fulfilled; or
|
||
•
|
By
either Citizens First or Premier Financial if the Merger shall violate
any
non-appealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
|
||
•
|
By
either Citizens First or Premier Financial upon the bankruptcy, insolvency
or assignment for the benefit of creditors of Citizens First, Premier
Financial or of any of the Premier Financial Subsidiary Banks;
or
|
||
•
|
By
either Citizens First or Premier Financial, if the shareholders of
Citizens First shall fail to approve the Merger by the vote required
under
the West Virginia Business Corporation Act and the Articles of
Incorporation and Bylaws of Citizens
First.
|
|
(1)
|
Any
new loan, or renewal of an existing loan, that totals $250,000 or
greater;
or
|
|
(2)
|
Any
new loan, or renewal of an existing loan, which, when included with
all
other loans from Citizens First to any such borrower and their related
interests, would cause such borrower’s total loans from Citizens First,
including loans from Citizens First to their related interests, to
exceed
$400,000.
|
•
|
By
either Traders or Premier Financial, if the Closing does not occur
on or
before April 30, 2008 unless extended by mutual agreement in writing;
or
|
||
•
|
By
Traders by giving written notice thereof to Premier Financial during
the
five day period (“Election Period”) ending two business days prior to the
Closing Date, if the volume weighted average of the daily closing
price
per share of Premier Financial common stock for the five trading
days
ending with the tenth trading day prior to the Closing Date (“Closing
Price”) is less than $11.20, unless Premier Financial by giving written
notice to Traders after having received a termination notice from
Traders,
at its option, increases the Stock Consideration to a sufficient
ratio
such that Traders shareholders receive shares of Premier Financial
common
stock which are the equivalent to at least $42.00, based upon the
Closing
Price and the total Merger Consideration being received by Traders
shareholders is equal to at least $92.00 per share.
|
||
•
|
By
Premier Financial by giving written notice thereof to Traders during
the
Election Period if the Closing Price is more than $16.80, unless
Traders
by giving written notice to Premier after having received a termination
notice from Premier, at its option, decreases the Stock Consideration
to a
sufficient ratio such that Traders shareholders receive shares of
Premier
Financial common stock which are the equivalent to, at the greatest,
$63.00 based upon the Closing Price and the total Merger Consideration
being received by Traders’ shareholders is equal to, at the greatest,
$113.00 per share.
|
($
in thousands)
|
|||||
Assets
|
105,968 | ||||
Liabilities
|
93,651 | ||||
Stockholders’
Equity
|
12,317 | ||||
Net
Income
|
323 |
|
(1)
|
Retention
of an independent management consultant acceptable to both regulators
to
conduct a review of the functions and performance of Traders Bank’s
management and Traders Bank’s staffing needs, and the formulation by
Traders Bank of a management plan to address the findings and
recommendations of such report.
|
|
(2)
|
Traders
Bank is required to notify the Federal Reserve Bank of Richmond of
appointment of any new officers or directors.
|
|
(3)
|
Traders
Bank is restricted in its indemnification of and payment of severance
payments to certain executive officers.
|
|
(4)
|
Traders
Bank was required to submit to both regulators written loan policies
and
procedures.
|
|
(5)
|
Traders
Bank was required to submit to both regulators a written plan to
improve
the bank’s asset position on past due loans or adversely classified or
listed loans, and to submit quarterly progress reports to both regulators
updating the asset improvement plan.
|
|
(6)
|
Traders
Bank was required to submit to both regulators a revised written
loan
review program addressing loan review deficiencies.
|
|
(7)
|
Traders
Bank is required to maintain adequate loan loss reserves.
|
|
(8)
|
Traders
Bank was required to submit to both regulators a written strategic
business plan for improving earnings and overall conditions of the
Bank.
|
|
(9)
|
Traders
Bank was required to submit to both regulators a written plan to
achieve
and maintain sufficient capital.
|
|
(10)
|
Traders
Bank is prohibited from declaring or paying any dividends without
prior
written approval of both regulators.
|
|
(11)
|
Traders
Bank was required to submit to both regulators a written investment
policy
and procedures statement.
|
|
(12)
|
Traders
Bank was required to submit to both regulators a written plan for
enhancing independent testing of the bank’s anti-money laundering
compliance and customer due diligence program.
|
|
•
|
|
Gary
Brown, the President and CEO
of Traders, is party to an employment contract dated November 21,
2005. The initial term of the employment contract was for 2
years and automatically renewed for a period of one year, until November
21, 2008. The employment contract provides, upon “Change of
Control”, that the executive may terminate the employment contract and
will be entitled to 225% of his annual salary plus any accrued incentive
compensation as “Severance Pay”, plus any accrued vacation
days. Mr. Brown has indicated that it his current intention to
terminate his employment. Mr. Brown would
be
paid the “Severance Pay”
currently
estimated to
be
$411,717.
|
•
|
Elta
K. Cottrell, Executive Vice
President of Traders is party to an existing “Employment and
Change-of-Control Agreement” dated May 22, 2007. The term of
the employment contract is for a period of 5 years. The “Change
of Control” provision of the contract provides for the payment of
“Severance Pay” equal to one year’s compensation, including Base Salary
and accrued incentive bonus to the executive upon termination or
a
material change in title, position, status, pay, benefits, location
of
employment, authority or duties. It is anticipated
that Ms.
Cottrell will be paid
the “Severance Pay” currently estimated
to be
$97,537.
|
||
•
|
Marshall
T. McNeer, Vice President
of Traders is party to an existing “Employment and Change-of-Control
Agreement” dated December 19, 2006. The term of the employment
contract is for a period of 2 years. The “Change of Control”
provision of the contract provides for the payment of “Severance Pay”
equal to one year’s compensation, including Base Salary and accrued
incentive bonus (Mr. McNeer does not participate in the incentive
bonus
program) to executive upon termination or a material change in title,
position, status, pay or benefits. It is anticipated
that Mr. McNeer
will be paid
the
“Severance Pay” currently estimated
to be
$78,750.
|
||
•
|
Martha
J. Haymaker, Executive Vice
President and Chief Financial Officer of Traders is party to an existing
“Employment and Change-of-Control Agreement” dated October 12,
2006. The term of the employment contract is for a period of 5
years. The “Change of Control” provision of the contract
provides for the payment of “Severance Pay” equal to one year’s
compensation, including Base Salary and accrued incentive bonus to
executive upon termination or a material change in title, position,
status, pay or benefits. In the event
of such termination
or change, Ms. Haymaker wouldbe paid “Severance Pay”
which is currently
estimated to
be
$101,310.
|
ANALYSIS
of RETURN ON ASSETS and EQUITY
|
||||||||||||||||||||
from
continuing operations
|
||||||||||||||||||||
2006
|
2005
|
2004
|
2003(1)
|
2002
|
||||||||||||||||
As
a percent of average earning assets
|
||||||||||||||||||||
Fully
taxable-equivalent net
interest income
|
4.32 | % | 4.00 | % | 3.61 | % | 3.63 | % | 3.84 | % | ||||||||||
Provision
for loan
losses
|
0.23 | (0.00 | ) | (0.20 | ) | (3.81 | ) | (1.70 | ) | |||||||||||
Net
credit income
|
4.55 | 4.00 | 3.41 | (0.18 | ) | 2.14 | ||||||||||||||
Gains
on the sales of assets
& subsidiaries
|
0.00 | 0.00 | 0.02 | 0.11 | (0.01 | ) | ||||||||||||||
Non-interest
income
|
0.84 | 0.78 | 0.69 | 0.62 | 0.50 | |||||||||||||||
Non-interest
expense
|
(3.40 | ) | (3.46 | ) | (3.52 | ) | (3.26 | ) | (3.21 | ) | ||||||||||
Tax
equivalent
adjustment
|
(0.03 | ) | (0.03 | ) | (0.03 | ) | (0.07 | ) | (0.08 | ) | ||||||||||
Applicable
income
taxes
|
(0.66 | ) | (0.41 | ) | (0.18 | ) | 0.98 | 0.27 | ||||||||||||
Return
on average earning assets
|
1.30 | 0.88 | 0.39 | (1.79 | ) | (0.40 | ) | |||||||||||||
Multiplied
by average earning
assets to
average
total
assets
|
93.07 | 92.84 | 92.39 | 92.86 | 92.34 | |||||||||||||||
Return
on average assets
|
1.21 | % | 0.82 | % | 0.36 | % | (1.66 | )% | (0.37 | )% | ||||||||||
Multiplied
by average assets
to
average
equity
|
9.31 | X | 10.23 | X | 11.33 | X | 11.13 | X | 10.26 | X | ||||||||||
Return
on average equity
|
11.31 | % | 8.42 | % | 4.06 | % | (18.46 | )% | (3.77 | )% | ||||||||||
QUARTERLY
FINANCIAL INFORMATION
|
||||||||||||||||||||
(Dollars
in thousands, except per share amounts)
|
||||||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
Full
Year
|
||||||||||||||||
2006
|
||||||||||||||||||||
Interest
income
|
$ | 7,676 | $ | 8,014 | $ | 8,248 | $ | 8,462 | $ | 32,400 | ||||||||||
Interest
expense
|
2,472 | 2,654 | 2,871 | 3,008 | 11,005 | |||||||||||||||
Net
interest
income
|
5,204 | 5,360 | 5,377 | 5,454 | 21,395 | |||||||||||||||
Provision
for loan
losses
|
(194 | ) | (819 | ) | (38 | ) | (110 | ) | (1,161 | ) | ||||||||||
Securities
gains
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Net
overhead
|
3,348 | 3,161 | 3,196 | 3,067 | 12,772 | |||||||||||||||
Income
before income
taxes
|
2,050 | 3,018 | 2,219 | 2,497 | 9,784 | |||||||||||||||
Net
income
|
1,367 | 2,000 | 1,475 | 1,659 | 6,501 | |||||||||||||||
Basic
net income per
share
|
0.26 | 0.38 | 0.28 | 0.32 | 1.24 | |||||||||||||||
Diluted
net income per
share
|
0.26 | 0.38 | 0.28 | 0.32 | 1.24 | |||||||||||||||
Dividends
paid per
share
|
0.00 | 0.00 | 0.05 | 0.05 | 0.10 | |||||||||||||||
2005
|
||||||||||||||||||||
Interest
income
|
$ | 7,045 | $ | 7,172 | $ | 7,465 | $ | 7,717 | $ | 29,399 | ||||||||||
Interest
expense
|
2,318 | 2,279 | 2,410 | 2,540 | 9,547 | |||||||||||||||
Net
interest
income
|
4,727 | 4,893 | 5,055 | 5,177 | 19,852 | |||||||||||||||
Provision
for loan
losses
|
243 | 191 | (140 | ) | (290 | ) | 4 | |||||||||||||
Securities
gains
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Net
overhead
|
3,327 | 3,660 | 3,189 | 3,209 | 13,385 | |||||||||||||||
Income
before income
taxes
|
1,157 | 1,042 | 2,006 | 2,258 | 6,463 | |||||||||||||||
Net
income
|
803 | 727 | 1,367 | 1,537 | 4,434 | |||||||||||||||
Basic
net income per
share
|
0.15 | 0.14 | 0.26 | 0.29 | 0.85 | |||||||||||||||
Diluted
net income per
share
|
0.15 | 0.14 | 0.26 | 0.29 | 0.84 | |||||||||||||||
Dividends
paid per
share
|
0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
AVERAGE
CONSOLIDATED BALANCE
SHEETS AND NET INTEREST INCOME ANALYSIS
|
||||||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||||||
2006
|
2005
|
2004
|
||||||||||||||||||||||||||
Average
Balance
|
Interest
(2)
|
Yield/
Rate
(3)
|
Average
Balance
|
Interest
(2)
|
Yield/
Rate
(3)
|
Average
Balance
|
Interest
(2)
|
Yield/
Rate
(3)
|
||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||
Interest
earning assets
|
||||||||||||||||||||||||||||
U.S.
Treasury and federal agency
securities
|
$
|
95,705
|
$
|
3,398
|
3.55
|
%
|
$
|
107,177
|
$
|
3,278
|
3.06
|
%
|
$
|
112,260
|
$
|
3,117
|
2.78
|
%
|
||||||||||
States
and municipal obligations
(1)
|
2,342
|
138
|
5.89
|
2,666
|
153
|
5.74
|
4,941
|
338
|
6.84
|
|||||||||||||||||||
Mortgage
backed securities
|
33,953
|
1,564
|
4.61
|
37,050
|
1,583
|
4.27
|
29,803
|
1,183
|
3.97
|
|||||||||||||||||||
Other
securities
|
3,179
|
182
|
5.73
|
3,089
|
148
|
4.79
|
3,216
|
138
|
4.29
|
|||||||||||||||||||
Total
investment securities
|
135,179
|
5,282
|
3.91
|
149,982
|
5,162
|
3.44
|
150,220
|
4,776
|
3.18
|
|||||||||||||||||||
Federal
funds sold
|
24,365
|
1,215
|
4.99
|
23,083
|
745
|
3.23
|
29,369
|
380
|
1.29
|
|||||||||||||||||||
Interest-bearing
deposits with
banks
|
486
|
24
|
4.94
|
436
|
12
|
2.75
|
256
|
6
|
2.57
|
|||||||||||||||||||
Loans,
net of unearned income
(4)(5)
|
||||||||||||||||||||||||||||
Commercial
|
161,898
|
12,424
|
7.67
|
147,398
|
10,291
|
6.98
|
132,785
|
8,913
|
6.71
|
|||||||||||||||||||
Real
estate mortgage
|
129,944
|
9,271
|
7.13
|
132,527
|
9,236
|
6.97
|
145,387
|
10,182
|
7.00
|
|||||||||||||||||||
Installment
|
46,494
|
4,334
|
9.32
|
46,690
|
4,083
|
8.74
|
47,438
|
4,029
|
8.49
|
|||||||||||||||||||
Total
loans
|
338,336
|
26,029
|
7.69
|
326,615
|
23,610
|
7.23
|
325,610
|
23,124
|
7.10
|
|||||||||||||||||||
Total
interest earning assets
|
498,366
|
32,550
|
6.53
|
500,116
|
29,529
|
5.90
|
505,455
|
28,286
|
5.60
|
|||||||||||||||||||
Allowance
for loan losses
|
(7,465
|
)
|
(8,998
|
)
|
(11,413
|
)
|
||||||||||||||||||||||
Cash
and due from banks
|
13,824
|
13,619
|
13,837
|
|||||||||||||||||||||||||
Premises
and equipment
|
7,055
|
7,256
|
7,738
|
|||||||||||||||||||||||||
Other
assets
|
23,688
|
26,697
|
31,490
|
|||||||||||||||||||||||||
Assets
of discontinued operations
|
-
|
-
|
39,762
|
|||||||||||||||||||||||||
Total
assets
|
$
|
535,468
|
$
|
538,690
|
$
|
586,869
|
||||||||||||||||||||||
Liabilities
and
Equity:
|
||||||||||||||||||||||||||||
Interest
bearing liabilities
|
||||||||||||||||||||||||||||
NOW
and money market
|
$
|
129,080
|
1,766
|
1.37
|
%
|
$
|
142,501
|
1,409
|
0.99
|
%
|
$
|
158,169
|
1,290
|
0.82
|
%
|
|||||||||||||
Savings
deposits
|
52,295
|
321
|
0.61
|
59,365
|
412
|
0.69
|
62,518
|
521
|
0.83
|
|||||||||||||||||||
Certificates
of deposit and other
time deposits
|
188,044
|
6,896
|
3.67
|
174,057
|
4,904
|
2.82
|
164,932
|
4,455
|
2.70
|
|||||||||||||||||||
Total
interest bearing deposits
|
369,419
|
8,983
|
2.43
|
375,923
|
6,725
|
1.79
|
385,619
|
6,266
|
1.62
|
|||||||||||||||||||
Short-term
borrowings
|
9,591
|
234
|
2.44
|
8,422
|
180
|
2.14
|
6,539
|
118
|
1.80
|
|||||||||||||||||||
Other
borrowings
|
7,765
|
574
|
7.39
|
1,586
|
14
|
0.88
|
5,306
|
248
|
4.67
|
|||||||||||||||||||
FHLB
advances
|
7,815
|
453
|
5.80
|
8,775
|
499
|
5.69
|
9,955
|
556
|
5.59
|
|||||||||||||||||||
Debentures
|
7,887
|
760
|
9.64
|
20,480
|
2,129
|
10.40
|
25,397
|
2,869
|
11.30
|
|||||||||||||||||||
Total
interest-bearing liabilities
|
402,477
|
11,004
|
2.73
|
%
|
415,186
|
9,547
|
2.30
|
%
|
432,816
|
10,057
|
2.32
|
%
|
||||||||||||||||
Non-interest
bearing deposits
|
72,781
|
66,848
|
62,486
|
|||||||||||||||||||||||||
Other
liabilities
|
2,721
|
4,007
|
7,393
|
|||||||||||||||||||||||||
Liabilities
of discontinued operations
|
-
|
-
|
35,876
|
|||||||||||||||||||||||||
Shareholders’
equity
|
57,489
|
52,649
|
48,298
|
|||||||||||||||||||||||||
Total
liabilities and equity
|
$
|
535,468
|
$
|
538,690
|
$
|
586,869
|
||||||||||||||||||||||
Net
interest
earnings
(1)
|
$
|
21,546
|
$
|
19,982
|
$
|
18,229
|
||||||||||||||||||||||
Net
interest
spread
(1)
|
3.80
|
%
|
3.60
|
%
|
3.28
|
%
|
||||||||||||||||||||||
Net
interest
margin
(1)
|
4.32
|
%
|
4.00
|
%
|
3.61
|
%
|
||||||||||||||||||||||
(1)
Taxable - equivalent yields are calculated assuming a 34% federal
income
tax rate
(2)
Excludes the interest income and interest expense of discontinued
operations
(3)
Yields are calculated on historical cost except for yields on marketable
equity securities that are calculated used fair value
(4)
Includes loan fees, immaterial in amount, in both interest income
and the
calculation of yield on loans
(5)
Includes loans on non-accrual
status
|
LOAN
SUMMARY
|
|||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
|||||||||||||||||||||||||||||||
As
of December 31,
|
|||||||||||||||||||||||||||||||
2006
|
%
|
2005
|
%
|
2004
|
%
|
2003(2)
|
%
|
2002
|
%
|
||||||||||||||||||||||
Summary
of Loans by Type
|
|||||||||||||||||||||||||||||||
Commercial,
secured by real estate
|
$
|
101,786
|
29.6
|
%
|
$
|
85,989
|
26.2
|
%
|
$
|
101,567
|
31.3
|
%
|
$
|
101,325
|
30.5
|
%
|
$
|
109,571
|
29.3
|
%
|
|||||||||||
Commercial,
other
|
43,981
|
12.8
|
49,362
|
15.0
|
40,923
|
12.6
|
38,063
|
11.5
|
51,347
|
13.8
|
|||||||||||||||||||||
Real
estate construction
|
11,303
|
3.3
|
11,070
|
3.4
|
5,906
|
1.8
|
5,414
|
1.6
|
7,318
|
2.0
|
|||||||||||||||||||||
Real
estate mortgage
|
138,795
|
40.4
|
134,570
|
40.9
|
128,243
|
39.5
|
126,134
|
38.0
|
134,271
|
36.0
|
|||||||||||||||||||||
Agricultural
|
1,930
|
0.5
|
1,670
|
0.5
|
2,380
|
0.7
|
3,032
|
0.9
|
4,381
|
1.2
|
|||||||||||||||||||||
Consumer
|
42,188
|
12.3
|
42,096
|
12.8
|
44,470
|
13.7
|
56,216
|
17.0
|
63,534
|
17.0
|
|||||||||||||||||||||
Other
|
3,814
|
1.1
|
3,960
|
1.2
|
1,438
|
0.4
|
1,610
|
0.5
|
2,677
|
0.7
|
|||||||||||||||||||||
Total
loans
|
$
|
343,797
|
100.0
|
%
|
$
|
328,717
|
100.0
|
%
|
$
|
324,927
|
100.0
|
%
|
$
|
331,794
|
100.0
|
%
|
$
|
373,099
|
100.0
|
%
|
|||||||||||
Non-performing
Assets
|
|||||||||||||||||||||||||||||||
Non-accrual
loans
|
$
|
4,698
|
$
|
3,751
|
$
|
6,847
|
$
|
11,958
|
$
|
8,197
|
|||||||||||||||||||||
Accruing
loans which are contractually
past
due
90
days
or more
|
992
|
853
|
739
|
4,137
|
1,238
|
||||||||||||||||||||||||||
Restructured loans
|
1,268
|
1,540
|
238
|
104
|
129
|
||||||||||||||||||||||||||
Total
non-performing and restructured
loans
|
6,958
|
6,144
|
7,824
|
16,199
|
9,564
|
||||||||||||||||||||||||||
Other
real estate acquired through
foreclosures
|
495
|
2,049
|
2,247
|
3,187
|
3,505
|
||||||||||||||||||||||||||
Total
non-performing and restructured
loans
and
other
real estate
|
$
|
7,453
|
$
|
8,193
|
$
|
10,071
|
$
|
19,386
|
$
|
13,069
|
|||||||||||||||||||||
Non-performing
and restructured
loans
as
a
% of total
loans
|
2.02%
|
1.87%
|
2.41%
|
4.88%
|
2.56%
|
||||||||||||||||||||||||||
Non-performing
and restructured
loans and
other
real
estate as a % of total assets
(1)
|
1.39%
|
1.55%
|
1.87%
|
3.57%
|
2.21%
|
||||||||||||||||||||||||||
Allocation
of Allowance for Loan Losses
|
|||||||||||||||||||||||||||||||
Commercial, other
|
$
|
839
|
14.4
|
%
|
$
|
1,071
|
16.7
|
%
|
$
|
1,734
|
13.7
|
%
|
$
|
4,166
|
12.9
|
%
|
$
|
2,294
|
15.7
|
%
|
|||||||||||
Real estate, construction
|
117
|
3.3
|
134
|
3.4
|
83
|
1.8
|
662
|
1.6
|
632
|
2.0
|
|||||||||||||||||||||
Real estate, other
|
3,395
|
70.0
|
3,810
|
67.1
|
4,276
|
70.8
|
4,886
|
68.5
|
4,341
|
65.3
|
|||||||||||||||||||||
Consumer installment
|
521
|
12.3
|
772
|
12.8
|
1,255
|
13.7
|
2,478
|
17.0
|
977
|
17.0
|
|||||||||||||||||||||
Unallocated
|
1,789
|
2,105
|
2,036
|
2,108
|
1,454
|
||||||||||||||||||||||||||
Total
|
$
|
6,661
|
100.0
|
%
|
$
|
7,892
|
100.0
|
%
|
$
|
9,384
|
100.0
|
%
|
$
|
14,300
|
100.0
|
%
|
$
|
9,698
|
100.0
|
%
|
|||||||||||
(1)
From continuing operations
|
SUMMARY
OF LOAN LOSS
EXPERIENCE
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
For
the Year Ended December 31
|
||||||||||||||||
2006
|
2005
|
2004
|
2003(1)
|
2002
|
||||||||||||
Allowance
for loan losses beginning
of period
|
$
|
7,892
|
$
|
9,384
|
$
|
14,300
|
$
|
9,698
|
$
|
7,371
|
||||||
Amounts
charged off:
|
||||||||||||||||
Commercial,
financial and agricultural loans
|
154
|
736
|
1,520
|
4,417
|
4,080
|
|||||||||||
Real
estate construction loans
|
0
|
0
|
5
|
0
|
833
|
|||||||||||
Real
estate loans - other
|
863
|
549
|
2,413
|
6,427
|
1,072
|
|||||||||||
Consumer
installment loans
|
393
|
930
|
3,054
|
5,669
|
1,904
|
|||||||||||
Total
charge-offs
|
1,410
|
2,215
|
6,992
|
16,513
|
7,889
|
|||||||||||
Recoveries
on amounts previously charged-off:
|
||||||||||||||||
Commercial,
financial and agricultural loans
|
266
|
91
|
264
|
145
|
138
|
|||||||||||
Real
estate construction loans
|
8
|
1
|
1
|
37
|
16
|
|||||||||||
Real
estate loans - other
|
340
|
84
|
87
|
74
|
163
|
|||||||||||
Consumer
installment loans
|
726
|
543
|
698
|
346
|
446
|
|||||||||||
Total
recoveries
|
1,340
|
719
|
1,050
|
602
|
763
|
|||||||||||
Net
charge-offs
|
70
|
1,496
|
5,942
|
15,911
|
7,126
|
|||||||||||
Provision
for loan losses
|
(1,161
|
)
|
4
|
1,026
|
20,513
|
9,453
|
||||||||||
Allowance
for loan losses, end of period
|
$
|
6,661
|
$
|
7,892
|
$
|
9,384
|
$
|
14,300
|
$
|
9,698
|
||||||
Average
total loans
|
$
|
338,336
|
$
|
326,615
|
$
|
325,610
|
$
|
352,156
|
$
|
382,763
|
||||||
Total
loans at year-end
|
343,797
|
328,717
|
324,927
|
331,794
|
373,099
|
|||||||||||
As
a percent of average loans
|
||||||||||||||||
Net
charge-offs
|
0.02
|
%
|
0.46
|
%
|
1.82
|
%
|
4.52
|
%
|
1.86
|
%
|
||||||
Provision
for loan losses
|
(0.34
|
)%
|
0.00
|
%
|
0.32
|
%
|
5.83
|
%
|
2.47
|
%
|
||||||
Allowance
for loan losses
|
1.97
|
%
|
2.42
|
%
|
2.88
|
%
|
4.06
|
%
|
2.53
|
%
|
||||||
As
a percent of total loans at year-end
|
||||||||||||||||
Allowance
for loan losses
|
1.94
|
%
|
2.40
|
%
|
2.89
|
%
|
4.31
|
%
|
2.60
|
%
|
||||||
As
a multiple of net charge-offs
|
||||||||||||||||
Allowance
for loan losses
|
95.16X
|
5.28X
|
1.58X
|
0.90X
|
1.36X
|
|||||||||||
Income
before tax and provision for loan losses
|
123.19X
|
4.32X
|
0.65X
|
0.35X
|
0.80X
|
|||||||||||
|
LOAN
MATURITIES and INTEREST
SENSITIVITY
|
|||||||||||||
December
31,
2006
|
|||||||||||||
(Dollars
in thousands)
|
|||||||||||||
Projected
Maturities*
|
|||||||||||||
One
Year or Less
|
One
Through Five Years
|
Over
Five
Years
|
Total
|
||||||||||
Commercial,
secured by real estate
|
$
|
38,310
|
$
|
51,758
|
$
|
11,718
|
$
|
101,786
|
|||||
Commercial,
other
|
21,357
|
19,694
|
2,930
|
43,981
|
|||||||||
Real
estate construction
|
6,927
|
3,114
|
1,262
|
11,303
|
|||||||||
Agricultural
|
592
|
794
|
544
|
1,930
|
|||||||||
Total
|
$
|
67,186
|
$
|
75,360
|
$
|
16,454
|
$
|
159,000
|
|||||
Fixed
rate loans
|
$
|
15,065
|
$
|
36,113
|
$
|
4,558
|
$
|
55,736
|
|||||
Floating
rate loans
|
52,121
|
39,247
|
11,896
|
103,264
|
|||||||||
Total
|
$
|
67,186
|
$
|
75,360
|
$
|
16,454
|
$
|
159,000
|
|||||
Fixed
rate loans projected to mature after one year
|
$
|
40,671
|
|||||||||||
Floating
rate loans projected to mature after one year
|
51,143
|
||||||||||||
Total
|
$
|
91,814
|
|||||||||||
(*)
Based on scheduled or approximate repayments
|
FAIR
VALUE OF SECURITIES
AVAILABLE FOR SALE
|
||||||||||
(Dollars
in thousands)
|
||||||||||
As
of December 31
|
||||||||||
2006
|
2005
|
2004
|
||||||||
U.S.
Treasury securities
|
$
|
6,401
|
$
|
3,941
|
$
|
250
|
||||
U.S.
Agency securities
|
76,911
|
95,300
|
115,514
|
|||||||
States
and political subdivisions
|
3,413
|
2,514
|
2,751
|
|||||||
Mortgage-backed
securities
|
34,617
|
35,639
|
34,942
|
|||||||
Corporate
securities
|
25
|
25
|
435
|
|||||||
Total
securities
|
$
|
121,367
|
$
|
137,419
|
$
|
153,892
|
||||
SECURITIES
MATURITY AND YIELD
ANALYSIS
|
||||||||||
December
31,
2006
|
||||||||||
(Dollars
in thousands)
|
||||||||||
Market
Value
|
Average
Maturity (yrs/mos)
|
Taxable
Equivalent Yield*
|
||||||||
U.S.
Treasury securities
|
||||||||||
Within
one year
|
$
|
994
|
4.44
|
%
|
||||||
After
one but within five years
|
5,407
|
4.36
|
||||||||
Total
U.S. Treasury Securities
|
6,401
|
2/5
|
4.38
|
|||||||
U.S.
Government Agencies securities
|
||||||||||
Within
one year
|
26,901
|
3.16
|
||||||||
After
one but within five years
|
50,010
|
4.18
|
||||||||
Total
U.S. Government Agencies securities
|
$
|
76,911
|
1/7
|
3.82
|
||||||
States
and political subdivisions
|
||||||||||
Within
one year
|
349
|
4.26
|
||||||||
After
one but within five years
|
964
|
4.93
|
||||||||
After
five but within ten years
|
544
|
4.65
|
||||||||
Over
ten years
|
1,556
|
5.84
|
||||||||
Total
states and political subdivisions securities
|
$
|
3,413
|
6/11
|
5.23
|
||||||
Mortgage-backed
securities**
|
||||||||||
Within
one year
|
3,681
|
3.93
|
||||||||
After
one but within five years
|
1,993
|
5.36
|
||||||||
After
five but within ten years
|
911
|
3.85
|
||||||||
Over
ten years
|
28,032
|
4.68
|
||||||||
Total
mortgage-backed securities
|
$
|
34,617
|
11/3
|
4.62
|
||||||
Corporate
securities
|
$
|
25
|
||||||||
Total
securities available-for-sale
|
$
|
121,367
|
4/7
|
4.12
|
||||||
(*)
Fully tax-equivalent using the rate of 34%
|
||||||||||
(**)
Maturities for mortgage-backed securities are based on final
maturity
|
MATURITY
OF TIME DEPOSITS
$100,000 OR MORE
|
||||
December
31,
2006
|
||||
(Dollars
in thousands)
|
||||
Maturing
3 months or less
|
$
|
11,105
|
||
Maturing
over 3 months
|
11,263
|
|||
Maturing
over 6 months
|
19,108
|
|||
Maturing
over 12 months
|
12,001
|
|||
Total
|
$
|
53,477
|
||
PAYMENTS
DUE ON CONTRACTUAL
OBLIGATIONS
|
||||||||||||||||
December
31,
2006
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
|
||||||||||||||||
Total
|
Less
than one year
|
1-3
years
|
3-5
years
|
More
than five years
|
||||||||||||
Federal
Home Loan Bank advances
|
$
|
7,285
|
$
|
637
|
$
|
1,375
|
$
|
5,203
|
$
|
70
|
||||||
Other
borrowed funds
|
12,275
|
1,344
|
2,860
|
3,118
|
4,953
|
|||||||||||
Operating
lease obligations
|
206
|
138
|
62
|
4
|
2
|
|||||||||||
Data
and item processing contracts*
|
5,280
|
1,848
|
2,772
|
660
|
0
|
|||||||||||
Total
|
$
|
25,046
|
$
|
3,967
|
$
|
7,069
|
$
|
8,985
|
$
|
5,025
|
||||||
*
Data and item processing contractual obligations are estimated
using the
average billing for the last three months of
2006.
|
Year-end
2006
|
Year-end
2005
|
ALCO
Guidelines
|
|
Projected
1-year net interest income
|
|||
-100
bp change vs. base rate
|
-0.9%
|
-0.6%
|
5%
|
+100
bp change vs. base rate
|
1.4%
|
0.5%
|
5%
|
Projected
1-year net interest income
|
|
||
-200
bp change vs. base rate
|
-2.2%
|
-1.3%
|
10%
|
+200
bp change vs. base rate
|
2.6%
|
0.9%
|
10%
|
SELECTED
CAPITAL
INFORMATION
|
||||||||||
(Dollars
in thousands)
|
||||||||||
As
of December 31
|
||||||||||
2006
|
2005
|
Change
|
||||||||
Stockholders’
Equity
|
$
|
61,002
|
$
|
54,287
|
$
|
6,715
|
||||
Qualifying
capital securities of subsidiary trust
|
0
|
15,250
|
(15,250
|
)
|
||||||
Disallowed
amounts of goodwill and other intangibles
|
(15,816
|
)
|
(15,816
|
)
|
0
|
|||||
Disallowed
deferred tax assets
|
0
|
(628
|
)
|
628
|
||||||
Unrealized
loss on securities available for sale
|
1,150
|
1,718
|
(568
|
)
|
||||||
Tier
I capital
|
$
|
46,336
|
$
|
54,811
|
$
|
(8,475
|
)
|
|||
Tier
II capital adjustments
|
||||||||||
Qualifying
capital securities of subsidiary trust
|
0
|
0
|
||||||||
Allowable
amount of the allowance for loan losses
|
3,977
|
3,899
|
||||||||
Total
capital
|
$
|
50,313
|
$
|
58,710
|
||||||
Total
risk-weighted assets
|
$
|
315,485
|
$
|
307,951
|
||||||
Ratios
|
||||||||||
Tier
I capital to risk-weighted assets
|
14.69
|
%
|
17.80
|
%
|
||||||
Total
capital to risk-weighted assets
|
15.95
|
%
|
19.06
|
%
|
||||||
Leverage
at year-end
|
8.89
|
%
|
10.61
|
%
|
||||||
RATE
VOLUME ANALYSIS OF CHANGES
IN NET INTEREST INCOME
|
|||||||||||||||||||
(Dollars
in thousands on a tax equivalent basis)
|
|||||||||||||||||||
2006
vs 2005
|
2005
vs 2004
|
||||||||||||||||||
Increase
(decrease) due to change in
|
Increase
(decrease) due to change in
|
||||||||||||||||||
Volume
|
Rate
|
Net
Change
|
Volume
|
Rate
|
Net
Change
|
||||||||||||||
Interest
income*:
|
|||||||||||||||||||
Loans
|
$
|
867
|
$
|
1,552
|
$
|
2,419
|
$
|
72
|
$
|
414
|
$
|
486
|
|||||||
Investment
securities
|
(324
|
)
|
444
|
120
|
(8
|
)
|
394
|
386
|
|||||||||||
Federal
funds sold
|
43
|
427
|
470
|
(61
|
)
|
426
|
365
|
||||||||||||
Deposits
with banks
|
2
|
10
|
12
|
5
|
0
|
5
|
|||||||||||||
Total
interest income
|
$
|
588
|
$
|
2,433
|
$
|
3,021
|
$
|
8
|
$
|
1,234
|
$
|
1,242
|
|||||||
Interest
expense:
|
|||||||||||||||||||
Deposits
|
|||||||||||||||||||
NOW
and money market
|
$
|
(116
|
)
|
$
|
473
|
$
|
357
|
$
|
(104
|
)
|
$
|
223
|
$
|
119
|
|||||
Savings
|
(46
|
)
|
(45
|
)
|
(91
|
)
|
(25
|
)
|
(84
|
)
|
(109
|
)
|
|||||||
Certificates
of deposit
|
419
|
1,573
|
1,992
|
252
|
197
|
449
|
|||||||||||||
Short-term
borrowings
|
27
|
27
|
54
|
38
|
24
|
62
|
|||||||||||||
Other
borrowings
|
194
|
366
|
560
|
(108
|
)
|
(126
|
)
|
(234
|
)
|
||||||||||
FHLB
borrowings
|
(56
|
)
|
10
|
(46
|
)
|
(67
|
)
|
10
|
(57
|
)
|
|||||||||
Debt
|
(1,224
|
)
|
(145
|
)
|
(1,369
|
)
|
(524
|
)
|
(216
|
)
|
(740
|
)
|
|||||||
Total
interest expense
|
$
|
(802
|
)
|
$
|
2,259
|
$
|
1,457
|
$
|
(538
|
)
|
$
|
28
|
$
|
(510
|
)
|
||||
Net
interest income*
|
$
|
1,390
|
$
|
174
|
$
|
1,564
|
$
|
546
|
$
|
1,206
|
$
|
1,752
|
|||||||
(*)
Fully taxable equivalent using the rate of 34%
Note
- Changes to rate/volume are allocated to both rate and volume
on a
proportional dollar basis
|
NON-INTEREST
INCOME AND
EXPENSE
|
||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||
Increase
(Decrease) Over Prior Year
|
||||||||||||||||||||||
2006
|
2005
|
|||||||||||||||||||||
2006
|
2005
|
2004
|
Amount
|
Percent
|
Amount
|
Percent
|
||||||||||||||||
Non-interest
income:
|
||||||||||||||||||||||
Service
charges on deposit accounts
|
$
|
2,804
|
$
|
2,732
|
$
|
2,513
|
$
|
72
|
2.64
|
$
|
219
|
8.71
|
||||||||||
Electronic
banking income
|
498
|
403
|
250
|
95
|
23.57
|
153
|
61.20
|
|||||||||||||||
Secondary
market mortgage income
|
303
|
217
|
71
|
86
|
39.63
|
146
|
205.63
|
|||||||||||||||
Other
|
560
|
568
|
672
|
(8
|
)
|
(1.41
|
)
|
(104
|
)
|
(15.48
|
)
|
|||||||||||
Total
fees and other income
|
$
|
4,165
|
$
|
3,920
|
$
|
3,506
|
245
|
6.25
|
414
|
11.81
|
||||||||||||
Investment
securities gains
|
0
|
0
|
100
|
0
|
(100
|
)
|
||||||||||||||||
Total
non-interest income
|
$
|
4,165
|
$
|
3,920
|
$
|
3,606
|
$
|
245
|
6.25
|
$
|
314
|
8.71
|
||||||||||
Non-interest
expense:
|
||||||||||||||||||||||
Salaries
and wages
|
$
|
7,540
|
$
|
7,443
|
$
|
7,103
|
$
|
97
|
1.30
|
$
|
340
|
4.79
|
||||||||||
Employee
benefits
|
1,590
|
1,642
|
1,633
|
(52
|
)
|
(3.17
|
)
|
9
|
0.55
|
|||||||||||||
Total
staff costs
|
9,130
|
9,085
|
8,736
|
45
|
0.50
|
349
|
3.99
|
|||||||||||||||
Occupancy
and equipment
|
1,907
|
2,262
|
2,141
|
(355
|
)
|
(15.69
|
)
|
121
|
5.65
|
|||||||||||||
Outside
data processing
|
2,036
|
1,505
|
1,023
|
531
|
35.28
|
482
|
47.12
|
|||||||||||||||
Professional
fees
|
496
|
554
|
2,271
|
(58
|
)
|
(10.47
|
)
|
(1,717
|
)
|
(75.61
|
)
|
|||||||||||
Taxes,
other than payroll, property
and income
|
598
|
423
|
589
|
175
|
41.37
|
(166
|
)
|
(28.18
|
)
|
|||||||||||||
OREO
(gains) losses and expenses, net
|
(91
|
)
|
52
|
(45
|
)
|
(143
|
)
|
(275.00
|
)
|
97
|
215.56
|
|||||||||||
Bad
check losses (recoveries)
|
(79
|
)
|
36
|
94
|
(115
|
)
|
(319.44
|
)
|
(58
|
)
|
(61.70
|
)
|
||||||||||
Supplies
|
333
|
362
|
365
|
(29
|
)
|
(8.01
|
)
|
(3
|
)
|
(0.82
|
)
|
|||||||||||
Accelerated
amortization of subordinated
debt issuance
costs
|
548
|
184
|
214
|
364
|
197.83
|
(30
|
)
|
(14.02
|
)
|
|||||||||||||
Other
expenses
|
2,059
|
2,842
|
2,394
|
(783
|
)
|
(27.55
|
)
|
448
|
18.71
|
|||||||||||||
Total
non-interest expenses
|
$
|
16,937
|
$
|
17,305
|
$
|
17,782
|
$
|
(368
|
)
|
(2.13
|
)
|
$
|
(477
|
)
|
(2.68
|
)
|
PREMIER
FINANCIAL BANCORP, INC.
|
||||||||||||||||||||||||
AVERAGE
CONSOLIDATED BALANCE SHEETS
|
||||||||||||||||||||||||
AND
NET INTEREST INCOME ANALYSIS
|
||||||||||||||||||||||||
Nine
Months Ended Sept 30, 2007
|
Nine
Months Ended Sept 30, 2006
|
|||||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest
Earning Assets
|
||||||||||||||||||||||||
Federal
funds sold and
other
|
$ |
38,696
|
$ |
1,508
|
5.21 | % | $ |
24,006
|
$ |
884
|
4.92 | % | ||||||||||||
Securities
available for
sale
|
||||||||||||||||||||||||
Taxable
|
122,247
|
4,093
|
4.46
|
134,974
|
3,853
|
3.81
|
||||||||||||||||||
Tax-exempt
|
4,104
|
118
|
5.81
|
2,288
|
70
|
6.18
|
||||||||||||||||||
Total
investment
securities
|
126,351
|
4,211
|
4.51
|
137,262
|
3,923
|
3.85
|
||||||||||||||||||
Total
loans
|
343,759
|
20,343
|
7.91
|
336,327
|
19,130
|
7.60
|
||||||||||||||||||
Total
interest-earning
assets
|
508,806
|
26,062
|
6.86 | % |
497,595
|
23,937
|
6.44 | % | ||||||||||||||||
Allowance
for loan losses
|
(6,650 | ) | (7,663 | ) | ||||||||||||||||||||
Cash
and due from banks
|
13,871
|
13,760
|
||||||||||||||||||||||
Other
assets
|
29,547
|
31,035
|
||||||||||||||||||||||
Total
assets
|
$ |
545,574
|
$ |
534,727
|
||||||||||||||||||||
Liabilities
and
Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities
|
||||||||||||||||||||||||
Interest-bearing
deposits
|
$ |
376,335
|
8,273
|
2.94
|
$ |
368,983
|
6,439
|
2.33
|
||||||||||||||||
Short-term
borrowings
|
13,195
|
248
|
2.51
|
9,464
|
175
|
2.47
|
||||||||||||||||||
FHLB
advances & other
borrowings
|
16,078
|
889
|
7.39
|
14,930
|
710
|
6.36
|
||||||||||||||||||
Debentures
|
-
|
-
|
0.00
|
9,298
|
672
|
9.66
|
||||||||||||||||||
Total
interest-bearing
liabilities
|
405,608
|
9,410
|
3.10 | % |
402,675
|
7,996
|
2.65 | % | ||||||||||||||||
Non-interest
bearing deposits
|
74,279
|
72,891
|
||||||||||||||||||||||
Other
liabilities
|
2,578
|
2,594
|
||||||||||||||||||||||
Shareholders’
equity
|
63,109
|
56,567
|
||||||||||||||||||||||
Total
liabilities and
equity
|
$ |
545,574
|
$ |
534,727
|
||||||||||||||||||||
Net
interest earnings
|
$ |
16,652
|
$ |
15,941
|
||||||||||||||||||||
Net
interest spread
|
3.76 | % | 3.79 | % | ||||||||||||||||||||
Net
interest margin
|
4.39 | % | 4.29 | % | ||||||||||||||||||||
PREMIER
FINANCIAL BANCORP, INC.
|
||||||||||||||||||||||||
AVERAGE
CONSOLIDATED BALANCE SHEETS
|
||||||||||||||||||||||||
AND
NET INTEREST INCOME ANALYSIS
|
||||||||||||||||||||||||
Three
Months Ended Sept 30, 2007
|
Three
Months Ended Sept 30, 2006
|
|||||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest
Earning Assets
|
||||||||||||||||||||||||
Federal
funds sold and
other
|
$ |
35,241
|
$ |
450
|
5.07 | % | $ |
21,004
|
$ |
287
|
5.42 | % | ||||||||||||
Securities
available for
sale
|
||||||||||||||||||||||||
Taxable
|
124,124
|
1,425
|
4.59
|
131,456
|
1,299
|
3.95
|
||||||||||||||||||
Tax-exempt
|
4,008
|
38
|
5.75
|
2,111
|
24
|
6.89
|
||||||||||||||||||
Total
investment
securities
|
128,132
|
1,463
|
4.63
|
133,567
|
1,323
|
4.00
|
||||||||||||||||||
Total
loans
|
344,316
|
6,826
|
7.87
|
342,798
|
6,637
|
7.68
|
||||||||||||||||||
Total
interest-earning
assets
|
507,689
|
8,738
|
6.85 | % |
497,369
|
8,247
|
6.60 | % | ||||||||||||||||
Allowance
for loan losses
|
(6,613 | ) | (7,226 | ) | ||||||||||||||||||||
Cash
and due from banks
|
13,865
|
13,654
|
||||||||||||||||||||||
Other
assets
|
30,133
|
30,405
|
||||||||||||||||||||||
Total
assets
|
$ |
545,074
|
$ |
534,202
|
||||||||||||||||||||
Liabilities
and
Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities
|
||||||||||||||||||||||||
Interest-bearing
deposits
|
$ |
375,841
|
2,814
|
2.97
|
$ |
368,423
|
2,350
|
2.53
|
||||||||||||||||
Short-term
borrowings
|
13,234
|
83
|
2.49
|
9,560
|
60
|
2.49
|
||||||||||||||||||
FHLB
advances & other
borrowings
|
13,847
|
251
|
7.19
|
14,365
|
255
|
7.04
|
||||||||||||||||||
Debentures
|
-
|
-
|
0.00
|
8,505
|
205
|
9.64
|
||||||||||||||||||
Total
interest-bearing
liabilities
|
402,922
|
3,148
|
3.10 | % |
400,853
|
2,870
|
2.84 | % | ||||||||||||||||
Non-interest
bearing deposits
|
74,830
|
72,122
|
||||||||||||||||||||||
Other
liabilities
|
2,873
|
3,039
|
||||||||||||||||||||||
Shareholders’
equity
|
64,449
|
58,188
|
||||||||||||||||||||||
Total
liabilities and
equity
|
$ |
545,074
|
$ |
534,202
|
||||||||||||||||||||
Net
interest earnings
|
$ |
5,590
|
$ |
5,377
|
||||||||||||||||||||
Net
interest spread
|
3.75 | % | 3.76 | % | ||||||||||||||||||||
Net
interest margin
|
4.39 | % | 4.31 | % | ||||||||||||||||||||
(In
Thousands)
|
||||||||
2007
|
2006
|
|||||||
Non-accrual
loans
|
$ |
3,432
|
$ |
4,698
|
||||
Accruing
loans which are contractually past
due 90 days or more
|
1,048
|
992
|
||||||
Restructured
|
1,428
|
1,268
|
||||||
Total
non-performing
loans
|
5,908
|
6,958
|
||||||
Other
real estate acquired through foreclosure
|
229
|
495
|
||||||
Total
non-performing
assets
|
$ |
6,137
|
$ |
7,453
|
||||
Non-performing
loans as a percentage of
total loans
|
1.71 | % | 2.02 | % | ||||
Non-performing
assets as a percentage of
total assets
|
1.12 | % | 1.39 | % |
|
1.
|
Core
deposits consisting of both consumer and commercial deposits and
certificates of deposit of $100,000 or more. Management believes
that the
majority of its $100,000 or more certificates of deposit are no more
volatile than its other deposits. This is due to the nature of the
markets
in which the subsidiaries operate.
|
|
2.
|
Cash
flow generated by repayment of loans and interest.
|
|
3.
|
Arrangements
with correspondent banks for purchase of unsecured federal funds.
|
|
4.
|
The
sale of securities under repurchase agreements and borrowing from
the
Federal Home Loan Bank.
|
|
5.
|
Maintenance
of an adequate available-for-sale security portfolio. The Company
owns
$123.4 million of securities at market value as of September 30,
2007.
|
Premier
Financial
|
Citizens
First
|
|
10,000,000
shares of common stock, no par value per share and 1,000,000 shares
of
preferred stock, without par value.
|
750,000
shares of common stock, $1.00 par value per share.
|
|
Authority
is given in Premier Financial’s articles of incorporation for its board of
directors to issue, without shareholder approval, up to 1,000,000
shares
of preferred stock, to divide the shares of preferred stock into
series
and, within the limitations of laws of the Commonwealth of Kentucky,
to
vary, as between series, dividend rates, voting rights, redemption
provisions, voluntary and involuntary liquidation prices, sinking
fund
provisions and conversion privileges. Any preferred stock
issued could be granted priority and preference over Premier Financial
common stock in payment of dividends and upon liquidation or dissolution
of Premier Financial. Premier Financial has no current plans
for issuance of authorized shares of preferred stock.
|
Citizens
First’s articles of incorporation do not authorize issuance of preferred
stock.
|
Premier
Financial
|
Citizens
First
|
|
Premier
Financial’s bylaws provide that the number of directors of Premier
Financial shall be fixed by the board of directors from time to
time. Presently the board of directors of Premier Financial
consists of 9 individuals.
|
Citizens
First’s bylaws provide that the board of directors shall consist of not
less than five (5) nor more than twenty-five (25) shareholders, the
exact
number of directors within such minimum and maximum limits to be
fixed and
determined from time to time by resolution of a majority of the full
board
of directors or by resolution of the shareholders at any annual or
special
meeting thereof. Presently the board of directors consists of 6
individuals.
|
Premier
Financial
|
Citizens
First
|
|
Premier
Financial only has one class of directors.
|
Citizens
First has only one class of directors.
|
Premier
Financial
|
Citizens
First
|
|
Newly
created directorships resulting from any increase in the authorized
number
of directors or any vacancies in the board of directors resulting
from
death, resignation, retirement, disqualification, removal from office
or
other cause shall be filled by action of a majority of the remaining
directors then in office, and directors so chosen shall hold office
for a
term expiring at the next annual meeting of shareholders.
|
When
any vacancy occurs among the board of directors for any reason, including
an increase in the number thereof, the remaining members of the board
may
appoint a director to fill such vacancy at any regular meeting of
the
board, or at a special meeting called for that
purpose.
|
Premier
Financial
|
Citizens
First
|
|
At
a meeting of shareholders called expressly for the purpose of removing
one
or more directors, any director or the entire board of directors
may be
removed, with or without cause, by a vote of the holders of a majority
of
the shares then entitled to vote at any election of
directors. If less than the entire board is to be removed, no
one of the directors may be removed if the votes cast against his
removal
are sufficient to elect him if such votes had been cumulatively voted
at
an election of the entire board of directors or, if there are classes
of
directors, at an election of the class of directors of which he is
a
part.
|
A
director may be removed from the board of directors by affirmative
vote of
75% of outstanding shares.
|
Premier
Financial
|
Citizens
First
|
|
Nominations
for election to the board of directors may be made by the board of
directors or by any shareholder entitled to vote for election of
directors. Nominations other than those made by or on behalf of
the existing management shall be made in writing and be delivered
or
mailed to the President of Premier Financial not less than fourteen
(14)
days nor more than fifty (50) days prior to any meeting of shareholders
called for the election of directors; provided, however, that if
less than
twenty-one (21) days notice of the meeting is given to shareholders,
such
nomination shall be mailed or delivered to the President of Premier
Financial not later than the close of business on the 7th
day following the day on which the notice of the meeting was
mailed. Such notification shall contain specified information
to the extent known to the notifying shareholder.
|
Nominations
for election to the board of directors may be made by the board of
directors or by any stockholder of any outstanding class of capital
stock
of the Bank entitled to vote for election of directors. Each
director must beneficially own at least 500 shares of common stock
of the
Bank at all times that he or she serves as
director.
|
Premier
Financial
|
Citizens
First
|
|
None
|
Citizens
First’s Articles of Incorporation provides that unless certain fair price
provisions are met certain proposed business combinations require
a higher
vote of the shareholders (75%) to approve the business
combination.
|
Premier
Financial
|
Citizens
First
|
|
The
annual meeting of the shareholders of Premier Financial shall be
held at
such time, place and on such date as the chief executive officer
may
designate, said date to be no later than six months following the
end of
Premier Financial’s fiscal year. The purpose of such meetings
shall be the election of directors and the transaction of such other
business as may properly come before it. If the election of
directors shall not be held on the day designated for an annual meeting,
or at any adjournment thereof, the board of directors shall cause
the
election to be held at a special meeting of the shareholders to be
held as
soon thereafter as may be practicable.
|
The
annual meeting of the shareholders for the election of directors
and the
transaction of whatever other business may properly come before the
meeting, shall be held on the third Thursday of April of each year,
or at
such other date and time as the board of directors may
designate.
|
Premier
Financial
|
Citizens
First
|
|
The
Articles of Incorporation of Premier Financial may be amended by
a
majority vote of shareholders voting at any meeting at which a quorum
is
present called for the purpose of amending the Articles of
Incorporation.
|
The
Articles of Incorporation of Citizens First may be amended by a majority
vote of the shareholders voting on an issue at a meeting at which
a quorum
is present except that 75% of the outstanding shares is required
to change
the Articles of Incorporation dealing with the “Vote Required for Certain
Business Combinations”, the vote required to change the certain matters
dealing with the “Stockholder Nomination of Directors Candidates” “Newly
Created Directorship and Vacancies” and “Removal” of
directors.
|
Premier
Financial
|
Citizens
First
|
|
The
board of directors shall have the power and authority to alter, amend
or
repeal the bylaws by the vote of a majority of the entire board of
directors, subject always to the power of the shareholders to change
or
repeal such bylaws.
|
Generally,
the bylaws may be amended, altered or repealed, at any regular meeting
of
the board of directors or at any special meeting of the board of
directors
called for such purpose, by a vote of a majority of the whole number
of
directors. However, certain provisions of the bylaws dealing
with the annual meeting of shareholders; the fixing of a record date
for
the annual meeting of shareholders; number, nomination and qualification
of directors; filling vacancies on the board of directors; and the
removal
of directors require a vote of 75% of the
shareholders.
|
Premier
Financial
|
Citizens
First
|
|
Shareholders
of Premier Financial have appraisal rights in accordance with Kentucky
law.
|
Shareholders
of Citizens First have appraisal rights in accordance with West Virginia
law.
|
Premier
Financial
|
Citizens
First
|
|
A
Kentucky corporation generally may pay dividends in cash, property
or its
own shares except when the corporation is unable to pay its debts
as they
become due in the usual course of business or the corporation’s total
assets would be less than the sum of its total liabilities plus the
amount
that would be needed, if the corporation were to be dissolved at
the time
of the dividend, to satisfy any stockholders who have rights superior
to
those receiving the dividend.
|
A
West Virginia corporation generally may pay dividends in cash, property
or
its own shares except when the corporation is unable to pay its debts
as
they become due in the usual course of business or the corporation’s total
assets would be less than the sum of its total liabilities plus the
amount
that would be needed, if the corporation were to be dissolved at
the time
of the dividend, to satisfy any stockholders who have rights superior
to
those receiving the dividend.
|
|
Premier
Financial
|
Citizens
First
|
|
Premier
Financial bylaws provide that Premier Financial shall, to the fullest
extent permitted by, and in accordance with the provisions of, the
Kentucky Business Corporation Act, indemnify each director and officer
of
Premier Financial against expenses (including attorneys’ fees), judgments,
taxes, fines, and amounts paid in settlement, incurred in connection
with,
and shall advance expenses (including attorneys’ fees) incurred in
defending, any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) to which
he is,
or is threatened to be made, a party by reason of the fact that he
is or
was a director or officer of Premier Financial, or is or was serving
at
the request of Premier Financial as a director, officer, partner,
employee, or agent of another domestic or foreign corporation,
partnership, joint venture, trust or other enterprise.
|
Citizens
First’s Articles of Incorporation provide that each person who was or is
a
party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, investigative or otherwise in nature,
by
reason of the fact that he or she, or a person of whom he or she
is the
legal representative, is or was a director or officer of the corporation
or is or was serving at the written request of the corporation's
board of
directors, president or their delegate as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or
other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action or omission
in an
official capacity as a director, officer, trustee, employee or agent
or in
any other capacity, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by law, including but
not
limited to the West Virginia Code.
|
• Definitive
Proxy Materials for the 2007 Annual Meeting of
Shareholders
|
Filed
on April 24, 2007.
|
|
• Current
Reports on Form 8-K
|
Filed
on November 26, 2007, November 28, 2007, November 29, 2007, December
6,
2007 and February 13, 2008.
|
Premier
Financial Bancorp, Inc.
|
|||
2883
Fifth Avenue
|
|||
Huntington,
West Virginia 25301
|
|||
Attention: Brien
M. Chase
|
|||
Telephone:
(304) 525-1600
|
By
Order of the Board of Directors
|
|
|
|
|
|
Thomas
M. Lookabaugh,
|
|
President
and Chief Executive Officer
|
2006
|
2005
|
||||||
ASSETS
|
|||||||
Cash
and due from banks
|
$
|
16,974
|
$
|
16,080
|
|||
Federal
funds sold
|
27,583
|
18,812
|
|||||
Securities
available for sale
|
121,367
|
137,419
|
|||||
Loans
held for sale
|
1,978
|
868
|
|||||
Loans
|
343,797
|
328,717
|
|||||
Allowance
for loan losses
|
(6,661
|
)
|
(7,892
|
)
|
|||
Net
loans
|
337,136
|
320,825
|
|||||
Federal
Home Loan Bank and Federal Reserve Bank stock
|
3,265
|
3,060
|
|||||
Premises
and equipment, net
|
6,533
|
7,126
|
|||||
Real
estate and other property acquired through foreclosure
|
495
|
2,049
|
|||||
Interest
receivable
|
2,821
|
2,661
|
|||||
Goodwill
|
15,816
|
15,816
|
|||||
Other
assets
|
1,484
|
3,608
|
|||||
Total
assets
|
$
|
535,452
|
$
|
528,324
|
|||
LIABILITIES
AND STOCKHOLDERS'
EQUITY
|
|||||||
Deposits
|
|||||||
Non-interest
bearing
|
$
|
72,784
|
$
|
69,856
|
|||
Time
deposits, $100,000 and over
|
53,477
|
42,169
|
|||||
Other
interest bearing
|
312,689
|
323,818
|
|||||
Total
deposits
|
438,950
|
435,843
|
|||||
Federal
funds purchased
|
976
|
-
|
|||||
Securities
sold under agreements to repurchase
|
12,555
|
9,317
|
|||||
Federal
Home Loan Bank advances
|
7,285
|
8,334
|
|||||
Other
borrowed funds
|
12,275
|
-
|
|||||
Notes
payable
|
-
|
1,402
|
|||||
Guaranteed
junior subordinated interest debentures
|
-
|
15,722
|
|||||
Interest
payable
|
1,061
|
724
|
|||||
Other
liabilities
|
1,348
|
2,695
|
|||||
Total
liabilities
|
474,450
|
474,037
|
|||||
Commitments
and contingent liabilities
|
-
|
-
|
|||||
Stockholders'
equity
|
|||||||
Preferred
stock, no par value; 1,000,000 shares authorized;
|
|||||||
none
issued or outstanding
|
-
|
-
|
|||||
Common
stock, no par value; 10,000,000 shares authorized;
|
|||||||
5,236,899
in 2006 and 5,233,897 in 2005 shares
issued and outstanding
|
1,108
|
1,105
|
|||||
Additional
paid-in capital
|
43,624
|
43,458
|
|||||
Retained
earnings
|
17,420
|
11,442
|
|||||
Accumulated
other comprehensive income (loss)
|
(1,150
|
)
|
(1,718
|
)
|
|||
Total
stockholders' equity
|
61,002
|
54,287
|
|||||
Total
liabilities and
stockholders' equity
|
$
|
535,452
|
$
|
528,324
|
2006
|
2005
|
2004
|
||||||||
Interest
income
|
||||||||||
Loans,
including fees
|
$
|
25,926
|
$
|
23,532
|
$
|
23,073
|
||||
Investment
securities
|
||||||||||
Taxable
|
5,148
|
5,014
|
4,444
|
|||||||
Tax-exempt
|
88
|
96
|
217
|
|||||||
Federal
funds sold
|
1,215
|
745
|
380
|
|||||||
Other
interest income
|
23
|
12
|
7
|
|||||||
Total
interest income
|
32,400
|
29,399
|
28,121
|
|||||||
Interest
expense
|
||||||||||
Deposits
|
8,984
|
6,725
|
6,267
|
|||||||
Repurchase
agreements and other
|
234
|
180
|
115
|
|||||||
FHLB
advances and other borrowings
|
1,027
|
513
|
807
|
|||||||
Debentures
|
760
|
2,129
|
2,868
|
|||||||
Total
interest expense
|
11,005
|
9,547
|
10,057
|
|||||||
Net
interest
income
|
21,395
|
19,852
|
18,064
|
|||||||
Provision
for loan losses
|
(1,161
|
)
|
4
|
1,026
|
||||||
Net
interest income after
provision for loan losses
|
22,556
|
19,848
|
17,038
|
|||||||
Non-interest
income
|
||||||||||
Service
charges
|
2,804
|
2,732
|
2,513
|
|||||||
Electronic
banking income
|
498
|
403
|
250
|
|||||||
Secondary
market mortgage income
|
303
|
217
|
71
|
|||||||
Securities
gains
|
-
|
-
|
100
|
|||||||
Other
|
560
|
568
|
672
|
|||||||
4,165
|
3,920
|
3,606
|
||||||||
Non-interest
expenses
|
||||||||||
Salaries
and employee benefits
|
9,130
|
9,085
|
8,736
|
|||||||
Occupancy
and equipment expenses
|
1,907
|
2,262
|
2,141
|
|||||||
Outside
data processing
|
2,036
|
1,505
|
1,023
|
|||||||
Professional
fees
|
496
|
554
|
2,271
|
|||||||
Taxes,
other than payroll, property and income
|
598
|
423
|
589
|
|||||||
Write-downs,
expenses, sales of other
real
estate owned, net of gains
|
(91
|
)
|
52
|
(45
|
)
|
|||||
Supplies
|
333
|
362
|
365
|
|||||||
Other
expenses
|
2,528
|
3,062
|
2,702
|
|||||||
16,937
|
17,305
|
17,782
|
||||||||
Income
from continuing operations before
income taxes
|
9,784
|
6,463
|
2,862
|
|||||||
Provision
for income taxes
|
3,283
|
2,029
|
899
|
|||||||
Income
from continuing
operations
|
6,501
|
4,434
|
1,963
|
|||||||
Discontinued
operation
|
||||||||||
Income
from operations of discontinued component
|
-
|
-
|
4
|
|||||||
Gain
on sale of discontinued component
|
-
|
-
|
6,664
|
|||||||
Provision
for income taxes
|
-
|
-
|
1,934
|
|||||||
Income
from discontinued operation
|
-
|
-
|
4,734
|
|||||||
Net
income
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
2006
|
2005
|
2004
|
||||||||
Weighted
average shares outstanding:
|
||||||||||
Basic
|
5,236
|
5,233
|
5,232
|
|||||||
Diluted
|
5,264
|
5,248
|
5,237
|
|||||||
Earnings
per share from continuing operations:
|
||||||||||
Basic
|
$
|
1.24
|
$
|
0.85
|
$
|
0.37
|
||||
Diluted
|
1.24
|
0.84
|
0.37
|
|||||||
Earnings
per share from discontinued operation:
|
||||||||||
Basic
|
$
|
-
|
$
|
-
|
$
|
0.90
|
||||
Diluted
|
-
|
-
|
0.90
|
|||||||
Net
earnings per share:
|
||||||||||
Basic
|
$
|
1.24
|
$
|
0.85
|
$
|
1.28
|
||||
Diluted
|
1.24
|
0.84
|
1.28
|
|||||||
2006
|
2005
|
2004
|
||||||||
Net
income
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
||||
Other
comprehensive income
(loss):
|
||||||||||
Unrealized
gains and (losses) arising during the period
|
861
|
(1,805
|
)
|
(1,730
|
)
|
|||||
Reclassification
of realized amount
|
-
|
-
|
(100
|
)
|
||||||
Net
change in unrealized gain (loss) on securities
|
861
|
(1,805
|
)
|
(1,830
|
)
|
|||||
Less
tax impact
|
293
|
(614
|
)
|
(622
|
)
|
|||||
Other
comprehensive income
(loss):
|
568
|
(1,191
|
)
|
(1,208
|
)
|
|||||
Comprehensive
income
|
$
|
7,069
|
$
|
3,243
|
$
|
5,489
|
||||
Common
Stock
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
|
||||||||||||
Balances,
January 1, 2004
|
$
|
1,103
|
$
|
43,445
|
$
|
311
|
$
|
681
|
$
|
45,540
|
||||||
Net
change in unrealized gains (losses)
on
securities available for sale
|
-
|
-
|
-
|
(1,208
|
)
|
(1,208
|
)
|
|||||||||
Net
income
|
-
|
-
|
6,697
|
-
|
6,697
|
|||||||||||
Balances,
December 31, 2004
|
1,103
|
43,445
|
7,008
|
(527
|
)
|
51,029
|
||||||||||
Net
change in unrealized gains (losses)
on
securities available for sale
|
-
|
-
|
-
|
(1,191
|
)
|
(1,191
|
)
|
|||||||||
Stock
options exercised, 1,667 shares
|
2
|
13
|
-
|
-
|
15
|
|||||||||||
Net
income
|
-
|
-
|
4,434
|
-
|
4,434
|
|||||||||||
Balances,
December 31, 2005
|
1,105
|
43,458
|
11,442
|
(1,718
|
)
|
54,287
|
||||||||||
Net
change in unrealized gains (losses)
on
securities available for sale
|
-
|
-
|
-
|
568
|
568
|
|||||||||||
Cash
dividends paid ($0.10 per share)
|
-
|
-
|
(523
|
)
|
-
|
(523
|
)
|
|||||||||
Stock
options exercised, 3,002 shares
|
3
|
24
|
-
|
-
|
27
|
|||||||||||
Stock
based compensation expense
|
-
|
142
|
-
|
-
|
142
|
|||||||||||
Net
income
|
-
|
-
|
6,501
|
-
|
6,501
|
|||||||||||
Balances,
December 31,
2006
|
$
|
1,108
|
$
|
43,624
|
$
|
17,420
|
$
|
(1,150
|
)
|
$
|
61,002
|
|||||
2006
|
2005
|
2004
|
||||||||
Cash
flows from continuing
operating activities
|
||||||||||
Net
income
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
||||
Adjustments
to reconcile income to net cash from
continuing
operating activities
|
||||||||||
Income
from discontinued operation
|
-
|
-
|
(4,734
|
)
|
||||||
Depreciation
and impairment of real estate
|
868
|
976
|
904
|
|||||||
Provision
for loan losses
|
(1,161
|
)
|
4
|
1,026
|
||||||
Amortization,
net
|
187
|
236
|
496
|
|||||||
FHLB
stock dividends
|
(145
|
)
|
(113
|
)
|
(90
|
)
|
||||
Gains
on other real estate owned, net
|
(105
|
)
|
(17
|
)
|
(123
|
)
|
||||
Stock
compensation expense
|
142
|
-
|
-
|
|||||||
Securities
gains
|
-
|
-
|
(100
|
)
|
||||||
Changes
in :
|
||||||||||
Interest
receivable
|
(160
|
)
|
79
|
708
|
||||||
Deferred
income taxes
|
1,071
|
1,119
|
3,334
|
|||||||
Loans
held for sale
|
(1,110
|
)
|
(868
|
)
|
-
|
|||||
Other
assets
|
288
|
1,069
|
1,774
|
|||||||
Interest
payable
|
337
|
(4,808
|
)
|
1,630
|
||||||
Other
liabilities
|
(1,347
|
)
|
(18
|
)
|
(20
|
)
|
||||
Net
cash from continuing
operating activities
|
5,366
|
2,093
|
11,502
|
|||||||
Cash
flows from continuing
investing activities
|
||||||||||
Purchases
of securities available for sale
|
(23,248
|
)
|
(18,486
|
)
|
(76,861
|
)
|
||||
Proceeds
from sales of securities available for sale
|
-
|
-
|
1,911
|
|||||||
Proceeds
from maturities and calls of securities
available
for sale
|
39,974
|
34,143
|
66,675
|
|||||||
Purchase
of FHLB stock, net of redemptions
|
(60
|
)
|
(336
|
)
|
(31
|
)
|
||||
Proceeds
from sale of subsidiary
|
-
|
-
|
14,311
|
|||||||
Net
change in federal funds sold
|
(8,771
|
)
|
(1,470
|
)
|
(291
|
)
|
||||
Net
change in loans
|
(20,284
|
)
|
(6,120
|
)
|
311
|
|||||
Purchases
of loan participations from other banks
|
(1,605
|
)
|
(1,197
|
)
|
(2,943
|
)
|
||||
Payments
on loan participations with other banks
|
6,067
|
589
|
10
|
|||||||
Purchases
of premises and equipment, net
|
(361
|
)
|
(845
|
)
|
(205
|
)
|
||||
Proceeds
from sale of other real estate acquired
through
foreclosure
|
2,417
|
1,658
|
4,610
|
|||||||
Net
cash from continuing
investing activities
|
(5,871
|
)
|
7,936
|
7,497
|
2006
|
2005
|
2004
|
||||||||
Cash
flows from continuing
financing activities
|
||||||||||
Net
change in deposits
|
3,107
|
(1,955
|
)
|
(17,676
|
)
|
|||||
Cash
dividends paid
|
(523
|
)
|
-
|
-
|
||||||
Repayment
of Federal Home Loan Bank advances
|
(1,049
|
)
|
(954
|
)
|
(1,417
|
)
|
||||
Early
redemption of debentures, net
|
(15,250
|
)
|
(5,000
|
)
|
(5,500
|
)
|
||||
Repayment
of other borrowed funds
|
(2,627
|
)
|
(800
|
)
|
(5,400
|
)
|
||||
Proceeds
from other borrowings
|
13,500
|
-
|
-
|
|||||||
Proceeds
from stock option exercises
|
27
|
15
|
-
|
|||||||
Net
change in federal funds purchased
|
976
|
(1,838
|
)
|
1,838
|
||||||
Net
change in agreements to repurchase securities
|
3,238
|
2,109
|
7,208
|
|||||||
Net
cash from continuing
financing activities
|
1,399
|
(8,423
|
)
|
(20,947
|
)
|
|||||
Net
change in cash and cash equivalents
from
continuing activities
|
894
|
1,606
|
(1,948
|
)
|
||||||
Cash
and cash equivalents of discontinued operations
|
||||||||||
Net
cash from operating activities
|
-
|
-
|
432
|
|||||||
Net
cash from investing activities
|
-
|
-
|
(2,636
|
)
|
||||||
Net
cash from financing activities
|
-
|
-
|
(3,102
|
)
|
||||||
Cash
and cash equivalents at beginning of year
|
||||||||||
Continuing
operations
|
16,080
|
14,474
|
16,422
|
|||||||
Discontinued
operations
|
-
|
-
|
5,306
|
|||||||
Cash
and cash equivalents at
end of year
|
$
|
16,974
|
$
|
16,080
|
$
|
14,474
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Cash
paid during year for -
|
||||||||||
Interest
|
$
|
10,667
|
$
|
14,354
|
$
|
8,428
|
||||
Income
taxes paid (refunded)
|
2,285
|
191
|
(3,946
|
)
|
||||||
Loans
transferred to real estate acquired through foreclosure
|
$
|
672
|
$
|
1,443
|
$
|
3,547
|
||||
Fixed
assets transferred to other real estate owned
|
141
|
-
|
-
|
|||||||
Unaudited
|
|||||||||||||
December 31,
2006
|
|||||||||||||
Subsidiary
|
Location
|
Year
Acquired
|
Total
Assets
|
Net
Income
|
|||||||||
Citizens
Deposit Bank & Trust
|
Vanceburg,
Kentucky
|
1991
|
$
|
121,176
|
$
|
1,988
|
|||||||
Farmers
Deposit Bank
|
Eminence,
Kentucky
|
1996
|
77,073
|
1,320
|
|||||||||
Ohio
River Bank
|
Ironton,
Ohio
|
1998
|
80,121
|
933
|
|||||||||
First
Central Bank, Inc.
|
Philippi,
West Virginia
|
1998
|
105,446
|
1,855
|
|||||||||
Boone
County Bank, Inc.
|
Madison,
West Virginia
|
1998
|
151,260
|
2,218
|
|||||||||
Mt.
Vernon Financial Holdings, Inc.
|
Huntington,
West Virginia
|
1999
|
1,537
|
32
|
|
2005
|
2004
|
||||||
Income
from continuing operations
|
$
|
4,434
|
$
|
1,963
|
|||
Deduct:
Stock based compensation expense determined under
fair
value based method
|
(93
|
)
|
(63
|
)
|
|||
Pro
forma income
|
$
|
4,341
|
$
|
1,900
|
|||
Basic
earnings per share from continuing operations
|
$
|
0.85
|
$
|
0.37
|
|||
Pro
forma basic earnings per share
|
0.83
|
0.36
|
|||||
Diluted
earnings per share from continuing operations
|
$
|
0.84
|
$
|
0.37
|
|||
Pro
forma basic earnings per share
|
0.82
|
0.36
|
For
the six months
ended
June 30, 2004
|
||||
Interest
income
|
$
|
2,021
|
||
Interest
expense
|
732
|
|||
Net
interest income
|
1,289
|
|||
Provision
for loan losses
|
-
|
|||
Non-interest
income
|
434
|
|||
Non-interest
expense
|
1,718
|
|||
Income
tax (benefit)
|
(1
|
)
|
||
Net
income
|
$
|
4
|
2004
|
||||
Balance,
beginning of year
|
$
|
2,164
|
||
Loans
charged-off
|
(283
|
)
|
||
Recoveries
|
124
|
|||
Provision
for loan losses
|
-
|
|||
Sale
of subsidiary
|
(2,005
|
)
|
||
Balance,
end of year
|
$
|
-
|
2006
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||
Available
for sale
|
|||||||||||||
U.
S. Treasury securities
|
$
|
6,454
|
$
|
-
|
$
|
(53
|
)
|
$
|
6,401
|
||||
U.
S. agency securities
|
77,885
|
43
|
(1,017
|
)
|
76,911
|
||||||||
Obligations
of states and political
subdivisions
|
3,413
|
15
|
(15
|
)
|
3,413
|
||||||||
Mortgage-backed
securities
|
35,332
|
40
|
(755
|
)
|
34,617
|
||||||||
Corporate
securities
|
25
|
-
|
-
|
25
|
|||||||||
Total
available for sale
|
$
|
123,109
|
$
|
98
|
$
|
(1,840
|
)
|
$
|
121,367
|
2005
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||
Available
for sale
|
|||||||||||||
U.
S. Treasury securities
|
$
|
3,952
|
$
|
3
|
$
|
(14
|
)
|
$
|
3,941
|
||||
U.
S. agency securities
|
97,209
|
-
|
(1,909
|
)
|
95,300
|
||||||||
Obligations
of states and political
subdivisions
|
2,487
|
31
|
(4
|
)
|
2,514
|
||||||||
Mortgage-backed
securities
|
36,349
|
2
|
(712
|
)
|
35,639
|
||||||||
Corporate
securities
|
25
|
-
|
-
|
25
|
|||||||||
Total
available for sale
|
$
|
140,022
|
$
|
36
|
$
|
(2,639
|
)
|
$
|
137,419
|
Amortized
Cost
|
Fair
Value
|
||||||
Available
for sale
|
|||||||
Due
in one year or less
|
$
|
28,491
|
$
|
28,244
|
|||
Due
after one year through five years
|
57,154
|
56,382
|
|||||
Due
after five years through ten years
|
539
|
544
|
|||||
Due
after ten years
|
1,593
|
1,580
|
|||||
Mortgage-backed
securities
|
35,332
|
34,617
|
|||||
Total
available for sale
|
$
|
123,109
|
$
|
121,367
|
|||
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||||
Description
of Securities
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
U.S.
treasury securities
|
$
|
5,435
|
$
|
(32
|
)
|
$
|
966
|
$
|
(21
|
)
|
$
|
6,401
|
$
|
(53
|
)
|
||||
U.S.
agency securities
|
3,735
|
(12
|
)
|
63,145
|
(1,005
|
)
|
66,880
|
(1,017
|
)
|
||||||||||
Obligations
of states and
political
subdivisions
|
1,581
|
(12
|
)
|
322
|
(3
|
)
|
1,903
|
(15
|
)
|
||||||||||
Gov’t
guaranteed mortgage-
backed
securities
|
-
|
-
|
13,121
|
(381
|
)
|
13,121
|
(381
|
)
|
|||||||||||
Mortgage-backed
securities
|
943
|
(3
|
)
|
14,720
|
(371
|
)
|
15,663
|
(374
|
)
|
||||||||||
Total
temporarily impaired
|
$
|
11,694
|
$
|
(59
|
)
|
$
|
92,274
|
$
|
(1,781
|
)
|
$
|
103,968
|
$
|
(1,840
|
)
|
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||||
Description
of Securities
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||
U.S.
treasury securities
|
$
|
968
|
$
|
(14
|
)
|
$
|
-
|
$
|
-
|
$
|
968
|
$
|
(14
|
)
|
|||||
U.S.
agency securities
|
22,096
|
(332
|
)
|
73,204
|
(1,577
|
)
|
95,300
|
(1,909
|
)
|
||||||||||
Obligations
of states and
political
subdivisions
|
397
|
(4
|
)
|
-
|
-
|
397
|
(4
|
)
|
|||||||||||
Mortgage-backed
securities
|
22,328
|
(341
|
)
|
11,968
|
(371
|
)
|
34,297
|
(712
|
)
|
||||||||||
Total
temporarily impaired
|
$
|
45,789
|
$
|
(691
|
)
|
$
|
85,172
|
$
|
(1,948
|
)
|
$
|
130,962
|
$
|
(2,639
|
)
|
2006
|
2005
|
||||||
Commercial,
secured by real estate
|
$
|
101,786
|
$
|
85,989
|
|||
Commercial,
other
|
43,981
|
49,362
|
|||||
Real
estate construction
|
11,303
|
11,070
|
|||||
Residential
real estate
|
138,795
|
134,570
|
|||||
Agricultural
|
1,930
|
1,670
|
|||||
Consumer
and home equity
|
42,188
|
42,092
|
|||||
Other
|
3,814
|
3,964
|
|||||
$
|
343,797
|
$
|
328,717
|
Balance,
December 31, 2005
|
$
|
14,668
|
||
Additions,
including loans now meeting disclosure requirements
|
8,198
|
|||
Amounts
collected and loans no longer meeting disclosure
requirements
|
(8,535
|
)
|
||
Balance,
December 31, 2006
|
$
|
14,331
|
2006
|
2005
|
2004
|
||||||||
Balance,
beginning of year
|
$
|
7,892
|
$
|
9,384
|
$
|
14,300
|
||||
Loans
charged off
|
(1,410
|
)
|
(2,215
|
)
|
(6,992
|
)
|
||||
Recoveries
|
1,340
|
719
|
1,050
|
|||||||
Provision
for loan losses
|
(1,161
|
)
|
4
|
1,026
|
||||||
Balance,
end of year
|
$
|
6,661
|
$
|
7,892
|
$
|
9,384
|
||||
2006
|
2005
|
2004
|
||||||||
Impaired
loans at year-end with an allowance
|
$
|
7,766
|
$
|
7,926
|
$
|
12,918
|
||||
Impaired
loans at year-end with no allowance
|
0
|
291
|
263
|
|||||||
Amount
of the allowance for loan losses allocated
|
1,774
|
1,921
|
2,915
|
|||||||
Average
of impaired loans during the year
|
8,258
|
10,819
|
16,069
|
|||||||
Interest
income recognized during impairment
|
480
|
583
|
640
|
|||||||
Cash-basis
interest income recognized
|
480
|
499
|
620
|
2006
|
2005
|
2004
|
||||||||
Loans
past due over 90 days still on accrual
|
$
|
992
|
$
|
853
|
$
|
739
|
||||
Non-accrual
loans
|
4,698
|
3,751
|
6,847
|
|||||||
Restructured
loans
|
1,268
|
1,540
|
238
|
|||||||
2006
|
2005
|
||||||
Land
and improvements
|
$
|
1,522
|
$
|
1,618
|
|||
Buildings
and leasehold improvements
|
5,659
|
6,218
|
|||||
Furniture
and equipment
|
7,431
|
7,039
|
|||||
14,612
|
14,875
|
||||||
Less:
accumulated depreciation
|
(8,079
|
)
|
(7,749
|
)
|
|||
$
|
6,533
|
$
|
7,126
|
2007
|
$
|
138
|
||
2008
|
47
|
|||
2009
|
15
|
|||
2010
|
2
|
|||
2011
and thereafter
|
4
|
|||
$
|
206
|
2007
|
$
|
154,155
|
||
2008
|
26,853
|
|||
2009
|
7,739
|
|||
2010
|
7,248
|
|||
2011
and thereafter
|
3,037
|
|||
$
|
199,032
|
2006
|
2005
|
||||||
Year-end
balance
|
$
|
12,555
|
$
|
9,317
|
|||
Average
balance during the year
|
$
|
9,542
|
$
|
8,201
|
|||
Average
interest rate during the year
|
2.43
|
%
|
2.10
|
%
|
|||
Maximum
month-end balance during the year
|
$
|
12,555
|
$
|
9,378
|
|||
Weighted
average interest rate at year-end
|
2.34
|
%
|
2.39
|
%
|
|||
2007
|
$
|
637
|
||
2008
|
670
|
|||
2009
|
705
|
|||
2010
|
4,742
|
|||
2011
|
461
|
|||
Thereafter
|
70
|
|||
$
|
7,285
|
|||
2007
|
$
|
1,344
|
||
2008
|
1,400
|
|||
2009
|
1,460
|
|||
2010
|
1,524
|
|||
2011
|
1,594
|
|||
Thereafter
|
4,953
|
|||
$
|
12,275
|
|||
March
31, 2003
|
$
|
3,000
|
||
October
15, 2004
|
4,500
|
|||
December
31, 2004
|
1,000
|
|||
December
31, 2005
|
5,000
|
|||
January
31, 2006
|
7,000
|
|||
November
10, 2006
|
8,250
|
|||
$
|
28,750
|
2006
|
2005
|
2004
|
||||||||
Current
|
$
|
2,212
|
$
|
910
|
$
|
(2,435
|
)
|
|||
Deferred
|
1,071
|
1,119
|
3,334
|
|||||||
Provision
for income taxes
|
$
|
3,283
|
$
|
2,029
|
$
|
899
|
||||
2006
|
2005
|
||||||
Deferred
tax assets
|
|||||||
Allowance
for loan losses
|
$
|
2,265
|
$
|
2,683
|
|||
AMT
and other credit carryforwards
|
0
|
359
|
|||||
Write-downs
of other real estate owned
|
80
|
9
|
|||||
Taxable
income on non-accrual loans
|
153
|
54
|
|||||
Unrealized
loss on investment securities
|
592
|
885
|
|||||
Other
|
40
|
59
|
|||||
Total
deferred tax assets
|
3,130
|
4,049
|
|||||
Deferred
tax liabilities
|
|||||||
Amortization
of intangibles
|
$
|
2,001
|
$
|
1,660
|
|||
Depreciation
|
105
|
101
|
|||||
Federal
Home Loan Bank dividends
|
318
|
270
|
|||||
Other
|
157
|
105
|
|||||
Total
deferred tax liabilities
|
2,581
|
2,136
|
|||||
Net
deferred tax assets, included in other assets
|
$
|
549
|
$
|
1,913
|
2006
|
2005
|
2004
|
|||||||||||||||||
U.S.
federal income tax rate
|
$
|
3,327
|
34.0
|
%
|
$
|
2,197
|
34.0
|
%
|
$
|
973
|
34.0
|
%
|
|||||||
Changes
from the statutory rate
|
|||||||||||||||||||
Tax-exempt
interest income
|
(97
|
)
|
(1.0
|
)
|
(81
|
)
|
(1.3
|
)
|
(131
|
)
|
(4.6
|
)
|
|||||||
Non-deductible
interest expense
related
to carrying tax-exempt
interest
earning assets
|
8
|
0.1
|
5
|
0.1
|
5
|
0.2
|
|||||||||||||
Non-deductible
stock compensation
expense
|
46
|
0.5
|
-
|
0.0
|
-
|
0.0
|
|||||||||||||
Tax
credits
|
(10
|
)
|
(0.1
|
)
|
(10
|
)
|
(0.2
|
)
|
-
|
0.0
|
|||||||||
Other
|
9
|
0.1
|
(82
|
)
|
(1.2
|
)
|
52
|
1.8
|
|||||||||||
$
|
3,283
|
33.6
|
%
|
$
|
2,029
|
31.4
|
%
|
$
|
899
|
31.4
|
%
|
||||||||
2006
|
2005
|
2004
|
||||||||
Risk-free
interest rate
|
4.62
|
%
|
3.70
|
%
|
3.15
|
%
|
||||
Expected
option life (yrs)
|
5.00
|
5.00
|
5.00
|
|||||||
Expected
stock price volatility
|
0.26
|
0.25
|
0.25
|
|||||||
Dividend
yield
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||
Weighted
average fair value of
options
granted during the year
|
$
|
5.21
|
$
|
3.48
|
$
|
2.64
|
2006
|
2005
|
2004
|
||||||||
Intrinsic
value of options exercised
|
$
|
9
|
$
|
5
|
$
|
-
|
||||
Cash
received from option exercises
|
27
|
15
|
-
|
|||||||
Tax
benefit realized from option exercises
|
2
|
-
|
-
|
----------2006----------
|
----------2005----------
|
----------2004----------
|
|||||||||||||||||
Weighted
Average
Exercise
|
Weighted
Average
Exercise
|
Weighted
Average
Exercise
|
|||||||||||||||||
Options
|
Price
|
Options
|
Price
|
Options
|
Price
|
||||||||||||||
Outstanding
at beginning of year
|
111,750
|
$
|
11.05
|
83,650
|
$
|
10.65
|
55,450
|
$
|
11.33
|
||||||||||
Grants
|
35,250
|
16.00
|
35,000
|
11.62
|
28,200
|
9.30
|
|||||||||||||
Exercises
|
(3,002
|
)
|
9.02
|
(1,667
|
)
|
8.50
|
|||||||||||||
Forfeitures
or expired
|
(23,750
|
)
|
13.11
|
(5,233
|
)
|
9.31
|
-
|
0.00
|
|||||||||||
Outstanding
at year-end
|
120,248
|
$
|
12.25
|
111,750
|
$
|
11.05
|
83,650
|
$
|
10.65
|
||||||||||
Exercisable
at year-end
|
55,931
|
$
|
10.68
|
54,180
|
$
|
11.61
|
39,821
|
$
|
12.65
|
||||||||||
Weighted
average remaining life
|
7.3
|
6.2
|
6.2
|
||||||||||||||||
Weighted
average fair value of
options
granted during the year
|
$
|
5.21
|
$
|
3.48
|
$
|
2.64
|
|||||||||||||
-
- - - - - - - Outstanding - - - - - - - -
|
-
- - - - - - - Currently Exercisable - - - - - - - -
|
|||||||||||||||||||||
Range
of Exercise Prices
|
Number
|
Weighted
Average Exercise Price
|
Aggregate
Intrinsic Value
|
Number
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise Price
|
Aggregate
Intrinsic Value
|
|||||||||||||||
$7.50
to $10.00
|
42,749
|
$
|
8.70
|
$
|
230
|
34,590
|
6.5
|
$
|
8.55
|
$
|
191
|
|||||||||||
$10.01
to $12.50
|
32,999
|
11.62
|
81
|
10,341
|
8.0
|
11.62
|
25
|
|||||||||||||||
$15.01
to $17.50
|
44,500
|
16.12
|
0
|
11,000
|
2.0
|
16.50
|
0
|
|||||||||||||||
Outstanding
at Dec 31, 2006
|
120,248
|
12.25
|
$
|
311
|
55,931
|
5.9
|
10.68
|
$
|
216
|
2006
|
2005
|
2004
|
||||||||
Basic
earnings per share from continuing operations
|
||||||||||
Income
available to common stockholders
|
$
|
6,501
|
$
|
4,434
|
$
|
1,963
|
||||
Weighted
average common shares outstanding
|
5,236
|
5,233
|
5,232
|
|||||||
Earnings
per share
|
$
|
1.24
|
$
|
0.85
|
$
|
0.37
|
||||
Diluted
earnings per share from continuing operations
|
||||||||||
Income
available to common stockholders
|
$
|
6,501
|
$
|
4,434
|
$
|
1,963
|
||||
Weighted
average common shares outstanding
|
5,236
|
5,233
|
5,232
|
|||||||
Add
dilutive effects of assumed exercise of stock options
|
28
|
15
|
5
|
|||||||
Weighted
average common and dilutive potential
common
shares outstanding
|
5,264
|
5,248
|
5,237
|
|||||||
Earnings
per share assuming dilution
|
$
|
1.24
|
$
|
0.84
|
$
|
0.37
|
||||
Basic
earnings per share
|
||||||||||
Income
available to common stockholders
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
||||
Weighted
average common shares outstanding
|
5,236
|
5,233
|
5,232
|
|||||||
Earnings
per share
|
$
|
1.24
|
$
|
0.85
|
$
|
1.28
|
||||
Diluted
earnings per share
|
||||||||||
Income
available to common stockholders
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
||||
Weighted
average common shares outstanding
|
5,236
|
5,233
|
5,232
|
|||||||
Add
dilutive effects of assumed exercise of stock options
|
28
|
15
|
5
|
|||||||
Weighted
average common and dilutive potential
common
shares outstanding
|
5,264
|
5,248
|
5,237
|
|||||||
Earnings
per share assuming dilution
|
$
|
1.24
|
$
|
0.84
|
$
|
1.28
|
2006
|
2005
|
||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
||||||||||
Financial
assets
|
|||||||||||||
Cash
and due from banks
|
$
|
16,974
|
$
|
16,974
|
$
|
16,080
|
$
|
16,080
|
|||||
Federal
funds sold
|
27,583
|
27,583
|
18,812
|
18,812
|
|||||||||
Securities
available for sale
|
121,367
|
121,367
|
137,419
|
137,419
|
|||||||||
Loans
held for sale
|
1,978
|
1,978
|
868
|
868
|
|||||||||
Loans,
net
|
337,136
|
337,730
|
320,825
|
304,589
|
|||||||||
Federal
Home Loan Bank and
Federal
Reserve Bank stock
|
3,265
|
3,265
|
3,060
|
3,060
|
|||||||||
Interest
receivable
|
2,821
|
2,821
|
2,661
|
2,661
|
|||||||||
Financial
liabilities
|
|||||||||||||
Deposits
|
$
|
(438,950
|
)
|
$
|
(437,280
|
)
|
$
|
(435,843
|
)
|
$
|
(434,459
|
)
|
|
Federal
funds purchased
|
(976
|
)
|
(976
|
)
|
-
|
-
|
|||||||
Securities
sold under agreements
to
repurchase
|
(12,555
|
)
|
(12,555
|
)
|
(9,317
|
)
|
(9,317
|
)
|
|||||
Federal
Home Loan Bank advances
|
(7,285
|
)
|
(7,506
|
)
|
(8,334
|
)
|
(7,355
|
)
|
|||||
Other
borrowed funds
|
(12,275
|
)
|
(12,303
|
)
|
-
|
-
|
|||||||
Notes
payable
|
-
|
-
|
(1,402
|
)
|
(1,319
|
)
|
|||||||
Guaranteed
junior subordinated
interest
debentures
|
-
|
-
|
(15,722
|
)
|
(14,997
|
)
|
|||||||
Interest
payable
|
(1,061
|
)
|
(1,061
|
)
|
(724
|
)
|
(724
|
)
|
|||||
2006
|
2005
|
||||||
Standby
letters of credit
|
$
|
678
|
$
|
949
|
|||
Commitments
to extend credit
|
|||||||
Fixed
|
$
|
5,498
|
$
|
8,303
|
|||
Variable
|
32,988
|
24,158
|
|||||
To
Be Well Capitalized
|
|||||||||||||||||||
For
Capital
|
Under
Prompt Corrective
|
||||||||||||||||||
Actual
|
Adequacy
Purposes
|
Action
Provisions
|
|||||||||||||||||
2006
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||
Total
Capital (to Risk-Weighted Assets):
|
|||||||||||||||||||
Consolidated
(1)
|
$
|
50,313
|
16.0
|
%
|
$
|
25,239
|
8
|
%
|
$
|
31,549
|
10
|
%
|
|||||||
Boone
County Bank
|
16,488
|
20.7
|
6,372
|
8
|
7,965
|
10
|
|||||||||||||
Citizens
Deposit Bank
|
12,819
|
17.4
|
5,893
|
8
|
7,366
|
10
|
|||||||||||||
Farmers
Deposit Bank
|
10,441
|
23.2
|
3,606
|
8
|
4,507
|
10
|
|||||||||||||
Ohio
River Bank
|
7,233
|
16.3
|
3,557
|
8
|
4,447
|
10
|
|||||||||||||
First
Central Bank
|
9,291
|
12.6
|
5,904
|
8
|
7,380
|
10
|
|||||||||||||
Tier
I Capital (to Risk-Weighted Assets):
|
|||||||||||||||||||
Consolidated
(1)
|
$
|
46,336
|
14.7
|
%
|
$
|
12,619
|
4
|
%
|
$
|
18,929
|
6
|
%
|
|||||||
Boone
County Bank
|
15,490
|
19.5
|
3,186
|
4
|
4,779
|
6
|
|||||||||||||
Citizens
Deposit Bank
|
11,893
|
16.2
|
2,946
|
4
|
4,419
|
6
|
|||||||||||||
Farmers
Deposit Bank
|
9,854
|
21.9
|
1,803
|
4
|
2,704
|
6
|
|||||||||||||
Ohio
River Bank
|
6,721
|
15.1
|
1,779
|
4
|
2,668
|
6
|
|||||||||||||
First
Central Bank
|
8,475
|
11.5
|
2,952
|
4
|
4,428
|
6
|
|||||||||||||
Tier
I Capital (to Average Assets):
|
|||||||||||||||||||
Consolidated
(1)
|
$
|
46,336
|
8.9
|
%
|
$
|
20,855
|
4
|
%
|
$
|
26,068
|
5
|
%
|
|||||||
Boone
County Bank
|
15,490
|
10.6
|
5,824
|
4
|
7,280
|
5
|
|||||||||||||
Citizens
Deposit Bank
|
11,893
|
10.0
|
4,779
|
4
|
5,974
|
5
|
|||||||||||||
Farmers
Deposit Bank
|
9,854
|
13.4
|
2,949
|
4
|
3,686
|
5
|
|||||||||||||
Ohio
River Bank
|
6,721
|
8.4
|
3,211
|
4
|
4,013
|
5
|
|||||||||||||
First
Central Bank
|
8,475
|
8.5
|
3,981
|
4
|
4,976
|
5
|
|||||||||||||
(1)
Consolidated company is not subject to Prompt Corrective Action
Provisions
|
To
Be Well Capitalized
|
|||||||||||||||||||
For
Capital
|
Under
Prompt Corrective
|
||||||||||||||||||
Actual
|
Adequacy
Purposes
|
Action
Provisions
|
|||||||||||||||||
2005
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||
Total
Capital (to Risk-Weighted Assets):
|
|||||||||||||||||||
Consolidated
(1)
|
$
|
58,710
|
19.1
|
%
|
$
|
24,636
|
8
|
%
|
$
|
30,795
|
10
|
%
|
|||||||
Boone
County Bank
|
15,778
|
20.8
|
6,073
|
8
|
7,591
|
10
|
|||||||||||||
Citizens
Deposit Bank
|
12,318
|
17.0
|
5,801
|
8
|
7,251
|
10
|
|||||||||||||
Farmers
Deposit Bank
|
9,398
|
12.7
|
3,470
|
8
|
4,337
|
10
|
|||||||||||||
Ohio
River Bank
|
6,978
|
16.3
|
3,434
|
8
|
4,292
|
10
|
|||||||||||||
First
Central Bank
|
8,584
|
12.1
|
5,658
|
8
|
7,073
|
10
|
|||||||||||||
Tier
I Capital (to Risk-Weighted Assets):
|
|||||||||||||||||||
Consolidated
(1)
|
$
|
54,811
|
17.8
|
%
|
$
|
12,318
|
4
|
%
|
$
|
18,477
|
6
|
%
|
|||||||
Boone
County Bank
|
14,927
|
19.7
|
3,036
|
4
|
4,555
|
6
|
|||||||||||||
Citizens
Deposit Bank
|
11,396
|
15.7
|
2,900
|
4
|
4,351
|
6
|
|||||||||||||
Farmers
Deposit Bank
|
8,823
|
20.3
|
1,735
|
4
|
2,602
|
6
|
|||||||||||||
Ohio
River Bank
|
6,482
|
15.1
|
1,717
|
4
|
2,575
|
6
|
|||||||||||||
First
Central Bank
|
7,690
|
10.9
|
2,829
|
4
|
4,244
|
6
|
|||||||||||||
Tier
I Capital (to Average Assets):
|
|||||||||||||||||||
Consolidated
(1)
|
$
|
54,811
|
10.6
|
%
|
$
|
20,660
|
4
|
%
|
$
|
25,826
|
5
|
%
|
|||||||
Boone
County Bank
|
14,927
|
10.3
|
5,772
|
4
|
7,216
|
5
|
|||||||||||||
Citizens
Deposit Bank
|
11,396
|
9.7
|
4,699
|
4
|
5,873
|
5
|
|||||||||||||
Farmers
Deposit Bank
|
8,823
|
11.4
|
3,096
|
4
|
3,870
|
5
|
|||||||||||||
Ohio
River Bank
|
11,303
|
12.5
|
3,606
|
4
|
4,507
|
5
|
|||||||||||||
First
Central Bank
|
7,690
|
8.2
|
3,771
|
4
|
4,713
|
5
|
|||||||||||||
(1)
Consolidated company is not subject to Prompt Corrective Action
Provisions
|
CONDENSED
BALANCE SHEETS
|
|||||||
December
31
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Cash
|
$
|
3,562
|
$
|
3,248
|
|||
Investment
in subsidiaries
|
69,218
|
66,936
|
|||||
Premises
and equipment
|
560
|
541
|
|||||
Other
assets
|
375
|
1,106
|
|||||
Total
assets
|
$
|
73,715
|
$
|
71,831
|
|||
LIABILITIES
AND STOCKHOLDERS’
EQUITY
|
|||||||
Other
liabilities
|
$
|
438
|
$
|
420
|
|||
Notes
payable
|
-
|
1,402
|
|||||
Subordinated
debentures issued to trust
|
-
|
15,722
|
|||||
Other
borrowed funds
|
12,275
|
-
|
|||||
Total
liabilities
|
12,713
|
17,544
|
|||||
Stockholders’
equity
|
|||||||
Preferred
stock
|
-
|
-
|
|||||
Common
stock
|
1,108
|
1,105
|
|||||
Additional
paid-in capital
|
43,624
|
43,458
|
|||||
Retained
earnings
|
17,420
|
11,442
|
|||||
Accumulated
other comprehensive income
|
(1,150
|
)
|
(1,718
|
)
|
|||
Total
stockholders’ equity
|
61,002
|
54,287
|
|||||
Total
liabilities and
stockholders’ equity
|
$
|
73,715
|
$
|
71,831
|
|||
Condensed
Statement of Operations
|
||||||||||
Years
Ended December 31
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Income
|
||||||||||
Dividends
from continuing subsidiaries
|
$
|
6,440
|
$
|
8,405
|
$
|
5,800
|
||||
Interest
and dividend income
|
37
|
45
|
46
|
|||||||
Other
income
|
615
|
484
|
367
|
|||||||
Total
income
|
7,092
|
8,934
|
6,213
|
|||||||
Expenses
|
||||||||||
Interest
expense
|
1,334
|
2,142
|
3,117
|
|||||||
Salaries
and employee benefits
|
1,199
|
1,180
|
726
|
|||||||
Professional
fees
|
165
|
37
|
1,607
|
|||||||
Accelerated
subordinated debenture issuance costs
|
548
|
184
|
214
|
|||||||
Other
expenses
|
420
|
341
|
514
|
|||||||
Total
expenses
|
3,666
|
3,884
|
6,178
|
|||||||
Income
from continuing operations before income
taxes and
equity
in undistributed
income
of subsidiaries
|
3,426
|
5,050
|
35
|
|||||||
Income
tax (benefit)
|
(1,160
|
)
|
(1,314
|
)
|
(2,071
|
)
|
||||
Income
from continuing operations before
equity
in undistributed income of subsidiaries
|
4,586
|
6,364
|
2,106
|
|||||||
Equity
in undistributed income (excess distributions) of
subsidiaries
continuing in operation
|
1,915
|
(1,930
|
)
|
(143
|
)
|
|||||
Net
income from continuing operations
|
6,501
|
4,434
|
1,963
|
|||||||
Net
income from discontinued operations
|
-
|
-
|
4,734
|
|||||||
Net
income
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
Condensed
Statement of Cash Flows
|
||||||||||
Years
Ended December 31
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Cash
flows from operating activities
|
||||||||||
Net
income
|
$
|
6,501
|
$
|
4,434
|
$
|
6,697
|
||||
Adjustments
to reconcile net income to
net
cash from operating activities
|
||||||||||
Income
from discontinued operation
|
-
|
-
|
(4,734
|
)
|
||||||
Depreciation
|
101
|
83
|
91
|
|||||||
Stock
compensation expense
|
142
|
-
|
-
|
|||||||
(Gain)
loss from sales of assets
|
(4
|
)
|
(3
|
)
|
159
|
|||||
Dividends
in excess of net income of
subsidiaries
continuing in operation
|
-
|
1,930
|
143
|
|||||||
Equity
in undistributed earnings of subsidiaries
|
(1,915
|
)
|
-
|
-
|
||||||
Change
in other assets
|
258
|
(35
|
)
|
(1,436
|
)
|
|||||
Change
in other liabilities
|
17
|
(4,934
|
)
|
1,406
|
||||||
Net
cash from operating activities
|
5,100
|
1,475
|
2,326
|
|||||||
Cash
flows from investing activities
|
||||||||||
Capital
contributed to subsidiaries continuing in operation
|
-
|
-
|
(1,831
|
)
|
||||||
Proceeds
from liquidation of subsidiary
|
203
|
-
|
14,311
|
|||||||
Proceeds
from sales of assets, net of purchases
|
(116
|
)
|
(108
|
)
|
192
|
|||||
Net
cash from investing activities
|
87
|
(108
|
)
|
12,672
|
||||||
Cash
flows from financing activities
|
||||||||||
Early
redemption of subordinated note
|
(15,250
|
)
|
(5,000
|
)
|
(5,500
|
)
|
||||
Cash
dividends paid to shareholders
|
(523
|
)
|
-
|
-
|
||||||
Issuance
of common stock
|
27
|
15
|
-
|
|||||||
Proceeds
from borrowings
|
13,500
|
-
|
-
|
|||||||
Payments
on other borrowed funds
|
(2,627
|
)
|
(800
|
)
|
(5,400
|
)
|
||||
Net
cash from financing activities
|
(4,873
|
)
|
(5,785
|
)
|
(10,900
|
)
|
||||
Net
change in cash and cash equivalents
|
314
|
(4,418
|
)
|
4,098
|
||||||
Cash
and cash equivalents at beginning of year
|
3,248
|
7,666
|
3,568
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
3,562
|
$
|
3,248
|
$
|
7,666
|
Earnings
per Share
|
||||||||||||||||
|
Interest
Income
|
Net
Interest Income
|
Net
Income
|
Basic
|
Fully
Diluted
|
|||||||||||
2006
|
||||||||||||||||
First
Quarter
|
$
|
7,676
|
$
|
5,204
|
$
|
1,367
|
$
|
0.26
|
$
|
0.26
|
||||||
Second
Quarter
|
8,014
|
5,360
|
2,000
|
0.38
|
0.38
|
|||||||||||
Third
Quarter
|
8,248
|
5,377
|
1,475
|
0.28
|
0.28
|
|||||||||||
Fourth
Quarter
|
8,462
|
5,454
|
1,659
|
0.32
|
0.32
|
|||||||||||
2005
|
||||||||||||||||
First
Quarter
|
$
|
7,045
|
$
|
4,727
|
$
|
803
|
$
|
0.15
|
$
|
0.15
|
||||||
Second
Quarter
|
7,172
|
4,893
|
727
|
0.14
|
0.14
|
|||||||||||
Third
Quarter
|
7,465
|
5,055
|
1,367
|
0.26
|
0.26
|
|||||||||||
Fourth
Quarter
|
7,717
|
5,177
|
1,537
|
0.29
|
0.29
|
(UNAUDITED)
|
||||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ |
15,152
|
$ |
16,974
|
||||
Federal
funds sold
|
35,238
|
27,583
|
||||||
123,347
|
121,367
|
|||||||
Loans
held for sale
|
4,251
|
1,978
|
||||||
346,502
|
343,797
|
|||||||
(6,499 | ) | (6,661 | ) | |||||
Net
loans
|
340,003
|
337,136
|
||||||
Federal
Home Loan Bank and Federal Reserve Bank stock
|
3,316
|
3,265
|
||||||
Premises
and equipment, net
|
6,259
|
6,533
|
||||||
Real
estate and other property acquired through foreclosure
|
229
|
495
|
||||||
Interest
receivable
|
3,179
|
2,821
|
||||||
Goodwill
|
15,816
|
15,816
|
||||||
Other
assets
|
212
|
1,484
|
||||||
Total
assets
|
$ |
547,002
|
$ |
535,452
|
||||
LIABILITIES
AND STOCKHOLDERS'
EQUITY
|
||||||||
Deposits
|
||||||||
Non-interest
bearing
|
$ |
76,735
|
$ |
72,784
|
||||
Time
deposits, $100,000 and
over
|
54,074
|
53,477
|
||||||
Other
interest
bearing
|
320,151
|
312,689
|
||||||
Total
deposits
|
450,960
|
438,950
|
||||||
Federal
funds purchased
|
-
|
976
|
||||||
Securities
sold under agreements to repurchase
|
13,034
|
12,555
|
||||||
4,910
|
7,285
|
|||||||
8,767
|
12,275
|
|||||||
Interest
payable
|
1,184
|
1,061
|
||||||
Other
liabilities
|
2,675
|
1,348
|
||||||
Total
liabilities
|
481,530
|
474,450
|
||||||
Stockholders'
equity
|
||||||||
Preferred
stock, no par value;
1,000,000 shares authorized;
|
||||||||
none
issued or
outstanding
|
-
|
-
|
||||||
Common
stock, no par value;
10,000,000 shares authorized;
|
||||||||
5,236,899
shares issued and
outstanding
|
1,108
|
1,108
|
||||||
Additional
paid in
capital
|
43,732
|
43,624
|
||||||
Retained
earnings
|
21,232
|
17,420
|
||||||
Accumulated
other comprehensive
income (loss)
|
(600 | ) | (1,150 | ) | ||||
Total
stockholders'
equity
|
65,472
|
61,002
|
||||||
Total
liabilities and stockholders'
equity
|
$ |
547,002
|
$ |
535,452
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Interest
income
|
||||||||||||||||
Loans,
including
fees
|
$ |
6,825
|
$ |
6,637
|
$ |
20,343
|
$ |
19,130
|
||||||||
Securities
available for
sale
|
||||||||||||||||
Taxable
|
1,424
|
1,300
|
4,093
|
3,855
|
||||||||||||
Tax-exempt
|
39
|
24
|
118
|
69
|
||||||||||||
Federal
funds sold and
other
|
450
|
287
|
1,508
|
884
|
||||||||||||
Total
interest
income
|
8,738
|
8,248
|
26,062
|
23,938
|
||||||||||||
Interest
expense
|
||||||||||||||||
Deposits
|
2,815
|
2,351
|
8,273
|
6,440
|
||||||||||||
Repurchase
agreements and
other
|
83
|
60
|
248
|
175
|
||||||||||||
FHLB
advances and other
borrowings
|
250
|
255
|
889
|
710
|
||||||||||||
Debentures
|
-
|
205
|
-
|
672
|
||||||||||||
Total
interest
expense
|
3,148
|
2,871
|
9,410
|
7,997
|
||||||||||||
Net
interest income
|
5,590
|
5,377
|
16,652
|
15,941
|
||||||||||||
Provision
for loan losses
|
25
|
(38 | ) | (103 | ) | (1,051 | ) | |||||||||
Net
interest income after
provision for loan losses
|
5,565
|
5,415
|
16,755
|
16,992
|
||||||||||||
Non-interest
income
|
||||||||||||||||
Service
charges on deposit
accounts
|
691
|
775
|
2,031
|
2,088
|
||||||||||||
Electronic
banking
income
|
156
|
129
|
446
|
366
|
||||||||||||
Secondary
market mortgage
income
|
172
|
94
|
460
|
183
|
||||||||||||
Life
insurance
benefit
|
-
|
-
|
212
|
-
|
||||||||||||
Other
|
91
|
129
|
312
|
394
|
||||||||||||
1,110
|
1,127
|
3,461
|
3,031
|
|||||||||||||
Non-interest
expenses
|
||||||||||||||||
Salaries
and employee
benefits
|
2,159
|
2,314
|
6,647
|
6,846
|
||||||||||||
Occupancy
and equipment
expenses
|
483
|
575
|
1,490
|
1,549
|
||||||||||||
Outside
data
processing
|
537
|
525
|
1,575
|
1,512
|
||||||||||||
Professional
fees
|
110
|
108
|
301
|
363
|
||||||||||||
Taxes,
other than payroll,
property and income
|
128
|
160
|
436
|
442
|
||||||||||||
Write-downs,
expenses, sales of
other
real estate owned, net of gains
|
(111 | ) | (7 | ) | (77 | ) | (29 | ) | ||||||||
Supplies
|
74
|
77
|
230
|
252
|
||||||||||||
Other
expenses
|
577
|
571
|
1,630
|
1,801
|
||||||||||||
3,957
|
4,323
|
12,232
|
12,736
|
|||||||||||||
Income
before income taxes
|
2,718
|
2,219
|
7,984
|
7,287
|
||||||||||||
Provision
for income taxes
|
911
|
744
|
2,601
|
2,445
|
||||||||||||
Net
income
|
$ |
1,807
|
$ |
1,475
|
$ |
5,383
|
$ |
4,842
|
||||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
5,237
|
5,237
|
5,237
|
5,236
|
||||||||||||
Diluted
|
5,262
|
5,262
|
5,265
|
5,264
|
||||||||||||
Net
income per share:
|
||||||||||||||||
Basic
|
$ |
0.35
|
$ |
0.28
|
$ |
1.03
|
$ |
0.92
|
||||||||
Diluted
|
0.34
|
0.28
|
1.02
|
0.92
|
||||||||||||
Dividends
per share
|
0.10
|
0.05
|
0.30
|
0.05
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Net
income
|
$ |
1,807
|
$ |
1,475
|
$ |
5,383
|
$ |
4,842
|
||||||||
Other
comprehensive
income:
|
||||||||||||||||
Unrealized
gains arising during
the period
|
1,371
|
2,136
|
833
|
597
|
||||||||||||
Reclassification
of realized
amount
|
-
|
-
|
-
|
-
|
||||||||||||
Net
change in unrealized gain
(loss) on securities
|
1,371
|
2,136
|
833
|
597
|
||||||||||||
Less
tax impact
|
466
|
726
|
283
|
203
|
||||||||||||
Other
comprehensive
income:
|
905
|
1,410
|
550
|
394
|
||||||||||||
Comprehensive
income
|
$ |
2,712
|
$ |
2,885
|
$ |
5,933
|
$ |
5,236
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating
activities
|
||||||||
Net
income
|
$ |
5,383
|
$ |
4,842
|
||||
Adjustments
to reconcile net
income to net cash from
operating
activities
|
||||||||
Depreciation
|
573
|
666
|
||||||
Provision
for loan
losses
|
(103 | ) | (1,051 | ) | ||||
Amortization
(accretion),
net
|
(31 | ) |
37
|
|||||
Stock
compensation
expense
|
108
|
104
|
||||||
FHLB
stock
dividends
|
-
|
(103 | ) | |||||
OREO
writedowns (gains on sales),
net
|
(47 | ) | (34 | ) | ||||
Loans
originated for
sale
|
(22,835 | ) | (7,875 | ) | ||||
Secondary
market loans
sold
|
20,562
|
7,604
|
||||||
Changes
in :
|
||||||||
Interest
receivable
|
(358 | ) | (199 | ) | ||||
Other
assets
|
989
|
733
|
||||||
Interest
payable
|
123
|
489
|
||||||
Other
liabilities
|
(150 | ) | (1,618 | ) | ||||
Net
cash from operating
activities
|
4,214
|
3,595
|
||||||
Cash
flows from investing
activities
|
||||||||
Purchases
of securities available
for sale
|
(28,114 | ) | (15,004 | ) | ||||
Proceeds
from maturities and calls
of securities available for sale
|
28,450
|
23,472
|
||||||
Proceeds
from sale of securities
available for sale
|
25
|
-
|
||||||
Redemption
of
FHLB stock, (net of purchases)
|
(51 | ) | (58 | ) | ||||
Net
change in federal funds
sold
|
(7,655 | ) | (3,258 | ) | ||||
Net
change in
loans
|
(2,966 | ) | (17,685 | ) | ||||
Purchases
of premises and
equipment, net
|
(299 | ) | (392 | ) | ||||
Proceeds
from sale of other real
estate acquired through foreclosure
|
515
|
2,133
|
||||||
Net
cash from investing
activities
|
(10,095 | ) | (10,792 | ) | ||||
Cash
flows from financing
activities
|
||||||||
Net
change in
deposits
|
12,010
|
9,977
|
||||||
Cash
dividends
paid
|
(1,571 | ) | (261 | ) | ||||
Repayment
of Federal Home Loan
Bank advances
|
(2,375 | ) | (702 | ) | ||||
Repayment
of subordinated
notes
|
-
|
(1,402 | ) | |||||
Proceeds
from other
borrowings
|
-
|
7,000
|
||||||
Repayment
of other borrowed
funds
|
(3,508 | ) | (413 | ) | ||||
Early
redemption of Trust
Preferred Securities
|
-
|
(7,000 | ) | |||||
Proceeds
from stock option
exercises
|
-
|
27
|
||||||
Net
change in federal funds
purchased
|
(976 | ) |
-
|
|||||
Net
change in agreements to
repurchase securities
|
479
|
157
|
||||||
Net
cash from financing
activities
|
4,059
|
7,383
|
||||||
Net
change in cash and cash equivalents
|
(1,822 | ) |
186
|
|||||
Cash
and cash equivalents at beginning of period
|
16,974
|
16,080
|
||||||
Cash
and cash equivalents at
end of period
|
$ |
15,152
|
$ |
16,266
|
2007
|
2006
|
|||||||
Supplemental
disclosures of
cash flow information:
|
||||||||
Cash
paid during period for
interest
|
$ |
9,287
|
$ |
7,508
|
||||
Loans
transferred to real estate
acquired through foreclosure
|
202
|
465
|
||||||
September
30, 2007
|
||||||||||||||
Year
|
Total
|
Net
Income
|
||||||||||||
Subsidiary
|
Location
|
Acquired
|
Assets
|
Qtr
|
YTD
|
|||||||||
Citizens
Deposit Bank & Trust
|
Vanceburg,
Kentucky
|
1991
|
$ |
123,238
|
$ |
446
|
$ |
1,336
|
||||||
Farmers
Deposit Bank
|
Eminence,
Kentucky
|
1996
|
71,934
|
327
|
974
|
|||||||||
Ohio
River Bank
|
Ironton,
Ohio
|
1998
|
85,795
|
297
|
838
|
|||||||||
First
Central Bank, Inc.
|
Philippi,
West Virginia
|
1998
|
110,314
|
366
|
1,097
|
|||||||||
Boone
County Bank, Inc.
|
Madison,
West Virginia
|
1998
|
156,596
|
652
|
1,872
|
|||||||||
Mt.
Vernon Financial Holdings, Inc.
|
Huntington,
West Virginia
|
1999
|
635
|
13
|
198
|
|||||||||
Parent
and Intercompany Eliminations
|
(1,510 | ) | (294 | ) | (932 | ) | ||||||||
Consolidated
Total
|
547,002
|
1,807
|
5,383
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
Available
for sale
|
||||||||||||||||
U.
S. Treasury
securities
|
$ |
6,472
|
$ |
25
|
$ | (4 | ) | $ |
6,493
|
|||||||
U.
S. agency
securities
|
76,012
|
191
|
(294 | ) |
75,909
|
|||||||||||
Obligations
of states and
political subdivisions
|
4,080
|
6
|
(26 | ) |
4,060
|
|||||||||||
Mortgage-backed
securities
|
37,692
|
32
|
(839 | ) |
36,885
|
|||||||||||
Total
available for
sale
|
$ |
124,256
|
$ |
254
|
$ | (1,163 | ) | $ |
123,347
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
|||||||||||||
Available
for sale
|
||||||||||||||||
U.
S. Treasury
securities
|
$ |
6,454
|
$ |
-
|
$ | (53 | ) | $ |
6,401
|
|||||||
U.
S. agency
securities
|
77,885
|
43
|
(1,017 | ) |
76,911
|
|||||||||||
Obligations
of states and
political subdivisions
|
3,413
|
15
|
(15 | ) |
3,413
|
|||||||||||
Mortgage-backed
securities
|
35,332
|
40
|
(755 | ) |
34,617
|
|||||||||||
Corporate
securities
|
25
|
-
|
-
|
25
|
||||||||||||
Total
available for
sale
|
$ |
123,109
|
$ |
98
|
$ | (1,840 | ) | $ |
121,367
|
Less
than 12 Months
|
12
Months or More
|
Total
|
||||||||||||||||||||||
Description
of Securities
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
||||||||||||||||||
U.S.
treasury securities
|
$ |
-
|
$ |
-
|
$ |
986
|
$ | (4 | ) | $ |
986
|
$ | (4 | ) | ||||||||||
U.S.
agency securities
|
-
|
-
|
43,980
|
(294 | ) |
43,980
|
(294 | ) | ||||||||||||||||
Obligations
of states and political
subdivisions
|
2,963
|
(24 | ) |
208
|
(2 | ) |
3,171
|
(26 | ) | |||||||||||||||
Gov’t
guaranteed mortgage-backed
securities
|
1,312
|
(6 | ) |
11,537
|
(384 | ) |
12,849
|
(390 | ) | |||||||||||||||
Mortgage-backed
securities
|
5,290
|
(53 | ) |
12,911
|
(396 | ) |
18,201
|
(449 | ) | |||||||||||||||
Total
temporarily impaired
|
$ |
9,565
|
$ | (83 | ) | $ |
69,622
|
$ | (1,080 | ) | $ |
79,187
|
$ | (1,163 | ) |
Less
than 12 Months
|
12
Months or More
|
Total
|
||||||||||||||||||||||
Description
of Securities
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
||||||||||||||||||
U.S.
treasury securities
|
$ |
5,435
|
$ | (32 | ) | $ |
966
|
$ | (21 | ) | $ |
6,401
|
$ | (53 | ) | |||||||||
U.S.
agency securities
|
3,735
|
(12 | ) |
63,145
|
(1,005 | ) |
66,880
|
(1,017 | ) | |||||||||||||||
Obligations
of states and political
subdivisions
|
1,581
|
(12 | ) |
322
|
(3 | ) |
1,903
|
(15 | ) | |||||||||||||||
Gov’t
guaranteed mortgage-backed
securities
|
-
|
-
|
13,121
|
(381 | ) |
13,121
|
(381 | ) | ||||||||||||||||
Mortgage-backed
securities
|
943
|
(3 | ) |
14,720
|
(371 | ) |
15,663
|
(374 | ) | |||||||||||||||
Total
temporarily impaired
|
$ |
11,694
|
$ | (59 | ) | $ |
92,274
|
$ | (1,781 | ) | $ |
103,968
|
$ | (1,840 | ) |
2007
|
2006
|
|||||||
Commercial,
secured by real estate
|
$ |
100,604
|
$ |
101,786
|
||||
Commercial,
other
|
41,164
|
43,981
|
||||||
Real
estate construction
|
19,983
|
11,303
|
||||||
Residential
real estate
|
136,516
|
138,795
|
||||||
Agricultural
|
2,033
|
1,930
|
||||||
Consumer
and home equity
|
43,038
|
42,188
|
||||||
Other
|
3,164
|
3,814
|
||||||
$ |
346,502
|
$ |
343,797
|
2007
|
2006
|
|||||||
Impaired
loans at period end with an allowance
|
$ |
4,895
|
$ |
7,766
|
||||
Impaired
loan at period end with no allowance
|
-
|
-
|
||||||
Amount
of allowance for loan losses allocated
|
1,528
|
1,774
|
2007
|
2006
|
|||||||
Non-accrual
loans
|
$ |
3,432
|
$ |
4,698
|
||||
Accruing
loans which are contractually past due 90 days or more
|
1,048
|
992
|
||||||
Restructured
loans
|
1,428
|
1,268
|
||||||
Total
|
$ |
5,908
|
$ |
6,958
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Balance,
beginning of period
|
$ |
6,640
|
$ |
7,198
|
$ |
6,661
|
$ |
7,892
|
||||||||
Gross
charge-offs
|
(312 | ) | (370 | ) | (636 | ) | (1,131 | ) | ||||||||
Recoveries
|
146
|
151
|
577
|
1,231
|
||||||||||||
Provision
for loan losses
|
25
|
(38 | ) | (103 | ) | (1,051 | ) | |||||||||
Balance,
end of period
|
$ |
6,499
|
$ |
6,941
|
$ |
6,499
|
$ |
6,941
|
2007
(remaining three months)
|
$ |
46
|
||
2008
|
190
|
|||
2009
|
198
|
|||
2010
|
4,207
|
|||
2011
|
206
|
|||
Thereafter
|
63
|
|||
$ |
4,910
|
|||
Sept
30,
2007
|
December
31,
2006
|
Regulatory
Minimum
Requirements
|
To
Be Considered
Well
Capitalized
|
|
Tier
I Capital (to Risk-Weighted Assets)
|
15.7%
|
14.7%
|
4.0%
|
6.0%
|
Total
Capital (to Risk-Weighted Assets)
|
17.0%
|
16.0%
|
8.0%
|
10.0%
|
Tier
I Capital (to Average Assets)
|
9.5%
|
8.9%
|
4.0%
|
5.0%
|
2007
|
2006
|
2005
|
||||||||||
Risk-free
interest rate
|
4.78 | % | 4.62 | % | 3.70 | % | ||||||
Expected
option life (yrs)
|
5.00
|
5.00
|
5.00
|
|||||||||
Expected
stock price volatility
|
0.25
|
0.26
|
0.25
|
|||||||||
Dividend
yield
|
1.41 | % | 0.00 | % | 0.00 | % | ||||||
Weighted
average fair value of options
granted during the year
|
$ |
3.81
|
$ |
5.21
|
$ |
3.48
|
-
- - - - - 2007 - - - - - -
|
-
- - - - - 2006 - - - - - -
|
||||||||||||
Weighted
Average
Exercise
|
Weighted
Average
Exercise
|
||||||||||||
Options
|
Price
|
Options
|
Price
|
||||||||||
Outstanding
at beginning of year
|
120,248
|
$
|
12.25
|
111,750
|
$
|
11.05
|
|||||||
Grants
|
37,000
|
14.22
|
35,250
|
16.00
|
|||||||||
Exercises
|
-
|
-
|
(3,002
|
)
|
9.02
|
||||||||
Forfeitures
or expired
|
(4,831
|
) |
14.44
|
(21,750
|
) |
13.10
|
|||||||
Outstanding
at September 30,
|
152,417
|
$
|
12.66
|
122,248
|
$
|
12.26
|
|||||||
Exercisable
at September 30,
|
85,764
|
56,432
|
|||||||||||
Weighted
average remaining life of options outstanding
|
7.1
|
7.6
|
|||||||||||
Weighted
average fair value of options granted
during the year
|
$
|
3.81
|
$
|
5.21
|
-
- - - - - - Outstanding - - - - - - -
|
-
- - - - - - - Currently Exercisable - - - - - - - -
|
|||||||||||||||||||||
Range
of Exercise Prices
|
Number
|
Weighted
Average Exercise Price
|
Aggregate
Intrinsic Value
|
Number
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise Price
|
Aggregate
Intrinsic Value
|
|||||||||||||||
$7.50
to $10.00
|
42,749
|
$
|
8.70
|
$
|
261
|
42,749
|
5.9
|
$
|
8.70
|
$
|
261
|
|||||||||||
$10.01
to $12.50
|
32,500
|
11.62
|
103
|
21,172
|
7.3
|
11.62
|
67
|
|||||||||||||||
$12.51
to $15.00
|
34,000
|
14.22
|
20
|
0
|
0.0
|
14.22
|
0
|
|||||||||||||||
$15.01
to $17.50
|
43,168
|
16.13
|
0
|
21,843
|
6.6
|
16.25
|
0
|
|||||||||||||||
Outstanding
- September 30, 2007
|
152,417
|
12.66
|
$
|
384
|
85,764
|
7.1
|
11.34
|
$
|
328
|
|||||||||||||
Page | ||
Section 1. | Merger | |
1.1
|
General
Effect of Merger; Assets
|
2
|
1.2
|
Liabilities
of Surviving Bank
|
2
|
1.3
|
Name,
Directors and Officers of Surviving Bank
|
2
|
1.4
|
Offices,
Policies of Surviving Bank
|
3
|
1.5
|
Capital
Structure of Surviving Bank
|
3
|
1.6
|
Change
in Method of Effecting Acquisition
|
3
|
Section 2. | Conversion, Exchange and Cancellation of Shares | |
2.1
|
General
|
4
|
2.2
|
Stock
Consideration and Cash Consideration
|
4
|
2.3
|
Manner
of Exchange
|
4
|
2.4
|
Fractional
Shares
|
5
|
2.5
|
Lost
Certificates
|
5
|
Section 3. | Representations, Warrantis and Covenants of Premier | |
3.1
|
Organization,
Standing and Authority
|
6
|
3.2
|
Capital
Structure
|
6
|
3.3
|
Premier
Subsidiaries
|
6
|
3.4
|
Authority
|
7
|
3.5
|
Premier
Financial Statements
|
8
|
3.6
|
Allowance
for Possible Loan Losses
|
8
|
3.7
|
Accuracy
of Annual Reports
|
8
|
3.8
|
Absence
of Undisclosed Liabilities
|
8
|
3.9
|
Tax
Matters
|
9
|
3.10
|
Loans
|
9
|
3.11
|
Properties
|
10
|
3.12
|
Compliance
with Laws
|
10
|
3.13
|
Employee
Benefit Plans
|
10
|
3.14
|
Commitments
and Contracts
|
11
|
3.15
|
Labor
|
11
|
3.16
|
Material
Contracts Furnished
|
12
|
3.17
|
Material
Contracts
|
12
|
3.18
|
Material
Contract Defaults
|
12
|
3.19
|
Legal
Proceedings
|
12
|
3.20
|
Absence
of Certain Changes or Events
|
12
|
3.21
|
Reports
|
13
|
3.22
|
Investments
|
13 |
3.23
|
Securities
Portfolio
|
13
|
3.24
|
Environmental
Matters
|
13
|
3.25
|
Accuracy
of Proxy Statement
|
13
|
3.26
|
Interim
Bank Formation; Adoption Agreement
|
14
|
3.27
|
Filing
of Application to Merge
|
14
|
3.28
|
Best
Efforts
|
14
|
3.29
|
Conduct
of Business - Acquisitions
|
14
|
3.30
|
Conduct
of Business - Affirmative Covenants of Premier
|
14
|
Section 4. | Representations, Warranties and Covenants of Bank | |
4.1
|
Organization,
Standing and Authority
|
16
|
4.2
|
Capital
Structure
|
16
|
4.3
|
No
Subsidiaries
|
16
|
4.4
|
Authority
|
16
|
4.5
|
Bank
Financial Statements
|
16
|
4.6
|
Accuracy
of Annual Reports
|
17
|
4.7
|
Allowance
for Possible Loan Losses
|
17
|
4.8
|
Absence
of Undisclosed Liabilities
|
17
|
4.9
|
Tax
Matters
|
18
|
4.10
|
Loans
|
18
|
4.11
|
Properties
|
18
|
4.12
|
Compliance
with Laws
|
19
|
4.13
|
Employee
Benefit Plans
|
19
|
4.14
|
Commitments
and Contracts
|
20
|
4.15
|
Labor
|
20
|
4.16
|
Material
Contracts Furnished
|
20
|
4.17
|
Material
Contracts
|
20
|
4.18
|
Material
Contract Defaults
|
21
|
4.19
|
Legal
Proceedings
|
21
|
4.20
|
Absence
of Certain Changes or Events
|
21
|
4.21
|
Reports
|
21
|
4.22
|
Accuracy
of Proxy Statement
|
22
|
4.23
|
Investments
|
22
|
4.24
|
Securities
Portfolio
|
22
|
4.25
|
Environmental
Matters
|
22
|
4.26
|
Best
Efforts
|
22
|
4.27
|
Conduct
of Business – Negative Covenants of Bank
|
22
|
4.28
|
Conduct
of Business – Affirmative Covenants of Bank
|
24
|
Section 5. | Indemnification and Confidentiality | |
5.1
|
Access
and Information
|
26
|
5.2
|
Furnishing
Information and Indemnification
|
26
|
5.3
|
Confidentiality
|
27
|
5.4
|
Updates
to Information
|
27
|
Section 6. | Conditions Precedent | |
(a)
|
Governmental
Approvals
|
28
|
(b)
|
Shareholder
Approval
|
28
|
(c)
|
Registration
Statement
|
28
|
(d)
|
Affiliates
|
28
|
(e)
|
No
Divestiture or Adverse Condition
|
29
|
(f)
|
Accuracy
of Representations and Warranties; Performance of Obligations
and
Covenants - Premier
|
29
|
(g)
|
Accuracy
of Representations and Warranties; Performance of Obligations
and
Covenants – Bank
|
29
|
(h)
|
Opinion
of Counsel for Bank
|
29
|
(i)
|
Opinion
of Counsel for Premier
|
30
|
(j)
|
Less
than 20% Dissenters
|
32
|
(k)
|
Tax
Ruling or Opinion Letter
|
32
|
(l)
|
Absence
of Material Adverse Changes - Premier
|
32
|
(m)
|
Absence
of Material Adverse Changes – Bank
|
33
|
Section 7. | Closing Date and Effective Time | |
7.1
|
Closing
Date
|
34
|
7.2
|
Effective
Time
|
34
|
Section 8. | Termination of Agreement | |
8.1
|
Grounds
for Termination
|
35
|
8.2
|
Effect
of Termination
|
35
|
8.3
|
Lost
Opportunity Costs
|
35
|
8.4
|
Return
of Information
|
37
|
Section 9. | Waiver and Amendment | 38 |
Section 10. | Meeting of Shareholders of Bank | 39 |
Section 11. | Rights of Dissenting Shareholders | 40 |
Section 12. | Indemnification | |
12.1
|
Indemnification
|
41
|
12.2
|
Insurance
|
41
|
12.3
|
Consolidation
or Merger
|
41
|
12.4
|
Survival
|
41
|
Section 13. | Operations after the Closing Date | |
13.1
|
Employees
of the Bank
|
42
|
13.2
|
Severance
|
42
|
13.3
|
Survival
|
42
|
Section 14. | Miscellaneous | |
14.1
|
Public
Announcements
|
43
|
14.2
|
Brokers
and Finders
|
43
|
14.3
|
Disclosed
In Writing
|
43
|
14.4
|
Entire
Agreement
|
43
|
14.5
|
Counterparts
|
43
|
14.6
|
Invalid
Provisions
|
43
|
14.7
|
Notices
|
43
|
14.8
|
Headings
|
44
|
14.9
|
Expenses
|
44
|
14.10
|
Governing
Law
|
44
|
14.11
|
No
Assignment
|
44
|
14.12
|
Effectiveness
of Agreement
|
44
|
14.13
|
Further
Acts
|
45
|
14.14
|
Representations
and Warranties Not to Survive
|
45
|
14.15
|
Individual
Directors
|
45
|
|
(1)
|
Any
new loan, or renewal of an existing loan, that totals $250,000
or greater;
or
|
|
(2)
|
Any
new loan, or renewal of an existing loan, which, when included
with all
other loans from Bank to any such borrower and their related interests,
would cause such borrower’s total loans from Bank, including loans from
Bank to their related interests, to exceed
$400,000.
|
Weighted
Average Premier Stock Price
|
Stock
Consideration
|
Cash
per Citizens First Share
|
Total
Value per Citizens First Share
|
$16.50
|
1.20
|
9.450
|
$29.250
|
$16.40
|
1.20
|
9.570
|
$29.250
|
$16.30
|
1.20
|
9.690
|
$29.250
|
$16.20
|
1.20
|
9.810
|
$29.250
|
$16.10
|
1.20
|
9.930
|
$29.250
|
$16.00
|
1.20
|
10.050
|
$29.250
|
$15.90
|
1.20
|
10.170
|
$29.250
|
$15.80
|
1.20
|
10.290
|
$29.250
|
$15.70
|
1.20
|
10.410
|
$29.250
|
$15.60
|
1.20
|
10.530
|
$29.250
|
$15.50
|
1.20
|
10.650
|
$29.250
|
$15.40
|
1.20
|
10.770
|
$29.250
|
$15.30
|
1.20
|
10.890
|
$29.250
|
$15.20
|
1.20
|
11.010
|
$29.250
|
$15.10
|
1.20
|
11.130
|
$29.250
|
$15.00
|
1.20
|
11.250
|
$29.250
|
$14.90
|
1.20
|
11.370
|
$29.250
|
$14.80
|
1.20
|
11.490
|
$29.250
|
$14.70
|
1.20
|
11.610
|
$29.250
|
$14.60
|
1.20
|
11.730
|
$29.250
|
$14.50
|
1.20
|
11.850
|
$29.250
|
$14.40
|
1.20
|
11.970
|
$29.250
|
$14.30
|
1.20
|
12.090
|
$29.250
|
$14.20
|
1.20
|
12.210
|
$29.250
|
$14.10
|
1.20
|
12.330
|
$29.250
|
$13.90
|
1.20
|
12.570
|
$29.250
|
$13.80
|
1.20
|
12.690
|
$29.250
|
$13.70
|
1.20
|
12.810
|
$29.250
|
$13.60
|
1.20
|
12.930
|
$29.250
|
$13.50
|
1.20
|
13.050
|
$29.250
|
$13.40
|
1.20
|
13.170
|
$29.250
|
$13.33
|
1.20
|
13.250
|
$29.250
|
$13.30
|
1.20
|
13.250
|
$29.214
|
$13.20
|
1.20
|
13.250
|
$29.094
|
$13.10
|
1.20
|
13.250
|
$28.974
|
$13.00
|
1.20
|
13.250
|
$28.854
|
$12.90
|
1.20
|
13.250
|
$28.734
|
$12.80
|
1.20
|
13.250
|
$28.614
|
$12.70
|
1.20
|
13.250
|
$28.494
|
Frederick
C.
Hardman
|
||
|
Chairman
of the Board
|
|
Traders Bankshares, Inc. |
|
1.
|
|
A
proposal to approve and adopt
the Agreement of Merger dated as of November 27, 2007, between Premier
Financial Bancorp, Inc. and Traders Bankshares, Inc. (hereinafter
the
“Merger Agreement”) and the transactions contemplated thereby. The Merger
Agreement provides that Traders Bankshares, Inc. will merge with
and into
a subsidiary of Premier Financial Bancorp, Inc., upon the terms and
subject to the conditions set forth in the Merger Agreement, as more
fully
described in the accompanying proxy
statement/prospectus.
|
|
2.
|
|
A
proposal to adjourn the meeting
to a later date or dates, if necessary, to permit further solicitation
of
proxies in the event there are not sufficient votes at the time of
the
meeting to approve the matters to be considered by the shareholders
at the
meeting, as more fully described in the accompanying proxy
statement/prospectus.
|
|
3.
|
|
Such
other matters as may properly
come before the special
meeting.
|
By
Order of the Board of Directors
|
||
Frederick
C. Hardman
|
||
___________,
2008
|
Chairman
of the Board
|
|
Page
|
|
ADDITIONAL
INFORMATION
|
|
|
|
|
|
QUESTIONS
AND ANSWERS
ABOUT THE SHAREHOLDER MEETING AND THE MERGER
|
|
|
|
|
|
SUMMARY
|
|
|
|
|
|
RISK
FACTORS
|
|
|
FORWARD-LOOKING STATEMENTS | ||
PRICE RANGE OF COMMON STOCK AND DIVIDENDS | ||
SUMMARY SELECTED FINANCIAL DATA | ||
THE SPECIAL MEETING | ||
General | ||
Matters to be Considered | ||
Proxies | ||
Solicitation of Proxies | ||
Record Date and Voting Rights | ||
Vote Required | ||
Recommendation of the Traders Board of Directors | ||
APPROVAL OF THE MERGER | ||
Merger | ||
Merger Consideration | ||
No Fractional Shares | ||
Dissenters’ Appraisal Rights | ||
Background of the Merger; Board Recommendations and Reasons for the Merger | ||
Opinion of Financial Advisor | ||
Premier Financial’s Reasons for the Merger | ||
Interests of Certain Persons in the Merger | ||
Conditions of the Merger | ||
Traders Bank Signage and Board Members | ||
Regulatory Matters Regarding Traders | ||
Conditions of the Merger | ||
Representations and Warranties | ||
Termination of the Merger Agreement | ||
Termination Fee | ||
Waiver and Amendment | ||
Indemnification; Directors’ and Officers’ Insurance | ||
Acquisition Proposals | ||
Closing Date; Effective Time | ||
Regulatory Approvals | ||
Conduct of Business Pending the Merger | ||
Accounting Treatment | ||
Management and Operations after the Merger | ||
Resales of Premier Financial Common Stock | ||
PROPOSED ACQUISITION | ||
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER | ||
General | ||
The Merger | ||
Consequences to Shareholders | ||
Backup Withholding and Reporting Requirements | ||
INFORMATION ABOUT PREMIER FINANCIAL BANCORP, INC. AND TRADERS BANKSHARES, INC. | ||
PREMIER FINANCIAL BANCORP, INC. | ||
Description of Business | ||
Business - General | ||
Competition | ||
Regulatory Matters | ||
Number of Employees | ||
Properties | ||
Legal Proceedings | ||
Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Year End 2006 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations – September 30, 2007 | ||
TRADERS BANKSHARES, INC. | ||
DESCRIPTION OF PREMIER FINANCIAL COMMON STOCK | ||
General | ||
Common Stock | ||
Preemptive Rights | ||
Certain Provisions of the Bylaws | ||
Shares Eligible for Future Sale | ||
COMPARATIVE RIGHTS OF SHAREHOLDERS | ||
ADJOURNMENT OF THE MEETING | ||
LEGAL MATTERS | ||
EXPERTS | ||
SHAREHOLDER PROPOSALS | ||
WHERE YOU CAN FIND MORE INFORMATION | ||
OTHER MATTERS | ||
PREMIER CONSOLIDATED FINANCIAL STATEMENTS | ||
December 31, 2006, 2005, 2004 (Audited) | ||
PREMIER CONSOLIDATED FINANCIAL STATEMENTS | ||
September 30, 2007 and December 31, 2006 (Unaudited) |
Appendix
I
|
–
|
Agreement
of Merger dated as of November 27, 2007, between Premier Financial
Bancorp, Inc. and Traders Bankshares, Inc.
|
Appendix II |
–
|
West Virginia Code 31D-13-1301 et seq. - Appraisal Rights |
Appendix III |
–
|
Opinion of Baxter Fentriss and Company |
Brien
M. Chase
|
||
Premier
Financial Bancorp, Inc.
|
||
2883
Fifth Avenue
|
||
Huntington,
WV
25702
|
||
(304)
525-1600
|
Q:
|
What
will shareholders be voting on at the special meeting?
|
||
A:
|
Shareholders
will be voting on the following matters:
|
||
• |
A
proposal to approve and adopt
the Merger Agreement between Premier Financial Bancorp, Inc. (“Premier
Financial”) and Traders Bankshares, Inc. (“Traders”) and the transactions
contemplated thereby.
|
||
• |
A
proposal to adjourn the meeting
to a later date or dates, if necessary, to permit further solicitation
of
proxies in the event there are not sufficient votes at the time of
the
meeting to approve the matters to be considered by the shareholders
at the
meeting.
|
Shareholders
will also consider any other matters that may properly come before
the
meeting.
|
|||
Q:
|
Why
is Traders proposing the Merger?
|
||
A:
|
We
believe the proposed Merger is in the best interests of Traders and
its
shareholders. Our board of directors believes that combining with
Premier
Financial provides significant value to our shareholders and provides
shareholders the opportunities for growth offered by the combined
company. Additionally, Premier Financial is a publicly-traded
company, so Traders shareholders will have a greater market access
in the
event the shareholder wishes to sell the shares received by the
shareholder.
|
||
You
should review the reasons for the Merger described in greater detail
under
the caption “Background of the Merger; Board Recommendations and Reasons
for the Merger” beginning on page __.
|
|||
Q:
|
When
and where is the shareholder meeting?
|
||
A:
|
The
special meeting is scheduled to take place on ,
_____________ ___, 2008, at ______ __.m., local time, at the offices
of Traders, 303 Main Street, Spencer, West Virginia.
|
||
Q:
|
What
does the Traders board of directors recommend?
|
||
A:
|
The
Traders board of directors has approved the Merger Agreement. The
Traders
board recommends that shareholders vote “FOR” the proposal to approve the
Merger Agreement and the transactions contemplated
thereby.
|
||
Q:
|
What
will shareholders receive for their stock?
|
||
A:
|
For
each share of Traders common stock that you own, you will
receive:
|
||
(1) |
3.75
shares of Premier Financial
common stock; and
|
||
(2)
|
$50.00
cash.
The
stock exchange ratio (“Stock
Consideration”) is subject to (a) increase, if the Premier Financial share
price is less than $11.20 under certain circumstances, to ensure
that
Traders shareholders receive Premier Financial common stock equivalent
to
at least $42, or (b) decrease, if the Premier Financial share price
is
more than $16.80 under certain circumstances, so that Traders shareholders
receive Premier Financial common stock not greater than
$63.00.
|
||
Q: |
Is
my vote needed to adopt the Merger Agreement and to approve the
transactions contemplated thereby?
|
||
A:
|
Yes. The
adoption of the Merger Agreement and the approval of transactions
contemplated thereby by the shareholders of Traders requires the
affirmative vote of the holders of a majority of the Traders common
shares
outstanding and entitled to vote at the special
meeting.
|
||
The
special meeting may be adjourned, if necessary, to solicit additional
proxies in the event there are not sufficient votes at the time of
the
special meeting to approve the Merger Agreement. The
affirmative vote of the holders of a majority of the common shares
represented, in person or proxy, at the special meeting is required
to
adjourn such special meeting.
|
Q:
|
How
do I vote?
|
||
A:
|
If
you were the record holder of Traders common shares as of ______________,
2008, you may vote in person by attending the special shareholders
meeting
or, to ensure that your common shares are represented at the special
meeting, you may vote your common shares by signing and returning
the
enclosed proxy card in the postage-paid envelope
provided.
|
||
If
you hold Traders common shares in the name of a broker, bank or other
nominee, please see the discussion below regarding common shares
held in
“street name.”
|
|||
Q:
|
What
will happen if I fail to vote or abstain from voting?
|
||
A:
|
If
you are a Traders shareholder, your failure to vote may prevent Traders
from attaining the quorum necessary to hold the special
meeting. A vote to abstain will have the same effect as a vote
“AGAINST”
the
proposal to adopt the Merger Agreement and the transactions contemplated
thereby. A vote to abstain will have the same effect as a vote “AGAINST”
the proposal
to
approve the adjournment of the Traders special meeting, if necessary,
to
solicit additional proxies. The failure to vote, however, will
have no effect on the proposal to approve the adjournment of the
Traders
special meeting, if necessary, to solicit additional
proxies.
|
||
Q:
|
If
my common shares are held in a stock brokerage account or by a bank
or
other nominee (in “street name”), will my broker, bank or other nominee
vote my common shares for me?
|
||
A:
|
No. You
must provide your broker, bank or nominee (the record holder of your
common shares) with instructions on how to vote your common
shares. Please follow the voting instructions provided by your
broker, bank or nominee.
|
||
If
you do not provide voting instructions to your broker, bank or nominee,
then your common shares will not be voted by your broker, bank or
nominee. This will have the effect of a vote “AGAINST”
the proposal
to
adopt the Merger Agreement and the transactions contemplated
thereby.
|
|||
Q:
|
How
will my common shares be voted if I return a blank proxy
card?
|
||
A:
|
If
you sign, date and return your proxy card and do not indicate how
you want
your common shares to be voted, then:
|
||
• |
your
Traders common shares will be
voted “FOR”the
adoption of the Merger
Agreement and the approval of the transactions contemplated thereby;
and
|
||
•
|
your
Traders common shares will be
voted “FOR”the
approval, if necessary, of the
adjournment of the special meeting to solicit additional
proxies.
|
||
Q: | Can I change my vote after I have submitted my proxy? | ||
A: | Yes. You may revoke your proxy at any time before a vote is taken at the special meeting by: | ||
• | filing a written notice of revocation with the Secretary of Traders, at 303 Main Street, Spencer, West Virginia 25276; | ||
• | executing and returning a later-dated proxy card; or | ||
• | attending the special meeting and giving notice of revocation in person. | ||
Attendance at the special meeting will not, by itself, revoke your proxy. | |||
If
you have instructed your broker, bank or nominee to vote your common
shares, you must follow directions received from your broker, bank
or
nominee to change your vote.
|
|||
Q: | If I do not favor the adoption of the Merger Agreement, what are my rights? | ||
A: |
If
you are a Traders shareholder as of the ______________, 2008, record
date
and you do not vote in favor of the adoption of the Merger Agreement,
you
will have the right under Section 13D-13-1301, et seq. of the West
Virginia Business Corporation Act to demand the fair cash value for
your
Traders common shares. The right to make this demand is known
as “dissenters’ rights.” For additional information regarding
your dissenters’ rights, see “Dissenters’ Rights” on Page ___ of this
prospectus/proxy statement and the complete text of the West Virginia
Business Corporation Act article concerning Dissenters’ Rights, which is
attached to this prospectus/proxy statement as Appendix
II.
|
Q:
|
When
do you expect the Merger to be completed?
|
||
A:
|
We
are working to complete the Merger as quickly as we can. We
expect to complete the Merger on or before __________, 2008, assuming
shareholder approval and all applicable governmental approvals have
been
received by that date and all conditions precedent to the Merger
have been
satisfied or waived.
|
||
Q:
|
When
should I send in my Traders share certificate?
|
||
A:
|
Please
do not send in your Traders share certificates with your proxy
card. Should the Merger be approved, at a later date, Premier
Financial’s exchange agent, will mail to you a Transmittal Form that you
should use to surrender your Traders share certificates. You
should not surrender your Traders share certificates for exchange
until
you receive the Transmittal Form from the exchange
agent.
|
||
Q:
|
Where
will my Premier Financial common shares be listed?
|
||
A:
|
Premier
Financial common shares currently trade on NASDAQ Global Market under
the
symbol “PFBI”.
|
||
Q:
|
What
do I need to do now?
|
||
A:
|
After
carefully reviewing this prospectus/proxy statement, including its
appendixes, please sign and date the enclosed proxy card and return
it in
the enclosed postage-paid envelope as soon as possible. By
submitting your proxy, you authorize the individuals named in the
proxy to
vote your common shares at the Traders special shareholders meeting
in
accordance with your instructions. Your
vote
is very important. Whether or not you plan to attend the
special meeting, please submit your proxy with voting instructions
to
ensure that your common shares will be voted at the Traders special
shareholder meeting.
|
||
Q:
|
Who
can answer my questions?
|
||
A:
|
Traders
shareholders who have questions about the Merger or desire additional
copies of this prospectus/proxy statement or additional proxy cards
should
contact:
|
||
Gary
L. Brown
President
and Chief Executive Officer
Traders
Bankshares, Inc.
303
Main Street
Spencer,
West Virginia 25276
(304)
927-3340
|
|
•
|
|
the
value to be received by the
shareholders under the Merger Agreement relative to the historical
trading
price of Traders common stock represented a premium of approximately
44.0%
over the closing price of Traders common stock on November 26, 2007,
the
last trading day before the Merger Agreement was
signed;
|
|
•
|
|
the
per share value of the
consideration to Traders shareholders and the fact that a portion
of the
consideration will be in the form of cash;
|
|
•
|
|
the
anticipated tax-free exchange
of Traders common stock for Premier Financial common stock for that
portion of consideration; and
|
|
•
|
|
the
ability of Traders
shareholders, through the Premier Financial common stock component
of the
merger consideration, to participate in the potential growth of the
combined institutions following consummation of the
transaction.
|
|
•
|
|
to
approve the Merger Agreement
and the transactions contemplated thereby; and
|
|
•
|
|
if
necessary, to consider and vote
upon a proposal to adjourn the meeting to a later date or dates,
to permit
further solicitation of proxies in the event that there are not sufficient
votes at the time of the meeting to approve the Merger
Agreement.
|
|
•
|
|
Traders’
shareholders’
approval
of
the Merger Agreement;
|
|
•
|
|
approval
of the Merger by the
necessary federal and state regulatory
authorities;
|
|
•
|
|
absence
of any law or court order
prohibiting the Merger;
|
|
•
|
|
receipt
of opinions from counsel
to Traders and Premier Financial that the Merger will qualify as
a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
|
|
•
|
|
The
continued accuracy of certain
representations and
warranties.
|
•
|
there
has been a material adverse
change in the financial condition of Premier Financial, any Premier
Financial Subsidiary Bank, or Traders since December 31, 2006;
or
|
||
|
•
|
|
either
party breaches any of its
representations or obligations under the Merger Agreement, and does
not
cure the breach within 30 days if such breach individually or in the
aggregate with other breaches results in a material adverse effect;
or
|
|
•
|
|
the
approval of any governmental
entity required for consummation of the Merger is denied or the
shareholders of Traders do not approve the Merger Agreement;
or
|
|
•
|
|
if
the Closing does not occur on
or before April 30, 2008 unless extended by mutual agreement in
writing.
|
•
|
if
the volume weighted average of
the daily closing price per share of Premier Financial common stock
for
the five trading days ending with the tenth trading day prior to
the Closing Date (“Closing Price”) is less than $11.20, unless Premier
Financial by giving written notice to Traders after having received
a
termination notice from Traders, at its option, increases the Stock
Consideration to a sufficient ratio such that Traders shareholders
receive
shares of Premier Common Stock which are the equivalent to at least
$42.00, based upon the Closing Price and the total Merger Consideration
being received by Traders shareholders is equal to at least $92.00
per
share.
|
•
|
if
the Closing Price is more than $16.80, unless Traders by giving written
notice to Premier Financial after having received a termination notice
from Premier, at its option, decreases the Stock Consideration to
a
sufficient ratio such that Traders shareholders receive shares of
Premier
common stock which are the equivalent to, at the greatest, $63.00
based
upon the Closing Price and the total Merger Consideration being received
by Traders’ shareholders is equal to, at the greatest, $113.00 per
share.
|
|
•
|
|
timely
and successfully integrate
the operations of Premier Financial and Traders;
|
|
•
|
|
maintain
existing relationships
with depositors in Traders, wholly owned subsidiary, Traders Bank,
to
minimize withdrawals of deposits subsequent to the
Merger;
|
|
•
|
|
maintain
and enhance existing
relationships with borrowers to limit potential losses from loans
made by
Traders Bank;
|
|
•
|
|
control
the incremental
non-interest expense from Premier Financial to maintain overall operating
efficiencies;
|
|
•
|
|
retain
and attract qualified
personnel at Premier Financial and Traders Bank;
and
|
|
•
|
|
compete
effectively in the
communities served by Premier Financial and Traders Bank and in nearby
communities.
|
|
•
|
|
the
ability of Traders to obtain
the required shareholder approval or the companies to obtain the
required
regulatory approvals for the Merger;
|
|
•
|
|
the
ability of the companies to
consummate the Merger;
|
|
•
|
|
the
ability to successfully
integrate Traders into Premier Financial following the
Merger;
|
|
•
|
|
a
material adverse change in the
financial condition, results of operations or prospects of either
Traders
or Premier Financial;
|
|
•
|
|
the
ability to fully realize any
cost savings and/or revenue enhancements or the ability to realize
them on
a timely basis;
|
|
•
|
|
the
risk of borrower, depositor
and other customer attrition after the transaction is
completed;
|
|
•
|
|
a
change in general business and
economic conditions;
|
|
•
|
|
changes
in the interest rate
environment, deposit flows, loan demand, real estate values, and
competition;
|
|
•
|
|
changes
in accounting principles,
policies or guidelines;
|
|
•
|
|
changes
in legislation and
regulation;
|
|
•
|
|
other
economic, competitive,
governmental, regulatory, geopolitical, and technological factors
affecting the companies’ operations, pricing, and services;
and
|
|
•
|
|
other
risk factors described on
pages __ to __ of this proxy
statement/prospectus.
|
Premier
Financial
|
Traders
|
|||||||||||||||||||||||
Cash
|
Cash
|
|||||||||||||||||||||||
Sales
Price
|
Dividend
|
Sales
Price
|
Dividend
|
|||||||||||||||||||||
High
|
Low
|
Declared
|
High
|
Low
|
Declared
|
|||||||||||||||||||
2005
|
||||||||||||||||||||||||
First
Quarter
|
$
|
12.75
|
$
|
10.78
|
$
|
-
|
$
|
*
|
$
|
*
|
$
|
-
|
||||||||||||
Second
Quarter
|
13.00
|
10.00
|
-
|
*
|
*
|
-
|
||||||||||||||||||
Third
Quarter
|
14.93
|
11.90
|
-
|
*
|
*
|
-
|
||||||||||||||||||
Fourth
Quarter
|
-
|
80.00
|
80.00
|
-
|
||||||||||||||||||||
2006
|
||||||||||||||||||||||||
First
Quarter
|
$
|
16.44
|
$
|
14.01
|
$
|
-
|
$
|
70.00
|
$
|
70.00
|
$
|
-
|
||||||||||||
Second
Quarter
|
16.50
|
13.25
|
-
|
70.00
|
70.00
|
-
|
||||||||||||||||||
Third
Quarter
|
15.40
|
13.90
|
0.05
|
*
|
*
|
-
|
||||||||||||||||||
Fourth
Quarter
|
14.90
|
13.40
|
0.05
|
*
|
*
|
-
|
||||||||||||||||||
2007
|
||||||||||||||||||||||||
First
Quarter
|
$
|
16.49
|
$
|
13.36
|
$
|
0.10
|
$
|
70.00
|
$
|
70.00
|
$
|
0.25
|
||||||||||||
Second
Quarter
|
16.50
|
15.03
|
0.10
|
|
70.00
|
|
70.00
|
0.25
|
||||||||||||||||
Third
Quarter
|
16.45
|
13.23
|
0.10
|
70.00
|
70.00
|
0.25
|
||||||||||||||||||
Fourth
Quarter
|
14.77
|
12.10
|
0.10
|
|
*
|
|
*
|
0.25
|
||||||||||||||||
2008
|
||||||||||||||||||||||||
First
Quarter (through Jan. 31, 2008)
|
$ |
13.59
|
$ |
12.20
|
$
|
-
|
*
|
*
|
$ |
-
|
||||||||||||||
* No reported trades |
Dollars
in thousands,
except
per share amounts
|
As
of or for the
Nine
Months
Ended
September
30,
|
At
or for the Years Ended December 31,
|
||||||||||||||||||||||||||
2007
|
2006
|
2006
|
|
2005
|
2004
|
2003
|
2002
|
|||||||||||||||||||||
|
(Unaudited)
|
|||||||||||||||||||||||||||
Summary
Statements of Income
|
||||||||||||||||||||||||||||
Net
interest
income
|
$ | 16,652 | $ | 15,941 | $ | 21,395 | $ | 19,852 | $ | 18,064 | $ | 19,182 | $ | 20,838 | ||||||||||||||
Provision
for loan
losses
|
(103 | ) | (1,051 | ) | (1,161 | ) | 4 | 1,026 | 20,513 | 9,453 | ||||||||||||||||||
Non-interest
income
|
3,461 | 3,031 | 4,165 | 3,920 | 3,606 | 4,064 | 2,717 | |||||||||||||||||||||
Non-interest
expense
|
12,232 | 12,736 | 16,937 | 17,305 | 17,782 | 17,632 | 17,831 | |||||||||||||||||||||
Income
taxes
(benefit)
|
2,601 | 2,445 | 3,283 | 2,029 | 899 | (5,282 | ) | (1,522 | ) | |||||||||||||||||||
Income
(loss) from
continuing
operations
|
5,383 | 4,842 | 6,501 | 4,434 | 1,963 | (9,617 | ) | (2,207 | ) | |||||||||||||||||||
Income
(loss) from
discontinued
operations
|
- | - | - | - | 4,734 | (80 | ) | (1,130 | ) | |||||||||||||||||||
Net
income
(loss)
|
$ | 5,383 | $ | 4,842 | $ | 6,501 | $ | 4,434 | $ | 6,697 | $ | (9,697 | ) | $ | (3,337 | ) | ||||||||||||
Per
Share Information
|
||||||||||||||||||||||||||||
Income (loss) from
continuing
operations
- basic
|
$ | 1.03 | $ | 0.92 | $ | 1.24 | $ | 0.85 | $ | 0.37 | $ | (1.84 | ) | $ | (0.42 | ) | ||||||||||||
Income
(loss) from
continuing
operations
- diluted
|
1.02 | 0.92 | 1.24 | 0.84 | 0.37 | (1.84 | ) | (0.42 | ) | |||||||||||||||||||
Net
income –
basic
|
1.03 | 0.92 | 1.24 | 0.85 | 1.28 | (1.85 | ) | (0.64 | ) | |||||||||||||||||||
Net
income –
diluted
|
1.02 | 0.92 | 1.24 | 0.84 | 1.28 | (1.85 | ) | (0.64 | ) | |||||||||||||||||||
Book
value
|
12.50 | 11.35 | 11.65 | 10.37 | 9.75 | 8.70 | 10.73 | |||||||||||||||||||||
Cash
dividends
|
0.30 | 0.05 | 0.10 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Selected
Balance Sheet Information
|
||||||||||||||||||||||||||||
Total
assets of continuing
operations
|
$ | 547,002 | $ | 539,701 | $ | 535,452 | $ | 528,324 | $ | 537,255 | $ | 543,229 | $ | 590,868 | ||||||||||||||
Total
assets of discontinued
operations
|
- | - | - | - | - | 79,163 | 84,406 | |||||||||||||||||||||
Loans,
net of unearned
income
|
346,502 | 346,037 | 343,797 | 328,717 | 324,937 | 331,794 | 373,099 | |||||||||||||||||||||
Allowance
for loan
losses
|
6,499 | 6,941 | 6,661 | 7,892 | 9,384 | 14,300 | 9,698 | |||||||||||||||||||||
Goodwill
and other
intangibles
|
15,816 | 15,816 | 15,816 | 15,816 | 15,816 | 15,816 | 15,816 | |||||||||||||||||||||
Securities
|
123,347 | 129,510 | 121,367 | 137,419 | 153,892 | 147,646 | 144,698 | |||||||||||||||||||||
Deposits
|
450,960 | 445,820 | 438,950 | 435,843 | 437,798 | 455,474 | 477,724 | |||||||||||||||||||||
Other
borrowings
|
26,711 | 23,693 | 33,091 | 19,053 | 20,536 | 18,307 | 32,600 | |||||||||||||||||||||
Subordinated
debentures
|
- | 8,505 | - | 15,722 | 20,876 | 26,546 | 29,639 | |||||||||||||||||||||
Stockholders’
equity
|
65,472 | 59,393 | 61,002 | 54,287 | 51,029 | 45,540 | 56,124 | |||||||||||||||||||||
As
of or for the
Nine
Months Ended
September
30,
|
At
or for the Years Ended December 31,
|
||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||
(Unaudited)
|
|||||||||||||||||||||
Selected
Ratios
|
|||||||||||||||||||||
Return
on average assets (1),
(2)
|
1.30 | % | 1.19 | % | 1.21 | % | 0.82 | % | 0.36 | % | (1.66 | )% | (0.37 | )% | |||||||
Return
on average equity
(2)
|
11.25 | % | 11.31 | % | 11.31 | % | 8.42 | % | 4.06 | % | (18.46 | )% | (3.77 | )% | |||||||
Dividend
payout
(2)
|
29.41 | % | 5.43 | % | 8.06 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||
Stockholders’
equity
to total
assets assets
at period-end (3)
|
11.97 | % | 11.00 | % | 11.39 | % | 10.28 | % | 9.50 | % | 8.38 | % | 9.50 | % | |||||||
Average
stockholders’ equity to
average total assets (1)
|
11.57 | % | 10.58 | % | 10.74 | % | 9.77 | % | 8.23 | % | 7.88 | % | 8.44 | % | |||||||
(1) Computed
based on average assets from continuing operations
(2) Computed
based on income (loss) from continuing operations
(3) Shareholders’
equity at period-end divided by assets from continuing
operations
(4) A
2003 investigation into the conduct of the former president of
Farmers
Deposit Bank by Premier and the FDIC, resulted in the charge-off
of over
$17.2 million of loans. The resulting depletion of the allowance
for loan
losses together with the analysis of additional risk in the loan
portfolio
warranted significant additional provisions for loan losses at
the Bank.
In addition to the provision for loan losses, interest income reversals
and other non-interest expenses, including bad check write-offs
and loan
review expenses, were
recorded.
|
Dollars
in thousands
except
per share
amounts
|
As
of or for the
Nine
Months Ended
September
30,
|
At
or for the Years Ended December 31,
|
||||||||||||||||||||||||||
2007 | 2006 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
Summary
Statements of Income
|
||||||||||||||||||||||||||||
Net
interest
income
|
$ | 3,126 | $ | 3,171 | $ | 4,274 | $ | 4,584 | $ | 4,819 | $ | 5,518 | $ | 5,618 | ||||||||||||||
Provision
for loan
losses
|
0 | 105 | 105 | 5,295 | 1,480 | 1,275 | 0 | |||||||||||||||||||||
Non-interest
income
|
562 | 437 | 638 | 546 | 625 | 539 | 507 | |||||||||||||||||||||
Non-interest
expense
|
3,231 | 3,395 | 4,482 | 4,529 | 4,024 | 4,027 | 3,499 | |||||||||||||||||||||
Income
taxes
(benefit)
|
270 | 31 | 325 | (1,775 | ) | (221 | ) | 495 | 951 | |||||||||||||||||||
Net
income
(loss)
|
$ | 323 | $ | 127 | $ | 470 | $ | (2,919 | ) | $ | 160 | $ | 260 | $ | 1,674 | |||||||||||||
Per
Share Information
|
||||||||||||||||||||||||||||
Net
income –
basic
|
1.79 | 0.71 | 2.61 | (16.22 | ) | 0.89 | 1.45 | 9.30 | ||||||||||||||||||||
Net
income -
diluted
|
1.79 | 0.71 | 2.61 | (16.22 | ) | 0.89 | 1.45 | 9.30 | ||||||||||||||||||||
Book
value
|
68.42 | 61.69 | 66.43 | 61.97 | 81.04 | 79.97 | 84.07 | |||||||||||||||||||||
Cash
dividends
|
0.50 | 0.00 | 0.00 | 0.00 | 0.35 | 4.20 | 4.20 | |||||||||||||||||||||
Selected
Balance Sheet Information
|
||||||||||||||||||||||||||||
Total
assets
|
$ | 105,968 | $ | 102,776 | $ | 103,777 | $ | 106,691 | $ | 110,844 | $ | 119,001 | $ | 126,060 | ||||||||||||||
Loans,
net of unearned
income
|
56,362 | 50,193 | 48,463 | 59,595 | 75,204 | 91,318 | 102,673 | |||||||||||||||||||||
Allowance
for loan
losses
|
2,310 | 2,072 | 2,066 | 3,201 | 2,069 | 2,103 | 1,519 | |||||||||||||||||||||
Securities
|
41,673 | 44,884 | 42,224 | 33,608 | 23,914 | 10,653 | 10,951 | |||||||||||||||||||||
Deposits
|
93,161 | 91,371 | 91,166 | 94,190 | 95,554 | 106,692 | 109,928 | |||||||||||||||||||||
Other
borrowings
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Stockholders’
equity
|
12,317 | 11,104 | 11,957 | 11,155 | 14,588 | 14,394 | 15,134 | |||||||||||||||||||||
Shares
outstanding
|
180,000 | 180,000 | 179,900 | 179,900 | 180,000 | 180,000 | 180,000 | |||||||||||||||||||||
Selected
Ratios
|
||||||||||||||||||||||||||||
Return
on assets
(1)
|
0.41 | % | 0.16 | % | 0.45 | % | (2.74 | )% | 0.14 | % | 0.22 | % | 1.33 | % | ||||||||||||||
Return
on equity
(2)
|
3.50 | % | 1.52 | % | 3.93 | % | (26.17 | )% | 1.10 | % | 1.81 | % | 11.06 | % | ||||||||||||||
Dividend
payout
|
27.93 | % | 0.00 | % | 0.00 | % | 0.00 | % | 39.33 | % | 289.66 | % | 45.16 | |||||||||||||||
(1)
Using period end total assets
(2)
Using period-end stockholders’ equity
|
|
•
|
|
to
approve the Merger Agreement
and the transactions contemplated thereby; and
|
|
•
|
|
to
consider and vote upon a
proposal to adjourn the meeting to a later date or dates, if necessary,
to
permit further solicitation of proxies in the event there are not
sufficient votes at the time of the meeting to approve the Merger
Agreement.
|
|
•
|
|
$50.00
cash;
and
|
|
•
|
|
3.75
shares of Premier Financial
common stock. The stock exchange
ratio (“Stock
Consideration”) is subject to (a) increase, if the Premier Financial share
price is less than $11.20 under certain circumstances, to ensure
that
Traders shareholders receive Premier Financial common stock equivalent
to
at least $42, or (b) decrease, if the Premier Financial share price
is
more than $16.80 under certain circumstances, so that Traders shareholders
receive Premier Financial common stock not greater than
$63.00.
|
|
·
|
You
must deliver a written demand for appraisal to Traders before the
vote is
taken on the Merger Agreement at Traders’ special meeting. This
written demand for appraisal must be in addition to and separate
from any
proxy or vote against the Merger Agreement. Merely voting
against, abstaining from voting or failing to vote in favor of adoption
of
the Merger Agreement will not constitute a demand for appraisal within
the
meaning of §31D-13-1321. See “Requirements for Written Demand
for Appraisal” below for more details on making a demand for appraisal.
|
|
·
|
You
must not vote in favor of approval and adoption of the Merger Agreement.
A
failure to vote will satisfy this requirement, but a vote in favor
of the
Merger Agreement will constitute a waiver of your right of appraisal.
Accordingly, if you want to maintain your appraisal rights you must
either
check the “Against” box or the “Abstain” box on the proxy card or refrain
from executing and returning the enclosed proxy card.
|
|
·
|
You
must continuously hold your shares of Traders stock from the date
you make
the demand for appraisal through the effective date of the Merger.
A
stockholder who is the record holder of shares of Traders common
stock on
the date the written demand for appraisal is made, but who thereafter
transfers these shares prior to completion of the Merger, will lose
any
right to appraisal in respect of those shares.
|
|
•
|
|
the
value to be received by the
shareholders under the Merger Agreement relative to the historical
trading
price of Traders common stock represented a premium of approximately
44.0%
over the closing price of Traders common stock on November 26, 2007,
the
last trading day before the Merger Agreement was
signed;
|
|
•
|
|
the
per share value of the
consideration to Traders shareholders and the fact that at least
a portion
of the consideration will be in the form of
cash;
|
|
•
|
|
the
anticipated tax-free exchange
of Traders common stock for Premier Financial common stock for that
portion of consideration;
|
|
•
|
|
the
ability of Traders
shareholders, through the Premier Financial common stock component
of the
merger consideration, to participate in the potential growth of the
combined institutions following consummation of the
transaction;
|
|
•
|
|
the
competitive environment facing
community banks like Traders Bank, and management’s belief that its
customers and employees would benefit from a combination with Premier
Financial due to the combined company’s enhanced ability to serve its
customers more broadly and effectively because of the combined company’s
greater scale, broader product mix, stronger platform and robust
systems;
|
|
|
|
|
|
•
|
|
the
result of the due diligence
investigation of Premier Financial conducted by
Traders;
|
|
•
|
|
the
board’s familiarity with and
review of the business, financial condition, results of operations,
and
prospects of Premier Financial, including among others, its growth
and
profitability potential;
|
|
•
|
|
management’s
belief that the
Merger would likely be approved by the appropriate regulatory authorities
without undue conditions of delay and in accordance with the terms
proposed;
|
•
|
the
fact that Traders’ shares are
not traded in the public market, and management’s belief that its
shareholders desire greater liquidity;
|
||
|
•
|
|
the
potential alternatives
available to Traders, including other potential merger transactions
and
the alternative of remaining independent, and the risks and challenges
inherent in successfully implementing its business plan;
and
|
•
|
the
fairness opinion of Baxter
Fentriss and Company ("Baxter Fentriss") (a copy of which is attached
hereto as Appendix III).
|
·
|
the
historical and current financial condition and results of operations
of
Traders and Premier Financial including interest income, interest
expense,
non-interest income, non-interest expense, earnings, book value,
returns
on assets and equity, and possible tax consequences resulting from
the
transaction;
|
·
|
the
proposed acquisition of Citizens First Bank, Inc. by Premier
Financial;
|
·
|
the
business prospects of Traders and Premier
Financial;
|
·
|
the
economies of Traders and Premier Financial’s respective market areas;
and
|
·
|
the
nature and terms of certain other acquisition transactions that it
believed to be relevant.
|
·
|
the
Merger Agreement;
|
·
|
the
Annual Reports to shareholders of Traders for the years ended December
31,
2005 and 2006, Traders’ September 30, 2007 Call Report and Traders’
September 30, 2007 unaudited internal financial statements, as well
as
certain current interim reports to shareholders and regulatory
agencies;
|
·
|
the
Annual Reports to shareholders of Premier Financial for the years
ended
December 31, 2004, 2005, and 2006, Premier Financial’s September 30, 2007
Form 10-Q, as well as certain current interim reports to shareholders
and
regulatory agencies;
|
·
|
certain
additional financial and operating information with respect to the
business, operations and prospects of Traders and Premier Financial
as it
deemed appropriate.
|
·
|
held
discussions with members of Traders’ and Premier Financial’s senior
management regarding the historical and current business operation,
financial condition and future prospects of their respective
companies;
|
·
|
reviewed
the historical market prices and trading activity for Traders’ common
stock and Premier Financial’s common stock, as applicable, and compared
them with those of certain publicly traded companies that it deemed
to be
relevant;
|
·
|
compared
the results of operations of Traders and Premier Financial with those
of
certain banking companies that it deemed to be
relevant;
|
·
|
analyzed
the pro-forma financial impact of the Citizens First Bank, Inc.
Acquisition and the pro-forma financial impact of the Traders Merger
on
Premier Financial; and
|
·
|
conducted
such other studies, analyses, inquiries, and examinations as Baxter
Fentriss deemed appropriate.
|
GROUP
1 (WV)
|
||||||||||||||||||||
Price/
LTM
Earnings
|
Price/
Book
|
Price/
Assets
|
Price/
Deposits
|
Equity/
Assets
|
||||||||||||||||
(x)
|
(x)
|
(%)
|
(%)
|
(%)
|
||||||||||||||||
Mean:
|
23.21 | 1.68 | 15.08 | 17.64 | 9.36 | |||||||||||||||
Traders:
|
27.24 | 1.48 | 17.12 | 19.47 | 11.56 | |||||||||||||||
Rank:
|
3 | 5 | 5 | 5 | ||||||||||||||||
GROUP
2 (KY, OH, WV)
|
||||||||||||||||||||
Price/
LTM
Earnings
|
Price/
Book
|
Price/
Assets
|
Price/
Deposits
|
Equity/
Assets
|
||||||||||||||||
(x)
|
(x)
|
(%)
|
(%)
|
(%)
|
||||||||||||||||
Mean:
|
22.24 | 1.70 | 17.43 | 22.28 | 10.44 | |||||||||||||||
Traders:
|
27.24 | 1.48 | 17.12 | 19.47 | 11.56 | |||||||||||||||
Rank:
|
5 | 22 | 14 | 19 |
SUMMARY
OF BAXTER FENTRISS
DISCOUNTED CASH FLOW ANALYSIS
|
|||||||||
|
|
|
|
|
|
|
|
|
|
DISCOUNT
RATE
OF
|
12.50%
|
AND
GROWTH RATES
FROM
|
8%
|
TO
|
14%
|
||||
|
|
RANGEOF
PRESENTVALUE
CALCULATIONS
|
|||||||
TERMINAL
VALUE
|
|
SELL
SHARES
IN
|
|
SELL
SHARES
IN
|
|||||
OF
EARNINGS
|
|
FIVE
YEARS
|
|
TEN
YEARS
|
|||||
16X
|
|
$48.26
|
TO
|
$63.24
|
|
$39.35
|
TO
|
$67.57
|
|
18X
|
|
$54.30
|
TO
|
$71.15
|
|
$44.27
|
TO
|
$76.02
|
|
20X
|
|
$60.33
|
TO
|
$79.05
|
|
$49.19
|
TO
|
$84.47
|
|
|
|
|
|
|
|
|
|
|
|
DISCOUNT
RATE
OF
|
13.50%
|
AND
GROWTH RATES
FROM
|
8%
|
TO
|
14%
|
||||
|
|
RANGEOF
PRESENTVALUE
CALCULATIONS
|
|||||||
TERMINAL
VALUE
|
|
SELL
SHARES
IN
|
|
SELL
SHARES
IN
|
|||||
OF
EARNINGS
|
|
FIVE
YEARS
|
|
TEN
YEARS
|
|||||
16X
|
|
$46.17
|
TO
|
$60.51
|
|
$36.02
|
TO
|
$61.85
|
|
18X
|
|
$51.95
|
TO
|
$68.07
|
|
$40.52
|
TO
|
$69.58
|
|
20X
|
|
$57.72
|
TO
|
$75.63
|
|
$45.02
|
TO
|
$77.31
|
|
|
|
|
|
|
|
|
|
|
|
DISCOUNT
RATE
OF
|
14.50%
|
AND
GROWTH RATES
FROM
|
8%
|
TO
|
14%
|
||||
|
|
RANGEOF
PRESENTVALUE
CALCULATIONS
|
|||||||
TERMINAL
VALUE
|
|
SELL
SHARES
IN
|
|
SELL
SHARES
IN
|
|||||
OF
EARNINGS
|
|
FIVE
YEARS
|
|
TEN
YEARS
|
|||||
16X
|
|
$44.19
|
TO
|
$57.91
|
|
$32.99
|
TO
|
$56.66
|
|
18X
|
|
$49.72
|
TO
|
$65.15
|
|
$37.12
|
TO
|
$63.74
|
|
20X
|
|
$55.24
|
TO
|
$72.39
|
|
$41.24
|
TO
|
$70.82
|
|
|
|
|
|
|
|
|
|
|
|
•
|
|
The
directors and officers of the surviving company at the Effective
Time
shall be those persons who are directors and officers respectively
of
Traders immediately before the Effective Time. The committees
of the Board of Directors of the surviving company at the Effective
Time
shall be the same as and shall be composed of the same persons who
are
serving on committees appointed by the Board of Directors of Traders
as
they exist immediately before the Effective Time. The
committees of officers of the surviving company at the Effective
Time
shall be the same as and shall be composed of the same officers who
are
serving on the committees of officers of Traders as they exist immediately
before the Effective Time.
|
|
•
|
|
Gary
Brown, the President and CEO
of Traders, is party to an employment contract dated November 21,
2005. The initial term of the employment contract was for 2
years and automatically renewed for a period of one year, until November
21, 2008. The employment contract provides, upon “Change of
Control”, that the executive may terminate the employment contract and
will be entitled to 225% of his annual salary plus any accrued incentive
compensation as “Severance Pay”, plus any accrued vacation
days. Mr. Brown has indicated that it is his current intention
to terminate his employment. Under terms of
the contract he will be paid the “Severance Pay” using an April
30, 2008 incentive accrual date. Total payments to Mr. Brown
are estimated to be $411,717.
|
•
|
Elta
K. Cottrell, Executive Vice
President of Traders is party to an existing “Employment and
Change-of-Control Agreement” dated May 22, 2007. The term of
the employment contract is for a period of 5 years. The “Change
of Control” provision of the contract provides for the payment of
“Severance Pay” equal to one year’s compensation, including Base Salary
and accrued incentive bonus to the executive upon termination or
a
material change in title, position, status, pay, benefits, location
of
employment, authority, or duties. Upon a material change in
title, position, status, pay, benefits, location of employment authorities
or duties of the executive, or termination of her employment after
the
Effective Date, Ms. Cottrell will be paid the “Severance Pay” using an
April 30, 2008 incentive accrual date. Total payments are
estimated to be $97,537.
|
||
•
|
Marshall
T. McNeer, Vice President
of Traders is party to an existing “Employment and Change-of-Control
Agreement” dated December 19, 2006. The term of the employment
contract is for a period of 2 years. The “Change of Control”
provision of the contract provides for the payment of “Severance Pay”
equal to one year’s compensation, including Base Salary and accrued
incentive bonus (Mr. McNeer does not participate in the incentive
bonus
program) to executive upon termination or a material change in title,
position, status, pay or benefits. Upon a material change in title,
position, status, pay, benefits, location of employment authorities
or
duties of the executive, or termination of his employment after the
Effective Date, Mr. McNeer will be paid the “Severance Pay” using an April
30, 2008 incentive accrual date. Total payments are estimated
to be $78,750.
|
||
•
|
Martha
J. Haymaker, Executive Vice
President and Chief Financial Officer of Traders is party to an existing
“Employment and Change-of-Control Agreement” dated October 12,
2006. The term of the employment contract is for a period of 5
years. The “Change of Control” provision of the contract
provides for the payment of “Severance Pay” equal to one year’s
compensation, including Base Salary and accrued incentive bonus to
executive upon termination or a material change in title, position,
status, pay or benefits. Upon a material change in title,
position, status, pay, benefits, location of employment authorities
or
duties of the executive, or termination of her employment after the
Effective Date, Ms. Haymaker will be paid the “Severance Pay” using an
April 30, 2008 incentive accrual date. Total payments are
estimated to be $101,310.
|
|
(1)
|
Retention
of an independent management consultant acceptable to both regulators
to
conduct a review of the functions and performance of Traders Bank’s
management and Traders Bank’s staffing needs, and the formulation by
Traders Bank of a management plan to address the findings and
recommendations of such report.
|
|
(2)
|
Traders
Bank is required to notify the Federal Reserve Bank of Richmond of
appointment of any new officers or directors.
|
|
(3)
|
Traders
Bank is restricted in its indemnification of and payment of severance
payments to certain executive officers.
|
|
(4)
|
Traders
Bank was required to submit to both regulators written loan policies
and
procedures.
|
|
(5)
|
Traders
Bank was required to submit to both regulators a written plan to
improve
the bank’s asset position on past due loans or adversely classified or
listed loans, and to submit quarterly progress reports to both regulators
updating the asset improvement plan.
|
|
(6)
|
Traders
Bank was required to submit to both regulators a revised written
loan
review program addressing loan review deficiencies.
|
|
(7)
|
Traders
Bank is required to maintain adequate loan loss reserves.
|
|
(8)
|
Traders
Bank was required to submit to both regulators a written strategic
business plan for improving earnings and overall conditions of the
Bank.
|
|
(9)
|
Traders
Bank was required to submit to both regulators a written plan to
achieve
and maintain sufficient capital.
|
|
(10)
|
Traders
Bank is prohibited from declaring or paying any dividends without
prior
written approval of both regulators.
|
|
(11)
|
Traders
Bank was required to submit to both regulators a written investment
policy
and procedures statement.
|
|
(12)
|
Traders
Bank was required to submit to both regulators a written plan for
enhancing independent testing of the bank’s anti-money laundering
compliance and customer due diligence program.
|
|
•
|
|
The
shareholders of Traders
approve the Merger Agreement and the transactions contemplated thereby,
described in the proxy statement/prospectus at the special meeting
of
shareholders of Traders;
|
|
•
|
|
All
regulatory approvals required
by law to consummate the transactions contemplated by the Merger
Agreement
are obtained from the Federal Reserve Board, the West Virginia Board
of
Banking and Financial Institutions and any other appropriate federal
and/or state regulatory agencies without unreasonable conditions,
and all
waiting periods after such approvals required by law or regulation
expire;
|
|
•
|
|
The
registration statement (of
which this proxy statement/prospectus is a part) registering shares
of
Premier Financial common stock to be issued in the Merger is declared
effective and not subject to a stop order or any threatened stop
order;
|
|
•
|
|
There
shall be no actual or
threatened litigation, investigations or proceedings challenging
the
validity of, or damages in connection with, the Merger that would
have a
material adverse effect with respect to the interests of Premier
Financial
or Traders or impose a term or condition that shall be deemed to
materially adversely impact the economic or business benefits of
the
Merger;
|
|
•
|
|
The
absence of any statute, rule,
regulation, judgment, decree, injunction or other order being enacted,
issued, promulgated, enforced or entered by a governmental authority
effectively prohibiting consummation of the
Merger;
|
|
•
|
|
All
permits or other
authorizations under state securities laws necessary to consummate
the
Merger and to issue the shares of Premier Financial common stock
to be
issued in the Merger being obtained and remaining in full force and
effect.
|
|
•
|
|
The
representations and warranties
of Traders made in the Merger Agreement are true and correct as of
the
date of the Merger Agreement and as of the effective time of the
Merger
and Premier Financial receives a certificate of the chief executive
officer and the chief financial officer of Traders to that
effect;
|
|
•
|
|
Traders
performs in all material
respects all obligations required to be performed under the Merger
Agreement prior to the effective time of the Merger and delivers
to
Premier Financial a certificate of its chief executive officer and
chief
financial officer to that effect; and
|
|
•
|
|
Premier
Financial shall have
received an opinion of Huddleston Bolen LLP, counsel to Premier Financial,
dated as of the effective time of the Merger, that the Merger constitutes
a “reorganization” under Section 368 of the Internal Revenue
Code.
|
|
•
|
|
The
representations and warranties
of Premier Financial made in the Merger Agreement are true and correct
as
of the date of the Merger Agreement and as of the effective time
of the
Merger and Traders receives a certificate of the chief executive
officer
and chief financial officer of Premier Financial to that
effect;
|
|
•
|
|
Premier
Financial performs in all
material respects all obligations required to be performed under
the
Merger Agreement prior to the effective time of the Merger and delivers
to
Traders a certificate of its chief executive officer and chief financial
officer to that effect; and
|
|
•
|
|
Traders
shall have received an
opinion of Jackson Kelly,
PLLC, counsel to Traders,
stating that, among other things, as of the effective time of the
Merger,
the Merger constitutes a “reorganization” under Section 368 of the
Internal Revenue Code and that no gain or loss will be recognized
by the
shareholders of Traders to the extent that they receive Premier Financial
common stock in exchange for their Traders common stock in the
Merger.
|
|
•
|
|
organization
and good standing of
each entity and its subsidiaries;
|
|
•
|
|
each
entity’s capital
structure;
|
|
•
|
|
each
entity’s authority relative
to the execution and delivery of, and performance of its obligations
under, the reorganization agreement;
|
|
•
|
|
absence
of material adverse
changes since December 31, 2006;
|
|
•
|
|
consents
and approvals
required;
|
|
•
|
|
regulatory
matters;
|
|
•
|
|
accuracy
of documents, including
financial statements and other reports, filed with the
SEC;
|
|
•
|
|
absence
of defaults under
contracts and agreements;
|
|
•
|
|
absence
of environmental
problems;
|
|
•
|
|
absence
of conflicts between each
entity’s obligations under the Merger Agreement and its charter documents
and contracts to which it is a party or by which it is
bound;
|
|
•
|
|
litigation
and related
matters;
|
|
•
|
|
taxes
and tax regulatory
matters;
|
|
•
|
|
employee
benefit matters;
and
|
|
•
|
|
books
and records fully and
accurately maintained and fairly present events and
transactions.
|
|
•
|
|
By
mutual consent in writing of Traders and Premier Financial;
or
|
|
•
|
|
By
Traders by giving written notice thereof to Premier Financial if
(i) a
material adverse change shall have occurred in the financial condition,
results of operations or business of Premier or any Premier Financial
Subsidiary Bank since December 31, 2006, or (ii) Premier has in any
material respect breached any covenant, undertaking, representation
or
warranty contained in the Merger Agreement and such breach has not
been
cured within thirty (30) days after the giving of such notice;
or
|
|
•
|
|
By
Premier Financial by giving written notice thereof to Traders if
(i) a
material adverse change shall have occurred in the financial condition,
results of operations or business of Traders since December 31, 2006
or
(ii) Traders has breached any covenant, undertaking, representation
or
warranty contained in the Merger Agreement and such breach has not
been
cured within thirty (30) days after the giving of such notice;
or
|
•
|
By
either Traders or Premier Financial upon written notice to the other
if
any regulatory agency whose approval of the transactions contemplated
by
the Merger Agreement is required denies such application for approval
by
final order or ruling (which order or ruling shall not be considered
final
until expiration or waiver of all periods for review or appeal);
or
|
||
•
|
By
either Traders or Premier Financial upon written notice to the other
if
any condition precedent to either party’s performance under the Merger
Agreement is not satisfied or fulfilled; or
|
||
•
|
By
either Traders or Premier Financial if the Merger shall violate any
non-appealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
|
||
•
|
By
either Traders or Premier Financial upon the bankruptcy, insolvency
or
assignment for the benefit of creditors of Traders, Premier or of
any of
the Premier Financial Subsidiary Banks; or
|
||
•
|
By
either Traders or Premier Financial, if the shareholders of Traders
shall
fail to approve the Merger by the vote required under the West Virginia
Business Corporation Act and the Articles of Incorporation and Bylaws
of
Traders; or
|
||
•
|
By
either Traders or Premier Financial, if the Closing does not occur
on or
before April 30, 2008 unless extended by mutual agreement in writing;
or
|
||
•
|
By
Traders by giving written notice thereof to Premier Financial during
the
five day period (“Election Period”) ending two business days prior to the
Closing Date, if the volume weighted average of the daily closing
price
per share of Premier Financial common stock for the five trading
days
ending with the tenth trading day prior to the Closing Date (“Closing
Price”) is less than $11.20, unless Premier Financial by giving written
notice to Traders after having received a termination notice from
Traders,
at its option, increases the Stock Consideration to a sufficient
ratio
such that Traders shareholders receive shares of Premier Financial
common
stock which are the equivalent to at least $42.00, based upon the
Closing
Price and the total Merger Consideration being received by Traders
shareholders is equal to at least $92.00 per share.
|
||
•
|
By
Premier Financial by giving written notice thereof to Traders during
the
Election Period if the Closing Price is more than $16.80, unless
Traders
by giving written notice to Premier after having received a termination
notice from Premier, at its option, decreases the Stock Consideration
to a
sufficient ratio such that Traders shareholders receive shares of
Premier
Financial common stock which are the equivalent to, at the greatest,
$63.00 based upon the Closing Price and the total Merger Consideration
being received by Traders’ shareholders is equal to, at the greatest,
$113.00 per share.
|
|
•
|
|
The
Merger Agreement is terminated
for failure to obtain the approval of Traders’ shareholders, and at such
time a competing acquisition proposal for Traders has been made public
and
not withdrawn; or
|
|
•
|
|
The
Merger Agreement is terminated
because Traders’ board fails to recommend, withdraws, modifies, or changes
its recommendation of the
Merger.
|
|
(1)
|
Any
new loan, or renewal of an existing loan, that totals $200,000 or
greater;
or
|
|
(2)
|
Any
new loan, or renewal of an existing loan, which, when included with
all
other loans from Traders to any such borrower and their related interests,
would cause such borrower’s total loans from Traders, including loans from
Traders to their related interests, to exceed $400,000.
|
|
(1)
|
Any
and all employment contracts to which either Traders or the Traders’
Subsidiary Bank is a party.
|
|
(2)
|
Any
defined benefit plan to which either Traders or the Traders’ Subsidiary
Bank is a party; provided,
however,
that
if all appropriate steps are taken for termination and the defined
benefit
plan is frozen, the actual termination of any defined benefit plan
need
not be accomplished prior to, or at, Closing.
|
|
(3)
|
Any
and all deferred compensation plans to which either Traders or the
Traders’ Subsidiary Bank is a party; provided,
however,
that
liability for accrued but unpaid deferred compensation shall remain
on the
balance sheet of Traders.
|
(4) | Any and all employee “carve-out life insurance” benefit plans. |
($
in thousands)
|
|||||
Assets
|
59,062 | ||||
Liabilities
|
53,120 | ||||
Stockholders’
Equity
|
5,942 | ||||
Net
Income
|
374 |
ANALYSIS
of RETURN ON ASSETS and EQUITY
|
||||||||||||||||||||
from
continuing operations
|
||||||||||||||||||||
2006
|
2005
|
2004
|
2003(1)
|
2002
|
||||||||||||||||
As
a percent of average earning assets
|
||||||||||||||||||||
Fully
taxable-equivalent net
interest income
|
4.32 | % | 4.00 | % | 3.61 | % | 3.63 | % | 3.84 | % | ||||||||||
Provision
for loan
losses
|
0.23 | (0.00 | ) | (0.20 | ) | (3.81 | ) | (1.70 | ) | |||||||||||
Net
credit income
|
4.55 | 4.00 | 3.41 | (0.18 | ) | 2.14 | ||||||||||||||
Gains
on the sales of assets
& subsidiaries
|
0.00 | 0.00 | 0.02 | 0.11 | (0.01 | ) | ||||||||||||||
Non-interest
income
|
0.84 | 0.78 | 0.69 | 0.62 | 0.50 | |||||||||||||||
Non-interest
expense
|
(3.40 | ) | (3.46 | ) | (3.52 | ) | (3.26 | ) | (3.21 | ) | ||||||||||
Tax
equivalent
adjustment
|
(0.03 | ) | (0.03 | ) | (0.03 | ) | (0.07 | ) | (0.08 | ) | ||||||||||
Applicable
income
taxes
|
(0.66 | ) | (0.41 | ) | (0.18 | ) | 0.98 | 0.27 | ||||||||||||
Return
on average earning assets
|
1.30 | 0.88 | 0.39 | (1.79 | ) | (0.40 | ) | |||||||||||||
Multiplied
by average earning
assets to
average
total
assets
|
93.07 | 92.84 | 92.39 | 92.86 | 92.34 | |||||||||||||||
Return
on average assets
|
1.21 | % | 0.82 | % | 0.36 | % | (1.66 | )% | (0.37 | )% | ||||||||||
Multiplied
by average assets
to
average
equity
|
9.31 | X | 10.23 | X | 11.33 | X | 11.13 | X | 10.26 | X | ||||||||||
Return
on average equity
|
11.31 | % | 8.42 | % | 4.06 | % | (18.46 | )% | (3.77 | )% | ||||||||||
QUARTERLY
FINANCIAL INFORMATION
|
||||||||||||||||||||
(Dollars
in thousands, except per share amounts)
|
||||||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
Full
Year
|
||||||||||||||||
2006
|
||||||||||||||||||||
Interest
income
|
$ | 7,676 | $ | 8,014 | $ | 8,248 | $ | 8,462 | $ | 32,400 | ||||||||||
Interest
expense
|
2,472 | 2,654 | 2,871 | 3,008 | 11,005 | |||||||||||||||
Net
interest
income
|
5,204 | 5,360 | 5,377 | 5,454 | 21,395 | |||||||||||||||
Provision
for loan
losses
|
(194 | ) | (819 | ) | (38 | ) | (110 | ) | (1,161 | ) | ||||||||||
Securities
gains
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Net
overhead
|
3,348 | 3,161 | 3,196 | 3,067 | 12,772 | |||||||||||||||
Income
before income
taxes
|
2,050 | 3,018 | 2,219 | 2,497 | 9,784 | |||||||||||||||
Net
income
|
1,367 | 2,000 | 1,475 | 1,659 | 6,501 | |||||||||||||||
Basic
net income per
share
|
0.26 | 0.38 | 0.28 | 0.32 | 1.24 | |||||||||||||||
Diluted
net income per
share
|
0.26 | 0.38 | 0.28 | 0.32 | 1.24 | |||||||||||||||
Dividends
paid per
share
|
0.00 | 0.00 | 0.05 | 0.05 | 0.10 | |||||||||||||||
2005
|
||||||||||||||||||||
Interest
income
|
$ | 7,045 | $ | 7,172 | $ | 7,465 | $ | 7,717 | $ | 29,399 | ||||||||||
Interest
expense
|
2,318 | 2,279 | 2,410 | 2,540 | 9,547 | |||||||||||||||
Net
interest
income
|
4,727 | 4,893 | 5,055 | 5,177 | 19,852 | |||||||||||||||
Provision
for loan
losses
|
243 | 191 | (140 | ) | (290 | ) | 4 | |||||||||||||
Securities
gains
|
0 | 0 | 0 | 0 | 0 | |||||||||||||||
Net
overhead
|
3,327 | 3,660 | 3,189 | 3,209 | 13,385 | |||||||||||||||
Income
before income
taxes
|
1,157 | 1,042 | 2,006 | 2,258 | 6,463 | |||||||||||||||
Net
income
|
803 | 727 | 1,367 | 1,537 | 4,434 | |||||||||||||||
Basic
net income per
share
|
0.15 | 0.14 | 0.26 | 0.29 | 0.85 | |||||||||||||||
Diluted
net income per
share
|
0.15 | 0.14 | 0.26 | 0.29 | 0.84 | |||||||||||||||
Dividends
paid per
share
|
0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
AVERAGE
CONSOLIDATED BALANCE
SHEETS AND NET INTEREST INCOME ANALYSIS
|
||||||||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||||||||
2006
|
2005
|
2004
|
||||||||||||||||||||||||||
Average
Balance
|
Interest
(2)
|
Yield/
Rate
(3)
|
Average
Balance
|
Interest
(2)
|
Yield/
Rate
(3)
|
Average
Balance
|
Interest
(2)
|
Yield/
Rate
(3)
|
||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||
Interest
earning assets
|
||||||||||||||||||||||||||||
U.S.
Treasury and federal agency
securities
|
$
|
95,705
|
$
|
3,398
|
3.55
|
%
|
$
|
107,177
|
$
|
3,278
|
3.06
|
%
|
$
|
112,260
|
$
|
3,117
|
2.78
|
%
|
||||||||||
States
and municipal obligations
(1)
|
2,342
|
138
|
5.89
|
2,666
|
153
|
5.74
|
4,941
|
338
|
6.84
|
|||||||||||||||||||
Mortgage
backed securities
|
33,953
|
1,564
|
4.61
|
37,050
|
1,583
|
4.27
|
29,803
|
1,183
|
3.97
|
|||||||||||||||||||
Other
securities
|
3,179
|
182
|
5.73
|
3,089
|
148
|
4.79
|
3,216
|
138
|
4.29
|
|||||||||||||||||||
Total
investment securities
|
135,179
|
5,282
|
3.91
|
149,982
|
5,162
|
3.44
|
150,220
|
4,776
|
3.18
|
|||||||||||||||||||
Federal
funds sold
|
24,365
|
1,215
|
4.99
|
23,083
|
745
|
3.23
|
29,369
|
380
|
1.29
|
|||||||||||||||||||
Interest-bearing
deposits with
banks
|
486
|
24
|
4.94
|
436
|
12
|
2.75
|
256
|
6
|
2.57
|
|||||||||||||||||||
Loans,
net of unearned income
(4)(5)
|
||||||||||||||||||||||||||||
Commercial
|
161,898
|
12,424
|
7.67
|
147,398
|
10,291
|
6.98
|
132,785
|
8,913
|
6.71
|
|||||||||||||||||||
Real
estate mortgage
|
129,944
|
9,271
|
7.13
|
132,527
|
9,236
|
6.97
|
145,387
|
10,182
|
7.00
|
|||||||||||||||||||
Installment
|
46,494
|
4,334
|
9.32
|
46,690
|
4,083
|
8.74
|
47,438
|
4,029
|
8.49
|
|||||||||||||||||||
Total
loans
|
338,336
|
26,029
|
7.69
|
326,615
|
23,610
|
7.23
|
325,610
|
23,124
|
7.10
|
|||||||||||||||||||
Total
interest earning assets
|
498,366
|
32,550
|
6.53
|
500,116
|
29,529
|
5.90
|
505,455
|
28,286
|
5.60
|
|||||||||||||||||||
Allowance
for loan losses
|
(7,465
|
)
|
(8,998
|
)
|
(11,413
|
)
|
||||||||||||||||||||||
Cash
and due from banks
|
13,824
|
13,619
|
13,837
|
|||||||||||||||||||||||||
Premises
and equipment
|
7,055
|
7,256
|
7,738
|
|||||||||||||||||||||||||
Other
assets
|
23,688
|
26,697
|
31,490
|
|||||||||||||||||||||||||
Assets
of discontinued operations
|
-
|
-
|
39,762
|
|||||||||||||||||||||||||
Total
assets
|
$
|
535,468
|
$
|
538,690
|
$
|
586,869
|
||||||||||||||||||||||
Liabilities
and
Equity:
|
||||||||||||||||||||||||||||
Interest
bearing liabilities
|
||||||||||||||||||||||||||||
NOW
and money market
|
$
|
129,080
|
1,766
|
1.37
|
%
|
$
|
142,501
|
1,409
|
0.99
|
%
|
$
|
158,169
|
1,290
|
0.82
|
%
|
|||||||||||||
Savings
deposits
|
52,295
|
321
|
0.61
|
59,365
|
412
|
0.69
|
62,518
|
521
|
0.83
|
|||||||||||||||||||
Certificates
of deposit and other
time deposits
|
188,044
|
6,896
|
3.67
|
174,057
|
4,904
|
2.82
|
164,932
|
4,455
|
2.70
|
|||||||||||||||||||
Total
interest bearing deposits
|
369,419
|
8,983
|
2.43
|
375,923
|
6,725
|
1.79
|
385,619
|
6,266
|
1.62
|
|||||||||||||||||||
Short-term
borrowings
|
9,591
|
234
|
2.44
|
8,422
|
180
|
2.14
|
6,539
|
118
|
1.80
|
|||||||||||||||||||
Other
borrowings
|
7,765
|
574
|
7.39
|
1,586
|
14
|
0.88
|
5,306
|
248
|
4.67
|
|||||||||||||||||||
FHLB
advances
|
7,815
|
453
|
5.80
|
8,775
|
499
|
5.69
|
9,955
|
556
|
5.59
|
|||||||||||||||||||
Debentures
|
7,887
|
760
|
9.64
|
20,480
|
2,129
|
10.40
|
25,397
|
2,869
|
11.30
|
|||||||||||||||||||
Total
interest-bearing liabilities
|
402,477
|
11,004
|
2.73
|
%
|
415,186
|
9,547
|
2.30
|
%
|
432,816
|
10,057
|
2.32
|
%
|
||||||||||||||||
Non-interest
bearing deposits
|
72,781
|
66,848
|
62,486
|
|||||||||||||||||||||||||
Other
liabilities
|
2,721
|
4,007
|
7,393
|
|||||||||||||||||||||||||
Liabilities
of discontinued operations
|
-
|
-
|
35,876
|
|||||||||||||||||||||||||
Shareholders’
equity
|
57,489
|
52,649
|
48,298
|
|||||||||||||||||||||||||
Total
liabilities and equity
|
$
|
535,468
|
$
|
538,690
|
$
|
586,869
|
||||||||||||||||||||||
Net
interest
earnings
(1)
|
$
|
21,546
|
$
|
19,982
|
$
|
18,229
|
||||||||||||||||||||||
Net
interest
spread
(1)
|
3.80
|
%
|
3.60
|
%
|
3.28
|
%
|
||||||||||||||||||||||
Net
interest
margin
(1)
|
4.32
|
%
|
4.00
|
%
|
3.61
|
%
|
||||||||||||||||||||||
(1)
Taxable - equivalent yields are calculated assuming a 34% federal
income
tax rate
(2)
Excludes the interest income and interest expense of discontinued
operations
(3)
Yields are calculated on historical cost except for yields on
marketable
equity securities that are calculated used fair value
(4)
Includes loan fees, immaterial in amount, in both interest income
and the
calculation of yield on loans
(5)
Includes loans on non-accrual
status
|
LOAN
SUMMARY
|
|||||||||||||||||||||||||||||||
(Dollars
in thousands)
|
|||||||||||||||||||||||||||||||
As
of December 31,
|
|||||||||||||||||||||||||||||||
2006
|
%
|
2005
|
%
|
2004
|
%
|
2003(2)
|
%
|
2002
|
%
|
||||||||||||||||||||||
Summary
of Loans by Type
|
|||||||||||||||||||||||||||||||
Commercial,
secured by real estate
|
$
|
101,786
|
29.6
|
%
|
$
|
85,989
|
26.2
|
%
|
$
|
101,567
|
31.3
|
%
|
$
|
101,325
|
30.5
|
%
|
$
|
109,571
|
29.3
|
%
|
|||||||||||
Commercial,
other
|
43,981
|
12.8
|
49,362
|
15.0
|
40,923
|
12.6
|
38,063
|
11.5
|
51,347
|
13.8
|
|||||||||||||||||||||
Real
estate construction
|
11,303
|
3.3
|
11,070
|
3.4
|
5,906
|
1.8
|
5,414
|
1.6
|
7,318
|
2.0
|
|||||||||||||||||||||
Real
estate mortgage
|
138,795
|
40.4
|
134,570
|
40.9
|
128,243
|
39.5
|
126,134
|
38.0
|
134,271
|
36.0
|
|||||||||||||||||||||
Agricultural
|
1,930
|
0.5
|
1,670
|
0.5
|
2,380
|
0.7
|
3,032
|
0.9
|
4,381
|
1.2
|
|||||||||||||||||||||
Consumer
|
42,188
|
12.3
|
42,096
|
12.8
|
44,470
|
13.7
|
56,216
|
17.0
|
63,534
|
17.0
|
|||||||||||||||||||||
Other
|
3,814
|
1.1
|
3,960
|
1.2
|
1,438
|
0.4
|
1,610
|
0.5
|
2,677
|
0.7
|
|||||||||||||||||||||
Total
loans
|
$
|
343,797
|
100.0
|
%
|
$
|
328,717
|
100.0
|
%
|
$
|
324,927
|
100.0
|
%
|
$
|
331,794
|
100.0
|
%
|
$
|
373,099
|
100.0
|
%
|
|||||||||||
Non-performing
Assets
|
|||||||||||||||||||||||||||||||
Non-accrual
loans
|
$
|
4,698
|
$
|
3,751
|
$
|
6,847
|
$
|
11,958
|
$
|
8,197
|
|||||||||||||||||||||
Accruing
loans which are contractually
past
due
90
days
or more
|
992
|
853
|
739
|
4,137
|
1,238
|
||||||||||||||||||||||||||
Restructured loans
|
1,268
|
1,540
|
238
|
104
|
129
|
||||||||||||||||||||||||||
Total
non-performing and restructured
loans
|
6,958
|
6,144
|
7,824
|
16,199
|
9,564
|
||||||||||||||||||||||||||
Other
real estate acquired through
foreclosures
|
495
|
2,049
|
2,247
|
3,187
|
3,505
|
||||||||||||||||||||||||||
Total
non-performing and restructured
loans
and
other
real estate
|
$
|
7,453
|
$
|
8,193
|
$
|
10,071
|
$
|
19,386
|
$
|
13,069
|
|||||||||||||||||||||
Non-performing
and restructured
loans
as
a
% of total
loans
|
2.02%
|
1.87%
|
2.41%
|
4.88%
|
2.56%
|
||||||||||||||||||||||||||
Non-performing
and restructured
loans and
other
real
estate as a % of total assets
(1)
|
1.39%
|
1.55%
|
1.87%
|
3.57%
|
2.21%
|
||||||||||||||||||||||||||
Allocation
of Allowance for Loan Losses
|
|||||||||||||||||||||||||||||||
Commercial, other
|
$
|
839
|
14.4
|
%
|
$
|
1,071
|
16.7
|
%
|
$
|
1,734
|
13.7
|
%
|
$
|
4,166
|
12.9
|
%
|
$
|
2,294
|
15.7
|
%
|
|||||||||||
Real estate, construction
|
117
|
3.3
|
134
|
3.4
|
83
|
1.8
|
662
|
1.6
|
632
|
2.0
|
|||||||||||||||||||||
Real estate, other
|
3,395
|
70.0
|
3,810
|
67.1
|
4,276
|
70.8
|
4,886
|
68.5
|
4,341
|
65.3
|
|||||||||||||||||||||
Consumer installment
|
521
|
12.3
|
772
|
12.8
|
1,255
|
13.7
|
2,478
|
17.0
|
977
|
17.0
|
|||||||||||||||||||||
Unallocated
|
1,789
|
2,105
|
2,036
|
2,108
|
1,454
|
||||||||||||||||||||||||||
Total
|
$
|
6,661
|
100.0
|
%
|
$
|
7,892
|
100.0
|
%
|
$
|
9,384
|
100.0
|
%
|
$
|
14,300
|
100.0
|
%
|
$
|
9,698
|
100.0
|
%
|
|||||||||||
(1)
From continuing operations
|
SUMMARY
OF LOAN LOSS
EXPERIENCE
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
For
the Year Ended December 31
|
||||||||||||||||
2006
|
2005
|
2004
|
2003(1)
|
2002
|
||||||||||||
Allowance
for loan losses beginning
of period
|
$
|
7,892
|
$
|
9,384
|
$
|
14,300
|
$
|
9,698
|
$
|
7,371
|
||||||
Amounts
charged off:
|
||||||||||||||||
Commercial,
financial and agricultural loans
|
154
|
736
|
1,520
|
4,417
|
4,080
|
|||||||||||
Real
estate construction loans
|
0
|
0
|
5
|
0
|
833
|
|||||||||||
Real
estate loans - other
|
863
|
549
|
2,413
|
6,427
|
1,072
|
|||||||||||
Consumer
installment loans
|
393
|
930
|
3,054
|
5,669
|
1,904
|
|||||||||||
Total
charge-offs
|
1,410
|
2,215
|
6,992
|
16,513
|
7,889
|
|||||||||||
Recoveries
on amounts previously charged-off:
|
||||||||||||||||
Commercial,
financial and agricultural loans
|
266
|
91
|
264
|
145
|
138
|
|||||||||||
Real
estate construction loans
|
8
|
1
|
1
|
37
|
16
|
|||||||||||
Real
estate loans - other
|
340
|
84
|
87
|
74
|
163
|
|||||||||||
Consumer
installment loans
|
726
|
543
|
698
|
346
|
446
|
|||||||||||
Total
recoveries
|
1,340
|
719
|
1,050
|
602
|
763
|
|||||||||||
Net
charge-offs
|
70
|
1,496
|
5,942
|
15,911
|
7,126
|
|||||||||||
Provision
for loan losses
|
(1,161
|
)
|
4
|
1,026
|
20,513
|
9,453
|
||||||||||
Allowance
for loan losses, end of period
|
$
|
6,661
|
$
|
7,892
|
$
|
9,384
|
$
|
14,300
|
$
|
9,698
|
||||||
Average
total loans
|
$
|
338,336
|
$
|
326,615
|
$
|
325,610
|
$
|
352,156
|
$
|
382,763
|
||||||
Total
loans at year-end
|
343,797
|
328,717
|
324,927
|
331,794
|
373,099
|
|||||||||||
As
a percent of average loans
|
||||||||||||||||
Net
charge-offs
|
0.02
|
%
|
0.46
|
%
|
1.82
|
%
|
4.52
|
%
|
1.86
|
%
|
||||||
Provision
for loan losses
|
(0.34
|
)%
|
0.00
|
%
|
0.32
|
%
|
5.83
|
%
|
2.47
|
%
|
||||||
Allowance
for loan losses
|
1.97
|
%
|
2.42
|
%
|
2.88
|
%
|
4.06
|
%
|
2.53
|
%
|
||||||
As
a percent of total loans at year-end
|
||||||||||||||||
Allowance
for loan losses
|
1.94
|
%
|
2.40
|
%
|
2.89
|
%
|
4.31
|
%
|
2.60
|
%
|
||||||
As
a multiple of net charge-offs
|
||||||||||||||||
Allowance
for loan losses
|
95.16X
|
5.28X
|
1.58X
|
0.90X
|
1.36X
|
|||||||||||
Income
before tax and provision for loan losses
|
123.19X
|
4.32X
|
0.65X
|
0.35X
|
0.80X
|
|||||||||||
|
LOAN
MATURITIES and INTEREST
SENSITIVITY
|
|||||||||||||
December
31,
2006
|
|||||||||||||
(Dollars
in thousands)
|
|||||||||||||
Projected
Maturities*
|
|||||||||||||
One
Year or Less
|
One
Through Five Years
|
Over
Five
Years
|
Total
|
||||||||||
Commercial,
secured by real estate
|
$
|
38,310
|
$
|
51,758
|
$
|
11,718
|
$
|
101,786
|
|||||
Commercial,
other
|
21,357
|
19,694
|
2,930
|
43,981
|
|||||||||
Real
estate construction
|
6,927
|
3,114
|
1,262
|
11,303
|
|||||||||
Agricultural
|
592
|
794
|
544
|
1,930
|
|||||||||
Total
|
$
|
67,186
|
$
|
75,360
|
$
|
16,454
|
$
|
159,000
|
|||||
Fixed
rate loans
|
$
|
15,065
|
$
|
36,113
|
$
|
4,558
|
$
|
55,736
|
|||||
Floating
rate loans
|
52,121
|
39,247
|
11,896
|
103,264
|
|||||||||
Total
|
$
|
67,186
|
$
|
75,360
|
$
|
16,454
|
$
|
159,000
|
|||||
Fixed
rate loans projected to mature after one year
|
$
|
40,671
|
|||||||||||
Floating
rate loans projected to mature after one year
|
51,143
|
||||||||||||
Total
|
$
|
91,814
|
|||||||||||
(*)
Based on scheduled or approximate repayments
|
FAIR
VALUE OF SECURITIES
AVAILABLE FOR SALE
|
||||||||||
(Dollars
in thousands)
|
||||||||||
As
of December 31
|
||||||||||
2006
|
2005
|
2004
|
||||||||
U.S.
Treasury securities
|
$
|
6,401
|
$
|
3,941
|
$
|
250
|
||||
U.S.
Agency securities
|
76,911
|
95,300
|
115,514
|
|||||||
States
and political subdivisions
|
3,413
|
2,514
|
2,751
|
|||||||
Mortgage-backed
securities
|
34,617
|
35,639
|
34,942
|
|||||||
Corporate
securities
|
25
|
25
|
435
|
|||||||
Total
securities
|
$
|
121,367
|
$
|
137,419
|
$
|
153,892
|
||||
SECURITIES
MATURITY AND YIELD
ANALYSIS
|
||||||||||
December
31,
2006
|
||||||||||
(Dollars
in thousands)
|
||||||||||
Market
Value
|
Average
Maturity (yrs/mos)
|
Taxable
Equivalent Yield*
|
||||||||
U.S.
Treasury securities
|
||||||||||
Within
one year
|
$
|
994
|
4.44
|
%
|
||||||
After
one but within five years
|
5,407
|
4.36
|
||||||||
Total
U.S. Treasury Securities
|
6,401
|
2/5
|
4.38
|
|||||||
U.S.
Government Agencies securities
|
||||||||||
Within
one year
|
26,901
|
3.16
|
||||||||
After
one but within five years
|
50,010
|
4.18
|
||||||||
Total
U.S. Government Agencies securities
|
$
|
76,911
|
1/7
|
3.82
|
||||||
States
and political subdivisions
|
||||||||||
Within
one year
|
349
|
4.26
|
||||||||
After
one but within five years
|
964
|
4.93
|
||||||||
After
five but within ten years
|
544
|
4.65
|
||||||||
Over
ten years
|
1,556
|
5.84
|
||||||||
Total
states and political subdivisions securities
|
$
|
3,413
|
6/11
|
5.23
|
||||||
Mortgage-backed
securities**
|
||||||||||
Within
one year
|
3,681
|
3.93
|
||||||||
After
one but within five years
|
1,993
|
5.36
|
||||||||
After
five but within ten years
|
911
|
3.85
|
||||||||
Over
ten years
|
28,032
|
4.68
|
||||||||
Total
mortgage-backed securities
|
$
|
34,617
|
11/3
|
4.62
|
||||||
Corporate
securities
|
$
|
25
|
||||||||
Total
securities available-for-sale
|
$
|
121,367
|
4/7
|
4.12
|
||||||
(*)
Fully tax-equivalent using the rate of 34%
|
||||||||||
(**)
Maturities for mortgage-backed securities are based on final
maturity
|
MATURITY
OF TIME DEPOSITS
$100,000 OR MORE
|
||||
December
31,
2006
|
||||
(Dollars
in thousands)
|
||||
Maturing
3 months or less
|
$
|
11,105
|
||
Maturing
over 3 months
|
11,263
|
|||
Maturing
over 6 months
|
19,108
|
|||
Maturing
over 12 months
|
12,001
|
|||
Total
|
$
|
53,477
|
||
PAYMENTS
DUE ON CONTRACTUAL
OBLIGATIONS
|
||||||||||||||||
December
31,
2006
|
||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
|
||||||||||||||||
Total
|
Less
than one year
|
1-3
years
|
3-5
years
|
More
than five years
|
||||||||||||
Federal
Home Loan Bank advances
|
$
|
7,285
|
$
|
637
|
$
|
1,375
|
$
|
5,203
|
$
|
70
|
||||||
Other
borrowed funds
|
12,275
|
1,344
|
2,860
|
3,118
|
4,953
|
|||||||||||
Operating
lease obligations
|
206
|
138
|
62
|
4
|
2
|
|||||||||||
Data
and item processing contracts*
|
5,280
|
1,848
|
2,772
|
660
|
0
|
|||||||||||
Total
|
$
|
25,046
|
$
|
3,967
|
$
|
7,069
|
$
|
8,985
|
$
|
5,025
|
||||||
*
Data and item processing contractual obligations are estimated
using the
average billing for the last three months of
2006.
|
Year-end
2006
|
Year-end
2005
|
ALCO
Guidelines
|
|
Projected
1-year net interest income
|
|||
-100
bp change vs. base rate
|
-0.9%
|
-0.6%
|
5%
|
+100
bp change vs. base rate
|
1.4%
|
0.5%
|
5%
|
Projected
1-year net interest income
|
|
||
-200
bp change vs. base rate
|
-2.2%
|
-1.3%
|
10%
|
+200
bp change vs. base rate
|
2.6%
|
0.9%
|
10%
|
SELECTED
CAPITAL
INFORMATION
|
||||||||||
(Dollars
in thousands)
|
||||||||||
As
of December 31
|
||||||||||
2006
|
2005
|
Change
|
||||||||
Stockholders’
Equity
|
$
|
61,002
|
$
|
54,287
|
$
|
6,715
|
||||
Qualifying
capital securities of subsidiary trust
|
0
|
15,250
|
(15,250
|
)
|
||||||
Disallowed
amounts of goodwill and other intangibles
|
(15,816
|
)
|
(15,816
|
)
|
0
|
|||||
Disallowed
deferred tax assets
|
0
|
(628
|
)
|
628
|
||||||
Unrealized
loss on securities available for sale
|
1,150
|
1,718
|
(568
|
)
|
||||||
Tier
I capital
|
$
|
46,336
|
$
|
54,811
|
$
|
(8,475
|
)
|
|||
Tier
II capital adjustments
|
||||||||||
Qualifying
capital securities of subsidiary trust
|
0
|
0
|
||||||||
Allowable
amount of the allowance for loan losses
|
3,977
|
3,899
|
||||||||
Total
capital
|
$
|
50,313
|
$
|
58,710
|
||||||
Total
risk-weighted assets
|
$
|
315,485
|
$
|
307,951
|
||||||
Ratios
|
||||||||||
Tier
I capital to risk-weighted assets
|
14.69
|
%
|
17.80
|
%
|
||||||
Total
capital to risk-weighted assets
|
15.95
|
%
|
19.06
|
%
|
||||||
Leverage
at year-end
|
8.89
|
%
|
10.61
|
%
|
||||||
RATE
VOLUME ANALYSIS OF CHANGES
IN NET INTEREST INCOME
|
|||||||||||||||||||
(Dollars
in thousands on a tax equivalent basis)
|
|||||||||||||||||||
2006
vs 2005
|
2005
vs 2004
|
||||||||||||||||||
Increase
(decrease) due to change in
|
Increase
(decrease) due to change in
|
||||||||||||||||||
Volume
|
Rate
|
Net
Change
|
Volume
|
Rate
|
Net
Change
|
||||||||||||||
Interest
income*:
|
|||||||||||||||||||
Loans
|
$
|
867
|
$
|
1,552
|
$
|
2,419
|
$
|
72
|
$
|
414
|
$
|
486
|
|||||||
Investment
securities
|
(324
|
)
|
444
|
120
|
(8
|
)
|
394
|
386
|
|||||||||||
Federal
funds sold
|
43
|
427
|
470
|
(61
|
)
|
426
|
365
|
||||||||||||
Deposits
with banks
|
2
|
10
|
12
|
5
|
0
|
5
|
|||||||||||||
Total
interest income
|
$
|
588
|
$
|
2,433
|
$
|
3,021
|
$
|
8
|
$
|
1,234
|
$
|
1,242
|
|||||||
Interest
expense:
|
|||||||||||||||||||
Deposits
|
|||||||||||||||||||
NOW
and money market
|
$
|
(116
|
)
|
$
|
473
|
$
|
357
|
$
|
(104
|
)
|
$
|
223
|
$
|
119
|
|||||
Savings
|
(46
|
)
|
(45
|
)
|
(91
|
)
|
(25
|
)
|
(84
|
)
|
(109
|
)
|
|||||||
Certificates
of deposit
|
419
|
1,573
|
1,992
|
252
|
197
|
449
|
|||||||||||||
Short-term
borrowings
|
27
|
27
|
54
|
38
|
24
|
62
|
|||||||||||||
Other
borrowings
|
194
|
366
|
560
|
(108
|
)
|
(126
|
)
|
(234
|
)
|
||||||||||
FHLB
borrowings
|
(56
|
)
|
10
|
(46
|
)
|
(67
|
)
|
10
|
(57
|
)
|
|||||||||
Debt
|
(1,224
|
)
|
(145
|
)
|
(1,369
|
)
|
(524
|
)
|
(216
|
)
|
(740
|
)
|
|||||||
Total
interest expense
|
$
|
(802
|
)
|
$
|
2,259
|
$
|
1,457
|
$
|
(538
|
)
|
$
|
28
|
$
|
(510
|
)
|
||||
Net
interest income*
|
$
|
1,390
|
$
|
174
|
$
|
1,564
|
$
|
546
|
$
|
1,206
|
$
|
1,752
|
|||||||
(*)
Fully taxable equivalent using the rate of 34%
Note
- Changes to rate/volume are allocated to both rate and volume
on a
proportional dollar basis
|
NON-INTEREST
INCOME AND
EXPENSE
|
||||||||||||||||||||||
(Dollars
in thousands)
|
||||||||||||||||||||||
Increase
(Decrease) Over Prior Year
|
||||||||||||||||||||||
2006
|
2005
|
|||||||||||||||||||||
2006
|
2005
|
2004
|
Amount
|
Percent
|
Amount
|
Percent
|
||||||||||||||||
Non-interest
income:
|
||||||||||||||||||||||
Service
charges on deposit accounts
|
$
|
2,804
|
$
|
2,732
|
$
|
2,513
|
$
|
72
|
2.64
|
$
|
219
|
8.71
|
||||||||||
Electronic
banking income
|
498
|
403
|
250
|
95
|
23.57
|
153
|
61.20
|
|||||||||||||||
Secondary
market mortgage income
|
303
|
217
|
71
|
86
|
39.63
|
146
|
205.63
|
|||||||||||||||
Other
|
560
|
568
|
672
|
(8
|
)
|
(1.41
|
)
|
(104
|
)
|
(15.48
|
)
|
|||||||||||
Total
fees and other income
|
$
|
4,165
|
$
|
3,920
|
$
|
3,506
|
245
|
6.25
|
414
|
11.81
|
||||||||||||
Investment
securities gains
|
0
|
0
|
100
|
0
|
(100
|
)
|
||||||||||||||||
Total
non-interest income
|
$
|
4,165
|
$
|
3,920
|
$
|
3,606
|
$
|
245
|
6.25
|
$
|
314
|
8.71
|
||||||||||
Non-interest
expense:
|
||||||||||||||||||||||
Salaries
and wages
|
$
|
7,540
|
$
|
7,443
|
$
|
7,103
|
$
|
97
|
1.30
|
$
|
340
|
4.79
|
||||||||||
Employee
benefits
|
1,590
|
1,642
|
1,633
|
(52
|
)
|
(3.17
|
)
|
9
|
0.55
|
|||||||||||||
Total
staff costs
|
9,130
|
9,085
|
8,736
|
45
|
0.50
|
349
|
3.99
|
|||||||||||||||
Occupancy
and equipment
|
1,907
|
2,262
|
2,141
|
(355
|
)
|
(15.69
|
)
|
121
|
5.65
|
|||||||||||||
Outside
data processing
|
2,036
|
1,505
|
1,023
|
531
|
35.28
|
482
|
47.12
|
|||||||||||||||
Professional
fees
|
496
|
554
|
2,271
|
(58
|
)
|
(10.47
|
)
|
(1,717
|
)
|
(75.61
|
)
|
|||||||||||
Taxes,
other than payroll, property
and income
|
598
|
423
|
589
|
175
|
41.37
|
(166
|
)
|
(28.18
|
)
|
|||||||||||||
OREO
(gains) losses and expenses, net
|
(91
|
)
|
52
|
(45
|
)
|
(143
|
)
|
(275.00
|
)
|
97
|
215.56
|
|||||||||||
Bad
check losses (recoveries)
|
(79
|
)
|
36
|
94
|
(115
|
)
|
(319.44
|
)
|
(58
|
)
|
(61.70
|
)
|
||||||||||
Supplies
|
333
|
362
|
365
|
(29
|
)
|
(8.01
|
)
|
(3
|
)
|
(0.82
|
)
|
|||||||||||
Accelerated
amortization of subordinated
debt issuance
costs
|
548
|
184
|
214
|
364
|
197.83
|
(30
|
)
|
(14.02
|
)
|
|||||||||||||
Other
expenses
|
2,059
|
2,842
|
2,394
|
(783
|
)
|
(27.55
|
)
|
448
|
18.71
|
|||||||||||||
Total
non-interest expenses
|
$
|
16,937
|
$
|
17,305
|
$
|
17,782
|
$
|
(368
|
)
|
(2.13
|
)
|
$
|
(477
|
)
|
(2.68
|
)
|
PREMIER
FINANCIAL BANCORP, INC.
|
||||||||||||||||||||||||
AVERAGE
CONSOLIDATED BALANCE SHEETS
|
||||||||||||||||||||||||
AND
NET INTEREST INCOME ANALYSIS
|
||||||||||||||||||||||||
Nine
Months Ended Sept 30, 2007
|
Nine
Months Ended Sept 30, 2006
|
|||||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest
Earning Assets
|
||||||||||||||||||||||||
Federal
funds sold and
other
|
$ |
38,696
|
$ |
1,508
|
5.21 | % | $ |
24,006
|
$ |
884
|
4.92 | % | ||||||||||||
Securities
available for
sale
|
||||||||||||||||||||||||
Taxable
|
122,247
|
4,093
|
4.46
|
134,974
|
3,853
|
3.81
|
||||||||||||||||||
Tax-exempt
|
4,104
|
118
|
5.81
|
2,288
|
70
|
6.18
|
||||||||||||||||||
Total
investment
securities
|
126,351
|
4,211
|
4.51
|
137,262
|
3,923
|
3.85
|
||||||||||||||||||
Total
loans
|
343,759
|
20,343
|
7.91
|
336,327
|
19,130
|
7.60
|
||||||||||||||||||
Total
interest-earning
assets
|
508,806
|
26,062
|
6.86 | % |
497,595
|
23,937
|
6.44 | % | ||||||||||||||||
Allowance
for loan losses
|
(6,650 | ) | (7,663 | ) | ||||||||||||||||||||
Cash
and due from banks
|
13,871
|
13,760
|
||||||||||||||||||||||
Other
assets
|
29,547
|
31,035
|
||||||||||||||||||||||
Total
assets
|
$ |
545,574
|
$ |
534,727
|
||||||||||||||||||||
Liabilities
and
Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities
|
||||||||||||||||||||||||
Interest-bearing
deposits
|
$ |
376,335
|
8,273
|
2.94
|
$ |
368,983
|
6,439
|
2.33
|
||||||||||||||||
Short-term
borrowings
|
13,195
|
248
|
2.51
|
9,464
|
175
|
2.47
|
||||||||||||||||||
FHLB
advances & other
borrowings
|
16,078
|
889
|
7.39
|
14,930
|
710
|
6.36
|
||||||||||||||||||
Debentures
|
-
|
-
|
0.00
|
9,298
|
672
|
9.66
|
||||||||||||||||||
Total
interest-bearing
liabilities
|
405,608
|
9,410
|
3.10 | % |
402,675
|
7,996
|
2.65 | % | ||||||||||||||||
Non-interest
bearing deposits
|
74,279
|
72,891
|
||||||||||||||||||||||
Other
liabilities
|
2,578
|
2,594
|
||||||||||||||||||||||
Shareholders’
equity
|
63,109
|
56,567
|
||||||||||||||||||||||
Total
liabilities and
equity
|
$ |
545,574
|
$ |
534,727
|
||||||||||||||||||||
Net
interest earnings
|
$ |
16,652
|
$ |
15,941
|
||||||||||||||||||||
Net
interest spread
|
3.76 | % | 3.79 | % | ||||||||||||||||||||
Net
interest margin
|
4.39 | % | 4.29 | % | ||||||||||||||||||||
PREMIER
FINANCIAL BANCORP, INC.
|
||||||||||||||||||||||||
AVERAGE
CONSOLIDATED BALANCE SHEETS
|
||||||||||||||||||||||||
AND
NET INTEREST INCOME ANALYSIS
|
||||||||||||||||||||||||
Three
Months Ended Sept 30, 2007
|
Three
Months Ended Sept 30, 2006
|
|||||||||||||||||||||||
Balance
|
Interest
|
Yield/Rate
|
Balance
|
Interest
|
Yield/Rate
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Interest
Earning Assets
|
||||||||||||||||||||||||
Federal
funds sold and
other
|
$ |
35,241
|
$ |
450
|
5.07 | % | $ |
21,004
|
$ |
287
|
5.42 | % | ||||||||||||
Securities
available for
sale
|
||||||||||||||||||||||||
Taxable
|
124,124
|
1,425
|
4.59
|
131,456
|
1,299
|
3.95
|
||||||||||||||||||
Tax-exempt
|
4,008
|
38
|
5.75
|
2,111
|
24
|
6.89
|
||||||||||||||||||
Total
investment
securities
|
128,132
|
1,463
|
4.63
|
133,567
|
1,323
|
4.00
|
||||||||||||||||||
Total
loans
|
344,316
|
6,826
|
7.87
|
342,798
|
6,637
|
7.68
|
||||||||||||||||||
Total
interest-earning
assets
|
507,689
|
8,738
|
6.85 | % |
497,369
|
8,247
|
6.60 | % | ||||||||||||||||
Allowance
for loan losses
|
(6,613 | ) | (7,226 | ) | ||||||||||||||||||||
Cash
and due from banks
|
13,865
|
13,654
|
||||||||||||||||||||||
Other
assets
|
30,133
|
30,405
|
||||||||||||||||||||||
Total
assets
|
$ |
545,074
|
$ |
534,202
|
||||||||||||||||||||
Liabilities
and
Equity
|
||||||||||||||||||||||||
Interest-bearing
liabilities
|
||||||||||||||||||||||||
Interest-bearing
deposits
|
$ |
375,841
|
2,814
|
2.97
|
$ |
368,423
|
2,350
|
2.53
|
||||||||||||||||
Short-term
borrowings
|
13,234
|
83
|
2.49
|
9,560
|
60
|
2.49
|
||||||||||||||||||
FHLB
advances & other
borrowings
|
13,847
|
251
|
7.19
|
14,365
|
255
|
7.04
|
||||||||||||||||||
Debentures
|
-
|
-
|
0.00
|
8,505
|
205
|
9.64
|
||||||||||||||||||
Total
interest-bearing
liabilities
|
402,922
|
3,148
|
3.10 | % |
400,853
|
2,870
|
2.84 | % | ||||||||||||||||
Non-interest
bearing deposits
|
74,830
|
72,122
|
||||||||||||||||||||||
Other
liabilities
|
2,873
|
3,039
|
||||||||||||||||||||||
Shareholders’
equity
|
64,449
|
58,188
|
||||||||||||||||||||||
Total
liabilities and
equity
|
$ |
545,074
|
$ |
534,202
|
||||||||||||||||||||
Net
interest earnings
|
$ |
5,590
|
$ |
5,377
|
||||||||||||||||||||
Net
interest spread
|
3.75 | % | 3.76 | % | ||||||||||||||||||||
Net
interest margin
|
4.39 | % | 4.31 | % | ||||||||||||||||||||
(In
Thousands)
|
||||||||
2007
|
2006
|
|||||||
Non-accrual
loans
|
$ |
3,432
|
$ |
4,698
|
||||
Accruing
loans which are contractually past
due 90 days or more
|
1,048
|
992
|
||||||
Restructured
|
1,428
|
1,268
|
||||||
Total
non-performing
loans
|
5,908
|
6,958
|
||||||
Other
real estate acquired through foreclosure
|
229
|
495
|
||||||
Total
non-performing
assets
|
$ |
6,137
|
$ |
7,453
|
||||
Non-performing
loans as a percentage of
total loans
|
1.71 | % | 2.02 | % | ||||
Non-performing
assets as a percentage of
total assets
|
1.12 | % | 1.39 | % |
|
1.
|
Core
deposits consisting of both consumer and commercial deposits and
certificates of deposit of $100,000 or more. Management believes
that the
majority of its $100,000 or more certificates of deposit are no more
volatile than its other deposits. This is due to the nature of the
markets
in which the subsidiaries operate.
|
|
2.
|
Cash
flow generated by repayment of loans and interest.
|
|
3.
|
Arrangements
with correspondent banks for purchase of unsecured federal funds.
|
|
4.
|
The
sale of securities under repurchase agreements and borrowing from
the
Federal Home Loan Bank.
|
|
5.
|
Maintenance
of an adequate available-for-sale security portfolio. The Company
owns
$123.4 million of securities at market value as of September 30,
2007.
|
Premier
Financial
|
Traders
|
|
10,000,000
shares of common stock, no par value per share and 1,000,000 shares
of
preferred stock, without par value.
|
360,000
shares of common stock, $5.00 par value per share.
|
|
Authority
is given in Premier Financial’s articles of incorporation for its board of
directors to issue, without shareholder approval, up to 1,000,000
shares
of preferred stock, to divide the shares of preferred stock into
series
and, within the limitations of laws of the Commonwealth of Kentucky,
to
vary, as between series, dividend rates, voting rights, redemption
provisions, voluntary and involuntary liquidation prices, sinking
fund
provisions and conversion privileges. Any preferred stock
issued could be granted priority and preference over Premier Financial
common stock in payment of dividends and upon liquidation or dissolution
of Premier Financial. Premier Financial has no current plans
for issuance of authorized shares of preferred stock.
|
Traders is not authorized to issue preferred stock |
Premier
Financial
|
Traders
|
|
Premier
Financial’s bylaws provide that the number of directors of Premier
Financial shall be fixed by the board of directors from time to
time. Presently the board of directors of Premier Financial
consists of 9 individuals.
|
Traders’
Articles of Incorporation provide that the total number of directors
of
Traders shall be not less than nine (9) nor more than eighteen (18)
as
from time to time fixed by the board of directors. Presently
the board of directors of Traders consists of eight (8) individuals,
because of a recent vacancy.
|
Premier
Financial
|
Traders
|
|
Premier
Financial only has one class of directors.
|
The
Traders board of directors shall be divided into three classes, designated
Class I, Class II and Class III, consisting of an equal number of
directors per class. Each class serves a term of three years.
The term of office of directors of one class shall expire at each
annual
meeting of shareholders, and as to each director until his or her
successor shall be elected and shall qualify, or until his or her
earlier
resignation, removal from office, death or
incapacity. Additional directorships resulting from an increase
in number of directors shall be apportioned among the classes as
equally
as possible. A decrease in the number of directors by death,
resignation or removal may but shall not be required to be filed
by the
remaining board members. At each annual meeting of stockholders
the number of directors equal to the number of directors of the class
whose term expires at the time of such meeting for, if less, the
number of
directors properly nominated and qualified for election shall be
elected
to hold office until the third succeeding annual meeting of the
shareholders after their election.
|
Premier
Financial
|
Traders
|
|
Newly
created directorships resulting from any increase in the authorized
number
of directors or any vacancies in the board of directors resulting
from
death, resignation, retirement, disqualification, removal from office
or
other cause shall be filled by action of a majority of the remaining
directors then in office, and directors so chosen shall hold office
for a
term expiring at the next annual meeting of shareholders.
|
When
any vacancy occurs among the board of directors for any reason, including
an increase in the number thereof, the remaining members of the board
may
appoint a director to fill such vacancy at any regular meeting of
the
board, or at a special meeting called for that
purpose.
|
Premier
Financial
|
Traders
|
|
At
a meeting of shareholders called expressly for the purpose of removing
one
or more directors, any director or the entire board of directors
may be
removed, with or without cause, by a vote of the holders of a majority
of
the shares then entitled to vote at any election of
directors. If less than the entire board is to be removed, no
one of the directors may be removed if the votes cast against his
removal
are sufficient to elect him if such votes had been cumulatively voted
at
an election of the entire board of directors or, if there are classes
of
directors, at an election of the class of directors of which he is
a
part.
|
The
removal from office of any director must be for cause. Except
as may otherwise be provided by law, cause for removal shall be construed
to exist only if:
(1) the
director whose removal is proposed has been convicted, or where a
director
was granted immunity to testify where another has been convicted,
of a
felony by a court of competent jurisdiction and such conviction is
no
longer subject to direct appeal;
(2) such
director has been adjudicated by a court of competent jurisdiction
to be
liable for negligence, or misconduct, in the performance of his duty
to
Traders and such adjudication is no longer subject to direct
appeal;
(3)
such
director has become mentally incompetent, whether or not so adjudicated,
which mental incompetency directly affects his or her ability as
a
director of Traders;
(4) such
director ceases to fulfill the qualification requirements for a director
of a West Virginia bank holding company; or
(5) such
director’s actions or failure to act have been determined by a majority of
the board of directors to be in derogation of the director’s
duties.
|
Premier
Financial
|
Traders
|
|
Nominations
for election to the board of directors may be made by the board of
directors or by any shareholder entitled to vote for election of
directors. Nominations other than those made by or on behalf of
the existing management shall be made in writing and be delivered
or
mailed to the President of Premier Financial not less than fourteen
(14)
days nor more than fifty (50) days prior to any meeting of shareholders
called for the election of directors; provided, however, that if
less than
twenty-one (21) days notice of the meeting is given to shareholders,
such
nomination shall be mailed or delivered to the President of Premier
Financial not later than the close of business on the 7th
day following the day on which the notice of the meeting was
mailed. Such notification shall contain specified information
to the extent known to the notifying shareholder.
|
Neither
the Articles of Incorporation nor the Bylaws of Traders provide for
a
formal nomination process for the election of directors to Traders’ board
of directors.
|
Premier
Financial
|
Traders
|
|
None
|
Subject
to any other requirements provided for by law, in order to be approved,
any merger or consolidation of Traders with another corporation and
any
sale, lease or exchange by liquidation or otherwise of all or
substantially all of the assets of Traders shall require the affirmative
vote of at least sixty six and two-thirds percent (66 2/3%) of the
authorized, issued and outstanding voting shares of the Traders unless
the
business combination has been previously approved by at least two-thirds
(2/3) of the board of directors of Traders in which case only a simple
majority vote of the shareholders shall be
required.
|
Premier
Financial
|
Traders
|
|
The
annual meeting of the shareholders of Premier Financial shall be
held at
such time, place and on such date as the chief executive officer
may
designate, said date to be no later than six months following the
end of
Premier Financial’s fiscal year. The purpose of such meetings
shall be the election of directors and the transaction of such other
business as may properly come before it. If the election of
directors shall not be held on the day designated for an annual meeting,
or at any adjournment thereof, the board of directors shall cause
the
election to be held at a special meeting of the shareholders to be
held as
soon thereafter as may be practicable.
|
The
annual meeting of the shareholders of Traders shall be held on the
fourth
Monday in the month of April in each year, for the purpose of electing
directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting
shall be a legal holiday in the State of West Virginia, such meeting
shall
be held on the next succeeding business day. If the election of
directors shall not be held on the day designated herein for any
annual
meeting of the shareholders, or at any adjournment thereof, the board
of
directors shall cause the election to be held at a special meeting
of the
shareholders as soon thereafter as conveniently may
be.
|
Premier
Financial
|
Traders
|
|
The
Articles of Incorporation of Premier Financial may be amended by
a
majority vote of shareholders voting at any meeting at which a quorum
is
present called for the purpose of amending the Articles of
Incorporation.
|
The
Articles of Incorporation of Traders provides that any amendment,
change
or repeal of the Articles of Incorporation, which would have the
effect of
modifying or permitting circumvention of any provision of the Articles
of
Incorporation, shall require the affirmative vote, at a meeting of
shareholders of Traders, of holders of at least sixty-six and two
thirds
percent (66 2/3%) of the then outstanding voting shares of Traders;
provided, however, that any such amendment, change or repeal recommended
to shareholders by the favorable vote of not less then two-thirds
(2/3) of
the directors of Traders and any such amendment, change or repeal
so
recommended shall require only a simple majority vote of the shareholders
to be approved.
|
Premier
Financial
|
Traders
|
|
The
board of directors shall have the power and authority to alter, amend
or
repeal the bylaws by the vote of a majority of the entire board of
directors, subject always to the power of the shareholders to change
or
repeal such bylaws.
|
These
bylaws may be altered, amended or repealed and new bylaws may be
adopted
by the board of directors at any regular or special meeting of the
board
of directors, but any bylaws or amendments to bylaws made by the
directors
may be amended, altered or repealed by the board of directors or
by a
majority of the shareholders.
|
Premier
Financial
|
Traders
|
|
Shareholders
of Premier Financial have appraisal rights in accordance with Kentucky
law.
|
Shareholders
of Traders have appraisal rights in accordance with West Virginia
law.
|
Premier
Financial
|
Traders
|
|
A
Kentucky corporation generally may pay dividends in cash, property
or its
own shares except when the corporation is unable to pay its debts
as they
become due in the usual course of business or the corporation’s total
assets would be less than the sum of its total liabilities plus the
amount
that would be needed, if the corporation were to be dissolved at
the time
of the dividend, to satisfy any stockholders who have rights superior
to
those receiving the dividend.
|
A
West Virginia corporation generally may pay dividends in cash, property
or
its own shares except when the corporation is unable to pay its debts
as
they become due in the usual course of business or the corporation’s total
assets would be less than the sum of its total liabilities plus the
amount
that would be needed, if the corporation were to be dissolved at
the time
of the dividend, to satisfy any stockholders who have rights superior
to
those receiving the dividend.
|
|
Premier
Financial
|
Traders
|
|
Premier
Financial bylaws provide that Premier Financial shall, to the fullest
extent permitted by, and in accordance with the provisions of, the
Kentucky Business Corporation Act, indemnify each director and officer
of
Premier Financial against expenses (including attorneys’ fees), judgments,
taxes, fines, and amounts paid in settlement, incurred in connection
with,
and shall advance expenses (including attorneys’ fees) incurred in
defending, any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) to which
he is,
or is threatened to be made, a party by reason of the fact that he
is or
was a director or officer of Premier Financial, or is or was serving
at
the request of Premier Financial as a director, officer, partner,
employee, or agent of another domestic or foreign corporation,
partnership, joint venture, trust or other enterprise.
|
Traders’
Articles of Incorporation provide that each person who was or is
a party
or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise in nature, by reason of
the
fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation
or is
or was serving at the written request of the corporation's board
of
directors, president or their delegate as a director, officer, employee
or
agent of another corporation, partnership, joint venture, trust or
other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action or omission
in an
official capacity as a director, officer, trustee, employee or agent
or in
any other capacity, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by law, including but
not
limited to the West Virginia Code.
|
• Definitive
Proxy Materials for the 2007 Annual Meeting of
Shareholders
|
Filed
on April 24, 2007.
|
|
• Current
Reports on Form 8-K
|
Filed
on November 26, 2007, November 28, 2007, November 29, 2007, December
6,
2007 and February 13, 2008.
|
Premier
Financial Bancorp, Inc.
|
|||
2883
Fifth Avenue
|
|||
Huntington,
West Virginia 25301
|
|||
Attention: Brien
M. Chase
|
|||
Telephone:
(304) 525-1600
|
By
Order of the Board of Directors
|
|
|
|
|
|
Frederick
C. Hardman
|
|
Chairman
of the Board
|
Page | ||
Section 1. | Merger | |
1.1
|
General
Effect of Merger; Assets
|
2
|
1.2
|
Liabilities
of Surviving Company
|
2
|
1.3
|
Name,
Directors and Officers of Surviving Company
|
2
|
1.4
|
Offices,
Policies of Surviving Company
|
3
|
1.5
|
Capital
Structure of Surviving Company
|
3
|
1.6
|
Change
in Method of Effecting Acquisition
|
3
|
Section 2. | Conversion, Exchange and Cancellation of Shares |
|
2.1
|
General
|
4
|
2.2
|
Stock
Consideration and Cash Consideration
|
4
|
2.3
|
Manner
of Exchange
|
4
|
2.4
|
Fractional
Shares
|
5
|
2.5
|
Lost
Certificates
|
5
|
Section
3.
|
Representations,
Warrantis and Covenants of Premier
|
|
3.1
|
Organization,
Standing and Authority
|
6
|
3.2
|
Capital
Structure
|
6
|
3.3
|
Premier
Subsidiaries
|
7
|
3.4
|
Authority
|
8
|
3.5
|
Premier
Financial Statements
|
8
|
3.6
|
Allowance
for Possible Loan Losses
|
9
|
3.7
|
Accuracy
of Annual Reports
|
9
|
3.8
|
Absence
of Undisclosed Liabilities
|
9
|
3.9
|
Tax
Matters
|
9
|
3.10
|
Loans
|
10
|
3.11
|
Properties
|
10
|
3.12
|
Compliance
with Laws
|
10
|
3.13
|
Employee
Benefit Plans
|
11
|
3.14
|
Commitments
and Contracts
|
11
|
3.15
|
Labor
|
12
|
3.16
|
Material
Contracts Furnished
|
12
|
3.17
|
Material
Contracts
|
12
|
3.18
|
Material
Contract Defaults
|
12
|
3.19
|
Legal
Proceedings
|
13
|
3.20
|
Absence
of Certain Changes or Events
|
13
|
3.21
|
Reports
|
13
|
3.22
|
Investments
|
13
|
3.23
|
Securities
Portfolio
|
13
|
3.24
|
Environmental
Matters
|
14
|
3.25
|
Accuracy
of Proxy Statement
|
14
|
3.26
|
Interim
Bank Formation; Adoption Agreement
|
14
|
3.27
|
Filing
of Application to Merge
|
14
|
3.28
|
Best
Efforts
|
14
|
3.29
|
Conduct
of Business - Acquisitions
|
15
|
3.30
|
Conduct
of Business - Affirmative Covenants of Premier
|
15
|
Section
4.
|
Representations,
Warranties and Covenants of Traders
|
|
4.1
|
Organization,
Standing and Authority
|
16
|
4.2
|
Capital
Structure
|
16
|
4.3
|
Subsidiary
|
16
|
4.4
|
Authority
|
16
|
4.5
|
Traders
Financial Statements
|
17
|
4.6
|
Accuracy
of Annual Reports
|
17
|
4.7
|
Allowance
for Possible Loan Losses
|
17
|
4.8
|
Absence
of Undisclosed Liabilities
|
17
|
4.9
|
Tax
Matters
|
18
|
4.10
|
Loans
|
19
|
4.11
|
Properties
|
19
|
4.12
|
Compliance
with Laws
|
19
|
4.13
|
Employee
Benefit Plans
|
19
|
4.14
|
Commitments
and Contracts
|
20
|
4.15
|
Labor
|
21
|
4.16
|
Material
Contracts Furnished
|
21
|
4.17
|
Material
Contracts
|
21
|
4.18
|
Material
Contract Defaults
|
21
|
4.19
|
Legal
Proceedings
|
21
|
4.20
|
Absence
of Certain Changes or Events
|
22
|
4.21
|
Reports
|
22
|
4.22
|
Accuracy
of Proxy Statement
|
22
|
4.23
|
Investments
|
22
|
4.24
|
Securities
Portfolio
|
22
|
4.25
|
Environmental
Matters
|
22
|
4.26
|
Best
Efforts
|
23
|
4.27
|
Conduct
of Business – Negative Covenants of Traders
|
23
|
4.28
|
Conduct
of Business – Affirmative Covenants of Traders
|
24
|
4.29 | CEO/CFO Certification Checklist | 26 |
4.30 | Branch Operations Certification | 26 |
4.31 | Termination of "Trade-In Your Mortgage" Program | 26 |
Section
5.
|
Indemnification
and Confidentiality
|
|
5.1
|
Access
and Information
|
27
|
5.2
|
Furnishing
Information and Indemnification
|
27
|
5.3
|
Confidentiality
|
28
|
5.4
|
Updates
to Information
|
28
|
Section
6.
|
Conditions
Precedent
|
|
(a)
|
Governmental
Approvals
|
29
|
(b)
|
Shareholder
Approval
|
29
|
(c)
|
Registration
Statement
|
29
|
(d)
|
Affiliates
|
29
|
(e)
|
No
Divestiture or Adverse Condition
|
30
|
(f)
|
Accuracy
of Representations and Warranties; Performance of Obligations
and
Covenants - Premier
|
30
|
(g)
|
Accuracy
of Representations and Warranties; Performance of Obligations
and
Covenants – Traders
|
30
|
(h)
|
Opinion
of Counsel for Traders
|
30
|
(i)
|
Opinion
of Counsel for Premier
|
32
|
(j)
|
Less
than 20% Dissenters
|
33
|
(k)
|
Tax
Ruling or Opinion Letter
|
34
|
(l)
|
Absence
of Material Adverse Changes - Premier
|
34
|
(m)
|
Absence
of Material Adverse Changes – Traders
|
34
|
(n) | Consent of Lenders | 34 |
(o) | Financing | 35 |
(p) | No Excess Parachute Payment | 35 |
(q) | Fairness Opinion | 35 |
Section
7.
|
Closing
Date and Effective Time
|
|
7.1
|
Closing
Date
|
36
|
7.2
|
Effective
Time
|
36
|
Section
8.
|
Termination
of Agreement
|
|
8.1
|
Grounds
for Termination
|
37
|
8.2
|
Effect
of Termination
|
38
|
8.3
|
Lost
Opportunity Costs
|
38
|
8.4
|
Return
of Information
|
39
|
Section
9.
|
Waiver
and Amendment
|
40
|
Section
10.
|
Meeting
of Shareholders of Traders
|
41
|
Section
11.
|
Rights
of Dissenting Shareholders
|
42
|
Section
12.
|
Indemnification
|
|
12.1
|
Indemnification
|
43
|
12.2
|
Insurance
|
43
|
12.3
|
Consolidation
or Merger
|
43
|
12.4
|
Survival
|
43
|
12.5 | Regulatory Constraints | 43 |
Section
13.
|
Operations
after the Closing Date
|
|
13.1 | Maintenance of Existence | 44 |
13.2
|
Employees
of Traders
|
44
|
13.3
|
Severance
|
45
|
13.4
|
Survival
|
46
|
Section
14.
|
Miscellaneous
|
|
14.1
|
Public
Announcements
|
46
|
14.2
|
Brokers
and Finders
|
46
|
14.3
|
Disclosed
In Writing
|
46
|
14.4
|
Entire
Agreement
|
46
|
14.5
|
Counterparts
|
46
|
14.6
|
Invalid
Provisions
|
46
|
14.7
|
Notices
|
46
|
14.8
|
Headings
|
47
|
14.9
|
Expenses
|
47
|
14.10
|
Governing
Law
|
47
|
14.11
|
No
Assignment
|
47
|
14.12
|
Effectiveness
of Agreement
|
47
|
14.13
|
Further
Acts
|
48
|
14.14
|
Representations
and Warranties Not to Survive
|
48
|
14.15
|
Individual
Directors
|
48
|
|
(1)
|
Any
new loan, or renewal of an existing loan, that totals $200,000
or greater;
or
|
|
(2)
|
Any
new loan, or renewal of an existing loan, which, when included
with all
other loans from Traders or Traders’ Subsidiary Bank to any such borrower
and their related interests, would cause such borrower’s total loans from
Traders or Traders’ Subsidiary Bank, including loans from Traders or
Traders’ Subsidiary Bank to their related interests, to exceed
$400,000.
|
|
(1)
|
Terminate
pursuant to the terms thereof any and all employment contracts
to which
either Traders or the Traders’ Subsidiary Bank is a
party.
|
|
(2)
|
Terminate
any defined benefit plan to which either Traders or the Traders’
Subsidiary Bank is a party; provided,
however,
that
if all appropriate steps are taken for termination and the defined
benefit
plan is frozen, the actual termination of any defined benefit plan
need
not be accomplished prior to, or at,
Closing.
|
|
(3)
|
Terminate
any and all deferred compensation plans to which either Traders
or the
Traders’ Subsidiary Bank is a party; provided,
however,
that
liability for accrued but unpaid deferred compensation shall remain
on the
balance sheet of Traders.
|
|
(4)
|
Terminate
any and all employee “carve-out life insurance” benefit
plans.
|
|
(1)
|
Traders
is a corporation duly organized, validly existing and in good standing
under the laws of the State of West Virginia, is a bank holding
company
under the Bank Holding Company Act of 1956 and is duly authorized
to own
its properties and to conduct its business as then being
conducted.
|
|
(2)
|
Traders’
Subsidiary Bank is a banking corporation validly existing and in
good
standing under the laws of the State of West Virginia and is duly
authorized to own its properties and to conduct its business as
then being
conducted.
|
|
(3)
|
The
authorized capitalization of Traders is as set forth in such opinion
and
the shares of Traders Common Stock issued and outstanding (as of
a date
specified in such opinion not more than 5 days prior to the date
of such
opinion) are as stated in such opinion. Such issued and
outstanding shares of stock are validly issued, fully paid and
were not
issued in violation of any preemptive rights of the shareholders
of
Traders. As of such date, there are, to the best of such
counsel’s knowledge, no options, warrants, rights, commitments or
convertible securities outstanding or authorized on behalf of Traders,
calling for the purchase from it of shares of unissued capital
stock or
capital stock held as treasury
shares.
|
|
(4)
|
Traders
had the corporate power and authority to execute, deliver and perform
its
obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered by Traders and constitutes the
legal,
valid and binding obligation of Traders, enforceable in accordance
with
its terms.
|
|
(5)
|
All
necessary corporate proceedings of the board of directors and the
shareholders of Traders, to the extent required by law, its Articles
of
Incorporation and Bylaws or otherwise, to authorize the execution
and
delivery of this Agreement by Traders and the consummation of the
Merger
by Traders pursuant to this Agreement have been duly and validly
taken. The number of shares of stock of Traders voted for and
against the Merger are as stated in such counsel’s opinion; and the number
of shares of such stock as to which shareholders have perfected
their
rights to dissent and appraisal under the West Virginia Business
Corporation Act are as stated in such counsel’s
opinion.
|
|
(6)
|
Such
counsel has reviewed the registration statement filed by Premier
as
described in Section 6(c), and with respect to all information
relating to
Traders contained therein, such counsel does not know of any respect
in
which the registration statement contained any false or misleading
statement of any material fact or failed to state a material fact
which
was necessary to be stated to prevent the statements made from
being false
or misleading in any material respect (except as to the financial
statements and related notes and schedules and other financial
data, as to
which such counsel need express no
opinion).
|
|
(7)
|
The
consummation of the Merger will not violate or result in a breach
of, or
constitute a default under, the Articles of Incorporation or By-Laws
of
Traders or constitute a breach or termination of, or default under,
any
agreement or instrument of which such counsel has knowledge and
which
would have a material adverse affect on the business of Traders,
and to
which Traders is a party or by which it or any of its property
is
bound.
|
|
(8)
|
Such
counsel does not know of any breach of any warranty contained in
this
Agreement on the part of Traders or any failure on the part of
Traders to
perform any of the conditions precedent to the consummation of
the Merger
imposed upon it herein.
|
|
(1)
|
Premier
is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Kentucky, is a bank holding
company
under the Bank Holding Company Act of 1956, and is duly authorized
to own
its properties and to conduct its business as then being
conducted.
|
|
(2)
|
Each
of the Premier State Banks are banking corporations duly organized,
validly existing and in good standing under the laws of the States
of Ohio
or West Virginia or the Commonwealth of Kentucky, as the case may
be, and
each is duly authorized to own its properties and to conduct its
business
as then being conducted.
|
|
(3)
|
The
authorized capitalization of Premier is as set forth in such opinion
and
the shares of Premier Common Stock issued and outstanding (as of
a date
specified in such opinion not more than 5 days prior to the date
of such
opinion) are as stated in such opinion. Such issued and
outstanding shares of stock are validly issued, fully paid and
non-assessable, and were not issued in violation of any preemptive
rights
of the shareholders of Premier or any Premier Subsidiary. As of
such date, there are, to the best of such counsel’s knowledge, no options,
warrants, rights, commitments or convertible securities outstanding
or
authorized on behalf of Premier or any Premier Subsidiary, calling
for the
purchase from any of them of shares of unissued capital stock or
capital
stock held as treasury shares, except as otherwise permitted by
the
Agreement or for those shares of stock issued pursuant to any employee
stock option plan of Premier. All of the issued and outstanding
shares of each of the Premier Subsidiaries are held of record by
Premier.
|
|
(4)
|
All
necessary corporate proceedings of the Boards of Directors and
the
shareholders of Premier and Interim Company to the extent required
by law,
their Articles of Incorporation or Association or By-Laws or otherwise,
to
authorize the execution and delivery of this Agreement or the Adoption
Agreement and the consummation of the Merger pursuant to this Agreement
have been duly and validly taken. Premier and Interim Company
have the corporate power and authority to execute, deliver and
perform
this Agreement or the Adoption Agreement. This Agreement has
been duly authorized, executed and delivered by Premier and Interim
Company (by virtue of the Adoption Agreement) and constitutes the
legal,
valid and binding obligation of Premier and Interim Company in
accordance
with its terms.
|
|
(5)
|
The
consummation of the Merger will not violate or result in a breach
of, or
constitute a default under the Articles of Incorporation or By-Laws
of
Premier or constitute a breach or termination of, or default under,
any
agreement or instrument of which such counsel has knowledge and
to which
Premier is a party or by which it or its property is
bound.
|
|
(6)
|
To
the best of such counsel’s knowledge, all approvals of public authorities,
federal, state or local, the granting of which is necessary for
the
consummation of the Merger by Premier have been
obtained.
|
|
(7)
|
The
shares of Premier Common Stock into which shares of Traders Common
Stock
are to be converted upon the Effective Time will upon the Effective
Time
be duly authorized, and such shares, when transferred to holders
of
Traders Common Stock pursuant to the terms of the Merger, will
be validly
issued, fully paid and nonassessable shares of Premier Common
Stock.
|
|
(8)
|
Such
counsel has reviewed the registration statement described in Section
6(c),
and with respect to all information relating to the Merger and
to Premier
and the Premier Subsidiaries contained therein, such counsel does
not know
of any respect in which the registration statement contained any
false or
misleading statement of any material fact or failed to state a
material
fact which was necessary to be stated to prevent the statements
made from
being false or misleading in any material respect (except as to
the
financial statements and related notes and schedules and other
financial
data, as to which such counsel need express no
opinion).
|
|
(9)
|
The
registration statement has been filed on the proper form under
the rules
and regulations of the Securities and Exchange Commission, notice
of
effectiveness of the registration statement has been received,
and, to the
best of such counsel’s knowledge, no stop order suspending the
effectiveness of the registration statement has been issued and
no
proceeding for that purpose has been
instituted.
|
|
(1)
|
The
Merger will constitute and qualify as a reorganization within the
meaning
of Sections 368 of the Internal Revenue Code and Traders, Surviving
Company and Premier will each qualify as “a party to a reorganization” as
that term is defined in the Internal Revenue
Code;
|
|
(2)
|
No
gain or loss will be recognized by the shareholders of Traders
who
exchange their Traders Common Stock for Premier Common Stock pursuant
to
the Merger, except that gain or loss may be recognized as to cash
received
as Merger Consideration and cash received in lieu of fractional
share
interests;
|
|
(3)
|
No
gain or loss will be recognized by Premier, Traders, or Surviving
Company
by reason of the Merger; and
|
|
(4)
|
The
holding period of Premier Common Stock received by Traders shareholders
in
exchange for Traders Common Stock will include the holding period
of the
shares of Traders Common Stock so exchanged, provided that the
Traders
Common Stock is held as a capital asset at the Effective
Time.
|
Signature
|
Title
|
Date
|
/s/
Robert W. Walker
|
Director,
President and Chief Executive Officer
|
_____________________
|
Robert
W. Walker
|
||
/s/
Brien M. Chase
|
Chief
Financial Officer and Chief Accounting Officer
|
_____________________
|
Brien
M. Chase
|
||
/s/
Toney K. Adkins
|
Director
|
______________________
|
Toney
K. Adkins
|
||
/s/
Hosmer A. Brown, III
|
Director
|
______________________
|
Hosmer
A. Brown, III
|
||
/s/
Edsel R. Burns
|
Director
|
______________________
|
Edsel
R. Burns
|
||
/s/
E. V. Holder, Jr.
|
Director
|
______________________
|
E.V.
Holder, Jr.
|
||
/s/
Keith F. Molihan
|
Director
|
______________________
|
Keith
F. Molihan
|
||
/s/
Marshall T. Reynolds
|
Director
|
______________________
|
Marshall
T. Reynolds
|
||
/s/
Neal W. Scaggs
|
Director
|
______________________
|
Neal
W. Scaggs
|
||
/s/
Thomas W. Wright
|
Director
|
______________________
|
Thomas
W. Wright
|
2.1
|
Agreement
of Merger dated October 24, 2007 between Premier Financial Bancorp,
Inc.
and Citizens First Bank, Inc. and CFB Interim Bank, Inc. (included
as
Appendix I to the Citizens First portion of the Proxy Statement)
|
2.2
|
Agreement
of Merger dated November 27, 2007 between Premier Financial Bancorp,
Inc.
and Traders Bankshares, Inc. (included as Appendix I to the Traders
portion of the Proxy Statement)
|
5.1
|
Opinion
of Huddleston Bolen LLP, including consent. (Citizens
First)
|
5.2
|
Opinion
of Huddleston Bolen LLP, including consent.
(Traders)
|
8.1
|
Form
of Tax Opinion of Huddleston Bolen LLP, including consent (Citizens
First).
|
8.2
|
Form
of Tax Opinion of Huddleston Bolen LLP, including consent (Traders).
|
8.3
|
Form
of Tax Opinion of Jackson Kelly PLLC, including consent. (Citizens
First)
|
8.4
|
Form
of Tax Opinion of Jackson Kelly PLLC, including consent. (Traders)
|
21
|
Subsidiaries
of Registrant (Incorporated herein by reference to Premier Financial
Bancorp, Inc.’s Form 10-K for the year ended December 31, 2006).
|
23.1
|
Consent
of Huddleston Bolen LLP
|
23.2
|
Consent
of Jackson Kelly PLLC
|
23.3
|
Consent
of Baxter Fentriss and Company.
|
24
|
Powers
of Attorney (included on Pages II-5 and
II-6)
|
99.1
|
Form
of Proxy for Citizens First Bank,
Inc.
|
99.2
|
Form
of Proxy for Traders Bankshares,
Inc.
|